TIM S.A. Q2 FY2026 earnings call

Overall Financial Performance

• Q2 2026 total revenue approached 7 billion reais, with net income surpassing 1 billion reais, a 6% year-over-year increase.
• H1 2026 service revenue grew ~6% year-over-year; EBITDA grew ~7% and EBITDA after lease grew close to 8%, supported by operational efficiency, cost discipline, and margin expansion.
• H1 2026 operating cash flow surpassed 3 billion reais, growing at a double-digit pace, reflecting consistent strong cash generation.

New Product & Ecosystem Expansion

• Launched Team Fit, a new credit card-payable post-paid control plan for customers that do not qualify for standard credit-based control plans, expanding the addressable market and supporting prepaid-to-postpaid migration with lower credit risk.
• Launched Teamplay, a paid content aggregation streaming platform that increases customer stickiness and monetizes the existing subscriber base, while optimizing content acquisition costs.
• Launched Team Ultracombo, the company's first fully convergent offering combining fiber broadband, mobile, and streaming content, available nationwide across the company's existing fiber footprint (both owned and partner networks), with early results positive ahead of a full marketing rollout.
• Expanded the digital ecosystem through a new financial services partnership with PicPay to create cross-selling opportunities.

Operational & Efficiency Initiatives

• Integrated the recently acquired iSystem fiber network, which accelerates the company's broadband strategy by giving full control over network infrastructure, customer experience, and broadband profitability, alongside the existing partnership with Vital.
• Deployed AI across multiple operational functions to drive efficiency: AI-powered collections has already engaged over 2 million customers and meaningfully improved debt recovery rates. First-wave AI deployments for network optimization, IT, and basic call center tasks have delivered material productivity gains, with work ongoing to automate more complex call center workflows related to billing inquiries.
• Completed the initial integration of the V8 digital solutions acquisition, adding AI and digital service capabilities to the B2B segment.

1. Mobile: Remains the core revenue foundation of the business. Mobile service revenue grew at a single-digit 4.7% year-over-year, with post-paid subscriptions now accounting for close to 70% of total mobile service revenue. Net customer additions softened in H1 2026 after a first-quarter price increase that drove higher churn. 2. Ultrafibra (Broadband): The segment maintains positive momentum with consistent customer and revenue growth, and is one of two business lines growing at a double-digit pace. 3. B2B: The second double-digit growing segment, now representing approximately 7% of total company service revenues. The segment is expanding beyond basic connectivity into IoT, private networks, and digital AI-powered solutions, and saw its strongest ever Q2 for IoT solution revenue, with a robust sales pipeline for digital services. 4. Platform/Other Revenues: Platform revenue more than doubled year-over-year in Q2 2026, though this line is inherently more volatile quarter-to-quarter due to the size of individual partnership deals, with a positive long-term growth trend.

• Overall capital expenditure guidance remains unchanged; the iSystem acquisition and its associated CapEx will be absorbed within the previously announced CapEx profile, with ongoing optimization of network spending offsetting any incremental requirements.
• Bad debt expenses, which saw volatility in H1 2026 from a one-off B2B customer write-down and a slight structural increase from expanded post-paid penetration, are expected to reach a plateau and gradually stabilize going forward, with AI-powered collections initiatives expected to improve performance in coming quarters.
• Roaming interconnection costs, which peaked in Q1 2026 due to the timing of annual carrier settlements, normalized in Q2 2026; the mismatch between quarterly roaming costs and revenues will resolve on a full-year basis, with the historical pattern of higher first-half costs and higher second-half revenues holding for 2026.
• No changes to the company's long-standing capital allocation framework: the company will continue to prioritize investments with attractive returns and maximize shareholder remuneration, with sufficient cash on hand to support planned dividends and CapEx even after the iSystem acquisition.

• Increased competitive pressure in the Brazilian mobile market, driven by wider availability of discounted below-the-line (BTL) promotional plans from major competitors, which has contributed to higher churn and softer net customer additions in H1 2026.
• Cannibalization risk for existing high-margin post-paid control plans from the new lower-priced Team Fit offering, mitigated through product design (targeted exclusively at customers that do not qualify for standard control plans) and aligned commercial team compensation structures.
• B2B revenue exposure to broader macroeconomic volatility, though the company has not yet seen a slowdown in its targeted B2B verticals (agribusiness, logistics, utilities, mining) and maintains a robust sales pipeline.
• Quarter-to-quarter volatility in non-core revenue lines, including platform revenue (driven by large intermittent partnership deals) and roaming expenses (driven by the annual timing of intercarrier settlement agreements).

Q: How does the iSystem acquisition change the company's FTTH broadband economics and growth ambitions, and why did mobile customer base contract this quarter? Is this a deliberate value-over-volume choice, or is competitive pressure hurting growth? / A: The iSystem acquisition acts as an accelerator for the company's broadband strategy, as it now fully controls network infrastructure, customer experience, and profitability, complementing the existing partnership with Vital. Any incremental CapEx for iSystem is being absorbed through optimization of the existing CapEx portfolio, with no overall increase to guidance. The mobile customer slowdown was expected after a Q1 price increase, which typically drives temporary higher churn and softer net additions. The company has launched new offerings including Team Ultracombo and Team Fit to re-accelerate customer growth. (259 chars)

Q: Mobile core revenue growth has slowed below inflation. Do you have plans to re-accelerate growth, and how intense is current competitive discounting in the market? / A: The company recently completed a full portfolio review to boost mobile growth. Key new initiatives include the convergent Team Ultracombo, monetizable streaming platform Teamplay, and credit-card based Team Fit control plan, which will drive ARPU growth, prepaid-to-postpaid migration, and improved market competitiveness. Competition has increased recently as competitors expanded below-the-line promotional pricing that was previously limited, but this kind of promotional cycle is normal for the market and tends to shift over time. The company will adjust front-book pricing for control plans after observing moves from larger competitors with higher post-paid market share. (356 chars)

Q: What is the risk of cannibalization from the new Team Fit lower-tier plan, and what is the company's current appetite for M&A to expand broadband? / A: Cannibalization risk is mitigated by design: Team Fit is exclusively offered to customers that fail the credit check for standard control plans, so it targets an addressable market that was previously inaccessible, and commercial compensation structures are aligned to prevent cross-cannibalization. The iSystem acquisition already delivers immediate broadband growth, with strong early results from the new Team Ultracombo convergent offering. The company continues to evaluate all potential broadband M&A targets, but has no rush to complete deals; current market conditions may create more attractive pricing opportunities over time, and the company already has ample organic growth opportunities across its existing segments. (362 chars)

Q: How do margins continue to expand despite slowing core client revenue growth, and how will the iSystem acquisition impact capital allocation? / A: Margin expansion is driven by ongoing operational productivity initiatives across the business, offsetting modest increases in some costs such as G&A from iSystem and V8 integration. Different segments have different margin profiles, and the company's active portfolio shift to higher-margin growth segments supports overall expansion. Capital allocation strategy remains unchanged: the iSystem acquisition will not increase overall guided CapEx, as incremental spending is absorbed through existing CapEx optimization. The company has sufficient cash to support planned CapEx, iSystem debt restructuring, and committed shareholder dividends while maintaining focus on high-return investments. (321 chars)