Press Release 3 Q07
Published on: Mar 4, 2016
Transcripts - Press Release 3 Q07
TIM Participações S.A.
TIM PARTICIPAÇÕES S.A. Announces its Consolidated
Results for the Third Quarter 2007
Rio de Janeiro, November 7th, 2007 – TIM Participações S.A. (BOVESPA: TCSL3 and
BOVESPA 1 TCSL4; and NYSE: TSU), the company which controls directly TIM Celular S.A. and
(lot = 1 share) indirectly TIM Nordeste S.A., announces its results for the third quarter 2007 (3Q07).
TIM Participações S.A. (“TIM Participações” or “TIM”) provides mobile
telecommunications services through its mobile operators throughout Brazil and is the
NYSE 1 largest GSM operator in South America. The following financial and operating
(1 ADR = 10 shares) information, except where otherwise indicated, is presented on a consolidated basis and
TSU: US$43.87 in Brazilian Reais (R$), pursuant to Brazilian Corporate Law. All comparisons refer to the
(1) Figures of November 6th, 2007 third quarter of 2006 (3Q06), except when otherwise indicated.
• TIM was awarded with the “Top of Mind” as the most remembered
3Q07 Conference Call Brazilian mobile operator company, for the third consecutive year.
Conference Call in English • Launch of “TIM Casa Flex”, in October, a package with convergent
November 7th, 2007, at 1 PM Brasília services that combines a fixed and a mobile number in the same chip in
time. any GSM handset.
(10 AM US ET)
• Launch of “TIM Mais Completo” package, combining mobile/residential
Conference Call in Portuguese: telephony and USB modem device, also allowing computer internet access
November 7th, 2007, at 2:30 PM,
Brasília time. through a fully wireless solution.
(11:30 AM US ET)
• Launch of “TIM Web”: an innovative data package for wireless internet
For further information, please access without the need of a provider, including a USB modem offer.
access the Company’s website:
www.timpartri.com.br • Development of “Plano 1”, a pioneer product in the Brazilian market,
which offers low-cost recharges, lower tariffs to predefined numbers and
bonus TIM SMS, fostering the access to mobile telephony services in
• TIM reaches, at the end of September, 29.2 million customers with 1.7
Mario Cesar Pereira de Araújo million net additions in the 3Q07.
CEO and Interim Investor Relations
Officer • Continuous improvement in customer base mix: postpaid subscribers
represented 22.6% of the total base.
(55 21) 4009-3742 / 8113-0571 • Leadership in net service revenue: R$2,877.9 million in the 3Q07, 20.2% up on
(55 21) 8113-0790
• Average revenue per user (ARPU) totaled R$34.0, remaining above the
email@example.com market average.
Leonardo Wanderley • Incremental bad debt expenses in the 3Q07 deriving from the write-off on
(55 21) 4009-3751 / 8113-0547 accounts receivable of handsets sales in installments.
• EBITDA stood at R$547.3 million (EBITDA margin of 17.3%). Excluding the
Fabio Levy Costa non recurring effect of higher bad debt expenses, EBITDA would have been R$720.5
(55 21) 4009-3446 / 8113-0024 million, a 25.3% growth compared to the 3Q06, generating an EBITDA margin of
• TIM’s results in the quarter, allied to the commercial activity expected for the last
months of the year, allow us to confirm our targets for 2007, despite the non
recurring write-off on accounts receivable impact.
• Acquisition of additional frequencies of the Personal Mobile Service to
improve the quality of the existing coverage. The price paid (approximately
R$ 50 million) was close to minimum (9.9% average premium).
Main Accounting Changes
1. Accounting changes
Following an analysis of the best accounting practices for the sector, the Company
implemented certain changes whose effects are presented below and which differ
substantially from those in the previous quarterly information disclosed to
shareholders and the market.
1.1. Handset Subsidies
In the 3Q07, handset subsidies were fully booked as “discounts on products sold”, instead of
being partially allocated to selling expenses and the cost of goods sold.
This change was implemented as of the fourth quarter of 2006 and is retroactive to
January 1st, 2006. 3Q06 figures were therefore adjusted for comparative purposes.
1.2. Asset Retirement Obligation – ARO
In the fourth quarter of 2006, pursuant to CVM Resolution 489/85, the Company
began to adopt new accounting procedures, so as to bring them into line with those
adopted by other companies in the telecommunications sector. Now the estimated
cost of dismantling radio towers and equipment in rented buildings will be
recognized as a liability, as a counter-entry of permanent assets. The depreciation of
these assets is calculated based on their useful life. The estimated liability is discounted to
present value in order to reflect the best current estimate.
The change was implemented as of the fourth quarter of 2006 and is retroactive to
January 1st, 2006. The figures from the 3T06 were therefore duly altered for
1.3. Reclassification of the goodwill amortization paid in the privatization
As of the 1Q07, part of the amortization related to the goodwill paid in the privatization, which
used to be booked under “other operating expenses”, is being booked as income tax, in line with
international accounting standards.
