TIM Participações S A : Results Presentation 4Q19

Disclaimer

This presentation contains declarations that constitute forward looking statements regarding the intent, belief or current expectations of the customer base, estimates regarding future financial results and other aspects of the activities.

Analysts and investors are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. TIM Part undertakes no obligation to release publicly the results of any revisions to these forward looking statements.

Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected as a result of various factors.

Financial results are presented considering impacts from IFRS 9 & IFRS 15 adoption, disconsidering impacts from IFRS 16 adoption.

The normalized numbers reported in this presentation are adjusted by the effects listed below.

Operating Costs and EBITDA normalized by adjustments to the sale-leaseback contract of towers (+R$ 11 thousand in 2Q19, +R$ 1.5 million in 1Q19, +R$ 431 thousand in 4Q18, +R$ 1.1 million in 2Q18 and +R$ 220 thousand in 1Q18), tax credit due to the exclusion of ICMS from the calculation basis of PIS/COFINS (-R$ 75 million in 3Q19, -R$ 1,720 million in 2Q19 and -R$ 159 million in 4Q18), non-recurring expenses with legal services connected to the PIS/COFINS court decision (+R$ 4.4 million in 3Q19 and +R$ 3.5 million in 2Q19), loss forecast revision for internal labor, taxes and civil contingencies (+R$ 11 million in 3Q19, +R$ 222 million in 2Q19 and +R$ 157 million in 4Q18) and contractual losses (+R$ 22 million in 3Q19). Net Financial Results adjusted by monetary correction over tax credits and labor, taxes and civil contingencies (- R$ 66 million in 3Q19, -R$ 1,051 million in 2Q19 and -R$ 66 million in 4Q18). Net Income normalized by the tax credit and other effects (+R$ 35 million in 3Q19, +R$ 865 million in 2Q19 and +R$ 23 million in 4Q18), deferred taxes (+R$ 30.3 million in 1Q19) and by the tax credit due to the merger of TIM Celular into TIM S.A. (-R$ 950 million

TIM Participações - Investor Relations

in 3Q18).

Results Presentation

2

2019: Another Year of Evolution with Few Adjustments Along the Way

	Restore agile		Best	Assertive		Efficiency
	Best	Growth in all	Mindset
Reclaim offer/	approach to	adjustment
accelerate	segments'	spread
communication	decision making	4G / 700 MHz	Fixed Ultra	in offers'
innovation		Broadband Ranked	ARPUs	across the
leadership		coverage	by Estadão	portfolio
				company
		Network	1st	Image	TIM Live	Record high
Refuel	Focus on key	efficiency	Recovery	organization
accountability	areas of the	Spectrum refarming;	5G tests	recovery	Improved caring;	climate
culture to	business	Massive-MIMO trials;	in all segments	Network catch-up;
empower			Net adds	results
	MOU with Vivo
employees				acceleration

Continuous growth acceleration during the year

TIM Participações - Investor Relations

Results Presentation

3

FY19 & 4Q Financial Highlights: Consistent Improvement Recovering Momentum

Growth reignited…	High delivery on Efficiency Plan driving consistent
EBITDA and margin evolution

2019 Service Revenues

R$ 16.6bln	+2.4%	3.2%
	3.0%

2019 EBITDA¹2019 EBITDA Margin¹

R$ 6.8bln +6.7%	39.1%	+1.6p.p. YoY

Growth		2.4%
1.0%
% YoY
	1Q19	2Q19	3Q19	4Q19

Growth				8.1%
	6.2%	6.8%
% YoY
5.3%
	1Q19	2Q19	3Q19	4Q19

42.9%

39.6%

37.9%

35.7%

1Q19 2Q19 3Q19 4Q19

Strong cash generation…

				EBITDA¹ - CAPEX
% Net		15%	17%
Revenues
	+15.9%
				2,945
			2,540	633
		4Q	449
mlnR$	2Q	541	794
671
		3Q	742
		1Q	808	847
			2018	2019

Combined with a strong balance sheet ready for strategic opportunities

0.07x Net Debt /

EBITDAFitchRatings

• R$3.4bln in tax credits (PIS/COFINS Disputes) already in use, full consumption in 3/4 years

(1) EBITDA normalized for the effects detailed in slide 2..	TIM Participações - Investor Relations	4
Results Presentation

Sustaining Revenue Growth Despite Relevant Challenges

Total Net Revenues Breakdown									(R$ mln)
%YoY
			MSR: +1.9%		FSR: +11.3%			+0.6%
Growth
			329					115				5		17,377
		16,981					-34				-18
													+2.3%

2018	Client Generated		TIM Live	Other Fixed	Handsets	2019
ITX + Other
	Revenues	Mobile

• Revenue expansion limited by a macroeconomic environment at slow recovery (2019 GDP at ~1%)
• 1H19: Tough competition dynamic, also contributed for a challenging environment

% YoY Growth

Mobile Blended ARPU	Postpaid Revenues (CGR)
	23.7	GrowthYoY%
22.5	+5.6%	+6.9%
2018	2019	2018	2019

Prepaid Revenues (CGR)
% YoY Growth	-4.9%
2018	2019

TIM Live Revenues
% YoY Growth	+30.6%
2018	2019

TIM Participações - Investor Relations

Results Presentation

5

Mobile Postpaid: Despite Adjustments to Segment's Go-to-Market

Transition from Volume to Value Continues

Commercial approach adjusted: Controlling the quality of migration already reflects in a better churn trend that will help achieve sustainable growth.

