Turnar arou ound on T Track: k: Virtuou uous Cycle e on the Rise 000 070 145 4G Network Expansion “Human” Postpaid Net Additions (1Q17) 235 000 (# 4G sites – e-NodeB) (Excluding M2M and modem; in thd lines) 040 #1 in Net 12.5 418 Adds 327 8.0 +55% Operational 166 -8 1Q16 1Q17 TIM P1 P3 P4 Source: Anatel Network Financial Mobile Service Net Revenues Normalized¹ EBITDA – CAPEX (R$ million) (%YoY) Cash 3.7% 000 081 594 135 452 1Q16 1Q17 000 +31% 110 YoY 184 -9.2% 1Q16 1Q17 000 % over Net 156 12% 15% ¹ Normalized for towers sale and other transformation impacts 222 Revenues Results Presentation 2 Investor Relations
Custo tome mer r Base Transforma rmati tion on: : Postpa paid 000 070 145 Better quality improves acquisition and loyalty… 235 000 Gross Adds and Migration Net Mobile Number Portability Churn & Downgrade 040 (Postpaid; %YoY) (Postpaid) (Postpaid) +16% -12% >2x 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 ... while “more for more” strategy and price -ups improves ARPU Postpaid Base Evolution Acquisition ARPU Customer Base ARPU (mln users; % of Postpaid over CB) (Postpaid gross adds; R$/month) (Postpaid customers; R$/month) 000 15.3 081 135 +8% Postpaid 13.5 000 +25% 110 +17% 184 Controle 1Q16 2Q16 3Q16 4Q16 1Q17 000 156 1Q16 1Q17 1Q16 1Q17 222 20% 25% Results Presentation 3 Investor Relations
Custo tome mer r Base Transforma rmati tion on: : Prepa paid 000 070 145 Recurring Prepaid Base 235 Focusing on recurring offers (Quarterly average) 000 040 Daily packages Weekly packages 2X R$0.99 1GB + 100 min R$10 + Deezer +WhatsApp 50MB +WhatsApp + 1GB + unlimited R$0.99 R$9 on-net + Deezer +WhatsApp Unlimited voice on-net 1Q16 1Q17 Prepaid Customer Profile % Data ARPU utilization 2x >70% 000 081 135 x <50% 000 110 184 Recurring offers successfully attracting 000 156 higher value prepaid subs. 222 Results Presentation 4 Investor Relations
Data Services ces Revenu enues s Over 50% % of MSR 000 070 145 Changing Customer Base profile 235 000 4G users over CB 040 All plans with digital (%) 32% services embedded. Improving loyalty and 14% acquisition 1Q16 1Q17 Yielding data Mobile Service Net Revs Mix VAS ARPU revenues (%) (R$; %YoY) 000 66% 34% Traditional 9.8 081 57% 135 52% 7.4 000 48% 110 Data 43% 184 34% 000 1Q16 2Q16 3Q16 4Q16 1Q17 156 1Q15 1Q16 1Q17 222 Results Presentation 5 Investor Relations
Residen enti tial al Soluti tion ons: : TIM Live Consistency ency and New Opportun tunit itie ies 000 070 145 Efficient Customer base increase TIM Live ARPU Expansion 235 #1 on Netflix ISP 000 Speed Index (%YoY) 040 +9% Homes Passed (mln) Customer base (thd) 322 3.1 +26% 2.9 +7% 256 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 TIM Live Net Revenues (R$ bln; %YoY) WTTx Solution Trials: TIM Casa Internet +38% Runs over LTE (700MHz, 1.8GHz and 2.6GHz); • +8.9% PC TV Available offers: 2Mbps (50GB) and 4Mbps (80GB); • Mobile • Target markets: Residential; IDU • Self-installed CPE ( comodat o with lock-in contract) 000 081 135 First Results : 000 1Q16 2Q16 3Q16 4Q16 1Q17 • City: Rio Verde (GO) 110 TIM Live on >20% >30% 184 Fixed Revs. • High satisfaction levels (>9.6/10) Average data consumption: • 000 ~70GB/month 156 222 • >80% clients did not have broadband Results Presentation 6 Investor Relations
