TIM Brasil - Meeting with Investors
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TIM Brasil - Meeting with Investors SeptemberTIM, 2012Brasil - Meeting with Investors February, 2013 Knowing TIM Better Shareholders Structure TIM: A Huge Brazilian Company Presence in Brazil since 1998 TIM Brasil Serv. e Part. S.A. Minoritários Unique Telco company listed on the Novo Mercado: ON: 67% (1.611.969.946) ON: 33% (805.662.701) .100% Tag Along and equal dividend rights . One single class of shares . Independent Board members TIM Participações S.A. A more strict disclosure policy 100% 100% ~ 11,000 direct employees TIM Celular S.A. Intelig + 21,000 indirect jobs +400,000 Points of Sales (Top-up and SIM cards) + 130 own stores > 70 million costumers. The 2nd player. 11 Customer Care Centers with 14,000 consultants Highest level of ~ 11,500 antennas in 3,383 cities, covering +94% urban Requirement of Corporate protection for population Governance minority Demand for Exclusive attendance of 391 municipalities and 1.64 transparency and shareholders Legal disclosures million customers Requirements Payment of R$7.3 billion in taxes and contributions in 2011 Investment: R$3.8 billion in 2012 Brazilian Law “Nível” 1 “Nível” 2 “Lei das S.A” 3 Strategy 4+ Macro-Economic Fundamentals Remain Solid Families Income is increasing continually Brazilian families consumption is growing every year Average Real Salary (R$) Families consumption on Brazilian GDP demand side - %YoY growth 2.000 8 6,9 1.900 7 6,1 5,7 1.800 5,2 6 4,8 1.700 5 4,4 4,1 4,3 1.600 4 3,0 1.500 1.400 3 1.300 2 Lowest 1.200 1 Growth 1.100 - 1.000 2006a 2007a 2008a 2009a 2010a 2011a 2012e 2013e 2014e Family Indebtness will probably drop Unemployment rate is reaching a low record constantly % debt service/families income Unemployment Rate(%) 30 13,0 12,4 12,0 11,5 25 22,4 19,1 19,2 20,3 19,5 20 20,2 11,0 9,9 10,0 20 17,8 10,0 9,3 Peak 9,0 7,9 8,1 15 8,0 6,7 7,0 6,0 10 5,5 6,0 4,8 5 5,0 4,2 4,0 - 3,0 Source: Credit Suisse, BaCen and IBGE 5 Mobile Business in Brazil is driving sector growth A huge market…. …with demographic bonus … and still low Voice and Data usage Serv.Rev. US$ Bln; Mln subs; 2011 Mln of people MoU (minutes); Data as a % of Serv. Rev.; 2011 173 2002 2009 2014 Minutes of Use %Data Serv. Rev. Service 108 898 Revenue 82 Class A/B 14.5 20 29.1 37 4o 55% - 50,00 100,00 150,00 200,00 250,00 300,00 350,00C 400,00 67.5450,00 500,00 95 118 452 38% 986 339 31% D 46.1 44.5 32.1 19% Subscriber 894 116 46.6 28.9 Base 332 E 16.8 246 o Above From US$891 From US$558 From zero 4 US$3.843 to US$3.843 to US$891 to US$558 - 200,00 400,00 600,00 800,00 1.000,00 1.200,00 Brazil: GDP vs. Telecom Revenues Growth ARPM Fixed vs. Mobile % Growth YoY R$ Mobile 25% 20% 15% 10% TIM 5% Mobile Market 50% mobile 0% GDP** discount Fixed -5% -10% Wireline -15% Market* 2006 2007 2008 2009 2010 2011 2012 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 **BaCen estimates for 3Q12 Source: Company estimates; BofA ML Global Wireless Matrix 3Q12; Teleco; IBGE; Bloomberg; Credit Suisse * Wireline Market is composed by incumbents only 6 Mobile Segment to Support Universalization Customers Growth - Telecom Market Transformation (Mln customers) Total