Earnings call transcript: TIM S.A. Q2 2025 sees growth in mobile service revenues

TIM S.A. reported a robust performance in its Q2 2025 earnings call, with significant growth in service revenues and EBITDA. Despite the lack of specific earnings forecasts, the company demonstrated strong operational metrics, particularly in mobile services and 5G expansion. The stock price saw a slight decline, dropping 1.4% to 24.98, reflecting cautious investor sentiment amid broader market trends.

Key Takeaways

• Service revenues increased by 5.4% year-over-year.
• Postpaid revenue grew by 12.2%, representing 70% of mobile service revenues.
• 5G coverage now reaches 70% of the urban population.
• TIM S.A. reported the highest mobile ARPU in the industry at R$33 per month.
• The company added 450,000 new postpaid customers in Q2.

Company Performance

TIM S.A. showcased a strong performance in Q2 2025, driven by a focus on postpaid services and 5G network expansion. The company remains a leader in mobile ARPU and has made significant strides in expanding its 5G coverage, which now reaches 70% of the urban population. The telecom market’s rational approach has allowed TIM S.A. to focus on quality service rather than price competition.

Financial Highlights

• Service revenues: Increased by 5.4% year-over-year.
• EBITDA: Grew by 6.5% with a margin of 49.5%.
• Mobile service revenues: Rose by 5.6%.
• Postpaid revenue: Increased by 12.2% year-over-year.

Outlook & Guidance

TIM S.A. is focused on several strategic initiatives moving forward, including developing financial service partnerships and expanding B2B IoT solutions. The company is also accelerating efficiency initiatives and renegotiating tower and lease contracts. These efforts are expected to bolster its competitive position and drive future growth.

Executive Commentary

Alberto Griselli, CEO, emphasized the company’s progress, stating, "We are on track to meet our 2025 targets." He also highlighted the role of artificial intelligence in enhancing productivity: "Artificial intelligence is at the center of present and future opportunities to improve productivity." Vicente Ferreira, Investor Relations Officer, noted, "We are committed to decommission towers that are not in line with market prices."

Risks and Challenges

• Market Competition: The telecom market remains competitive, which could pressure margins.
• Regulatory Environment: Changes in regulations could impact operational strategies.
• Economic Conditions: Macroeconomic pressures could affect consumer spending and investment in telecom services.
• Infrastructure Costs: High costs associated with network expansion and modernization may impact profitability.
• Technological Advancements: Rapid technological changes require continuous investment in new technologies.

TIM S.A.’s Q2 2025 results demonstrate solid growth and strategic focus, positioning the company well for future opportunities despite the challenges in the telecom sector.

Full transcript - Tim Participacoes SA (TIMS3) Q2 2025:

Vicente Ferreira, Investor Relations Officer, TIM Brasil: Good morning, ladies and gentlemen. Welcome to TIM S.A. 2025 Second Quarter Results Video Conference Call. We would like to inform you that this event is being recorded, and all participants will be in listen-only mode during the company’s presentation. There will be a replay for this call on the company’s website. After TIM S.A. remarks are completed, there will be a Q&A section for participants. At that time, further instructions will be given. Hello and welcome to our earnings conference for the second quarter of 2025. I’m Vicente Ferreira, Investor Relations Officer of TIM Brasil. This video highlights our recent performance and how we see the market evolving in the first half of the year. After that, we will have a live Q&A with our CEO, Alberto Griselli, and our CFO, Andrea Viegas. Please note that management may make forward-looking statements, and this presentation may contain them.

Refer to the disclaimer on the screen and on our Investor Relations website. Now, let’s review our results. Hello everyone, I’m Alberto Griselli, CEO of TIM Brasil. The first half of 2025 has been marked by strong execution and clear strategic vision, driving solid financial and operational results. Service revenues grew by 5.4% year-over-year, supported by mobile services, while EBITDA increased by 6.5%, reflecting improved profitability with a 49.5% margin. Operating cash flow expanded significantly while we maintained our commitment, ramping up distribution to shareholders. We continue to lead in 5G technology, which allows us to offload traffic from 4G. Today, 30% of traffic flows via our 5G network. Additionally, TIM was recognized as the most sustainable Brazilian company, topping the B3 Sustainability Index. Global volatility has increased by the end of the semester, but we march forward, implementing our strategic initiatives.

