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

Company Information

Capita

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

01/01/2017 to 06/30/2017

01/01/2016 to 06/30/2016

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

01/01/2017 to 06/30/2017

01/01/2016 to 06/30/2016

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

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

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	Initial date of record date at CVM:	09/10/1998
Country of origin:	Brazil	Country of securities registration:	Brazil
Issuer's page in Internet:	www.tim.com.br/ri
Type of participant:	Listed Company
Record category at CVM:	Category A	Current category registration date:	01/01/2010
Issuer's situation:	Operational	Initial date:	10/09/1998
Type of Control:	Private	Last change in control:
Last change in accounting period		Accounting period:	Day: 30  Month: 06
Activity:	Telecommunication
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)	06/30/2016
Paid up Capital
Common	2,421,032,479
Preferred	-
Total	2,421,032,479
Treasury Stock
Common	638,225
Preferred	-
Total	638,225

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Information – Approval of Dividends

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Balance Sheet - Assets (in thousands of Reais)

Account Code	Account Description	06/30/2017	12/31/2016
1	Total Assets	17,656,236	17,439,301
1.01	Current Assets	74,914	194,295
1.01.01	Cash and Cash Equivalents	32,778	8,593
1.01.03	Trade Accounts Receivable	329	329
1.01.03.02	Other Accounts Receivable	329	329
1.01.06	Taxes and Contributions Recoverable	22,425	22,351
1.01.06.01	Current Taxes and Contributions Recoverable	22,425	22,351
1.01.07	Prepaid Expenses	2,183	2,149
1.01.08	Other Current Assets	17,199	160,873
1.01.08.03	Other Assets	17,199	160,873
1.01.08.03.01	Dividends and interests on own capital receivable	0	134,606
1.01.08.03.03	Other Assets	17,199	26,267
1.02	Non-Current Assets	17,581,322	17,245,006
1.02.01	Long-Term Assets	105,925	96,264
1.02.01.07	Prepaid Expenses	5,456	6,407
1.02.01.09	Other Non-Current Assets	100,469	89,857
1.02.01.09.05	Judicial Deposits	100,469	89,857
1.02.02	Investments	17,317,841	16,991,186
1.02.02.01	Investments on Subsidiaries	17,317,841	16,991,186
1.02.02.01.02	Subsidiaries	17,317,841	16,991,186
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	06/30/2017	12/31/2016
2	Total Liabilities	17,656,236	17,439,301
2.01	Current Liabilities	79,527	220,048
2.01.01	Social and Labor Obligations	3,108	3,844
2.01.01.02	Labor Obligations	3,108	3,844
2.01.02	Suppliers - Trade Payable	6,706	2,086
2.01.02.01	Domestic Suppliers	6,399	1,652
2.01.02.02	Foreign suppliers	307	434
2.01.03	Taxes, rates and contributions	399	354
2.01.03.01	Federal Obligations	70	45
2.01.03.01.02	Other Fiscal Taxes	70	45
2.01.03.03	Municipal Obligations	329	309
2.01.03.03.01	ISS payable	329	309
2.01.05	Other Obligations	69,314	213,764
2.01.05.02	Others	69,314	213,764
2.01.05.02.01	Dividends payable	61,639	206,112
2.01.05.02.04	Other Current Liabilities	7,675	7,652
2.02	Non-Current Liabilities	31,780	31,740
2.02.02	Long-Term Liabilities	29,757	29,758
2.02.02.02	Others	29,757	29,758
2.02.02.02.03	Other Liabilities	29,757	29,758
2.02.04	Provisions	2,023	1,982
2.02.04.01	Tax, Labor and Civil Provisions	2,023	1,982
2.02.04.01.02	Civil and Labor Provisions	2,023	1,982
2.03	Shareholders' Equity	17,544,929	17,187,513
2.03.01	Paid up Capital	9,866,298	9,866,298
2.03.02	Capital Reserves	1,564,990	1,560,780
2.03.02.01	Offering's Goodwill	380,560	380,560
2.03.02.04	Stock Option	28,232	24,678
2.03.02.05	Treasury Stock	(2,713)	(3,369)
2.03.02.07	Reserve for Tax Benefits	1,158,911	1,158,911
2.03.04	Revenue Reserves	5,760,942	5,760,942
2.03.04.01	Legal Reserve	657,034	657,034
2.03.04.10	Reserve for expansion	5,103,908	5,103,908
2.03.05	Retained earnings	351,016	-
2.03.08	Other comprehensive income	1,683	(507)

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

Account Code	Account Description	Quarter - current year 04/01/2017 to 06/30/2017	Year-to-date - current year 01/01/2017 to 06/30/2017	Quarter - prior year 04/01/2016 to 06/30/2016	Year-to-date - current year 01/01/2016 to 06/30/2016
3.04	Operating Income (Expenses)	219,240	351,218	74,747	201,882
3.04.02	General and Administrative	(10,145)	(16,431)	(4,376)	(10,277)
3.04.04	Other Operating Revenues	-	-	4	191
3.04.05	Other Operating Expenses	(61)	(186)	-	(61)
3.04.06	Equity Pick Up	229,446	367,835	79,119	212,029
3.05	Operating Income	219,240	351,218	74,747	201,882
3.06	Financial	(315)	(202)	(298)	475
3.06.01	Financial Revenues	486	1,245	988	1,990
3.06.02	Financial Expenses	(801)	(1,447)	(1,286)	(1,515)
3.07	Income Before Taxes	218,925	351,016	74,449	202,357
3.08	Income Tax and Social Contribution	-	-	-	-
3.09	Profit for the Period on continued operations	218,925	351,016	74,449	202,357
3.11	Profit for the Period	218,925	351,016	74,449	202,357
3.99	Earnings per share (R$/share)	-	-	-	-
3.99.01	Earnings per share basic	-	-	-	-
3.99.01.01	ON	0.0905	0.1450	0.0308	0.0836
3.99.02	Earnings per share diluted	-	-	-	-
3.99.02.01	ON	0.0904	0.1450	0.0308	0.0837

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

Account Code	Account Description	Quarter - current year 04/01/2017 to 06/30/2017	Year-to-date - current year 01/01/2017 to 06/30/2017	Quarter - prior year 04/01/2016 to 06/30/2016	Year-to-date - current year 01/01/2016 to 06/30/2016
4.01	Profit for the period	218,925	351,016	74,449	202,357
4.02	Other comprehensive income	-	2,190	10,063	(6,243)
4.02.01	Cash flow hedges	-	2,190	10,063	(6,243)
4.03	Comprehensive Income for the period	218,925	353,206	84,512	196,114

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 01/01/2017 to 06/30/2017	Year-to-date - current year 01/01/2016 to 06/30/2016
6.01	Net cash and cash equivalents Operating activities	167,676	471,293
6.01.01	Cash and cash equivalents generated by operating activities	(15,610)	(12,731)
6.01.01.01	Earning before income tax (EBIT)	351,016	202,357
6.01.01.02	Equity Pick Up	(367,835)	(212,029)
6.01.01.04	Provision for judicial and administrative proceedings	115	(1,437)
6.01.01.05	Monetary fluctuation on judicial deposits and provision for legal and administrative proceedings	(503)	(555)
6.01.01.07	Stock options	1,597	(1,067)
6.01.02	Variations in assets and liabilities	183,286	484,024
6.01.02.01	Taxes and contributions recoverable	(73)	(27)
6.01.02.02	Prepaid expenses	179,606	489,013
6.01.02.03	Judicial Deposits	(10,090)	(7,021)
6.01.02.04	Other current and non-current assets	9,067	10,460
6.01.02.05	Labor obligations	(735)	(381)
6.01.02.06	Suppliers	4,621	1,863
6.01.02.07	Taxes and contributions	45	(73)
6.01.02.08	Payment of legal and administrative proceedings	(92)	(150)
6.01.02.09	Other current and non-current liabilites	916	(9,678)
6.03	Net cash and cash equivalents Financing activities	(143,491)	(460,262)
6.03.01	Dividends paid	(144,474)	(460,262)
6.03.02	Disposal shares in treasury	983	-
6.05	Increase / (Decrease) on cash and cash equivalents	24,185	11,031
6.05.01	Beginning cash and cash equivalents balance	8,593	24,763
6.05.02	Ending cash and cash equivalents balance	32,778	35,794