Revenues- R$ Bln 258,9 CAGR ’12-’15 +114% 242,2 129 4% 202,9 124 116 174,0 10 14 150,6 28% 104 8 (7%) (9%) (12%) Mobile 121,0 • Mobile 6 (6%) Mobile: +7% +11% VAS 41 43 45 46 39,4 41,2 41,5 42,0 43,0 43,7 0% • Mobile (40%) (40%) (40%) (40%) Fixed Voice 17 • Fixed 18 19 2007 2008 2009 2010 2011 3Q12 (16%) 21 7% Data* (17%) (17%) (18%) Mobile 40 Fixed: -1% 64% 79% 90% 105% 124% 132% • Fixed 39 37 35 Penetration (38%) (36%) -5% Voice (33%) (30%) Customers Growth – Broadband 2009 2012 2014 2015 (Mln customers) Market split between: 50,8 +3,658% Mobile 47 60 69 75 (45%) (52%) (56%) (58%) 33,2 57 56 55 55 Mobile Fixed (55%) (48%) (44%) (42%) 18,6 14,6 16,3 10,0 11,4 +86% Fixed 4,1 13,8 1,4 Mobile Segment as the Growth Driver and 2008 2009 2010 2011 3Q12 Sector Universalization 7 FMS Secular Trend Remains on Play Fixed to Mobile Substitution… …impacting Fixed Incumbents … benefiting Mobile Segment Fixed Tariff Premium over Mobile Lines in Service ARPM (R$/min) (Fixed - Residential, Mobile, D% yoy, D% yoy growth average) Fixed +18% Mobile (Residential) -6% Mobile 50% mobile discount 1Q11 3Q12 1Q11 3Q12 Fixed Revenues 2006 2007 2008 2009 2010 2011 2012 (Fixed, Mobile, D% yoy, D% yoy growth average) Leading Traffic to a Sharp Increase Fixed Mobile -7% +9% (Bln Minutes) 26.4 21.8 22.6 23.8 18.4 20.1 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 1Q11 3Q12 1Q11 3Q12 EBITDA Leadership in LD Market Share (Integrated, Mobile as TIM, D% yoy, D% yoy growth average) (% Minutes) Integrated Mobile 88.2% -5% +10% 66.5% 53.3% 49.8% 48.5% 48.3% 49.7% 6.7% 45.8% 48.1% 28.3% 42.0% 47.8% 47.7% jun/09 jun/10 jun/10 dec/10 jun/11 dec/11 mar/12 1Q11 3Q12 1Q11 3Q12** TIM Incumbents* * Telemar, Brasil Telecom, Telesp e Embratel. Source: Companies results and Teleco. **TIM’s Organic EBITDA 8 4Q12 Results Business Resilience Against a Strong Headwind Operational Improvement Users, Minutes, Unique Users, %YoY Leader in customer base th +10% +14% growth for the 10 +22% consecutive quarter 150 ~21 70.3 67.2 68.9 69.4 139 64.1 ~18 131 126 127 Leader in pre-paid #2 in post-paid voice (ex - M2M and Dongles) 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 Customer Base – Mln Minutes of Usage Data Monthly Unique Users - Mln Record of MoU at 150 min Smartphone penetration Financials reached 43% of total base R$ Bln, %YoY Increasing investment to Total Revenues Organic EBITDA Organic Net Income R$3.4 Bln (+12% YoY) ex- 19% 27% 34% licenses 13% 16% 8% 7% 8% -2% % YoY 7% 7% 6% Organic Net Income FY12 = R$1.5 Bln (+17.4% YoY) EBITDA – Capex = R$1.6 Bln (ex-licenses) 5.0 0.4 0.5 0.3 4.7 0.3 Proposed dividends of 4.5 4.5 1.2 1.2 1.2 1.4 ~R$743 mln (+39% YoY) 1Q12 2Q12 3Q12 4Q12 1Q12 2Q12 3Q12 4Q12 1Q12 2Q12 3Q12 4Q12 % Margin 26.2 26.7 26.3 28.4 6.1 7.5 9.0 9.2 10 Guidance: Check Point % 2011 2012 Guidance R$ billion Achievement Total Net 17.1 18.8 18.8 100% Revenues (+10%) Organic EBITDA 4.7 5.1 5.1 100% (+10%) Organic Capex 3.0 3.4 3.0 113% Tough Year Underscored by Solid Business Foundation • Resilience of customer base growth • Macroeconomic slowdown Net Service Revenue Evolution and usage (especially data) • Regulatory scrutiny 2.7% • ARPU sequentially improving 1.7% • Image damage 1.8% 13.1% • Good cost