SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the month of May, 2020
Commission File Number 001-14491
TIM PARTICIPAÇÕES S.A.
(Exact name of registrant as specified in its charter)
TIM PARTICIPAÇÕES S.A.
(Translation of Registrant's name into English)
Avenida João Cabral de Melo Neto, nº 850, Torre Norte, 12º andar – Sala 1212,
Barra da Tijuca - Rio de Janeiro, RJ, Brazil
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F _______
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No ___X____
TIM Participações S.A.,
TIM Participações S.A. and
Subsidiary
QUARTERLY INFORMATION
as at March 31, 2020
TIM PARTICIPAÇÕES S.A. and
TIM PARTICIPAÇÕES S.A. e SUBSIDIARY
QUARTERLY INFORMATION
March 31, 2020 and 2019
Contents
Report of the independent auditors on the quarterly information
|
1
|
Audited quarterly information
|
|
Balance sheets
|
3
|
Income statements
|
5
|
Statements of comprehensive income
|
7
|
Statements of changes in shareholders’ equity
|
9
|
Cash flow statements
|
11
|
Statements of value added
|
12
|
Comments on performance
|
13
|
Notes to the quarterly information
|
34
|
Opinion of the Fiscal Council
|
105
|
Declaration of the officers on the financial statements
|
106
|
Statutory officers statement on independent auditors
|
107
|
|
|
INDEPENDENT AUDITOR’S REVIEW REPORT ON QUARTERLY INFORMATION
The shareholders, board of directors and officers
TIM Participações S.A.
Rio de Janeiro - RJ
Introduction
We have reviewed the accompanying individual and consolidated interim financial information, contained in the Quarterly Information Form (ITR) of Tim Participações S.A. (“Company”) for the quarter ended March 31, 2020, comprising the balance sheet as of March 31, 2020 and the statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the three-month period then ended, including the explanatory notes.
Management is responsible for preparation of the individual and consolidated interim financial information in accordance with NBC TG 21 – Demonstração Intermediária, and IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the fair presentation of this information in conformity with the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of the Quarterly Information Form (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope of review
We conducted our review in accordance with Brazilian and international standards on review engagements (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the individual and consolidated interim financial information
Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated interim financial information included in the quarterly information referred to above are not prepared, in all material respects, in accordance with NBC TG 21 and IAS 34 applicable to the preparation of Quarterly Information Form (ITR), and presented consistently with the rules issued by the Brazilian Securities and Exchange Commission (CVM).
Other matters
Statements of value added
1
INDEPENDENT AUDITOR’S REVIEW REPORT ON QUARTERLY INFORMATION
The quarterly information referred to above includes the individual and consolidated statements of value added (DVA) for the nine-month period ended March 31, 2020, prepared under the responsibility of the Company's management and presented as supplementary information for IAS 34 purposes. These statements have been subject to review procedures performed in conjunction with the review of quarterly information to conclude that they are reconciled with interim financial information and accounting records, as applicable, and if their form and content are consistent with the criteria defined in NBC TG 09 “Statement of Added Value”. Based on our review, we are not aware of any fact that leads us to believe that these statements of value added were not prepared, in all material respects, in accordance with the criteria established in the Technical Pronouncement and is consistent with respect to the individual interim financial information and consolidated taken as whole.
Review of prior year/period corresponding figures
The amounts corresponding to the individual and consolidated statements of income comprehensive income, changes in shareholders’ equity, cash flows and value added, for the three periods ended March 31, 2019, presented for comparative purposes, were previously reviewed by other independent auditors who issued an unqualified review report on the interim accounting information on May 07, 2019.
Rio de Janeiro, May 05, 2020.
ERNST & YOUNG
Auditores Independentes S.S.
CRC-2SP015199/O-6
Fernando Alberto S. Magalhães
Accountant CRC-1SP133169/O-0
2
|
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A. AND SUBSIDIARY
|
BALANCE SHEETS
|
March 31, 2020 and December 31, 2019
|
(In thousands of Reais)
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Consolidated
|
|
Notes
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
|
|
Asset
|
|
22,737,360
|
|
23,133,188
|
|
39,499,755
|
|
40,348,924
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
108,250
|
|
677,929
|
|
7,186,880
|
|
8,454,129
|
Cash and cash equivalents
|
4
|
20,396
|
|
762
|
|
1,590,927
|
|
2,284,810
|
Marketable securities
|
5
|
14,365
|
|
12,167
|
|
39,279
|
|
654,479
|
Trade accounts receivable
|
6
|
520
|
|
1,844
|
|
3,123,849
|
|
3,184,780
|
Inventory
|
7
|
-
|
|
-
|
|
268,547
|
|
203,278
|
Dividends and interest on shareholders’ equity receivable
|
13
|
-
|
|
597,550
|
|
-
|
|
-
|
Indirect taxes, charges and contributions recoverable
|
8
|
-
|
|
-
|
|
419,074
|
|
420,284
|
Direct taxes, charges and contributions recoverable
|
9
|
28,474
|
|
28,383
|
|
1,137,312
|
|
1,395,193
|
Prepaid expenses
|
11
|
2,327
|
|
2.729
|
|
411,720
|
|
175,868
|
Derivative Financial Instruments
|
37
|
-
|
|
-
|
|
49,444
|
|
16,602
|
Financial leases
|
16
|
-
|
|
-
|
|
5,379
|
|
4,931
|
Regulatory credits recoverable
|
17
|
-
|
|
-
|
|
47,293
|
|
33,090
|
Other current assets
|
|
42,168
|
|
34,494
|
|
94,056
|
|
80,814
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
22,629,110
|
|
22,455,259
|
|
32.312.875
|
|
31,894,795
|
Long-term receivables
|
|
86,855
|
|
88,077
|
|
4,899,272
|
|
4,614,305
|
Marketable securities
|
5
|
-
|
|
-
|
|
3,926
|
|
3,849
|
Trade accounts receivable
|
6
|
-
|
|
-
|
|
155,841
|
|
103,075
|
Indirect taxes, charges and contributions recoverable
|
8
|
-
|
|
-
|
|
835,344
|
|
823,349
|
Direct taxes, charges and contributions recoverable
|
9
|
-
|
|
-
|
|
2,386,830
|
|
2,367,607
|
Deferred income tax and social contribution
|
10
|
-
|
|
-
|
|
-
|
|
-
|
Judicial Deposit
|
12
|
85,617
|
|
87,049
|
|
969,556
|
|
1,006,899
|
Prepaid expenses
|
11
|
1,238
|
|
1,028
|
|
63,172
|
|
69,656
|
Derivative Financial Instruments
|
37
|
-
|
|
-
|
|
272,627
|
|
29,909
|
Financial leases
|
16
|
-
|
|
-
|
|
150,135
|
|
151,447
|
Other current assets
|
|
-
|
|
-
|
|
61,841
|
|
58,514
|
|
|
|
|
|
|
|
|
|
Investment
|
13
|
22,384,699
|
|
22,209,626
|
|
-
|
|
-
|
Property, plant and equipment
|
14
|
-
|
|
-
|
|
17,874,186
|
|
17,612,164
|
Intangible
|
15
|
157,556
|
|
157,556
|
|
9,539,417
|
|
9,668,326
|
|
The accompanying notes are an integral part of the quarterly information.
3
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A.
