TIM S.A. — Form 6-K Summary
Reporting period: Third quarter and nine months ended September 30, 2021. Filed October 25, 2021. Financial information is presented under IFRS in Brazilian reais and includes IFRS 9, 15 and 16 effects.
Business Context and Reporting Period
TIM S.A. is a Brazilian telecommunications operator focused on mobile, fixed broadband, digital advertising, financial services and educational partnerships. Management described the quarter as a continued shift from volume toward higher-value customers, supported by postpaid migration, network expansion and preparation to integrate Oi’s mobile assets.
Key Financial and Operating Metrics
- Service revenue: Total Service Revenue increased 4.2% year over year in 3Q21 and 5.3% in 9M21. Mobile Service Revenue was R$4.096 billion, up 4.1% in 3Q21 and 5.1% in 9M21. The filing text does not provide a clear consolidated total-revenue value in the supplied content.
- Postpaid and ARPU: Mobile ARPU increased 4.4% year over year to R$26.5. Postpaid revenue increased 5.3% in 3Q21 and 6.0% in 9M21. Postpaid customers represented 43.4% of the mobile base and more than 56% of service revenue.
- EBITDA: Normalized EBITDA was approximately R$2.2 billion in 3Q21, up 4.5%, and R$6.3 billion in 9M21, up 5.0%. Normalized EBITDA margin was 48.0% in 3Q21 and 47.4% in 9M21.
- Profit: Normalized net income was R$474 million in 3Q21, up 21.4%, and approximately R$1.4 billion in 9M21, up 71.9%. Reported income tax and social contribution benefited from tax credits related to SELIC adjustments; normalized net income excludes R$526.8 million of tax credits and other effects in 3Q21.
- Operating costs: Reported operating costs and expenses were R$2.353 billion in 3Q21, up 1.7%, and R$6.992 billion in 9M21, up 5.9%. The quarter included R$7.7 million of non-recurring legal and administrative expenses related to Oi and FiberCo projects.
- Cash generation and capital expenditure: EBITDA less Capex was R$1.270 billion in 3Q21, up 3.9%, representing 28.2% of net revenue. Capex was R$897 million in 3Q21, up 5.5%, and R$3.126 billion in 9M21, up 28.8%. Working capital generated R$520 million in the quarter, compared with R$125 million in 3Q20.
- Debt and liquidity: Financing after hedging totaled R$3.439 billion at quarter-end, with an average non-lease debt cost of 6.3% per year. Cash and securities totaled R$7.372 billion, up R$3.735 billion year over year. TIM raised R$2.6 billion of new debt during 2021.
- Customer base and infrastructure: The mobile base totaled 51.6 million users. Human postpaid customers totaled 18.3 million, while 4G users reached 44.7 million. TIM Live had 675,000 broadband connections, up 7.7% year over year, with 59% of customers on plans above 100 Mbps. FTTH coverage reached approximately 4.0 million homes passed.
Material Changes Versus Prior Comparable Period
- Service and mobile revenue continued to grow, led by postpaid pricing, customer migration and improved commercial activity.
- Normalized EBITDA and margin improved despite higher personnel, network, interconnection and cloud-related expenses.
- Normalized net income increased substantially, principally reflecting improved operating performance and tax-related effects.
- Capex accelerated materially year to date, primarily due to network expansion and preparation for the integration of Oi mobile assets.
- Debt increased following approximately R$2.6 billion of new borrowings, while cash and securities also increased significantly.
- Net Product Revenue declined 28.3% year over year in 3Q21 because of weaker macroeconomic conditions and equipment supply issues, although it increased 4.3% in 9M21.
- Subscriber acquisition cost rose 50.9% to R$63.4 per gross addition, and customer payback increased to 2.4 months from 1.7 months.
Guidance, Outlook, Commentary and Risks
- Management expects fixed broadband revenue growth to return toward double-digit levels as the effects of more gradual price adjustments and FiberCo preparation diminish, although competition remains a constraint.
- The company continued 4G expansion, 700 MHz deployment and 5G standalone testing in São Paulo and Rio de Janeiro. Network investment and Oi asset integration are expected to remain important uses of capital.
- Approximately R$1 billion related to 2020 and 2021 Fistel fees, including default interest, remained suspended without a defined payment date.
- Higher interest rates increased the cost of debt, and additional borrowings were incurred to finance future obligations related to the Oi acquisition.
- TIM’s partnership with Banco C6 reached an indirect equity interest of approximately 3.6% in 3Q21 and approximately 4.08% after the fourth tranche was achieved in October. An arbitration proceeding concerning contractual interpretation could result in termination of the partnership if TIM loses.
- The company entered a strategic educational partnership that may provide TIM with subscription rights representing up to 30% of AmpliCo’s capital, subject to applicable conditions and annual calculations.
- Forward-looking statements are subject to operating, macroeconomic, competitive, regulatory, integration, financing and litigation risks. The filing states that management is not obligated to update such statements.
Most Important Facts to Verify
- Reconcile reported versus normalized net income, including the R$526.8 million tax-credit and other-effect adjustment in 3Q21.
- Review the complete financial statements for consolidated revenue, reported EBITDA, balance-sheet composition, lease liabilities and detailed cash-flow totals, which are not fully visible in the supplied text.
- Assess liquidity after planned Oi mobile integration spending and the effect of higher interest rates on debt costs.
- Monitor the approximately R$1 billion suspended Fistel obligation and its eventual payment timing.
- Follow the C6 arbitration and the potential effect on TIM’s equity interest, partnership economics and related accounting values.
- Confirm operating-indicator dates, as the filing notes that certain 3Q21 and 9M21 operating figures are as of July 2021.