TIM S.A. 2020 Fourth-Quarter Results
Reporting period: Form 6-K dated February 9, 2021, covering the fourth quarter and full year ended December 31, 2020. Results are presented under IFRS, including IFRS 9, 15 and 16, in Brazilian reais. Comparisons are primarily with 4Q19 and full-year 2019. Because TIM Participações S.A. was reverse-incorporated into TIM S.A. in August 2020, comparative 2019 figures reflect TIM Participações for economic comparability.
Business Context and Operating Performance
- TIM operated in Brazil’s mobile and fixed broadband markets and ended 2020 with 51.4 million mobile users, down 5.5% year over year, and 645,000 TIM Live broadband connections, up 14.0%.
- Mobile ARPU increased 7.7% year over year to R$27.0 in 4Q20. Human postpaid churn declined by 1.0 percentage point year over year.
- TIM Live ARPU increased 8.2% year over year to R$90.7 in 4Q20. TIM Live revenue rose 25.0% in 4Q20 and 27.9% for 2020.
- 4G coverage reached 3,877 cities, including 3,294 cities covered by 700MHz spectrum. VoLTE was available in more than 3,860 cities.
- FTTH passed 3.2 million homes by year-end in 27 cities and seven administrative regions; total fixed broadband coverage, including FTTC, reached 6.4 million homes.
Financial Metrics
| Metric | 4Q20 | 2020 | Change versus comparable period |
|---|---|---|---|
| Net revenue | Not clearly provided in the filing text | R$17,268 million | Down 0.6% for 2020 |
| Mobile service revenue | R$4,164 million | Not clearly provided | Up 1.5% in 4Q20; broadly stable for 2020, down 0.2% |
| Net service revenue | Not clearly provided | Not clearly provided | Up 0.4% for 2020 |
| Normalized EBITDA | R$2.4 billion | Not clearly provided | Up 3.0% in 4Q20 and 3.2% for 2020 |
| Normalized EBITDA margin | 50.9% | 48.5% | Record quarterly and annual levels |
| EBITDA less Capex | R$916 million | R$4,480 million | Down 6.2% in 4Q20; up 5.2% for 2020 |
| Capex | R$1,464 million | R$3,891 million | Up 9.7% in 4Q20 and 1.0% for 2020 |
| Normalized EBIT margin | 21.4% | 16.5% | Down 5.9 percentage points in 4Q20 and 0.7 percentage points for 2020 |
| Normalized financial result | Negative R$44 million | Negative R$807 million | Improved from negative R$1,096 million in 2019 for the full year |
| Operating free cash flow | Not clearly provided | R$4.6 billion | Up 40.1% |
| Gross debt | R$10,257 million | R$10,257 million at year-end | Up R$646 million year over year |
| Cash and short-term investments | R$4,646 million | R$4,646 million at year-end | Up R$1,706 million year over year |
| Net debt | R$5,611 million | R$5,611 million at year-end | Down R$1,061 million year over year |
| Net debt to EBITDA | Not clearly provided | 0.67x | Excluding leases, net cash position with net debt-to-EBITDA of negative 0.42x |
Reported operating costs and expenses were R$2,325 million in 4Q20, up 2.2% year over year. Normalized costs and expenses increased 1.0% year over year, below inflation. Bad-debt expense declined 47.8% in 4Q20 and 26.1% for 2020, reaching R$97 million, or 1.5% of gross revenue, in the quarter.
Reported net income, normalized net income and several detailed income-statement amounts are shown in attachments that are not legible in the supplied filing text; the filing text therefore does not provide a clear value for those metrics.
Material Changes Versus Prior Period
- Revenue trends improved during the second half of 2020 as commercial activity recovered from pandemic-related restrictions. Full-year product revenue declined 22.7%, while service revenue remained resilient.
- Profitability improved at the EBITDA level through customer monetization, cost control and lower bad debt, although higher depreciation reduced EBIT margins.
- Capex increased as investments resumed after pandemic-related project reassessments. Approximately 93% of 4Q20 Capex was directed to infrastructure, IT, 4G, transport networks and FTTH.
- Cash generation and working capital improved materially. Full-year working capital generated R$159 million, versus a use of R$2,501 million in 2019, although the comparison was affected by prior-year tax-credit items and the postponement of certain FISTEL payments.
- Gross debt increased, but cash grew faster, reducing net debt. IFRS 16 lease liabilities represented R$8,217 million of gross debt.
Guidance, Outlook, Risks and Unusual Items
- The filing does not provide specific quantitative financial guidance. Management emphasized continued mobile monetization, network investment, FTTH expansion, digital channels and cost efficiency.
- The COVID-19 pandemic continued to affect customer spending, commercial activity, handset sales and the broader economic environment, although operating trends improved in the second half.
- TIM and Telefónica Brasil and Claro agreed to acquire Oi’s mobile assets for a total transaction value of R$16.5 billion plus approximately R$819 million of present-value capacity-contract compensation. TIM’s expected share was approximately R$7.3 billion for the base price and transition services, plus approximately R$476 million for its share of the capacity contract.
- The Oi transaction remained subject to customary closing conditions, including prior approval by ANATEL and CADE and, if applicable, approval by TIM’s shareholders.
- TIM declared R$1,083 million of interest on capital in 2020, including R$500 million announced in October and R$583 million announced in December.
- TIM obtained subscription bonuses representing an indirect interest of approximately 1.4% in Banco C6 after reaching the first performance level. The bonuses had not yet been exercised as of the report date and would provide a minority position without control or significant influence.
- The company approved the creation of a FiberCo intended to provide wholesale fiber infrastructure services and potentially attract a strategic partner. The transaction was described as preparatory and subject to future steps.
- Non-recurring items included R$27.2 million of legal and administrative expenses related to M&A projects in 4Q20, as well as prior-period tax-credit, contingency, lease and financial-result adjustments used in normalized measures.
- Forward-looking statements are subject to operating, macroeconomic, regulatory, transaction-completion and pandemic-related risks. The company disclaims an obligation to update such statements.
Facts Investors Should Verify
- Verify reported and normalized net income, EPS, EBITDA and balance-sheet details in the complete audited financial statements and attachments.
- Confirm the final funding, regulatory approvals, closing timetable and accounting treatment of the Oi mobile-asset acquisition.
- Assess the effect of the R$7.3 billion expected Oi transaction outlay on leverage, liquidity, dividends and future Capex.
- Review the terms, exercise price and accounting treatment of the Banco C6 subscription bonuses.
- Monitor the timing and amount of the suspended FISTEL TFF payment and other tax, labor, civil and regulatory contingencies.
- Evaluate whether mobile ARPU growth, postpaid additions, declining churn and TIM Live expansion can offset the declining total mobile base and pandemic-related economic risks.