tim 1q10

Rio de Janeiro, May 3rd 2010TIM PARTICIPAÇÕES S.A. | Investor Relations

Results Presentation

1Q10

1

TIM PARTICIPAÇÕES S.A. | Investor Relations

Agenda

1 year later: a Better Company (TIM Only)

1Q 2010 Economics & Financials (TIM+Intelig)

2010 Goal: Strengthening the Foundations

Disclaimer. 1Q2010 Presentation and Earnings Release are presented in BR GAAP (without any accounting changes). Operational data are presented for TIM stand alone basis – in order to allow better comparison. In addition, growth for net service revenues and EBITDA margin (pag. 2) are also presented in IFRS (following Telecom Italia accounting report rule)

2


Customer Base

EBITDA

Net Service Revenues

EBITDA Margin

Q1 snapshot: more Revenues, higher Profitability

20.1%25.8%

0

0

0

0

0

0

0

1Q'09 1Q'100

20

40

60

80

100

120

140

160

180

1Q'09 1Q'10

TIM + Intelig

618 810

TIM + Intelig

2,985 3,146

R$ Mln

%

+570 bps

19.5% 24.8%

%, Mln lines, EoP

Market share(# lines)

23.5% 23.6%

+30.9% +530 bps

Customer Base

TIM

+5.4%

R$, Mln

609

806+32.2%

TIM + Intelig

TIM TIM

Post-paid

Pre-paid

~29% in IFRS*

+6.2% in IFRS*

* IFRS figure according to controlling shr. report

~28% in IFRS*

+5.3%2,846

2,997

2500

2600

2700

2800

2900

3000

3100

3200

1Q'09 1Q'10

+17.3%

+6.9%

+19.5%29.9 35.8

6.26.6

36.1 42.4

0

5

10

15

20

25

30

35

40

45

1Q'09 1Q'10

Voice Mobile

+12% YoY

3


“Breaking the Rules”

One year later: a Better Company

1Q ’10 KPIs

Sales Productivity Improvement

0.2

-0.4

Mln

Net Adds Pre

Net Adds Post

1Q’09

1Q’10

1Q’09 1Q’10

Mln

Market Research Nov/Dec 2009*∆ pp vs. previous wave

+9pp

+3pp

+3pp

-5pp32

34

28

25

#1 in Innovation

Quality of Service

Cost Control

0.79

1.1

1

1

1

1

1

1

1

1

Drop calls

7.52

6.77

6

7

7

8

8

10.2

5.2

0

2

4

6

8

10

12

1Q’09 1Q’101Q’09 1Q’10

% dropped calls

Traffic Out

1Q’09 1Q’10

Commercial costs and Bad Debt 1Q’09 1Q’10

-400 bps

Industrial costs

and ITX-170 bps

Personnel and

G&A costs-150 bps

% on services revenues

1Q’09 1Q’10

1Q’09 1Q’10

Bln of Minutes

83 94

50

60

70

80

90

100

110

120

1Q’09 1Q’10

CSI IDA

Network

Caring

99.8%93.4%

Quality

Efficiency

1Q’09 1Q’10 1Q’09 1Q’10

+570 bps in Margin

Costs(as % of Revenues)

RankingAnatel

Innovation

Customer Base

1Q’09 1Q’10 1Q’09 1Q’10

#4

#1

36.1 42.4MlnCustomer Satisfaction

IndexCaring Performance Index (Anatel)

Data refers to TIM only

* % of respondents which indicated the operator as “innovative company”

X2

1.1

0.1

Player 1

Player 2

Player 3

100% in March

4


Quality of Service (1/2) : Network Reliability

Radio transmission 2G (Capacity)

3G Roll-out

Drop Call

3G Coverage

# Node-B Activated

1Q'09 1Q'10

1Q'09 1Q'10

# TRX Activated

32%47%

EoY'09 Apr 10

57

74131

0

20

40

60

80

100

120

140

EoY’09 Apr 10

# Cities % Population

193

1,020>2x

0.79

1.1

1

1

1

1

1

1

1

1

% dropped calls

1Q’09 1Q’10

352

3,852

x11

x5

CAPEX

1Q'09 1Q'10

Mln R$

194

567

3X

•1 city per day•1 antenna per hour

(2G / 3G / Radio Microwaves)


5.1 10.22xOutgoingTraffic (bln min)