AND SUBSIDIARY
|
BALANCE SHEETS
|
March 31, 2020 and December 31, 2019
|
(In thousands of Reais)
|
|
|
Parent
Company
|
|
Consolidated
|
|
Note
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
Other Long-Term
Liabilities
|
|
22,737,360
|
|
23,133,188
|
|
39,499,755
|
|
40,348,924
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
149,905
|
|
701,370
|
|
16,912,300
|
|
17,917,106
|
|
|
|
|
|
|
|
|
|
Current
|
|
71,531
|
|
624,194
|
|
5,957,115
|
|
8,117,479
|
Current
Assets
|
18
|
9,680
|
|
(6,987)
|
|
2,634,800
|
|
3,923,035
|
Suppliers
|
20
|
-
|
|
-
|
|
1,149,764
|
|
1,384,180
|
Loans and financings
|
16
|
-
|
|
-
|
|
885,521
|
|
873,068
|
Financial leases
|
36
|
-
|
|
-
|
|
4,146
|
|
858
|
Derivative Financial Instruments
|
|
1,146
|
|
898
|
|
253,513
|
|
(218,421)
|
Payroll and related charges
|
21
|
545
|
|
530
|
|
585,453
|
|
463,606
|
Indirect taxes, charges and contributions
payable
|
22
|
190
|
|
25,816
|
|
73,864
|
|
296,305
|
Direct taxes, charges and contributions
payable
|
25
|
47,834
|
|
577,837
|
|
47,834
|
|
577,837
|
Dividends and interest on shareholders’ equity
payable
|
19
|
-
|
|
-
|
|
89,285
|
|
88,614
|
Authorizations payable
|
23
|
-
|
|
-
|
|
219,623
|
|
281,930
|
Deferred revenues
|
|
12,136
|
|
12,126
|
|
13,312
|
|
9,625
|
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
78,374
|
|
77,176
|
|
10,955,185
|
|
9,799,627
|
Non-current
assets
|
|
|
|
|
|
|
|
|
Loans and financings
|
20
|
-
|
|
-
|
|
1,311,574
|
|
644,908
|
Derivative Financial Instruments
|
36
|
-
|
|
-
|
|
‐
|
|
3,547
|
Financial leases
|
16
|
-
|
|
-
|
|
7,283,025
|
|
6,907,802
|
Indirect taxes, charges and contributions
payable
|
21
|
‐
|
|
‐
|
|
3,036
|
|
2,997
|
Direct taxes, charges and contributions
payable
|
22
|
‐
|
|
‐
|
|
212,770
|
|
212,310
|
Deferred income tax and social contribution
|
10
|
|
|
|
|
146,441
|
|
47,734
|
Provision for legal and administrative
proceedings
|
24
|
48,622
|
|
47,423
|
|
885,663
|
|
840,637
|
Pension plan and other post-employment
benefits
|
37
|
‐
|
|
‐
|
|
5,782
|
|
5,782
|
Authorizations payable
|
19
|
-
|
|
-
|
|
239,065
|
|
237,723
|
Deferred revenues
|
23
|
-
|
|
-
|
|
808,276
|
|
827,182
|
Other current liabilities
|
|
29,752
|
|
29,753
|
|
59,553
|
|
69,005
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
25
|
22,587,455
|
|
22,431,818
|
|
22,587,455
|
|
22,431,818
|
Capital Stock
|
|
9,866,298
|
|
9,866,298
|
|
9,866,298
|
|
9,866,298
|
Capital reserves
|
|
410,753
|
|
410,650
|
|
410,753
|
|
410,650
|
Profit reserves
|
|
12,159,162
|
|
12,159,162
|
|
12,159,162
|
|
12,159,162
|
Accumulated other comprehensive income
|
|
(1,088)
|
|
(1,088)
|
|
(1,088)
|
|
(1,088)
|
Treasury shares
|
|
(9,511)
|
|
(3,204)
|
|
(9,511)
|
|
(3,204)
|
Profit for the period
|
|
161,841
|
|
‐
|
|
161,841
|
|
‐
|
The explanatory notes are an integral part of the
quarterly information.
4
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A.
AND SUBSIDIARY
|
STATEMENTS OF INCOME
|
Periods ended March 31, 2020 and 2019
|
(In thousands of Reais, except as otherwise
stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Consolidated
|
|
Notes
|
|
1st
Qtr / 20
|
|
03/2020
|
|
1st
Qtr / 19
|
|
03/2019
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
27
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Costs of services provided and goods sold
|
28
|
|
‐
|
|
‐
|
|
-
|
|
-
|
Gross income
|
|
|
‐
|
|
‐
|
|
‐
|
|
‐
|
|
|
|
|
|
|
|
|
|
|
Operational incomes (expenses):
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
28
|
|
‐
|
|
‐
|
|
-
|
|
-
|
General and administrative expenses
|
28
|
|
(8,476)
|
|
(8,476)
|
|
(9,094)
|
|
(9,094)
|
Income from equity accounting
|
13
|
|
172,873
|
|
172,873
|
|
213,721
|
|
213,721
|
Other revenues (expenses), net
|
29
|
|
722
|
|
722
|
|
(45,972)
|
|
(45,972)
|
|
|
|
165,119
|
|
165,119
|
|
158,655
|
|
158,655
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
165,119
|
|
165,119
|
|
158,655
|
|
158,655
|
|
|
|
|
|
|
|
|
|
|
Financial income (Expenses)
|
|
|
|
|
|
|
|
|
|
Financial income
|
30
|
|
2.519
|
|
2.519
|
|
(640)
|
|
(640)
|
Financial expenses
|
31
|
|
(5,797)
|
|
(5,797)
|
|
(41,227)
|
|
(41,227)
|
|
|
|
(3,278)
|
|
(3,278)
|
|
(41,867)
|
|
(41,867)
|
Profit before income tax and social
contribution
|
|
|
161,841
|
|
161,841
|
|
116,788
|
|
116,788
|
|
|
|
|
|
|
|
|
|
|
Income tax and social contributions
|
32
|
|
‐
|
|
‐
|
|
3,246
|
|
3,246
|
|
|
|
|
|
|
|
|
|
|
Net profit for the period
|
|
|
161,841
|
|
161,841
|
|
120,034
|
|
120,034
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to the Company’s
shareholders (expressed in R $ per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
33
|
|
0.07
|
|
0.07
|
|
0.05
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
33
|
|
0.07
|
|
0.07
|
|
0.05
|
|
0.05
|
The accompanying notes are an integral part of the
quarterly information.
5
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A.
AND SUBSIDIARY
|
STATEMENTS OF INCOME
|
Periods ended March 31, 2020 and 2019
|
(In thousands of reais, unless otherwise
stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
Notes
|
|
1st
Qtr / 20
|
|
03/2020
|
|
1st
Qtr / 19
|
|
03/2019
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
27
|
|
4,215,308
|
|
4,215,308
|
|
4,190,826
|
|
4,190,826
|
|
|
|
|
|
|
|
|
|
|
Costs of services provided and goods sold
|
28
|
|
(1,961,448)
|
|
(1,961,448)
|
|
(1,957,381)
|
|
(1,957,381)
|
Gross profit
|
|
|
2,253,860
|
|
2,253,860
|
|
2,233,445
|
|
2,233,445
|
|
|
|
|
|
|
|
|
|
|
Operational incomes (expenses):
|
|
|
|
|
|
|
|
|
|
Sales
|
28
|
|
(1,209,040)
|
|
(1,209,040)
|
|
(1,277,046)
|
|
(1,277,046)
|
General and administrative
|
28
|
|
(438,164)
|
|
(438,164)
|
|
(405,348)
|
|
(405,348)
|
Other revenues (expenses), net
|
29
|
|
(91,534)
|
|
(91,534)
|
|
(102,396)
|
|
(102,396)
|
|
|
|
(1,738,738)
|
|
(1,738,738)
|
|
(1,784,790)
|
|
(1,784,790)
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
515,122
|
|
515,122
|
|
448,655
|
|
448,655
|
|
|
|
|
|
|
|
|
|
|
Financial income (Expenses)
|
|
|
|
|
|
|
|
|
|
Financial income
|
30
|
|
365,217
|
|
365,217
|
|
62,557
|
|
62,557
|
Financial expenses
|
31
|
|
(619,792)
|
|
(619,792)
|
|
(325,105)
|
|
(325,105)
|
|
|
|
(254,575)
|
|
(254,575)
|
|
(262,548)
|
|
(262,548)
|
Profit before income tax and social
contribution
|
|
|
260,547
|
|
260,547
|
|
186,107
|
|
186,107
|
|
|
|
|
|
|
|
|
|
|
Income tax and social contributions
|
32
|
|
(98,706)
|
|
(98,706)
|
|
(66,073)
|
|
(66,073)
|
|
|
|
|
|
|
|
|
|
|
Net profit for the period
|
|
|
161,841
|
|
161,841
|
|
120,034
|
|
120,034
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to the Company’s
shareholders (expressed in R $ per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
33
|
|
0.07
|
|
0.07
|
|
0.05
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
33
|
|
0.07
|
|
0.07
|
|
0.05
|
|
0.05
|
6
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A.
AND SUBSIDIARY
|
COMPREHENSIVE INCOME STATEMENT
|
Periods ended March 31, 2020 and 2019
|
(In thousands of Reais)
|
|
|
1st
Qtr / 20
|
|
03/2020
|
|
1st
Qtr / 19
|
|
03/2019
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
161,841
|
|
161,841
|
|
120,034
|
|
120,034
|
|
|
|
|
|
|
|
|
|
Other items in comprehensive income
|
|
|
|
|
|
|
|
|
Item not to be reclassified to
income:
|
|
|
|
|
|
|
|
|
Pension plan and other
post-employment benefits
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the
period
|
|
161,841
|
|
161,841
|
|
120,034
|
|
120,034
|
The accompanying notes are an integral part of the
quarterly information.
7
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A.
