Commission File Number 001-14491

 

 

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Index

Company Information

Capital

Approval of Dividends

Parent Company Financial Statements

Balance Sheet Assets

Balance Sheet Liabilities and Shareholders' Equity

Statements of Income

Statements of Comprehensive Income

Statements of Cash Flow

Statements of Changes in Shareholders' Equity

01/01/2015 to 09/30/2015

01/01/2014 to 09/30/2014

Statements of Added Value

Consolidated Company Financial Statements

Balance Sheet Assets

Balance Sheet Liabilities and Shareholders' Equity

Statements of Income

Statements of Comprehensive Income

Statements of Cash Flow

Statements of Changes in Shareholders' Equity

01/01/2015 to 09/30/2015

01/01/2014 to 09/30/2014

Statements of Added Value

Earnings release

Notes to quarterly information

Opinions and Statements

Report of Independent Registered Public Accounting Firm - Unqualified

Fiscal's Council Opinion or Equivalent Board

Directors’ Statement on the Financial Statements

Director’s Statement on the Auditor’s Report on Special Review

Company name:	TIM PARTICIPAÇÕES SA
Last change in the Company Name:	08/30/2004	Prior Company Name:	Tele Celular Sul Participações S.A.
Record date:	05/22/1998	C.N.P.J.:	02.558.115/0001-21
CVM Code:	01763-9	CVM incorporation date:	08/19/1998
Situação do Registro na CVM:	Active	Inicial date of record date at CVM:	09/10/1998
Country of origin:	Brazil	Contry of securities registration:	Brazil
Issuer's page in Internet:	www.tim.com.br/ri
Type of participant:	Listed Company
Record category at CVM:	Categoria A	Current category registration date:	01/01/2010
Issuer's situation:	Operational	Inicial date:	10/09/1998
Type of Control:	Private	Last change in control:
Last change in accounting period		Accounting period:	Day: 30  Month: 09
Activity:	Telecommunication
Activity description:
Journal name	Journal State
Jornal do Commercio	RJ
Valor Econômico	SP
Country	Incorporation date
United States of America	12/16/1998

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Information - Capital

Number of Shares	Current Quarter
(units)	09/30/2015
Paid up Capital
Common	2,421,032,479
Preferred	-
Total	2,421,032,479
Treasury Stock
Common	795,889
Preferred	-
Total	795,889

 

 

Account Code	Account Description	09/30/2015	12/31/2014
1	Total Assets	17,034,007	15,787,526
1.01	Current Assets	89,374	463,010
1.01.01	Cash and Cash Equivalents	50,914	43,455
1.01.03	Trade Accounts Receivable	329	329
1.01.03.02	Other Accounts Receivable	329	329
1.01.06	Taxes and Contributions Recoverable	21,582	20,648
1.01.06.01	Current Taxes and Contributions Recoverable	21,582	20,648
1.01.08	Other Current Assets	16,549	398,578
1.01.08.03	Other Assets	16,549	398,578
1.01.08.03.01	Dividends and interests on own capital receivable	0	385,835
1.01.08.03.03	Other Assets	16,549	12,743
1.02	Non-Current Assets	16,944,633	15,324,516
1.02.01	Long-Term Assets	66,496	65,729
1.02.01.01	Financial assets at fair value through profit or loss	0	98
1.02.01.01.02	Available for Sale	0	98
1.02.01.09	Other Non-Current Assets	66,496	65,631
1.02.01.09.05	Judicial Deposits	66,496	65,631
1.02.02	Investments	16,720,581	15,101,231
1.02.02.01	Investments on Subsidiaries	16,720,581	15,101,231
1.02.02.01.02	Subsidiaries	16,720,581	15,101,231
1.02.04	Intangible	157,556	157,556
1.02.04.01	Intangible Assets	157,556	157,556

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Balance Sheet – Liabilities and Shareholders’ Equity (in thousands of Reais)

Account Code	Account Description	09/30/2015	12/31/2014
2	Total Liabilities	17,034,007	15,787,526
2.01	Current Liabilities	72,241	432,125
2.01.01	Social and Labor Obligations	1,850	2,119
2.01.01.02	Labor Obligations	1,850	2,119
2.01.02	Suppliers - Trade Payable	2,023	1,218
2.01.02.01	Domestic Suppliers	2,023	1,218
2.01.03	Taxes, rates and contributions	213	239
2.01.03.01	Federal Obligations	58	204
2.01.03.01.02	Other Fiscal Taxes	58	204
2.01.03.03	Municipal Obligations	155	35
2.01.03.03.01	ISS payable	155	35
2.01.05	Other Obligations	68,155	428,549
2.01.05.02	Others	68,155	428,549
2.01.05.02.01	Dividends payable	60,576	421,002
2.01.05.02.04	Other Current Liabilities	7,579	7,547
2.02	Non-Current Liabilities	33,483	33,367
2.02.02	Long-Term Liabilities	29,763	29,764
2.02.02.02	Others	29,763	29,764
2.02.02.02.03	Other Liabilities	29,763	29,764
2.02.04	Provisions	3,720	3,603
2.02.04.01	Tax, Labor and Civil Provisions	3,720	3,603
2.02.04.01.02	Civil and Labor Provisions	3,720	3,103
2.02.04.01.05	Regulatory Provisions	-	500
2.03	Shareholders' Equity	16,928,283	15,322,034
2.03.01	Paid up Capital	9,866,298	9,866,298
2.03.02	Capital Reserves	1,344,161	1,341,101
2.03.02.01	Offering's Goodwill	380,560	380,560
2.03.02.04	Stock Option	19,432	16,372
2.03.02.05	Treasury Stock	(3,369)	(3,369)
2.03.02.07	Reserve for Tax Benefits	947,538	947,538
2.03.04	Revenue Reserves	4,112,332	4,112,332
2.03.04.01	Legal Reserve	515,956	515,956
2.03.04.10	Reserve for expansion	3,596,376	3,596,376
2.03.05	Retained earnings	1,595,562	-
2.03.08	Other comprehensive income	9,930	2,303

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Statements of Income (in thousands of Reais)

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Statements of Comprehensive Income (in thousands of Reais)

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Statements of Cash Flow – Indirect Method (in thousands of Reais)

Account Code	Account Description	Year-to-date - current year 01/01/2015 to 09/30/2015	Year-to-date - prior year 01/01/2014 to 09/30/2014
6.01	Net cash and cash equivalents generated by operating activities	367,787	842,793
6.01.01	Cash and cash equivalents generated by operating activities	(11,920)	(16,523)
6.01.01.01	Earning before income tax (EBIT)	1,595,562	1,086,076
6.01.01.02	Equity Pick Up	(1,609,010)	(1,114,605)
6.01.01.03	Provision for legal and administrative proceedings	1,388	609
6.01.01.04	Monetary fluctuation on judicial deposits and provision for legal and administrative proceedings	(207)	(297)
6.01.01.05	Monetary fluctuation on dividends	-	10,957
6.01.01.06	Stock options	347	737
6.01.02	Variations in assets and liabilities	379,707	859,316
6.01.02.01	Taxes and contributions recoverable	(934)	3,156
6.01.02.02	Dividends received	385,835	871,796
6.01.02.03	Judicial Deposits	(13)	(11,587)
6.01.02.04	Other assets	(3,805)	(2,567)
6.01.02.05	Labor obligations	(269)	980
6.01.02.06	Suppliers	805	456
6.01.02.07	Taxes and contributions	(26)	(2,771)
6.01.02.08	Other current and non-current liabilites	28	19
6.01.02.10	Payment of legal and administrative proceedings	(1,914)	(166)
6.02	Net cash and cash equivalents generated (used) by investment activities	98	3
6.02.02	Financial assets valued through profit or loss	98	3
6.03	Net cash and cash equivalents used by financing activities	(360,426)	(816,877)
6.03.01	Dividends paid	(360,426)	(835,849)
6.03.02	Increase on capital stock	-	18,972
6.05	Increase on cash and cash equivalents	7,459	25,919
6.05.01	Beginning cash and cash equivalents balance	43,455	19,112
6.05.02	Ending cash and cash equivalents balance	50,914	45,031

 

Account Code	Account Description	Capital	Capital Reserves	Revenues Reserves	Retained Earnings	Other Comprehensive Income	TOTAL SHAREHOLDERS' EQUITY
5.01	Beginning balance	9,866,298	1,341,101	4,112,332	-	2,303	15,322,034
5.03	Adjusted Beginning balance	9,866,298	1,341,101	4,112,332	-	2,303	15,322,034
5.04	Shareholder´s Transactions	-	3,060	-	-	-	3,060
5.04.03	Stock option	-	3,060	-	-	-	3,060
5.04.06	Dividends	-	-	-	-	-	-
5.05	Total Comprehensive Income	-	-	-	1,595,562	7,627	1,603,189
5.05.01	Profit  for the Period	-	-	-	1,595,562	-	1,595,562
5.05.02	Other comprehensive income	-	-	-	-	7,627	7,627
5.05.02.06	Cash flow hedges	-	-	-	-	7,627	7,627
5.06	Internal changes in shareholders´ equity	-	-	-	-	-	-
5.06.01	Reserves constitution	-	-	-	-	-	-
5.07	Ending balance	9,866,298	1,344,161	4,112,332	1,595,562	9,930	16,928,283

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Statements of Changes in Shareholders´ Equity from 01/01/2014 to 09/30/2014 (in thousands of Reais)

Account Code	Account Description	Capital	Capital Reserves	Revenues Reserves	Retained Earnings	Other Comprehensive Income	TOTAL SHAREHOLDERS' EQUITY
5.01	Beginning balance	9,839,770	1,214,271	3,538,586	-	2,013	14,594,640
5.03	Ajusted Beginning balance	9,839,770	1,214,271	3,538,586	-	2,013	14,594,640
5.04	Shareholder´s Transactions	19,301	4,099	(484,255)	-	-	(460,855)
5.04.01	Increase on capital stock	19,301	-	-	-	-	19,301
5.04.03	Stock option	-	4,099	-	-	-	4,099
5.04.09	Dividends recorded directly on shareholders equity	-	-	1,467	-	-	1,467
5.04.10	Suplemmentary Dividends	-	-	(485,722)	-	-	(485,722)
5.05	Total Comprehensive Income	-	-	-	1,086,076	-	1,086,076
5.05.01	Profit for the Period	-	-	-	1,086,076	-	1,086,076
5.06	Internal changes in shareholders´equity	-	880	(880)	-	-	-
5.06.04	Fiscal benefit reserve constitution	-	880	(880)	-	-	-
5.07	Ending balance	9,859,071	1,219,250	3,053,451	1,086,076	2,013	15,219,861

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Statements of Added Value (in thousands of Reais)

Account Code	Account Description	Year-to-date - current year 01/01/2015 to 09/30/2015	Year-to-date - prior year 01/01/2014 to 09/30/2014
7.02	Raw Material Acquired from Third Parties	(7,867)	(9,823)
7.02.02	Material, Energy, Services and Others	(7,867)	(9,823)
7.03	Gross Added Value	(7,867)	(9,823)
7.05	Net Added Value Produced	(7,867)	(9,823)
7.06	Added Value Received from Transfers	1,614,418	1,116,409
7.06.01	Equity Pick Up	1,609,010	1,114,605
7.06.02	Financial Revenues	5,408	1,804
7.07	Total Added Value to Share	1,606,551	1,106,586
7.08	Sharing Added Value	1,606,551	1,106,586
7.08.01	Labor	7,415	7,258
7.08.01.01	Cost of Working	6,454	6,383
7.08.01.02	Benefits	787	742
7.08.01.03	F.G.T.S	151	133
7.08.01.04	Others	23	-
7.08.02	Taxes, Fees and Contributions	2,180	1,879
7.08.02.01	Federal	2,166	1,863
7.08.02.02	State	-	1
7.08.02.03	Municipal	14	15
7.08.03	Earnings - Borrowed Capital	1,394	11,373
7.08.03.01	Interest	1,233	11,228
7.08.03.02	Rentals	161	145
7.08.04	Earnings - Owned Capital	1,595,562	1,086,076
7.08.04.03	Retained Earnings	1,595,562	1,086,076

 

