TIM S.A. — Form 6-K Summary
Reporting period: First quarter ended March 31, 2021; filed May 5, 2021. Results are consolidated, reported in Brazilian reais, and reflect IFRS 9, 15 and 16. Comparisons are primarily with the first quarter of 2020.
Business context and operating performance
- TIM operates mobile and fixed telecommunications businesses in Brazil.
- Total mobile subscribers were 51.2 million, down 2.1% year over year but up 0.6% sequentially. Postpaid subscribers increased 2.5% to 22.2 million, while prepaid subscribers declined 5.3% to 29.5 million.
- TIM Live broadband connections increased 13.3% to 662,000. FTTH homes passed exceeded 3.5 million, and total FTTH plus FTTC homes passed reached 6.4 million.
- 4G coverage expanded to 4,121 cities, representing 96% of the urban population. VoLTE was available in 4,086 cities.
Financial metrics
| Metric | 1Q21 | Change versus 1Q20 |
|---|---|---|
| Total service revenue | Growth of 3.3% | Accelerated from the prior comparable period |
| Mobile service revenue | R$3,947 million | Up 2.8% |
| Fixed service revenue | R$281 million | Up 12.1% |
| TIM Live revenue | Not separately stated | Up 20.4% |
| Normalized EBITDA | R$2.0 billion | Up 4.5% |
| Normalized EBITDA margin | 46.6% | Up 0.7 percentage points |
| Normalized net income | R$277 million | Up 57.9% |
| Reported operating costs and expenses | R$2,319 million | Up 1.5% |
| Provision for doubtful accounts | R$123 million | Down 34.5% |
| Normalized EBIT margin | 13.7% | Up 1.2 percentage points |
| Net financial result | Expense of R$225 million | R$26 million improvement |
| Capital expenditures | R$1,324 million | Up 46.5% |
| EBITDA less capex | R$696 million | Down 32.4% |
| Change in working capital | Outflow of R$74 million | 94.8% improvement |
| Gross debt | R$10,235 million | Up R$79 million |
| Cash and securities | R$4,319 million | Up R$2,723 million |
| Net debt | R$5,917 million | Down from R$8,561 million |
| Net debt/EBITDA | 0.70x | Prior-year comparison not clearly stated for this measure |
Material changes versus the prior comparable period
- Mobile ARPU increased 6.6% to R$25.5, supported by migration toward higher-value prepaid and postpaid plans.
- Postpaid revenue increased 3.9%, while prepaid revenue declined 4.1%, an improvement from the 4.9% decline in 4Q20.
- Operating expense growth remained below inflation, and bad debt declined substantially. Subscriber acquisition cost decreased 12.6% to R$52.1 per gross addition, reducing payback to 2.0 months from 2.5 months.
- Capex increased materially as projects deferred during the pandemic were resumed and the company prepared for the integration of Oi Mobile assets. Approximately 95% of investment was directed to infrastructure.
- Cash and securities increased faster than debt, reducing reported net debt. Excluding leases, TIM reported net cash of R$2,480 million, compared with net debt of R$393 million on the comparable basis in 1Q20.
- Operating trends remained affected by COVID-19 restrictions, including store closures and weaker prepaid commercial activity.
Outlook, transactions, risks and unusual items
- Management emphasized recovery in commercial activity, continued ARPU expansion, infrastructure investment, and preparation to receive Oi Mobile assets. The filing does not provide quantitative full-year financial guidance.
- In April 2021, TIM signed two foreign-bank loan agreements totaling approximately R$1.1 billion, payable over three years. The company had also approved financing of up to R$4 billion for the Oi Mobile acquisition; two April contracts totaled R$1.072 billion.
- In April, TIM received authorization to issue up to R$5.75 billion of incentive debentures to finance infrastructure projects, including mobile, fixed and 5G networks.
- On May 5, 2021, TIM agreed to sell 51% of FiberCo to IHS while retaining 49%. FiberCo had an enterprise value of R$2.6 billion, including R$1.028 billion payable to TIM and R$609 million contributed to FiberCo. Closing remains subject to asset transfers and regulatory approvals, including Anatel and CADE authorization.
- FiberCo is expected to support broadband expansion and potentially reduce TIM’s consolidated capex burden. Its business plan targets 8.9 million FTTH homes within four years, but these are forward-looking expectations.
- A Brazilian tax assessment originally totaling R$1.265 billion was partially resolved in TIM’s favor. The excluded amount was R$736 million in historical terms, or R$1.4 billion updated; the remaining disputed amount continues through administrative proceedings and may be reviewed by CARF’s Upper Chamber.
- Reported results include management-defined normalized measures. Normalizations include certain legal, administrative, tax-credit and other effects; the filing should be reconciled to the attached statutory financial statements.
- COVID-19 restrictions, execution and integration risks related to Oi Mobile, regulatory approvals, network investment requirements, tax and labor contingencies, and reliance on forward-looking assumptions remain material considerations.
Important facts for investors to verify
- Reconcile normalized EBITDA and normalized net income with reported income-statement figures and confirm all normalization adjustments.
- Review the attached balance sheet and cash-flow statement for operating cash flow, free cash flow, lease liabilities, maturities and current versus non-current debt.
- Confirm the accounting treatment, closing conditions, valuation and cash proceeds of the FiberCo transaction.
- Assess the funding requirements, regulatory status and integration costs associated with the Oi Mobile asset acquisition.
- Review the remaining tax contingency, related probability classifications and potential cash exposure.
- Evaluate whether the sharp increase in capex and infrastructure commitments is consistent with future revenue and cash-flow generation.