Executive Summary / Key Takeaways

• TIM S.A. is solidifying its position as a leader in the Brazilian telecommunications market, propelled by its advanced 5G network, which now covers 70% of the urban population and handles 30% of total traffic, offering a significantly lower cost per gigabyte compared to 4G.
• The company's "more-for-more" strategy and disciplined operational efficiency are driving robust financial performance, with Q2 2025 service revenues growing 5.4% year-over-year and EBITDA increasing by 6.5% with a 49.5% margin, alongside the industry's highest mobile ARPU of nearly BRL 33.
• Strategic diversification into B2B IoT and a growing digital ecosystem, including partnerships in energy sales and financial services, are opening new revenue streams, with B2B IoT contracted revenues exceeding BRL 700 million by Q4 2024.
• TIM S.A. is committed to consistent shareholder remuneration, with the Board approving R$480 million in Interest on Shareholders' Equity for payment by January 2026, and a 2025-2027 guidance projecting revenue growth above inflation, stable CapEx, and expanding cash flow.
• Despite a competitive landscape and challenges in the prepaid and fixed broadband segments, TIM S.A.'s focus on network quality, customer experience, and AI-driven efficiency initiatives positions it for sustained profitability and market leadership.

Brazil's Telecom Landscape: TIM S.A.'s Strategic Ascent

TIM S.A. stands as a formidable force in Brazil's dynamic telecommunications sector, strategically positioning itself as a leader in mobile connectivity and an innovator in emerging digital services. The company's overarching strategy, encapsulated in its "3B" framework—Best Network, Best Offer, and Best Service—is designed to deliver exceptional customer value through superior network quality, competitive offerings, and service excellence. This approach is particularly critical in a market characterized by intense competition from established players like Vivo (Telefônica Brasil) and Claro (America Móvil) , as well as regional operators and new entrants.

The Brazilian telecom market is undergoing significant transformation, driven by increasing demand for high-speed data, the widespread adoption of 5G technology, and the burgeoning opportunities in B2B IoT and digital ecosystems. Broader industry trends, such as the rise of AI and data centers, are further amplifying the need for robust connectivity and resilient telecom infrastructure. TIM S.A.'s strategic responses to these trends, rooted in its historical investments and technological prowess, are shaping its competitive standing and financial trajectory.

Technological Edge: The Core of TIM S.A.'s Moat

TIM S.A.'s competitive advantage is deeply embedded in its technological leadership, particularly its aggressive and efficient rollout of 5G and its innovative application of Artificial Intelligence. The company has consistently prioritized network quality and capacity, translating into tangible benefits for both its operations and customer experience.

TIM S.A. has established itself as a frontrunner in 5G deployment in Brazil, covering 70% of the urban population and leading in the number of cities with 5G coverage. This extensive 5G network is not merely a coverage play; it is a critical operational asset. By Q2 2025, 30% of TIM S.A.'s total traffic flowed through its 5G network, with this figure rising to 36% in São Paulo, demonstrating significant traffic offload from 4G. This offload is crucial for efficiency, as 5G boasts a significantly lower cost per gigabyte—just 30% of 4G's cost. The rapid expansion has also spurred adoption, with 5G devices growing fivefold since 2022, now representing 28% of total devices on the network.

The company's network modernization efforts, such as the ongoing swap in São Paulo, are yielding substantial benefits. This project, which has already modernized half of the committed sites and benefited approximately 10 million people across nearly 250 cities, has improved coverage and capacity while simultaneously reducing energy consumption. Following this implementation, TIM S.A. achieved overall download leadership and, for the first time, became a leader in 5G speeds in São Paulo. This focus on "coverage leadership first, followed by capacity to improve throughput" underscores a strategic approach to network quality.

Beyond 5G, TIM S.A. is leveraging Artificial Intelligence to drive operational efficiency and enhance business performance. The company has mapped 100 use cases for AI, prioritized 56 for strategic value, piloted 24, and executed 7 projects, primarily focused on cost efficiency and some addressing commercial opportunities. The full rollout of TIM AIX to over 5,000 attendants and the use of speech and text analytics for consumer complaints highlight a commitment to integrating AI across its operations. Six new AI projects are slated for development in the second half of 2025, signaling a continuous technological roadmap.

For investors, these technological differentiators are foundational to TIM S.A.'s competitive moat. The superior efficiency and lower cost per gigabyte of 5G directly contribute to better margins and stronger financial performance. Leadership in network quality and speed enhances customer experience, reduces churn, and supports the company's premium "more-for-more" strategy, allowing for effective monetization of its customer base. The strategic application of AI promises further cost reductions and improved productivity, reinforcing TIM S.A.'s ability to expand margins even in a competitive environment.

