TIM Participações S A : 2020 - 2022 Strategic Plan

TIM PARTICIPAÇÕES S.A.	TIM S.A.
Publicly-Held Company	Closed Company
Corporate Taxpayer's ID (CNPJ/MF):	Corporate Taxpayer's ID (CNPJ/MF):
02.558.115/0001-21	02.421.421/0001-11
Corporate Registry (NIRE): 33 300 276 963	Corporate Registry (NIRE): 33.300.324.631

MATERIAL FACT

STRATEGIC PLAN 2020-2022 AND GUIDANCE RELEASE

TIM PARTICIPAÇÕES S.A. ("Company" or "TPAR) (B3: TIMP3; NYSE: TSU) and its wholly owned subsidiary TIM S.A. ("Subsidiary" or "TSA"), in compliance with Article 157 of Law No 6,404 and the provisions of CVM Instruction N. 358, hereby informs its shareholders, the market in general and other interested parties that Telecom Italia Group released today its forecasts for 2020-2022 period. In this context, TIM updates the forecasts of its Strategic Plan 2019-2021, released to the market through a Material Fact dated February 21st, 2019.

The Company releases this update after a year of consistent improvements, with the achievement of a significant part of the short-term objectives outlined in its Strategic Plan 2019- 2021, which demonstrates the correctness of the strategy implemented throughout the year. These objectives were achieved despite macroeconomic expectations that were not confirmed due to a slower and more unstable recovery of the economy, compared to projections made by the market in general and by TPAR and its subsidiary.

Projections 2019-21

with IFRS 9+15

	KPIi			2019 Projection (Short			2019 Results
			Term)
	Service Revenues Growth (YoY)	3-5%		2.4%
	EBITDA Growth (YoY)		Mid to High-Single Digit	6.7%
		Growth
	EBITDA Margin		≥39% in 2020	39.1%
	% CAPEX over Net Revenues		Low 20's	22.2%
	% EBITDA - CAPEX over Net Revenues	>15%		16.9%
	IoE distribution		~R$ 1 bln		R$ 995 mln

TIM, however, in this new triennium, reaffirms its commitment with (i) the preservation of an austere approach in cost controls, aiming to raise the profitability of its operation, and so it adjusts the goal to exceed the level of 40% EBITDA Margin in 2022, as well as (ii) an efficient capital allocation, characterized by the CAPEX destination to infrastructure (network and IT) extension and modernization projects, and (iii) the continuous expansion of the cash generation characterized by the growth of EBITDA - CAPEX over Revenues indicator to surpass the level of 20%.

			Projections 2019-21		Projections 2020-22
			with IFRS 9+15		with IFRS 9+15 and IFRS16
	KPIi		2019 (Short Term)			Long Term		2020 (Short Term)		Long Term
	Service Revenues	3-5%			CAGR '18-'21		Mid-Single Digit		CAGR '19-'22
	Growth (YoY)			Mid-Single Digit			Mid-Single Digit
	EBITDA Growth (YoY) /		Mid to High-Single		≥39% in 2020		Mid-Single Digit		≥40% in 2022
	% EBITDA Margin		Digit Growth				(≥47% w/ IFRS 16)
	% CAPEX over Net Revs.		Low 20's		~R$ 12.0 bln		Low 20's		R$ 12.0 - 12.5 bln
	/ ∑ CAPEX			(∑'19-'21)			(∑'20-'22)
	% EBITDA - CAPEX	>15%			≥20% in 2021	>16%		≥20% in 2022
	over Net Revenues				(>20% w/ IFRS 16)		(≥25% w/ IFRS 16)

Lastly, TIM presents, as an attachment to this Material Fact, additional details about the 2020- 2022 Strategic Plan and its guidance.

Rio de Janeiro, March 10th, 2020.

TIM Participações S.A.	TIM S.A.
Adrian Calaza	Adrian Calaza
Chief Financial Officer and	Chief Financial Officer and
Investor Relations Officer	Investor Relations Officer

2020-2022 Strategic Plan

March, 2020

2019 Financial and Operational Highlights

Net Service Revenues1,2

R$ 16.6 bln

(+2.4% YoY)

TIM Live1,2

R$ 491 mln

(+30.6% YoY)

Net Service Revenues

Growth2 (%YoY)

		3.0%	3.2%
	2.4%
1.0%
1Q19	2Q19	3Q19	4Q19

Mobile ARPU2 (R$)

22.5 +5.6% 23.7

20182019

Network evolution supported by innovation: 5G trials, massive MIMO, refarming, MOU with Vivo

