apresentação conferência morgan stanley

TIM ParticipaTIM Participaçções S.A.ões S.A.Morgan Stanley Latin America CEO Conference

Miami – January 2009

2

Brazilian TLC overview

TIM Strategy

3Q08 Results: Operacional & Financial

Guidance

Historical Indicators

3

Competitive Landscape

Telecom Market

Political and Regulatory

1

3

2Mobile and broadband as main drivers for market growth

Modest growth in the fixed market (mainly due to low competition)

Increasing bundle offers (following the ‘one-stop-shop’ concept)

National consolidation of the main playersTough competition remains in mobile with aggressiveness in promotionsHuge opportunity in the broadband market due to strong demandAlternative operators and NP brought competition to the fixed marketHorizontal expansion aiming convergent offers

More political interventions over regulatory agentsRegulatory changes to allow TLC companies merge (OI & BRT)Pressure by Government for Telecom services universalization and digital inclusionTaxes and interconnection tariff discussionsWidening the competition: Number Portability (already in place), Wi-Max and Unbundling (to be discussed)


4

Brazilian TLC overview: Political and Regulatory2009-10 Scenario Impacts for TIM

VU-M rates expected broadly stable with possible elasticity effect on traffic to exploitLower interconnection dependency due to better traffic mix and convergent offers

Agreement among fixed and mobile operators until mid-2009New regulatory rule by 2010 (Full Allocated Cost model)

Mobile: efforts to improve quality (call center, coverage) and loyalty as a competitive advantageFixed: opportunity with convergent offers

Full implementation by the end of 1Q09Widening competition

License payment: up front in 4Q08 (R$1.2bn)2009 coverage roll-out balancing value and regulatory obligationsCAPEX and OPEX impact

Anatel’s loan facility at a higher costCoverage obligation (service universalization and digital inclusion)“H” band to be auctioned

More capacity / frequency for BB offerDelayed Wi-Max commercial launchOpportunity in a niche market

Complementary vehicle for BroadbandAuction expected for 2009 (more than 2 years of delay)Widening competition

Updated rules to become commercially viableImplementation expected for 2010Widening competition

Allowing a fair competition in the fixed and broadband market for TIM

Interconnection tariff (VU-M)

3G license

Wi-Max license

Number Portability (Fixed and Mobile)

Unbundling

1

5

Brazilian TLC overview: Telecom Market

Billion of R$Million of lines

Source: internal estimates

BB Mobile

2008 2011

~5%

Fixed

Mobile

BB Fixed

~50%

~10%

~2%

CAGR

43

43 50

81115

46

2008 2011

41

144194

10

163

10

45

BB Mobile

Fixed

Mobile

BB Fixed

~10%

~50%

~3%

CAGR

~17%

2

Strong growth driven by Mobile BB fueled by market PC boom and low penetration ratioUniversalization of mobile service (~100% penetration by 2011)Fixed market growth fueled by increase of competition

TLC Subscriber Market TLC Revenue Market

6

Brazilian TLC overview: Competitive Landscape3

(1) Including Telemig Celular(2) Including Amazonia Celular(3) Considering its regional presence(4) 3Q08 figuresSource: company reports

Oi (2)/Brasil TelecomTIM Embratel /ClaroTelefonica/Vivo (1)

Long distanceincumbentPl

ayer

Foo

tprin

t

Mobile + Fixed Incumbent

Mobile

30%(42.3 MM)

25%(35.2 MM)

Fixed

Mobile

BroadbandMar

ket s

hare

(4)

National fixed license acquired

in may / 07

~0.4%

25%(35.7 MM)

19%(27.1 MM)

~4%

~30% / ~90%(3) ~12% ~55% / ~85%(3)

~25% ~22% ~40%

7


TIM Strategy


Guidance


8

Push on Mobile BB

Growth

Flexible/simple tariff plans (“no-frills”)Smartphone and 3G devices -new Wi-Fi devices

Lower PC entry level

New specialized kits for mass market distribution

Development of IM, social networking, mobile advertising

Key Objectives

'08 '11

0.5

~ 2.5

BB Users (Mn)30% contribution togrowth on servicerevenue

ActionsStrategy

0.2

> 3.0

TIM Fixo Customers (Mn)7% market shareHomezoning

Offers through TIM Fixo

Innovative OfferingsBest value for price (VAS included)

