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TIM Participações S.A.
2Q06’s Results
July 24th, 2006
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Key Achievements
Market Performance
Financial Performance
Key Regulatory Outcomes
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Key AchievementsDelivering continuous and profitable growth
Strong Subscriber growth
EBITDA of R$500 million: 73.4% higher YoY21.5% Margin EBITDA (+7.6 p.p. YoY)
ARPU marked trend improvement QoQ and YoY
Consistent focus on Profitability
Successful performance on services top-line
Over 1.3 million net adds22.3 million clients base24.3% of market share
Net service revenues: + 20% YoY
Growing momentum of VAS revenue: + 62% YoY(8.9% of total service revenues)
Full pipeline of innovative services continuously
stimulating usage
Promotions focused on usage and on net trafficFirst and unique to offer international roaming (VAS + Voice) for GSM prepaid customers First to offer BlackBerry to business and consumerLeader in the business segment
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Key Achievements
Market Performance
Financial Performance
Key Regulatory Outcomes
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Continuing outperforming market growth
National Market and Penetration Market share
YoY Lines growth
Market
TIM39.8% 37.6%60.8% 56.4%
30.3%43.5%
31.4%
48.5% FirstPlayer
TIM-6.6 pp
+ 2.1 pp
YoY change
49.2%
75,580,0
86,289,4 91,8
41.6%44.0%
47.3% 48.1%
2Q05 3Q05 4Q05 1Q06 2Q06
21.3%33.3%
22.2% 22.9% 23.4% 24.3%23.5%
31.1%33.7%34.5%36.1%
37.7%
2Q05 3Q05 4Q05 1Q06 2Q06
Narrowing the gap vs. 1st. Player
Total market lines (mln) National Penetration
Source: Anatel’s data base.
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Customer base: combining growth and quality
22.2% 24.3%Market Share (%)
TIM Lines (mln) Strong Quality Base
16.8
80%85%
2Q05 2Q06
+33.3%
YoYStrong postpaid gross additions in the quarter (21.6% share of total gross vs. 17.5% in 2Q05)
Continuous customer mix improvement: 21% postpaid lines vs20% one year ago
Leader in GSM market
87% of our lines are GSM, an increase of +12 pp YoY
GSM base grew by 54% YoY
+ 32.9%
+35.1%
Prepaid
Postpaid
20%
22.3
21%
79%
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Leveraging on Corporate MarketLeader in Business Segment
Leadership in mobile office solutions
Long Distance and International roaming aggressive offer
Volume discount for national contracts
Acquisition
Segmented management through customer profiling (evolution from retention to relationship)
One on one Retention offers
Implementation of dedicated account for top SME clients
Main driver of TIM postpaid base growth:
70% of the total net additions YTD
Increasing share of churn market from
competitors
Powerful and growing large account portfolio
First to offer BlackBerry
Leader in the business segment with almost
2 million lines
Retention
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Promotions focused on usage and on-net trafficSegmented Consumer Offer
“Tarifa Zero”Zero Tariff
on net
Bonuses for on net callRegional approachReduced aggressivenessin prepaid subsidy
Leveraging on TIM community concept
Boosting sales in regions with lower market share growth
Quality acquisitions: new clients show 15% higher ARPU than the average prepaid base
Proactive retention : 1 of 5 prepaid current lines already moved to “TIM + 25” or “TIM +5”
Push on “TIM Chip Only” pays off: users recharge 3x > average
“TIM +25”& “TIM + 5”
“TIM Chip Only”Push on recharge
Bonuses for rechargemade in 48 hoursLow SAC strategy
Focus on prepaid high userReward outgoing trafficImportant acquisition and retention tool
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Roaming all over the world Focus on corporate segment, but not only…
Leader in International GSM/GPRS/EDGE/MMS/SMS roaming First and only to offer Voice/VAS prepaid international roaming
TIM’s roaming services are based on :Convenience: one handset – and one number – worldwideCoverage: the largest international GSM network available for customers
Promotional bundle offer: positive effects on outbound traffic (stimulating the usage)
Roaming Alianza(one rate offer)
Virtual Home Environment
(intelligent network)
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Bringing technology to the low and mid user Industry trend: Improved handsets mix at a more accessible cost
LOW (entry price <= R$399)
15 models• 100% colour display• 90% GPRS WAP• 80% with speaker phone
MED (> R$400 <= R$999) HIGH ( >R$999)
9 models• 100% with Video Play Back• 100% Bluetooth and
embedded camera • 67% with EDGE features
Customers are searching for more sophisticated handsets
•Monochromatic•Monophonic•No Camera•No GPRS and WAP
•Colour Display•Polyphonic, MP3•Camera•GPRS and WAP•EDGE•Infrared
2Q05 2Q06Features of the most sold handsets
55%
37%26%
WAP GPRS MMS
Enabling handsets base – 2Q06
16 models • 100% color display, GPRS/
WAP and MMS• 93% embedded camera• 56% infrared (data connection)
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Pushing on VAS usage: Try and Buy
TV Globo World Cup Promotion
Cross-operator innovation initiative the user can subscribe a World Cup channel per week and win
2006 prizes (boost revenue in June)
MMS Promotion
Promotional price on MMS for all customers during a month to reduce the entry barrier and improve
service penetration.
Mega TIM
SMS special bundle sold electronically (IVR) and through recharge cards during short periods to pull
customer usage.
New TIM WAP site
New site to facilitate access to the WAP content: segmented layout to low, med and high users.