Account Code	Account Description	09/30/2015	12/31/2014
1	Total assets	33,904,040	32,695,111
1.01	Current Assets	10,346,491	11,174,415
1.01.01	Cash and Cash Equivalents	4,408,450	5,232,992
1.01.02	Financial assets	420,654	-
1.01.02.01	Financial assets at fair value through profit or loss	384,902	-
1.01.02.02	Financial assets measured at amortized cost	35,752	-
1.01.02.02.01	Held to maturity	35,752	-
1.01.03	Accounts Receivable	2,981,349	3,537,417
1.01.03.01	Clients	2,981,349	3,537,417
1.01.04	Inventories	160,713	264,033
1.01.06	Taxes and Contributions Recoverable	1,436,611	1,642,625
1.01.06.01	Current Taxes and Contributions Recoverable	1,436,611	1,642,625
1.01.06.01.01	Indirect Taxes and Contributions Recoverable	1,145,930	1,285,143
1.01.06.01.02	Direct Taxes and Contributions Recoverable	290,681	357,482
1.01.07	Prepaid Expenses	358,982	266,264
1.01.08	Other Current Assets	579,732	231,084
1.01.08.03	Others	579,732	231,084
1.01.08.03.01	Operations with derivatives	416,223	47,541
1.01.08.03.02	Financial leasing	1,881	1,525
1.01.08.03.03	Other assets	161,628	182,018
1.02	Non-Current Assets	23,557,549	21,520,696
1.02.01	Long-Term Assets	3,596,142	3,283,133
1.02.01.01	Financial assets at fair value through profit or loss	-	41,149
1.02.01.03	Accounts Receivable	26,331	29,886
1.02.01.03.01	Clients	26,331	29,886
1.02.01.06	Deferred Taxes	739,286	889,064
1.02.01.06.01	Deferred Income Tax and Social Contribution	739,286	889,064
1.02.01.07	Prepaid Expenses	56,144	70,587
1.02.01.09	Other Non-Current Assets	2,774,381	2,252,447
1.02.01.09.03	Operations with derivatives	774,948	463,157
1.02.01.09.04	Other Non-Current Assets	48,507	11,926
1.02.01.09.05	Judicial Deposits	1,070,414	986,017
1.02.01.09.06	Indirect Taxes and Contributions Recoverable	659,246	574,490
1.02.01.09.07	Direct Taxes and Contributions Recoverable	24,383	23,346
1.02.01.09.08	Financial leasing	196,883	193,511
1.02.03	Property, Plant and Equipment	10,164,053	8,914,929
1.02.03.01	Property, Plant and Equipment in Operation	9,637,805	8,243,084
1.02.03.03	Construction work in progress	526,248	671,845
1.02.04	Intangible	9,797,354	9,322,634
1.02.04.01	Intangibles	8,270,135	7,795,415
1.02.04.01.02	Software rights	3,360,669	3,025,260
1.02.04.01.03	Authorizations	1,287,808	1,463,353
1.02.04.01.04	Other Intangibles	3,621,658	3,306,802
1.02.04.02	Goodwill	1,527,219	1,527,219

 

Account Code	Account Description	09/30/2015	12/31/2014
2	Total liabilities	33,904,040	32,695,111
2.01	Current Liabilities	7,239,288	9,123,256
2.01.01	Social and Labor Obligations	275,990	208,629
2.01.01.02	Labor Obligations	275,990	208,629
2.01.02	Suppliers - Trade Payable	3,301,592	5,402,204
2.01.02.01	Domestic Suppliers	3,199,355	5,295,382
2.01.02.02	Foreign suppliers	102,237	106,822
2.01.03	Taxes, rates and contributions	593,976	808,207
2.01.03.01	Federal Obligations	116,169	207,586
2.01.03.01.01	Income Tax and Social Contribution Payable	9,750	74,891
2.01.03.01.02	Other Taxes	106,419	132,695
2.01.03.02	State Obligations	439,013	561,845
2.01.03.02.01	ICMS	439,013	561,845
2.01.03.03	Municipal Obligations	38,794	38,776
2.01.03.03.01	ISS	38,794	38,776
2.01.04	Loans and Financing	1,873,274	1,281,554
2.01.04.01	Loans and Financing	1,873,274	1,281,554
2.01.04.01.01	Domestic Currency	554,975	966,039
2.01.04.01.02	Foreign Currency	1,318,299	315,515
2.01.05	Other Obligations	1,194,456	1,422,662
2.01.05.02	Others	1,194,456	1,422,662
2.01.05.02.01	Dividends payable	60,576	421,002
2.01.05.02.04	Operations with derivatives	194,488	67,044
2.01.05.02.05	Authorizations Payable	449,284	493,169
2.01.05.02.06	Deferred revenues	20,572	9,943
2.01.05.02.07	Financial leasing	25,819	3,642
2.01.05.02.08	Other liabilities	443,717	427,862
2.02	Non-Current Liabilities	9,736,469	8,249,821
2.02.01	Loans and Financing	5,015,961	5,472,865
2.02.01.01	Loans and Financing	5,015,961	5,472,865
2.02.01.01.01	Domestic Currency	3,074,413	3,374,733
2.02.01.01.02	Foreign Currency	1,941,548	2,098,132
2.02.02	Other Obligations	3,470,025	1,602,354
2.02.02.02	Others	3,470,025	1,602,354
2.02.02.02.03	Operations with derivatives	-	-
2.02.02.02.04	Indirect Taxes and Contributions Payable	100	94
2.02.02.02.05	Direct Taxes and Contributions Payable	239,628	229,027
2.02.02.02.06	Authorizations Payable	626,081	879,012
2.02.02.02.07	Other liabilities	30,591	30,609
2.02.02.02.08	Financial leasing	1,539,840	326,027
2.02.02.02.09	Deferred revenues	1,033,785	137,585
2.02.03	Deferred Taxes	773,705	481,173
2.02.03.01	Deferred Income Tax and Social Contribution	773,705	481,173
2.02.04	Provisions	476,778	693,429
2.02.04.01	Tax, Labor and Civil Provisions	428,766	407,154
2.02.04.01.01	Tax Provisions	225,146	194,845
2.02.04.01.02	Labor Provisions	66,942	62,947
2.02.04.01.03	Benefits Provisions	643	645
2.02.04.01.04	Civil Provisions	106,854	103,303
2.02.04.01.05	Regulatory Provisions	29,181	45,414
2.02.04.02	Other Provisions	48,012	286,275
2.02.04.02.03	Asset Retirement Obligation	48,012	286,275
2.03	Shareholders' Equity	16,928,283	15,322,034
2.03.01	Paid up Capital	9,866,298	9,866,298
2.03.02	Capital Reserves	1,344,161	1,341,101
2.03.02.01	Offering's Goodwill	380,560	380,560
2.03.02.04	Stock Option	19,432	16,372
2.03.02.05	Treasury stock	(3,369)	(3,369)
2.03.02.07	Tax benefit reserve	947,538	947,538
2.03.04	Revenue Reserves	4,112,332	4,112,332
2.03.04.01	Legal Reserve	515,956	515,956
2.03.04.10	Reserve for expansion	3,596,376	3,596,376
2.03.05	Retained earnings	1,595,562	-
2.03.08	Other Comprehensive Income	9,930	2,303

 

Account Code	Account Description	Quarter - current year 07/01/2015 to 09/30/2015	Year-to-date - current year 01/01/2015 to 09/30/2015	Quarter - prior year 07/01/2015 to 09/30/2015	Year-to-date - prior year 01/01/2014 to 09/30/2014
3.01	Net Operating Revenues from Goods Sold and/or Services Rendered	4,117,027	13,016,777	4,852,764	14,329,721
3.02	Cost of Goods Sold and/or Services Rendered	(2,028,774)	(6,567,088)	(2,525,696)	(7,382,397)
3.03	Gross Income	2,088,253	6,449,689	2,327,068	6,947,324
3.04	Operating Revenues (Expenses)	(1,374,678)	(3,851,047)	(1,757,794)	(5,217,251)
3.04.01	Sales	(1,141,047)	(3,621,104)	(1,283,699)	(3,820,340)
3.04.02	General and Administrative	(295,983)	(847,603)	(286,954)	(825,608)
3.04.04	Other Operating Revenues	303,323	1,269,577	15,109	37,645
3.04.05	Other Operating Expenses	(240,971)	(651,917)	(202,250)	(608,948)
3.04.05.01	Authorizations' Amortization	(84,162)	(259,897)	(82,945)	(262,237)
3.04.05.02	Other Operating Expenses	(156,809)	(392,020)	(119,305)	(346,711)
3.05	Operating Income	713,575	2,598,642	569,274	1,730,073
3.06	Financial	(167,013)	(282,977)	(74,336)	(182,877)
3.06.01	Financial Revenues	953,040	1,804,152	174,530	620,352
3.06.02	Financial Expenses	(1,120,053)	(2,087,129)	(248,866)	(803,229)
3.07	Income Before Taxes	546,562	2,315,665	494,938	1,547,196
3.08	Income Tax and Social Contribution	(190,095)	(720,103)	(146,609)	(461,120)
3.08.01	Current	(3,247)	(277,793)	(50,226)	(264,857)
3.08.02	Deferred	(186,848)	(442,310)	(96,383)	(196,263)
3.09	Profit for the Period on continued operations	356,467	1,595,562	348,329	1,086,076
3.11	Consolidated Profit for the Period	356,467	1,595,562	348,329	1,086,076
3.11.01	Atributted to shareholders	356,467	1,595,562	348,329	1,086,076
3.99	Earnings per share (R$/share)
3.99.01	Earnings per share basic
3.99.01.01	ON	0.14729	0.65926	0.14411	0.44933
3.99.02	Earnings per share diluted
3.99.02.01	ON	0.14730	0.65921	0.14402	0.44903

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Consolidated Company Statements of Comprehensive Income (in thousands of Reais)

 

Accont Code	Account description	Year-to-date - current year 01/01/2015 to 09/30/2015	Year-to-date - prior year 01/01/2014 to 09/30/2014
6.01	Net cash and cash equivalents generated by operating activities	1,907,411	2,440,359
6.01.01	Cash and cash equivalents generated by operating activities	4,816,906	4,762,101
6.01.01.01	Earnings before income tax (EBIT)	2,315,666	1,547,196
6.01.01.02	Depreciation and amortization	2,493,127	2,250,014
6.01.01.03	Gain on sale of fixed assets disposed - Towers	5,535	5,803
6.01.01.04	Monetary variation on ARO provision	3,465	2,644
6.01.01.05	Provision for legal and administrative proceedings	257,799	191,590
6.01.01.06	Monetary fluctuation on judicial deposits and provision for legal and administrative proceedings	23,354	34,367
6.01.01.07	Interest and monetary and exchange variation on loans and other financial adjustments	647,457	497,600
6.01.01.08	Monetary fluctuation on dividends	-	10,957
6.01.01.10	Allowance for doubtful accounts	179,288	211,326
6.01.01.11	Stock options	3,060	4,099
6.01.01.13	Interests on leasing asset	90,136	32,816
6.01.01.14	Interests on leasing liability	(17,910)	(26,311)
6.01.01.15	Gain on sale of fixed assets disposed - Towers	(1,184,071)	-
6.01.02	Variations in assets and liabilities	(2,909,495)	(2,321,742)
6.01.02.01	Trade Accounts receivable	442,393	(80,448)
6.01.02.02	Taxes and contributions recoverable	123,692	(310,412)
6.01.02.03	Inventories	103,320	(9,790)
6.01.02.04	Prepaid expenses	(78,275)	(133,973)
6.01.02.05	Judicial Deposits	(46,866)	(203,776)
6.01.02.06	Other current and non-current assets	(10,027)	(89,006)
6.01.02.07	Labor obligations	67,361	90,905
6.01.02.08	Suppliers	(2,232,056)	(1,080,372)
6.01.02.09	Taxes, fees and contributions payable	(497,056)	(318,238)
6.01.02.10	Payment of legal and administrative proceedings	(297,070)	(197,935)
6.01.02.11	Authorizations payable	(322,504)	28,276
6.01.02.12	Deferred revenues	(85,903)	(76,277)
6.01.02.13	Other current and non-current liabilities	(76,504)	59,304
6.02	Net cash and cash equivalents used by investing activities	(1,241,650)	(2,626,889)
6.02.01	Financial assets valued through profit or loss	(379,505)	(13,205)
6.02.02	Additions to property plant and equipment and intangibles	(3,223,531)	(2,607,583)
6.02.03	ARO obligation	(52,760)	(6,101)
6.02.04	Cash received on fixed assets solds	2,414,146	-
6.03	Net cash and cash equivalents generated (used) by financing activities	(1,490,303)	326,758
6.03.01	New loans	-	1,925,191
6.03.02	Loans amortization	(1,389,216)	(666,712)
6.03.03	Dividends paid	(360,426)	(835,850)
6.03.04	Operations with derivatives	306,282	(103,602)
6.03.06	Reeimbursement to shareholders - TIM Fiber RJ S.A. purchase allocation	(18)	(19)
6.03.07	Payments on financial lease	(61,108)	(29,241)
6.03.08	Receipts on financial lease	14,183	18,019
6.03.09	Increase on capital stock	-	18,972
6.05	Increase (decrease) on cash and cash equivalents	(824,542)	140,228
6.05.01	Beginning cash and cash equivalents balance	5,232,992	5,287,642
6.05.02	Ending cash and cash equivalents balance	4,408,450	5,427,870