Account Code	Account Description	Capital	Capital Reserves	Revenues Reserves	Retained Earnings	Other Comprehensive Income	Total Shareholders´ Equity
5.01	Beginning balance	9,866,298	1,560,780	5,760,942	-	(507)	17,187,513
5.04	Shareholder´s Transactions	-	4,210	-	-	-	4,210
5.04.03	Stock option	-	2,833	-	-	-	2,833
5.04.05	Treasury stock sold	-	1,377	-	-	-	1,377
5.05	Total Comprehensive Income	-	-	-	351,016	2,190	353,206
5.05.01	Profit  for the Period	-	-	-	351,016	-	351,016
5.05.02	Other comprehensive income	-	-	-	-	2,190	2,190
5.05.02.06	Cash flow hedges	-	-	-	-	2,190	2,190
5.07	Ending balance	9,866,298	1,564,990	5,760,942	351,016	1,683	17,544,929

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Parent Company Statements of Changes in Shareholders´ Equity from 01/01/2016 to 06/30/2016 (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	9,866,298	1,438,728	5,270,409	-	1,887	16,577,322
5.04	Shareholder´s Transactions	-	1,055	-	-	-	1,055
5.04.03	Stock option	-	1,055	-	-	-	1,055
5.05	Total Comprehensive Income	-	-	-	202,357	(6,243)	196,114
5.05.01	Profit for the period	-	-	-	202,357	-	202,357
5.05.02	Other comprehensive income	-	-	-	-	(6,243)	(6,243)
5.05.02.06	Cash flow hedge	-	-	-	-	(6,243)	(6,243)
5.07	Ending balance	9,866,298	1,439,783	5,270,409	202,357	(4,356)	16,774,491

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 01/01/2017 to 06/30/2017	Year-to-date - current year 01/01/2016 to 06/30/2016
7.02	Raw Material Acquired from Third Parties	(7,217)	(4,817)
7.02.02	Material, Energy, Services and Others	(7,217)	(4,817)
7.03	Gross Added Value	(7,217)	(4,817)
7.05	Net Added Value Produced	(7,217)	(4,817)
7.06	Added Value Received from Transfers	369,080	214,019
7.06.01	Equity Pick Up	367,835	212,029
7.06.02	Financial Revenues	1,245	1,990
7.07	Total Added Value to Share	361,863	209,202
7.08	Sharing Added Value	361,863	209,202
7.08.01	Labor	8,627	4,040
7.08.01.01	Cost of Working	7,948	3,909
7.08.01.02	Benefits	536	234
7.08.01.03	F.G.T.S	113	97
7.08.01.04	Others	30	(200)
7.08.02	Taxes, Fees and Contributions	789	1,192
7.08.02.01	Federal	789	1,176
7.08.02.02	State	-	-
7.08.02.03	Municipal	-	16
7.08.03	Earnings - Borrowed Capital	1,431	1,613
7.08.03.01	Interest	1,421	1,495
7.08.03.02	Rentals	10	118
7.08.04	Earnings - Owned Capital	351,016	202,357
7.08.04.03	Retained Earnings	351,016	202,357

Account Code	Account Description	06/30/2017	12/31/2016
1	Total assets	32,089,027	34,655,680
1.01	Current Assets	7,860,817	10,107,399
1.01.01	Cash and Cash Equivalents	3,422,500	5,128,186
1.01.02	Financial assets	5,077	479,953
1.01.03	Accounts Receivable	2,655,144	2,919,177
1.01.03.01	Clients	2,655,144	2,919,177
1.01.04	Inventories	162,069	143,934
1.01.06	Taxes and Contributions Recoverable	713,279	968,660
1.01.06.01	Current Taxes and Contributions Recoverable	713,279	968,660
1.01.06.01.01	Indirect Taxes and Contributions Recoverable	528,030	633,854
1.01.06.01.02	Direct Taxes and Contributions Recoverable	185,249	334,806
1.01.07	Prepaid Expenses	564,187	130,392
1.01.08	Other Current Assets	338,561	337,097
1.01.08.03	Others	338,561	337,097
1.01.08.03.01	Operations with derivatives	62,451	82,454
1.01.08.03.02	Other assets	188,524	168,718
1.01.08.03.03	Financial leasing	2,732	2,818
1.01.08.03.04	Regulatory credit to be offset	84,854	83,107
1.02	Non-Current Assets	24,228,210	24,548,281
1.02.01	Long-Term Assets	2,846,978	2,831,176
1.02.01.03	Accounts Receivable	24,967	24,092
1.02.01.03.01	Clients	24,967	24,092
1.02.01.06	Deferred Taxes	30,478	41,690
1.02.01.06.01	Deferred Income Tax and Social Contribution	30,478	41,690
1.02.01.07	Prepaid Expenses	46,887	54,374
1.02.01.09	Other Non-Current Assets	2,744,646	2,711,020
1.02.01.09.03	Operations with derivatives	46,735	134,468
1.02.01.09.04	Other Non-Current Assets	12,713	12,442
1.02.01.09.05	Judicial Deposits	1,338,775	1,294,125
1.02.01.09.06	Indirect Taxes and Contributions Recoverable	937,879	867,143
1.02.01.09.07	Direct Taxes and Contributions Recoverable	204,781	200,898
1.02.01.09.08	Financial leasing	203,763	201,944
1.02.03	Property, Plant and Equipment	10,354,364	11,084,530
1.02.03.01	Property, Plant and Equipment in Operation	9,197,426	9,264,924
1.02.03.03	Construction work in progress	1,156,938	1,819,606
1.02.04	Intangible	11,026,868	10,632,575
1.02.04.01	Intangibles	9,499,649	9,105,356
1.02.04.01.02	Software rights	3,782,643	3,731,736
1.02.04.01.03	Authorizations	1,148,699	1,163,192
1.02.04.01.04	Other Intangibles	4,568,307	4,210,428
1.02.04.02	Goodwill	1,527,219	1,527,219