+0.6 Postpaid (ex-M2M) ARPU

% (2019 vs 2018)

Postpaid Revenues (CGR)1

Churn control is key to deliver fair share growth

(Consumer churn rate | % p.m.)

Sales still follow on a positive trend

(Human2 gross adds LTM | '000)

+13.8%

Net adds showing first signs of reversal but w/ new benchmark

(Human net adds | '000)

154

75

-149

-270

(YoY)

1Q19 2Q19 3Q19 Oct-19Nov-19Dec-19

1Q19

2Q19

3Q19

4Q19

1Q19 2Q19 3Q19 4Q19 Future

7.2%

4Q18

1Q19

2Q19

3Q19

4Q19

Improved value proposition: Increasing perception and high-end positioning to better mix postpaid base.

Entertainment hub for high-end		Device to differentiate
positioning: TIM Black Família		Control offer
(TIM Black Família net adds)	back to
+23%	2	nd
	position in
	Control market
	Top of Mind

2Q19 3Q19 4Q19

(1) 2018 YoY on a pro-forma basis and 2019 YoY with IFRS 15 impacts. CGR - Client Generated Revenues excludes incoming and other revenues.	TIM Participações - Investor Relations	6
Results Presentation

Prepaid Efforts are Paying Off. Competition Rationality and Macro Recovery can Lead to Further Improvements

+4.2 Prepaid ARPU

% (2019 vs 2018)

Prepaid Revenues (CGR)1

(YoY)

4Q18 1Q19 2Q19 3Q19 4Q19

0.7%

Reversal in trends: Growth above the market average and signs of better days on the spending
side.
Rechargers		Spending
(EOP)			(R$ / recharger)
				+2.5%
2016	2017	2018 Mar-19Jun-19Sep-19Dec-19	2018	2019

Constant presence in the segment: Launch of TIM Pré TOP brought consistency to the Prepaid offer throughout the year.

(now!)

(2Q19)

1st

(3Q19)	position in
	Prepaid market
	Top of Mind

(1) 2018 YoY on a pro-forma basis and 2019 YoY with IFRS 15 impacts. CGR - Client Generated Revenues excludes incoming and other revenues.	TIM Participações - Investor Relations	7
Results Presentation

TIM Live: Positive Signs of the Recovery Plan Begin to Show in the Dynamics of the Customer Base

+8.0% TIM Live ARPU

(2019 vs 2018)

TIM Live Revenues1 (R$ mln)

			+26.5%
		112	115	127	137
109

4Q18

1Q19

2Q19

3Q19

4Q19

FTTH expansion: New additions, concentrated on high-end plans, will advance with the new coverage to come.

Net adds					Customer base
('000)					('000)
								+21.1%
				30	29	467	566
			21			32%
18	19			11%
						≥100 Mbps
						89%	68%			<100 Mbps
	4Q18	1Q19	2Q19	3Q19	4Q19
		4Q18	4Q19

Combining relevant content with the best service: Recognition of service quality with a

bundle to appeal the customer.

Best UBB

Best

Fixed BB

TIM Participações - Investor Relations

Results Presentation

8

Mobile Network: Proper Strategy Confirmed by Improved Customer Experience and Independent Measures

Customer experience prioritization: Concentrating on the most important KPIs to guarantee stable and constant access in 4G.

Urban Population Coverage (%)		Mobile Network Experience1
4G	4.5G	1.1k cities	4G Availability
	3.5k cities	(% of time)
	(+6% YoY)	(+44% YoY)

94%64%

700 MHz	Refarming
2.3k cities	2.5k cities
(+62% YoY)	(+3% YoY)

81%77%

VoLTE	NB-IoT
3.4k cities	3.3k cities
(+35% YoY)	(all in 2019)

93%92%

85.7	77.7	77.3
	68.2

TIM	P3	P2	P4
Latency
(ms)
	58.4	61.4	68.4
57.4
TIM	P3	P2	P4

Innovation to better serve the customer: Massive MIMO application to network stress situations - Copacabana New Year's Eve case.

• ~3 mln people in 4 km length
• 36x moresimultaneous connections
• +60% YoY data traffic increase
• 174k calls (>50% VoLTE )

Main results of massive
MIMO approach:
6x
	3x
			throughput
			per user2
	data
	consumption2

(1) According to Tecnoblog News from 16/Jan; (2) Compared to regular access.	TIM Participações - Investor Relations	9
Results Presentation

Fixed Network: Operations Catch-Up to Ensure Future Growth

Acceleration

Cluster approach to expand coverage: Recife's example - cherry-pickingin metropolitan areas.

