TIM SA Q3 FY2024 earnings call

• Rock in Rio Sponsorship: TIM was a master sponsor of the Rock in Rio music festival, showcasing its 5G network strength and reliability during the event.
• Revenue Growth: Service revenues grew 6.1%, driven by mobile services which expanded 6.3% YOY. Mobile ARPU increased nearly 5%, and post-paid customer base grew close to 8% YOY.
• EBITDA and Cash Flow: EBITDA grew 7.5% with margin expansion for 13 consecutive quarters. Operating cash flow was a record high, growing over 20% YOY.
• Prepaid Initiatives: Launched a new prepaid proposition focusing on appeal, recharge frequency, and usage of App Meu TIM.
• AI and Innovation: TIM AIX rolled out to over 5,000 attendants, using speech and text analytics to improve customer complaints handling.
• Digital Ecosystem and B2B: Expanded digital ecosystem in verticals like health, mobile apps, etc., and B2B contracted revenues closed over BRL600 million with new contracts.

In the third quarter of 2024, TIM S.A. achieved a 6.1% growth in service revenues. Mobile services expanded by 6.3% compared to the third quarter of 2023. EBITDA grew by 7.5%, and operating cash flow reached a record high for the quarter, growing above 20% year-over-year. As a percentage of revenues, operating cash flow was 25% in Q3 2024 and more than 21% in the first 9 months of 2024. Mobile ARPU rose nearly 5%, and the post-paid customer base improved with migration and a new record low churn at 0.7%.

• Maintained year-end guidance despite tougher second half comparisons.
• Intended to distribute an additional BRL2.7 billion in shareholder remuneration between dividends and interest on equity totaling BRL3.5 billion for 2024.
• Plans to grow above inflation in 2025, driven by post-paid customer base and ARPU growth, and prepaid improvement efforts.

• Competitive Pricing Pressures: Risks of pricing impacts in prepaid and post-paid lower segments.
• Exchange Rate Pressures: Impact of Forex exchange pressure on the business.
• Prepaid Performance Challenges: Challenges due to migration and lower recurrency in specific prepaid subsegments.

Q: Marcelo Santos from JPMorgan asked about prepaid performance and mobile service revenues growth compared to peers.

A: Alberto Griselli discussed prepaid migration and lower recurrency in specific subsegments, and how prepaid impact affected overall revenue growth, with new prepaid value proposition launched.

Q: Vitor Tomita from Goldman Sachs asked about post-paid competition and mobile advertising.

A: Alberto Griselli talked about post-paid competitive dynamics and mobile advertising evolution, focusing on own inventory and communication mechanisms.

Q: Gustavo Farias from UBS asked about prepaid bets and leasing expenses.

A: Alberto Griselli addressed prepaid subsegment impacts and Andrea Viegas discussed leasing expense increases due to inflation, new sites, and energy contracts.

Q: Phani Kanumuri from HSBC asked about price readjustments and CapEx guidance.

A: Alberto Griselli discussed price adjustment plans for next year, and Andrea Viegas mentioned CapEx guidance remains on track despite BRL depreciation.

Q: Gabriel Vaz de Lima from Morgan Stanley asked about 2025 growth.

A: Alberto Griselli stated plans to grow above inflation in 2025, driven by post-paid and prepaid improvement efforts, and B2B/B2C revenue growth.

Q: Unidentified Analyst asked about customer migration and OpEx margin expansion.

A: Alberto Griselli discussed migration strategies and Andrea Viegas and Alberto Griselli talked about OpEx efficiencies and margin expansion efforts.

Q: Daniel Federle from Bradesco BBI asked about plan simplicity and customer experience.

A: Alberto Griselli discussed plan simplification efforts and customer experience improvements in-app and in-store, and the impact of convergence offers.

Q: Lucca Brendim from Bank of America asked about working capital and other mobile revenues.

A: Alberto Griselli confirmed positive working capital dynamics in Q4 and discussed other mobile revenues as recurring and intentional.

Q: Carlos Sequeira from BTG Pactual asked about pricing dynamics and CapEx.

A: Alberto Griselli talked about pricing comparison and CapEx trends, expecting CapEx to sales ratio to continue decreasing.

Q: Gabriel Gusan from Citi asked about broadband operation sale.

A: Alberto Griselli discussed broadband optionality and potential sale considerations.