Network modernization accelerates with new regions, partnerships expand, and new revenue opportunities are developed. We are on track to meet our 2025 targets. As I mentioned, our service revenue’s evolution is driven by mobile. In Q2, total service revenue grew 5.1% year-on-year, while mobile sustained a faster pace at 5.6%. TIM’s strategy to combine value and value initiatives through offer innovation and rational commercial approach is working, as the company boasts the highest mobile ARPU in the industry at close to R$33 per month, expanding at mid-single digits. At the same time, we added more than 450,000 new postpaid customers in the second quarter. Postpaid services have increased in importance, with a penetration rate close to 70% of mobile service revenues, confirming the shift towards more stable and higher-value customer segments. It’s been 14 consecutive quarters of rapid postpaid revenue expansion.

In Q2, we maintained the double-digit pace, closing the first half with 12.2% year-over-year growth. Again, a combination of solid ARPU dynamics held by control to pure postpaid upselling and healthy customer base trends with low churn levels and prepaid-to-postpaid migrations. In the first quarter, we introduced the concept of 360° presence in specific markets. São Paulo was the first, and now we are expanding this approach to other regions of the country. Under this project, we work with a tripod: network, brand, and channels, aiming to translate our network leadership into changes in customer experience and perception. In São Paulo, we have completed the modernization of half of the sites we committed to, already benefiting nearly 250 cities and approximately 10 million people. The network swap improved coverage, capacity, and reduced energy consumption.

Following this implementation, we expanded our overall download speed leadership versus our peers, and for the first time, we became leaders in 5G as well. Speed with our coverage is not enough. That’s why our coverage leadership comes first, followed by capacity to improve throughput. Minas Gerais is next. There, we doubled the number of cities with 5G, benefiting around 10 million people as well. Commercial presence is expanded with 13 new stores in 2025, including one flagship location. Changing gears to new revenue streams, our B2B IoT strategy is performing well. We have seen substantial growth in contracted revenues, particularly in agribusiness, utilities, and logistics. Specifically, in the last vertical, we are consolidating our leadership amid an increasing interest from our peers in these projects. We expect that the sector can maintain a rational approach as we have seen in traditional mobile.

As pioneers in bringing digital connectivity to Brazilian highways, we have reached about 7,000 km of roads covered. Almost half of those are in partnership with large logistics players such as Way and EcoRodovias. It’s worth highlighting that we are starting to move up in the value chain, adding solutions to our connectivity. Video monitoring and specialized road lighting are now part of our portfolio. TIM is committed to providing integrated solutions that enhance operational efficiency for clients in various sectors. Further developing the B2B IoT opportunity, we will expand our addressable market and open new avenues for growth. With similar goals, our digital ecosystem continues to expand. Our collaboration with Electrobras is materializing as we launch the first two markets with energy sales to corporate clients. Nationwide expansion is expected by September.

Under this partnership, we are offering to high-voltage clients up to 30% discounts on their energy bills, targeting approximately 2 million customers. Sales will leverage TIM’s existing SME agents. Additionally, our 5G fund is bearing fruit. This technology-driven investment is performing well as investors grow their business and improve their valuation, contributing positively to the fund’s performance. A new investment is on the way. A financial service company named CATA Investimentos is the fund’s fourth investor. They are developing and delivering financial solutions through a credit-as-a-service model, facilitating access to capital and reducing the dependence on traditional banks. Moving ahead to infrastructure, I would like to recap how TIM is leading the way in 5G development in the country. It’s been three years since we began rolling out the technology that would change the way we view investments in the telecom sector.

Today, we cover 70% of the urban population, and we are number one in cities with 5G. The rapid expansion of our coverage has helped the number of 5G devices to grow fivefold since 2022, and now it represents 28% of total devices. This pairing of availability plus adoption is playing a major role in enabling traffic to shift from 4G to 5G. In state capitals, 5G accounts for 30% of data traffic, and in São Paulo, offload is at 36%. Customers spend over half of their time on 5G networks, reflecting strong adoption. Thanks to this scenario and 5G lower cost per gigabyte, just 30% of 4G, TIM is using its resources more efficiently. Another technology is also a key driver of operational efficiency and cost savings. Artificial intelligence is at the center of present and future opportunities to improve productivity.

