2Q Main Highlights ts: : Accel eler erat ated ed Recoveri vering ng Path Postpaid Net Adds in New Rhythm Mobile Net Service Revenues (Thd lines) (%YoY) 509 445 5.0% 211 3.7% +12 pp -33 -1.5% -3.0% 1Q16 2Q16 1Q17 2Q17 -6.8% 5x 2Q16 3Q16 4Q16 1Q17 2Q17 1H Net Adds 178K 954K Source: Anatel 4G Coverage Leadership Enhancement EBITDA¹ Growth (Cities covered with LTE) (%YoY) 80% Coverage in 1,850 June 15.5% 3x 8.7% 5.8% 579 +22 pp 0.5% -6.5% 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 2Q17 ¹ Normalized for towers sale and other items Results Presentation 2 Investor Relations
Portfol folio o Evoluti ution on: : More Focus on P Postpa paid id and C Changi ging ng Prepaid id Profil ile Pure Postpaid Prepaid Launched in June, 2017 Weekly plan focus : 40% of gross additions in 2Q (> 50% in July) No price change (same as 2016) Top-up incentives campaigns Reinforce communication with postpaid users: back to top brand Facebook partnership: dedicated monthly package for R$ 9.90 awareness ranking after 18 months Gathering all benefits into one plan Unlimited Calls Offering Service + Handset with lock-in Partnering to produce content, Smartphone with 12m shows, festivals and singers retention and no subsidy 500 minutes Additional features for the music platform differential 2 GB of internet Results Presentation 3 Investor Relations
Custo tome mer r Base Evoluti tion on: : Focus us on V Value e vs vs Volume me Postpaid User Base and Acquisition Dynamics Gross Adds + Migrations (Pre-Post) ARPU Breakdown Gaining (Net MNP ‘ 000; base mln lines; EoP) (lines; % YoY) (%) Traction New 2x +20% gross adds Portfolio + 15% +32% Postpaid after TIM Black YoY +25% Controle launch Old MNP 15.8 New 13.8 Portfolio Postpaid +11% Base Pure Old 2Q16 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 Pre to Post migrations remain strong Positive MNP balance against all players in every region Prepaid User Base Evolution Recurring Offers Over Recharge by Segment Value vs (mln lines; EoP) Gross Adds (%) Volume Market: (%) -10% >50% in July -10% 40% TIM Infinity 50.2 49.0 48.5 25% 46.5 45.0 Young 43% TIM Pre¹+Turbo 28% 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 2Q17 Jun/16 Jun/17 Strict disconnection policy Avoiding one-off effects Source: user base data from Anatel Results Presentation ¹TIM Pre recurring 4 Investor Relations
Network k Evolut utio ion: n: 4G F Fastest t Roll Out 4G Traffic Evolution 4G Cities Coverage Evolution # 1 (% of traffic generated by 4G devices) (# of cities) coverage 80% of 528 urban pop. new cities 1,850 covered in 2Q 71% 1,465 >90% 48% 1,360 1,322 1,291 1,276 sites w/ proprietary backhaul 2Q16 2Q17 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Enhancing Capacity and Efficiency with Carrier Aggregation Strategy 1,800 MHz & 700MHz (bandwidth serving 4G) 2,600 MHz 1x 1,800 MHz 2x 700 MHz >4x Client is limited to a fraction Client is able to access full Coverage in km of 4G network capacity 4G network capacity Larger spectrum availability for 4G Utilizing multiple bandwidth strategy to promote capacity increase and higher speed experience Results Presentation 5 Investor Relations
Network: k: Speedin ing g Up 4G U Under er 700 0 MHz Before x Signal Propagation Effect After 700 MHz 10 states capitals activated with 700 MHz Sites with 2.6 MHz Sites with 1.8 MHz Sites with 700 MHz 4G traffic increased 65% in Brasilia after the full speed operation of 700 MHz Continues SpeedTest – 4G 1,800 MHz Download rate Refarming (Mbps) of 1800 Reaching Rio de Janeiro MHz State and São Paulo interior (from 10 MHz to 15 MHz) Download speed enhanced 10 MHz 15 MHz 60% 6/1/17 6/8/17 6/15/17 6/22/17 6/29/17 7/6/17 7/13/17 HD Voice For New Revenues and Costs Optimization For The Customer (VoLTE) 100% service transparency IMS platform available for new services Improved voice quality Increase the voice coverage area: WiFi + LTE 700 MHz Faster Call Setup VoLTE spectrum efficiency Launched in cities with 700 MHz availability Optimization of the battery life Simplified the network architecture Improved indoor coverage Infrastructure reutilization for VoLTE, WiFi Calling and other services Results Presentation 6 Investor Relations