control (ITX / network • Increased competition costs up 9% while traffic +34%) 6.9% • Intelig’s business performance • More investments in infrastructure 2011 YoY MTR Intelig’s Macro 2012 YoY below expectations Net Service Impact Business Competition Net Service Revs Impact Regulatory Revs Impact 11 The only company to gain market share Total Market Share Growth (% of total lines) D YoY #1 Pre-paid 30.1% 30.2% 30.1% 29.7% 29.5% 29.5% 29.5% 29.5% 29.8% 29.6% 29.7% 27.6% 28.3% +63 Bps 29.1% Vivo -45 Bps -78 Bps 640 221 28.0% 27.2% 26.5% 26.8% 26.9% 26.8%26.9% bps 26.0% bps 25.4% 24.1% 25.3% 25.5% 25.4% 25.4% 25.6% 24.7% +67 Bps 24.9% +42 Bps 20.1% 23.7%24.0% 25.1% 25.1% 25.5% 25.3% 19.5% -53 Bps 24.5% 24.9% 24.6% 24.6% 24.5% Claro +0 Bps 2011 2012 20.4% 20.1% #2 Voice Post-paid 19.5% 19.4% 19.7% 19.1% 18.8% 18.8% 18.5% 18.7% 18.7% 18.8% Oi +3 Bps 38.2% 38.4% +21 Bps +121 Bps The only mobile 22.0% 23.2% operator which -282 Bps 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 grew in 2012 23.9% 21.0% 15.3% 16.7% +143 Bps Source: Anatel 2Q12 4Q12 Sales Force Focus on Efficiency Bad Debt Trend (Points of sale EoP) (R$; months) (as % of Gross Revenues) 2010 67 SAC/ 1.5 Own 1.3 1.4 2011 81 +96% ARPU Stores 2012 131 1.04% 36 0.92% 28 27 0.71% SAC 3Q12 298k +9% Mass -21% -5% Channel QoQ 4Q12 326k 4Q10 4Q11 4Q12 4Q10 4Q11 4Q12 12 Customer Base Evolution Voice post-paid Base Analysis (ex-M2M and broadband) (Million lines) Customer Base Growth D% YoY (% YoY) 10.5 10.7 10.4 10.2 10.410.3 +15% 9.9 10.0 9.8 9.4 9.5 9.7 9.3 +15.5% 10.7 Total post- 8.3 8.4 8.7 +25% paid 10.3 base 10.0 9.7 Voice post- 4Q12: 519k Net adds post-paid paid base 9.3 34% Net share (#2) Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Source: Anatel 4Q11 1Q12 2Q12 3Q12 4Q12 +75 Bps Voice Growth (MOU) (Minutes; %YoY; Top Up) post- 14.5% 14.4% 14.5% 14.8% 15.3% paid Mix % YoY +1.7% +0.2% +0.2% +6.7% +14.5% +8.8% 59.6 Top Up Volume 58.9 59.1 57.6 210 pre-paid 150 139 183 +15% 54.8 131 126 127 4Q11 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 Source: Anatel 13 Data as Key Driver for Growth Products Net Revenues Handset Sales Market Share Smart/Web phone Penetration (R$ Million) (% of handset revenues from Jan/12 to Nov/12) (% over total base of lines) +56.4% 1.6x 706 43.1% Operators 7% 39.1% 622 35.2% 563 54% 25% 31.1% 451 453 46% 30% 26.6% Open Market 38% 4Q11 1Q12 2Q12 3Q12 4Q12 P1 TIM P3 P4 Sales of web/smartphones represented 65% Source: Company estimates 4Q11 1Q12 2Q12 3Q12 4Q12 VAS Gross Revenues SMS unique users growth Data users (R$ Million; % of Gross Mobile Services Revenues) (Million Montlhy unique users) (Million monthly unique users) 19.6% 20.5% 18.1% 18.7% +21.5% 16.7% +24.6% >21 ~18 +29.7% 1,243 1,132 1,000 1,031 958 4Q11 1Q12 2Q12 3Q12 4Q12 3G coverage (% of urban 66% 72% 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 pop.) 14 EBITDA & Efficiency EBITDA Evolution (R$ Million) 16 mln of provision on advertising credit ~400 26 mln of provision on Anatel administrative procedures established between 2007/09 +69 +91 -630 +1,067 -202 -42 4,658 5,052 5,010 27.3% EBITDA Margin 26.9% 26.7% 32.4% 32.5% Service EBITDA Margin 32.1% EBITDA Δ Services Δ Handset Δ Marketing Δ Network Δ Pers./G&A Adj.