Results presentation 2 q14 eng

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  • 1. 26k 100k Postpaid segment grew by 7% and postpaid mix over customer base reached 16.5%, while SAC/ARPU remained below 2 months 19% 22% 27% 2Q12 2Q13 2Q14 2nd QUARTER HIGHLIGHTS 2 Operational 2Q13 2Q14 +7% YoY Data as % of revenues Net Revenues: Usage (local + long distance) + VAS Total OPEX (% YoY)11% 9% 2% -3% -7% EBITDA Margin 27% 25% 28% 2Q12 2Q13 2Q14 % of total customer base 15.8% 16.5% 2Q13 2Q14 Mix of postpaid over total base World Cup Figures (in the Stadiums) Live TIM customer base Financial Gross Data Revenue growth at solid pace: R$1.6 bln in 2Q14 Net Revenues Business Generated (ex incoming) grew by 7% YoY Strong cost control: total opex dropped 7% YoY EBITDA grew 8% YoY with margin gain 28% 32% 39% Data users reached 29 mln lines Live TIM crossed 100 thousand customers milestone +3 p.p. +5 p.p. 2Q13 3Q13 4Q13 1Q14 2Q14 Jul/14Jun/13 2Q12 2Q13 2Q14 Photos sent: 50 mln Outgoing calls: 5 mln Data traffic: 26.7 TBMaracan Stadium
  • 2. CORE BUSINESS ANALYSIS & PERFORMANCE MTR cut full impact in 2Q Handset sales at a healthy level although reduced growth World Cup impact on commercial activities Mobile Service Net Revenues Analysis (% YoY) EBITDA Performance (mln; %YoY) June 2013 June 2014 No Holidays 1 National holiday 3 Brazils games (1/2 day holiday) Up to 2 municipal holidays in main cities hosting games Net revenues from MTR-18% -28% 2.4 3.1 2.7 2Q12 2Q13 2Q14 Total units sold (mln) (Local + LD + VAS) Business Received 2Q13 2Q14 1,232 2Q13 2Q14 Reported EBITDA Margin 1 2 3 +7% 24.9% 27.9% EBITDA 3 1Q14 2Q14 -30% Business Generated +3% -1% *MTR Impact +16% +8% 1,331 Total 6 months (YoY) +8% -26% +4% 0% (Incoming MTR + SMS) Ex-MTR Ex-MTR *MTR Impact Ex-MTR ~170 mln* ~96 mln* 1,427
  • 3. 118.5 23.2 2009 2010 2011 2012 2013 Jun/14 2Q13 2Q142Q13 2Q14 READY FOR DATA OPPORTUNITY 4 # Access Growth (users in mln) Brazilian Broadband: Low Average Speed (Mbps) WSJ: Brazil - The Social Media Capital of the Universe Fixed Data Experience is Mobile Capturing Data Opportunity Mobile 2.7 2.6 4Q13 1Q14 #2 in Facebook #2 in Twitter 2nd largest market #2 in WhatsApp 10.5 13.7 3.6 2.5 Sources: SocialBakers, e-Marketer, Semiocast, G1.com, Newspaper Folha de So Paulo Sources: Anatel, Akamai - State of Internet Source: IDC Tracker Source: Anatel # Total Market Equipment Sold (units in mln) Smartphone & Tablet Notebook & PC 1Q14 2Q14 SMS Web Content & Other 1,500 Data Gross Revenues Mix (R$ mln; %YoY) +22% +1% -8% +29% +33% +45% +72% BOU: Bytes of Use (Megabytes) Days of Use Data Users (# mln users) 23 29 2Q13 2Q14 +24% 2Q13 2Q14 2Q13 2Q14 +40% +30% In May, >45% connections in Brazil were < 2Mbps + 5X %YoY %YoY +20% 1,578
  • 4. 2Q13 2Q14 o Braslia o Curitiba o Rio de Janeiro 4Q13 2Q14 4Q13 1Q14 2Q14 INFRASTRUCTURE FOCUSED IN DATA 5 COVERAGE Homogeneous Access Upgrade In all relevant areas Site densification Small cell / Wi-Fi CAPACITY Higher speed 4G roll out Mobile broadband project acceleration Backhauling infrastructure AVAILABILITY Always available Fine tunning Fiber rings / redundance Resilience DATA CENTRIC APPROACH TIMs Infrastructure Strategy Network in Numbers Number of 3G & 4G Sites Number of Wi-Fi & Small Cell ~11.3 ~11.0 ~13.1 Number of sites with fiber (FTTS) Cities in mobile BB project +3.5x 53 66 1Q14 2Q14 +13 cities BioSite: New approach to coverage Patent pending +47% 1 2 3 After Before o New frequency at 900 MHz in SP o Better indoor coverage o Addressing capacity requirement Completed actions Initiating in:
  • 5. 75.7 76.2 79.4 68.9 72.2 74.2 63.0 66.5 68.8 47.8 49.7 51.1 47% 39% 20% 30% 21% 20% 12% 10% 2Q13 2Q14 23% 24% 24% 26% 40% 35% 11% 14% 2Q13 2Q14 2Q13 2Q14 CUSTOMER BASE EVOLUTION 6 # 1 player in prepaid Strong growth in Controle postpaid base Austere disconnection policy 2Q12 2Q13 TIM Source: ANATEL 2Q14 Vivo Claro Oi 4G Market Share (%; thd users) 3G Market Share (%; mln users) 28.9 30.2 41.5 16.2 Source: ANATEL TIM TIM 1,281 990 655 334 Customer Base (mln) Source: ANATEL +8.4% Source: Company Prepaid Recharge (R$; % YoY) 118 mln 3.3 mln