1.4 Reclassification of the ADENE tax benefit
As of the 3Q07, the ADENE tax benefit, recorded by the indirect subsidiary TIM Nordeste S.A.,
was booked in the quarter’s income statement rather than in the balance sheet under capital
Complete Financial Statements, including the Explanatory Notes, are available at our
Investor Relations website: www.timpartri.com.br.
2 / 15
Message from Management
TIM Participações once more stood out in the Brazilian market for its brand
recognition, client satisfaction and preference, as well as to the continued growth of
its market share and service revenue. We continue to grow with profitability and
In October, TIM received two important awards: “Top of Mind”, based on a survey by
Datafolha Survey Institute, as the most remembered mobile operator company; and
“Brazil’s Most Admired Company” from CartaCapital/TNS InterScience in the mobile
The Company’s solid operating and financial performance in the quarter points
towards continued growth. Close to 1.7 million subscribers were added to the
customer base, a record number in the first nine months of the year. Of these
additions, 32.4% were in the postpaid segment, confirming our leadership in the
postpaid segment. Net service revenue outpaced the 3Q06 by 20.2% and, once more,
ARPU remained above the Brazilian market’s average.
In the third quarter, the Company introduced a new credit and collection system to
improve accounts receivable management. This system allows the automatization of
processes, unification of controls and a higher flexibility on collection procedures.
During its implementation, it was noted that certain amounts, related to sales of
handset in installments, which the Company used to book as accounts receivable,
were not charged in monthly bills this year and the last three years. Consequently,
the Company wrote-off R$173.3 million of its accounts receivable from the sale of
handsets, R$118.6 million of which represent bad debt expenses and R$54.7 million,
were deducted from handset’s revenue.
It is important to note that the Company has already taken measures to correct this
procedure with its current clients and to avoid further situations of such kind.
Excluding these non recurring adjustments for comparative purposes, EBITDA would
have been R$ 720.6 million, 25.3% higher than in the 3Q06, accompanied by an
EBITDA margin of 22.4%, versus 21.1% in the 3Q06. This result is in line with the
market’s strong growth in the period, underlining a more competitive scenario while
reflecting investments in the development and launch of convergent services
(mobile + fixed) as part of the Company’s growth strategy.
TIM´s results in the quarter, allied to the commercial activity expected for the last
months of the year, allow us to confirm our targets for 2007, despite the non-
recurring bad debt impact.
In terms of marketing strategy, in July we launched two innovative products: “TIM
Web”, a postpaid plan of wireless internet access, without the need of a provider,
and “TIM Mais Completo”, which combined residential and mobile telephony and
In the quarter, we also developed two unprecedented services in the Brazilian
market: “TIM Casa Flex” and “Plano 1”. “TIM Casa Flex” is a package of convergent
services combining a fixed and a mobile number in the same chip in any GSM
handset, uniting convenience and competitive prices. “Plano 1” offers recharges of
R$1, R$3 and R$5 combined with lower tariffs for predefined numbers and the
possibility of advancing credits. This new offer reduces the entry barrier with
3 / 15
additional advantages and represents considerable progress in the universalization
of mobile telephony in Brazil.
TIM has recently completed a strategic partnership with Microsoft for the
development and supply of joint mobility solutions for the corporate segment and
Lastly, in September, TIM acquired the remaining lots of the “D” and “E” bands at the
Auction of Additional Licenses and Frequencies of the Personal Mobile Service held by
ANATEL. The acquisition was made in accordance with its strategic planning, in order
to improve the quality of the existing coverage in the states of São Paulo, Rio de
Janeiro, Espírito Santo, Rio Grande do Sul and the North and Mid-West regions. The
total average premium in the auction, including the purchase of all operators, was of
21.4%. TIM has acquired the above mentioned licenses for approximately R$50
million and an average premium of 9.9%.
At the end of September 2007, Brazil’s mobile telephony market reached 112.8
growth in million lines, growing by 17.6%. National penetration reached 59.4%, up by 8.2
the mobile p.p. year-on-year. The number of mobile lines in Brazil is already close to three times higher
phone than the number of fixed lines in use and continues to be one of the main drivers of digital
market: inclusion in the country.
million lines Net additions totaled 6.1 million, 35.0% higher than in the 2Q07 and 48.2% higher than
in the 3Q07 in the 3Q06.
The Company closed the third quarter with a customer base of 29.2 million – an
increase of 21.1% in the last 12 months. TIM’s market share grew from 25.1% in
the 3Q06 to 25.9%.
In the 3Q07, TIM Participações acquired 1.7 million new customers, accounting
for 27.6% of the market’s total net additions.