AND SUBSIDIARY
|
STATEMENT OF CHANGES IN SHAREHOLDERS’
EQUITY
|
Periods ended March 31, 2020 and 2019
|
(In thousands of Reais)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
reserves
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
Capital
reserve
|
|
Legal
reserve
|
|
Expansion reserve
|
|
Tax
incentive reserve
|
|
Treasury stock
|
|
Equity
valuation adjustments
|
|
Retained earnings
|
|
Total
|
Balances on December 31st,
2019
|
9,866,298
|
|
410,650
|
|
1,010,090
|
|
9,537,053
|
|
1,612,019
|
|
(3,204)
|
|
(1,088)
|
|
‐
|
|
22,431,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161,841
|
|
161,841
|
Reflection of the amount of
post-employment benefit posted directly in the subsidiary’s shareholders’
equity (note 13)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
‐
|
|
-
|
|
‐
|
|
-
|
|
‐
|
Total comprehensive income for the period
|
|
‐
|
|
‐
|
|
‐
|
|
‐
|
|
‐
|
|
‐
|
|
‐
|
|
161,841
|
|
161,841
|
Total shareholder contributions and distributions to
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options (note 25.b)
|
|
-
|
|
103
|
|
-
|
|
-
|
|
|
|
‐
|
|
-
|
|
-
|
|
103
|
Purchase of treasury shares, net of
disposals
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
6,307
|
|
-
|
|
-
|
|
6,307
|
Total contributions from shareholders and distributions to
shareholders
|
|
‐
|
|
103
|
|
‐
|
|
‐
|
|
‐
|
|
6,307
|
|
‐
|
|
‐
|
|
6,204
|
Balances on March 31,
2020
|
9,866,298
|
|
410,753
|
|
1,010,090
|
|
9,537,053
|
|
1,612,019
|
|
(9,511)
|
|
(1,088)
|
|
161,841
|
|
22,587,455
|
The explanatory notes are an integral part of the
quarterly information.
8
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A.
AND SUBSIDIARY
|
STATEMENT OF CHANGES IN SHAREHOLDERS’
EQUITY
|
Period ended March 31
|
(In thousands of Reais)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit reserves
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
Capital
reserve
|
|
Legal reserve
|
|
Expansion reserve
|
|
Tax
incentive reserve
|
|
Treasury stock
|
|
Equity
valuation adjustments
|
|
Retained earnings
|
|
Total
|
Balances on December 31,
2018
|
9,866,298
|
|
412,091
|
|
838,692
|
|
7,267,574
|
|
1,417,858
|
|
8.523
|
|
847
|
|
‐
|
|
19,794,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,034
|
|
120,034
|
Reflection of the amount of
post-employment benefit posted directly in the subsidiary’s shareholders’
equity (note 13)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
‐
|
|
-
|
|
‐
|
|
-
|
|
‐
|
Total comprehensive income for the period
|
|
‐
|
|
‐
|
|
‐
|
|
‐
|
|
‐
|
|
‐
|
|
‐
|
|
120,034
|
|
120,034
|
Total shareholder contributions and distributions to
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options (note 25.b)
|
|
-
|
|
2,886
|
|
-
|
|
-
|
|
|
|
‐
|
|
-
|
|
-
|
|
2,886
|
Purchase of treasury shares, net of
disposals
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
1,357
|
|
-
|
|
-
|
|
1,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
‐
|
Total shareholder contributions and distributions to
shareholders
|
|
‐
|
|
2,886
|
|
‐
|
|
‐
|
|
‐
|
|
1,357
|
|
‐
|
|
‐
|
|
4,243
|
Balance on March 31,
2020
|
9,866,298
|
|
414,977
|
|
838,692
|
|
7,267,574
|
|
1,417,858
|
|
7,166
|
|
847
|
|
120,034
|
|
19,919,114
|
The accompanying notes are an integral part of the
quarterly information.
9
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A.
AND SUBSIDIARY
|
STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
Periods ended March 31
|
|
|
|
|
|
|
|
|
|
(In thousands of Reais)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Consolidated
|
|
Note
|
|
03/2020
|
|
03/2019
|
|
03/2020
|
|
03/2019
|
Operational activities
|
|
|
|
|
|
|
|
|
|
Income Before Income Tax and Social
Contribution
|
|
|
161,841
|
|
116,788
|
|
260,547
|
|
186,107
|
Adjustments to reconcile profit to cash provided by
operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
-
|
|
-
|
|
1,408,605
|
|
1,334,210
|
Result of equity pickup
|
13
|
|
(172,873)
|
|
(213,721)
|
|
‐
|
|
-
|
Residual value of fixed and intangible assets written
off
|
|
|
-
|
|
-
|
|
2,411
|
|
4,533
|
Interest on obligations arising from the demobilization of
assets
|
|
|
-
|
|
-
|
|
13
|
|
133
|
Provision for administrative and judicial
proceedings
|
24
|
|
8,670
|
|
44,119
|
|
98,088
|
|
95,108
|
Monetary update on deposits and administrative and
judicial proceedings
|
|
|
2,582
|
|
41,516
|
|
57,712
|
|
42,714
|
Interest, monetary and exchange variation on loans and
other financial adjustments
|
|
|
1,030
|
|
-
|
|
68,960
|
|
21,141
|
Interest on commercial leasing
|
31
|
|
-
|
|
-
|
|
166,413
|
|
210,001
|
Interest on commercial leasing
|
30
|
|
-
|
|
-
|
|
(4,937)
|
|
6,422
|
Losses on expected settlement credits
|
28
|
|
-
|
|
-
|
|
188,588
|
|
172,610
|
Calls on shares
|
26
|
|
1,324
|
|
553
|
|
876
|
|
3,198
|
|
|
|
(74)
|
|
10,745
|
|
2,247,276
|
|
2,063,333
|
Decrease (Increase) of operating assets
|
|
|
|
|
|
|
|
|
|
Accounts receivable from customers
|
|
|
1,324
|
|
103
|
|
(150,774)
|
|
(327,822)
|
Taxes and contributions recoverable
|
|
|
(91)
|
|
27,891
|
|
245,268
|
|
96,847
|
Inventory
|
|
|
‐
|
|
-
|
|
(65,269)
|
|
(31,569)
|
Early expenses
|
|
|
192
|
|
543
|
|
(229,369)
|
|
(634,559)
|
Dividends and interest on the stockholders'
equity
|
|
|
597,550
|
|
362,436
|
|
‐
|
|
‐
|
Judicial deposits
|
|
|
3,616
|
|
24,962
|
|
44,042
|
|
44,526
|
Other assets
|
|
|
7,673
|
|
8,843
|
|
(30,311)
|
|
(17,125)
|
Increase (decrease) in operating liabilities
|
|
|
|
|
|
|
|
|
|
Labor liabilities
|
|
|
248
|
|
1.562
|
|
35,092
|
|
33,587
|
Suppliers
|
|
|
2,614
|
|
7.878
|
|
(1,302,096)
|
|
(540,745)
|
Taxes, fees and contributions
|
|
|
11.534
|
|
16,029
|
|
(38,782)
|
|
(112,763)
|
Commitments to be paid
|
|
|
‐
|
|
-
|
|
‐
|
|
7,843
|
Payments of judicial and administrative proceedings
|
24
|
|
(12,236)
|
|
42.023
|
|
(117,473)
|
|
(157,432)
|
Deferred revenues
|
|
|
‐
|
|
-
|
|
(81,213)
|
|
(77,118)
|
Other liabilities
|
|
|
(927)
|
|
(20)
|
|
(41,470)
|
|
5,733
|
Cash generated from
operations
|
|
|
596,077
|
|
349,645
|
|
514,921
|
|
341,270
|
Paid income tax and social contributions
|
|
|
‐
|
|
‐
|
|
(27,308)
|
|
(45,462)
|
Net cash generated by operating
activities
|
|
|
596,077
|
|
349,645
|
|
487,613
|
|
295,808
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Bond and securities
|
|
|
(2,198)
|
|
(7,820)
|
|
615,124
|
|
32.004
|
Additions to fixed and non-tangible assets
|
|
|
-
|
|
-
|
|
(904,351)
|
|
(650,092)
|
Receipt of finance lease
|
|
|
-
|
|
-
|
|
(5.802)
|
|
(5,802)
|
Net cash (invested in) generated by financing
activities
|
|
|
(2,198)
|
|
(7,820)
|
|
(283,425)
|
|
(612,286)
|
10
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A.
AND SUBSIDIARY
|
STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
Periods ended March 31
|
|
|
|
|
|
|
|
|
|
(In thousands of Reais)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Consolidated
|
|
Note
|
|
03/2020
|
|
03/2019
|
|
03/2020
|
|
03/2019
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
New
loans
|
|
|
-
|
|
-
|
|
800,000
|
|
1,000,000
|
Amortization
of loans
|
|
|
-
|
|
-
|
|
(665,997)
|
|
(134,678)
|
Interest paid - Loans
|
|
|
‐
|
|
‐
|
|
(33.264)
|
|
(15.368)
|
Payment of
commercial leasing
|
|
|
-
|
|
-
|
|
(213,313)
|
|
(151,595)
|
Interest paid on
commercial leasing
|
|
|
‐
|
|
‐
|
|
(211,252)
|
|
(200,448)
|
Derivative
Financial Instruments
|
|
|
-
|
|
-
|
|
‐
|
|
‐
|
Purchase of
treasury shares, net of disposals
|
|
|
7,080
|
|
1,045
|
|
(7,080)
|
|
1,045
|
Dividends
and interest on paid equity
|
|
|
(567,165)
|
|
(342,958)
|
|
(567,165)
|
|
(342,958)
|
Net cash
used in financing activities
|
|
|
(574,245)
|
|
(341,913)
|
|
(898,071)
|
|
155,998
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
19,634
|
|
(88)
|
|
(693,883)
|
|
(160,480)
|
|
|
|
|
|
|
|
|
|
|
Cash and
equivalents at the beginning of the period
|
|
|
762
|
|
167
|
|
2,284,810
|
|
1,075,530
|
Cash and
equivalents at the end of the period
|
|
|
20,396
|
|
79
|
|
1,590,927
|
|
915,050
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
03/2020
|
|
03/2019
|
|
|
|
|
|
|
|
|
|
|
Non-cash
transactions
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and
equipment and intangible assets - with no effect on cash
|
|
|
|
(643,466)
|
|
(5,054,003)
|
Increase in leasing obligations - no
effect on cash
|
|
|
|
|
|
643,466
|
|
5,054,003
|
The accompanying notes are an integral part of the
quarterly information.