The company has mapped 100 use cases, prioritized 56 for strategic fit and value, piloted 24, and executed seven projects focused on operational improvements. Most pilots target cost efficiency, with some addressing commercial opportunities. Six new projects are scheduled for development in the second half of 2025. This structured AI pipeline demonstrates TIM’s commitment to leverage advanced technology and innovation to optimize operations and enhance business performance. Now, let’s move on to the financial details with our CFO, Andrea Viegas.

Andrea Viegas, CFO, TIM Brasil: Hello everyone. I’m Andrea Viegas, CFO of TIM. I’m pleased to share that we’ve delivered another quarter of consistent performance, reinforcing our ability to stay on track with our guidance in a dynamic environment. Once again, we are seeing the benefits of disciplined cost control. Our efficiency program is running at full speed, helping us keep cost growth below inflation. It’s important to note that this multidisciplinary initiative impacts all expense lines and enables us to continue investing in key areas of our business. This strategy has consistently driven improvement across all major operating metrics. We have sustained positive momentum in both EBITDA and EBITDA release, showing another quarter of margin expansion. On the lease front, as I mentioned last quarter, we have several initiatives underway to optimize our industrial costs and lease, like tower contract negotiation, evolution of our rent sharing, and also new partnerships for tower development.

Our bottom line continues to expand at a healthy pace, marking another quarter of strong earnings growth and reinforcing the consistency of our financial delivery. As Alberto mentioned, we’ve now completed three years of 5G operations. Since then, we have been bearing fruit from the efficiency brought by this technology, which has become one of the key levers in our CapEx management strategy. All of this supported our operational cash flow, which once again posted double-digit growth. This performance highlights our strong first-half results and confirms our commitment to our strategy. Now, back to Alberto.

Vicente Ferreira, Investor Relations Officer, TIM Brasil: Thank you, Andrea. Before we conclude, I would like to highlight our ESG achievements. We disclosed our annual report with significant strides in our commitments, among other things, the use of renewable energy, promotion of diversity and inclusion policies, and prioritization of accessibility for people with disabilities. These efforts have earned TIM recognition across multiple sustainability indexes and awards, reinforcing our leadership in corporate responsibility. Looking ahead to the second half of 2025, TIM is focused on executing its strategic initiatives to meet its targets. Key areas include: First, developing new partnerships with a special focus on financial services. We expect to announce new initiatives in the coming months, filling the space left by Citizens Bank and expanding our presence within the financial service sector. Second, advancing B2B IoT solutions with the expansion of our portfolio and services, and reinforcing the presence in selected verticals.

Third, accelerating the implementation of efficiency initiatives under our program, supporting our ability to expand margins. Fourth, securing the implementation of a new approach to leases. Renegotiation with reduced prices, tower company switch is a key lever, sharing infrastructure and reduced exposure, and building is now an option. Fifth, improving broadband operations while proactively monitoring market movements. I want to emphasize our consistent trajectory of progress, the company’s commitment to innovation, operational excellence, and sustainable growth as it drives forward into the remainder of the year. Thank you all for your attention, and now let’s move to the live Q&A session.

Moderator: Thank you. We are now going to start the Q&A session. If you wish to ask a question, please use the raise hand button or type it down in the Q&A field. Wait while we pull four questions. Our first question comes from Marcelo Santos from JP Morgan. Please, Mr. Santos, your microphone is open.

Hi, good morning, Alberto, Andrea, Vicente. Thanks for taking questions. I have two questions on my side. The first is, and Luisa, good morning as well. The first question is outlook for lease lines in the remainder of the year. I think in the first couple of quarters, the line didn’t increase that much. I just wanted to see how we should expect to progress, especially now that you have these new tower projects. An update would be great. The second, I would like to see if there’s an evolution on management thought about the fixed business. I think in the previous calls, you have discussed that you’re considering a full spectrum of possibilities for what to do, what TIM wants to be on this business. I just want to see if something has evolved from the last call to this call. Thank you.

