TELECOM ITALIA GROUP
TIM Brasil 2014-2016 Plan Outline Milan, November 7th, 2013
TIM Brasil 2014-2016 Plan Outline
RODRIGO ABREU
TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
Safe Harbour These presentations contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company and the Group. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected or implied in the forward looking statements as a result of various factors. Consequently, Telecom Italia S.p.A. makes no representation, whether expressed or implied, as to the conformity of the actual results with those projected in the forward looking statements. Forward-looking information is based on certain key assumptions which we believe to be reasonable as of the date hereof, but forward looking information by its nature involves risks and uncertainties, which are outside our control, and could significantly affect expected results. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telecom Italia S.p.A. undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telecom Italia S.p.A. business or acquisition strategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged to consult the Company's Annual Report on Form 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securities and Exchange Commission. The accounting policies and consolidation principles adopted in the preparation of the Condensed Consolidated Financial Statements as of, and for the nine months ended, 30 September 2013 have been applied on a basis consistent with those adopted in the Annual Consolidated Financial Statements at 31 December 2012, to which reference can be made, except for the new standards and interpretations adopted by the Group, which, other than for the prospective adoption of IFRS 13 ( Fair Value measurement), didn’t impact on the Condensed Consolidated Financial Statements as of, and for the nine months ended, 30 September 2013. Some data for the first quarter 2012, used in comparisons, included into this presentation have been restated as a result of the early adoption, starting from the first half 2012, of the revised version of IAS 19 (Employee Benefits) and the reclassification of Matrix (company that was disposed of on October 31, 2012) from the Business Unit Domestic–Core Domestic to the Business Unit Other Activities.
RODRIGO ABREU
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TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
Where We Are: TIM Brasil 2013 Year-to-Date Results Financial R$ Million
9M13
YoY
14,738 12,359
7.3% 2.1%
VAS*
3,899
23.7%
Handset
2,379
45.2%
EBITDA
3,708
3.4%
CAPEX
2,769
+16.8%
Total Revenues Service
9M13
YoY
Postpaid (mln users)
11.9
16.4%
MOU (min)
147
12.7%
R$ 18.4
-2.0%
ARPU
Consistent financial and operational results even amidst a different macro scenario Continuous growth/acceleration on postpaid, improving customer base mix, ARPU evolution Maintaining data services at double digit growth, underscored by smartphone sales and innovative offers Solid improvement on Network and Quality indicators Executing on Fiber-to-the-Site (FTTS) project and 3G/4G roll-out, guaranteeing mobile broadband acceleration Strong efficiency: Industry benchmark for SAC and bad debt Strong savings on leased lines costs, even with traffic double digit growth
Reported figures for TIM Part. as of Sept/2013 *Gross mobile revenues RODRIGO ABREU
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TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
Macro Scenario: A Different Outlook Real GDP Forecast
Inflation Forecast
%YoY Growth; Source: BaCen 3.8
IPCA - %YoY Growth; Source: BaCen Old Scenario
3.6
3,3
Old Scenario New Scenario
2,4
2,3
2,4
5.8
New Scenario
6.0 5.5
2,4 5.5
5.4
5.5 5.0
2013
2014
2015
2016
2013
Interest Rate Forecast %Selic Target p.y. - Year average; Source: BaCen
2014
7,3
2013
10,3
10,0
8,7
9,0
2014
2015
2016
$/US$ - Year average; Source: BaCen
Market Consensus on Oct/12 Market Consensus on Oct/13
Market Consensus on Oct/13 10,3
2015
FX Rate Forecast
Market Consensus on Oct/12
8,4
2,2
2,3
2,4
2,4
8,8
2,0
2,0
2,0
2,1
2016
2013
2014
2015
2016
RODRIGO ABREU
Market consensus shows now a softer growth Telecom industry has shown resilience, specially on the mobile side, but it is not completely immune Mobile sector will continue to benefit from fixed-mobile substitution, now also strong on data
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TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
Still Increasing Internet Penetration and Data market 61.3 Mln
60%
Other
32% 11.8 Mln
Lack of Coverage
24% 8.8 Mln
Too Expensive
44% 16.2 Mln
36.8 Mln
> R$ 250
1%
R$ 250
1%
R$ 200
2%
R$ 150 R$ 100 R$ 80 R$ 70 R$ 50 R$ 40 R$ 30 R$ 20 R$ 10
Total Households
CABLE FTTH
Willingness to pay (% of Households)
5% 12% 18%
ADSL VDSL
Do NOT Possess Internet connection
40% 24.5 Mln