11
TIM PARTICIPAÇÕES S.A., TIM PARTICIPAÇÕES S.A.
AND SUBSIDIARY
|
STATEMENTS OF VALUE ADDED
|
Periods ended March 31, 2020 and 2019
|
(In thousands of Reais)
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Consolidated
|
|
03/2020
|
|
03/2019
|
|
03/2020
|
|
03/2019
|
Revenue
|
|
|
|
|
|
|
|
Gross operational revenue
|
‐
|
|
-
|
|
6,091,893
|
|
6,104,071
|
Losses on allowance for loan losses
|
‐
|
|
-
|
|
(188,588)
|
|
(172,610)
|
Discounts granted, returns and others
|
‐
|
|
-
|
|
(679,874)
|
|
(658,608)
|
|
‐
|
|
‐
|
|
5,223,431
|
|
5,272,853
|
Supplies acquired from third parties
|
|
|
|
|
|
|
|
Costs of services provided and goods
sold
|
‐
|
|
-
|
|
(599,276)
|
|
(717,716)
|
Materials, energy, third-party services, and
other
|
(2,517)
|
|
(48,286)
|
|
(796,131)
|
|
(852,903)
|
|
(2,517)
|
|
(48,286)
|
|
(1,395,407)
|
|
(1,570,619)
|
Retentions
|
|
|
|
|
|
|
|
Depreciation and amortization
|
‐
|
|
‐
|
|
(1,408,605)
|
|
(1,334,210)
|
Net value added generated
|
(2,517)
|
|
(48,286)
|
|
2,419,419
|
|
2,368,024
|
Value added received in transfer
|
|
|
|
|
|
|
|
Result of equity pickup
|
172,873
|
|
213,721
|
|
‐
|
|
-
|
Financial income
|
2.519
|
|
(640)
|
|
365,217
|
|
62,557
|
|
175,392
|
|
213,081
|
|
365,217
|
|
62,557
|
Total added value to be distributed
|
172,875
|
|
164,795
|
|
2,784,636
|
|
2,430,581
|
|
|
|
|
|
|
|
|
Added value distribution
|
|
|
|
|
|
|
|
Personnel and expenses
|
|
|
|
|
|
|
|
Direct
remuneration
|
1,986
|
|
4,125
|
|
136,108
|
|
124,733
|
Benefits
|
216
|
|
241
|
|
47,894
|
|
47,127
|
F.G.T.S.
|
67
|
|
111
|
|
14,878
|
|
13,749
|
Others
|
1,362
|
|
1,426
|
|
11,133
|
|
16,046
|
|
3,631
|
|
(5.903)
|
|
210,013
|
|
201,655
|
Taxes, fees and contributions
|
|
|
|
|
|
|
|
Federal
|
1,609
|
|
(2,369)
|
|
592,043
|
|
624,393
|
State
|
‐
|
|
-
|
|
953,761
|
|
961,074
|
Municipal
|
‐
|
|
-
|
|
33,745
|
|
28,690
|
|
1,609
|
|
(2,369)
|
|
1,579,549
|
|
1,614,157
|
Third-party Capital Remuneration
|
|
|
|
|
|
|
|
Interest
|
5,787
|
|
41,224
|
|
619,188
|
|
324,857
|
Rentals
|
7
|
|
3
|
|
214,045
|
|
168,188
|
|
5,794
|
|
41,227
|
|
833,233
|
|
493,045
|
Others
|
|
|
|
|
|
|
|
Social investment
|
‐
|
|
-
|
|
‐
|
|
1,690
|
|
‐
|
|
‐
|
|
‐
|
|
1,690
|
Shareholder's Equity Remuneration
|
|
|
|
|
|
|
|
Retained earnings
|
161,841
|
|
120,034
|
|
161,841
|
|
120,034
|
|
161,841
|
|
120,034
|
|
161,841
|
|
120,034
|
The accompanying notes are an integral part of the
quarterly information.
12
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
Highlights
Migrating from Volume to Value: continued transformation of the customer base profile
· TIM Live's UBB customer base grew 20.2% YoY, totaling 584k connections;
· Mobile ARPU maintained a solid advance of 4.8% YoY, reaching R$ 23.9;
· TIM Live ARPU posted robust growth of 6.1% YoY, reaching R$ 84.5;
· TIM Black Família offer reached ~500 thousand clients, contributing in a positive manner to the dynamics of migration to higher-value plans.
Infrastructure Development for a Better Client Experience
· Leader in 4G coverage spanning 3,506 cities, while utilizing multiple frequencies (700 MHz, 1.8 GHz, 2.1 GHz and 2.5 GHz) in order to expand capacity;
· 4G coverage in 100% of Paraná, Santa Catarina and Espírito Santo municipalities. São Paulo and Rio de Janeiro are also entirely covered;
· VoLTE technology available in more than 3,459 cities, improving voice user experience;
· Accelerated expansion of FTTH with 2.5 million homes covered by fiber optic in 24 cities as of March.
Resilient EBITDA, with strong cost efficiency compensating for post-COVID-19 challenges
· Services Revenue up 1.7% YoY in 1Q20;
· Client Generated Net Revenues (mobile segment) rose 1.3% YoY;
· TIM Live revenues advanced 29.1% YoY, maintaining its fast growth;
· Normalized Costs and Expenses* dropped 4.9% YoY, demonstrating an efficient approach amid short-term challenges;
· Normalized EBITDA* reached R$ 1.9 billion, maintaining its solid evolution at 8.0% YoY;
· Normalized EBITDA Margin* reached 45.7% in 1Q20, maintaining a good YoY expansion (+3.1 p.p.).
*Normalized Operating Costs and Normalized EBITDA according to the items in the Costs section (+R$ 2.6 million in 1Q20 and +R$ 1.5 million in 1Q19). Net Income normalized by adjustment to deferred taxes (+R$ 30.3 million in 1Q19).
Financial Performance (Including the effects of IFRS 9, 15 and 16)
13
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
OPERATING REVENUE
Mobile Segment Details (net of taxes and deductions):
Mobile Service Revenues (MSR) reached R$ 3,840 million in 1Q20, growth of 1.2% compared to the same quarter of the previous year. The expansion slowdown reflected mostly a sharper decline in prepaid revenues, following the reduction in the number of rechargers in the segment.
The dynamic of Mobile ARPU (Average Monthly Revenues per User), which grew 4.8% YoY to reach R$ 23.9, reflects the maintenance of the company's successful efforts to monetize its customer base through migrations to higher-value plans.
The segments' ARPU, which excludes other mobile revenues, rose in prepaid by 4.6% YoY (R$ 12.1) and in postpaid (ex-M2M) by 4.3% YoY (R$ 44.5).
14
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
Breakdown of each mobile segment in the first quarter:
(i) In prepaid we saw a reduction in the number of rechargers, reflecting the economic fallout from the COVID-19 pandemic, especially income restrictions and the shuttering of many physical recharge channels. We noted a reduction of approximately 10% YoY in the number of clients that recharged in 1Q20, an impact mainly from social distancing. The TIM Pré Top offer already accounts for 72% of the segment's base and keeps contributing for a greater resiliency in recharger spending. As a result, Prepaid Revenues fell 4.5% YoY in 1Q20.
(ii) The postpaid segment had a more limited financial impact from COVID-19 in the quarter. The TIM Black Família offer reached ~500k clients, positively contributing to higher-value plans representativeness in the base mix. In addition, the segment recorded a reduction in disconnections, corroborating the return to positive net additions, and resulting in a 2.8% YoY growth in Postpaid revenues in 1Q20 (+3.7% YoY excluding interconnection). The segment's dynamics experienced relevant changes from the third week of March, with the gradual shuttering of virtually all physical sales channels. Amid this context, we witnessed a sharp contraction in gross additions, which were partially compensated for by a reduction in disconnections.
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Interconnection Revenues (ITX) maintained a downward trajectory and in 1Q20 posted a 19.7% reduction YoY, reflecting a lower incoming traffic. The incidence of VU-M on Net Service Revenues reached 2.4% in the quarter.
Other Revenues rose 17.0% YoY in 1Q20. This performance remains impacted mainly by revenues generated by network sharing and swap agreements. The increase in network sharing volume is aligned with the company's strategy to expand the fiber transport infrastructure (backbone and backhaul) with greater efficiency in asset allocation (Capex and Opex).
|
Breakdown of Fixed Segment (net of taxes and deductions):
Fixed Service Revenues totaled R$ 251 million in the quarter, a 9.4% increase from 1Q19. This performance reflects the growth of TIM Live, which in rose 29.1% YoY in 1Q20 and already accounts for approximately 58% of fixed service revenues. By the end of March, TIM Live was present in 26 cities (including 6 capitals) and will further expand its coverage in the coming quarters.