Improved network quality recognized by independent measures

Assertive adjustment in offers' portfolio, back to the right dynamic

EBITDA1,2		EBITDA Margin3
R$ 6.8 bln					39.8%
(+6.7% YoY)			36.6%	38.5%
		33.5%
	31.5%
6 consecutive
years of EBITDA
growth
(CAGR 15-19:
6.5%)	2015	2016	2017	2018	2019

EBITDA - CAPEX3

(% on Net Revenues ; R$ bln)

			15.6%	16.9%
		11.1%
3.7%	4.7%		2.7	2.9
	1.8
	0.7
0.6
2015	2016	2017	2018	2019

in go-to-market

Image recovery in all segments

Record high organization climate

results

The year 2019 confirms the company's transformation in the last 5 years

(1) In 2019; (2) KPIs ex-IFRS 16 impacts; (3) Pro-forma basis (excluding IFRS 9, 15 and 16 impacts)

2

Strategic Pillars for 2020-22

Evolution Transformation

1	INFRASTRUCTURE
Preparing for the future

Evolution

• IT: solve operational issues through architecture and
  platforms review leveraging digital and automation
• Network: focus to improve
  spectrum efficiency
  through new sites deployments and use of innovative technology (M- MIMO) and refarming

Transformation

• 5G and data monetization
• Artificial Intelligence
• 2G / 3G consolidation
• Content distribution

2	MOBILE
From Volume to
	Value

Evolution

• Sustaining residual growth opportunity in a mature market
• Portfolio review to unlock upselling opportunities
• Selective "more for more" approach to increase
  ARPU
• Leveraging customer experience and mitigate attrition to reduce churn

UBB

3 Growth

Opportunity

Evolution

• Rollout plan with cherry picking approach based on geomarketing analyses
• Naked broadband with OTT friendly approach to differentiate our offers

Transformation
→ Creation	of	an
infrastructure		vehicle

through partnership to further accelerate the coverage

4	EFFICIENCY	5	BEYOND CORE
To the next level,	Monetizing
	enhancing CEX		customer base
	Evolution		Transformation
→	Accelerate digital &	→	IoT Services
	automation	→ Growing market in mobile
→ Revise make vs. buy
	digital advertising
	approach	→	Unique opportunity in
			mobile financial services
	Transformation

• E2E transformation to
  improve cash cost efficiency
• Network sharing
• Cloudification

3

Infrastructure: Preparing TIM Brasil for the future

IT to the next level in 18-24 months

Big data	NBA	Cognitive
evolution	roll-out	systems
Application and		Catalogue
architecture review	creation

Network 5 key pillars

Data	5G	IoT
Growth
ready
New		Fixed
initiatives		Broadband

Benefits:

Customers'

Integrated view

New capabilities

Fixed

Wireless

Access

New IoT businesses opportunities

Time-to- market

Automation of processes and efficiency increase

Decommissioning Savings

Densification and innovative solutions

Convergent architecture

Evolution	Transformation	4

Mobile: Move from volume to value to sustain mobile business growth, leveraging customer experience

		Premium Price
		P2
Convergence	P3		Innovation
		2022
		2019

P4 2014

Low Price

Residual growth: churn management becomes more important

Mobile Unique Users1,2 (MM)

	139	146
	Reduce
104

churn

Playing by opportunity, meeting clients true needs

Customer Base Mix1 (MM)

167	185	Attack all
30	117 Prepaid
56	segments

82 Postpaid

Postpaid Churn Rate (% p.m.)

3.5% 3.8%

-0.6 p.p.

until 2022

Mobile Customer Base by Segment (MM)

36

33

20	21	Postpaid
>45% in 2022

• Eliminate pain points: discount management
• Lock in high propensity customers
• Improve service level
• Prepaid acceleration (regional + smart promo, channel mgmt.)
• Postpaid: brand positioning, handsets
• SMB: consumerization

Innovation positioning:

ensuring execution and

Increasing "share of wallet"

SIMs per Unique Users1

Mobile ARPU (R$ / month)

→ Unlock upselling

customer satisfaction to

succeed.

1.9	1.7
	1.4

ARPU increase

22.5

23.7

CAGR 19-22 low to mid single digit

opportunities

→ Price with "more for more"

approach

→ Boost big data, data

analytics, NBA capabilities

(1) Total market; (2) Population > 10 years.