  • 6. vv GO TO MARKET PROGRESS 7 Equipping Customer Base % of smartphone sales among players in 2Q14 % of smart + webphone on TIMs base in 2Q14 % of smartphone over new sales in 2Q14 Postpaid o Reduce churn on postpaid o Attract dual SIM card users traffic o Renewed focus on corporate customers o Leveraging on pure mobile distinctiveness o Expanding daily tariff scheme to new regions o Simplicity / Transparency R$ 7 weekly service package R$ 0.75 daily offer Prepaid 35% 50% 62% 2Q12 2Q13 2Q14 39% 57% 71% 2Q12 2Q13 2Q14 41% 23% 28% 9% P3 P2 P1 TIM Managing customer base To Infinity and beyond Penetration of smart + webphones drives data usage growth Source: GFK Group Source: Company Source: Company
  • 7. 0.36 0.32 0.24 0.16 0.10 0.06 0.03 0.02 2012 2013 2014 2015 2016 2017 2018 2019 Auction expected for September License period: 15 + 15 years No additional obligation. Network and Spectrum sharing opportunities Switch off plan starting at the beginning of 2016 Minimum prices and clean-up costs not yet defined 4G Auction RFP Leased line (EILD) reference price reduction, in 2016, from ~20% until ~80% Establish regulated reference prices to leased lines speed up to 34 Mbps On preliminary static simulation show relevant OPEX reduction MTR New Glide Path (R$) Leased Lines - EILD New parameters established New MTR and EILD Analysis Source: Anatel Source: ANATEL, Commissioners Meeting on July 17th Main measures until July, 2014 Cancelation within 48 hours, without human assistance In case of dropped call, companies must call customer back Minimum of 30 days for prepaid credits to expire ANATEL's new costumer care policy - RGC Source: ANATEL Resolution 632/2014, GEX Meeting on July 17th REGULATORY UPDATE TIM has been working to improve transparency and caring 8
  • 8. 2Q13 3Q13 4Q13 1Q14 2Q14 TIM SOLUES CORPORATIVAS: PLAN MOVING FORWARD IN Q2 9 Turnaround Plan on Fixed Business 20132012 - 2014 New sales revenues (R$; YoY) Financial performance Governance / Efficiency Business development Quality and Process Activation time (days) Operational Improvements Paying Off + Segment EBITDA-CAPEX Source: Company Net Revenues (with intercompany) 2013 2014 Business Priorities 4Q13 1Q14 2Q14Plan Phases Highlights Financial sanitization Infrastructure reinforcement Market repositioning o Positive EBITDA o Cost efficiency o Customer base management o New business unit organization o IT renewal plan o Multiservice network launch o New branding o New offers and product launch o Restructured sales force 2H14 Showing results o Sales growth o Revenue rebound Business remodeling driving stable fixed revenues QoQ +19x 2Q13 2Q14 -80%
  • 9. +34% 11.5 18.3 24.5 2Q13 0 1Q14 2Q14 10 Gaining more traction Addressable HH (000 HH) Gross Adds (000 users) Customer Base (000 users) May/2014 o Live TIM Extreme 1Gbps for R$1,999.90 o Live TIM Blue Box release: optional TV approach Jul/2014 New speed: 70Mbps for R$119.90 Source: Netflix July 2014 Netflix Broadband Ranking (Average streaming speed representation) 31% Positive Neutral Negative Internet buzz FIXED BROADBAND: LIVE TIM New Offers 126 neighborhoods: 43 neighborhoods in SP 83 neighborhoods in RJ Quality Experience 609 804 1,069 1,138 1,220 2Q13 3Q13 4Q13 1Q14 2Q14 8% 31% 21% 51% 72% 18% 2nd 3rd 4th 5th 6th 1st Source: Gauge 1Q14 Source: Company +113% 10 26k 100k Jul/14Jun/13 Market average
  • 10. 4,065 Thousands 2Q13 2Q14 3,985 170 Thousands 96 2Q13 2Q14 +2.2% FINANCIAL RESULTS ANALYSIS (1/2)Service Net Revenues (R$ mln; % YoY) EBITDA (R$ mln; % YoY) Reported Revenue 2Q13 Reported Revenue 2Q14 3,985 1,232 Reported EBITDA 2Q13 Reported EBITDA 2Q14 +186 -87 Opex/ Others Traffic/Data Contribution Margin 24.9% 31.1% 1,331 27.9% 34.4% EBITDA Margin Service EBITDA Margin +5.8% +4.4% Efficient Cost Control Interconnection (% YoY) Leased Lines Cost (% YoY) % Bad Debt/Sales (% over gross revenues) Net Services Revenues Exposure EBITDA Exposure MTR Impact -2.0% ~ 25% ~ 12% 2Q10 2Q11 2Q12 2Q13 2Q14 ~ 35% ~18% 2Q10 2Q11 2Q12 2Q13 2Q14 MTR Impact +15.8% +8.0% -31.3% -10% ~1% ~1% 2Q13 2Q14 MTR Exposure 1,427 Pro forma EBITDA in 2Q14 4,155 Pro forma Revenue in 2Q14 stable +208 -253 -36 YoY +6.9% -29.6% -20.5% Others Business Incoming Business Generated YoY 11
  • 11. -1,227 2,648 -609 -1,654* -1,786 182 +41% FINANCIAL RESULTS ANALYSIS (2/2) Net Income - 6 months (R$ mln; % YoY) Net Debt (R