Underlining its strong focus on the postpaid segment, TIM recorded a 33.2%
growth in its postpaid base in the last 12 months well above the 19.9% increase
in the Brazilian postpaid market. In the quarter, the Company recorded an
outstanding 42.7% share of postpaid net additions.
In the corporate segment, the customer base grew even further, by 41.4% over
4 / 15
TIM Client Base (millions)
20.5% 21.3% 21.6% 22.0% 22.6%
3Q06 4Q06 1Q07 2Q07 3Q07
TIM Participações’s GSM base represented 95.2% of the total. GSM coverage reached
92.4% of the Brazilian urban population, extending across 2,538 municipalities. All the cities
covered by TIM’s GSM technology have access to GPRS, and the Company also offers EDGE
technology in more than 1,000 municipalities. This wide data coverage facilitates and
encourages the use of value-added services, (VAS), boosting the Company’s service revenue
In terms of innovation, our strategy is to increase our offers of convergent
services, develop new sources of revenues and maintain our leadership by
anticipating and satisfying growing customer needs.
In the quarter, we launched two cutting edge innovations: “TIM Web”, providing
wireless internet access, and “TIM Mais Completo”, a bundle of fixed and mobile
telephony and internet access. These solutions offer our customers mobile portable
internet access at competitive prices.
Complementing these offers, we also developed “TIM Casa Flex”, an integrated
voice solution that joins a fixed and a mobile number in the same chip in any GSM
handset. The official launch occurred in October and is unprecedented in the
national telephony market. A step ahead of “TIM Casa”, “TIM Casa Flex” foregoes
the need for a mobile voice plan, thus reducing entry barriers.
TIM also developed in the 3Q07 “Plano 1”, another pioneer prepaid plan in Brazil,
which offers recharges of R$1, R$3 and R$5 in addition to advantages such as the
choice of three TIM or fixed numbers with lower tariffs (R$0.20/minute), Special
Credit, which advances credits if the recharge ends, and free TIM SMS for calls
made. “Plano 1” makes the access to mobile telephony easier for prepaid
Promotions for Fathers’ Day continued to focus on encouraging the use of services
and increasing on-net traffic rather than subsidizing handsets. TIM thus launched
the “Feliz TIM dos Pais” (Happy Fathers’ TIM Day) campaign, offering postpaid
5 / 15
users 500 minutes free per month (out of which 40 minutes for TIM to TIM long-
distance calls, with the 41 code). For the prepaid and “Fixed Bill” segments, the
Company used the “7 Cents” promotion, charging 7 cents of reais for TIM to TIM
local calls, international calls to certain countries (using the 41 code) and TIM to
It is also worth highlighting the launch of the “Quem tem TIM tem mais” (Who has
TIM has more) promotion, aimed at reinforcing the loyalty of prepaid clients who
have been in our base for more than one year by offering bonuses in minutes for
local calls to TIM and fixed numbers valid for 30 days for recharges beginning at
The “Seu TIM Chip Vale Mais” (Your TIM chip is worth more) promotion, which
returns to clients the amount paid for the chip if they make a R$15 recharge within
48 hours, was used along with the other promotions to encourage the first
The first operator to bring Blackberry to Brazil, introducing it to the corporate
market in January 2005 and individuals in May 2006, TIM is also the first operator
to offer the “BlackBerry Assinatura Zero” (Blackberry Zero Subscription), launched
in October 2007, in which the customer pays only for the traffic, without the need
to pay any subscription fees to use the service.
Selected financial data 1
3Q07 3Q06 % Y-o-Y 2Q07 % Q-o-Q 2007 2006 % Y-o-Y
Total Gross Revenue 4,436,364 3,692,860 20.1% 4,215,510 5.2% 12,547,209 9,783,603 28.2%
Gross Service Revenue 3,937,155 3,157,577 24.7% 3,715,938 6.0% 11,199,039 8,277,793 35.3%
Gross Handset Revenue 499,209 535,283 -6.7% 499,573 -0.1% 1,348,170 1,505,810 -10.5%
Total Net Revenue 3,163,387 2,719,974 16.3% 3,059,568 3.4% 9,066,128 7,060,489 28.4%
Net Services Revenue 2,877,941 2,394,326 20.2% 2,781,858 3.5% 8,321,339 6,220,888 33.8%
Net Handsets Sales 285,446 325,648 -12.3% 277,710 2.8% 744,789 839,601 -11.3%
EBITDA 547,281 575,199 -4.9% 743,711 -26.4% 1,955,043 1,664,729 17.4%
EBITDA Margin 17.3% 21.1% -3.8 p.p. 24.3% -7.0 p.p. 21.6% 23.6% -2.0 p.p.
EBIT (21,970) 6,321 - 173,725 -112.6% 233,541 3,895 5895.9%
EBIT Margin -0.7% 0.2% -0.9 p.p. 5.7% -6.4 p.p. 2.6% 0.1% 2.5 p.p.
