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- 1. TIM Participaes S.A.1Q08s ResultsMay 6th, 20081
2. Highlights Market Overview Commercial Strategy Financial Performances 2 3. 1Q08 Main Highlights Indicators ResultsDrivers Perspectives YoY Growth: 23.7% vsMaintaining market share focused on Maintaining our competitive Client competitors 23.0%;valuable customer base (prepaid and approach;postpaid); Base Post paid mix: 20.8% vsSegmented approach: Push thecompetitors 18.6%.Benefits from TIM national wide right customers to the right plans.consolidated Company.Data transmission and internet Increase 29.0% YoY;TIM Web Banda Larga: wirelessaccess: TIM Web and Nosso link; Accounting for 8.4% of broadband solution speed up with 3G;VAS Data package offers; gross service revenue. 3G content providers partnerships.Push on media content. Selective approach in promotion;Aggressiveness on traffic promotions/disc; Migration from incoming to on-nettraffic; Stable incoming revenues (lower F-M6.6% YoY growth in netAdditional revenues through cross- Revenuestraffic and the cellcos on-net strategy);service revenues. selling offers: TIM Casa Flex and 3G+; Low income classes penetration.Guidance Revision: 2008 total netrevenue growth as around 9%Telesales channel had its process Bad debt 9.6% of net serviceAggressive campaign in remodeled;revenue. telesales distribution channel.Normalized level around 6% of net servicerevenue on a yearly basis. Bad Debt increase;Margin of 17.9%. 2008 EBITDA >23%. EBITDAModest revenue increase. 3 4. Highlights Market Overview Commercial Strategy Financial Performances 4 5. 1Q08 Brazilian market at a glance Market quarterly net addsMobile penetration by social class (2007) Mln lines8.2 (YoY)(+103%)83% 77%6.1 63.5% (+48%)4.553%4.1 4.0 4.8 3.2(-35%) (+92%) (+116%)(-8%) (+6%) 28%2.42.2 (-66%)(-30%) 1Q062Q06 3Q064Q06 1Q07 2Q073Q07 4Q07 1Q08 BrazilClass A Class BClass C Classes D/E Source: Anatel Source: IBGE (PNAD 2006) and internal estimates Market Overview and TIMs Approach Reversal trend of quarterly net adds in 2Q07;Strong hold on market maintaining solid share performance; Prepaid net adds grew by 159% YoY in 1Q08, mainly due to:Leadership in gross addition (~26% in the 1Q08) fueled by:Growth concentrated in social classes C and D/E ; Strong national brand;Naked SIM-Card sales; Large distribution network;On-net calls promotions;Push on traffic promotions; Market gross addition increased around 35% YoY;Leveraging second-hand cell-phone market by offering TIMChip only. Second-hand cell-phones accounted for 26% of sales in 20071Capturing low income-class growth;Note: 1) According to Latin Panel survey 5 6. Competitively marking the market Total Lines (Mn) and Penetration Rate Market Share Performance YoY-2.7 p.p. gap -1.4 p.p. gap -2.8 Mn lines -1.8 Mn lines 63.5% 65.8% +11.6 p.p. First 59.4%56.4% player 54.2% +23.2%28.4% 27.3%121.0125.8112.8 102.2 106.7 25.8% 25.9% +23.0% 24.8%24.1%Third +23.7% player26.3 27.529.2 31.332.5+1.7 p.p. gap+1.1 p.p. gap+1.7 Mn lines+1.3 Mn lines1Q07 2Q073Q07 4Q07 1Q08TIM Competitors Penetration Rate1Q07 2Q073Q074Q071Q08 Mobile market growth continues strong in 2008; Successful hold on positioning with resilient marketCredit expansion and purchase power improvement;share performance;Naked SIM-Card further enhance net addition; Postpaid mix at 20.8% and above competitors averageNew technology/services;of 18.6%;Source: ANATEL and companys data. 6 7. Highlights Market Overview Commercial Strategy Financial Performances 7 8. A National wide consolidated company Innovative, Reliable and Appealing brand: Living beyond Technology First national consolidated operator (since 2002): Largest presence in Brazil through our network coverage(voice and data) and strong distribution channels (sales and recharge); Top of mind1 and consumer preference1: Brand nationally recognized as innovative company; Info-Exame magazine award (March-2008): The best wireless company in Brazil; Transparent relation with customers: Handset SIM-lock - giving customers free will.RANKING 2002National presence 1Brand (Top of Mind)1 1Coverage (voice and data) 2Market share Note: 1) Instituto Synovate - Oct-Nov/2007 8 9. Commercial strategy overview Acquisition Strong net addition in YoY basis (+42.7%);Promoting On-net traffic Strategy on promotions: focus on traffic incentives; MOU increase to 94 min (vs. 89 min. in 1Q07).Reducing our blended monthly churn rate to Retention Loyalty/ 2.6% (vs. 2.9% in 1Q07); Aiming valuable clients 20% of our prepaid base added to our loyalty promotion Bonus in minutes.Cross selling opportunities: more than 50% of Convergent TIM Web are new clients in our base; Offers Catering to total 3G+: TIM Web speed up; communication needs Offers with lower entry price barrier compared with fixed operators. Data Package: plans and promotions; VAS Leading innovationPush on contents (strategic partnerships); 3G+ launch: better quality and velocity. Recharge