TIM Live: e: Another r Great Quart rter er For the Ultra Broadba band nd Busines ess Value Customer Growth Offer Experience User Base User Base Mix (>=50Mb) ANATEL Satisfaction Survey (‘000) (2016, General Satisfaction in points; 0-10) (Volume ‘000) #1 net adds in SP & Rio São Paulo Rio de Janeiro (Apr/May) +11% +23% TIM 7.8 TIM 7.4 P3 7.1 P7 6.8 348 P1 6.9 284 P3 6.6 P8 6.8 P6 6.3 2Q16 2Q17 2Q16 2Q17 P4 5.3 P1 5.9 Net Revenues ARPU (R$ mln) (R$) Netflix ISP Speed Index (Jun/17, Mbps) Leader 23x in the last +32% +11% 26 months 3.2 3.1 P1 2.9 P3 2.4 P6 2.1 P4 2Q16 2Q17 2Q16 2Q17 Strong revenue performance Investments in customer High value customer mix is backed by solid user base experience and network quality are boosting ARPU levels. expansion. perceived by the clients. Results Presentation 7 Investor Relations
Continuous nuous Revenue nue Recov over ery: y: New Traject ctory ory Confirme rmed d Net Service Revenues Data on Mobile Net Service Revenues (%YoY) (% of VAS Revenues over MSR) +6.6% 3,750 +5.0% 60% 3,570 45% +5.0% 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 Mobile Fixed 2Q17 Business Generated MTR Exposure ARPU (% VU-M/Service Revenues) (R$) (excl. incoming rev.) (%YoY) 5.8% 19.38 7.5% 3.7% 17.22 +7.5% - 210 +12.6% YoY bps YoY +15.5% YoY -4.0% ARPU outgoing 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 2Q17 Results Presentation 8 Investor Relations
Opex: Second Quarte ter r in D Details Normalized Opex Breakdown Analysis COGS (R$ mln; %YoY) Trend following reduction in prepaid handset sales and targeted • lock-in contracts expansion. Traffic -15% -2% ITX: lower cost after MTR (VU-M) cut partially offset by off-net • traffic growth and negative one-off impact of TU-RL dispute*. Rental & Power: growth driven by network expansion . • 2,616 • Network: positive one-off impact of 639 resolution* (already -4% 2,552 booked starting from 4Q16) and structural lower leased line COGS 273 232 costs (EILD). Market Traffic 966 924 • Stronger postpaid sales (+32%) driving SAC increase. (Network + ITX) • Higher postpaid CB (+15%) generating increase in customer +3% management opex (customer care, billing and collection, bad- debt), partially offset by efficiencies. Positive impact from recharge channels revision • Marketing (Selling & Market 922 952 Process + Bad Debt) • Lower process driven costs mainly due to third party services -3% Process contracts renegotiation, FUST/FUNTTEL reduction partially offset 456 444 (Personnel + G&A + Other) by higher personnel costs 2Q16 2Q17 Efficiency Plan Recap Efficiency Plan Completion Main Actions (R$ bln) (%) Digitalization of business and • administrative processes R$1.1 bln R$0 Sales channels redesign • -1.2 1.7 0.6 1.1 ~60% Project zero leased lines • 0.5 2017 2018 2019 IT and Network vendors rationalization "Original" Realized Residual Additional New Plan • Plan 2016-18 until 2016 Savings 2017-19 2017-19 Zero based budget • * The one-off events offset each other with no impact on EBITDA Results Presentation 9 Investor Relations
EBITDA A and Profi fita tabi bili lity ty: : Cash Genera rati tion on Normalized EBITDA¹ Normalized EBITDA¹ yearly Evolution (%YoY) (R$ mln) 15.5% Normalized EBITDA¹ – CAPEX as % of Revenues 8.7% (R$ mln; %) 5.8% 1,391 0.5% 1,204 35% 32% Margin -6.5% 2Q16 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 6 p.p 14 p.p. CAPEX over Rev 26% 21% Normalized EBIT¹ Margin Reported Net Income (R$ mln; %) (R$ mln) 2Q16 2Q17 10.1% - EBITDA ~2.5x 229 582 EBIT ~3 x 6.6% CAPEX Margin 219 399 EBIT 253 74 2Q16 2Q17 2Q16 2Q17 EPS 0.03 0.09 ¹ Normalized for tower sales and other items Results Presentation 10 Investor Relations
2Q17 Main Takeaway ways: s: Busines ess Progre ressi ssing ng Across the Board Network Infrastructure Advances Improved Revenue Mix Customer Experience (MSR excl. incoming) Acceleration in 4G coverage (YTD) Speed up of digital transformation initiatives Pay per use 2,000 cities covered by Young Dedicated caring for high value end of July customers Bundle Offers* Cities with 700 MHz 58% 70% Big Data analyses driving marketing and network decisions 62 Cities Jun/16 Jun/17 o/w 10 Capitals TIM Live remains as #1 fixed ultra new proposition for broadband quality of services high value segment Launch of VoLTE “All you can eat” bundle July 2017 Revenues at new frontier EBITDA Margin Improvement and High FCF Yield To mid From 30s Turnaround + High EBITDA % 20s Progressing - Low Double Dig. FCF Yield Low Single Dig. 2Q16 3Q16 4Q16 1Q17 2Q17 * Bundle offers = postpaid + weekly prepaid bundle Results Presentation 11 Investor Relations
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