Paulista Olinda

Recife (PE)

Jaboatão dos Guararapes

+12 launches

in 2019

(totaling 25 covered cities)

New OLTs - Regions Covered

(# of units)

Jan-19	Apr-19	Jul-19	Oct-19Dec-19
		Budget			Act

FTTH Coverage (# mln households)

+103%	3.5	3.6
2.3
1.1
FTTH	FTTC

Backbone + Backhaul

('000 Km)

	+11.9%
90	101

+50 OLTs

in 4Q

>5.5 mln

>100k

km

• Renewed commercial capacity.

• 2x FTTH coverage in 2019.

• Transport infrastructure supporting both business

4Q184Q19

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Results Presentation

10

Continuous Efforts on Cost Control Supported by Ongoing Digitalization

Initiatives

Caring

Billing &

Payment

Acquisition

+18%

Meu TIM

unique users

+18%

E-Bills

(Penetration of ~66%)

+36%

Postpaid E-Sales

(FY19 YoY)

-17%

• Human interactions

+14%

E-Paymentbase

+28%

Control E-Sales

Normalized OPEX¹ Significant Below Inflation	(R$mln ,%YoY)
					2019 OPEX: -0.3% YoY			vs. IPCA2 4.3%
		4Q	2,637	-0.7%	2,619
		3Q	2,634	-0.6%	2,619
		2Q	2,641	+0.2%	2,646
		1Q	2,698	-0.2%	2,694
			2018		2019
					Bad Debt

Recharges

+55%

Recharges via App

>37%

Penetration of E-Recharges

• Still challeging, but starting to show improvements
• OPEX ex-Bad Debt would have decreased 2.3% YoY in 2019

-6.9% QoQ

201

187

3Q194Q19

(1) OPEX normalized for the effects detailed in slide 2.	TIM Participações - Investor Relations	11
(2) Last twelve months IPCA as of December 2019.	Results Presentation

Better Operational Trends Are Supporting a Continuous Evolution of Margin and Cash Generation

Solid Normalized¹ EBITDA & Margin	(%; R$ bln, %YoY)	Consistent Margin¹ (Pro-forma2) Evolution	(%;)
				37.5%	39.1%	6 consecutive years of
					margin expansion.			39.8%
							38.5%
EBITDA1					6,798
						36.6%
Margin			42.9%		+6.7%
40.8%		6,371
						33.5%
	1,820	+8.1%	1,967			31.5%
EBITDA1								+8.3 p.p.
	4Q18		4Q19	2018	2019	2015	2016	2017	2018	2019

Strong Normalized¹ EBITDA - CAPEX	(R$ mln)		Normalized Net Income¹ Expansion	(R$ mln, %YoY)

% Net	15%	17%
Revenues
		2,945
	2,540	+15.9%

2018

2019

		+32.1%	2,049
	1,552	+28.7%	756
4Q	587
3Q		+61.4%	619
383
2Q	336	+26.0%	423
1Q	245	+2.5%	251
	2018		2019

(1) Normalized for the effects detailed in slide 2.	TIM Participações - Investor Relations	12
(2) Pro-forma excludes the effects of the adoption of IFRS 9, 15 and 16.	Results Presentation

Solid Balance Sheet and Operating Cash Flow

Net Financial Position¹

(R$ mln)

1,465

770

476

163

541

-347

-2.116

NFP 2018 Normalized

Normalized Net

Cash

Dividends Paid Others

NFP 2019

FOCF

Financial

Taxes

(ex-license)

Expenses

(IR/CSLL)

Consolidation of Normalized FOCF¹ Turnaround

(R$ mln)

1,845

1,059

-178

-610

1Q19

2Q19

3Q19

4Q19

• Positive seasonality for operating cash flow confirmed
• Net debt reduction to sustain a strong balance sheet: ready for strategic movements
• Shareholder remuneration evolving consistently

Shareholder Remuneration	(Announced R$ mln)
							995
		~3x higher in		953
		three years
IOC	850
339
			190
Dividends 149
103
	2017			2018	2019

(1) EBITDA, Working Capital and Net Financial Expenses normalized for the effects detailed in slide 2.	TIM Participações - Investor Relations	13
Results Presentation

2019 Targets Delivered Despite a Challenging Environment

	2019 GUIDANCE		Back on track and ready for the new
		challenges
Guidance	Short Term			2019 external assumptions were not met:
2019 Results		➢ Slower	and	unbalanced	economic
Metrics	Targets (2019)
			recovery (GDP ~1% vs 2.5% assumed in
1) Service	3-5% (YoY)	2.4%	2H19:		Strategic Plan)
Revenues	+3.1%
	Mid to High Single			2020 Main Focus:
2) EBITDA Growth	6.7%		➢	Unlocking efficiency in a broader way
Digit (YoY)
					(cash approach)
3) EBITDA - Capex	> 15%	16.9%		➢ B2B: further develop IoT opportunity
on Revenues
				➢ Accelerating the movement "from
4) IOC Distribution	~ R$ 1 bln	R$ 995 mln			volume to value"
				➢ Focus on operation quality recovering
5) CAPEX	~ R$ 4 bln	R$ 3.9 bln			customer satisfaction
	➢ Developing new sources of revenues

TIM Participações - Investor Relations

Results Presentation

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