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|
15
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
The remaining services in the fixed segment dropped 9.3% YoY.
Detailing Handsets and Devices (net of taxes and deductions):
In the quarter, Revenues from Products fell 25.5% YoY, mainly due to a decline in the volume of handsets sold (29.4% YoY) reflecting the handset market’s sharp contraction stemming from lower disposable income and a currency devaluation increasing handset prices.
16
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
OPERATING COSTS AND EXPENSES
*Operating Costs normalized by adjustments to the sale-leaseback contract of towers (+R$ 2.6 million in 1Q20 and +R$ 1.5 million in 1Q19).
Operating Costs and Expenses were R$ 2,292 million in 1Q20 (-4.8% YoY). During the quarter, this item was impacted by non-recurring expenses – totaling R$ 2.6 million – related to adjustments to the sale-leaseback contract of towers.
Note: due to the adoption of IFRS 16, Operating Costs and Expenses - mainly those reported within the Network account - are not impacted by rents, sharing or other types of lease agreements with terms exceeding 12 months, as determined by the standard. Therefore, the amounts for long-term contracts related to infrastructure lease (in addition to others less relevant), important for the company’s operations, are reflected in the P&L under Depreciation and Financial Expenses.
Breakdown of Performance of Costs and Expenses:
Personnel rose 4.7% YoY in 1Q20. This performance was influenced mainly by organic elements such as inflation on wages.
Selling and Marketing Expenses fell 10.2% YoY in 1Q20, reflecting the structural trends seen in prior quarters with efficiency gains from initiatives focusing on process digitization, reduction of FISTEL expenses and lower prepaid recharging fees, as well as lower spending on advertising. It is important to note that this line was also impacted during part of 1Q20 by a lower volume of sales and recharging due to the economic fallout from the COVID-19 pandemic.
The Network and Interconnection Group fell 4.7% YoY in 1Q20, driven by lower costs in the interconnection subgroup (ITX). The decline in the ITX subgroup is explained by: (i) drop in the mobile termination rate (VU-M) in January and February compared to 2019 and (ii) lower pressure
from traffic to other operators. The Network subgroup was impacted by lower costs from infrastructure sharing.
17
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
General and Administrative Expenses (G&A) rose 21.3% YoY in the quarter. This growth is explained mainly by higher spending on IT projects, consultancies and legal and administrative services.
Cost of Goods Sold (COGS) fell 20.1% YoY in 1Q20, aligned with the sharp decline in Prouct Revenues caused by a lower volume of handsets sold, mostly due to the COVID-19 pandemic, although higher-value products represented bigger share of the sales mix.
In 1Q20, Provisions for Doubtful Accounts (Bad Debt) rose 9.3% YoY. For the fourth consecutive quarter, the pace of growth slowed, remaining the most challenging cost-related line. After posting the first quarterly reduction in 4Q19, the line grew by 0.9% QoQ in 1Q20. The performance is explained by a higher revenue base exposed to delinquencies, due to the 5.3% YoY increase in the postpaid base, in addition to a challenging macroeconomic environment (unemployment, income and indebtedness). Still, the improvement seen in the past two quarters reflects efforts to enhance client acquisition, through more sophisticated credit models and policies, and higher efficiency in collection and recovery.
Other Operating Expenses normalized by non-recurring effects declined 11.9% YoY in 1Q20, explained mainly by a reduction in contingency expenses. The participation of this line in total normalized OPEX was 3.9% in 1Q20 (4.2% in 1Q19).
Subscriber Acquisition Costs (SAC = subsidy + commissioning + advertising expenses) totaled R$ 59.6 per gross addition in 1Q20, down by 5.2% YoY. The steep reduction was due to more efficiency in selling and marketing expenses.
|
The SAC/ARPU ratio (payback per client) fell YoY, reaching 2.4 months in 1Q20, from 2.8 months in 1Q19.
|
18
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
FROM EBITDA TO NET INCOME
* EBITDA normalized according to the items in the Costs section (+R$ 2.6 million in 1Q20 and +R$ 1.5 million in 1Q19). Net Income normalized by adjustment to deferred taxes (+R$ 30.3 million in 1Q19).
BITDA (Earnings before interest, taxes, depreciation and amortization)
EBITDA exposure to MTR was 0.4% in 1Q20. In this quarter, net MTR (revenue – cost) was positive due to interconnection revenues slightly higher than costs with MTR.
DEPRECIATION AND AMORTIZATION (D&A) / EBIT
In 1Q20, D&A rose 5.6% YoY explained mostly by an increase in the amortization of the 700 MHz license, related to the operational expansion in new cities (offset by lower software amortization), and by a higher volume of leasing contracts following the adoption of IFRS 16.
19
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
Normalized EBIT in 1Q20 rose 15.0% YoY, reflecting EBITDA growth. Normalized EBIT margin ended the quarter at 12.3%, a 1.5 p.p. expansion from 1Q19.
NET FINANCIAL RESULT
Net Financial Result in 1Q20 was negative by R$ 255 million, a R$ 8 million improvement compared to 1Q19. The difference is mainly due to:
(i) Higher financial revenues from monetary correction of the tax credit balance stemming from the right to exclude ICMS from the calculation basis for PIS and COFINS contributions (the remaining balance at the end of each period is updated by the Selic rate until its full compensation, thus becoming a recurring element for the subsequent years);
(ii) Lower expense due to a decline in the interest rate and, consequently, lower accrual of interest on debt, and a smaller volume of interest on leasings.
INCOME TAX AND SOCIAL CONTRIBUTION
In 1Q20, Income Tax and Social Contribution totaled -R$ 99 million, a R$ 33 million increase compared to 1Q19, mainly due to higher Earnings Before Taxes. On a Normalized basis, the R$ 63 million increase compares to IR/CSLL of R$ 36 million in 1Q19, when the line was impacted extraordinarily by deferred taxes.
In 1Q20, the effective rate stood at -37.9% vs. -35.5% in 1Q19 (-19.1% on a Normalized basis).
NET INCOME
20
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
CASH FLOW, DEBT AND CAPEX
* EBITDA normalized according to the items in the Costs section (+R$ 2.6 million in 1Q20 and +R$ 1.5 million in 1Q19).
CAPEX
Capex totaled R$ 904 million in 1Q20, growth of 39.1% from 1Q19. The increase was mostly due to a lower level of Capex in 1Q19, which represented only 17% of the total amount invested in 2019. The Capex of 1Q20 remains in accordance to our plan. Investments are still being destined to infrastructure (exceeding 90% of the total), mainly to projects in IT, 4G technology through 700 MHZ, transport network and FTTH expansion (which received approximately 15% of the investments made in 1Q20).
VARIATION IN WORKING CAPITAL
Working capital variation was negative by R$ 1,415 million, a decrease of 2.9% when compared to 1T19. Unlike the first quarter of last year, the negative impact in 1Q20 was caused mainly by a R$ 1,302 million reduction in the Suppliers account (vs. a reduction of 541 million in 1Q19). In 2019, the impact on Working Capital from the payment of acquisitions at the end of 2018 was seen only partially in 1Q19, with the remainder impacting 2Q19. For late 2019 acquisitions, this impact was mainly seen in 1Q20.
In 1Q20, the FISTEL payment (about R$ 789 million) – usually due in March – was postponed to August 31st (with the possibility make the full payment on this date or to pay it in five instances beginning on this date). However, it is important to highlight that the share of FISTEL related to Condecine (approximately R$ 227 million) was paid in March 31st (original due date) due to lack of legal support warranting the non-payment. The injunction postponing this payment to August was released by the end of the same day e the amount was fully refunded on April 2nd. In summary, this payment negatively impacted 1Q20 Cash Flow (with benefit in this quarter thus totaling approximately R$ 562 million, relative to TFF and CFRP). On the other hand, its refund will bring a positive effect to Cash Flow of 2T20.
21
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
DEBT AND CASH
Gross Debt in 1Q20 was R$ 10,156 million, up R$ 1,012 million YoY. The current balance includes (i) leasing recognition in the total amount of R$ 8,013 million (related to the sale of towers, the LT Amazonas project and leasing contracts with terms exceeding 12 months, pursuant to IFRS 16) and (ii) hedge position in the amount of R$ 318 million (reducing gross debt). Excluding the leasing contracts related to the adoption of IFRS 16, gross debt would be R$ 3,571 million. At the end of march, TIM’s financing debt (post hedge) was R$ 2,143 million.
TIM’s financing debt consists mainly of Debentures and financing with private banks. Approximately 38% of the total financing debt is denominated in foreign currency (USD and EUR) and is fully hedged to local currency. The average cost of debt excluding leasing was 4.5% p.y. in the quarter, down compared to 7.6% p.y. in 1Q19.