Net Income (Loss) (121,836) (93,768) 29.9% 34,014 - (107,287) (420,569) -74.5%
Note: (1) Consolidated data
Gross revenue totaled R$4,436.4 million in the 3Q07, up by 20.1% on the third
quarter of 2006.
Total net revenue came to R$3,163.4 million, 16.3% higher than in the 3Q06,
mainly due to the expansion of operations. In the period, part of the incremental
bad debt (R$54.7 million) is being deducted from net handset revenues. Excluding
this effect, total net revenues would have increased 18.3% on a year-on-year
6 / 15
Net service revenue totaled R$2,877.9 million, up by 20.2% on the R$2,394.3
million recorded in the 3Q06, in line with 2Q07 y-o-y expansion net of the of Bill & Keep
Parcial elimination effect. This strong year-on-year growth arose chiefly from the customer
base expansion and the increase in total traffic (+20%). MOU (monthly average of minutes
Maintained per client) remained in line with the previous quarters (approximately 94 minutes/month).
net service Gross revenue from value-added services (VAS) totaled R$321.9 million,
48% up year- representing 8.2% of gross service revenue. It is worth noting that innovative services
on-year. went up by 101% when compared to 3Q06.
ARPU above Average revenue per user (ARPU) reached R$34.0, virtually in line with the R$34.4
the market’s and R$34.6 recorded in the 3Q06 and 2Q07, despite the strong growth in net
average additions in the period.
Net handsets revenue stood at R$285.4 million in the 3Q07. This figure includes
the deduction of R$54.7 million related to the sale of handsets whose installments
were not charged in the monthly bills. Excluding this adjustment, net handsets
revenue would have been R$340.1 million, compared to the R$325.6 million
recorded in the 3Q06. This increase was due to the growth in gross additions and the
36.7% rise in handset sales volume (1.9 million in the 3Q07 versus 1.4 million in the 3Q06).
The sale of more sophisticated handsets was increased, regarding the growing scale of GSM
handsets, aiming at stimulating the use of high value-added services. TIM continued
moving forward in its strategy of encouraging the sale of SIM Cards, which
represented more than 50% of total sales in the period.
Operating Costs and Expenses
Operating costs and expenses totaled R$2,497.5 million in the 3Q07 (excluding
R$118.6 million additional bad debt expenses from the write-off on accounts
receivable related to handset sales in installments) versus R$2,144.8 million in the
3Q06. This increase was chiefly related to the upturn of variable costs resulting
from the period’s massive revenue growth, the expansion of customer base and
commercial expenses associated with the development and launch of new
Network and interconnection costs came to R$996.5 million in the 3Q07, versus
R$815.1 million in the same period of 2006, 22.3% up. This growth was due to the year-on-
year expansion in traffic volume (+20%) and the higher customer base, especially
in the postpaid segment (+33.2%). In July, interconnection tariffs moved up by close to
2% (68.5% of the increase in wireline VC1).
The cost of goods sold, composed basically of handset and accessory sales, stood
at R$420.7 million in the 3Q07, up by 14.6% year-on-year, in line with the 14.1%
expansion in gross additions in the period. In the quarter, the Company sold 1.9 million
handsets, versus 1.4 million in the 3Q06. The impact of the deferral of handset subsidies for
the postpaid segment amounted to R$34.5 million in the 3Q06, versus R$21.8 million in the
driven by the
Selling expenses totaled R$674.7 million, 11.9% up on the 3Q06, mainly reflecting
development and an increase in gross additions and the launch of products integrating voice (fixed +
launch of mobile) and internet access, according to TIM’s convergence strategy, such as
complete “TIM Web” and “TIM Mais Completo”. These events affected mostly variable expenses
communication related to advertising and commissions (+R$53.5 million year-on-year). Note that the
services commissions were mostly tied to an increase in usage (therefore recharges) by prepaid base.
7 / 15
In addition, the period’s customer base expansion impacted variable expenses related to the
FISTEL tax (charged by Anatel on each activation and on the total initial base).
SAC/ARPU Subscriber acquisition costs (SAC) dropped by 11.6% in the 3Q07 (from R$146 in the
ratio fell 3Q06 to R$129), due to the commercial strategy based on efficient sales channels, higher SIM
Card sales and the encouragement of postpaid acquisitions. Compared to the previous
the 3Q06 to quarter, SAC increased thanks to the focus on corporate clients, raising the weight of
3.8 months commodatum in the total SAC, in addition to the USB Modem sales promotions associated with
in the 3Q07 “TIM WEB” and “TIM Mais Completo”.
General and administrative expenses (G&A) – excluding depreciation/amortization
and personnel expenses – closed the 3Q07 at R$102.8 million, versus R$98.9
million in the 3Q06.