New packages for heavy users

Packaging TIM Fixo+ Mobile BB

Distribution (telesales, kiosks, and door to door approach) '08 '11

Mobile: “Customer

Centric"Approach

Focus on partnership with other operators of the new TMT chain (content & 4-Play)Reinforce TIM cutting edge positioning on data offers (through Smartphones: iPhone, Blackberry and etc)Invest in CRM capabilities improving customer life - cycle managementSelective approach by segment and geography

Market share of ~24% in 2011 with focus on value

Defend revenue share

Recovering brand awareness

TIM Strategy: Convergence through mobile network

9

TIM fixedlicense

MOBILEMOBILE

FIXEDFIXED

Partnership in Pay TV

Partnership in Pay TV

TIM Web

TIM Casa FlexTIM Casa

...2006...2006 20072007

Number portability

Competing on broadband market with mobility concept

Widening portfolio

Increase customer's share of wallet through bundle offers

Capturing opportunities on fixed voice services through number

portability

Strengthening our mobile business

Strengthening partnership inPay TV offers

Convergent Company

+

+

+

=

INTERNETINTERNETTIM 3Glicense TIM Web

Broadband

20082008 2008...2008...

TIM Fixo

TIM Strategy: Roadmap to a Convergent Company

10

TIM Strategy: Efficiency

Commercial Efficiency

New commissioning model increasingly oriented on acquisition quality and value, leading to higher efficiency of customer investments

Subsidy strategy increasingly focused on high user segment

Bad debt reduction to industry benchmark leveraging on new control rules/ stricter credit analysis

Structural Efficiency

Optimize transport network infrastructure (partnerships vs. make or buy)

Maximum exploitation of IT platforms synergies with Telecom Italia

Tight G&A cost control

Harvest Human Resources efficiency

Financial objectiveActions

Commercial cash cost as % of service revenues

Bad debt as % of service revenues

Industrial (Network and IT) costs per customer per year

G&A & labour cost as % of serv. revs.

>2pp reduction in 2011 from 2008 level

From ~6% in 2008 to ~4% in 2011

Slightly decrease

~1pp reduction in 2011 from 2008 level

11

TIM Strategy: paving a sustainable growth

On December 1st of 2008, TIM became part of the new portfolio of

Bovespa’s Corporate Sustainability Index (ISE);

ISE is composed by 30 companies out of 394 traded at Bovespa,

comprising only the companies with a strongcommitment to sustainability and social responsibility;

ISE is based on the international concept of the Triple Bottom Line (TBL), which makes an integrated assessment

of companies’ social, environmental and financial elements;

Underlining TIM’s commitment on a constant relationship improvement among all its stakeholders and

strengthening its environmental indicators performance;

Recognized as one of the national companies more committed to management transparency and which contributes

to the development of a fair social system, environmentally balanced and economically prosperous.

TIM became part of Bovespa’ s Corporate Sustainability Index (ISE)

12


TIM Strategy


Guidance


13

Subscribers base (Mn)

3Q08 Results: Subs and Market ShareRevenue vs. Market share

33.831.3 32.529.2

35.2

6.6 6.8 6.8 6.8 6.8

3Q07 4Q07 1Q08 2Q08 3Q08Post-paid Pre-paid

22.6 24.5 25.8 27.0 28.4

20.7%

Pre-paid growth supported by on-net promotions and naked

SIM-Card sales (>50% of total gross adds)

Post-paid

. Selective approach on acquisition with focus on value and quality

. Commercial focus on retention

. Launch of new premium customer care channel

A selective approach on subscriber base growth, with focus on

profitability and a strict disconnection policy;

Capturing additional value from subscriber base through cross-

selling offer

Source: Anatel and internal estimates * net service revenues

TIM Competitors

RevenueShare*

28%

Marketshare

25%

14

► Widening our TIM Web plan to address different needs► Focus on number portability opportunity► Cross-selling convergent offers via TIM Web, TIM Fixo and Mobile

VOICE: Remodeling tariffs and promotions dynamics

VAS: Push on innovative services

CONVERGENCE: Strengthening our portfolio

► Change in promotions conditions aiming profitability► Shortening promotion validity► Handset subsidy value oriented (on retention and acquisition)► Stimulating customer’s recharges through promotional bonus

► Segregate VAS promotion from voice► Stimulating usage through data package offer► VAS empowered by 3G roll-out► Further enhance partnerships

Stimulating VAS traffic‘Mega TIM Torpedo’

TIM + ASUSEnhance partnership

‘TIM FIXO’ launchConvergent offer

Post-paid focus with smartphone

‘Nova Tarifa Zero’

Pre-paid reinforce offer‘Use e Ganhe’