In 1Q20, TIM borrowed R$ 800 million to strengthen its cash position after repaying the outstanding balance with BNDES (~R$ 620 million). In April, the company's Board of Directors approved a R$ 1,000 million debt financing to enhance liquidity ahead of possible impacts that the COVID-19 pandemic may cause on the economy. Of that figure, TIM raised R$ 574 million from Scotiabank in April and is now monitoring alternatives regarding the remainder. At the end of March, TIM had R$ 2,252 million worth of credit lines available for drawdown at BNDES and BNB.
The debt repayment schedule is presented below:
At the end of the quarter, Cash and Securities totaled R$ 1,630 million, a reduction of R$ 38 million YoY.
22
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
The average financial yield was stable at 3.9% p.y. in 1Q20, down compared to 6.5% p.y. in 1Q19, following the reduction of the Selic base rate.
In 1Q20, Net Debt totaled R$ 8,526 million, up by R$ 1,050 million compared to the same period a year earlier, when net debt was R$ 7,477 million. The increase is explained by a higher leasing volume due to more rentals and infrastructure sharing contracts being classified as financial leases under IFRS 16.
Net Debt to EBITDA stood at 1.03x in the quarter. Excluding financial leasing from the adoption of IFRS 16, Net Debt to EBITDA was 0.28x in the quarter, down compared to 0.35x in 1Q19.
23
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
QUARTERLY EVENTS AND SUBSEQUENT EVENTS
TIM REINFORCES COMMITMENT TO EMPLOYEES, CUSTOMERS AND SOCIETY IN FIGHTCOVID-19
The services will remain in full operation and the company is focused on customer demands and access to information, in addition to taking all measures to preserve the health and safety of its employees and prioritize collaboration with government agencies and other entities. These are TIM's commitments in fighting the transmission of the new coronavirus, described in a letter sent to Anatel on April 3rd.
TIM is aware that technology has an essential role to face the crisis and contain the spread of the virus.
The TIM Group's experience in Italy has been important in anticipating and adapting the necessary actions and meeting the requirements during the period of coronavirus fight in Brazil. TIM is confident that the whole of society will be united and will emerge even stronger from this situation.
CADE AND ANATEL APPROVAL FOR TIM-VIVO NETWORK SHARING AGREEMENT
On April 23rd, the general office of the CADE Antitrust council approved - without restrictions - the agreement signed between TIM and Vivo to share 2G, 3G and 4G networks. Later, on April 30th, Anatel also unanimously approved the agreement. TIM expects, initially, to consolidate the 2G network in 50 cities.
TIM CHOSES GOOGLE CLOUD AS STRATEGIC PARTNER TO PROVIDE CLOUD BIG DATA, ANALYTS AND MACHINE LEARNING PLATFORM
TIM Brasil concluded an agreement with Google Cloud to use Google Cloud Platform (GCP) as its strategic platform of cloud for Big Data, Analytics and Machine Learning. The Google Cloud platform allows the company to make analysis in real-time to achieve exclusive insights about its business. This information will help the operator to enhance even further its services to clients, the planning and optimization of the network and to provide custom offers to users, as well as product based on data and analytics. Google Cloud will be responsible for providing Google Cloud Platform and also consultancy involving the migration from current environment, redesign and optimization on cloud, as well as the support in constructing TIM’s CoE (Center of Excellence), which will be responsible to manage the environment once it is complete.
24
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
Operating and Marketing Performance
MOBILE SEGMENT:
GENERAL MARKET
The mobile market fell 0.8% YoY in 1Q20, a record low level of reduction in 20 quarters. Prepaid led the contraction, as the SIM card consolidation continued. In the past 12 months, the segment experienced net disconnections of 12.6 million users. Postpaid retained its pace of expansion with net additions of 10.8 million users. Human lines (ex-M2M) still accounted for approximately half of this performance.
TIM
TIM ended 1Q20 with 52.8 million users, ending the period at -4.1% YoY.
|
The postpaid base totaled 21.7 million lines. The addition of 1.1 million lines in the past 12 months led to 5.3% growth YoY in the number of users. The segment keeps expanding within the total base, setting a new record of 41.0% (+3.7 p.p. YoY). New activations remained as the main lever of growth in the quarter, however at low levels - similar to those observed three years ago - due to the shuttering of sales channels during March 2020. On the other hand, voluntary churn fell 3.9% compared to the prior quarter. TIM Black Família remains an important driver of value, reaching a milestone of ~500k users in the quarter. Since the end of March 2020, TIM has been adopting adjustment measures to the segment amid the pandemic, in order to help clients to keep their lines with special payment conditions.
|
The prepaid base totaled 31.2 million users, down 9.7% YoY. In the past 12 months, the segment presented 3.4 million net disconnections. During the quarter, total net disconnections hit 1.8 million. With the dynamic for new users affected, churn had a greater impact on net growth for the segment as the metric is determined by business rules that are still in place during social distancing. The uncertain macroeconomic environment could add another challenge to prepaid
acquisitions. We implemented a few temporary bonuses, seeking to retain clients and avoid increased marketing costs in the future aimed at acquiring clients.
25
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
The 4G base ended 1Q20 with 38.6 million users, again presenting fast growth (8.3% YoY). Total handsets featuring this technology reached 79% of voice users (+11.1 p.p. YoY). YoY).
The M2M base ended the quarter with 3.8 million users (+60% YoY). The strong result in the year is still an outcome of the incorporation of the M2M user base of Porto Seguro Conecta in 2Q19.
FIXED SEGMENT:
TIM Live ended 1Q20 with 584k users (+20.2% YoY). Users starting at 100 mbps reached 36% of the total, a 20 p.p. increase YoY.
Net additions to FTTH (Fiber To The Home) remained responsible for the good performance of the business, and kept an YoY acceleration with 28k new users in the quarter and 124k in the past 12 months. It is important to note that the commercial dynamic initially saw a deceleration, as social distancing took effect. As the operation had to be adapted, our main sales channel, dubbed door-to-door, made way to digital and the impact was accommodated, allowing the resumption of growth for this service.
|
|
In 1Q20 we launched in a new city, Betim (Minas Gerais state), furthering the expansion into the segment's potential market. TIM Live coverage ended the period present in 24 cities with FTTH.
26
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
Quality and Network
QUALITY AND CUSTOMER EXPERIENCE
With the social distancing caused by the COVID-19 pandemic, at the end of March, 100% of TIM's brick-and-mortar stores were closed. This led to an even higher need for digital sales channels. In this quarter, sales in postpaid and consumer control rose 4.6% YoY. Also, digital recharges keep increasing their penetration in total sales, up +3.6 p.p. YoY in 1Q20.
The app Meu TIM again proved to be a highly relevant platform in customer relationship, streamlining customer service and promoting adequate functions to help clients manage their plans. The app's total unique users grew 18.9% YoY. Even with added relationship difficulties, human interactions declined 24.9% YoY, corroborating our caring strategy and cutting dependence on call centers.
Additional important factors are the digital means for billing and payment, which maintained growth during 1Q20. The invoices delivered via digital channels rose 12.3% YoY. Meanwhile, the number of
users paying via digital channels also expanded by +11.7% YoY. Another important function offered to customers is the possibility to add credit and/or to check one's balance, in addition to receiving invoices through WhatsApp.
27
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
In the latest Satisfaction and Perceived Quality Survey released by Anatel in 2020, TIM maintained a superior perception in terms of general satisfaction for broadband and fixed services, compared to the average in Brazil.
|
|
NETWORK DEVELOPMENT
As a fundamental pillar within TIM's strategic plans, the expansion and enhancement of network infrastructure is associated with the continuous improvement of service quality. At the beginning of the year, TIM took another important step in this process. Even with the challenges concerning the fight against the novel coronavirus, the company maintained its investments in network expansion and completed the 4G coverage in all 399 municipalities in the state of Paraná, all 295 municipalities in the state of Santa Catarina and all 78 municipalities in the state of Espírito Santo, becoming the third, fourth and fifth states with 100% of their municipalities covered by the technology.1
Capex dedicated to infrastructure projects (Network + IT) topped 90% in 1Q20, again underpinned by analytical tools that allowed an efficient resource allocation. Highlighted projects:
o Expansion of the fiber optic network (backbone, backhaul and FTTH);
o Frequency refarming;
o Densification of sites;
o Aggregation of carriers;
o Agreements in sharing and transport network.
Regarding the main actions and projects underway for modernization, efficiency and/or enhancement of our infrastructure during this quarter, we highlight:
o Expansion of refarming of 2.1 GHz frequency in 4G, reaching approximately 304 cities;
1 São Paulo, Rio de Janeiro, Espírito Santo, Santa Catarina and Paraná are the states with 4G coverage from TIM for 100% of their municipalities.
28
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
o Installation of multiple data centers to enhance experience (25 at the end of 1Q), of which are 14 DCC (Data Center Core) and 11 are DCE (Data Center Edge);
o Infrastructure virtualization project;
o Expansion of VoLTE, available in more than 3,450 cities;
o Expansion of network capacity through the solution Massive MIMO;
o Approval of the Network Sharing Agreement with Vivo: 50 cities with shared 2G as an initial effort;
o Consolidation of NB-IoT network, present in more than 3,322 municipalities, enabling the creation of IoT solutions not only in big cities, but in distant municipalities.
