TIM S.A. — Form 6-K Summary
Reporting period: Fourth quarter and full year ended December 31, 2021. The report was filed February 23, 2022 and presents consolidated IFRS information in Brazilian reais. Comparisons are primarily with 4Q20 and full-year 2020.
Business Context and Operating Performance
- TIM operated a mobile and fixed telecommunications business in Brazil, with emphasis on higher-value postpaid customers, 4G/5G network expansion, fiber broadband and customer-platform initiatives.
- The mobile customer base reached 52.1 million, up 1.2% year over year. Postpaid lines increased 4.7% to 22.9 million, while prepaid lines declined 1.4% to 29.2 million.
- TIM Live ended the year with 685,000 connections, up 6.1%, and plans above 100 Mbps represented 62% of the base.
- 4G coverage reached 4,715 cities, including 3,975 cities covered by the 700 MHz frequency. FTTH infrastructure passed approximately 4.2 million homes.
Financial Metrics
| Metric | 4Q21 | FY2021 | Change versus comparable period |
|---|---|---|---|
| Total services revenue | Not clearly provided in filing text | Not clearly provided in filing text | +4.0% in 4Q; +5.0% for the year |
| Mobile services revenue | R$4.323 billion | Not clearly provided in filing text | +3.8% in 4Q; +4.7% for the year |
| Normalized EBITDA | R$2.4 billion | R$8.7 billion | +2.9% in 4Q; +4.4% for the year |
| Normalized EBITDA margin | 51.0% | 48.4% | Not clearly provided for the prior comparable period |
| Normalized operating cash flow | Not clearly provided in filing text | R$6.1 billion | Up R$1.5 billion |
| Normalized capex | R$1.255 billion | R$4.382 billion | -14.2% in 4Q; +12.6% for the year |
| Total capex, including spectrum | R$4.840 billion | R$7.966 billion | Includes 5G auction-related amounts |
| Normalized EBITDA less capex | R$1.194 billion | R$4.356 billion | +30.3% in 4Q; annual margin not clearly provided |
| Normalized EBIT | Not clearly provided in filing text | R$3.034 billion | +6.7% for the year |
| Net financial result | Expense of R$180 million | Expense of R$653 million | Annual expense improved from R$807 million in 2020 |
| Cash and securities | R$9.797 billion | R$9.797 billion at year-end | Up R$5.151 billion year over year |
| Normalized debt after hedging | R$13.520 billion | R$13.520 billion at year-end | Up R$3.262 billion year over year |
Profit: The filing text does not provide a clear reported or normalized net income amount because the income-statement attachment is not reproduced as readable text. Reported income tax and social contribution expense was R$549 million in 4Q21, compared with income of R$83 million in 4Q20, mainly due to a R$509.2 million tax effect related to the I-Systems transaction.
Material Changes Versus Prior Period
- Service revenue and EBITDA continued their recovery from 2020, supported by postpaid growth, higher mobile ARPU and fixed broadband expansion.
- Mobile ARPU increased 5.9% for 2021 to R$26.4; 4Q21 ARPU was R$27.7, up 2.6%.
- Postpaid revenue rose 5.4% for 2021, while prepaid revenue declined 1.9%, reflecting weaker macroeconomic conditions and the end of emergency government aid.
- Product revenue declined 24.3% in 4Q21 and 6.9% for the year, affected by macroeconomic pressure and equipment supply issues.
- Normalized capex increased for the year because of infrastructure preparation for the integration of Oi’s mobile assets. Total capex also included R$3.585 billion associated with frequency licenses.
- Debt increased primarily because of financing for the Oi transaction and frequency-auction obligations. Bank debt was R$3.845 billion, while IFRS 16 lease liabilities were R$8.820 billion.
- Operating working capital contributed R$1.007 billion in 2021, compared with R$159 million in 2020. Approximately R$1 billion related to 2020 and 2021 Fistel obligations remained unpaid with no defined payment date.
Guidance, Outlook, Risks and Unusual Items
- Management expected TIM Live to resume expansion into new FTTH locations in 2022 after a slowdown caused by the creation of I-Systems, increased competition and weaker FTTC performance.
- TIM acquired 11 lots in the 4G/5G auction covering 3.5 GHz, 2.3 GHz and 26 GHz frequencies for approximately R$1.05 billion, with additional infrastructure and financial obligations.
- IHS Brasil acquired 51% of I-Systems for R$1.1 billion paid to TIM, while R$600 million was allocated to I-Systems’ cash. TIM retained 49% and remained an anchor customer.
- Reported 4Q21 operating costs benefited from a R$782.2 million gain related to the sale of control of I-Systems. Normalized EBITDA excludes this and other nonrecurring items.
- The C6 Bank partnership reached a 4.08% equity interest for TIM and generated R$83 million of 2021 revenue, but an arbitration proceeding was initiated because of disagreements between the partners.
- Subscriber acquisition cost increased to R$58.9 per gross addition for 2021, up 28.9%, and the payback ratio increased to 2.3 months from 1.7 months in 4Q20.
- Management’s forward-looking statements are subject to operational, macroeconomic, competitive, regulatory, spectrum, integration, financing and execution risks. The company stated that future results may differ materially from expectations.
- Alberto Mario Griselli became CEO on January 31, 2022, replacing Pietro Labriola.
Investor Verification Points
- Verify reported and normalized net income, total revenue, balance-sheet amounts and detailed cash-flow figures in the complete financial statements and notes.
- Assess the recurring versus nonrecurring effects of the I-Systems transaction, including the R$782.2 million operating-cost benefit and R$509.2 million tax impact.
- Review the total financial and commercial obligations associated with the 5G auction, including the R$843 million financing-related amount and R$2.682 billion of EAF/EACE obligations.
- Monitor debt-service capacity, lease liabilities, interest-rate exposure and the impact of higher CDI and inflation-linked obligations.
- Evaluate execution of the Oi mobile-asset integration, FTTH expansion and 5G rollout, as well as the potential effects of competition and weaker prepaid demand.
- Review the C6 Bank arbitration and the valuation and accounting treatment of TIM’s strategic partnership interests.