100% of network quality in

March

5


Quality of Service (2/2) : Caring enhancement

Lead time

# Call / Customer

Caring Performance Index

ServiceLevel

Efficiency

1Q'09 1Q'10

Average call per customer

1Q'09 1Q'10

Lead time (in seconds) before answered by an attendant

92.32

83.35

1Q'09 1Q'10

Anatel Index, %

-36%

-42%

+9 pp

Customer Satisfaction Index

6.77

7.52

1Q'09 1Q'10

+11%

Market Research


6


Improved Sales Productivity1Q 2009 vs. 1Q 2010

∆Capillarity 1Q’09 vs 1Q’10

# point of sales

Productivity

+

0%

-

- 0% +

+172%Quality

Post Paid Consumer

Key Success Factors

# point of sales

Productivity

+

0%

-

- 0% +

+16%

Efficiency

Traditional

channels

Alternative

channels

+193%

Pre Paid Consumer

# agents

Productivity

+

0%

-

- 0% +

Coverage

Post Paid Business

+61%

Net Adds Pre Paid

MNP Post Paid

SAC and SAC/ARPU

Net Adds Post Paid

Mln

Mln

1Q’09 1Q’10

1Q’09 1Q’10

% Port IN / Port Out

1Q’09 1Q’10

100%:In=Out

156%

32%-0.4

0.1

Value Value

Volume Efficiency

1.1

0.2

∆Productivity 1Q’09 vs 1Q’10

Gain

Loss

R$/Gross Adds

1Q’09 1Q’10

104

78-25%

SAC/ARPU 4.0 3.3

SAC


7


Key Success Factors

• Pay per call vs. traditional pay per minute

• Community based local and Long Distance (Local=Long Distance)

Innovation and Offering

Pre-paid

Infinity Pre-Paid

• “All you can eat”community based (local and long distance)

• Chip-only + handset sales in 12x (unlocked)

Post-paid

Liberty / Infinity Post-PaidCustomer Base, Mln lines

Innovation (ranking)∆ pp vs. previous wave

+9pp

+3pp

+3pp

-5pp32

34

28

25

Market Research Nov/Dec 2009*

#1

*% of respondents which indicated the operator as “innovative company”

78

80

82

83

100

Services tailoredfor their needs

Best coverage

Own customers advantages

Leadership

Best promo

Market Research Nov/Dec 2009,Customers top 5 factors in choosing an operator

Player 1

Player 2

Player 3

Customer Base, Mln lines

0

1.1

1Q’09 1Q’10

0

22

1Q’09 1Q’10

•Attractive: More Gross Adds

•Efficient: lower handset dependence

•Profitable: MARPU accretive

8


2426.2

1Q'09 1Q'10

ITX Costs

Reshaping traffic to core business

MOU

Lower MTR Exposure

ARPU

ARPU Contribution (MARPU)Reshape traffic profiletowards core business:

- Outgoing vs. Incoming

- On-net vs. Off-net

Lower MTR exposure

Improving traffic contribution(MARPU)

70

100

1Q'09 1Q'10

Incoming

Outgoing

-20%

+70%

+42%

Minutes/line/month

R$ Mn

R$/month

R$/month

24.026.2

1Q'09 1Q'10

Incoming

Outgoing stable

-22%

-8.6%

IncomingRevenues

Contribution

-15%<35% of EBITDA

>45% of EBITDA

-10%

Total

Total

ITX, subsidy, bad debt

ARPU

MARPU Slightincrease

-8.6%


9.5 6.9

4882

22

18

1Q'09 1Q'10

-0.3%

On-net strategy

17.4 17.1

Voice Outgoing 14.6 14.4stable

Ability to maintain ARPU outgoing voice flat despite CB growth of 17%

ARPU outgoing voice = 60% over total ARPU

9


Agenda




10


+12%

-11%

+6.4%

124189

1Q 2010 Economics

YoY %

3,1462,985

% on services revenues

TIM

+ In

telig

Commercial costs and Bad Debt 1Q'09 1Q'10

-360 bps

Industrial costs

and ITX-170 bps

1Q’09 1Q'10

Personnel and

G&A costs-140 bps

1Q'09 1Q'10

Commercial costs and Bad Debt 1Q'09 1Q'10

-400 bps

Industrial costs

and ITX-170 bps

1Q’09 1Q'10

Personnel and

G&A costs-150 bps

1Q'09 1Q'10

TIM

Efficiency Plan

R$ Millions

EBITDA

Revenues Mix (% on Gross Service Revenues)

4,3414,080

Net HandsetsRevenues

R$ Millions

-34%

+5.4%

Business Generated

Business Received

618 810

19.5% 24.8%

1Q'09 1Q'10

EBITDAMargin

+30.9%

25% 21%

11%

58% 62%

6%

1Q'09 1Q'10

+530 bps

Net Service Revenues

Incoming

MobileOutgoing

100%=

11%VAS

6%Fixed

25.8% TIM only(+570 bps YoY)

Chip-only strategy

Local +9%LD +25%

11


30

142.6

809.8

(38.9)

(73.7)

(667.2)

Inverted bottom line Results: from loss to Net Income

EBITDA1Q'10

Depreciation & Amortization

EBIT Net Financial Expenses

Taxes and Others

Net Profit

1Q'09 (672.0) (53.5) (68.8) (43.0)618.5 (165.2)

191.3 4.8 (4.9) 4.0 195.2YoY 196.1

R$ Millions

Net Profit

30

1Q'09 1Q'10

(165)

12


R$ Millions

Improved Financial Results

+716+192

1Q09* (1,666)618

∆ YoY (382)