As the leader in 4G coverage in Brazil, TIM reached 3,506 cities (94% of the country's urban population) in the first quarter of 2020. The 37% growth YoY in network elements for this technology adds to our focus to increase capacity and quality of the mobile network. As a result, 4G data traffic accounted for approximately 87% of the total, up 8 p.p. compared to 1Q19.
Fixed broadband coverage is also enjoying constant expansion, having reached in the first quarter of this year 2.5 million homes in FTTH, while FTTC surpassed 3.6 million. This represents a total of 5.6 million homes in 26 cities (FTTH + FTTC)2. In 1Q20, FTTH initiated commercial activities in a new city: Betim (Minas Gerais state).
In transport infrastructure, TIM reached a total of 21,652 sites in the quarter and 84% of said units are connected via high capacity backhaul. The company exceeded 102,000km with its fiber optic for backbone and backhaul (representing an 11.2% advance YoY).
Lastly, by reaching a total of 1,582 active Biosites at the end of 1Q20, TIM again proves that it keeps targeting the development of this infrastructure, which is aligned with its corporate social responsibility values, in addition to being a solution for the densification of the mobile access network (antennas/towers) with a very low visual impact. In addition, Biosites also have a lower cost, are installed quickly and contribute to the harmonization with the environment and urban
infrastructure – a multi-functionality beyond the transmission of telecommunications, lighting and security cameras.
2 (+) Rio de Janeiro (RJ), São Gonçalo (RJ), Nilópolis (RJ), Nova Iguaçu (RJ), São João do Meriti (RJ), Duque de Caxias (RJ), São Paulo (SP), Mauá (SP), Poá (SP), Suzano (SP), Francisco Morato (SP), Franco da Rocha (SP), Diadema (SP), Salvador (BA), Lauro de Freitas (BA), Camaçari (BA), Feira de Santana (BA), Recife (PE), Olinda (PE), Jaboatão dos Guararapes (PE), Paulista (PE), Goiânia (GO), Aparecida de Goiânia (GO), Anápolis (GO) and Manaus (AM).
29
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
Currently, the Company is authorized to use more than 110 MHz, with 36 MHz in frequencies below 1 GHz distributed as follows:
Average Spectrum Weighted by Population
|
700 MHz
|
850 MHz
|
900 MHz
|
1,800 MHz
|
2,100 MHz
|
2,500 MHz
|
20
|
11
|
5
|
35
|
22
|
20
|
30
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
Corporate Social Responsibility
To access the quarterly report on Social and Corporate Responsibility, please refer to: www.tim.com.br/ri/ ESG-Report.
Disclaimer
The consolidated financial and operating information disclosed in this document, except where otherwise indicated, is presented in accordance with the International Financial Reporting Standards (IFRS) and in Brazilian Reais (R$), in compliance with the Brazilian Corporate Law (Law 6,404/76). Comparisons refer to the first quarter of 2019 (1Q19) and the year to date 2020 (3M20), 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 report 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.
31
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
Attachments
Attachment 1: Operating Indicators
32
2020 First Quarter Results (Including the effects of IFRS 9, 15 e 16)
Attachment 6
TIM PARTICIPAÇÕES S.A.
Operating Ratios
33
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND SUBSIDIARY
NOTES TO THE QUARTERLY INFORMATION
As at March 31
(In thousands of Reais, except as otherwise stated)
1. Operations
1. a Corporate Structure
TIM Participações SA (“TIM Participações” and / or “Company”) is a publicly-held company, headquartered in the city of Rio de Janeiro, RJ, controlled by TIM Brasil Serviços e Participações SA (“TIM Brasil”). TIM Brasil is a subsidiary of the Telecom Italia group and held 66.58% of TIM Participações’ capital stock on March 31, 2020 and December 31, 2019.
The main purpose of the Company and its subsidiary (the “Group”) is to control companies providing telecommunications services, including personal mobile telecom services and others, in their licensed areas. The services provided by TIM Participações’ subsidiary are regulated by the Agência Nacional de Telecomunicações (“ANATEL”).
The Company’s shares are traded on B3 (formerly 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 market best practice, TIM Participações adopts the practice of simultaneously releasing its financial information in Reais in both markets, in Portuguese and English.
CVM approves category “A” registration request of TIM S.A
On March 18, 2020, TIM PARTICIPAÇÕES SA and its wholly-owned subsidiary, TIM SA, after the Material Fact published on October 28, 2019, communicate to their shareholders, the market in general and the other interested parties that TIM SA that received, on March 17, 2020, Official Letter-RIC nº 4/2020 / CVM / SEP informing about the granting of registration as a publicly held company in category “A” before CVM (without offering securities), according to CVM Instruction 480/09 .
The Company and TIM SA note that there was no request to register a Securities Offer, which is why this communication should not be considered a public offering of shares or other securities of the Company or TSA. Single Company
Direct subsidiary – TIM S.A.
TIM S.A. (current name of INTELIG TELECOMUNICAÇÕES LTDA. and successor by merger of TIM CELULAR S.A.)
The Company holds 100% of TIM S.A.’s capital. This subsidiary provides Landline Telephone Services (“STFC”) - Domestic Long-Distance and International Long-Distance Voice Services, Personal Mobile Service (“SMP”) and Multimedia Communication Services (“SCM”) in all Brazilian states and in the Federal District.
34
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND SUBSIDIARY
NOTES TO THE QUARTERLY INFORMATION - continued
As at March 31
(In thousands of Reais, except as otherwise stated)
2. Basis for preparation and disclosure of the quarterly information
The individual and consolidated quarterly information has been prepared in accordance with the accounting practices adopted in Brazil, which include the rulings issued by the CVM and the pronouncements, guidance and interpretations issued by the Accounting Pronouncements Committee (“CPC”) and the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), and provide all material information required for such quarterly information, and only such information, which is consistent with the information used by Management in the course of its duties. In addition, the Company has taken into account the guidance provided in Technical Guidance OCPC 07 in the preparation of its quarterly information. Thus, the relevant information in the quarterly information is being evidenced and corresponds to that used by the Management in its management.
The significant accounting policies applied to the preparation of this quarterly information are described below and/or presented in the respective notes. These policies were consistently applied to the years presented, unless otherwise indicated.
a. General preparation and disclosure criteria
The quarterly information were prepared taking into account the historical cost as the base value as well as financial assets and liabilities (including derivative financial instruments) measured at fair value.
The individual and consolidated quarterly information were prepared in accordance with accounting practices adopted in Brazil issued by the Accounting Pronouncements Committee (CPC) and in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Due to the fact that accounting practices adopted in Brazil applied in the individual quarterly information, as from 2014, do not differ from the IFRS applicable to the separate quarterly information, since this standard now allows the application of the equity method in subsidiaries, affiliates and joint ventures in the separate statements, they also comply with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). These individual statements are disclosed together 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 exception to this procedure involves deferred income tax and social contribution balances (assets and liabilities) and contingent liabilities that are fully classified as long-term.
The presentation of the individual and consolidated Statement of Value Added (Demonstração do Valor Adicionado – “DVA”) is required by the Brazilian Corporate Legislation and accounting practices adopted in Brazil applicable to listed companies. The DVA was prepared according to the criteria set forth in CPC Technical Pronouncement No. 09 - “Statement of Value Added”. IFRS does not require the presentation of this statement. As
a consequence, according to
the IFRS, this statement is presented as supplementary information, without
affecting the quarterly information.
35
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Interests paid are classified as
financing cash flow in the statement of cash flows as it represents costs of
obtaining financial resources.
b. Functional currency and
presentation currency
The presentation currency for the quarterly information is the
Real
(R$), which is also the functional currency for the company consolidated in
these quarterly information.
Transactions in foreign currency are recognized at the exchange
rate on the date of the transaction. Monetary items in foreign currency are
converted into Reais
at the exchange rate on the date of the balance sheet published 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 components of the entity that develop
business activities from which revenue can be obtained and in relation to which
expenses are incurred. Their operating results are regularly reviewed by the
entity’s chief operating decision maker 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 between 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 line of service. 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 over which
the Group holds control. The Group controls an entity when it is liable or has
rights to variable returns on the basis of 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 control over that entity.
The purchase accounting method is used
to record the acquisition of subsidiaries by the Group. The acquisition cost is
measured as the fair value of the acquired assets,
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 as 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.
36
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Transactions between Group companies, as
well as balances, unrealized gains and losses related to these transactions, are
eliminated. The accounting policies of the subsidiary were adjusted to ensure
consistency with the accounting policies adopted by TIM Participações. The dates
of the quarterly information used in the consolidation are the same for all
Group companies.
e. Approval of the quarterly
information
These quarterly information were approved by the Company’s Board of Directors on May 05,
2020.
f. New standards,
amendments and interpretations of standards
The following new standards were issued
by the Accounting Pronouncements Committee (CPC) and by International Standards
Board (IASB) but are not in force for the period ended December 31,
2019.