Personnel expenses totaled R$149.4 million, versus R$153.7 million in the 3Q06, as
a result of the decline in provisions related to bonuses and variable remuneration.
In the third quarter, the Company introduced a new credit and collection system to
debt expenses: improve the management of accounts receivable. During its implementation, it was
Measures were noted that certain amounts, related to sale of handsets to the postpaid segment in
taken to correct installments, which the Company used to book as accounts receivable, were not
procedures charged in monthly bills in the current and the last three fiscal years. Although the
Company has already taken measures to correct this procedure with its current
clients, it is booking an additional bad debt expenses related to the write-off on
accounts receivable from the sale of handsets in the amount of R$173.3 million in
the 3Q07, of which R$118.6 million were booked under bad debt expenses.
Bad debt expenses, excluding the previously mentioned non recurring impact,
came to R$156.8 million in the 3Q07, equivalent to 5.4% of net service revenue,
versus 6.0% in the 2Q07 and 5.3% in 3Q06. The increase related to 3Q06 is due to the
significant upturn in postpaid revenue (which however remains stable in terms of collection)
and the increase in provisions for bad debt from long distance services by non TIM customers.
Other net operating revenue totaled R$3.4 million in the 3Q07, versus R$19.0
million in the 3Q06. Operating revenues include basically fines related to overdue
payments, service cancellations, dividend prescription, etc, partially offset by operating
expenses such as provisions for contingencies and taxes on operational transactions. Note that
the reduction compared to the 3Q06 and 2Q07 results from non-recurring revenue related to
the recovery of taxes in the subsidiaries in those periods.
EBITDA (earnings before interest, taxes, depreciation and amortization) totaled
R$547.3 million, generating an EBITDA margin of 17.3%. The Company’s operating
result was chiefly impacted by exceptional write-off on accounts receivable related to the sale of
handsets in installments.
Adjusted EBITDA, excluding the effect above for comparative purposes, would have
come to R$720.5 million, up by 25.3% on the R$575.2 million recorded in the 3Q06.
The Adjusted EBITDA margin would thus have been 22.4%, 1.3 p.p. versus the same
figure in the 3Q06 (21.1%).
Despite the accounting adjustments in the accounts receivable from the sale of handsets, the
continuous increase in service revenue offset variable costs related to the period’s strong base
growth and the launch of convergent services. The Company thus expects to maintain its
targets and expectations for the current year.
8 / 15
EBITDA and EBITDA Margin
R$ Mln handsets receivable
3Q06 3Q07 Handsets Incremental 3Q07
EBITDA EBITDA Revenue Bad Debt Adjusted
21.1% 17.3% 22.4%
Depreciation and Amortization
Depreciation and amortization expenses totaled R$569.2 million, remaining in line
with the R$569.0 million recorded in the 3Q06.
EBIT – earnings before interest and taxes – was R$22.0 million negative in the 3Q07, versus
R$6.3 million positive in the 3Q06, chiefly impacted by the exceptional write-off on
accounts receivable related to the sale of handset installments. Excluding such
effect for comparative purposes, we would have an EBIT of R$151.3 million
Net Financial Result
TIM Participações posted a net financial expense of R$80.9 million in the 3Q07,
8.9% lower than the R$88.8 million expense recorded in the 3Q06. The net financial
result reflects the lower gross debt and the decline in interest rates, marked by the drop in the
average cost of our debt (11.0% p.y. in 3Q07 versus 13.9% p.y. in 3Q06).
Income and Social Contribution Taxes
Income and social contribution taxes are calculated based on the separate income of each
subsidiary, adjusted by the additions and exclusions provided for by tax law. In the 3Q07,
income and social contribution taxes totaled R$8.0 million, with R$12.6 million arising
from the payment of the installment to amortize the goodwill resulting from the company’s
privatization and R$11.6 million from provisions for income tax and social contribution,
partially offset by an income tax and social contribution reversal of R$16.2 million.
9 / 15
TIM Participações closed the 3Q07 with a net loss of R$121.8 million chiefly
impacted by the exceptional write-off on accounts receivable related to the
handsets sales. Excluding such effect for comparative purposes, the Company
would have posted a net income of R$51.5 million, an improvement of R$145.3
million over the loss reported in the 3Q06.
Investments Investments amounted to R$341.0 million (not including the R$ 3.5 million related to
of R$ 341.0 the obligations derived from the discontinued assets - Assets Retirement Obligation – ARO)
million in the versus R$374.4 million in the 3Q06. Of the total capital expenditure in the quarter, 44.0%
2Q07 were allocated to the expansion and improvement in the quality and capacity of the GSM
network, 33.2% to development and improvement of the information technology systems,
18.4% to the no-charge lease (commodatum) program, a component of the corporate
segment’s strategy to expand and increase customer loyalty, and 2.7% to others.