 

Account Code	Account Description	Capital	Capital Reserves	Revenues Reserves	Retained Earnings	Other Comprehensive Income	TOTAL SHAREHOLDERS' EQUITY	Minority Interest	Consolidated SHAREHOLDERS' EQUITY
5.01	Beginning balance	9,866,298	1,341,101	4,112,332	-	2,303	15,322,034	-	15,322,034
5.03	Prior year adjusted	9,866,298	1,341,101	4,112,332	-	2,303	15,322,034	-	15,322,034
5.04	Shareholder´s Transactions	-	3,060	-	-	-	3,060	-	3,060
5.04.03	Options granted	-	3,060	-	-	-	3,060	-	3,060
5.04.06	Dividends	-	-	-	-	-	-	-	-
5.05	Comprehensive income statement	-	-	-	1,595,562	7,627	1,603,189	-	1,603,189
5.05.01	Net income for the period	-	-	-	1,595,562	-	1,595,562	-	1,595,562
5.05.02	Other comprehensive income	-	-	-	-	7,627	7,627	-	7,627
5.05.02.06	Cash flow hedges	-	-	-	-	7,627	7,627	-	7,627
5.06	Internal changes in shareholders´ equity	-	-	-	-	-	-	-	-
5.06.01	Reserves constitution	-	-	-	-	-	-	-	-
5.07	Ending balance	9,866,298	1,344,161	4,112,332	1,595,562	9,930	16,928,283	-	16,928,283

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Consolidated Company Statements of Changes in Shareholders´ Equity from 01/01/2014 to 09/30/2014 (in thousands of Reais)

Account Code	Account Description	Capital	Capital Reserves	Revenues Reserves	Retained Earnings	Other Comprehensive Income	TOTAL SHAREHOLDERS' EQUITY	Minority Interest	Consolidated SHAREHOLDERS' EQUITY
5.01	Beginning balance	9,839,770	1,214,271	3,538,586	-	2,013	14,594,640	-	14,594,640
5.03	Prior year adjusted	9,839,770	1,214,271	3,538,586	-	2,013	14,594,640	-	14,594,640
5.04	Shareholder´s Transactions	19,301	4,099	(484,255)	-	-	(460,855)	-	(460,855)
5.04.01	Increase on capital stock	19,301	-	-	-	-	19,301	-	19,301
5.04.03	Options granted	-	4,099	-	-	-	4,099	-	4,099
5.04.06	Dividends	-	-	-	-	-	-	-	-
5.04.09	Dividends recorded directly on shareholders equity	-	-	1,467	-	-	1,467	-	1,467
5.04.10	Suplemmentary Dividends	-	-	(485,722)	-	-	(485,722)	-	(485,722)
5.05	Comprehensive income statement	-	-	-	1,086,076	-	1,086,076	-	1,086,076
5.05.01	Net income for the period	-	-	-	1,086,076	-	1,086,076	-	1,086,076
5.06	Internal changes in shareholders´equity	-	880	(880)	-	-	-	-	-
5.06.04	Fiscal benefit reserve constitution	-	880	(880)	-	-	-	-	-
5.07	Ending balance	9,859,071	1,219,250	3,053,451	1,086,076	2,013	15,219,861	-	15,219,861

 

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Consolidated Company Statements of Added Value (in thousands of Reais)

Account code	Account description	Year-to-date - current year 01/01/2015 to 09/30/2015	Year-to-date - prior year 01/01/2014 to 09/30/2014
7.01	Revenues	17,624,178	19,087,555
7.01.01	Net Operating Revenues from Goods Sold and/or Services Rendered	17,803,466	19,298,881
7.01.04	Allowance for doubtful accounts	(179,288)	(211,326)
7.02	Raw Material Acquired from Third Parties	(5,626,117)	(8,067,500)
7.02.01	Cost of Goods Sold and/or Services Rendered	(4,240,530)	(5,278,851)
7.02.02	Material, Energy, Services and Others	(1,385,587)	(2,788,649)
7.03	Gross Added Value	11,998,061	11,020,055
7.04	Retentions	(2,493,127)	(2,250,014)
7.04.01	Depreciation and Amortization	(2,493,127)	(2,250,014)
7.05	Net Added Value Produced	9,504,934	8,770,041
7.06	Added Value Received from Transfers	1,804,152	620,352
7.06.02	Financial Revenues	1,804,152	620,352
7.07	Total Added Value to Share	11,309,086	9,390,393
7.08	Sharing Added Value	11,309,086	9,390,393
7.08.01	Labor	624,579	573,920
7.08.01.01	Cost of Working	439,453	411,271
7.08.01.02	Benefits	131,803	113,778
7.08.01.03	F.G.T.S.	42,787	38,568
7.08.01.04	Others	10,536	10,303
7.08.02	Taxes, Fees and Contributions	6,538,513	6,515,318
7.08.02.01	Federal	2,521,533	2,412,729
7.08.02.02	State	4,003,085	4,090,814
7.08.02.03	Municipal	13,895	11,775
7.08.03	Earnings - Borrowed Capital	2,550,432	1,215,079
7.08.03.01	Interest	2,084,414	800,240
7.08.03.02	Rentals	466,018	414,839
7.08.04	Earnings - Owned Capital	1,595,562	1,086,076
7.08.04.03	Retained Earnings	1,595,562	1,086,076

 

EARNINGS RELEASE

 

 

 

Operational Highlights

·

#1 in 4G coverage: 278 cities covered in October 2015 (+233 cities vs. Dec/14)

·

Network evolution: 173 cities in Mobile Brodband Plan, covering >70% of 3G data traffic

·

Postpaid customer base growth: +13% 3Q15 vs. 3Q14

·

Smartphones penetration at 63% (although data users represents 43% of total base)

·

Innovative ARPU grew 37% YoY in 3Q15

·

Live TIM customer base surpasses 200k milestone.

Financial Highlights

·

Data Services remained at solid pace of 41% YoY

·

Fixed net revenues showed robust growth of +11% YoY, and +13% YoY in 9M15

·

Efficiency Plan on track: Opex (ex towers sale) is down 20% YoY vs. 3Q14

·

EBITDA margin (ex towers sale) at 31.5% in 3Q15. EBITDA service margin (excluding the handset business) reached 36.3% in 3Q15

·

Capex: Total investments amounted R$1.2 bln in 3Q15 (+22% YoY)

 

 

Conference Call in English:

Public Meeting in Portuguese:

Nov 4^th, 2015, at:

Nov 4^th, 2015, at:

12:00 AM Brasília time

09:30 Brasília time

09:00 AM US EST

06:30 AM US EST

Tel.: +1 888 700-0802 (USA)

Maksoud Plaza Hotel - SP

  

       +55 11 3193-1001 or +55 11 2820-4001 (Brazil)

To access live broadcast please click here.

   

       +1 786 924-6977 (other countries)

Code: TIM

 

MESSAGE FROM CEO

Dear Shareholders, Analysts and Stakeholders,

The great transformation in the mobile industry we have been highlighting since the beginning of 2015 continued well into the third quarter, accompanied once again by the very tough macroeconomic environment, which presented an accentuated deterioration of the exchange rate, yet another negative adjustment to GDP growth and a confirmation of the high inflation for the year.

As anticipated, the decline of voice usage continues, and this last quarter we could observe a reduction of 13% YoY in our MOUs, in line with industry wide declines, as our users move away from voice and into data consumption, replacing voice usage by messaging and data before the effect of the reduction of the MTRs and its impact on off-net voice tariffs takes hold.

With the pressure of the macroeconomic scenario, the achievement of a near saturation level for voice lines in the country, and the accelerated substitution of voice by messaging and data, we confirm our prediction of the beginning of a significant consolidation in the number of multiple prepaid SIM cards, resulting in an important reduction in the so called “community effect” (club effect, with on-net calls costing a fraction of off-net calls and retaining users based on the total size of the customer base, or “community”), and a corresponding overall reduction in the number of total users due to the reduction of the prepaid base. As further confirmation, all players presented reductions in the prepaid base during the quarter as observed by the numbers disclosed by Anatel, leading to a quarter with overall customer base reduction for the first time in the historical series.

On the positive side, as a confirmation of our stated strategy of focus on data, the growth of our data revenues continued unabated even by the macro crisis, and achieved again an impressive 41% year over year over the third quarter 2014, effectively doubling our data revenues in the period of one year. Innovative revenues, which include content and applications on top of data connectivity, grew 34% YoY, with a more conservative approach to generating value added service revenues in face of increasing customer satisfaction metrics. As indication of the strength of data growth, both our Data ARPU and BOU (Bytes of Use) metrics also experienced fast growth, at the clip of 37% and 30% YoY respectively, boosted by the increase in Smartphone penetration in the base, which reached 64% in the third quarter, up from 44% last year.

This performance was certainly helped by the continuation of our long term focus on investing in infrastructure, which again delivered substantial results in Q3 as detailed further below, and also by the strategy of moving up the value of our customer base, which presented an improvement in mix between postpaid and prepaid customers, with the former growing at double digits and reaching a mix of 19% during Q3, as compared to 16% a year prior.

Despite the growth in data revenues, the continuation of the decline in incoming revenues due to MTR reduction, in addition to the trends in voice and SMS, which combined still account for roughly 65% of revenues, again brought short term pressures to service revenue growth during last quarter, resulting in a 6.5% decline over the same period in 2014. An important indicator must be highlighted though, which is the sequential stability on service revenues on a QoQ basis when compared with 2Q 2015. On total revenue figures, it is very important to understand the significant change in strategy as far as handset sales go, and given the penetration levels on the base have already achieved levels close to 70% as stated above, the company has decided to reduce overall volumes, focusing sales on value channels where better opportunities for qualified sales exist, resulting in a large decline to product revenues, but without any impact to the company’s profitability or overall strategy, as also anticipated in our second quarter message.

The results of the third quarter indicate we will still see the short term challenges on revenues, and to a lesser extent on EBITDA, for a few tough quarters, but also indicate that the strategy of building the infrastructure for the future, focusing on growing and protecting data revenues, changing the profile of our customer base and relentlessly working on cost efficiencies will eventually bring us to the return of growth in both revenues as well as EBITDA, with the crossing point between data and voice revenues expected for sometime around the middle of 2016. With this in mind, let me expand quickly on what we have been doing as far as each component of our strategy goes.

Infrastructure investments leading us into the future: achieving leadership in 4G coverage

We have been stating the importance of the infrastructure component as the primary pillar of our long-term strategy for over two years now, but most importantly we have been delivering very solid results on all of our infrastructure and network quality fronts, and Q3 2015 was no exception. During the quarter, our Capex investments were up 22% when compared to last year, again with a heavy emphasis in expanding our 3G and 4G coverage and guaranteeing an improved experience in the use of our mobile broadband services.

During Q3, our Mobile Broadband project reached over 170 cities, and now we cover over 70% of our total data traffic in the country with a very high speed infrastructure of fiber and/or high capacity digital radios, allowing us to move up substantially in all Anatel quality metrics, and in particular in the two data metrics which measure “average speed” and “instantaneous speed”, where TIM has been the mobile operator with the greatest improvements, getting close to the a leadership position in those indicators. Still during Q3, we increased our number of 3G sites by over 19%, adding approximately 300 cities when compared to last years numbers, and increased the number of 4G sites by over 55%, reaching virtually half of the urban population in the country with 4G.