Account Code	Account Description	06/30/2017	12/31/2016
2	Total liabilities	32,089,027	34,655,680
2.01	Current Liabilities	5,897,642	7,281,555
2.01.01	Social and Labor Obligations	219,604	212,279
2.01.01.02	Labor Obligations	219,604	212,279
2.01.02	Suppliers - Trade Payable	2,652,744	3,461,081
2.01.02.01	Domestic Suppliers	2,569,862	3,378,980
2.01.02.02	Foreign suppliers	82,882	82,101
2.01.03	Taxes, rates and contributions	499,912	816,856
2.01.03.01	Federal Obligations	181,138	389,872
2.01.03.01.01	Income Tax and Social Contribution Payable	58,986	279,406
2.01.03.01.02	Other Taxes	122,152	110,466
2.01.03.02	State Obligations	275,118	381,659
2.01.03.02.01	ICMS	275,118	381,659
2.01.03.03	Municipal Obligations	43,656	45,325
2.01.03.03.01	ISS	43,656	45,325
2.01.04	Loans and Financing	1,562,607	1,145,225
2.01.04.01	Loans and Financing	1,562,607	1,145,225
2.01.04.01.01	Domestic Currency	1,331,162	880,947
2.01.04.01.02	Foreign Currency	231,445	264,278
2.01.05	Other Obligations	962,775	1,646,114
2.01.05.02	Others	962,775	1,646,114
2.01.05.02.01	Dividends payable	61,639	206,112
2.01.05.02.04	Operations with derivatives	9,427	36,163
2.01.05.02.05	Authorizations Payable	204,212	486,494
2.01.05.02.06	Deferred revenues	561,303	812,340
2.01.05.02.07	Financial leasing	118,324	96,604
2.01.05.02.08	Other liabilities	7,870	8,401
2.02	Non-Current Liabilities	8,646,456	10,186,612
2.02.01	Loans and Financing	4,613,879	5,574,557
2.02.01.01	Loans and Financing	4,613,879	5,574,557
2.02.01.01.01	Domestic Currency	4,151,569	4,215,708
2.02.01.01.02	Foreign Currency	462,310	1,358,849
2.02.02	Other Obligations	3,345,254	4,001,903
2.02.02.02	Others	3,345,254	4,001,903
2.02.02.02.04	Indirect Taxes and Contributions Payable	2,486	112
2.02.02.02.05	Direct Taxes and Contributions Payable	265,447	258,840
2.02.02.02.06	Authorizations Payable	272,309	900,138
2.02.02.02.07	Deferred revenues	1,028,482	1,061,304
2.02.02.02.08	Financial leasing	1,724,353	1,705,634
2.02.02.02.09	Operations with derivatives	30,555	30,565
2.02.02.02.10	Other liabilities	21,622	45,310
Account Code	Account Description	06/30/2017	12/31/2016
2.02.03	Deferred Taxes	127,184	108,358
2.02.03.01	Deferred Income Tax and Social Contribution	127,184	108,358
2.02.04	Provisions	560,139	501,794
2.02.04.01	Tax, Labor and Civil Provisions	542,115	480,068
2.02.04.01.01	Tax Provisions	229,836	216,423
2.02.04.01.02	Labor Provisions	138,665	90,789
2.02.04.01.03	Benefits Provisions	1,586	1,586
2.02.04.01.04	Civil Provisions	141,844	141,988
2.02.04.01.05	Regulatory Provisions	30,184	29,282
2.02.04.02	Other Provisions	18,024	21,726
2.02.04.02.03	Asset Retirement Obligation	18,024	21,726
2.03	Shareholders' Equity	17,544,929	17,187,513
2.03.01	Paid up Capital	9,866,298	9,866,298
2.03.02	Capital Reserves	1,564,990	1,560,780
2.03.02.01	Offering's Goodwill	380,560	380,560
2.03.02.04	Stock Option	28,232	24,678
2.03.02.05	Treasury stock	(2,713)	(3,369)
2.03.02.07	Tax benefit reserve	1,158,911	1,158,911
2.03.04	Revenue Reserves	5,760,942	5,760,942
2.03.04.01	Legal Reserve	657,034	657,034
2.03.04.10	Reserve for expansion	5,103,908	5,103,908
2.03.05	Retained earnings	351,016	-
2.03.08	Other Comprehensive Income	1,683	(507)

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

Accont Code	Account description	Year-to-date - current year 01/01/2017 to 06/30/2017	Year-to-date - current year 01/01/2016 to 06/30/2016
6.01	Net cash and cash equivalents Operating activities	388,660	403,378
6.01.01	Cash and cash equivalents generated by operating activities	3,229,793	2,822,303
6.01.01.01	Earnings before income tax (EBIT)	440,646	267,653
6.01.01.02	Depreciation and amortization	1,980,283	1,860,823
6.01.01.03	(Gain) / loss on sale of fixed assets disposed (towers)	1,802	(37,029)
6.01.01.04	Monetary fluctuation on asset retirement	314	589
6.01.01.05	Provision for legal and administrative proceedings	204,875	147,272
6.01.01.06	Monetary fluctuation on judicial deposits and provision for legal and administrative proceedings	56,291	9,788
6.01.01.07	Interest and monetary and exchange variation on loans and other financial adjustments	268,031	318,816
6.01.01.09	Residual value of fixed and intangible assets	7,846	6,576
6.01.01.10	Allowance for doubtful accounts	147,827	140,517
6.01.01.11	Stock options plan	3,227	1,055
6.01.01.12	Interests on leasing asset	(12,656)	(12,594)
6.01.01.13	Interests on leasing liability	131,307	118,837
6.01.02	Variations in assets and liabilities	(2,841,133)	(2,418,925)
6.01.02.01	Trade Accounts receivable	136,163	(18,810)
6.01.02.02	Taxes and contributions recoverable	189,643	113,574
6.01.02.03	Inventories	(18,136)	(31,083)
6.01.02.04	Prepaid expenses	(426,308)	(441,043)
6.01.02.05	Judicial Deposits	(37,071)	(79,934)
6.01.02.06	Other assets	(15,902)	(86,406)
6.01.02.07	Labor obligations	7,325	10,926
6.01.02.08	Suppliers	(808,824)	(1,256,255)
6.01.02.09	Taxes, fees and contributions payable	(382,938)	(162,635)
6.01.02.10	Payment of legal and administrative proceedings	(206,698)	(196,046)
6.01.02.11	Authorizations payable	(919,483)	57,117
6.01.02.12	Deferred revenues	(297,230)	(247,595)
6.01.02.13	Other liabilities	(61,674)	(80,735)
6.02	Net cash and cash equivalents Investing activities	(989,576)	(1,467,522)
6.02.01	Securities	474,876	108,096
6.02.02	Additions to property plant and equipment and intangibles	(1,478,302)	(1,685,242)
6.02.04	Net cash received on sales of assets	13,850	109,624
6.03	Net cash and cash equivalents Financing activities	(1,104,770)	(1,717,847)
6.03.01	New loans	646,854	500,000
6.03.02	Loans amortization	(1,505,817)	(2,035,790)
6.03.03	Dividends paid	(144,474)	(460,262)
6.03.04	Operations with derivatives	1,565	361,224
6.03.05	Payments on financial lease	(114,803)	(93,253)
Accont Code	Account description	Year-to-date - current year 01/01/2017 to 06/30/2017	Year-to-date - current year 01/01/2016 to 06/30/2016
6.03.06	Receipts on financial lease	10,922	10,234
6.03.07	Disposal shares in treasury	983	-
6.05	Increase / (Decrease) on cash and cash equivalents	(1,705,686)	(2,781,991)
6.05.01	Beginning cash and cash equivalents balance	5,128,186	6,100,403
6.05.02	Ending cash and cash equivalents balance	3,422,500	3,318,412

Account Code	Account Description	Capital	Capital Reserves	Revenues Reserves	Retained Earnings	Other Comprehensive Income	Total Shareholders´ Equity
5.01	Beginning balance	9,866,298	1,560,780	5,760,942	-	(507)	17,187,513
5.04	Shareholder´s Transactions	-	4,210	-	-	-	4,210
5.04.03	Options granted	-	2,833	-	-	-	2,833
5.04.05	Treasury stock sold	-	1,377	-	-	-	1,377
5.04.06	Dividends	-	-	-	-	-	-
5.05	Comprehensive income statement	-	-	-	351,016	2,190	353,206
5.05.01	Net income for the period	-	-	-	351,016	-	351,016
5.05.02	Other comprehensive income	-	-	-	-	2,190	2,190
5.05.02.06	Cash flow hedges	-	-	-	-	2,190	2,190
5.07	Ending balance	9,866,298	1,564,990	5,760,942	351,016	1,683	17,544,929

Free Translation into English of Quarterly Information (ITR)Originally Issued in Portuguese Consolidated Statements of Changes in Shareholders´ Equity from 01/01/2016 to 06/30/2016 (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	9,866,298	1,438,728	5,626,131	-	1,887	16,933,044
5.04	Shareholder´s Transactions	-	1,055	-	-	-	1,055
5.04.03	Options granted	-	1,055	-	-	-	1,055
5.05	Comprehensive income statement	-	-	-	202,357	(6,243)	196,114
5.05.01	Net income for the period	-	-	-	202,357	-	202,357
5.05.02	Other comprehensive income	-	-	-	-	(6,243)	(6,243)
5.05.02.06	Cash flow hedge	-	-	-	-	(6,243)	(6,243)
5.07	Ending balance	9,866,298	1,439,783	5,270,409	202,357	(4,356)	16,774,491

