TIM S.A. (TIMB) Q3 2025 Earnings Call Transcript

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Overview

The earnings call highlights strong financial performance, with significant growth in postpaid lines and stable broadband ARPU. The company shows resilience in cash flow and EBITDA growth, supported by cost optimization. Despite slight mobile revenue deceleration, management attributes it to seasonal patterns, not competition. The Q&A section reveals opportunities in B2B and IoT, with a positive competitive environment. However, some management responses lack clarity. Overall, the positive financial results, strategic growth plans, and market opportunities suggest a stock price increase within the next two weeks.

Key Financial Performance

Service Revenues Achieved a 5.2% year-over-year increase for the first 9 months of 2025. Growth driven by the mobile segment, particularly postpaid expansion and the more-for-more strategy.

EBITDA Rose 6.7% year-over-year with a 50.3% margin. Growth attributed to disciplined cost management and operational efficiency.

Net Income Increased by 42.2% year-over-year. Growth supported by operational improvements and cost optimization.

Operational Cash Flow Reached BRL 4.5 billion, up by double digits year-over-year. Growth driven by disciplined CapEx and robust financial structure.

Mobile Service Revenues Increased 5.6% annually over 9 months and 5.2% in the third quarter. Growth supported by postpaid expansion and the more-for-more strategy.

Postpaid Lines Added 415,000 postpaid lines in the quarter, with prepaid to postpaid migrations up by double digits. Postpaid monthly churn remains low at 0.8%.

Broadband ARPU Stable at BRL 94 in the third quarter, with client base resuming growth at 3.7% year-over-year. Growth supported by operational improvements and positive net adds.

EBITDA After Lease Advanced 8.3% year-over-year with margin expansion to 51.7%. Growth driven by industrial cost optimization strategies, including contract renegotiations and network sharing agreements.

Net Income (Quarter) Reached BRL 1.2 billion, bringing the year-to-date figure to almost BRL 3 billion. Growth supported by disciplined execution and cost control.

Operational Cash Flow (Quarter) Measured as EBITDA after lease minus CapEx, reached BRL 1.7 billion in the quarter, up 8.1% year-over-year. Growth supported by resilient financial structure.

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Operating Highlights

TIM Smart Mining solution: Gaining traction with a new partnership with Vale, offering 5G, 4G, IoT, and AI solutions for safer, efficient, and sustainable mining environments.

Exclusive Black Friday offers: Includes iPhone 16E and PlayStation 5, enhancing value proposition and supporting postpaid growth.

TIM ULTRAFIBRA: Broadband ARPU at BRL 94 in Q3, with 3.7% year-over-year client base growth and 8 consecutive months of positive net adds.

Revamped MyTIM app: Driving digital engagement and e-commerce growth with over 17.7 million unique users and 33% penetration.

5G and 4G network expansion: 5G now available in 1,000 cities across Brazil, with Sao Paulo's network modernization completed and leadership in download speed rankings.

B2B IT solutions: Coverage includes 23.5 million hectares, 7,600 kilometers of highways, and 400,000 smart lighting spots, generating BRL 435 million in contracted revenues since Q1 2024.

Cost management: Cost growth kept at 1.8%, below inflation, with a 7.2% increase in EBITDA and margin reaching 51.7%.

Operational cash flow: EBITDA after lease minus CapEx reached BRL 1.7 billion in Q3, up 8.1% year-over-year, and BRL 4.5 billion year-to-date.

Shareholder returns: Distributed BRL 1.8 billion in interest on capital and repurchased BRL 369 million in shares.

ESG practices: Ranked in the top 10 of the FTSE Russell Diversity and Inclusion Index, the only Brazilian company and telco on the list.

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Risk or Challenges

Market Conditions: Potential challenges in maintaining growth in service revenues amidst competitive pressures and market saturation in the mobile segment.

Regulatory Hurdles: Dependence on regulatory approvals, such as the recent CADE approval for network sharing agreements, which could impact operational strategies if delayed or denied.

Economic Uncertainties: Potential risks from inflation and economic instability, which could affect cost management and customer spending behavior.

Supply Chain Disruptions: No explicit mention of supply chain issues, but reliance on technology and network modernization could be vulnerable to disruptions.

Strategic Execution Risks: Challenges in executing the 'more-for-more' strategy effectively to balance offer attractiveness and revenue growth, as well as ensuring the success of new initiatives like TIM Smart Mining and digital engagement programs.

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Guidance & Outlook

Service Revenue: The company is on track to achieve its 2025 goals and expects to deliver on full-year guidance for service revenue, driven by strong performance in mobile postpaid and B2B segments, as well as recovery in prepaid and broadband.

EBITDA: The company anticipates achieving its full-year EBITDA guidance, supported by cost control measures and efficiency programs.

Capital Expenditures (CapEx): CapEx is expected to remain disciplined, contributing to operational cash flow growth.

Shareholder Returns: The company plans to accelerate its buyback program and maintain strong momentum in shareholder returns.

Mobile Postpaid Segment: The mobile postpaid segment is expected to continue performing strongly, supported by the more-for-more strategy and exclusive offers like iPhone 16E and PlayStation 5.

Prepaid Segment: The prepaid segment is showing signs of stabilization and is expected to continue recovering, supported by targeted offers and improved customer experience.

