TIM Participacoes' (TSU) CEO Stefano De Angelis on Q2 2016 Results - Earnings Call Transcript

| About: TIM Participações (TSU)

TIM Participações S.A. (NYSE:TSU)

Q2 2016 Earnings Conference Call

July 26, 2016 10:30 AM ET


Rogério Tostes - IRO

Stéfano De Angelis - CEO

Guglielmo Noya - CFO


Richard Dineen - UBS

Walter Piecyk - BTIG

Mathieu Robilliard - Barclays

Andres Coello - Scotiabank


Good morning, ladies and gentlemen. We would like to welcome everybody to TIM Participações second quarter 2016 results conference call. We would like to inform you that this event is being recorded. [Operator Instructions] There will be a replay for this call on the website. [Operator Instructions]

Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of TIM Participasções' management. They involve risks, uncertainties and assumptions because they are related to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that internal and external factors could also affect the future results of TIM Participações. [Operator Instructions]

Now, I'll turn the conference over to the IRO, Mr. Rogério Tostes. Please, Mr. Tostes, you may now proceed.

Rogério Tostes

Hello. Good morning, everyone, and thank you for joining us in another conference call for the second quarter release. Together with me, I have the participation of our management team who would be available after the presentation during the Q&A session. As announced in the first quarter, we are pleased to say that Mr. Stéfano De Angelis, who has concluded our formal procedures, has taken over the CEO position.

So, with that, I’m turning the floor to Mr. Stéfano to conduct the presentation and start the Q&A session later on. Stéfano, please.

Stéfano De Angelis

Thank you, Rogério and good morning, everyone. This is our first opportunity to interact as I was just appointed TIM Participasções’ CEO after a long process to get my visa. And before starting, I would like to say thanks to Rodrigo Abreu, the previous CEO for his commitment and dedication to the company. Well, it’s an enormous pleasure to come back and lead this amazing company for the next year. I have been here before from 2004 till 2007 as the CFO, and I am really thrilled to be back. My connection with the city is very special, and it goes beyond my job routine.

Moving to the presentation, we will add in the next slide some comments of the recent results in heavy and our total for the coming years. From the second quarter on, we are seeing early signs of macro improvement, more stability on the political side, inflation back to single digit, improving consumer confidence and better perspectives for GDP. On the company side, we are also seeing constructive operational indicator, such as data consumption with solid double digit as shown in the top of the slide as well as the new trend for post-paid index that came well better than the previous quarters.

In the prepaid segment, operational indicators are improving, assured by the recovering of top-up customers. Both these trends are confirmed now in the month of July. Putting this whole together, macro and micro improvements, we can already see an encouraging and hopefully new phase and trend for revenues and EBITDA.

Moving to the next side, I am on page 3. I’d like to elaborate on the evolution of our portfolio and how we are implementing our client-centric strategy. On the left side, we detailed the action carried on the prepaid segments where we focus on three main items. First, as you know in the first semester, the taxation increase was passed through to our infinity plan prices. As for our new offer, we use a more-for-more approach, moving forward from BRL7 to BRL10 per week, but increasing data allowance to 500 megabytes.

Second, we are deepening our strategy of the so called mass customization, looking to fulfil clients’ needs by having segmentation capabilities in our CRMC segment, as a way to have a more one-to-one approach. Third, we are trying to improve data monetization and reduced cannibalization, focusing more on bundle offer data plus voice. We are also planning a new approach for data caps, which holds for not blocking users any longer paying a proper and safer charge.

These were the very important demand of our prepaid customers. In this regard, we are adding a new feature like the so called safety mode using the US, where our clients can navigate with reduced speed. The main difference from the speed caps we had in the past is a fact that clients need to choose what they want to do when they reach the cap limit. Every time this occurs, a menu will appear for the clients, and they have to choose to get an additional package or upgrade their allowances or continue to navigate. Promotionally, the third option is free for a couple of months.