At the end of the 3Q07, the Company’s net debt (total debt minus cash and cash
equivalents) came to R$1,787.9 million, versus R$1,972.9 million in the 2Q07, due to
the improvement of operating free cash flow.
By September 30, 2007, the Company’s debt amounted to R$2.2 billion, mainly
represented by loans and financing from the National Development Bank (BNDES) and
syndicated loans. Cash and cash equivalents totaled R$393.9 million, mainly
represented by highly liquid financial investments.
Ownership Breakdown Common % Preferred % Total %
TIM BRASIL SERVICOS E PARTICIPACOES S/A 644,404,708 81.21 978,715,255 63.71 1,623,119,963 69.67
OTHERS 149,139,569 18.79 557,455,328 36.29 706,594,897 30.33
TOTAL 793,544,277 100 1,536,170,583 100 2,329,714,860 100
10 / 15
About TIM Participações S.A.
Through its subsidiaries, TIM Participações is Brazil’s
largest personal mobile telephony operator, employing
GSM (Global System for Mobile Communications)
technology. The Company operates under its subsidiaries,
TIM Celular S.A. and TIM Nordeste S.A.
Focused on sustainable and profitable growth, TIM
concentrates its operations in higher-value customers in all
of its business segments: prepaid, postpaid and corporate.
Towards this aim, the Company has invested heavily in
quality enhancement and differentiating its products and
services, while seeking to develop innovative and low-cost
TIM Participações is controlled by TIM Brasil Serviços e
Participações S.A., a subsidiary of the Telecom Italia
Leader in service revenue
Since the launch of its operations in Brazil, the Telecom Second largest company in terms of
Italia Group has maintained a strong focus on its brand, client numbers
which today enjoys nationwide recognition and is Largest GSM operator in number of
synonymous with innovation and the first choice of clients
customers, especially in the corporate business. The largest mobile data transmission
TIM Participações has the largest mobile data transmission ARPU above national average
network in Brazil, using GPRS (General Packet Radio
Service) and EDGE (Enhanced Data rates for Global
Evolution) technologies, which enable internet connections
from any mobile device (laptops, personal digital
assistants – PDAs, and mobile handsets) without requiring
a modem, at any time and in any location covered by the
Company’s GSM network.
TIM Participações´s shares are traded in São Paulo
Stock Exchange (Bovespa: TCSL3 and TCSL4) and in
New York Stock Exchange (NYSE: TSU).
This document may contain forward-looking statements. Such statements are not
statements of historical fact and reflect the beliefs and expectations of the
Company's management. The words "anticipates”, "believes”, "estimates”, "expects”,
"forecasts”, "plans”, "predicts”, "projects”, "targets" and similar words are intended
to identify these statements, which necessarily involve known and unknown risks
and uncertainties foreseen, or not, by the Company. Therefore, the Company’s future
operating results may differ from current expectations and readers of this release
should not base their assumptions exclusively on the information given herein.
Forward-looking statements only reflect opinions on the date on which they are
made and the Company is not obliged to update them in light of new information or
11 / 15
Attachment 1: Balance Sheet (BR GAAP)
Attachment 2: Income Statements (BR GAAP)
Attachment 3: Cash Flow Statements (BR GAAP)
Attachment 4: EBITDA Calculation Statement (BR GAAP)
Attachment 5: Consolidated Operational Indicators
Attachment 6: Glossary
The Complete Financial Statements, including Explanatory Notes, are available at the
Company’s Investor Relations Website: www.timpartri.com.br
12 / 15
TIM PARTICIPAÇÕES S.A.
Balance Sheet (BR GAAP) (R$ Thousand)
DESCRIPTION Sep/07 Jun/07 %
ASSETS 13,242,326 13,187,998 0.4%
CURRENT ASSETS 4,360,246 4,063,586 7.3%
Cash and cash equivalents 277,884 233,277 19.1%
Inventories 244,967 180,342 35.8%
Recoverable Taxes 402,519 368,227 9.3%
Deferred income and social contribution taxes 42,041 50,450 -16.7%
Prepaid expenses 270,897 346,689 -21.9%
Other current assets 23,568 26,443 -10.9%
NONCURRENT 8,882,080 9,124,412 -2.7%
Related parties 9,826 11,272 -12.8%
Recoverable Taxes 230,485 242,754 -5.1%
Deferred income and social contribution taxes - 4,204 -
Judicial deposits 98,249 87,807 11.9%
Prepaid expenses 8,949 10,282 -13.0%
Other 7,256 7,265 -0.1%
Investments 5,543 5,938 -6.7%
Property, plant and equipment 6,584,483 6,744,957 -2.4%
Intangibles 1,736,451 1,798,511 -3.5%
Deferred 200,838 211,422 -5.0%
LIABILITIES 13,242,326 13,187,998 0.4%
CURRENT LIABILITIES 3,672,485 3,164,994 16.0%
Suppliers 2,059,934 1,874,787 9.9%
Loans and financing 780,846 540,165 44.6%
Salaries and related charges 129,081 114,058 13.2%
Taxes, charges and contributions 448,741 430,354 4.3%
Authorizations payable 45,908 38,806 18.3%
Dividends and interest on shareholders’ equity payable 27,752 33,101 -16.2%
Related parties 59,782 47,536 25.8%
Other 120,441 86,187 39.7%
NONCURRENT LIABILITIES 1,790,750 2,122,109 -15.6%
Loans and financing 1,400,984 1,760,219 -20.4%
Provision for contingencies 203,754 176,250 15.6%
Pension plan 6,083 6,083 0.0%
Authorizations payable - 6,637 -
Asset retirement obligations 179,929 172,920 4.1%
SHAREHOLDERS' EQUITY 7,779,091 7,900,895 -1.5%
Capital 7,512,710 7,512,710 0.0%
Capital reserves 135,230 135,230 0.0%
Income reserves 238,438 238,438 0.0%
Net Profit (Loss) for the period (107,287) 14,517 -
13 / 15
TIM PARTICIPAÇÕES S.A.