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

Account code	Account description	Year-to-date - current year 01/01/2017 to 06/30/2017	Year-to-date - current year 01/01/2016 to 06/30/2016
7.01	Revenues	10,273,730	10,433,232
7.01.01	Net Operating Revenues from Goods Sold and/or Services Rendered	10,421,557	10,573,749
7.01.04	Losses for doubtful accounts	(147,827)	(140,517)
7.02	Raw Material Acquired from Third Parties	(3,688,362)	(3,686,855)
7.02.01	Cost of Goods Sold and/or Services Rendered	(2,072,117)	(2,188,237)
7.02.02	Material, Energy, Services and Others	(1,616,245)	(1,498,618)
7.03	Gross Added Value	6,585,368	6,746,377
7.04	Retentions	(1,980,283)	(1,860,823)
7.04.01	Depreciation and Amortization	(1,980,283)	(1,860,823)
7.05	Net Added Value Produced	4,605,085	4,885,554
7.06	Added Value Received from Transfers	656,501	2,015,309
7.06.02	Financial Revenues	656,501	2,015,309
7.07	Total Added Value to Share	5,261,586	6,900,863
7.08	Sharing Added Value	5,261,586	6,900,863
7.08.01	Labor	373,987	431,937
7.08.01.01	Cost of Working	237,025	269,238
7.08.01.02	Benefits	77,236	100,889
7.08.01.03	F.G.T.S.	25,686	27,353
7.08.01.04	Others	34,040	34,457
7.08.02	Taxes, Fees and Contributions	3,255,096	3,667,765
7.08.02.01	Federal	1,234,563	1,250,339
7.08.02.02	State	2,010,619	2,409,152
7.08.02.03	Municipal	9,914	8,274
7.08.03	Earnings - Borrowed Capital	1,281,433	2,598,804
7.08.03.01	Interest	886,198	2,247,075
7.08.03.02	Rentals	395,235	351,729
7.08.04	Earnings - Owned Capital	351,016	202,357
7.08.04.03	Retained Earnings	351,016	202,357
7.08.05	Others	54	-
7.08.05.01	Social investment	54	-

EARNINGS RELEASE

2017 SECOND QUARTER RESULTS

HIGHLIGHTS

Customer base transformation

·

+15.1% of postpaid users (vs. Jun/16): 26% of postpaid penetration over user base;

·

Approximately 40% of prepaid gross additions are in recurring offers;

·

ARPU up 12.6% YoY, sixth consecutive quarter of growth.

Strengthening the leadership in 4G coverage

·

4G coverage expanded to 1,850 cities: reaching ~80% of urban population;

·

Capacity and indoor coverage expansion with the 700Mhz usage: 10 capitals already have this frequency.

Data Revenues accelerated and now represents 60% of Mobile Service Revenues (MSR)

·

4G users grew twice against Jun/16 and totaled 22.4 million subs reaching 37% of total base;

·

VAS ARPU reached R$ 11.6, accelerating growth to +51.5% YoY.

Revenues and EBITDA accelerated presenting a solid performance

·

Mobile Service Net Revenues sped up the growth to +5.0% YoY;

·

Costs and expenses remained under control, down 2.5% YoY;

·

Normalized EBITDA² presented a solid performance in the quarter (+15.5%YoY), after service revenues solid performance and opex under control;

·

For the 15^th consecutive quarter normalized³ EBITDA Margin expanded, reaching 35.3% up 375 bps versus 2Q16;

·

Net Income reached R$219 million (vs. R$74 million 2Q16).

 

FINANCIAL PERFORMANCE

OPERATING REVENUES

 

Net Revenues totaled R$ 3,942 million in the 2Q17 with 3.2% growth versus 2Q16, same trend of 6M17 (+2.9% YoY). This result was mainly driven by Mobile Service Net Revenues that rose 5.0% YoY, impacted positively by “business generated” (Outgoing + VAS) that grew 7.5% YoY. Innovative Revenues rose 46.1% YoY more than offsetting the fast reduction of voice services, slow macroeconomic recovery and negative impact of MTR.

Net Revenues Breakdown and Other Highlights:

 

 Service Revenues accelerated the trajectory of the last quarter and grew 5.0% YoY in the 2Q17 (versus +3.5% YoY in 1Q17), this improvement was also observed in Mobile Service Revenues (MSR) that rose 5.0% YoY in 2Q17 against +3.7% YoY in 1Q17.

Usage and Monthly fee revenues fell 25.2% YoY, following the same trend of the last quarters. This line is impacted by the continuous migration of voice to data and should keep this trajectory as TIM introduce more content services into bundle offers (voice+data). Minutes of Use totalized 107 minutes (MOU) in 2Q17 down by 9.7% YoY, this dynamic was already expected in face of the change in users’ consumption profile who are looking for much more data services, as described below.

Value Added Services (VAS) performance continued its growth trajectory in this quarter (+40.9% YoY) and now represent 59.9% of MSR. Innovative Revenues (connectivity services + content & other VAS) rose 46.1% YoY.  VAS Revenues should increase even more its relevance in the next quarters as bundle offers (voice+data) speed up their penetration over user base and content becomes more embedded in these offers.

BOU (bytes of use) grew 62.5% YoY following data allowances expansion and TIM efforts to switch customers to 4G and increase the smartphone penetration in order to drive Innovative Revenues growth.

 

Long Distance revenues were down 27.1% YoY in 2Q17, mainly due to the migration of voice services to data, same dynamic of monthly fee revenues.

 

In 2Q17, Interconnection revenues fell 27.7% YoY. The growth of incoming traffic was not enough to offset the impacts of Mobile Termination Rate (VU-M) tariff reduction which along with the SMS usage decrease continue to drive the mechanics of this revenues.

 

Thus, MTR incidence on Service Net Revenues step down into its lowest level 3.7%. Excluding the MTR cuts impacts, the Mobile Service Net Revenues would have grown 8.0% to R$3.657 million, instead of +5.0%.

In 2Q17, Other Mobile Revenues rose 18.8% YoY, mainly due to network sharing revenues growth.

 

ARPU (Monthly Average Revenue Per User) closed the quarter at R$19.4, rising 12.6% YoY, reaching its higher level since 4Q13. ARPU from VAS grew significantly, 51.5% YoY, confirming theses services as drivers for revenues improvement. Company efforts to increase the new offers portfolio penetration, which is responsible to bring higher value customers in all segments, were essential for ARPU performance.

Fixed Service Net Revenues rose 6.6% YoY, recovering against 1Q17 (-1.2% YoY). This result is driven by TIM Live revenues growth and Corporate services performance recovery.

Product Net Revenues were down 23.1% YoY in this quarter, mainly affected by a reduction in handsets sales for prepaid users. Despite this, in April, smartphone penetration reached 77.1% (vs. 70.3% in 2Q16).

OPERATING COSTS AND EXPENSES

 

Total normalized costs and expenses remain under strict control, down 2.5% from 2Q16, even amid strong growth in postpaid base and robust network acceleration. In the first half of the year, the drop was 1.3% YoY.

Normalized Expenses and Costs performance breakdown:

“Normalized” Personnel grew 7.8% YoY, mainly influenced by (i) inflation in the period (INPC of the last 12 months as of Aug/16 at 9.62%), (ii) lower provision for employees’ annual bonuses in 2Q16 and (iii) contingencies with labor law suits. In the first half, personnel line dropped by 6.5% compared to 6M16, with the main reason being the change in the employee base.

Commercial was up by 1.9% vs. 2Q16. This performance can be explained by (i) increasing expenses with commissioning due to strong post-paid additions and Mobile Number Portability (MNP) numbers and (ii) advertising expenses that, although relevant due to the launch of TIM Black (+3.1% QoQ), in comparison to 2Q16, were lower due to the rebranding process occurred last year. In 6M17, the slight expansion of 1.3% YoY is the result of higher commission costs that were partially offset by the reduction in FISTEL expenses.

Network and Interconnection (ITX) costs fell 4.3% YoY, due to lower interconnection tariffs (VU-M) and lower structural prices for leased lines (Anatel’s Resolution 639). On the other hand, costs continue to be pressured by the combination of (i) network expansion (+61% YoY in 4G sites and +16.7% YoY in 3G sites) influencing land rental, energy consumption and maintenance, (ii) infrastructure sharing (which generates costs and revenues) and (iii) content providers. In the quarter, this line also had two non-recurring effects that offset each other and are related to a leased lines dispute in which TIM had a positive decision and fixed interconnection (TU-RL) disputes regarding 2015 where negative decisions were taken. In 6M17, Network & ITX increased slightly (+1.2% YoY) due to growth in network, sharing and spending with content providers.