Moving to post-paid segment, on the right side of the slide, we maintain also the more-for-more approach considering the specifics of each customer profile. As not all post-paid are created equal, let’s dive a bit on its sub-segments. For the control segment, we are promoting a gradual acceleration of the migration of prepaid towards the control plan. B2C at the so-called pure post-paid with pricing gap, whole post-paid plan following the changes in taxation and for the new portfolio, we are using data and content services to segment clients, always in a more-for-more mind set.

Lastly, the B2B segment, we’re starting to benefit from this segment turnaround, thanks to a refocused to-to-market that leverages on 4G and data services. In all, such actions are presenting encouraging results in new portfolio penetration that reached 15% in a winning streak for mobile number portability for the eighth consecutive month.

Moving to slide four, please. Data services continue to expand and become every day more relevant to our business. First of all, we continue to see a pickup in 4G devices penetration, reaching near 90% of our sales mix. 4G utilization is growing fast. In the second quarter, 30% of steam data users are surfing using our LTE network. This represents a three times higher utilization in 12 months. Overall, data user penetration has reached above 50% of our base and all segments showed solid expansions.

On the bottom part of the right, we try to demonstrate the transition towards data and adding values to the revenue profile. To that extent, [Technical Difficulty] from value-added services has grown around 27% year-over-year. Total revenues coming from data reached 1.5 billion in this quarter, representing 45% of total mobile service revenues. Important to highlight that revenue from Innovative services is growing at a solid and consistent double-digit.

Now, we move on slide five. Firstly, it is important to mention that CapEx cycle peaked in 2015 and we are starting the distance from this level in 2016. This high CapEx cycle shows team’s commitment to improve the customer experience. We are indeed paving the way to the future of this company, but with investment, it’s not just a matter of increasing it forever. The key element is to be efficient and effective, being able to do more with fewer resources. It is even more important in a fast economic environment. Well, we’re trying our best to master these by focusing more on where it matters the most to clients, innovative services and quality. As part of our organic CapEx decreased by 20% in the first half, this was mainly due to a combination of faster, longer and successful negotiation with vendors and optimization of some projects.

Despite that, CapEx was pretty much stable against with that of 2015’s, in the low-20s. In the second half, the decrease shouldn’t be so strong and we will continue to focus more on 4G and 3G rollout of capacity and coverage. A clear indication of the benefits of this high investment cycle is shown by the improvement in the year-over-year comparison of our quality indicators related to data in the evolution of metrics like throughput and latency. We are also confirming strong results, as for example, the 4G coverage leadership using [indiscernible] and fibre network expansion.

Now, moving to the next slide please. All the investments over data services led us to highlight out these efforts translate into numbers. The company has passed through a substantial repositioning over the last year and is now more focused on innovation and customer experience. Despite the challenging period, we can see that the infrastructure deployment continues resilience. In terms of coverage, we were able to reach 579 cities covered with 4G, eight times more cities than a year ago, and a 25 percentage point increase of urban population coverage.

We are clearly widening the gap versus our competitors. On 3G, we keep improving, knowing these technologies still concentrate the majority of our customer base, but for not longer, as we’re pushing customers to migrate to 4G. The experience in 4G is much better, considering the 1.8 gigahertz requirements together with the [indiscernible] 4G technology would rapidly become the main invest option for data connectivity.

On the capacity front, we kept improving the number of sites connected with fibre, which have reached already almost 5,000 sites. In addition to that, all main cities in the country, close to 200, are covered with our high-capacity backhaul, almost 90% of our sites are kept with proprietary infrastructure being it fibre or microwave radios.

Now, I will turn the floor to Guglielmo to review the financial figure. Guglielmo, please.

Guglielmo Noya

Thank you, Stéfano and good morning, everyone. Starting with revenue dynamics, on the slide seven, we presented main evidences of top-line evolution. I would like particularly to highlight the resilient results of data revenues, backed by our strategy on the 4G, which more than compensated the first and full of SMS services, but not yet affecting the incoming pressure. As we can see on the top left, mobile service revenues contraction had a change in the trajectory and we can see a new trend versus the previous quarters.