Increasing service penetration
Evolving segmentation to community concept Boosting SMS
Provide community place, strategic content, real time Brazilian and Int.l editorial, Entertainment and music.
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Key Achievements
Market Performance
Financial Performance
Key Regulatory Outcomes
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Growing in ValueGross Revenues Gross Revenues Analysis
22%
78%
6.8%
R$ mln
Value Added Service (R$ mln) 237 + 62%
Handsets Revenue (R$ mln) 547 - 8%
2,418 + 20%
2Q06 YoY
YoY
+16%3,2022,753
Handsets sales
VAS revenue over total service revenue
Traffic Volume (Bln min.) 5.3 + 25%
Voice (R$ mln)
Service
2Q05 2Q06
17%
8.9%
83%
TOTAL NET REVENUE (R$ mln) 2,321 +12%
Net Service Revenues (R$ mln) 1,958 +20%
TOTAL GROSS REVENUE (R$ mln) 3,202 + 16%
Net Handset Revenues (R$ mln) 363 -18%
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ARPU Performance
marked improvements in ARPU dynamics over time
ARPU Analysis
2Q05 2Q06
VAS Revenues (R$ mln)
Growth YoY
Users
SMS P2P: + 38%MMS P2P: + 148%Data: + 223%
ARPU (R$)
30.0
1Q06
30.2
2Q0637%
Traditional Innovative
147 41% 237
Usage
MMS P2P: + 156%Data: + 345%
Growth YoY
-3.3%
+0.7% positive inversion
Improving ARPU trends
QoQ
2Q05 2Q06
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EBITDA Performance
EBITDA Weight on EBITDA Margin 1
R$ Mln YoY
(A) + (B)
A) Variable costs 2Q06Interconnection
Handsets Cost
- 2.0 pp
B) Fixed & Commercial 2Q06Commercial expensesG&A and Others
Industrial cost
-3.6 pp-2.8 pp
-1.8 pp
-5.6 pp-7.6 pp
EBITDA Margin over Total Net Revenue
+73%500.0288.3
2Q05 2Q06
13.9%21.5%
+7.6 p.p.
Labor cost +0.4 pp
-0.1 pp
-1.9 pp
Headcount growth lead by: CRM’s
improvements pre and post-sale
supporting
1 Calculated as YoY change of the OPEX weight on total revenues
Change in the provision
methodology in 2Q05. % on
revenues in line QoQ
Bad debt +2.2 ppSpeeding up YoY margin growth:
7.6 p.p. in the 2Q06 vs 6.2 p.p. in the 1Q06
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SAC Performance
SAC
Declining SAC level despite: increased % postpaid on gross addsfocus on corporate clients
progressively increases weight of comodato
Higher entry price handsets has positive impact on direct cost
41% 42%
59% 58%
2Q05 2Q06
170
CommissionSubsidyAnatel’s fee on
net adds
ComodatoAdvertisingOthers
168
Direct cost Indirect cost
R$
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From EBITDA to Bottom Line
(R$ Million)
EBITDA DepreciationAmortization
EBIT Net Financial Expenses
Taxes and Others
Net Losses
∆ YoY
25% reduction in the Net Losses
(100.2)(249.0)
500.0 (562.9)
(85.8)(62.9)
(R$ mln) +211.7 +84.4-103.1 +17.8 -39.8 +2.1
Minorities
R$ Mln
Include 75 mln non recurring provision
related to deferred tax asset*
+108.6
* Deferred tax asset booked in the incorporated companies, TIM Sul and TIM Nordeste, before the merger occured.
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Impact of strong working capital seasonality:4Q05 CAPEX paid out in 1Q06 significant handset stock paid for in 1Q06 Fistel on FY05 base paid in one installment in March 06
Net Financial Position
1Q06
(1,250)
+1,211
2Q06
(39)
R$ Mln
OperatingFCF
Operating Free Cash FlowNet Financial Position
1Q06 2Q06
(1,822)
Gross Debt: R$2.9 billion (of which ~90% long term / average cost of 14.9% in 2Q06)Financial Assets: R$1.1 billionNet Financial Position: R$1.8 billion
(39)(247)
EBITDA +500CAPEX (351)∆ Oper. WC (188)
Of whichDividends (58)
(1,536)
R$ MlnOn track to break-even
NonOperating
FCF
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Key Achievements
Market Performance
Financial Performance
Key Regulatory Outcomes
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Key Regulatory OutcomesEnd of
Bill & Keep(Effective from July 14th 2006)
• Anatel’s resolution excluded the partial bill & keep regime, which means that mobile company will now have to pay termination charges on each local call to other mobile company
• The same resolution established to the mobile companies the obligation to apply 30% discount between “peak” and “off peak”interconnection rates to Long Distance calls
Introduction of “peak”and “off peak” time
for LD calls
FAC(Full Allocated Cost)
• Implementation date to be defined.• The cost have to be defined for each group in 3 different regions, according to the PGO – “Plano Geral de Outorgas”
(Public Consultation)
3G Licenses • 5 band in the frequency 1.9/2.1 GHz• Auction criteria and prices to be defined• Licenses assignment expected for 1H07
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Statements in this presentation, as well as oral statements made by the management of TIM Participações S.A. (the “Company”, or “TSU”), that are not historical fact constitute “forward looking statements” that involve factors that could cause the actual results of theCompany 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.
“Safe Harbor” Statements
Investor RelationsAvenida das Américas, 3434 - Bloco 01
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
Phone: +55 21 4009-3742 / 4009-3751/8113-0571
Fax: + 55 41 4009-3990
Visit our Website:
http://www.timpartri.com.br