In the quarter, General and Administrative Expenses (G&A) fell by 2.8% YoY, benefiting from the Efficiency Plan with reductions in several lines, including expenses with third-party services. The same elements drove the dynamics in the half, leading G&A to fall 1.1% YoY.

COGS decreased 14.8% compared to 2Q16, amid a 15.3% reduction in the volume of equipment sold driven by a reduction in sales to prepaid users. With costs falling less than revenues, there was a worsening in product margin (equipment revenue - COGS), which came negative in R$40 million. This result is explained by an auction of obsolete devices (lower selling price, but equal cost) and by the introduction of new bundled offers that include handsets for lock-in contracts (e.g. TIM Black). In 6M17, the decrease in COGS was 17.6%.

Provisions for Doubtful Accounts (Bad Debt) increased 19.9% YoY, amid a continued postpaid growth (+15.1% YoY) and also influenced by a onetime impact of corporate customers. Despite this performance, Bad Debt as a percentage of Gross Revenue remained at healthy level (1.5%). In these first six months, Bad Debt increased by 5.2% and stood at 1.3% of Gross Revenue, denoting that default levels remain under control.

Normalized Other Operating Expenses decreased by 26.8% YoY in 2Q17, reversing 1Q17 performance and closing the semester with a slight increase of 3.5% YoY. Due to the conclusion of the tower sale process, this line was normalized by +R$1.8 million in 2Q17.

Subscriber Acquisition Costs (SAC = subsidy + commissioning + advertising expenses) reached R$43.1 per gross addition in the second quarter, an increase of 33.7% YoY, due to higher commissioning expenses (higher postpaid mix over gross additions) and increase in lock-in offers (discounted devices offers and obsolete device auction).

 

2.2

Months of payback

 

Despite the increase in SAC, SAC/ARPU ratio (which indicates the payback per client) remained at a healthy level of 2.2 months.

FROM EBITDA TO NET INCOME

EBITDA

Normalized EBITDA (excluding temporary costs in 2Q16 and 2Q17) accelerated the positive trend started last year and grew 15.5% YoY, in this quarter. Such performance can be explained by (i) the consistent improvement in our service revenues, (ii) a better first margin contribution as data revenues overtake voice (60% of MSR) and (iii) the strong efforts on the cost side, which help us to maintain our OPEX under control. In 6M17, normalized EBITDA grew 12.1% YoY.

The combination of the aforementioned elements is not only driving our EBITDA expansion, but is also improving the normalized EBITDA margin, that reached 35.3% in 2Q17 – a solid increase of 375 bps when compared to the same period last year. In 6M17, EBITDA margin stood at 33.6% up by 278 bps YoY.

It is also important to highlight that MTR incidence on Normalized EBITDA fell once more, reaching approximately 1%, and bringing the Company closer to a scenario where it will reach a balance between revenues and costs coming from mobile interconnection.

 

Depreciation & Amortization (D&A) / EBIT

In 2Q17, D&A was up 4.2% YoY. Depreciation grew 1.9% YoY in the quarter, reducing its growth pace as a result of CAPEX deceleration process in the last two years. Amortization however went up 7.2% YoY due to higher investments on software. Normalized EBIT posted a substantial increase of 57.9% YoY in 2Q17 as a consequence of lower D&A and consistent EBITDA improvements. Reported EBIT was up 37.0% YoY in the quarter and 33.9% in the semester.

NET FINANCIAL RESULT

Net Financial Result came negative in R$127 million in 2Q17, a 22.8% reduction when compared to the same period last year. Such performance is a consequence of lower hedging interest rates due to the reduction of foreign currency denominated debt. However, in 6M17, net financial result stood almost stable in the yearly comparison (-1.3% YoY).

INCOME AND SOCIAL CONTRIBUTION TAXES

This quarter, Income and Social Contribution Taxes Totaled R$51 million, almost stable (+0.9% YoY). In 6M17, this line was up 37.3% YoY chiefly impacted by the tower sales in 2Q16. Effective Tax rate ended 2Q17 at 18.9%.

NET INCOME

Net Income expended 194.1% YoY, reaching R$219 million in 2Q17. EPS (Earnings per Share) reached R$0.09 in 2Q17 versus R$0.03 in the same period last year. In 6M17, reported net income totaled R$351 million (+73.5% YoY).

CAPEX

In 2Q17, Capex totaled R$809 million, a reduction of 17.0% when compared to 2Q16 following the descending trajectory in the investments cycle which peaked in 2015. In the quarter, approximately 90% of the total Capex was dedicated to infrastructure, mainly related to 3G and 4G technologies, confirming the trends from TIM’s Industrial Plan. Until June, capex totaled R$1,478 million, down 12.3% YoY.

DEBT AND CASH

Gross Debt reached R$7,827 million by the end of 2Q17, including (i) leasing recognition in a total value of R$1,636 million related to towers leaseback, LT Amazonas project, and other financial leasing; and (ii) hedge position in an amount of R$78 million (reducing gross debt). When compared to 2Q16, gross debt posted a slight increase of 0.8%.

Company's debt is concentrated in long-term contracts (79% of the total), composed mainly by financing from BNDES (Brazilian Economic and Social Development Bank), as well as borrowings from other top international financial institutions. Approximately only 9% of total debt was denominated in foreign currency (USD). Average debt cost excluding leasing effects was 10.89% vs. 12.48% in 2Q16.

Cash and Securities position totaled R$3,428 million by the end 2Q17, a decrease vs. R$4,061 million on March/2017.

Main movements that affected cash and securities in the quarter are demonstrated as follow:

Average cash yield excluding securities (FX fund) fell to 11.08% in 2Q17 when compared to 14.24% in 2Q16 following the reduction of Selic interest rate.

Net Debt/EBITDA ratio reached 0.8x at 2Q17 when compared to 0.73x in 2Q16, mainly explained by the 700MHz clean-up payment occurred in 1Q17. Net debt totaled went up to R$4,400 million by the end of 2Q17 when compared to R$3,957 million same period of last year.

 

FREE CASH FLOW

 

In 6M17, Operating Free Cash Flow (OFCF) had a significant improvement of nearly R$1 billion when compared to same period last year excluding the 700MHz clean-up costs, due to the positive combination of higher EBITDA and lower CAPEX, coupled with a better working capital position in R$ 443 million – due to lower suppliers’ obligations. In the 2Q17 the OFCF came positive at R$365 million in 2Q17, decrease of 6.1% YoY.

TOWERS SALE IMPACTS

In 2Q17, TIM concluded the sixth and last closing under the Tower Sale agreement signed in November 2014 with American Tower do Brasil (ATC). By the end of the last closing, 5,873 towers were sold for a purchase price of R$2.65 billion as described below:

·

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

·

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

·

Third closing: On December 16, 2015 TIM transferred 182 towers to ATC and received approximately R$84 million.

·

Fourth closing: On June 9, 2016 TIM transferred 270 towers to ATC and received approximately R$109 million.

·

Fifth closing: On December 20, 2016 TIM transferred 66 towers to ATC and received approximately R$24 million.

·

Sixth closing: On June 30, 2017 TIM transferred 54 towers to ATC and received approximately R$20 million.

The Master lease agreement (MLA) defines the leaseback of the transferred towers for a 20-year 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 concerning the most recent and all closings:

 QUALITY AND NETWORK

QUALITY DEVELOPMENTS

This quarter, we will return to present Anatel quality KPIs in the form of national results (average), replacing the percentages of cities in the target disclosed in recent quarters. In the last 12 months (considering the official data released by Anatel until April 2017 and according to internal estimates for May 2017), TIM maintained solid performance, with all quality metrics above the Agency's target.

 

Instant Speed and Average Speed: Regarding Anatel metrics for instantaneous speed (SMP10) and average speed (SMP11), TIM maintained both indicators above the Agency target, ensuring a positive customer experience when using data in a scenario of strong data traffic growth (+72% YoY in 2Q17). These results also indicate strong resilience on the part of our network. Official data measured by Anatel goes until May/17.