Income Statements (BR GAAP) (R$ Thousand)
DESCRIPTION 3Q07 3Q06 % 2007 2006 Y-o-Y %
Gross Revenues 4,436,364 3,692,860 20.1% 12,547,209 9,783,603 28.2%
Telecommunications Services 3,937,155 3,157,577 24.7% 11,199,039 8,277,793 35.3%
Handset sales 499,209 535,283 -6.7% 1,348,170 1,505,810 -10.5%
Handset Sales 499,209 535,283 -6.7% 1,348,170 1,505,810 -10.5%
Discounts and deductions (1,272,977) (972,886) 30.8% (3,481,081) (2,723,114) 27.8%
Taxes and discounts on services (1,059,214) (763,251) 38.8% (2,877,700) (2,056,905) 39.9%
Taxes and discounts on handset sales (213,763) (209,635) 2.0% (603,381) (666,209) -9.4%
Net Revenues 3,163,387 2,719,974 16.3% 9,066,128 7,060,489 28.4%
Services 2,877,941 2,394,326 20.2% 8,321,339 6,220,888 33.8%
Handset revenues 285,446 325,648 -12.3% 744,789 839,601 -11.3%
Operating Expenses (2,616,106) (2,144,775) 22.0% (7,111,085) (5,395,760) 31.8%
Personal expenses (149,426) (153,680) -2.8% (458,231) (445,779) 2.8%
Selling & marketing expenses (674,698) (602,883) 11.9% (1,865,121) (1,625,875) 14.7%
Network & interconnection (996,524) (815,084) 22.3% (2,805,020) (1,714,792) 63.6%
G&A (102,812) (98,923) 3.9% (323,385) (332,735) -2.8%
Cost Of Goods and Service (420,673) (366,952) 14.6% (1,060,701) (986,137) 7.6%
Bad Debt (275,371) (126,227) 118.2% (616,744) (328,696) 87.6%
Other operational revenues (expenses) 3,398 18,974 -82.1% 18,117 38,254 -52.6%
EBITDA 547,281 575,199 -4.9% 1,955,043 1,664,729 17.4%
EBITDA - Margin over total net revenues 17.3% 21.1% -3.8 p.p 21.6% 23.6% -2.0 p.p
Depreciation & Amortization (569,251) (568,878) 0.1% (1,721,502) (1,660,834) 3.7%
Depreciation (338,563) (368,365) -8.1% (1,051,395) (1,075,006) -2.2%
Amortization (230,688) (200,513) 15.0% (670,107) (585,828) 14.4%
EBIT (21,970) 6,321 - 233,541 3,895 5895.9%
EBIT - Margin over total net revenues -0.7% 0.2% -0.9 p.p 2.6% 0.1% 2.5 p.p
Other non-operational revenues (expenses) (10,931) 884 - (14,641) 1,207 -
Net Financial Results (80,893) (88,811) -8.9% (225,610) (248,566) -9.2%
Financial expenses (89,645) (101,478) -11.7% (286,585) (356,285) -19.6%
Net exchange variance (4,348) (20,936) -79.2% (1,832) (43,236) -95.8%
Financial income 13,100 33,603 -61.0% 62,807 150,955 -58.4%
Net income before taxes and Minorities (113,794) (81,606) 39.4% (6,710) (243,464) -97.2%
Income tax and social contribution (8,042) (12,162) -33.9% (100,577) (177,105) -43.2%
Net Income (Loss) (121,836) (93,768) 29.9% (107,287) (420,569) -74.5%
14 / 15
TIM PARTICIPAÇÕES S.A.