But the most important achievement in the last few months as far as the progress of our data infrastructure came during the month of October, when, for the first time, TIM announced it has reached the leadership in 4G coverage in Brazil by number of cities served, which reached at the end of October 278 cities, well in excess of the cities covered by the operator with the second most cities deployed. This very important milestone was made possible by the innovative strategy of refarming the 1.8 GHz frequency from 2G to 4G, and with that in mind we expect to get close to 400 cities covered by 4G by the end of 2015, or close to 60% of Brazil’s urban population, in a sign of a very clear commitment with the future growth of data and TIM’s quality position in it.

New Offer Portfolio: transforming the mobile industry in Brazil yet again

As communicated in my last quarterly message, we have been adjusting our offer portfolio and focus on subscriber acquisition to “protect the value of our customer base while increasing our base of value customers”. And with the current scenario in mind, and the very solid execution on the main components of our strategy, at the end of Q3 TIM decided it was time for yet another bold move in transforming the industry in Brazil and changing the offer game going forward. As I wrote this, TIM has took the center stage in becoming the first mover on introducing attractive off-net voice minutes in all of its prepaid, control and postpaid offers, in addition to repositioning the data volumes for all plans in a more attractive manner, in a move which not only reinforces its image as being the innovator in Brazilian mobile space, but also helps us in our strategy of defending the first SIM card customers in a moment of SIM Card consolidation and migration to postpaid.

With just a few days of our new Portfolio announcements, it is already possible to see that this was a much anticipated change in the market, and even though the new offers will require some time to penetrate our customer base and to produce effects of volume/value share gain, we expect the industry to eventually move in the same direction. In the meantime, it will be important to recognize that the new offers will bring different margin dynamics to play with the use of off-net minutes, which will decrease in cost over time as the MTR continues to be reduced. It is also important to highlight that the new offers introduce several important strategic concepts such as recurring charging on prepaid, gradual reduction of the promotional OTT allowances, rightsizing of data packages to preserve data values and the extensive use of voice/data bundles across all families of plans. All of these moves will help protect TIM’s position on prepaid and also bring a new differentiation for higher value clients of control and postpaid plans.

This move marks also a departure in terms of communication strategy, which is now evolving to allow for a new brand positioning, more aligned with quality, innovation and the new reality of user needs and telecom services in Brazil.

Focus on efficiency becomes integral part of the strategy, solid financials

As highlighted many times before, the company has been investing relentlessly in becoming as operationally efficient as possible, by addressing opportunities both in day by day cost control activities as well as focusing on long term structural gains such as process improvements and business model changes. This disciplined approach to operational efficiency and cost control has then become an integral part of our strategy, and has helped us weather part of the short term impacts coming form the industry transformation and macroeconomic challenges faced by Brazil under the current scenario. During Q3, the results of this strategy could bee clearly seen again, with a reduction in total Opex expenses of 19% when compared to the same period last year, with reduction in virtually all cost components except personnel costs, which will continue to be addressed with organizational changes, rightsizing and additional efficiency approaches.

The result of this approach, even with declining revenues, was an increase in EBITDA margin from 27% in the 3^rd quarter of 2014 to 31% in the same quarter this year, and an increase in Service EBITDA margin from 34% to 36% in the same period comparison. This served to mitigate the impact of revenues on EBITDA decline, which presented a reduction of 2.7% net of the positive non-recurring effects of our tower sale process, despite an overall service revenue reduction of 6.5%. Considering the effects of the tower sale process, reported EBITDA on Q3 2015 was boosted by an additional R$ 267 million, leading to 17% growth YoY, and our reported Net Income received a boost of R$ 820 million on the first 9 months of 2015, or a 47% increase YoY on a non-recurring basis. Net Financial Position remains at a comfortable 0.46x, for a Net Debt of R$ 2.5 billion, stable from the second quarter.

Conclusion and Perspectives

This is, without a question, a period of great transformations, for the country, for the industry and ultimately for TIM. And we are firmly committed to our strategy of becoming a leading mobile data player in Brazil by continuing to invest in future proof infrastructure, becoming every day more operationally efficient, and transforming the market with disruptive offer innovation and customer base repositioning. By achieving 4G coverage leadership and launching a complete new offer Portfolio, we believe we are moving closer towards our goals of delivering sustained growth and superior strategic, operational and financial results. We know the challenges are not small, but we remain committed to our goals, and count with the most passionate team in the industry to make them happen.

Rodrigo Abreu

CEO

 

FINANCIAL PERFORMANCE

OPERATING REVENUES

 

 

Revenues performance remains impacted largely by MTR sharp reduction and faster migration from Voice to Data services. On the positive side, data services kept growing solid double digit year-over-year but not yet sufficient to offset the aforesaid pressure on traditional services.

Gross service revenues totaled R$17,406 million in the first nine months of 2015 (-4.8% YoY), while totaled R$5,724 million (-5.9% YoY) in the third quarter of 2015.

Gross revenues breakdown and other highlights are presented as follows:

Usage and monthly fee gross revenues reached R$7,405 million in 9M15 (-10.7% YoY), impacted by a tougher macroeconomic scenario and the continued migration towards data usage. As for 3Q15, usage and monthly fee gross revenues totaled R$2,364 million (-13.7% YoY), with prepaid segment being more impacted by macro headwinds. Minutes of Use (MOU) came in at 119 minutes in 3Q15, down 12.6% when compared to 3Q14.

 

Value Added Services (VAS) gross revenues totaled R$5,726 million in 9M15, a solid double digit growth of 20.4%. This solid result is mainly due to the strong increase of 42% YoY in innovative revenues, even with the impact of continuous decrease in SMS business, which fell by 32% YoY. As for 3Q15 analysis, VAS gross revenues reached R$1,987 million, up 19% YoY, again boosted by an increase of 36% YoY in innovative revenues. Both segments, prepaid and postpaid, kept a strong growth pace.

Data Revenues represents more than 36% of total mobile gross service revenues (up from 29% in 3Q14).

 

 

Long distance gross revenues came at R$2,077 million in 9M15, a drop of 11.5% when compared with the same period of 2014. Such performance is mainly explained by the service commoditization and the switch from voice to data usage pattern. As for 3Q15 figures, long distance gross revenues reached R$671 million (-11.8% YoY).

Interconnection gross revenues in 9M15 and in 3Q15 dropped near 39% YoY to R$1,217 million and R$370 million respectively, due to the impact of MTR price cut together with the intensification of the SMS substitution to messaging applications and the change in the dynamic of overall voice traffic.

Other Mobile Revenues reached R$245 million in 9M15, an increase of 22.5% YoY, mainly driven by the growth of revenues related to infrastructure sharing. As for 3Q15, growth reduced to 12.6% YoY, following the decline in tower leasing revenues as a consequence of the sale-leaseback transaction.

 

 

Fixed business gross revenues, including “TIM Soluções Corporativas”, “TIM Fixo” and  “Live TIM”, totaled R$736 million in the first nine months of 2015, a solid increase of 9.0% when compared to the same period of 2014. This performance keeps proving the success of the ultra-broadband business and the strategy to restructure TIM Soluções Corporativas (former Intelig). As for the 3Q15, fixed revenues reached R$257 million, showing once more a solid double digit growth of 10.4% YoY.

Product sales gross revenues decreased by 27.9% YoY and 56.1%, reaching R$2,276 million in 9M15 and R$503 million in 3Q15 respectively. Handset sales have being impacted by (i) tougher macroeconomic environment, (ii) FX appreciation causing handset price up, and (iii) adjustments in handset strategy.  

In all, product unit sale has reduced by 78.1% YoY in 3Q15 to 697 thousand units while average price has increased by 97.6% YoY in 3Q15.

 

Total Net Revenues reached R$13,017 million (-9.2% YoY) in the first nine months of the year and Net Services Revenues totaled R$11,508 million (-5.1% YoY). In the same period, Business Generated Net Revenues grew 0.9%, even with the faster transition from voice to data and stronger macroeconomic headwinds. Looking to 3Q15 performance, total net revenues reached R$4,117 million (-15.2% YoY) and Net Services Revenues R$3,784. In the period Business Generated (voice+data) has decreased by 1.6% YoY.

Last quarter, we have introduced a new format of net revenue breakdown, between “Innovative” and “Traditional”, aiming better indicating business trend. Innovative consists in VAS revenues excluding SMS revenues.

Said that, Innovative Mobile Net Revenues came at R$3,408 million in 9M15, a sound increase of 40.8% YoY. As for the third quarter, Innovative revenues totaled R$1,214 million (+34.1% YoY). Both performances were driven by a solid speed in data adoption and usage, BOU (bytes of use) rose by 30.3% in comparison to 3Q14. Also, smartphones penetration reached 62.7% of the customer base (44.2% in 3Q14).

ARPU (average revenue per user) reached R$16.4 in 3Q15, down -5.9% YoY, largely impacted by MTR cut and the reduction in voice usage. As for VAS ARPU, it posted a significant increase of 18.4% YoY, showing the resilience of innovative revenues.

 

 

As a consequence of consecutive MTR cuts combined with Innovative revenues gaining importance, the MTR incidence on net service revenues have been decreasing significantly every quarter, staying at its lowest level in 3Q15, near 8%.

 

OPERATING COSTS AND EXPENSES

 

In the nine months of 2015, Total Opex (ex-towers sale) reached R$9,109 million or

-12% versus 9M14. As for the 3Q15, Total Opex (ex-towers sale) totaled R$2,821 million, yet another saving of 20% year-over-year.

Organic operating expenses analysis for 3Q15 and 9M15 are presented as follows:

Personnel expenses reached R$253 million in 3Q15, a small growth of 1.5% when compared to the same period of last year, driven mainly by a revision in company’s estimates which led to a reduction in provisions related to variable compensation for the year. As for the 9M15 personnel expenses totaled R$770 million (+8.9% YoY) mainly as a result of the increase in 5% in the headcount.

Selling & Marketing expenses amounted to R$867 million in 3Q15, a decrease of 15.2% versus the same period last year, due to less commissioning and significant decline of 15% in FISTEL expenditures, following an austere disconnection policy set forth. In the 9M15, selling & marketing expenses totaled R$2,817 million (-7.0% YoY) impacted by the same elements mentioned above.

Network & Interconnection costs reached R$955 million in 3Q15, a decrease of 10.4% on a yearly comparison, driven mostly by the reduction on  (i) MTR price, (ii) voice/SMS off-net traffic and (iii) leased lines costs. As for the 9M15 network & interconnection costs totaled R$2,907 million (-11.1% YoY) for pretty much the same reasons mentioned.

General & Administrative expenses (G&A) amounted to R$151 million in 3Q15, a decrease of 9.9% YoY, mainly driven by the Efficiency Plan in progress. In 9M15 general & administrative expenses amounted R$423 million and another relevant saving of -14.7% YoY.

Cost of Goods Sold reached R$412 million in 3Q15, a sharp decrease of 51.8% versus the same period of last year due to a reduction of 78% in the number of handsets sold. Costs of goods sold in 9M15 totaled R$1,706 million (-26.7% YoY), with volume of sales dropping by 53% in the period.

Bad Debt expenses increased by 8.9% YoY in 3Q15 to R$63 million, mainly due to the expansion of postpaid mix to 19.0% of total customer base and up from the 16.4% in 3Q14. Bad debt expenses as a percentage of gross revenues stood at 1% (vs. 0.8% in 3Q14). As for the 9M15 period, Bad Debt reached R$179 million (-15.2% YoY) and represented 0.91% of gross revenues (vs. 0.99% in the same period of last year).

Other operational expenses (ex-towers sale) reached R$120 million in 3Q15, an increase of 15.2% vs. 3Q14, mainly due to higher costs on contingencies. As for 9M15 period, other operational expenses totaled R$307 million, flat on a yearly comparison.

Subscriber Acquisition Costs (where SAC = subsidy + commissioning + total advertising expenses) came at R$35.2 per gross add in the 3Q15, an increase of 13.1% YoY, mainly due to the postpaid increase. The SAC/ARPU ratio (indicating the payback per customer) reached 2.2x, a small increase versus 2.1x in 3Q14, again due to the new approach on postpaid segment. Postpaid users reached 13.8 million, up 12.8% from 3Q14.

FROM EBITDA TO NET INCOME

 

EBITDA

Organic EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) totaled R$3,908 million in 9M15, a decrease of 1.8% when compared to R$3,980 million in the same period last of year. In 3Q15, Organic EBITDA reached R$1,296 million, 2.7% lower than 3Q14. This performance was mainly due to: (i) a tougher macroeconomic environment, (ii) MTR cut impact and (iii) voice services faster decline.