Excluding the MTR cut effects, Mobile service net revenues would have fallen 3.4% instead of 6.8%. By the end of the quarter, data revenues reached 45% of total mobile service revenues, as shown in the top of the slide. Innovative data services had a strong increase of 19.1% in the quarter when compared to the same period of 2015. As mentioned by Stéfano, this was possible due to an increase on handset penetration and 4G services. Looking to the last chart at the top right, we show an overall ARPU recovery, growing by 7% in this quarter versus a year ago, accelerating the new trend already seen in the first quarter.

Moving to next slide, please. Despite the recent macro challenges, we implemented actions, focused in promoting even further efficiency in our operations. During the second quarter, operational cost and expenses came down close to 15% on an yearly basis. This four months is a consequence of actions like organizational restructuring, change in handset strategy and new approach in sales and customer base cleanup. It is worth mentioning this result is even more important in the scenario of still our inflation close to double digit in the same period. If we exclude the 10% cost related to handset and interconnection, total OpEx fell by almost 5% on a yearly basis, a strong performance in the recent quarters as we can see on the top right of the slide. Detailing the main cost lines, some remarks are necessary. Costs of goods sold showed a slight decrease of 57% on yearly basis following a drop of 77% in units sold as of serving previous quarter. We can attribute this to two main factors, one [indiscernible] and two the change in handset strategy moving from volume to the base.

Moving to the next slide on personnel cost, TIM started in the first quarter 2016 a layoff program to read a degree to the organization to the challenges of actual scenario. This led to workforce reduction of more than 6% to 12,104 employees. This will substantially contribute to the sustainability of our business in such turbulent period of our requirements. Selling and marketing performance fell by 11% in second quarter 2015 versus first quarter of the same year. This dynamic is a consequence of the robust reduction in commissioning expenses due to adjustment in remuneration and lower and gross addition, and two, to a reduction in sell expenses which came down 9.9% following negative net additions in the quarter of more than 3 million lines. Lastly, network and interconnection costs grew 3% year-over-year, the modest increase being explained by a couple of factors. Metal related costs were up by 3.9% year-over-year mainly explained by network sharing cost and size ground rental expenses.

However, it was partially offset by solid reduction in leased line expenditures as showed early, this cost fell close to 13% year over year. The second component was the interconnection cost, which grew 1.7% in the period while falling by 7.3% compared to first quarter 2016. This performance is due to an increase in cost related to off net traffic. Moving to the last slide on financial update on page 9. As a consequence of better revenue profile, on a yearly basis versus previous quarter’s and therefore its gain on efficiency, normalized EBITDA which excluded tower spacing cost dropped by 6.5% year over year in second quarter 2016, posting substantial improvement for the 13.5% of the first quarter. Analyzing the EBITDA performance on a yearly basis, as shown on the top right of the slide, we are still carrying negative impact of interconnection system and the reduction of additional business. Both were partially set by yet another efficiency program results by a better product margin. On the bottom right of the slide, we can see a decent expansion of 200 basis points and confirming the new spend for EBITDA margin of low 30s. If we make a zoom margin to the EBITDA margin and services than the profitability rose to above 34%. To conclude the financials, I would like to call your attention to the lowest level of business exposure to the MTR system beat for revenues and for EBITDA. This low dependence is already contributing positively to the financial performance and the cash positive contribution to continue as we move on.

With that I’ll turn back the floor to Stefano for his remarks on the industrial plan update. Stefano please.

Stéfano De Angelis

Thank you Guglielmo. Now we will discuss our view for the near future. This is an update to our previous guidance released at the beginning of the year and cover the periods from 2016 to 2019. We start this action recapping the macroeconomic assumptions as I said in my opening statement we can see already a positive change on the main macroeconomic indicator expectation. To point a few of them, we see encouraging perspective for GDP inflation and exchange rate, and hopefully this indicates that the pressure on our business from the economic practice will reduce. It’s also important to say that the political environment has also improved significantly from the beginning of this year with a most stable situation. Both elements together to bring and releasing contributed to a better business environment. Let's go directly now directly to the financial discussion, I'm on slide 12. Our view is that despite the challenging period for the sector this year of 2016 will mark as a transitional one. We believe starting from next year, overall mobile revenues will resume growth thanks to data service penetration, less impact from interconnections, better market forecast and more rational market. With that I believe being a few mobile with solid network infrastructure we might have a unique position to regain revenue share. We believe that our fair share of revenue should be above 24% in the near future.