4G Fast Rollout out Supporti rting ng Data Strategy egy 000 070 145 700MHz rollout 4G Cities Coverage Evolution Doubling 4G Capacity in Key Areas started in Goiás 235 (# of cities) 000 and Brasília Trough 1.8GHz Refarming fastest 4G 040 deployment 1.500 from to 1,322 (TIM) (1Q15) (1Q17) 1.200 20MHz 10MHz 66% through 4G (P3) of data 900 devices traffic (P1) Rio de Janeiro São Paulo 600 Porto Alegre Curitiba >90% 300 with proprietary (P4) Distrito Federal backhaul of sites 0 With additional 10MHz from Dec-13 Dec-14 Dec-15 Dec-16 Mar-17 700MHz still to come Source: Teleco website (other players) Quality Perception Surveys Customer Satisfaction Index¹ Already #1 (Postpaid general satisfaction) TIM’s Annual Evolution in Controle (2016 ANATEL’s Perception Survey) Offerings 76.3 000 74.8 73.6 P1 081 Problem Resolution Voice 72.7 TIM 135 71.8 70.9 P3 000 Customer Care 3G/4G Availability 69.9 P4 68.7 110 184 3G/4G Connection Billing Stability 2016 000 4Q15 4Q16 3G/4G Speed 156 2015 222 Source: CSI Model by CFI Group. From October to December, 2016. Results Presentation 7 Investor Relations
Turnar arou ound Milestone: ne: Revenue nues Back k to Positive ive 000 070 145 Reshaping Revenues Data Growth Acceleration Business Generated (VAS over MSR %) 235 (R$ mln; %YoY) (Mobile Services Net Revenues 000 ex-incoming ; %YoY) 040 52% 6.3% %YoY +14% +25% Total VAS 1,480 1,849 43% SMS -27% 0.9% 34% -0.3% Innovative +31% -4.0% -5.7% 1Q16 2Q16 3Q16 4Q16 1Q17 1Q16 1Q17 1Q15 1Q16 1Q17 Mobile Service Net Revenues Total Net Revenues Breakdown (%YoY) (R$ mln; %YoY) 7.0% + 3.5% -12.0% 3,951 000 3,854 3.7% 081 135 -5.4% 000 Ex – MTR impact +2.5% 110 184 Reported -9.2% 000 1Q16 2Q16 3Q16 4Q16 1Q17 156 1Q16 Services Revenues Handsets 1Q17 222 Results Presentation 8 Investor Relations
Solid EBITDA A Growth With Opex Control ol and Margin Expansion on 000 070 145 EBITDA Exposure to MTR Normalized 1 OPEX Normalized¹ EBITDA Growth (%) 235 (R$ bln; %YoY) (%YoY) 000 8.7% Stable Opex despite 040 Revenues growth and 8.2% 4.6% 12M inflation 2.7 2.7 -0.1% -13.5% 1Q16 2Q16 3Q16 4Q16 1Q17 1.9% Margin 30.2% 32.0% Service 1Q16 2Q16 3Q16 4Q16 1Q17 32.6% 33.6% 1Q16 1Q17 Margin Net Financial Position Evolution Normalized 1 EBITDA-Capex (R$ mln; %YoY) (R$ mln, %) 4,372 72 47 +R$964 mln 178 improvement 859 vs. 1Q16 594 +31% 495 000 452 081 2,721 135 000 +1,651 110 184 Net 000 NFP OFCF ex- 700MHz Cash Other NFP 1Q16 1Q17 Financial 156 Dec/16 license Clean Up Taxes Movements Mar/17 222 Expenses ¹ Normalized for towers sale and other transformation impacts Results Presentation 9 Investor Relations
1Q17 7 Key Messages es & O Outloo ook 000 070 145 Operational and financial turnaround already bearing results 235 000 Customer Base Mix Net Revenues Value approach in Revenues at a 040 (%YoY) both segments different pace 2.5% Prepaid 75% 80% 1Q16 1Q17 -1.7% -5.3% 36% (2019e) Pospaid 25% -12.4% 20% TURNAROUND -15.3% 1Q16 1Q17 IN PROGRESS Normalized EBITDA Network Traffic Mix (%YoY) 8,7% 5,8% (Data traffic through 4G devices) 66% 0,5% 40% 1Q16 1Q17 Normalized -6,5% 4G leadership EBITDA reshaping traffic -13,5% acceleration 1Q16 2Q16 3Q16 4Q16 1Q17 Recovery trend should continue going forward 000 Cities Covered with 4G 081 Network & (EoP) Network quality to be perceived as a differentiation factor and 135 Quality: VoLTE to be launched in 2Q17 helping voice quality >2K 000 1,255 110 Offers: New offers continue to reshape customer base and usage profile 184 Financials: 000 Revenues and EBITDA positive growth in every quarter 2016a 2017e 156 FCF growth to be continued 222 Results Presentation 10 Investor Relations
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