Commercial activities roadmap in 3Q08

Post-paid focus‘Tarifa Zero’

‘TIM Web’ BroadbandConvergent offer

3Q08 Results: Commercial activities

‘TIM TV 3G’Innovative service

JUL/08 AUG/08 SEP/08 OCT/08

15

3Q08 Results: KPI’s performance

R$ Minutes

R$ R$ Mn

ARPU MOU

SAC BAD DEBT

-13%

3Q07 2Q08 3Q081Q08

34.0 29.5 29.8 29.7

+7%

3Q07 2Q08 3Q081Q08

94 94 100 101

-14%-7%

3Q07 2Q08 3Q081Q08

129 117 119 110

275

3Q07 2Q08 3Q081Q08

156 143

~95**

~60**

177

272

203

143

~119*

* Impact from write-off of receivables in 3Q07 **Impact from telesales channel in Q1 and Q2

as % of net service revenue

9.6% 9.6% 6.8% 4.7%

16

3Q08 Results: Net Revenue and EBITDA performancesTotal Net Revenues

3,163 2,993 3,186

R$ Mn

Net Service Revenue Net Handsets Revenue

3Q07 2Q08 3Q08

YoY 1Q 2Q

Total net revenue +5.3% +4.1%

Service revenue +6.6% +6.8%

Handset revenue -14.5% -22.4%

3Q

+6.1%

+6.5%

+2.3%*

3,358

1Q08285 215 292

2,878 2,838 2,971 3,066

155

* -14% adjusting for write-off of receivables in 3Q07

EBITDA and EBITDA margin

542 637535

~173* ~95 ~60

715630

697

3Q07 2Q08 3Q081Q08

Additional bad debt impact

80012%

R$ Mn

*Impact from write-off of receivables in 3Q07: R$119 Mn in bad debt and R$55 Mn in handset revenue

20.0%

21.9%

23.8%

23.8%

17.9%

21.1%

17.1%

22.2%

Reported Margin

Adjusted Margin

17

3Q08 Results: EBITDA YoY performance

17.1%

Adjusted EBITDA Margin

R$ Mln

23.8%

Change

715.1 (173)

542.1

187.8 6.6 (40.3)(80.6) 42.6

132.1 799.89.5

AdjustedEBITDA

ReceivablesWrite-off

ReportedEBITDA

3Q07

ServiceRevenue

HandsetsRevenue

SellingExpenses

NetworkExpenses

COGS Bad Debt OtherExpenses

EBITDA3Q08

3Q07

+6.5% +2.3% +6.0% +8.1% -10.1% -48.0% -3.8%

22.2%

% YoY

(48.4) If adjusted by write-off of receivables in 3Q07

13.0 If adjusted by write-off of receivables in 3Q07

ReportedEBITDA Margin

18


TIM Strategy


Guidance


19

Guidance: TIM 2008 estimates and 2009-2011 targets

2008 E 2009 2011

Bn Reais CAGR 2008-2011

% on revenues Bn Reais % on revenues 2011

Bn Reais Bn Reais % on revenues 2011

Net Revenue

EBITDA

CAPEX

>7% ~14.4 ~8%

22 – 22.5% ~3.3 ~27%

~3.3* ~2.3 ~12%

Local currency BR GAAP

* Including 3G licenses (R$1.3 Bn)

20


TIM Strategy


Guidance


21Numbers may differ from the previous publishing due to rounding

Historical Indicators: Operational Results1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 QoQ % YoY %

Estimated population in the Region (million) 188.5 189.2 189.8 190.5 191.1 191.8 192.4 0.3% 1.4%

Municipalities Served (GSM) 2,460 2,501 2,538 2,655 2,706 2,733 2,765 1.2% 8.9%

Brazilian Wireless Subscriber Base (million) 102.2 106.7 112.8 121.0 125.8 133.2 140.8 5.7% 24.9%

Estimated Total Penetration 54.2% 56.4% 59.4% 63.5% 65.8% 69.4% 73.2% 3.7 p.p. 13.8 p.p.

Market Share 25.8% 25.8% 25.9% 25.8% 25.9% 25.4% 25.0% -0.4 p.p. -0.9 p.p.