 

Nevertheless, Organic EBITDA margin showed once again a significant improvement of 225bps in 9M15, reaching 30.0% vs. 27.8% in 9M14. As for the quarter analysis, EBITDA margin came at 31.5%, up from 27.4% in 3Q14.

 

 

Organic EBITDA margin on services (excluding handset business) came at 35.7% in 9M15, up by 225bps when compared to 33.4% in 9M14. In 3Q15, Organic EBITDA margin on services reached 36.3%, up by 226bps when compared to 3Q14.

Following a similar trajectory as revenues exposure, MTR incidence on organic EBITDA has been falling significantly, reaching its lowest levels at ~13%, in 3Q15.

 

Reported EBITDA (including towers sale) totaled R$5,092 million in 9M15, an increase of 27.9% when compared to the same period of last year. This is a consequence of the conclusion of first and second tranches of towers sale in April-29 (net effect of R$917.5 million) and in September-30 (net effect of R$266.5 million), as seen below in dedicated session. For the quarter, reported EBITDA amounted to R$1,563 million.

D&A / EBIT

In 9M15, Depreciation and Amortization totaled R$2,493 million, up 10.8% YoY when compared to the same period of last year due to an increase in network equipment following our Industrial Plan’s CAPEX increase. In the third quarter, Depreciation and Amortization amounted to R$849 million an 11% YoY increase due to the same reason aforesaid.

Following the increase in depreciation and amortization, Organic EBIT (earnings before interest and taxes) totaled R$1,415 million in 9M15, representing a decrease of 18.2% YoY. EBIT margin came at 10.9% (vs. 12.1% in 9M14). For 3Q15, Organic EBIT amounted to R$447 million, a decrease of 21.5% YoY.

NET FINANCIAL RESULT

In 9M15, Net financial result came at -R$283 million, an increase vs. -R$183 million in the same period of last year, with financial expenses at R$896 million (up 27.6% YoY), financial revenues at R$611 million (up 17.5% YoY) and FX variation at R$2 million. On the expenses side, the increase was due to towers sale and lease back and negative hedge effect following FX fast depreciation during the third quarter. On the revenue side, the yearly performance was largely impacted by interest rate increase and towers sale proceeds.

As for the 3Q15, net financial result totaled -R$167 million (+124.7% YoY), as an effect of R$392 million financial expenses (+46.5% YoY) and R$223 million of financial revenues (+16.4% YoY). Again driver were the mark-to-market spot and leasing negative effects.

INCOME AND SOCIAL CONTRIBUTION TAXES

In 9M15, Organic Income and Social Contribution taxes came at R$356 million, representing a decrease of 22.8% when compared to R$461 million in the same period of last year due to a reduction in the tax base for income tax and social contribution (earnings before tax decreased 26.9% YoY). Effective tax rate increased to 31.4% in 9M15 from 29.8% in 9M14. As for the 3Q15, Organic Income and Social Contribution taxes amounted R$108 million a decrease of 26.6% YoY when compared to R$147 million in 3Q14.

NET INCOME

In 9M15, Organic Net Income totaled R$776 million, a decrease of 28.6% YoY. EPS (Earnings per Share) reached R$0.32 in 9M15 (vs. R$0.45 in 9M14). As for the third quarter of 2015 Organic Net Income totaled R$172 million, a decrease of 50.5% YoY, with EPS reaching R$0.07 (vs. 0.14 in 3Q14).

In 3Q15, Reported Net Income totaled R$356 million, an increase of 2.3% YoY. Reported EPS (Earnings per Share) reached R$0.15.

CAPEX

In 9M15, Capex amounted to R$3,276 million, an increase of 25.2% when compared to 9M14, following our Industrial Plan’s Capex increase.

It’s worth highlighting that more than 91% of the total Capex in 9M was dedicated to infrastructure, mainly related to 3G and 4G technologies.

 

 

 

DEBT, CASH AND FREE CASH FLOW

Gross Debt reached R$7,331 million by the end of September/15, including the leasing recognition in a total value of R$977 million and R$230 million following the leaseback of the towers sold (1^st and 2^nd tranches respectively).

Company's debt is concentrated in long-term contracts (77% of the total) composed mainly by financing from BNDES (Brazilian Economic and Social Development Bank) and EIB (European Investment Bank), as well as borrowings from other top local and international financial institutions.

Approximately 39% of total debt is denominated in foreign currency (USD), and it is 100% hedged in local currency. In 3Q15, average cost of debt was 12.11% compared to 9.66% in 3Q14. Nevertheless, the increase in cost of debt was more than offset by a higher cash yield.

Cash and Cash equivalents totaled R$4,408 million by the end of September/15, a decrease vs. R$5,428 in September/14. The proceeds from the towers sale increased cash position, but were more than offset by the following cash outs:

 

The Company has an investment fund in foreign exchange of R$420.6 million in order to follow the variations of the US Dollar, basically formed by highly liquid public securities. Taking into account all investments made during the period, the fund’s profitability up to the end of the quarter was 26%. The investment is intended to reduce foreign exchange risk on payments made to suppliers in foreign currency.

Average cash yield reached 14.18% in 3Q15 compared to 10.95% in 3Q14.

Considering the last 12 months EBITDA, Net Debt/EBITDA ratio reached 0.46x in 3Q15 compared to 0.14x in 3Q14. Due to the above mentioned payments, net debt increased from R$791 million in 3Q14 to R$2,502 million by the end of 3Q15.

Organic Operating Free Cash Flow came negative at R$806 million in 9M15, (vs. positive R$93 million in 9M14), adversely impacted by an increase of 25.4% on Capex. In the quarter, Organic Operating Free Cash Flow totaled R$340 million, vs. R$884 million in 3Q14.

Organic Net Cash Flow in 9M15 totaled -R$2,052 million compared to -R$1,394 million in the same period of last year. In the quarter, Organic Net Cash Flow totaled -R$124 million, vs. positive R$240 million in 3Q14.

TOWERS SALE IMPACTS

In 3Q15, TIM concluded the second closing under the Tower Sale agreement signed in November 2014 with American Tower do Brasil (ATC) that comprised overall sale of 6,481 towers for ~R$3 billion cash.

 

·

First closing: On April 29, 2015, TIM transferred 4,176 towers to ATC and received ~R$1.9 billion.

·

Second closing: On September 30, 2015 TIM transferred 1,125 towers to ATC and received ~R$517 million.

The Master lease agreement (MLA) defines the leaseback of the transferred towers for a 20 years period. According to IAS17, this transaction should be registered as (1) sale and (2) leaseback and following its requirements, the leaseback registered as financial leasing.

Please find below the Financial Statements impacts conciliation and the related notes for further details of the second tranche:

 

 

OPERATIONAL PERFORMANCE

BRAZILIAN MOBILE MARKET OVERVIEW

In the last data released by Anatel, Brazilian mobile market reached 280.0 million lines by the end of August/15, representing a yearly growth of 0.9%, to a penetration rate of 136.9%, flat versus the same period of last year. Overall subscriber base growth has reduced the pace versus previous quarters, mainly due to operators’ recent movements to optimizing their subscriber base and the recent effect of sim cards consolidation, impacting directly the prepaid segment whilst consumers are revisiting their spending with telecommunication, focusing their usage in only one operator.

A more austere disconnection policiy and a tougher macroeconomic scenario also contributed for this phenomenon. Nonetheless, some segments are still experiencing double digit growth, such as the hybrid plans (aka “Controle”) and data plans.

 

 

 

·

Prepaid segment reached, in August, 208.0 million lines (-2.3% YoY) representing 74.3% of total Brazilian market (vs. 76.7% in August/14). On the same period, prepaid net adds reached -3.4 million lines (vs. +586k in the same period of last year).

·

Postpaid segment reached 72.0 million lines in August (+11.5% versus August/14) with net adds of 1.0 million lines (vs. 1.1 million in the same period of last year).

 

Brazilian market share evolution can be described as follow:

TIM’s PERFORMANCE

(Internal figures for September/15)

TIM’s subscriber base reached 72.6 million lines at the September/15, down -3.1% when compared to the same period of last year.

 

43% of customer base already using data services

 

In the 3G technology, total subscriber base reached 42.5 million users, an increase of 25.5% against 3Q14, proving the success of the company’s strategy of equip its customers with smartphones in order to stimulate data services penetration among its users.

As for the 4G, subscriber base reached 5.0 million users by the end of 3Q15, an increase of 32.5% over 2Q15, or +1.2 million new users in this quarter, and a support evidence that the Company’s approach on 4G is paying off.

Unique data users have reached 31.3 mln lines or 43% of total base.

Net additions totaled -2.0 million lines (vs. 674.3 thousand in 3Q14), as a result of lower gross addition (7.8 million lines and down 20.9% vs. 3Q14) and higher disconnections (9.8 million lines in the period and up 6.9% YoY), following a new guideline to reduce the “washing machine effect”. Consequently churn rate in 3Q15 came at 13.2% and up from 12.4% in the same period of last year.

 

Postpaid customer base reached 13.8 million users in 3Q15, +12.8% yearly growth. During 3Q15, TIM added 276 thousand users in the postpaid segment (vs. 5 thousand net adds in the same period of last year). In 9M15, TIM added 1.3 million postpaid lines, showing the company is being able to regain space in this arena.

As for prepaid segment, 3Q15 ended with 58.8 million users, down 6.2% YoY. TIM maintained the leadership in the prepaid market, with 29% market share on August/15, thanks to its pioneering position, simplicity and transparent concepts.

 

 

QUALITY AND NETWORK

QUALITY DEVELOPMENTS: Meeting All Anatel’s Target

Regarding Anatel’s network quality requirements, TIM kept its solid performance. From April to July (last data available), the Company has met all Anatel’s targets for both Voice and Data services (3G/4G) in every single state. This achievement is a result of strong commitment to quality and our goal to accelerate infrastructure development, specially to support data expansion and deliver a better usage experience. Network quality KPIs described below are based on the number of states that have met targets as disclosed by Anatel.

 

Instant Speed & Average Speed: This quarter, we also highlight TIM’s relevant evolution in terms of mobile broadband quality according to Anatel’s metrics of instant speed (SMP10) and average speed (SMP11). In July/2015, latest data available, both indicators showed significant progress when compared to the same period last year. This is a result of the Company’s effort to improve customer experience by monitoring network quality per municipalities.

 

 

Caring Indicators: This quarter overall market demands at the consumer’s protection agencies (PROCON - SINDEC¹) posted a relevant increase in a yearly comparison due to companies decision to block data usage whenever customers reached their data package cap. Even after that measure, which points to a fair monetization of data usage, TIM’s group (mobile and fixed) remained as the least demanded economic group at the customer’s protection agency in 3Q15, with a volume of demands 55% lower than the market’s average.

 

NETWORK EVOLUTION: Additional 6.9km thousand of Fiber and 4G coverage leadership

The 3Q15 was marked by strong evolution in terms of network implementation. Coverage and capacity continue to be the infrastructure central point and TIM is dedicating great financial and operational effort to maintain the solid expansion path. In 3Q15, 6.9 thousand km of optical fiber were implemented along with other network projects roll out, such as sites densification, Wi-Fi and small cell expansion, backhauling development, cell-site fine tuning and others.

TIM Wi-Fi project accelerated in the third quarter, with 73 new hotspots and totaling close to 1.8 thousand in the entire country. When compared to the same period last year, number of hotspots increased by 71%.

 

 

In 9M15, Mobile BroadBand Project (MBB)² added 48 new cities to the project’s roll out. Besides the new cities, the Company also focused its efforts on coverage densification of 46 cities that were already included in 2014 and are the pillar of the mobile VAS revenue growth. In 3Q15, the MBB project reached 173 cities, covering more than 70% of the entire TIM’s 3G traffic. The goal is to complete 195 cities until the end of 2015.

The average throughput gain for the cities that have completed the MBB is remarkable, proving the efficiency approach used by the project, tackling Access (LTE/HSPA+ with dual carrier), Transport (backhaul and backbone using FTTS and high capacity microwave links) and IP-Core (caching, peering and transit).

 

In 4G, TIM is proud to announce it has achieved leadership in terms of cities covered reaching 278 cities in October. By the end of 2015 the Company plans to extend its coverage to 400 cities, reaching 58% of urban population in the country. As for third quarter, TIM reached 48% of total urban population.