(194)

+535

(1,251)

EBITDA∆ Working

Capital CAPEX Oper.OCF

Free Operational Cash Flow Net Financial PositionR$ Millions

(950)

R$ 4.1 billion (of which 67% on long term)

~27% of debt is denominated in foreign currency (100% hedged)

9.9% in 1Q'10 vs. 12.5% in 1Q'09 and 9.7% in 4Q’09

Gross Debt

Average Annual Cost

3X CAPEX

-15%

3,0172,557

1Q09* 1Q10

* TIM stand-alone

810

(576) (716)

(950)

Net Financial Position

4Q’09 1,684

Oper Cash Flow (716)

Non-Oper Cash Flow (158)

1Q'10 2,557

13


Agenda




14


2010 priorities to complete Company Repositioning

Intelig Re-launch Build a Superior Network

“Ready to Go” on Data“Keep the Pressure” in the Voice Market

Priorities

Penetration: focus on weak areas

FMS:

- MOU intensive strategy

- Tim community

“Market rules” strategy:- Internet key: selective approach- Ultimate smartphone offering“Breaking the Rules” (LAN house substitution):- Low cost platform devices- Innovative offering

Intelig: A New Turnaround

Maintain/Gainmarket share

Focus on 3Q

TIM

Intelig

One NetworkTim + Intelig

One back-bone

Property radio backhauling

Double 2G Capacity

Double 3G Coverage

Network integration

Business relaunch

Lean Organization

1

23bPenetration Data

1 2 3

Penetration Usage

3a

15


Competitive advantage:

low incremental cost (Long Distance

calls and mobile Data growth)

Intelig: A New Turnaround

2010 Focus

1.2

0.6

0.6

Opexsavings

Capexsavings

TotalSaving

Capex / Opex SavingCumulated Saving 2010-2012, Bln R$

- Fiber optic metro rings (CAPEX)

- Incremental Leased Lines (OPEX)

Revenues Growth Cumulated Saving 2010-2012, Bln R$

2009 2010 2011 2012

~0.7

Residential

Business

Wholesale

X 3

Intelig Reason Why

TIM: Avoid Leased Lines costs explosion due to Data growth

Intelig Option Value

Fiber based property backhauling, directly linked to

main Base Stations to support Data transfer

2009 2010 2011 2012

+25%

CAGR ’09-’12

~ flat

Integrated Solutions

Fixed/Mobile multiple play

Attack Fixed Incumbents

(DDD, local voice, TIM fixo/web)

ConsumerSME SoHo

Top Clients

Leased Lines costs

Inertial

Expected

Bln R$

~2.0

Network •Backbone / MANsIntegration

•Brand / Offering: revamping as of 2Q

Marketing

•Intelig dedicated to fixed and convergent services commercialization

Go to market

•Lean approach to staff

Organi-zation

Avoided costs:

16


Back-hauling

Node-B

Access3G/HSDPA

PoP PoP

Access2G/Edge

BTS

Network Infrastructure

Backbone

Access2G/Edge

BTS

Leasedlines

Metro

Key actions

One single backbone (TIM - Intelig)

Link to Intelig MANs

Roll-out microwaves backhauling

Double 3G coverage

Double 2G capacity

1

2

3

4

5

Network targets and priorities

Efficiency & reliability in BackhaulingMicrowaves replacing leased lines

From … To …

Buy

Make

65%

35% 65%

35%vs.

Buy

Makevs.

Build a Superior Network

3G Coverage (# antennas)

2G Capacity (# Radio transmissions)

2G Coverage (# BTS)

Radio Backhauling (# Microwaves)

~6,000

>50,000

1,500

~10,000

~3,500

>15,000

~750

>4,000

2010-12 2010

~2,000

>10,000

By July 2010

>2,000

>400

2010 “peak season”for Network roll-out

Phase 1 high-speed project in San Paulo: 14 Mbps downlink

17


Take Aways

A better company

Economics & Financials

Looking forward

Focus on fundamentals: Quality, Innovation and Sustainability

Improved sales force productivity: +17% YoY Customer Base and inverted Net Adds trend in Post Paid (voice), with lower SAC

Re-shaped traffic to core business, with better contribution and lower MTR exposure

Service Revenues: +5.4% YoY (TIM only: +5.3% ) “entirely on voice outgoing +12%”

EBITDA: +31% YoY

EBITDA margin: 24.8%, +530 bps YoY (TIM only: 25.8%, +570 bps YoY)

Inverted bottom line results: positive net income in Q1 (vs. -165 mln R$ loss YA)

Better cash flow generation: +535 mln R$ vs. YA, with tripled CAPEX

Consistent debt reduction: -460 mln R$ vs. YA

2010 priorities to complete Company repositioning:

- Push on Fixed Mobile Substitution

- Enhance Data business as of H2

- Intelig network integration and business re-launch: a new turnaround

- Fast roll-out of 3G Network Coverage and 2G Capacity

tim 1q10

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