Marcelo, hi. Let me take the second one, and then we’ll pass to Andrea for the first one on the tower. When it comes to the fixed business, in terms of inorganic progress, there is no additional news to be shared at this stage. We are on the organic side, focused on optimizing the businesses. You see that for us, the scenario remains competitive, and we are tweaking our operations. You will see that basically we are losing less and increasing our customer base. We are doing some small adjustments and progress there. In terms of non-organic opportunities, we are at the same stage like last quarter. Basically, we got from one extreme, investment of the asset, whereby we will lose our strategic optionality. On the other extreme, some kind of largest deal that are by definition more complex.

In the middle, some more balanced opportunities that are the one where we are focusing. As soon as we are going to have some update, we’re going to share with the market. Nothing to date. We’ll pass towers to Andrea.

Andrea Viegas, CFO, TIM Brasil: Hi, Marcelo. Related to the towers, as we mentioned before, this year is very challenging to the lease, especially for inflation and also of our rollouts. We are keeping negotiations with our partners, the tower companies. It’s a very hard negotiation, very tough. We are positive that we will achieve our goal in this year, that is to increase the lease in the path of the inflation rates. We also are studying some alternatives, as I mentioned. As soon as we have news about this, we will show you. We are constantly keeping the negotiations with our partners.

Moderator: If I can add on the negotiation a few points, Marcelo, basically what we found over the last months is that some of the main players are more willing to negotiate than in the past, whereas other ones are less willing to negotiate than in the past. What we are literally looking at is some win-win situation whereby we got towers that are above market price or what we consider to be a fair market price. We got some negotiation, let’s put it this way, counter positive things to be put on the table, like extension of the contracts and this sort of time. In the case of the tower companies, and this is specifically one that is less inclined to negotiate with us, we already communicated that we are going to decommission all towers that are above what we consider to be fair market prices.

Of course, it’s not something going to happen in the super short term because we need to wait for contract leases to expire, and there is a pattern there not to pay fees or fines related to the early termination. We are committed to decommission towers that are not in line with market prices, and we are already doing it.

Perfect. Thank you very much for both answers.

Our next question comes from Gustavo Farias from UBS. Please, Mr. Farias, your microphone is open.

Hi everyone. Thanks for taking my questions and congrats on the results. Two from my end. The first one, if you could give a little bit more color on CapEx and leasing efficiency measures, and the outlook for CapEx intensity for the second semester, especially in the light of this whole network modernization in São Paulo and the 5G expansion in Minas Gerais. The second one, if you could comment on the sale and marketing expenses and how to think about this line going forward, also considering the ongoing commercial efforts in São Paulo with the opening of new stores and so on and so forth. Thanks.

Thanks. Okay, let me go with the first round of answers here. When it comes to the CapEx efficiency, as we said, these are related to a modernization of our infrastructure, basically, that has been negotiated last year. The good news is that what we were expecting in terms of improvement in TCO are materializing. We are in the middle, let’s put it this way, in the total swap of São Paulo Capital. The swap is performing well in terms of network performance. If you look at the benefits of what we are doing for the customers, you will see that we reached the number one position in that we already had in coverage and average speed, meaning 4G and 5G. Now we are best in class in both 4G and 5G, and of course, in the average.

You see that from that perspective, the modernization project is delivering what was expected to deliver in terms of increased coverage capacity and better service to our customers. At the same time, when you look at the efficiency, what we are measuring now is that what we were expecting is also materializing. Some of this is more negotiating, like the unit price and this sort of stuff. Some is related to the TCO, and this includes other costs like wind space, like energy consumption, and all. These benefits are materializing. What we design in our plan and is reflected in our guidance is being delivered in São Paulo and therefore now the expansion in other big capitals, same approach to capture the same benefits. This is then coupled with increased commercial penetration in those regions.