In addition to Anatel's official KPIs, the Speed Test numbers (as measured by Ookla¹) illustrate the ongoing improvements in the Company's network quality indicators, especially in relation to data usage. The recent intense cycle of Capex, which peaked in 2015 and began to decline gradually from 2016 onwards, coupled with continuous network and quality efforts have ensured significant results in the past and continue to contribute to the evolution of throughput indicators (downlink and uplink) and latency, especially for 4G indicators when compared to 2G+3G.

 

NETWORK EVOLUTION

In 2Q17, TIM continued with its commitment to coverage, capacity and availability and was able to enhance all quality metrics and provide a better customer experience on 4G and 3G technologies, as well as maintain its leadership in the cities covered by 4G. Quality associated with coverage is key to attract and maintain the customer base of value, while the company evolves mainly in the postpaid segment.

The commitment to the development of the infrastructure is demonstrated by the allocation of CAPEX, approximately 90% dedicated to infrastructure in 2Q17, in order to support the growing data traffic, which increased by 72% compared to 2Q16. Sites densification, expansion of hetnet coverage, frequency refarming and carrier aggregation of two or three frequencies, depending on region, were the major network projects that supported this growth with high quality. The expansion of infrastructure on several fronts enables TIM to explore new technologies, such as VoLTE and ViLTE (voice and video usage over LTE) which are being launched in the Company's portfolio in July.

The hetnet project reached 3.9 thousand new hotspots in the entire country, an increase of 16% when compared to 2Q16.

In 4G, TIM maintained its leadership in the cities covered by the technology, reaching 1,850 cities, or 80% of the urban population of the country, an increase of more than 200% in the number of cities covered, compared to 2Q16. Through spectrum refarming, the Company was able to achieve this significant result in the implementation of the 4G, in addition to releasing an additional 5MHz slot to improve its 4G capacity. The project uses the 1.800MHz band and reorganizes the frequency usage according to the spectrum availability in addition to a coverage optimization, using less Capex with better results.

Additionally, TIM continues to develop its LTE 4G network using the 700MHz frequency, operating in 62 cities of which 10 are capitals — Brasília (DF), Campo Grande (MS), Teresina (PI), Recife (PE), Fortaleza (CE), Maceió (AL), Natal (RN), Macapá (AP), Boa Vista (RR) and Rio Branco (AC). Thus, the Company is the first to release the 4G at 700 MHz in all major cities where the TV analog signal has been switched off. Activation of the 4G in the 700 MHz range allows for greater signal reach and increased speed, which provides an improvement to the customer experience. Being a lower frequency, the coverage range can be four times greater compared to the 2600 MHz band, as well as providing greater penetration in indoor environments.

The 3G technology also continues to evolve, TIM expanded its coverage to 2,916 cities, or 90% of the country's urban population, by the end of the second quarter of the year, an increase of 49% in terms of covered cities, compared to same period of the previous year. GSM coverage remained at 95% of the urban population.

 OPERATIONAL AND MARKETING PERFORMANCE

MOBILE MARKET

MARKET PERFORMANCE

2Q17 market performance was still impacted by the pace of reduction of SIM card observed in previous quarters, still under the influence of clean-up actions and the multiple chip consolidation process.   

TIM’s PERFORMANCE

By the end of June/17 TIM had 60.8 million active lines, preserving the disconnection trend seen last quarter. The Company posted negative net adds of 1.0 million lines this quarter. Despite achieving positive net adds of 508.9 thousand lines in the postpaid segment, clean-up actions in prepaid were higher once more, resulting in a negative performance over all.

 

 

Gross adds amounted 6.9 million lines, a 2.9% reduction in the yearly comparison. The mix of postpaid in the 2Q17 gross adds was 11.6%, a slightly increase when compared with 10.7% of the 2Q16. Disconnections were down by 23.5% YoY mainly due to a better performance in prepaid, which represented 94% of the total in the quarter. 2Q17 churn rate was 4.3% versus 15.6% in 2Q16.

 

The 2Q17 postpaid mobile number portability (MNP) continued to have positive results. Such result was observed in all postpaid segments and against all peers.

In 2Q17, TIM postpaid client base increased 15.1% YoY, reaching a total of 15.8 million users. Net adds remained at a solid pace totaling 508.9 thousand lines in the quarter versus 211.5 thousand in 2Q16. The migration of prepaid clients to postpaid, lower churn rates and favorable mobile number portability are main pillars to the increase in our postpaid base.

At the prepaid, disconnections remained strong reaching 1.5 million in the quarter, although smaller when compared to the previous quarter. The main reasons for this result were the migration of prepaid users to Controle plans, together with the strict disconnection polity to keep a clean base.   

Detailing the customer base by technology:

·

3G reached 24.3 million users in 2Q17, down by 28.4% YoY, corresponding to 9.7 million lines, as subscribers continue to migrate to modern 4G enabled devices.

·

4G amounted to 22.4 million users. When compared to 1Q17, 4G base grew 13.7%, or 2.7 million lines, while expanded 100.4% or 11.2 million lines when compared to the same quarter last year. Such performance confirms Company’s efforts to promote the migration of 3G users to 4G in order to deliver a better customer experience following the investments to increase coverage and quality of LTE network.

Smartphone total penetration achieved more than 77%, considering April, 2017 clients base. A relevant increase of 683 bps if compared with June, 2016 resulted by the Companies strategy to equip its clients in order to stimulate data services penetration, especially with 4G technology.  

 

FIXED BROADBAND MARKET

In 2Q17, Tim Live results remained solid and consistent when the principal metrics are analyzed: revenues, clients, coverage and quality.

The quarter ended with revenue growing over 30% YoY with the main drivers: (i) clients base expanded 30% YoY and reached 348 thousand users in June, 2017 and (ii) ARPU increased 11% YoY, driven by plans with more value being hired (+11% YoY in plans above 50 Mpbs).

This growth was accomplished in an efficient way combining increase in coverage (addressable households) by 42% against same period of 2016 and a higher occupation rate (647 bps) of installed MSANs.

Once again TIM Live quality service was recognized in a stand out way by remaining in first place at Netflix ranking of brazilian providers. This is the 22^nd leadership in 25 periods analyzed by the streaming Company.  

 

The initiative of fixed broadband using WTTx technology (TIM Casa Internet) continues to evolve in soft launch and reached the second city, Campo Grande – capital of the Mato Grosso do Sul State. The service is provided through mobile network using the 700 MHz spectrum, that guarantees a good experience for the users supporting an excellent quality evaluation (above 9 in a scale from 0 to 10). Since the beginning of the tests the profile of clients that joined the solution is from users that didn’t have access of residential internet (80%).

 

 ENVIRONMENTAL, SOCIAL AND GOVERNANCE

CORPORATE SOCIAL RESPONSIBILITY - ENERGY CONSUMPTION

In line with the principles of its Environmental Policy and Climate Change Management, TIM considers energy efficiency as one of its challenges.

Description	6M17	6M16	% YoY
Electricity, in MWh	344,4011	208,074	65.5
Fuels, in litros	514,4491	664,986	-22.6

                     ⁽¹⁾ Data subject to change - after external verification closing

Despite the already expected increase in energy consumption, due to the expansion of the network infrastructure, TIM invests in energy efficiency actions. Some examples of those actions are:

·

Swap Project (replacement of old access equipment for more modern and efficient models);

·

RAN Sharing Agreements (network infrastructure sharing model with other telecom operators);

·

FreeCooling (container ventilation system of Equipment through the installation of refrigeration equipment on sites, which reduces the use of energy and refrigerant gases in air conditioning equipment).

(Indicators EN3 and EN6, GRI² G4)

Currently, the search for space optimization in the implantation of antennas and telecommunications equipment associated with the growth of the urban population density has provided a scenario agglomerations of antennas on top of buildings, facades and metallic structures. In this context, Biosite emerged, a structure with a significant reduction in visual impact and contributing to harmonization with the environment and urban infrastructure. Its multifunctionality can add beyond the transmission of telecommunications, lighting and security through surveillance cameras. At the end of June 2017, the project reached a total of 433 active Biosites.