The overall trend of sim consolidation will continue to depress and due to that we should expect reduction in numbers of prepaid customers that will be compensated by increasing usage, recurring utilization and bundle offer. On the control plan, our view is very positive and we should secure our solid position in the second source of growth. As for the postpaid, we opt to recover our position and consequently we’ve had a more stable revenue profile. Lastly, on the corporate, especially for small enterprise customers we hope we can resume revenue growth following the segment restructuring planning progress. Moving now to the cost transformation plant, I’m on slide 13. For this plan update we use cash cost approach looking at the facilities to see more efficient and effective focusing on the free cash flow generation of the company. In this regard, the updated plant presents a significant reduction in operation and capital expenditures. As shown on the top right of this slide compared to our previous plan, we are presenting an accumulated reduction of BRL4.5 billion during the three year origin.

We closed 2015 with BRL11.7 billion in OpEx and we expect to finish 2018 with around BRL11 billion, reduction of approximately BRL600 million. On the bottom left, we show this is a consequence of our cost transformation program that combines efforts from the previous plan summing approximately BRL700 million, a new action reaching BRL1 billion. The program as a whole accumulates savings of BRL1.7 billion for the three year period and we more than offset inflection structural growth especially network elements and volume driven OpEx impact. On the CapEx side we are targeting a decline in shape that accelerates our statutory in more normal and rational level of CapEx after a peak in 2015. Investments we’ve done from 2016 to 2018 around BRL12.5 billion. During this process, we will focus our CapEx in our core business and within mobile services we will deepen our strategy to further data related technologies mainly 4G.

On the next slide, we will discuss further the action and impact for this plan. As I just explained, our OpEx program is a combination of a new plan and completion of the project we announced last year. The additional effort of BRL1 billion of the new plan is segmented in four main areas; process optimization which covers restructuring of our internal customer care, implementation of budgeting for core areas among others. Customer process re-engineering uses more digital channels improving customer experience with the end-to-end approach and renegotiating contracts with providers. Traditional state channels will also pass through a transformation with end-to-end process revision, increased online participation and higher process on quality and value versus volume. Finally, we expect yet another contribution from IT and network leveraging among others some vendor consolidation, energy optimization project and user deeper [indiscernible] analysis. On the other side, we are going to complete approximately BRL700 million in savings that remain for the previous efficiency plan.

As I they said in the beginning, we will more than the neutralize inflection and the structural OpEx growth applying those levels. That will bring total cost to a nominal reduction versus the starting point that is full-year 2015. Also the CapEx program implies an investment reduction as shown in the slide before this will not jeopardize the evolution of our infrastructure. This is due to the fact most of the hard work was already done and as I say mentioned we will re-channel investment to core areas and improve our negotiation with vendors. Lastly on page 15, we consolidate our view on some business KPIs and target for the coming year. First, we expect this plan to return in better revenue performance. Our goal is to surpass 24% of revenue shared by the end of 2018. This compares to 22.4 registered in the last result that is first quarter of ‘16. Then we believe that total OpEx should respond well for the new transformation plan, we are looking for BRL600 million at the run rate saving from 2015 till 2018. For EBITDA margin, we confirm our reputation that we continue improving average year of the current plan. To conclude our CapEx plan for the three-year period, 2016 till 2018 should be around BRL12.5 billion, a reduction of around BRL900 million of run rate when compared to 2016. Once more I want to highlight this new approach will not jeopardize our position in infrastructure development to serve data and this is translated in a target to secure more than 90% of new operation will be covered with 4G and 3G technologies.