A History of Strategic Evolution and Market Leadership

TIM S.A.'s journey in the Brazilian telecom market has been marked by continuous evolution and strategic adaptation. The company’s deep connection to music, exemplified by its master sponsorship of events like Rock in Rio since 2003, has been instrumental in shaping its brand perception. A significant period of infrastructure development saw TIM S.A. achieve 4G coverage across all Brazilian cities, a foundational step that laid the groundwork for its current 5G leadership.

A critical operational shift involved a substantial tower decommissioning project, including sites acquired from Oi (OIBRQ), which significantly enhanced its strategy regarding lease payments and efficiency. This proactive management of infrastructure costs continues to be a key lever for profitability. The company’s strategic deployment of 5G technology, initiated around Q2 2022, has been a game-changer, propelling it to the forefront of the industry in terms of coverage and traffic offload.

Throughout 2024 and into 2025, TIM S.A. has consistently executed its "3B strategy," driving robust postpaid growth and maintaining the highest Average Revenue Per User (ARPU) in the industry. The company successfully defended its postpaid market share against new entrants, demonstrating the effectiveness of its customer-centric approach. While facing challenges in the prepaid market, TIM S.A. implemented a three-step recovery plan focused on new offers, communication, and channel tactics to improve performance and slow revenue decline.

A notable strategic development in Q4 2024 was the termination of the C6 Bank partnership, which monetized TIM S.A.'s participation and opened new avenues for financial services initiatives. This was swiftly followed by a new investment in Kat Investimentos, a financial services company, through its 5G fund by Q2 2025, underscoring the company's agility in pursuing new growth opportunities.

Robust Financial Performance and Operational Discipline

TIM S.A. consistently demonstrates strong financial performance, underpinned by disciplined cost control and effective monetization strategies. In Q2 2025, service revenues grew by 5.4% year-over-year, with mobile services leading the charge at a 5.6% growth rate. This growth translated into a 6.5% increase in EBITDA, achieving a healthy 49.5% margin, reflecting improved profitability.

The company's mobile ARPU reached nearly BRL 33 per month, expanding at mid-single digits, solidifying its position as having the highest ARPU in the industry.

The postpaid segment remains a significant growth engine, contributing close to 70% of mobile service revenues and maintaining a double-digit revenue expansion pace of 12.2% year-over-year in the first half of 2025. This growth is driven by solid ARPU dynamics, successful upselling from control to pure postpaid, and a healthy customer base with low churn levels. The company added over 450,000 new postpaid customers in Q2 2025.

Operational efficiency is a continuous focus, with TIM S.A.'s efficiency program actively keeping cost growth below inflation across all expense lines. This multidisciplinary initiative allows the company to continue investing in key areas while expanding margins. While network and interconnection costs increased in Q2 2025 due to higher international roaming and provider costs, these are viewed positively by management due to the good associated margins. The company's net income has shown consistent expansion, marking the 80th consecutive quarter of double-digit growth in Q1 2025 and achieving its highest first-quarter net income in history.

Cash flow generation is a significant strength. Operational cash flow posted double-digit growth in Q2 2025, and in Q1 2025, it expanded by almost 20%, reaching R$1 billion with a cash flow margin of nearly 16%. For the full year 2024, operating free cash flow grew close to 23% year-over-year, reaching over 20% as a percentage of revenue. This robust cash generation supports consistent shareholder remuneration, with the Board approving R$480 million in Interest on Shareholders' Equity on September 23, 2025, to be paid by January 21, 2026. The gross value per share is estimated at R$0.20.

Expanding Horizons: B2B IoT and Digital Ecosystem

Beyond its core mobile business, TIM S.A. is strategically diversifying its revenue streams through its B2B IoT strategy and an expanding digital ecosystem. The B2B IoT segment is performing well, demonstrating substantial growth in contracted revenues, particularly in agribusiness, utilities, and logistics. By Q4 2024, contracted revenues had surpassed BRL 700 million since the project's inception, with BRL 270 million added in 2024 alone.

In logistics, TIM S.A. is consolidating its leadership, having covered approximately 7,000 kilometers of Brazilian highways with digital connectivity, nearly half in partnership with major logistics players. The company is also moving up the value chain by adding solutions like video monitoring and specialized road lighting to its portfolio. In utilities, it has sold over 340,000 smart lighting units with connectivity services.

The digital ecosystem continues to expand through strategic partnerships. A collaboration with Eletrobras (EBR) is materializing, with energy sales to corporate clients launched in two initial markets, targeting approximately 2 million customers with potential discounts of up to 30% on energy bills. Nationwide expansion is expected by September 2025. The 5G fund, managed by Upload Ventures, is bearing fruit, with investees growing their businesses and improving valuations. A new investment in Kat Investimentos, a financial services company, focused on a credit-as-a-service model, further highlights TIM S.A.'s commitment to this growth avenue. Mobile advertising and data monetization have also more than doubled revenues in the past 12 months.