GOVERNANCE

TIM adheres to good Corporate Governance practices and adopts transparency, accountability, equity and corporate social responsibility. See below the highlights for 2Q17 regarding the activities carried out by the Board of Directors of the Company and its Advisory Committees:

Board of Directors Activities

o

Members: 10 members (3 independents);

o

Meetings: 4 meetings, average attendance of 100%;

o

Most relevant activities:

§

Analysis and approval of the Quarterly Financial Report for the period ended on March 31, 2017;

§

Knowledge of the updating of the Project to sell towers of the Company's subsidiaries;

§

Resolve on corporate reorganization study;

§

Resolve on the proposal of new rules of Corporate Governance;

§

Resolve on the voting statement on the changes of the Novo Mercado Regulation;

§

Resolve on contracts with Related Parties;

§

Resolve on the election of the President and Secretary of the Board of Directors;

§

Resolve on the composition of the Statutory Audit Committee;

§

Resolve on the composition of the Control and Risk Committee;

§

Resolve on the composition of the Compensation Committee.

Fiscal Council Activities

o

Members: 3 members (3 independents);

o

Meetings: 2 meetings; average attendance of 100%;

o

Most relevant activities:

§

Analysis of the Report of Independent Auditors, BDO RCS Auditores Independentes S.S. for the year ended March 31, 2017;

§

Analysis of the Quarterly Financial Report for the period ended on March 31, 2017;

§

Resolve on the election of the Chairman of the Fiscal Council.

Statutory Audit Committee Activities

o

Members: 3 members (3 independents);

o

Meetings: 6 meetings; average attendance of 94%;

o

Most relevant activities:

§

Analysis of the Report of Independent Auditors, BDO RCS Auditores Independentes S.S. for the period ended on March 31, 2017;

§

Analysis of the Quarterly Financial Report for the period ended on March 31, 2017;

§

Analysis of the Company's Risk Management Process and Risk Appetite;

§

Knowledge about the operational procedures of Cyber Security;

§

Analysis of the proposal of new rules of Corporate Governance;

§

Analysis of the proposed amendment to the Conflict of Interest Policy;

§

Opinion on the voting statement on the changes of the Novo Mercado Regulation;

§

Analysis of the 2016 Sustainability Report;

§

Opinion on contracts with related parties

§

Resolve on the election of the Coordinator of the Statutory Audit Committee.

Compensation Committee Activities

o

Members: 3 members;

o

Meetings: 2 meetings; average attendance 100%;

o

Most relevant activities:

§

Analysis of the Management by Objectives program ("MBO") 2017;

§

Analysis of the proposal of criteria for distribution of the global remuneration of managers;

§

Resolve on the election of the Chairman of the Compensation Committee.

Control and Risk Committee Activities

o

Members: 5 members (2 independent);

o

Meetings: 3 meetings; average attendance of 87%;

o

Most relevant activities:

§

Supervision and evaluation of Internal Audit and Compliance work;

§

Knowledge about the operational procedures of Cyber Security;

§

Analysis of the Enterprise Risk Management Process and the Company's Risk Appetite

§

Analysis of the proposal of new rules of Corporate Governance;

§

Analysis of the proposed amendment to the Conflict of Interest Policy;

§

Analysis of the 2016 Sustainability Report;

§

Resolve on the election of the Chairman of the Control and Risk Committee.

 STOCK PERFORMANCE

The Company's shares, TIMP3, closed 2Q17 at R$9.79, an increase of 43.1% compared to 2Q16. In the same period, the Ibovespa (main Brazilian index of B3 stock exchange) appreciated 22.1%. The Company's ADRs, TSU, closed 2Q17 at US$14.80, an increase of 40.3% compared to 2Q16. In 2017, the Company's shares and ADRs increased 25.0% and 25.4%, respectively, while the Ibovespa increased 4.4%.

 

 SUBSEQUENT EVENTS

Reorganization of the Corporate Structure of the Company's Controlled Companies

TIM announces the Board of Directors deliberation on the adoption of the necessary procedures to implement the corporate reorganization project of its controlled companies, through the incorporation of TIM Celular S.A. by Intelig Telecomunicações Ltda..

The Reorganization aims to capture operational and financial synergies through the implementation of a more efficient process structure, as well as of accounting systems and internal controls.

The decision regarding the effective Reorganization is subject to the approval of the National Telecommunications Agency - ANATEL and the consent of National Bank for Economic and Social Development - BNDES, in addition to the approval of the competent corporate bodies of the companies involved.

More information regarding the Reorganization can be found in the Material Fact published by the Company on July 25, 2017.

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 second quarter of 2016 (2Q16) and first quarter of 2017 (1Q17), 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

Attachment 1:

 Cash Flow Statements

Attachment 2: Operational Indicators

Attachment 1

TIM PARTICIPAÇÕES S.A.

Operating Free Cash Flow

 

 Attachment 2

TIM PARTICIPAÇÕES S.A.

Operational Indicators

 

 

 

NOTES TO THE QUARTERLY INFORMATION

As at June 30, 2017

(in thousands of Reais, unless otherwise indicated)

(A free translation  of the original in Portuguese)

1

Operations

1.a Corporate Structure

TIM Participações S.A. (“TIM Participações” and/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 of June 30, 2017, (66.58% as of December 31, 2016). The Company’s and its subsidiaries (“Group”) main purpose is to control companies providing telecommunications services, including personal mobile telecom services and others, 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 (NYSE) – USA. 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 good market practice, TIM Participações adopts the practice of simultaneously releasing its financial information in Reais 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.

2.

Basis for preparation and disclosure of the quarterly information

The individual and consolidated quarterly information have been prepared according to CPC 21 / IAS 34 – “Interim Financial Statements”, and they provide all material information required for such interim financial statements, and only this information, which is consistent with that used by Management. Whenever there is no divergence regarding the application of CPC 21 / IAS 34, the Company adopts accounting policies originated from the Brazilian corporate legislation and specific rules issued by CVM.

The significant accounting policies applied to the preparation of the quarterly financial statements are described below and/or presented in their relevant notes. These policies were consistently applied in the periods/years presented, unless otherwise indicated.

a.

General preparation and disclosure criteria

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

In the individual quarterly information submitted along with the consolidated quarterly information, investments in subsidiaries are accounted by the equity method. Identical adjustments are made in the individual and consolidated quarterly information with a view 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 IFRS applicable to separate quarterly information, as now IFRS permits the application of the equity method in subsidiaries on separate financial statements, they are also in accordance with International Financial Reporting Standards (“IFRSs”), issued by IASB. These individual quarterly information 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 12 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 that are totally classified in long term.

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

b.

Functional currency and presentation currency

The presentation currency for the quarterly financial information is the Real (R$), which is also the functional currency for all the companies consolidated in these quarterly financial 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 in foreign currency are converted into Reais 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.

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 optimize 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 fund investment 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.

Consolidation procedures

Subsidiaries are all entities in which the Group holds the 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. The consolidation is discontinued from the date that the Group loses the control over that entity.

The purchase accounting method is used for recording 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.

e.

Approval of the interim financial information

Th is interim financial information w as approved by the Company’s Board of Directors on July 25 , 2017.

f.

New standards, changes and interpretations of standards not yet in force

The following new standards were issued by the IASB, but they are not in force for the period ended June 30 , 2017. The early adoption of these standards, although encouraged by IASB, was not allowed in Brazil by CVM, based on a pronouncement of the Accounting Pronouncements Committee (CPC).

There are no other present IFRS standards or IFRIC interpretations not yet in force that could have a significant impact on the quarterly financial statements of the Group.

3

Estimates and critical judgment in the application of the Company’s accounting policies

Accounting estimates and judgments are continuously reassessed. They are based on Company´s historical experience and other factors, such as expectations of future events, considering the circumstances presented as of the date of the quarterly financial information.