Broadband: Broadband is expected to continue recovering, with stable ARPU and a growing client base reducing negative dilution.

5G Network Expansion: The company plans to expand its 5G network to additional cities, building on its leadership in network quality and coverage.

Operational Efficiency: Efficiency programs are expected to keep cost growth below inflation and support margin expansion.

B2B Segment: The B2B segment is expected to grow, driven by solutions like TIM Smart Mining and expanded connectivity services.

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Shareholder Return Plan

Interest on Capital: BRL 1.8 billion distributed to shareholders.

Share Repurchase: BRL 369 million worth of shares repurchased.

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Key Q&A

Q:What caused the slight deceleration in mobile service revenues this quarter?

A:The deceleration is attributed more to seasonal patterns and the company's strategy rather than competition. Postpaid growth remains strong, while prepaid deceleration is being managed. The company expects this trend to continue in the coming quarters.

Q:How does the company view the M&A environment in the fiber space?

A:The Brazilian market is highly fragmented, making it less attractive due to ARPU and churn pressures. The company is optimizing capital allocation for broadband and has an unchanged strategy, both organic and inorganic. Improvements in net additions and operating momentum are expected to lead to better top-line results in the future.

Q:What is the competitive environment in mobile, and is there room to increase pure postpaid prices?

A:The competitive environment remains positive and rational, with smaller players being more aggressive but not disrupting national market dynamics. The company sees an opportunity to adjust pure postpaid prices, likely in early next year after the Black Friday promotional period.

Q:Can you provide more details on the lease efficiency plan and its expected impacts?

A:The lease efficiency plan involves agreements with partners like IHS for site construction and renegotiations of leasing contracts. The goal is to limit lease growth to inflation levels despite an increase in 5G coverage. RAN sharing agreements are being continued, but specific new agreements cannot be disclosed yet.

Q:What is driving the improving net additions in the fiber business?

A:Improvements are driven by better customer acquisition quality, optimized credit scoring, local targeting, and churn management. The company has also improved service quality and targeted high-value segments, leading to net growth.

Q:Has the company noticed any impact from new banks or MVNOs increasing their commercial outreach?

A:The company has observed increased allowances and some price reductions by competitors but has not seen a need to respond yet. The situation is being monitored for potential customer losses.

Q:What are the growth opportunities in B2B and IoT, and how does the company see the long-term potential?

A:The company is focusing on verticals like agribusiness, infrastructure, utilities, and mining, leveraging its technological strengths. It plans to expand its portfolio to include security and cloud services and may pursue inorganic growth to accelerate progress. The strategy aims for a mix of organic and inorganic growth in the medium term.

Q:Why is the operating cash flow after lease growth trending slightly below the annual guidance?

A:The company confirms its guidance and expects revenue growth, EBITDA expansion, and CapEx dynamics in the next quarter to align with the annual target of 14%-16% growth.

Q:What was the magnitude and scope of the price increase in Q3, and is there potential for a prepaid price increase next year?

A:The company implemented back book price adjustments for both control and pure postpaid customers earlier in the year, with personalized adjustments to minimize churn. Front book adjustments were made midyear for control but not for pure postpaid. A prepaid price increase is challenging due to the offer structure, but the company is exploring other monetization strategies.

Q:Are B2B margins dilutive to overall margins, and how do they impact cash flow?

A:B2B offerings generally have lower EBITDA margins but are accretive to cash flow, contributing positively to the bottom line.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on new agreements related to RAN sharing and lease renegotiations, citing confidentiality. Additionally, they did not disclose the exact magnitude of price adjustments or the percentage of the customer base affected, leaving some questions partially unanswered.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

TIMB Transcript

TIM S.A. (TIMB) Q3 2025 Earnings Call Transcript

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TIM S.A. (TIMB) Q2 2025 Earnings Call Transcript

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The earnings call summary indicates strong financial performance, with notable growth in mobile revenue, EBITDA, and operational cash flow. The Q&A reveals positive sentiment towards cost control and strategic initiatives, despite some uncertainties in lease line negotiations and fixed business updates. The new partnership announcement and strong guidance further bolster the outlook. Given these factors, a positive stock price movement is anticipated over the next two weeks.

TIM S.A. (TIMB) Q1 2025 Earnings Conference Call Transcript

Positive5-6

The earnings call highlights strong financial performance with significant net income growth and operational cash flow increase. Despite challenges in the broadband market and lease payments, management is implementing cost reduction and efficiency programs. Positive developments include postpaid revenue growth and strategic price adjustments. The Q&A session revealed proactive measures to address competitive pressures and market dynamics, maintaining a positive outlook. Overall, the positive financial metrics and strategic initiatives outweigh the challenges, suggesting a positive stock price movement.

TIM S.A. (TIMB) Q3 2024 Earnings Call Transcript

Positive11-5

The earnings call reflects strong financial performance with a 6.1% revenue growth and a 7.5% EBITDA increase. Despite some challenges in the prepaid segment, the company is launching new strategies to address these. The Q&A highlights management's focus on customer migration and cost efficiencies, with no significant impacts from currency fluctuations or competition. The positive outlook on growth above inflation and operational cash flow further supports a positive sentiment. Overall, the strong financial metrics and strategic initiatives suggest a stock price increase in the short term.

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