53% of active connection base has currently a speed below 2 Mbps
24% 39% 48% 59% 65%
MBB
Possess Internet connection
71%
Households which does NOT possess
Source: CETIC´13
Market Data Revenues Growth 2016 vs. 2012 >13 bn Reais on Mobile (+100%) >7 bn Reais on Fixed (+35%) RODRIGO ABREU
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TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
The Opportunity in Brazil and TIM’s Strategic Positioning A) Continue to Explore Voice FMS
B) Lead the Data / Internet Wave
Very large voice market, although declining High price umbrella in Fixed services Customer migration to higher plans / hybrid and postpaid
Market
Emerging data/internet user population Large un-served Internet demand Old Fixed networks legacy + bundle requirement Mobile as the natural vehicle for inclusion
Voice Revenues
Data Revenues
(R$ bln; Source: TIM Brasil)
39,9 33,8
Strategy/ Objectives
2007
41,2
41,1
42,8
39,7
40,4
38,4
2008
2009
2010
45,7
46,8
36,4
34,1
2011
2012
(R$ bln; Source: TIM Brasil)
46.0*
32,3
2013
FMS Customer Base Growth
Mobile
Mobile
Fixed 2014
2015
2016
Customer Base Expansion
15,1
16,7
17,9
2,7
4,0
5,8
8,0
2007
2008
2009
2010
13,4
19,2
20,4
10,5 13,3 2011
2012
… Massive Mobile Internet Access
21,7
Fixed
16,7 2013
2014
2015
2016
Internet and Data For All
C) Manage Existing Customer Base RODRIGO ABREU
* Excluded non recurrent and non-operational revenues (e.g.: towers sell)
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TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
Strategy: Infrastructure Evolution Backhauling Evolution
Increased Coverage & Access Capacity # new elements
Fiber to the Site / Mobile Broadband Project Key to Data Growth
Targeting 38 cities in 2013, 100+ cities till 2016
From 2-8 to 100+ Mbps
LTE Ready
Macro coverage fine tuning
82% urban population
#NodeB / eNodeB (3G + 4G) POP MW
POP MW
95% urban population
# BTS (2G)
BSC-RNC Site
2013
POP MW
Focus on IP infrastructure, caching, peering
POP MW POP MW
2014
2015
2016
Capex Evolution Towards Data % of total Capex
Fiber Base Infrastructure Growth 2009
INTELIG ACQUISITION
FIBER TO
2013 THE AMAZON
MASSIVE LD
2016 BACKBONE
2013
2014 LTE*
INTELIG 15.000KM
46,000 KM OF FIBER BY YE13
65,000 KM OF FIBER
New backbone routes - Increasing resilience. RODRIGO ABREU
2015 3G
2016 2G
Small Cell Approach # new elements
New Sites Including Small Cells
2012
*Includes 2.5 GHz RAN Sharing
2013e
2014e
2015e
2016e 6
TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
Strategy: Offer Evolution Smartphone Sales
Smart/Webphone Penetration
(% total handset sale)
42%
3Q12 4Q12
46%
1Q13
46%
67%
3Q13
Smartphone
52% 43%
22%
13%
Webphone
20% 2012
Essencial
>50%
34%
2012
2012
2016e
VAS/Revs.
>40%
23%
21%
24.5
3Q13
VAS Gross Revs.
2016e
RODRIGO ABREU
2016e
56%
46% Notebook
44%
XX%
XX%
3Q13
Devices Sales Share
(% of Mobile Services Gross Revenues; R$ Million)
XX%
+15%
21.3
Jul 13
VAS Revenue Growth
Data Users
(% of Data Users in CB; million users)
29%
>170
150
136
30%
21%
(Minutes)
>75%
35%
24%
57%
2Q13
28%
19%
Voice MOU
(% over total base of lines)
30%
Innovative Offers Driving Growth and Differentiation
36% Tablets 17% Desktop
2012
2013e
2016e
2010
2012
2014
2016
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TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
Fixed Business Evolution
INTELIG Business Stabilization and Recovery
TIM FIBER Sustainable Growth Mode
Top Line: Recovery Path
Focus on value, selecting high margin customers Selective approach focused on high potential verticals: Finance, ISP (data), Call Center (voice) Network ready to retake sales
2012
2013e
2014e
2015e
2016e
2014e
2015e
2016e
EBITDA: Inflection Point
Increasing addressable market with mobile synergy approach Optimize investment leveraging on multi service networks
2012
2013e
Leading market share for speeds above 34Mbps (ultra BB offers) Leveraging fiber assets in SP and RJ with reduced investment and efficient approach
Addressable Households ´000
522
UBB Market Share RJ/SP (Aug 13) >34 Mbps download speed
881
GVT 7.1%
Good potential at SME segment Strong support to mobile business w/ small cell backhauling
2012
3Q13
2016 LIVE TIM 48.5%
VIVO 22.0% NET 8.9%
RODRIGO ABREU
OTHER5. 6%
OI 7.8%
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TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
TIM Part: 2014-2016 Guidance
Guidance
R$ billion
18,8
Total Net Revenues
2012
2013-2016 CAGR: Mid Single Digit Growth 2013e
2014e
2015e
2016e
R$ billion
2013-2016 CAGR: Mid Single Digit Growth
5,0
EBITDA
2012
2013e
2014e
2015e
2016e
R$ billion
3.8
CAPEX Infrastructure
3,2
Other/Licenses
0,5 2012
RODRIGO ABREU
Total CAPEX 2014-2016: > R$11 billion* 2013e
2014e
2015e
*Does not consider 4G licenses (700Mhz).
2016e 9
TELECOM ITALIA GROUP TIM Brasil 2014-2016 Plan Outline
THANK YOU.
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