By definition, the accounting estimates resulting from such assumptions rarely equal the actual outcome. The estimates and assumptions that present significant risk with probability to cause relevant adjustments in the book values of assets and liabilities for the next fiscal years, are shown below:

 (a)

Impairment losses of non-financial assets

Losses from impairment take place when the book value of assets or cash generating unit exceeds the respective recoverable value, which is considered as the fair value less costs to sell, or the value in use, whichever is greater. The calculation of fair value less costs to sell is based on information available from sale transactions involving similar assets or market prices less additional costs that would be incurred to dispose of those assets. The value in use is based on the discounted cash flow model. Cash flows derive from the Company’s business plan. Since this is an ongoing business, as from the fifth projection year a perpetuity of nominal growth of cash flows was estimated (note 15).

Any reorganization activities to which the Company has not committed itself on the quarterly financial statements disclosure date or any material future investments aimed at improving the asset base of the cash generating unit being tested are excluded for the purposes of the impairment test.

The recoverable value is sensitive to the discount rates used in the discounted cash flow method, as well as to the expected future cash receivables and the growth rate of revenue and expenses used for extrapolation purposes. Adverse economic conditions may lead to significant changes in these assumptions.

The main non-financial assets valued this way were goodwill based on future profitability recorded by the Company (note 15).

As of the six-month period ended June 30, 2017, there were no changes in the estimates and assumptions that could present a significant risk, with the probability of causing a material adjustment to the book values of property, plant and equipment and intangible assets in this period.

 (b)

Income tax and social contribution (current and deferred)

Income tax and social contribution (current and deferred) are calculated in accordance with interpretations of the legislation currently in force. This process normally includes complex estimates in order to define the taxable income and differences. In particular, deferred tax assets on income tax and social contribution losses and temporary differences are recognized to the extent that it is probable that future taxable income will be available and can be offset. The measurement of recoverability of deferred income tax and social contribution losses carryforward and of temporary differences takes into account estimates of taxable income (note 10).

(c)

Provision for legal and administrative proceedings

Legal and administrative proceedings are analyzed by the Company’s Management and internal and external legal advisors. The Company’s reviews take into account factors such as the hierarchy of laws, case law available, recent court decisions, their relevance in the legal order, as well as payment history. Such reviews involve Management’s judgment (note 24).

(d)

Fair value of derivatives and other financial instruments

Financial instruments presented at fair value in the balance sheet are measured using evaluation techniques that considers observable data or observable data derived from the market (note 37).

(e)

Unbilled revenues

Considering that some billing cut-off dates occur at intermediate dates within the months, at the end of each month there are revenues already earned by the Company but not effectively billed to the customers. These unbilled revenues are recorded based on estimates which take into account historical data of usage, number of days since the last billing date, among other factors.

TIM PARTICIPAÇÕES S.A. AND

TIM PARTICIPAÇÕES S.A. AND SUBSIDIARIES

NOTES TO THE QUARTERLY INFORMATION

As at June 30, 2017

(in thousands of Reais, unless otherwise indicated)

(A free translation  of the original in Portuguese)

4

Cash and cash equivalents

These are financial assets classified as loans and receivables, being accounted at the amortized cost through the effective interest rate method. The Company’s Management determines the classification of its financial assets upon their initial recognition.

Bank Deposit Certificates (“CDBs”) and Repurchases are nominative securities issued by banks and sold to the public as a means of raising funds. Such securities can be traded during the contracted period, at any time, without any significant loss of value and are used to repay short-term obligations of the Company.

The annual average return of the Company’s investments regarding CBD´s and Repurchases is 100.81% (101.10% as of December 31, 2016) of the Interbank Deposit Certificate - CDI rate.

5

Securities

Shares in a non-exclusive foreign exchange fund were purchased during 2015. This foreign exchange fund has daily liquidity in order to follow the variations of the US Dollar, and is basically formed by highly liquid public securities. The investment was intended to reduce foreign exchange risk on repayments to suppliers in foreign currency. The classification as securities occurs due to significant changes in exchange rate in the event of an early redemption.

In the first six-month period of 2017, the Company redeemed the Foreign-Exchange Fund almost entirely, in line with its financial strategy.

TIM PARTICIPAÇÕES S.A. AND

TIM PARTICIPAÇÕES S.A. AND SUBSIDIARIES

NOTES TO THE QUARTERLY INFORMATION

As at June 30, 2017

(in thousands of Reais, unless otherwise indicated)

(A free translation  of the original in Portuguese)

6

Trade accounts receivable

These are financial assets classified as borrowings and receivables, and they refer to accounts receivable from users of telecommunications services, from network use (interconnection) and from sales of handsets and accessories. Accounts receivable are recorded at the price charged at the time of the transaction. The balances of accounts receivable also include services provided and not billed (‘unbilled’) 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”) ..

Losses on doubtful accounts were recognized as a reduction at accounts receivable 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 deemed sufficient.

The fair value of trade accounts receivable equals the book value recorded as of June 30, 2017, and December 31, 2016. A portion of the accounts receivable from clients is used to secure the total amount of BNDES borrowings (note 20).

Changes in losses on doubtful accounts, recorded as an asset reducing account, were as follows:

TIM PARTICIPAÇÕES S.A. AND

TIM PARTICIPAÇÕES S.A. AND SUBSIDIARIES

NOTES TO THE QUARTERLY INFORMATION

As at June 30, 2017

(in thousands of Reais, unless otherwise indicated)

(A free translation  of the original in Portuguese)

The aging of the accounts receivable is as follows:

7

Inventories

Inventories are stated at average acquisition cost. A loss 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.

8

Indirect taxes and contributions recoverable

ICMS (value added tax on goods and services) amounts recoverable primarily refer to (i) credits on the acquisition of property, plant and equipment directly related to the provision of telecommunication services (credits divided into 48 months), and (ii) ICMS amounts paid under the tax substitution regime from goods acquired for resale, mainly mobile handsets, chips, tablets and modems sold by TIM.

TIM PARTICIPAÇÕES S.A. AND

TIM PARTICIPAÇÕES S.A. AND SUBSIDIARIES

NOTES TO THE QUARTERLY INFORMATION

As at June 30, 2017

(in thousands of Reais, unless otherwise indicated)

(A free translation  of the original in Portuguese)

9

Direct taxes and contributions recoverable

(i)

The amounts regarding income and social contribution taxes refer to anticipation made over the period/year.

(ii)

The PIS/COFINS amounts recoverable refer to: (i) credits arising from a legal proceeding with a final favorable decision, about the unconstitutionality of broadening the calculation base for these contributions under Law 9718/98; and (ii) credits calculated on rights and services used as input, in accordance with the legislation applicable.

10

Deferred income tax and social contribution

Deferred income tax and social contribution are recognized on (1) accumulated income tax and social contribution losses carry forward and on (2) temporary differences arising from differences between the tax bases of assets and liabilities and their carrying values in the quarterly financial statements. Deferred income tax is determined using enacted tax rates (and tax laws), or substantially enacted, up to the balance sheet date. Subsequent changes in tax rates or tax legislation may modify deferred tax credit and debit balances.

Deferred income tax and social contribution credits are recognized only in the event of a profitable track record and/or when the annual forecast prepared by the Company, examined by the Fiscal Council and Statutory Audit Committee and approved by other management bodies, indicates the likelihood of future realization of those tax credits.

The balances of deferred income tax and social contribution credits and debits are shown in the balance sheet at net amount, when there is both a legal right and the intention to offset them at the time when current taxes are ascertained, usually in relation to the same legal entity and the same taxation authority. Thus, deferred tax credits and debits belonging to different entities are in general shown separately, not at their net amount.

As of June 30, 2017, and December 2016, the prevailing tax rates were 25% for income tax and 9% for social contribution. The tax incentives shown in note 334 are also being considered in deferred taxes.

TIM PARTICIPAÇÕES S.A. AND

TIM PARTICIPAÇÕES S.A. AND SUBSIDIARIES

NOTES TO THE QUARTERLY INFORMATION

As at June 30, 2017

(in thousands of Reais, unless otherwise indicated)

(A free translation  of the original in Portuguese)

The amounts recorded are as follows: