TIM S.A. — Form 6-K Summary
Reporting period: Fourth quarter and full year ended December 31, 2022. The report was filed on February 9, 2023. Financial information is presented under IFRS in Brazilian reais, with comparisons to 4Q21 and full-year 2021.
Financial performance
| Metric | 4Q22 | FY2022 | Change versus comparable period |
|---|---|---|---|
| Normalized net revenue | R$5,874 million | R$21,580 million | +22.4% and +19.5%, respectively |
| Normalized mobile service revenue | R$5,305 million | R$19,644 million | +22.7% and +20.2% |
| Normalized EBITDA | R$2,930 million | R$10,236 million | +19.6% and +17.2% |
| Normalized EBITDA margin | 49.9% | 47.4% | Down 1.1 and 1.0 percentage points |
| Normalized net income | R$590 million | R$1,795 million | Down 23.2% and 18.4% |
| Normalized EPS | R$0.24 | R$0.74 | Compared with R$0.32 and R$0.91 |
| Normalized capex | R$1,375 million | R$4,730 million | Annual capex up 8.0% |
| Normalized operating free cash flow | R$2,253 million | R$6,913 million | +28.0% and +27.8% |
| Total debt, post-hedge | Not separately stated | R$18,575 million | Up R$5,055 million year over year |
| Cash and securities | Not separately stated | R$4,739 million | Down R$5,057 million year over year |
Revenue and operating drivers
- Mobile service revenue benefited from the acquisition and integration of Oi Mobile customers and monetization of TIM’s customer base.
- Mobile ARPU was R$26.9 in 4Q22, down 3.2% year over year, reflecting dilution from lower-ARPU Oi customers. Postpaid ARPU was R$38.2, down 3.9%.
- Fixed service revenue increased 9.1% in 4Q22 and 7.6% for the year. TIM UltraFibra revenue grew 10.3% in 4Q22, with quarterly ARPU of R$95.0.
- Handset revenue grew 36.8% in 4Q22, supported by Black Friday and Christmas campaigns.
- Customer Platform revenue reached R$50.9 million in 4Q22 and R$188.1 million for the year, increasing 38.8% and 57.4%, respectively.
- At year-end, TIM had 62.5 million mobile lines, up 20.0% year over year, and 716 thousand UltraFibra connections, up 4.6%.
Material changes versus prior periods
- The Oi Mobile transaction materially increased the customer base, network footprint, operating expenses, depreciation, lease obligations and debt. Oi integration began affecting results from May 2022.
- By the end of January 2023, 8.7 million Oi customers had migrated to TIM, including 7.8 million prepaid and approximately 900 thousand postpaid customers. TIM disconnected 1.4 million inactive postpaid and 3.7 million inactive prepaid migrated lines during 4Q22.
- Normalized operating costs and expenses increased 25.2% in 4Q22 and 21.7% for the year, driven by Oi-related costs, temporary service agreement expenses, the larger customer and infrastructure base, and I-Systems network rentals.
- Reported operating costs increased 85.0% in 4Q22 and 33.5% for the year, partly because 4Q21 included an approximately R$780 million benefit from the sale of control of I-Systems.
- Net financial expense was R$350 million in 4Q22 and R$1,439 million for 2022, deteriorating by R$170 million and R$786 million, respectively, due to higher lease interest, higher interest rates, increased leverage and lower mark-to-market gains related to the C6 investment.
- Normalized net income declined despite EBITDA growth because of higher depreciation and amortization, financing costs and tax effects.
Cash flow, capex, debt and liquidity
- Normalized EBITDA less capex was R$1,555 million in 4Q22 and R$5,506 million for 2022. Excluding lease effects, the amounts were R$762 million and R$2,682 million.
- Normalized capex was R$4,730 million for 2022, equal to 21.9% of normalized net revenue. Investment supported Oi asset integration and nationwide 5G deployment.
- Total post-hedge debt was R$18,575 million at year-end, including approximately R$2.9 billion of finance leases recognized from the Oi transaction. Financing debt excluding leases and 5G licenses was R$5,086 million.
- Cash and securities totaled R$4,739 million. The reduction reflected the Oi acquisition, 5G spectrum-related payments and a R$670 million escrow deposit concerning the Oi purchase-price adjustment dispute.
- The company drew R$319 million under an existing BNDES Finem credit line at TJLP plus 1.95%, with a 2.8-year term.
Guidance, outlook, commentary and risks
- The filing emphasizes continued revenue growth from Oi customer integration, postpaid and prepaid monetization, UltraFibra expansion, 5G deployment, customer-platform initiatives and network-sharing arrangements. It does not provide a clear formal financial guidance range for 2023.
- Management expects the Cozani special-purpose company to be incorporated over the following months as part of integrating the Oi assets. Cozani-related tax and contractual effects affected normalized revenue and expenses in 4Q22.
- Operating risks include execution of Oi customer migration, retention of customers affected by price changes, higher bad debt, integration expenses, network and infrastructure costs, inflation and elevated interest rates.
- The company reported an ongoing arbitration procedure with C6 Bank. It also recorded a R$670 million escrow deposit related to an arbitration procedure against Oi concerning the Oi Mobile acquisition price adjustment.
- Payments of certain Fistel TFF charges for 2020, 2021 and 2022 remained suspended under preliminary injunctions. The filing states that no payment date had been established; R$163 million of default interest was recognized in 2022.
- Reported cash flow was affected by 5G auction obligations, including EAF and EACE payments, spectrum-related installments and TSA payments to Oi.
- Normalized figures exclude or adjust for various non-recurring items, including the I-Systems transaction, Cozani tax effects, Oi acquisition and migration costs, legal and administrative expenses, TSA costs and 5G license payments.
Investor verification points
- Reconcile normalized measures with the reported IFRS financial statements and confirm the precise bridge for revenue, operating costs, EBITDA and net income.
- Review the year-end debt maturity profile, lease liabilities, 5G-related obligations and available committed liquidity; the filing text does not provide a complete maturity schedule.
- Assess the remaining financial and operational costs of Oi integration, including customer churn, migration progress, TSA expiration and network rental obligations.
- Monitor the C6 arbitration and Oi price-adjustment arbitration, including potential effects of the R$670 million escrow deposit.
- Confirm the status and potential cash impact of suspended Fistel TFF payments and related default interest.
- Evaluate whether customer growth from Oi translates into sustainable ARPU and margins, given the reported dilution of mobile ARPU and higher bad debt.
- Verify the company’s future capex, 5G payment schedule and any formal 2023 guidance issued after this filing.