As we say, the 306 approach that is made up of is built on network robustness and to deliver in the midterm increased commercial performance. This comes also with new point of sales and increased communication effort. We are playing all delivers. When it comes to the second question, which is related to marketing and sales, basically in there you got a lot of cost categories, each one with different dynamics. You got some structural projects like, I will mention a few. In that category, you have carrying cost. You know that we are implementing a number of initiatives to increase the level of efficiency there, like the artificial intelligence project that are reported in the presentation. Then you have commercial cost. If you look at what is happening, we are shifting a bit more of our sales to e-commerce, for example.

E-commerce is more efficient for us versus other channels. At the same time, I don’t know if you remember, we internalized the e-commerce migration one and a half years ago, gross addition more recently. When you internalize, basically you put CapEx to internalize, but then you don’t pay commissions. What else?

Andrea Viegas, CFO, TIM Brasil: E-billing. Also, the e-billing and fixed payment mean that we have a reduction in our costs related to this. If you look forward to the second half, we have more campaigns than the first half. In this first half of the year, we have a very good performance related to the past year. In the second half, we have more campaigns: Father’s Day, Black Friday, and Christmas Day.

Moderator: This is seasonality.

Andrea Viegas, CFO, TIM Brasil: Yes, this is a seasonality of this first half of the year.

Moderator: It’s okay. Did you answer your questions? Okay, cool.

Yeah, super clear. Thanks for the answers.

Our next question comes from Victor Tomita from Goldman Sachs. Please, Mr. Tomita, your microphone is open.

Hello, good morning, and thanks for taking our questions. Two questions from my side. The first one is more on the mobile revenue side. The release cites that there was growth on customer-generated revenues driven by the customers, but also driven by roaming revenues and some interoperator agreements. Could you give a bit more color on this and whether this was due to any major new agreements? I remember that the initial boom in roaming was more related to changing our plans to include more international roaming. My second question would be a bit of a follow-up on the tower efficiencies points that other questions raised. If you could give me a bit more color on that initiative of a new RFQ partnership for 1,000 new towers and on how that differs from the way you typically negotiate or think about tower construction.

You also cited that building towers is more of an option now. I just wanted you to dig a bit more on that. Thank you.

Okay, Victor, let me go with the first one and we’ll pass to Andrea for the second one. When you look at the revenue generation drivers, basically, you have user-generated in our report, you see different lines. All of them are improving. When you look at the set of drivers, you have the user-generated revenues and postpaid, we say, is driving it. When you look at the other categories, you will see a number of different things. What is there? You have a combination of a roaming agreement that is related to what we commented on the previous calls. You have the B2B IoT progress that is also inside these numbers. When you look at the customer platform level revenues, you will see that you have a different mix of drivers. If you look overall, you see a flattish number.

Remember that you have something that we had last year, like C6, that we don’t have this year. We have some line of business like mobile advertising and teen data that are growing double digit. This is all related to our core strategy that is mobile and incremental revenues that we are working, and roaming would be in that category because it’s part of the evolution of our main offerings. You have new revenue streams like the B2B IoT or mobile advertising and teen data that are growing faster and contribute to the overall growth, exactly in line with our strategy to diversify our revenue portfolio.

Andrea Viegas, CFO, TIM Brasil: Hi, Victor. The negotiation that we made with the tower companies is more related to extend time of the contract and get a discount. With this, when we are talking about FFT and another opportunity that we are studying, it is a plus for us. For example, as Alberto mentioned, we have some partners that we are not achieving an agreement with and have very high monthly fee with this tower company. The alternative will be to build a tower. Another thing is in the contracts of B2B, sometimes we are in a place that it’s only us and the tower company is not interested in building a tower in this agribusiness or road. This also is an alternative for us. Until now, we already renegotiated 30% of our tower contracts, and we believe that we still have room to renegotiate a lot more. I don’t know if I was.

Victor, if I may add, look at it this way. We have a cost line that we really want to dominate, and we are putting in place all the levers and alternatives that we have to drive the cost where we want, as Andrea said. You have the negotiation, you have the ransharing agreement, you have a make versus buy option. We are putting all the options in place because we think that we have more flexibility and more levers to get this cost line where we want to go.

That’s clear. Makes sense. Thank you.