The Company keeps its focus on expanding the 4G coverage through spectrum refarming as well. The project consists in coverage optimization and the amplification in the number of locations with 4G technology, mostly by using the 1,800MHz band and reorganizing the frequency usage according to the spectrum availability.

As for the 3G, this quarter TIM expanded its coverage to 40 new cities, reaching 1,735 cities or 81.3% of urban population. By the end of 2015, Company expects to reach 1,992 cities, covering 82% of urban population. GSM coverage stood at almost 95% of urban population.

MARKETING PROGRESS

Post-paid: TIM Launches Liberty Top in 3Q15

This quarter most relevant marketing initiative was the Liberty Top offer launched in July, 20 2015. The offer generally consists in a very attractive and competitive plan for high value postpaid customers that have intensive data usage but don’t want to give up on voice. The plan was designed to be part of TIM’s efforts to go back to the value game.

In terms of performance, the new plan showed important results in 3Q15, improving postpaid net adds and accelerating prepaid to postpaid migrations. Important to highlight that cannibalization effect was small as more than 2/3 of migrations were upgrading plans.

The new plan consists in 6GB data cap (which can be shared with three different sim cards including smartphones, tablets and modems), unlimited on net calls and 400 minutes off net calls. Additionally, customers are able to send unlimited text and audio messages, share photos and videos through WhatsApp application without consuming their data allowance. Price-wise, offer was set at R$139.00/month in 14 states (including large markets such as SP, MG, BA and DF) and by R$99.00 in the states of Rio de Janeiro and Espírito Santo.

Prepaid Customers: Expanding Data Allowance

In August, TIM launched the Turbo WhatsApp offer to meet increasing demand for data in the prepaid segment. It is a monthly prepaid offer and consists in 50MB /day as data cap to be spend in WhatsApp usage, including  texting and audio messages, photos and videos, plus another 50MB/month allowance  to be spend in other internet content. The offer costs R$12 and was designed to meet increasing demand for the messaging app.

In October, TIM updated its Infinity Web and Infinity Web+SMS offers. The data cap moved to 50MB/day from 10MB/day while prices remained unchanged at R$0.75 and R$0.99 per day, respectively. Both offers also include unlimited usage of WhatsApp for texting, sending audio, photos and videos. These changes aim to increase customer satisfaction after a period of adjustments following the introduction of the data blockage after reaching user data allowance.

Handsets: Business in Transformation

Handset market continues to post significant decrease this year as sales of traditional phones plunged following the switch to smartphones. The pace of smartphones sales however is decelerating as customers continue to be negatively impacted by a tougher macroeconomic environment.

 

Research shows that handsets sales from manufacturers has decreased 17% in 1H15 in Brazil to 27.4 million units, according to the country`s electric and electronic industry association (ABIEE). This was largely impacted by a 78% decrease in traditional phones sales. Smartphone sales, however, posted an increase of 8% in the same period as a result of strong 1Q15 while 2Q15 posted a 13% contraction.

Despite this scenario TIM maintained its leadership position in smartphones sales in the retail sector, reaching a market share of 50% in July and August.

Other Marketing Initiatives

Following the strategy of expanding mobility and enabling users to extract the most from their devices, TIM kept expanding and improving its app portfolio. This quarter the highlights are below:

 

 

“TIM Gourmet” – Intended for cooking and gastronomy fans the app provides a wide range of services from restaurant guides to food delivery. The app also features recipes and cooking tips in video from the renowned chef Claude Troisgois. The subscription costs R$2.99 per week and the delivery service is provided in partnership with iFood platform.

 

“TIM Banca Virtual” – In a partnership with Editora Abril publishing house, TIM launched a platform that works as a virtual magazine stand concentrating customers’ favorite magazines from Abril. The service aims to provide a unique reading experience that goes beyond digitalization of the printed magazine providing audio, video and interactivity. Customers can choose from a monthly (R$12.99) or a weekly (R$5.99) subscription fee.

 

 

“TIM Empregos” – The app is a job/career tool that features a searching engine from Vagas.com website – a major web portal in the country – and specific content on career related topics, business and market trends. A section called “Prepare-se” (“Get Ready”) offers tips from the notorious career specialist in Brazil, Max Gehringer. The subscription is R$3.99 per week.

Live TIM: 200k. Remarkable quarter with continued expansion and quality perception

Live TIM ended 3Q15 with more than 200 thousand ultra-broadband customers, a strong growth of 67% when compared to the same period of 2014. This result placed 3Q15 as a remarkable quarter in Live TIM history, with 34 thousand new clients added to the base. Customers are concentrated at the 35 and 50 Mbps offers, nevertheless, as the portfolio grows, customers are adhering to higher speeds plans.

At the end of 3Q15 Live TIM had 29.2 thousand buildings connected (vs. 15.6 thousand in 3Q14), and an addressable market of over 1.9 million households in São Paulo and Rio de Janeiro metro regions. Prospect clients registered in Live TIM’s website reached 1.17 million (vs. 776k in 3Q14).

3Q15 was also marked by the confirmation of market quality perception on TIM’s broadband service. During the quarter, Live TIM has been awarded by:

o

The most recommended brand for CVA Solutions Institute

o

The best Broadband quality in the Perceived Quality Survey conducted by Anatel

o

The first place in the speed ranking of Netflix in Brazil

CORPORATE SOCIAL RESPONSIBILITY

TIM Institute, whose mission is to create and enhance resources for the democratization of science, technology, and innovation in Brazil, continues, in 2015, with many initiatives underway, all guided by four principles: education, technology applications, inclusion, and work.

Also, this last quarter TIM Institute launched the “Academic Working Capital” (AWC), a new project that will support innovative technology-based business with the creation of a product. The goal is to offer financial support to young entrepreneurs - students of the finals graduation – so that they may create companies from their Graduation Projects. In 2015, the TIM Institute will invest R$ 400 thousand in up to 40 projects.

The projects will be analyzed by a specialized judge committee, composed by teachers and market professionals, and the teams chose will receive orientation and financial support to launch their products over the next year. Throughout the project, students participate in workshops on Business and Technology and are weekly monitored by AWC’s consultants that will support the group mainly in making technical and business decisions. At the end of the project, students will have the opportunity to participate of an Investment Fair, on which each project will have a stand and team members will be available to present and demonstrate their solutions to investors and market professionals.

Currently, 11 projects are already being advised by AWC’s consultants. Among these projects, there is a biodigester capable to use surplus electricity from wind sources to generate biogas, a portable paper recycler and the Dumper Truck, an electric vehicle capable of carrying up to 200 kilos.

ENERGY CONSUMPTION

In line with its Environmental Policy principles, TIM considers energy consumption as one of its challenges that evolves according to the table below.

 

The increase in electricity consumption is due to the plant growth. In the third quarter of 2015 were activated about 1,900 new network elements, while in the same period of 2014 were activated about 500 network elements. At the end of 2014 third quarter we had about 27,200 active network elements, while the end of the same period in 2015 we reached about 30,600 network elements. The reduction observed in fuel consumption is due to route realignment of sales consultants vehicles.

Energy efficiency is carried out through some actions such as Swap Project (replacing access equipment with more modern and efficient models) and the RAN Sharing agreement (sharing model of network infrastructure with other telecom operators). In environmental terms, the RAN Sharing agreement reduces electricity consumption and also has a positive urban impact as it implies in reducing the number of new Radio Base Stations (RBS), minimizing the inconvenience to population (EN5 indicator, GRI3 3.1).

With a significant reduction in visual impact, Biosites help harmonize with the environment and urban infrastructure. Its multifunctionality can add beyond telecommunications transmission, contributing for lighting and security through surveillance cameras. At the end of September, the project surpassed the number of 100 activated Biosites, a considerable increase compared with 23 activated Biosites in December 2014.

STOCK PERFORMANCE

TIMP3 ended the third quarter of 2015 at R$7.51, down by 41.7% in the last 12 months, while the Bovespa Index (Ibovespa) was down 16.7% over the same period. The Company's ADRs closed 3Q15 at US$9.45, a decrease of 63.9% in the last 12 months (Brazilian Reais depreciated by 62% in relation to the American dollar in 3Q15 vs. 3Q14).

 

SUBSEQUENT EVENTS

NEW OFFERS - Changing Gears. Fast response to market new reality

On October 30^th, TIM launched a new offer portfolio, evolving Company’s postpaid, controle and prepaid go to market. This strategic change occurs in a scenario of: mobile market reaching maturity, community effect slowdown, SIM card consolidation, MOU sharp reduction, voice revenues decline overcoming data growth and final stages of MTR relevant impact.

In this context, the Company adjusted its offers focusing on mobile bundle proposition and unlocking off-net value. With that innovative and disruptive strategy, TIM expects to defend voice and accelerate data further to rebound revenues.

 

 

OWNERSHIP BREAKDOWN

ABOUT TIM PARTICIPAçõES S.A.

TIM is one of the largest telecommunications companies in Brazil.  With a focus on investing in innovation and in the quality of its network, services and customer service, TIM fulfills its mission of connecting and caring for everyone so that everyone can do more.

As the first operator in Brazil to have a nationwide presence, TIM has innovation in its DNA and seeks to enhance its users' lives through its technology. Therefore, in addition to constantly working on expanding and improving its network, the company has amassed a complete portfolio, offering mobile and fixed telephony and access to the Internet.  With TIM, individual and corporate customers can always be connected.

 

The company's infrastructure is one of its strategic priorities. Over the past few years, TIM has upgraded its equipment and made acquisitions - such as Intelig, in 2009, and AES Atimus, in 2011 - reinforcing its commitment to quality and accessibility. From 2015 to 2017, the Company will invest R$14 billion in its operations, and most of that amount will be earmarked to expand 4G and 3G coverage throughout the country, in line with the company’s growth expectations in demand for data traffic.

 

Transparency is also one of the company's pillars. TIM is a publicly-held company, whose shares are listed on São Paulo’s BM&FBOVESPA under the ticker symbol TIMP3,  and ADRs (American Depositary Receipts), listed on the NYSE (New York Stock Exchange) under the ticker symbol TSU. TIM is also the only company in the telecommunications industry listed on BM&FBOVESPA's "Novo Mercado," recognized for requiring the maximum level of corporate governance, and is also part of the Corporate Sustainability Index (ISE), and the Carbon Efficient Index (ICO2).  One of its key initiatives is the Open Doors project, which allows consumers to monitor network enhancement and improvement actions, in addition to get to know the true picture of TIM's coverage. Also worthy of note are the TIM Institute initiatives, which seek to create and maximize strategic resources to make science education and innovation available to everyone in Brazil.  

You, your home and your business

Mobile and fixed telephony and access to the Internet via modems, tablets, and mobile phones running on the 3G and 4G technologies, in addition to the ultra-broadband Internet, are the services that are part of TIM's innovative portfolio. The operator was the first on the market to invest in offering new formats, such as charging for the use of voice and mobile Internet per day or through monthly billing plans paid via credit card. And it continues revolutionizing the market, delivering more benefits and providing more accessible rates to its consumers.

The company also has ideal solutions for small, medium and large businesses. The Corporate Solutions area offers fixed voice and advanced data services to the corporate segment, understanding the corporations' profiles and needs and enhancing its customers' productivity and competitiveness while yet decreasing their costs.

In the fixed ultra-Internet segment, Live TIM is a quality benchmark, with the most satisfied customer base in the country. The carrier introduced on the market navigation plans that are about ten times faster than the average Brazilian broadband, thus allowing much faster file downloads and uploads, crash-free gaming, and high-definition, real-time video streaming. Live TIM offers 35 MB to 1 GB plans and is available to residential and business customers in São Paulo, Rio de Janeiro, Duque de Caxias, and Nova Iguaçu. The company also offers Live TIM Blue Box, an entertainment center that integrates - in a single system - free high-definition digital TV, Netflix and YouTube content, and pay TV through an exclusive collaboration with TV Alphaville.

DISCLAIMER

The financial and operating consolidated information disclosed in this document, except where otherwise indicated, is presented according to IFRS (International Financial Reporting Standards) and in Brazilian Reais (R$), pursuant to Brazilian Corporate Law. All comparisons refer to the third quarter of 2014 (3Q14), nine months of 2014 (9M14) and second quarter of 2015 (2Q15), except when otherwise indicated.

This document may contain forward-looking statements. Such statements are not statements of historical fact and reflect the beliefs and expectations of the Company's management. The words "anticipates”, "believes”, "estimates”, "expects”, "forecasts”, "plans”, "predicts”, "projects”, "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties foreseen, or not, by the Company. Therefore, the Company’s future operating results may differ from current expectations and readers of this release should not base their assumptions exclusively on the information given herein. Forward-looking statements only reflect opinions on the date on which they are made and the Company is not obliged to update them in light of new information or future developments.

 

ATTACHMENTS

 

Operational Indicators

 

 

 

 

NOTES TO QUARTERLY INFORMATION
At September 30, 2015

(In thousands of Reais, unless otherwise indicated)

1.

Operations

1.a Organizational Structure

TIM Participações S.A. (“TIM Participações” or “Company”) is a publicly-held corporation based in the city of Rio de Janeiro and is a subsidiary of TIM Brasil Serviços e Participações S.A. (“TIM Brasil”). TIM Brasil is a subsidiary of the Telecom Italia Group and holds 66.58% of the capital of TIM Participações as at September 30, 2015 (66.58% in 2014). The Company’s and its subsidiaries (“Group”) main purpose is to control companies providing telecommunications services, including personal mobile telecom services in their licensed areas. The services provided by TIM Participações’ subsidiaries are regulated by the Agência Nacional de Telecomunicações (“Anatel”).

 

The Company’s shares are traded on the BM&F/Bovespa. Additionally, TIM Participações trades its Level II American Depositary Receipts (ADRs) on the New York Stock Exchange. Accordingly, the Company is subject to the rules of the Brazilian Securities Commission (Comissão de Valores Mobiliários or “CVM”) and the U.S. Securities and Exchange Commission (“SEC”). In accordance with best market practices, TIM Participações adopts the practice of simultaneously releasing its financial information in Real in both markets, in Portuguese and English.

Direct subsidiaries

(a)

TIM Celular S.A. (“TIM Celular”)

The Company holds 100% of TIM Celular´s shares. This subsidiary provides Landline Telephone Services (“STFC”) - Domestic Long Distance and International Long Distance voice services, Personal Mobile Service (“SMP”) and Multimedia Communication Service (“SCM”) in all Brazilian states and in the Federal District.

(b)

Intelig Telecomunicações Ltda. (“Intelig”)

The Company also holds 100% of Intelig’s shares. This company provides STFC – Local voices services and SCM services in all Brazilian states and in the Federal District (DF).

 

TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES S.A. AND SUBSIDIARIES

NOTES TO QUARTERLY INFORMATION - Continuation
At September 30, 2015

(In thousands of Reais, unless otherwise indicated)

1.b Material transactions in the period - Sale of towers

In November 2014 and January 2015, the subsidiary TIM Celular signed with American Tower do Brasil Cessão de Infraestruturas Ltda. (“ATC”) two Sales Agreements for up to 6,481 telecommunication towers of its own property for around R$3 billion and a Master Lease Agreement (“MLA”) for part of the space on these towers for the term of 20 years. The sales transaction provides the transfer of the towers sold on tranches to the purchaser, considering the fulfillment on some precedent conditions.

On April 29, 2015, the Company transferred 4,176 towers (1^st tranche), or 64% of the total covered by the agreement with ATC. The sales amount for the first part of the transaction was approximately R$1.9 billion and the book balance of the assets recorded was R$1 billion. Still on April 29, 2015, TIM entered into two infrastructure lease agreements (MLA) for part of the space existing on each tower sold. These lease agreements will be effective for 20 years from the date of transfer of each tower and provide for monthly lease amounts depending on the type of tower (greenfield or rooftop).

On September 30, 2015, the Company transferred 1,125 towers (2^nd tranche), or approximately 17% of total towers to be transferred to ATC. The sales amount for the second part of the transaction was approximately R$517 million and the book balance of the assets recorded was R$0.2 billion. On the same date, TIM Celular amended the two infrastructure lease agreements to include a portion of the existing area on the new towers transferred.

The contract still provides the transfer of the remaining towers on a subsequent tranche, considering that allprovided conditions by the parts are fulfilled. For further details about the financial impacts on these quarterly information, see note 19.

The sales and lease agreements are part of a larger agreement where there are transfers of towers to ATC and a sale and leaseback transaction of part of the space on these towers transferred. This transaction will bring benefits to the Company’s operational and financial capabilities in favor of its investments in expansion and quality.

2

Licenses for the use of radio frequencies

In order to provide SMP services, the subsidiary TIM Celular obtained radio frequency authorizations for a fixed period and renewable for a further fifteen (15) years. The extension of the right of use includes the payment of an amount equal to two percent (2%) of the net revenues recorded in the regions covered by the Authorization that ends each biannual period. As at September 30, 2015, TIM Celular had accounts past due related to the renewal of Authorizations in the amount of R$120,273 (R$124,394 as at December 31, 2014).

As at March 31, 2014, Anatel granted to the subsidiary TIM Celular the right to use sub-bands of radio frequency from 912.5 MHz to 915 MHz and from 957.5 MHz to 960 MHz for 18 (eighteen) months, on a secondary basis, restricted to the Provision Area corresponding to AR11 (Greater São Paulo). On September 30, 2015, Anatel extended the radio frequency use rights for an equal period (Act No. 5.858/2015-SOR, published in the Federal Official Gazette (DOU) of October 1, 2015), for the amount of R$2,750.

At December 5, 2014, the subsidiary TIM Celular signed the Instrument of Authorization regarding the 700 MHz band (extract published in D.O.U. on December 8, 2014). The subsidiary paid the amount equivalent to R$1,678 million, recording the remaining balance of R$61 million as a liability, as provided for in the call notice. With no bids for some lots in the Call Notice for the 700 MHZ band, TIM Celular, along with other bidders, will have to bear a proportion of the costs regarding these lots, as a result of redistribution and digitalization of TV and RTV channels and the solutions for interference problems in the radio communication systems, being entitled to a discount on the final amount to be paid.

However, the methodology used by Anatel to calculate this amount was different from that included in the Call Notice and so TIM Celular filed an administrative appeal, which was heard and denied in December 2014 (as were the appeals of the other Winning Bidders). On March 31, 2015, TIM Celular filed a lawsuit questioning a surplus charge of R$61 million (R$72 million as of September 30, 2015), which is still pending trial. See note 18.

As mentioned above, the Company assumed an additional commitment to cleaning the 700 MHz radio frequency band, performing the redistribution and digitalization of TV and RTV channels, and reducing negative interferences, upon the constitution of the Redistribution and Digitalization Management Entity for TV and RTV Channels (“EAD”), with the total commitment assumed by TIM Celular amounting to R$1,199 million (see note 18.e), R$370,379 of which was paid as at April 9, 2015, to this entity.

On March 4, 2015, under Decision No. 66/2015-CD, Anatel: (i) accepted the request for withdrawal of the application to extend the period of radio frequency use for lot 208 (AR 92) of Authorization Instrument No. 523/2012 (P-Band); (ii) granted the application to extend the authorization for radio frequency use for lot 222 (AR 31) of Authorization Instrument No. 523/2012 (P-Band); and (iii) granted the application for extension of the period of authorization for radio frequency use in Bands D and E .. On July 22, 2015, Authorization Act No. 4710/2015-CD extended the authorization for use of the above radio frequencies (published in DOU on July 28, 2015).

At September 30, 2015, the Company and its subsidiaries have the following commitments with ANATEL:

The Authorizations held by TIM Celular as at September 30, 2015, as well as their maturity dates, are detailed below:

*Agreements already renewed for 15 years; therefore, TIM is not entitled to a new renewal period.

** Only complementary areas in the relevant States.

3

Basis for preparation and disclosure of the quarterly information

The significant accounting policies applied to the preparation of the quarterly information are described below. These policies were consistently applied in the periods presented, unless otherwise indicated.

a.

General preparation and disclosure criteria

The quarterly information was prepared taking into account the historical cost as the base value and financial assets and liabilities (including derivative instruments) evaluated at fair value.

The consolidated quarterly information was prepared according to CPC 21 (approved by CVM Resolution 673/11) / IAS 34 – “Interim Financial Statements”. Without disagreement as to the application of CPC 21 / IAS 34, the Company adopts accounting practices based on the Brazilian Corporate Law and Specific Rules issued by CVM and Anatel.

The individual quarterly information of the holding company was prepared according to CPC 21, submitted along with consolidated quarterly information, investments in subsidiaries are accounted by the equity method. Identical adjustments are made in individual quarterly information and consolidated quarterly information to reach the same result and shareholders’ equity attributable to the shareholders of parent company TIM Brasil. As the Brazilian accounting practices applicable to the individual financial statements, since 2014, do not differ from the IFRS applicable to the separate financial statements, as now IFRS permits the application of the equity method in subsidiaries on separate financial statements, they are also in accordance with IFRSs, issued by IASB .. These individual financial statements are presented along with the consolidated quarterly information.

Assets and liabilities are reported according to their degree of liquidity and collectability. They are reported as current when they are likely to be realized or settled over the next twelve months. Otherwise, they are recorded as non-current. The only exception to this procedure involves deferred income tax and social contribution balances, both assets and liabilities, which must always be recorded as non-current, in accordance with the provisions of pronouncement IAS 1 (CPC 26 - approved by CVM Resolution 676/11).

The preparation of the quarterly information requires the use of certain critical accounting estimates and the exercise of judgment by the Company’s Management in the process of applying the Group’s accounting policies. Those areas requiring a greater level of judgment and with greater complexity, as well as the areas in which assumptions and estimates are material for the consolidated and individual quarterly information, are described in Note 5.

The presentation of Statement of Value Added (Demonstração do Valor Adicionado – “DVA”), individual and consolidated, is required by the Brazilian Corporate Law and accounting practices adopted in Brazil applicable to the publicly held companies. The IFRS do not require the presentation of this statement. As a consequence, regarding IFRS, this statement is presented as supplementary information, without affecting the understanding of quarterly information as a whole.

Individual and consolidated quarterly information should be read together with financial statements for the year ended December 31, 2014.

b.

Approval of the quarterly information

This quarterly information was approved by the Board of Directors of the Company as at November 3, 2015.

 

TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES S.A. AND SUBSIDIARIES

NOTES TO QUARTERLY INFORMATION - Continuation
At September 30, 2015

(In thousands of Reais, unless otherwise indicated)

4

Summary of significant accounting practices

The following accounting practices are adopted in preparing the parent company’s quarterly information and the consolidated quarterly information.

a.

Functional currency and presentation currency

The presentation currency for the quarterly information is the Brazilian Real (R$), which is also the functional currency for all the companies consolidated in this quarterly information.

Transactions in foreign currency are recognized at the exchange rate on the date of the transaction. Except for assets and liabilities recorded at fair value, monetary items denominated in foreign currency are converted into Real at the exchange rate on the date of the balance sheet as informed by the Central Bank of Brazil. Exchange gains and losses linked to these items are recorded in the statement of income.

b.

Consolidation procedures

Subsidiaries are entities (including structured entities) in which the Group holds control. The Group controls an entity when it is liable or has rights to variable returns from its involvement with the subsidiaries and has the ability to affect those returns through its power over the investee. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Consolidation is discontinued from the date the Group loses control over that entity.

The following companies are consolidated in the quarterly information:

The purchase accounting method is used to record the acquisition of subsidiaries by the Group. The acquisition cost is measured as the fair value of assets offered, equity instruments (e.g. shares) issued and liabilities incurred or assumed by the acquirer at the date when control is exchanged. Identifiable assets acquired, contingencies and liabilities assumed in a business combination are initially measured at their fair value at the acquisition date, irrespective of the proportion of any minority interest. The excess of the acquisition cost over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of net assets of the subsidiary acquired, the difference is recognized directly in the statement of income as revenue, after a review of the concepts and calculations applied.

 

Transactions between Group companies, as well as balances and unrealized gains and losses in these transactions, are eliminated. Accounting policies of subsidiaries have been adjusted to ensure consistency with the accounting policies adopted by TIM Participações. The date of the financial statements used in the consolidation is the same for all Group companies.

c.

Segment information

Operating segments are the entity’s components that develop business activities from which revenues can be obtained and expenses incurred. Their operating results are regularly reviewed by the entity’s chief operating decision maker, in order to make decisions on the allocation of resources and to assess the performance of each segment. For a segment to exist, it must have separate financial information available.