Total Lines (´000) 26,307 27,478 29,160 31,254 32,533 33,815 35,206 4.1% 20.7%

Pre-paid Lines (´000) 20,629 21,435 22,571 24,483 25,775 26,993 28,386 5.2% 25.8%

Post-paid Lines (´000) 5,678 6,043 6,589 6,771 6,758 6,821 6,820 0.0% 3.5%

Gross Additions (´000) 3,105 3,724 3,996 4,576 3,787 4,046 4,573 13.0% 14.4%

Net Additions (´000) 896 1,172 1,681 2,094 1,279 1,282 1,392 8.6% -17.2%

Churn 8.7% 9.7% 8.4% 8.5% 7.9% 8.4% 9.4% 0.9 p.p. 1.0 p.p.

Total ARPU 34.4 34.6 34.0 34.5 29.5 29.8 29.7 -0.6% -12.7%

Total MOU 89 94 94 106 94 100 101 0.6% 7.4%

Investiment (R$ Mn) 255 326 344 1,007 273 1,706 511 -70.1% 48.3%

Employees 9,520 9,675 9,854 10,043 10,097 10,253 10,173 -0.8% 3.2%

22

Historical Indicators: Financial Results

2006 1Q07 2Q07 3Q07 4Q07 2007 1Q08 2Q08 3Q08Net Revenues 10,138,247 2,843,173 3,059,568 3,163,387 3,375,515 12,441,642 2,992,957 3,186,075 3,357,794Services 8,955,662 2,661,539 2,781,858 2,877,941 3,099,698 11,421,037 2,837,663 2,970,664 3,065,744Handset Revenue 1,182,585 181,634 277,710 285,445 275,816 1,020,606 155,294 215,411 292,051

Operating Expenses (7,701,710) (2,179,122) (2,315,857) (2,616,106) (2,460,679) (9,571,763) (2,457,594) (2,549,414) (2,557,961)Personal Expenses (594,890) (152,173) (156,631) (149,426) (167,167) (625,398) (162,625) (168,697) (152,654)Selling and Marketing Expenses (2,173,548) (571,742) (618,680) (674,698) (646,957) (2,512,078) (598,141) (665,621) (715,019)Network & Interconnection (2,690,571) (908,735) (899,760) (996,524) (1,060,069) (3,865,089) (1,044,547) (1,072,570) (1,077,171)General & Administrative (434,358) (112,562) (108,011) (102,812) (106,314) (429,699) (123,779) (107,984) (101,496)Cost of Goods and Services (1,407,761) (263,619) (376,408) (420,673) (373,729) (1,434,431) (263,235) (324,831) (378,072)Bad Debt (451,976) (172,968) (168,405) (275,371) (97,827) (714,571) (271,701) (203,327) (143,250)Other operational revenues (expenses) 51,394 2,678 12,039 3,399 (8,615) 9,502 6,434 (6,384) 9,702

EBITDA 2,436,537 664,051 743,711 547,281 914,836 2,869,879 535,363 636,662 799,834EBITDA - Margin over total net revenues 24.0% 23.4% 24.3% 17.3% 27.1% 23.1% 17.9% 20.0% 23.8%

Depreciation & Amortization (2,234,438) (582,266) (569,986) (569,251) (602,172) (2,323,674) (572,033) (596,338) (617,988)

EBIT 202,099 81,786 173,725 (21,970) 312,665 546,205 (36,670) 40,323 181,846

Net Financial Results (287,034) (63,255) (81,462) (80,893) (53,241) (278,851) (56,071) (59,157) (118,360)

Income (loss) before taxes and Minorities (82,409) 17,375 89,709 (113,794) 249,643 242,932 (95,316) (18,326) 62,108

Income tax and social contribution (203,133) (36,840) (55,695) (8,041) (66,261) (166,837) (12,613) (15,743) (39,579)Net Income (Loss) (285,542) (19,465) 34,014 (121,836) 183,383 76,095 (107,929) (34,069) 22,529

R$ (Th)

23

“Safe Harbor” Statements

Statements in this presentation, as well as oral statements made by the management of TIM Participações S.A. (the “Company”, or “TIM”), 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.

Statements in this presentation, as well as oral statements made by the management of TIM Participações S.A. (the “Company”, or “TIM”), 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, 3434 - Bloco 016° andar – Barra da Tijuca22640-102 Rio de Janeiro, RJPhone: +55 21 4009-3742 / 4009-3446 / 4009-4017Fax: +55 21 4009-3990

Investor Relations

Avenida das Américas, 3434 - Bloco 016° andar – Barra da Tijuca22640-102 Rio de Janeiro, RJPhone: +55 21 4009-3742 / 4009-3446 / 4009-4017Fax: +55 21 4009-3990

Visit our Website

http://www.timpartri.com.br

apresentação conferência morgan stanley

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