Moderator: Our next question comes from Luis Chagas from XP. Please, Mr. Chagas, your microphone is open.

Hi guys. Thank you for taking my question. From my side, I have two. The first one is regarding OpEx. What are the main drivers behind the increase in network and interconnection costs? Are these pressures likely to persist or do you expect normalization in the coming quarters? The second question is regarding competition. What’s your view on the competitive pressure from new entrants in regions like the Northeast? How are you responding to protect market share there? Thank you.

Luis, let me go on the first one, and then I will pass the OpEx question to Andrea. If you look at the overall market, it’s our view that we are in a rational market, with competition focused on quality by all main players and our peers. Let’s put it this way. You see some positive movements in the last quarter whereby some of the more for more back from book price adjustment has been executed. I believe, and we are studying some potential adjustment according to a more strategy from book prices for pure postpaid also. Overall, my reading on the competitive dynamics is that it’s rational. Of course, there are some regional competitors that tend to be a bit more aggressive, and they are playing more on the price levers. As we commented on the first quarter, we are looking at it very closely.

We are not reacting on prices at this point in time. We are more focusing on our levers in terms of quality of services to make these customers more happy and less sensible to the price movement or the regional competitors. So far, my take is that the threat is limited, but we look at this and will respond as things will evolve over time.

Andrea Viegas, CFO, TIM Brasil: Hi, Luis. The increase of the network interconnection is related to the increase in the international roaming cost and also in provider cost. International roaming, we are increasing the customers that are using the service, and the provider cost increased because we launched a new portfolio with streams on board and also because more customers are acquiring this kind of plan. For us, it’s a positive view, if I can say this, because all these have a good margin for us, profit, if we have an increase in our provided cost because we have more revenue related to this. In the roaming international, as we mentioned in the past time, we have an adjustment between cost and revenue that in the year, this is also a positive margin. The increase of these expenses is related to more customers and more revenue.

Okay, Luis, did we answer your question?

Moderator: Okay, Luis, did you answer your question?

Yes, thank you.

Okay. Just as a reminder, if you wish to ask a question, use the raise hand button or type it down in the Q&A field. Wait while we pull for questions. Our next question comes from Gustavo Farias from UBS. Please, Mr. Farias, your microphone is open.

Hi everyone. One additional question. I’d like to take a look on prepaid. We’ve seen sequential growth in ARPU versus the first quarter. Just wanted to have an outlook for the segment, how you’re seeing the segment, the perspectives ahead, and especially in the light of numbers from AMX last week, which also showed some improvements. Thank you.

Okay, Gustavo. Sorry, Gustavo here. It’s okay. Now, when you look at prepaid, one of the main drivers of our dynamics, I would feel our competitive dynamics also is related to the prepaid-to-postpaid migration. This is something that we will keep doing. We have been doing it. It’s accredited to our revenue growth, and it’s one of the drivers of the revenue performance of prepaid. As we commented, Gustavo, in the previous calls, we are also working on opportunities of improvement in the frequency of recharges. We have in place a number of initiatives on the offer side and channel side, with increased capillarity and communication that we’re putting in place. This, basically, if you look forward, should allow us to soften the decline of prepaid revenues from one side while sustaining the postpaid revenues with prepaid-to-postpaid migration. It’s a general trend, I would say.

I don’t comment on others, on our peers’ performance. I would say that a lot of what you see is strongly related to the prepaid-to-postpaid migration strategies of each operator, and each one of us has its own.

Perfect. Thanks a lot.

Once again, if you wish to ask a question, please use the raise hand button or type it down on the Q&A field. Wait while we pull for questions. Without any more questions from analysts, I’m returning the floor to Mr. Alberto Griselli for his final remarks. Please, Mr. Alberto, you may proceed. Thank you all for joining today’s video call. I think we wrap up the first half with strong momentum, and despite external challenges, we are staying true to our strategy and consistently delivering solid results. Looking into the second half, I’m genuinely excited for what the second half holds for us. We got a robust plan in place and the confidence to make it happen. I would like also to provide my heartfelt thanks to our entire team for their commitment and drive.

I look forward to catching up with some of you in the upcoming one-to-one meetings. Ciao, everybody.

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