With that I turn the floor over to Rogério for the Q&A session. Rogério please

Rogério Tostes

Thank you Stefano, so now we move to the Q&A session.

Question-and-Answer Session


[Operator Instructions] Our first question comes from Richard Dineen with UBS.

Richard Dineen

Could we just may be get your views on fixed line, you're growing that business growing the revenue quite nicely just wondering how you see then strategically for TIM is that non-core and if it is sort of non-core what is the strategy for TIM for the long-distance business going forward in terms of investments or may be if you have options to sell or partner for that business? And then just secondly just on the CapEx, just a clarification how do you look at 12.5 billion is that a sort of hard ceiling, is there a sort of scope to spend even less than that, I’m just thinking currency strengthening a little bit and also some of your competitors taking down CapEx quite significantly also, so any thoughts on that would be very helpful. Thank you.

Stéfano De Angelis

Hi Richard, I will answer the first part of the - first question and honestly we didn't get the second question, so we will ask you to repeat please. So moving to the first question regarding the wireline business as I told before in the [indiscernible] section, we are very happy with the result of TIM LIVE as you may see in the data that we released to grow up the revenue is double-digit consistent. We are almost doubling the customer base, what is happening in the wireline that we’re applying the same collective approach that we’re planning for each line of spending. This means that each time that we decide to approve a new investment for a new antenna, we will look at the payback of the antenna, while in the past we have a strategy to go and run with the coverage and then look at the fulfil of them. I will pass to [indiscernible] that will give you some additional color about the strategy that we are implementing on the TIM LIVE business.

Unidentified Company Representative

Thank you Stefano, several things, we deployed in the first four years of the operation, average growth coverage now we are reaching 3 million home passes plus and with that, few of them have empty network we’re managing to accelerate throughout without really requiring much investment. On top of that, so we believe that thanks to the current coverage in few and underdeveloped market that we will still manage to grow for a good period moving forward. On top of that the semi infrastructure we are also using to connect our corporate clients. So, we are also adding additional new clients with a much lower CapEx for connection. With the sum of these two things that ensures us to keep a steady growth on the fixed business.

Stéfano De Angelis

Richard, can you repeat the question regarding CapEx please?

Richard Dineen

Yes sorry and thanks for those comments on fixed line. Whether we should think about the 12.5 billion guidance of CapEx, how flexible is that number, do you see that as a sort of maximum could the spend turn out to be maybe even lower if you have further strengthening of the currency or maybe the macro situation doesn’t help or just how you think about how we should think about that 12.5 billion CapEx guidance?

Stéfano De Angelis

Thank you. Looking at the present condition and the present trajectory of our business plan, I will say that the, that CapEx is for big share a discretionary, but consistent with our strategy is that is to fill the gap in 3G and maintain the leadership in 4G. I will tell you that this is the real amount of money that I’m sure that we’ll invest in the evolution of our - especially of our network that accounts for the big portion of our CapEx.

Richard Dineen

Okay. Thank you very much for clarifying that. Thanks for the comments.


The next question comes from Walter Piecyk with BTIG.

Walter Piecyk

Thanks. I think just a follow-up on the question on why the CapEx, when you look at the reductions that are occurring, talking about the peak year sort of reductions that are happening in ‘16, ‘17, ‘18 I guess, what areas specifically are you going to cut and I think in the past, Rodrigo and the rest of the management team had talked about doubling the number of cell site spent in the timeframe, does the lower CapEx spending change the fact or the plan to double the delta in that timeframe, if you can just update us on kind of what that means and for the mix of CapEx, and what does it mean for additional cell sites?

Stéfano De Angelis

Hello, Walter, thank you for the question. If we look at the presentation, you may see that we have not reduced, we have increased our target for coverage in both 3G and 4G. That big results that allowed us to secure money with our strategies of doing more with less comes from very strong and tough renegotiation with vendors. As I just said, today in Brazil, if you have the money in your hands, you can strongly stress the negotiation because as you know, the industry today, there is not a huge amount of investing sectors. So we are stressing and we are consolidating our vendors. We are starting in this month the negotiation for the 700 deployment that is another part of the question.

Just to give you another example, we are consolidating all the vendors that we are working within in the maintenance of the fiber-optical network in the construction of the fiber-optic network, we have a different vendor, we have contract that was limited to the realization of a single piece of the network, what we have done in the last two months with our purchase in the Department, we have called the vendors, we have put a plan of three years because we know that the fiber is a very important topic. So we will continue to invest in fiber development and we have consolidated works to then areas, region and activities, maintenance with construction. The result was a very significant economy that you would find part in the OpEx side for the maintenance and part in the CapEx side for the construction.

Coming back to the 700, 700 megahertz is very strategic for us for two reasons. First of all, this allows us to close an historical gap in terms of indoor coverage. As you know, one of the stronger problems, the significant problem that we had in the past was the lack of 850 megahertz coverage in the big cities of Brazil, naming Rio de Janeiro and São Paulo. 700 is the national layer. So we will do all to accelerate the deployment of 700 because this will allow us to close this gap. This will allow us to have a more efficient and effective coverage when compared to the other two layers that we are using that is 1.8 and 2.6. So this will help us to have a better coverage, a wider coverage, securing mining when compared to the biggest plan.

Walter Piecyk

So when you look at that slide, I’d say that number is 14 where you show that the higher coverage, is that a combination of using the 700 megahertz and more cell sites or just the benefit of using 700?

Stéfano De Angelis

It is the benefit of the 700, but when we roll out 700, we roll out the other layers jointly with the 700, thanks to the new opportunity that we have from vendors of the multilayer technologies.

Walter Piecyk

Understood. And then, with all the exchanges as far as I guess the CapEx - the outlook for free cash flow looks much better, your debt levels are low, what would you expect to do with the free cash flow? I mean are we going to see greater dividend increases or some type of dividend, special dividend, share repurchase, what are you going to do with that money?

Stéfano De Angelis

Let’s get the result and then we have the problem.

Walter Piecyk

Okay, thank you.


The next question comes from Mathieu Robilliard with Barclays.

Mathieu Robilliard

Yes. Good morning everyone, and welcome back Stéfano. I had two questions, please, first with regards to the revenues. So you kind of maintained the flat trajectory for the revenues of the companies in slide 12, and I was wondering what was behind that. I understand you expect the macro to be better, you show increased market share, but are you also factoring in more for more initiatives in the coming years as you’ve implemented this year? Are there any other factors that are explained by positive outlook if you could develop on that it would be great?

And then kind of a question on the OpEx evolution on slide 13, you show a significant cut in OpEx between ‘15 and ‘16, and then OpEx goes back up, is that potentially marketing spending or is that inflation, if you could give us a little bit of color also in terms of the development between ‘16 and ‘18. Thank you.

Stéfano De Angelis

Thank you for the question. You are clear noticing that we have a significant drop this year than we come back, let me say to a natural path that is coming with the top line recovery, but what is important is that when you look at the new plan, for example, of the 1 billion run rate, the new efficiency plan, it is important to underline that 600 million of this plan have an internal target to be completed by this year. So we are strongly accelerating in order, even to reduce the risk associated to the top line trend, the cash cost efficiency program. So most of the benefit of the efficiency plan will come this year, 60% namely of the new 1 billion efficiency program.

Then, another important factor to be considered is that as you have seen in the first half result, part of the trend is generated by the handset reduction, that we are moving to a safer and proper size and this size will be maintained in the forthcoming year. So this year, we have this significant reduction that you might follow in the second quarter results. This will continue for the third quarter, we will come in the fourth quarter, let me say to, let me say, a safer amount of handset in our strategy and clearly this benefit on an year-over-year basis will not come in the future.

Moving to the topline, we have two different factors. As you underline, we have several factors that regards the whole industry. The macroeconomic situation and more rational approach to the market that we are pushing and that we hope that the industry will sustain, data penetration is increasing and this is something that we will allow an higher data monetization again for the industry. If we look at TIM and the target of increasing our revenue share, if you look at the past, TIM was maintaining less growing revenues, they are just in the prepaid segment. Now what we’re doing, we are moving back to focus on the postpaid and especially the control and we have the biggest leg, let’s call in this way in order to take up and upsell prepaid customers to control.

This will upsell the ARPU and will generate especially for seeing potential upside in the average ARPU of the customer and this means even in revenue share. Last but not least, we will take the benefit of the supremacy in the data environment. We are strongly pushing the 4G penetration and we will have to take the fruits from these kind of investments and on the other side, as I was mentioning before, the shutoff in the 3G coverage will give us approximately just to give you the figure that is below our upside in the 3G coverage, we will cover with 3G almost 10 million new customers and this will help us to take revenue share in the data environment.

Mathieu Robilliard

Thank you very much.


The next question comes from Andres Coello with Scotiabank.

Andres Coello

Yes. Thank you for taking my question. During the quarter, we saw obviously 3.3 million disconnections. In fact, it is possible that American Mobile is now the second-largest wireless player in Brazil again. So I was wondering if we should expect more disconnections in the future, and perhaps if you can give us color on what drove the disconnections, which kind of customers are leading the company?

And I have a second question, please on Oi. Obviously, Oi is ongoing a bankruptcy process, and I was wondering if you are exploring opportunities perhaps regarding mobile consolidation or perhaps integration of system and wireless networks in Brazil. So if you can just please give us any update on your view on Oi’s bankruptcy process? Thank you.

Stéfano De Angelis

So first question regarding the SIM share compared to the revenue share, we look at revenue share, as you may see in our guidance that we will continue to be, let me say in a good condition when compared to the third player in the market and this is what we will follow up internally and we do in the next quarter. Regarding the disconnection practice, this is more focused on securing taxes and on the other side, use all the potential of our CRM activities in order to try to revamp silent customers, then if we see that the customers, especially clearly in the prepaid is not using any more our SIM card, we are applying all the CRM capabilities to try to understand where is this customer and keep this customer and not the SIM of TIM still in their phone. We are [indiscernible] avoid an unusual payment of taxes. This was the result of, let me say, policies that we started to implement in the fourth quarter of last year and that we have repaid in the last two, three months. I don't expect order spikes of disconnection in the next month because the amount of what we internally call silent customers have very strongly reduced when compared to last year.

Andres Coello


Stéfano De Angelis

I was trying to forget the Oi question. I guess in Oi, we’re clearly following the early situation because when you are in a market where you have four big players, it’s clear that a procedure regarding one of the four player is really in our interest. Today, our focus is 100% in understanding the potential impact in our, let's call, day by day relation with what does it mean, we have a lease line that we use to serve our customers that we buy from Oi. We have swap agreements. We have brand sharing agreements, we have interconnections really agreement.

Well, this is our focus today in order to understand jointly with Anatel if we have any kind of potential issue. At the moment, we see no issue regarding, let’s say, the business continuity of our industry relation with OI. Regarding the M&A, I am very clear with you. I don't have the time to look at M&A because I am full in the recovering plan of TIM Brazil. So it is not the topic in our agenda today honestly. I don't know honestly what is happening, I read some newspaper, but I don't know what is happening. At this moment, I am completely focused on carrying on the recovering plan of TIM Brazil.

Andres Coello

Okay, thank you.


[Operator Instructions] Thank you, ladies and gentlemen. Without any more questions, I am returning to Mr. Stéfano De Angelis for his final remarks. Mr. Stéfano, please proceed.

Stéfano De Angelis

Okay. I would like to thank you all very much for attending our earnings release and have a very good night.


This will conclude the conference call results of TIM Participações. Your lines can be now disconnected. For further information and details of the company, please access our website at www.tim.com.br/ir and take the opportunity to download TIM IR App available for Android and iOS platforms. You can also follow at tim_ri on Twitter. Thank you.

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