Cash Flow Statements (BR GAAP) (R$ Thousand)
3Q07 3Q06 2006 2007
EBIT (21,970) 6,319 233,541 3,894
Depreciation and Amortization 569,250 568,878 1,721,502 1,660,834
Capital Expenditures (341,003) (374,436) (919,206) (894,709)
Changes in Net Operating Working Capital 26,451 (97,233) (1,190,321) (2,041,022)
FREE OPERATING CASH FLOW 232,728 103,528 (154,484) (1,271,002)
Income and Social Contribution Taxes 4,603 451 (62,707) (52,361)
Dividends and Interest on Own Capital (204) (172) (440,061) (114,749)
Net Financial Income (80,893) (88,811) (225,610) (248,566)
Contingencies, Net of Escrow Deposit 17,061 (3,835) 34,792 (31,546)
Other changes 11,684 24,164 87,138 28,998
NET CASH FLOW 184,980 35,326 (760,932) (1,689,226)
TIM PARTICIPAÇÕES S.A.
EBITDA (R$ Thousand)
EBITDA Reconciliation 3Q07 3Q06
Net Profit (Loss) (121,836) (93,768)
(+) Provision for Income Tax and Social Contribution (8,042) (12,162)
(+/-) Non-Operational Results (10,931) 884
(-) Net Financial Results (80,893) (88,811)
EBIT (21,970) 6,321
(-) Amortization and Depretiation (569,251) (568,878)
EBITDA 547,281 575,199
15 / 15
TIM PARTICIPAÇÕES S.A.
Consolidated Operational Indicators
3Q07 2Q07 3Q06
Estimated Population in the Region (million) 189.8 189.2 187.2 0.3% 1.4%
Municipalities Served - GSM 2,538 2,501 2,412 1.5% 5.2%
Brazilian Wireless Subscriber Base (million) 112.8 106.7 95.9 5.7% 17.6%
Estimated Total Penetration 59.4% 56.4% 51.2% 3.0 p.p. 8.2 p.p.
Market Share 25.9% 25.8% 25.1% 0.1 p.p. 0.8 p.p.
Total Lines 29,159,522 27,478,302 24,084,501 6.1% 21.1%
Prepaid 22,570,834 21,435,018 19,138,001 5.3% 17.9%
Postpaid 6,588,688 6,043,284 4,946,500 9.0% 33.2%
Gross Additions 3,996,155 3,723,591 3,501,045 7.3% 14.1%
Net Additions 1,681,220 1,171,603 1,746,102 43.5% -3.7%
Churn 8.4% 9.7% 7.8% -1.3 p.p 0.6 p.p
TOTAL ARPU R$34.0 R$34.6 R$34.4 -1.9% -1.2%
TOTAL MOU 94 94 95 0.1% -1.6%
Investment (R$ million) 344.5 326.2 374.4 5.6% -8.0%
Employees 9,854 9,675 9,478 1.9% 4.0%
Customers = Number of wireless lines in service
EBIT = Earnings before interest and tax
Gross additions = Total of customers acquired in the
EBITDA = Earnings before interest, tax, depreciation and
Net additions = Gross Additions – number of customers
EBITDA Margin = EBITDA/ Net Operating Revenue
CAPEX – (capital expenditure) capital investment
Market share = Company ’s total number of customers /
Subsidy = (net revenue from goods – cost of sales + vendors
number of customers in its operating area
discounts) / gross additions
Marginal Market share = participation of estimated net
Net debt = gross debt – cash
additions in the operating area.
PL – Shareholders ’ Equity
Market penetration = Company ’s total number of
customers + estimated number of customers of
competitors / each 100 inhabitants in the Company ’s
Technology and Services operating area
Churn rate = number of customers disconnected in the
TDMA = Time Division Multiple Access period
GSM = Global System for Mobile Communications – A system ARPU = Average Total Net Service Revenue per
storing and coding cell phone data, such as user calls and per customers in the period
data, enabling a user to be recognized anywhere in the Blended ARPU = ARPU of the total customer base
country by the GSM network. The GSM is now the standard (contract + prepaid)
most used in the world. Contract ARPU = ARPU of contract service customers
EDGE = Enhanced Data rates for Global Evolution – Prepaid ARPU = ARPU of prepaid service customers
technique developed to increase the speed of data MOU = minutes of use – monthly average. in minutes of
transmission via cell phone, creating a real broadband for traffic per customer = (Total number of outgoing minutes +
handsets with the GSM technology. The first EDGE handsets incoming minutes) / monthly average of customers in the
available offer speeds that can reach up to 200 Kbps, period
depending on the handset model. Contract MOU = MOU of contract service customers
SMS = Short Message Service – ability to send and receive Prepaid MOU = MOU of prepaid service customers
alphanumerical messages. SAC = Customer acquisition cost = (marketing expenses
+ commission + Fistel + “ comodato ” + costs of retention)
16 / 15