2010

2015

2020 2022

2018

2020

2022

Evolution	Transformation	5

Ultrabroadband: Industrialization to capture growth opportunity with financial discipline

Footprint expansion and operational

Fixed Net Revenues

FTTx Customer Base

improvement

The lever for

TIM Live CAGR 19-22:

Mln

In 2020…

→ Cherry peaking deployment

+15

>30%

fixed business

1.5

+40%

→ Reduce early churn

cities

growth.

households

From

→ Improve care and self-care

1.0

covered

Evolution…

→ Reliable bill to cash processes

FTTH

Differentiation: UBB + Content

TIM Live

0.5

Others

→ OTT content friendly approach

FTTC

→ Wi-Fi experience

-

2018

2019

2020

2021

2022

2018

2019

2020

2021

2022

... To Transformation

Strategic Partnership

Expanding TIM Live's services with the right balance between Sales and Capex, unlocking additional value of this asset

Create in partnership a neutral fiber infrastructure asset in Brazil

Market sound process with an advisor to find the right partner

Evolution	Transformation	6

Efficiency: Keep the lead in profitability taking efficiency to the next level, while enhancing customer experience

E2E transformation to improve cash cost efficiency, leveraging digital, automation, new make vs buy models.

Process efficiency		Digital & Automation

Make vs buy

Smart CAPEX

• Bad Debt (e.g. new credit models, collections systems improvement)
• Legal processes (e.g.
  predictive models to reduce JEC expenses - special court for small cases)

• Self-Provisioning(e.g.,

Naked SIM)

• Self-caring:Cognitive

IVR and WhatsApp services (e.g., second invoice, balance check and etc.)

• Self-healing(e.g.,

technical resolution for broadband services)

• Administrative

processes (e.g.,

commissioning, ground leasing)

• Pay-rollmanagement IT Planning & Development

• Industrial agreements

(e.g. VIVO MoU)

• Innovative

Technologies (Massive

MIMO)

• TIM Live's
  Transformation with partnership
• Cloudification (storage

as commodity)

Evolution	Transformation	7

Beyond the core: Leverage our assets with strategic partnerships through a unique window of opportunity

IoT

Develop at scale and monetize IoT

verticals to explore B2B opportunities.

Latin America IoT Market in 2022

Mobile Advertising

R$ 24.2 bln

Brazil's digital ad market in 2022

R$ 19 bln

Mobile Financial Services

Penetration over Brazilian Population

59%	79%
27%

2x connections

reaching 106.3 mln of IoT devices (19.6% CAGR).

US$~750 mln

addressable market in agriculture

delivered through mobile

	Credit Card	Debit Card	Mobile Penetration 2
	Ownership1	Ownership1
1	HIGH-END		2	LOW-END
Convenience and	Access to banking
	simplicity.			services.

US$~400 mln

addressable market in transport / logistics

1	TIM as	2	TIM as ad tech
publisher	player
	Exploring		Leveraging on
	available touch-		customer knowledge
	points.		and ownership.

→	Full bank offer	→	Symbiotic
→	Commercial partnership	→	partnership (JV like)
→	Value generated by	Value generated by
	profit sharing
	commissions in fees +

equity

	Connected Car
Sole operator in the	First mover: agreement
initiative developing	with car manufacturer to
agribusiness solutions	provide in-car connectivity
based on IoT.	and automation.

R$ 190 mln already generated in mobile ads products with a ~35% upside in 2020.

New trial contracts signed in the past 2 months.

Telecom + digital banking services.

Agreement with a digital bank to be announced in the coming weeks.

Partners short list under

analysis

Sources: GlobalData Market Opportunity Forecasts to 2023: Global IoT; Latin America Digital Ad Spending 2019 eMarketer; Global Findex Database 2017

(1) Population > 15 years; (2) Population > 10 years.

Evolution	Transformation	8

TIM Brasil 2020-'22 Targets

GOALS		DRIVERS	SHORT TERM TARGETS
	(2020)
Revenue Growth	→	Leverage mobile ARPU improve	Service Revenues Growth:
→	Expand Residential UBB operations	Mid single digit
Sustainability
→	Tap B2B opportunity	(YoY)
Improve	→	Accelerate digital transformation	EBITDA Growth:
→	Maintain zero-based budget approach	Mid single digit
Profitability
→	Reliable bill to cash process	(YoY)
Infrastructure	→	Smart and selective Capex approach	Capex on Net Revenues:
Development	Low 20's
	→		EBITDA-Capex on Net
Expand Cash	Strict financial discipline	Revenues:
Generation	→	Continue debt and tax rate optimization	>16%
			(>20% w/ IFRS 16)

(1) KPIs with IFRS 15/9, except when otherwise indicated.

LONG TERM TARGETS

Service Revenues Growth:

Mid single digit (CAGR '19-'22)

EBITDA Margin:

≥40% in 2022

(≥47% w/ IFRS 16)

Capex:

R$ 12.0 - 12.5 bln

(∑'20-'22)

EBITDA-Capex on Net

Revenues:

≥20% in 2022

(≥25% w/ IFRS 16)

9

10