Large distribution network and recharge;Sales/ Optimizing channels Increase of virtual recharge; Commissioning according to customer value*more than one year in our subscriber base 9 10. TIM convergent offer roadmap2005 2006 2007 200831.3 32.5 TIM Customer Base (MM)25.4 TIM Web Banda 20.2 Larga: wirelessbroadband solution TIM Casa Flex: convergent voice plan which combines a fixed and mobile number on the same TIM ChipTIM Web: wireless internet access with a stand alone data bundle using a USB modemTIM Casa: special tariff bundle for fixed numbers in a Home Zone concept Nosso Link: data plan for business customersTIM Convergent Customer Base (MM) ~1.5~1.2~0.6~0.2 2005 2006 20071Q08Convergent customer base achieved around 1.5 million by the end of 1Q0810 11. TIM : Aiming the future 3G+: a new experience for the most innovative VAS services Positioning / StrategyAdvantagesRoll-Out / Launching A step ahead on TIM convergent VELOCITY: Upgrade to 1Mbps Commercial Launching: offers through wireless broadband; and 7Mbps;850 Mhz - April 16th2.1 Ghz - May 1st Brand empowerment throughSIMPLICITY: All TIM Chip are3G ready; Buy & Play concept; 3G Initial coverage in key innovation; metropolitan area;MOBILITY: Wireless internetProtect TIM customer base; 3G roll-out easyly by our actualanywhere; national consolidated coverage;Deliver content to enhanceACCESSIBILITY: Any 3G device National 3G license for usage and revenue; and computers; R$1.3bln; Encourage use of VAS: more OPPORTUNITY: Limited More spectrum capacity; quality and speed; coverage and installation by fixedAlternative to digitaltelcos. universalization.Push on cross selling offers;11 12. Marketing 3G offers TIM Web Banda Larga: Wireless Broadband Solution TIM Web broadband : Buy & Play; Broadband Competitive plans: 1Mbps or 7Mbps unlimited; TIM Web - Automatic upgrade to 1Mbps (packages 40MB, 250MB e 1GB); First notebook in the market with TIM broadband access. VAS Strategic Partnership New and Improved Content OfferHandset PortfolioTIM TVGOOGLE MAPSTIM GAMESTIM VIDEO CALL TIM WAPTIM STUDIO YOUTUBEUOL MOBILE TIM MUSIC STORE12 13. Highlights Market Overview Commercial Strategy Financial Performances 13 14. Net Revenue Performance Total Net Revenues Outgoing voice revenues: R$ Mn . Good showing in outgoing traffic, fueled by largeYoYincentives to on-net and M-F calls; MOU (blended) stood at 94 minutes 2,993 +5.3%per user (5.2% up YoY) and maintaining the market highest users in2,843 our customer base;+6.6% Incoming revenues: 95% 94% . Performance linked to cellcos aggressive approach toon-net call promotion, and F-M continue pattern change; . Strategy oriented to convergent service (i.e..: TIM-5%-14.5%Casa), reducing our dependence of income revenues;6%1Q07 1Q08Value-added services (VAS): Net Service Revenue Net Handsets Revenue. VAS stood at 8.4% of gross service revenues (29%YoY growth). Innovative services (MMS, downloads etc) accounted for54% of these revenues.Handset revenues: . Net handset sales drop 14.5% YoY, as a result of lowerhandset price.2008 Total Net Revenues Guidance Revision Company has fined tuned total revenues guidance for 2008 mainly due to a decrease on handset revenue growth. Our new target for total net revenue growth is around 9% instead of higher than 12% from the previous announcement. We are maintaining the other targets unchanged. 14 15. ARPU PerformanceR$ Main reasons to ARPU performance: -14% Increase penetration in low income class and strong prepaid34.4 29.5 growth (25% YoY);Aggressiveness in traffic promotions/discount;VAS promotions put into place as to safeguard positioning and for education in light of recent launch of 3G+ service; 1Q07 1Q08 Migration of incoming calls to on-net calls; SAC PerformanceR$ -5%Subsidy strategy oriented to maintain competitiveness in124110117 Indirect costvaluable customers; - Comodatun - Advertising38%38%Focus on traffic promotion instead of high subsidy;42% - Others Acquisition cost was largely affected by lower commission and Direct costadvertising expenses; - Commission - Subsidy62%62%58% Gross adds were up 22.0% YoY and selling expenses were up - FISTEL 4.6% YoY. 1Q074Q07 1Q08SAC/ARPU: 3.8x 3.2x4.1x15 16. Bad Debt Major source of bad debt increase:R$ Mn % of net serviceAggressive campaign in telesales channel;revenues Strong gross addition (since 2H07), specially in postpaid.271.79.6%Actions implemented:95.0*3.4% Telesales channel had its process completely remodeled; Implement new rules; 6.5%173.0 176.76.2%Strict credit analysis;Bad debt expected to come back to its historical levels: 1Q071Q08Around 6% of net service revenues in a yearly basis. *additional bad-debt provision from Telesales channel16 17. EBITDA and EBITDA margin performanceR$ MlnStrong outgoing traffic volume, (off-net and M-F calls) and 3G deployment Selling expenses were 4.6% up from the 1Q07, while gross addition grew 22.0%.(135.8) (26.3) 176.1 (26.4)630.4 Additional(98.7) 95.0bad-debt 0.4(17.