The Company’s chief operating decision maker, responsible for allocating resources and for periodic performance evaluation, is the Executive Board. The Executive Board and the Board of Directors are jointly responsible for making strategic decisions and for managing the Group.

The Group’s strategy is to maximize the consolidated results of TIM Participações. This strategy includes optimizing the operations of each group company, in addition to taking advantage of the synergies generated among them. Notwithstanding the various business activities, the decision makers see the Group as a single business segment and do not take into account specific strategies intended for a particular service line. All decisions on strategic, financial, purchasing, investment and allocation of resources planning are made on a consolidated basis .. The aim is to maximize the consolidated result obtained by exploring the SMP, STFC and SCM licenses.

d.

Cash and cash equivalents

Cash and cash equivalents include cash, bank deposits and other short-term highly liquid investments, with an insignificant risk of change in value. Withdrawals can be done at any time without risk of losing the income earned and these amounts are used to pay short term obligations of the Company.

e.

Financial assets and liabilities

e ..1

Financial assets

e ..1.1

Classification

The Group classifies its financial assets in the following categories: (1) valued at fair value through profit or loss and (2) borrowings and receivables, on all dates shown in this quarterly information. Management determines the classification of its financial assets at initial recognition.

(a)

Financial assets valued at fair value through profit or loss

A financial asset is classified in this category if it was acquired primarily for sale in the short term. For this reason these assets are usually classified under current assets. However, when these assets are given in guarantee or other restrictions exist on their short-term use, they may be classified as non-current assets.

The derivatives held by the Company have also been classified in this category, given their nature. The Company does not have speculative derivatives.

(b)

Borrowings and receivables

These are non-derivative financial assets with fixed or determinable payments and are not quoted in an active market. In the quarterly information they are classified as trade “trade accounts receivable”, “cash and cash equivalents”, “leasing” and “other assets”.

e.1.2

Recognition and measurement

The regular purchases and sales of financial assets are recognized on the trade date - the date on which the Company undertakes to buy or sell the asset. Investments are initially recognized at fair value. The transaction costs incurred in acquiring investments valued at fair value through profit or loss are charged to the income statement as expenses on the transaction date. After initial recognition, changes in the fair value are booked in income for the year as finance income and expenses. Such assets are written off when the rights to receive cash flows from the asset have expired or when the Company has transferred substantially all risks and benefits of ownership them. Loans and receivables are recorded at amortized cost, using the effective interest rate method.

The fair values of investments with publicly quoted prices are based on their purchase price at each disclosure date. If the market for a financial asset is not active, the Company establishes fair value by using valuation techniques. These techniques include the analysis of recent transactions with third parties, reference to other instruments that are substantially similar, analysis of discounted cash flow models and option pricing models which make maximum use of information generated by the market and minimum use of possible information generated by Management.

e.1.3

Offsetting financial instruments

Financial assets and liabilities are reported at their net amount when there is a legal right and an intention to offset them on a net basis, or to realize the asset and liquidate the liability simultaneously.

e.1.4

Impairment of financial assets

At the end of each reporting period the Company evaluates whether there is objective evidence of the impairment of financial assets. An asset or group of financial assets is impaired and losses are recognized only if there is objective evidence of impairment. Such evidence would be the result of one or more events occurring after the initial recognition of the assets, and that loss event (or events) would have an impact on the estimated future cash flows of the financial asset (or group of financial assets) which can be reliably estimated.

The criteria which the Company uses to determine whether there is objective evidence of impairment include verification as to real situations involving:

·

material financial difficulties of the issuer or borrower;

·

a breach of contract, such as default or late payment of interest or principal;

·

the Company, for economic or legal reasons relating to the financial difficulty of the borrower, provides a concession to the latter that a lender would not normally consider;

·

it is likely that the borrower will declare bankruptcy or other financial reorganization that generates losses for lenders;

·

the disappearance of an active market for that financial asset because of financial difficulties; or

·

observable data indicating that there has been a measurable reduction in the estimated future cash flows of a portfolio of financial assets, although the decrease cannot yet be identified through individual analysis financial assets in the portfolio. These data include:

(i)

adverse changes in the payment status of borrowers in the portfolio; and

(ii)

national or local economic conditions that correlate with defaults on assets in the portfolio.

The amount of the impairment loss is measured as the difference between the book value of the assets and the present value of the estimated future cash flows discounted by the original interest rate to the financial assets in force. Where impairment losses are identified, they are recognized directly in the profit or loss for the year. If, in a subsequent period, the value of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment being recognized, the reversal of the impairment loss is also recognized in the statement of income for the year.

e.2

Financial liabilities

The main financial liabilities recognized by the Company and its subsidiaries are: supplier accounts payable, unrealized losses on derivative transactions, borrowings and financing and leasing. They are classified into the categories below according to their nature:

Financial liabilities valued at fair value through profit or loss: At each balance sheet date, these liabilities are measured at fair value. Interest, monetary restatement, exchange rate variations and variations arising from measurement at fair value, if any, are recognized in profit or loss as incurred, as finance income or expenses. On the disclosure date of this quarterly information, this category is composed basically of derivative financial instruments.

Financial liabilities measured at amortized cost: are basically non-derivative financial liabilities that are not usually traded before maturity. At the initial recognition, such liabilities are recorded at their fair value. After initial recognition, they are measured using the effective interest rate method. Under this method, transaction costs impact the liability initial amount, affecting the determination of the effective interest rate .. This rate is the one that discounts exactly all the cash flows from the financial instrument. The allocation of finance costs, according to the effective interest rate method, is recognized in the income statement under finance expenses. On disclosure date of this quarterly information, this category includes mainly borrowings and financing and suppliers accounts payable.

f.

Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value as of the date of the derivative agreement, being subsequently adjusted to fair value.  The method used for recognizing any gain or loss depends on whether the derivative is assigned or not as a hedge instrument in cases where hedge accounting is adopted.  

The Company now adopts hedge accounting, and accordingly designates certain derivatives as hedge for specific risks associated with an asset or liability recognized, or a transaction that is very likely to occur (cash flow hedge).

The effective portion of variation in the fair value of derivatives designated and qualified as cash flow hedge is recognized in the “Equity Valuation Adjustment” account, in Shareholders’ Equity.  Any gains or losses related to the non-effective portion are immediately recorded in the statement of income.

g.

Trade accounts receivable

Trade accounts receivable from users of telecommunications services, from network use (interconnection) and from sales of handsets and accessories are recorded at the price charged at the time of the transaction. The balances of accounts receivable also include services provided and not billed until the balance sheet date. Accounts receivable from clients are initially recognized at fair value and are subsequently measured at amortized cost using the effective interest rate method less the allowance for doubtful accounts (“impairment”) ..

The allowance for doubtful accounts is disclosed as a reduction at accounts receivable and is recorded based on the profile of the subscriber portfolio, the overdue aging of accounts receivable, the economic situation, the risks involved in each case and the collection curve at an amount that covers any losses from the realization of such credits.

h.

Inventories

Inventories are stated at average acquisition cost. A provision is recognized to adjust the cost of handsets and accessories to net realizable value (selling price) when this amount is less than the average acquisition cost.

i.

Indirect and direct taxes and contributions recoverable

These are stated at historical cost and, if applicable, adjusted according to the legislation in force.

j.

Prepaid expenses

These are initially stated at actual amounts disbursed and are allocated to income according to the accrual method as they are incurred.

k.

Judicial deposits

These are stated at historical cost and adjusted according to the legislation in force.

l.

Investments

Equity interests in subsidiaries are valued using the equity method only in the individual quarterly information.

m.

Property, plant and equipment

Property, plant and equipment are stated at acquisition and/or construction cost, less accumulated depreciation and the provision for impairment (the latter, only if applicable). Depreciation is calculated on the straight-line method over terms that take into account the expected useful lives of the assets and their residual values (Note 17). The Company recognizes its assets by individual component.

The estimated costs of dismantling towers and equipment on rented properties are capitalized and depreciated over the useful life of these assets. The Company recognizes the present value of these costs in property, plant and equipment with a counter-entry to the liability “provision for future asset retirement”. Interest incurred on updating the provision is classified as finance expenses. The accounting for this obligation is made according to ICPC 12 (IFRIC 1), approved by CVM Deliberation.

Gains and losses from disposals are determined by comparing the amounts of these disposals with the carrying values at the time of the transaction and are recognized in “other operating expenses (revenues), net” in the statement of income.

On January 1^st, 2009, Intelig on its first adoption of IFRS / CPCs, used deemed cost to measure its property, plant and equipment assets, according to ICPC 10, approved by CVM Deliberation. After initial measurement, its property, plant and equipment is stated at acquisition and / or construction historical cost. Both (deemed cost and historical cost) are decreased by the accumulated depreciation and from the impairment losses (this one, if applicable).

As the Group does not build assets requiring long periods of time for their completion, the Company does not capitalize interest on borrowings and financing.

n.

Intangible assets

Intangible assets are measured at historical cost less accumulated amortization and impairment losses (if applicable), and comprise: (i) licenses and rights to use radio frequency bands and (ii) software in use and/or development. Intangibles also include (i) right to use the infrastructure of other companies, (ii) customer lists, and (iii) goodwill on business combinations.

Amortization charges are calculated on the straight-line method over the estimated useful life of the assets contracted and over the terms of the authorizations. The useful life estimates of intangible assets are reviewed regularly (note 18).

Any financial charges on funds generically raised (that is, without a specific destination) and used for obtaining qualified assets, which are assets that necessarily require a significant time to be ready for use, are capitalized as part of the cost of the asset when it is likely to bring future economic benefits for the entity and such costs can be accurately measured. These costs are amortized throughout the estimated useful life of assets.

Goodwill

Goodwill is the positive difference between the amount paid and/or payable for an entity acquired and its net assets fair value on acquisition date. These net assets are the difference between the net fair value of assets and liabilities of the acquired entity. If the purchaser identifies a negative difference between the amount paid and/or payable for the entity acquired and its net assets (“bargain purchase”), this amount should be recorded as a gain in the statement of income for the period on acquisition date.

The goodwill is not amortized but must be tested annually to identify probable impairment in its value. The carrying amount of the goodwill is its cost amount less these losses (if any).

For the purposes of impairment test, the goodwill is allocated to Cash Generating Units (“CGUs”). The allocation is made to the CGUs or groups of CGUs that benefit from the business combination from which the goodwill arose.

Gains and losses arising from the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Software

The costs associated with maintaining software are recognized as expenses as incurred. Identifiable and unique development costs that are directly attributable to the design and testing of software products, controlled by the Group, are recognized as intangible assets when the following criteria are met:

·

it is technically feasible to complete the software to make it available for use;

·

Management plans to complete the software and use it or sell it;

·

the software will generate probable future economic benefits that can be demonstrated;

·

technical, financial and other resources are available to conclude development and use or sell the software; and

·

the expenditure attributable to the software during its development can be measured reliably.

Directly attributable costs, which are capitalized as part of the software product, relates to costs with employees directly allocated to its development.

Other development expenditures that do not meet these criteria are recognized as expense as incurred.

o.

Impairment of non-financial assets

Goodwill is tested for impairment annually. For other assets, impairment analysis is made whenever events or changes in circumstances indicate that the carrying value of the asset may exceed its recoverable value. The latter is the higher between the fair value of an asset less costs to sell and the value in use. For purposes of impairment test, assets are grouped at the lowest levels for which there are separately identifiable cash flows (Cash Generating Units – “CGUs”). The discount of expected cash flows is made by taking into account the time value of money and the specific risks related to the asset being analyzed.

The impairment provisions (or part of them) on these assets, except goodwill, may be reversed in case the reasons (or part of them) that gave rise to the provisions no longer exist on the quarterly information reporting date.

p.

Provisions

Provisions are recognized in the balance sheet when the Company has a present obligation and it is probable that an outflow of funds that embody economic benefits will be required to settle it.

q.

Suppliers accounts payable

Suppliers accounts payable are obligations to pay for goods or services that were purchased in the normal course of business. They are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method. Given the short maturity term of these obligations, in practical terms, they are usually recognized at invoice value.

r.

Employee benefits

Profit sharing

The Company and its subsidiaries record a provision on a monthly basis for the estimated amount of employee profit sharing, with a counter-entry to income. The provision calculation takes into account the targets disclosed to its employees and approved by the Board of Directors. Such amounts are recorded as personnel expenses and allocated to the statement of income in accordance with the employee’s cost center.