Competitive Dynamics and Strategic Positioning

TIM S.A. operates in a highly competitive Brazilian telecommunications market, primarily contending with Vivo (Telefônica Brasil) and Claro (America Móvil) , both of which possess significant scale and established infrastructure. While Vivo (VIV) emphasizes digital transformation and customer service, and Claro (AMX) focuses on high-speed internet and multimedia content, TIM S.A. differentiates itself through its aggressive 5G leadership, "more-for-more" value proposition, and targeted expansion into B2B IoT and digital ecosystems.

TIM S.A. has consistently demonstrated its network superiority, being the only operator to cover all Brazilian cities with 4G and leading in 5G coverage. Opensignal recognized TIM S.A. as the most awarded operator in its Mobile Network Experience report, winning 7 out of 14 categories and ranking #1 in consistent quality for three consecutive years. This network quality is a crucial competitive moat, allowing TIM S.A. to command the highest ARPU in the industry.

In the postpaid segment, TIM S.A. outpaced its peers in customer base growth in 2024, reinforcing its ability to attract and retain high-value customers. The company's low churn rate of 0.7% further underscores its strong customer loyalty. While regional competitors may be more aggressive on price, TIM S.A. maintains a disciplined approach, focusing on quality of service rather than reacting to price wars. The company views new entrants like Nubank's (NU) MVNO as BTL (Below The Line) offers, comparable to its own targeted migration strategies, and does not anticipate a significant shift in overall pricing dynamics.

However, challenges persist. The prepaid market continues to decline due to migrations to control plans and demand constraints, impacting TIM S.A. more given its higher proportion of prepaid revenues compared to some peers. The fixed broadband market also remains highly competitive and fragmented, with intense price competition from both national and regional players. TIM S.A.'s strategy in this segment is to optimize operations and explore inorganic opportunities, as it currently represents a small portion of revenues and is dilutive to free cash flow.

Outlook and Shareholder Returns

TIM S.A. is firmly on track to meet its 2025 targets and has provided a robust guidance for 2025-2027, projecting sustainable growth. The company expects to achieve revenue growth above inflation, driven by mobile core evolution, the increasing relevance of new revenue streams, and renewed efforts in efficiency. The revenue growth target for 2025 is between 5% and 6%.

Management's assumptions for this outlook include a rational market environment and the continued success of its "more-for-more" strategy, including planned back book and front book price adjustments. Key strategic initiatives for the second half of 2025 include developing new financial services partnerships, advancing B2B IoT solutions, accelerating efficiency programs, implementing a new approach to leases, and improving broadband operations.

The investment plan projects flattish CapEx despite foreign exchange oscillations, while maintaining network leadership. This capital efficiency, combined with revenue growth, is expected to lead to a decreasing CapEx-to-revenue ratio in the medium term. This disciplined capital allocation, coupled with strong operational cash flow evolution and margin expansion, underpins TIM S.A.'s commitment to increased shareholder remuneration. The company confirmed its intention to distribute an additional BRL 2.7 billion in shareholder remuneration for 2024, totaling BRL 3.5 billion. The proceeds from the C6 Bank settlement, an additional BRL 520 million, further bolster the company's cash profile and support shareholder distributions.

Risks and Challenges

Despite a compelling growth story, TIM S.A. faces several risks. Global volatility remains a concern, potentially impacting economic conditions and consumer spending. Inflationary pressures pose a significant challenge, particularly for lease costs, which are a major expense line item. While TIM S.A. is actively negotiating tower contracts and exploring alternatives like building its own towers, these efforts are ongoing and subject to market dynamics.

The prepaid segment's decline due to migration and demand constraints, coupled with a "negative elasticity" from past price adjustments, presents a challenge to overall mobile revenue growth. The highly competitive fixed broadband market, with its intense price competition, also limits TIM S.A.'s growth opportunities in that segment. Furthermore, while TIM S.A. has minimal exposure to exchange rate fluctuations due to contractual bands, significant and sustained depreciation of the Brazilian Real could impact CapEx costs.

Conclusion

TIM S.A. is a compelling investment opportunity, demonstrating a clear trajectory of sustainable growth and a steadfast commitment to shareholder value. The company's strategic focus on 5G leadership, coupled with its disciplined operational efficiency and expanding digital ecosystem, forms a robust foundation for future performance. Its ability to maintain the industry's highest mobile ARPU and drive consistent postpaid growth, even amidst a competitive landscape, underscores the effectiveness of its "more-for-more" strategy and superior network quality.

The ongoing diversification into high-growth areas like B2B IoT and financial services, alongside continuous innovation in AI, positions TIM S.A. to capture new revenue opportunities and further enhance profitability. With a clear guidance for revenue growth above inflation, stable CapEx, and increasing shareholder remuneration, TIM S.A. is poised to deliver consistent financial results. While challenges in the prepaid and fixed broadband markets, along with broader macroeconomic volatility, warrant careful monitoring, TIM S.A.'s technological leadership and strategic agility provide a strong competitive advantage, making it a noteworthy consideration for discerning investors seeking exposure to Brazil's evolving telecommunications sector.