·
CPC 11 –
Insurance contracts
In May 2017, the IASB issued IFRS 17 –
Insurance Contracts, a standard not yet issued by CPC in Brazil but which
will be codified as CPC 50 – Insurance Contracts and will replace CPC 11 –
Insurance Contracts. The general purpose of IFRS 17 is to provide an accounting
model for insurance contracts that is most useful and consistent for insurers.
·
Changes to
CPC 15 (R1): Definition of business
In October 2018, the IASB issued changes
to the business definition in IFRS 3, these changes being made in CPC revision
14 amending CPC 15 (R1) to help entities determine whether an acquired set of
activities and assets consists of or not in a business. They clarify the minimum
requirements for a company, eliminate the assessment of whether market
participants are capable of replacing any missing elements, include guidance to
help entities assess whether an acquired process is substantive, better delimit
business and product definitions, and introduce an optional fair value
concentration test. New illustrative cases have been provided along with the
changes.
As the changes apply prospectively to
transactions or other events that occur on or after the first application, the
Company will not be affected by these changes on the
transition date.
37
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
·
Amendments
to CPC 26 (R1) and IAS 8: Definition of material omission
In October 2018, the IASB issued
amendments to IAS 1 and IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors, these amendments being reflected in Revision 14 of the
CPC, amending CPC 26 (R1) and CPC 23 to align the definition of 'material
misstatement' or 'material misstatement' across the standards and clarify
certain aspects of the definition. The new definition states that: "the
information is material if its omission, misstatement or obscureness could
reasonably influence decisions that major users of general purpose quarterly
information make on the basis of those quarterly information, which provide
financial information about entity-specific reporting.
These changes are not expected to have a
significant impact on the Company's individual and consolidated quarterly
information.
COVID Impacts - 19
In December 2019, an outbreak of a
contagious disease, Coronavirus 2019 (COVID-19), began in mainland China and,
since the beginning of 2020, the virus has spread to Europe, the United States
and several other countries, including Brazil.
The COVID-19 outbreak developed rapidly
in 2020 and the measures taken to contain the virus affected economic activity,
which in turn may have implications for the Company’s operating results and cash
flows. Although COVID-19 already existed on December 31, 2019, the severity of
the virus and responses to the outbreak may have an impact on the entity’s
operations that took place in Brazil after March 16, 2020.
The Company’s management is not aware of
any material uncertainties related to events or conditions that may cast
significant doubts on the entity’s ability to continue as an ongoing company.
The Company has a robust infrastructure and is part of an extremely important
segment in this period of crisis, essential for the population, the government
and the health system. There is no indication of impairment of assets or risks
associated with compliance with obligations, since the Company is not highly
leveraged and still has lines of credit available to be used in the event of a
significant reduction in the volume of cash.
The Company is complying with the health
and safety protocols established by the authorities and agencies, it is
monitoring the evolution of the situation and closely assessing the impact of
COVID-19 on its business.
The COVID-19 pandemic and its
potential impact on general commercial activity and the global economy can
reduce our customers’ demand for more expensive plans or services (for example,
roaming
) or
even lead to plan cancellations or increased delinquency, while they can lead to
disruptions in our logistics chain, in the production or delivery of our
suppliers or in our ability to deliver our products (such as new devices or SIM
cards) or to meet our network in a timely manner, which may have a material
adverse effect on our
business and results of operations. At the moment, we have not suffered any
material impact on our operations. Although it is too early to predict the
impacts on our business or our financial targets on the expanding pandemic and
government responses to them, we would be materially adversely affected by a
prolonged slowdown in local, regional or global economic conditions.
38
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
3
Estimates and areas where judgment is significant in the application of the
Company’s accounting policies
Accounting estimates and judgments are
continuously reassessed. They are based on the Company´s historical experience
and other factors, such as expectations of future events, considering the
circumstances as at the date of the quarterly information.
By definition, the accounting estimates
resulting from such assumptions rarely equal the actual outcome. The estimates
and assumptions that present a significant risk of causing relevant adjustments
in the book values of assets and liabilities in subsequent periods are shown
below:
(a) Impairment losses on
non-financial assets
Losses due to impairment take place when
the book value of an asset or cash generating unit exceeds its respective
recoverable value, which is considered as the fair value less costs to sell
and/or the value in use, whichever is greater. The calculation of the fair value
less costs to sell is based on information available from sales 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.
Any reorganization activities to which
the Company has not yet committed itself on the quarterly information disclosure
date, or any material future investments aimed at improving the asset base of
the cash generating unit being tested, are excluded for the purpose of
impairment testing.
The main non-financial assets valued
this way were goodwill based on the future profitability recorded by the Company
(Note 15) and its tangible assets.
(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 and CPC 32 / IAS 12. This
process normally includes complex estimates to define the taxable income and
temporary 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 the recoverability of deferred income tax and
social contribution losses carry-forward and of temporary differences takes into
account the history of taxable
income, as well as estimates of future taxable income (Note 10).
39
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(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 review takes into account factors such as the hierarchy of laws,
case law available, recent court decisions, their relevance to 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 take
into account observable data or observable data derived from the market (Note
36).
(e) Unbilled
revenue
Considering that some billing cut-off
dates occur on intermediate dates within the months, at the end of each month
there will be revenue already earned by the Company but not effectively billed
to the customers. This unbilled revenue is recorded based on estimates which
take into account data on usage, the number of days since the last billing date,
among other factors (Note 27).
(f) Leasing
The Company has a significant number of
lease agreements in which it is the lessee, whereby with the adoption of
accounting standard IFRS 16/CPC 06(R2) – Leasing, as disclosed in Note 2.f., the
Company’s Management made certain judgments when measuring the lease liability
and the right-of-use assets, such as: (i) an estimation of the lease term, considering a
non-cancelable period and the periods covered by options to extend the lease
term, where such exercise depends only on the Company and is reasonably certain;
(ii) use of certain assumptions to calculate the discount rate.
The Company is not able to readily
determine the interest rate implicit in the lease and therefore considers its
incremental rate on loans to measure lease liabilities. The incremental rate is
the interest rate that the Company would have to pay when borrowing, for a
similar term and with similar collateral, the resources necessary to obtain the
asset with similar value to the asset with similar right of use in a similar
economic environment. Therefore, this assessment requires management to consider
estimates when no observable rates are available. Or when they need to be
adjusted to reflect the terms and conditions of a lease. The Company estimates
the incremental rate using observable data (such as market interest rates) when
available and considers in this estimate aspects that are specific to the
Company (such as the cost of the subsidiary's debt). The Company´s average
incremental rate is 10.28% for an average lease term as described in note 14.
40
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
4 Cash and cash
equivalents
These are financial assets measured at
amortized cost through the effective interest rate method. The Company’s
Management determines the classification of its financial assets upon initial
recognition.
|
|
Parent
Company
|
|
Consolidated
|
|
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
|
|
Cash and banks
|
|
182
|
|
61
|
|
91,278
|
|
101,928
|
Free financial investments
availability
|
|
|
|
|
|
|
|
|
CDB / Commitments
|
|
20,214
|
|
701
|
|
1,499,649
|
|
2,182,882
|
|
|
|
|
|
|
|
|
|
|
|
20,396
|
|
762
|
|
1,590,927
|
|
2,284,810
|
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 the short-term obligations of the Company.
The annual average
return on the Company’s investments in CBDs and Repurchases is 100.28% (99.95%
at December 31, 2019) of the Interbank Deposit Certificate (“CDI”)
rate.
5 Marketable
securities
|
|
Consolidated
|
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
FUNCINE (3)
|
|
3,926
|
|
3,849
|
Sovereign Fund (4)
|
|
3,481
|
|
7,329
|
FIC: (1)
|
|
|
|
|
Government bond
|
|
8,692
|
|
179,390
|
Repo operations
|
|
12,907
|
|
216,196
|
Financial Bill
|
|
4,992
|
|
105,857
|
Others (5)
|
|
9,207
|
|
145,707
|
|
|
43,205
|
|
658,328
|
|
|
|
|
|
Current portion
|
|
(39,279)
|
|
(654,479)
|
Non-current portion
|
|
3,926
|
|
3,849
|
|
|
|
|
|
(1) In August 2017, the
Company invested in open-ended Investment Funds in Units (“FICs”). The Funds are
mostly made up of government securities and instruments of first-tier
financial institutions. In 2019, the average yield of FICs was 80.83% (99.67 %
as in December 31, 2019) of the variation of the CDI rate.
41
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(2)
“Repo transactions” are securities issued by banks with a commitment to
repurchase within one day at pre-established rates. These repo transactions are
backed by federal government bonds and are used by the fund with the purpose of
remunerating the capital available in cash.
(3) In December 2017, the Company, with the
objective of using tax deductibility benefit for income tax and social
contribution purposes, invested in the Fund for Financing of the National Film
Industry (FUNCINE) in the amount of R $ 3 million, in subsequent periods, other
investments were made in the amount of R $ 2.4 million (2018) and R $ 2.2
million (2019) The average remuneration of FUNCINE on March 31, 2020 is -1.94%
and in 2019 it was 9,18%.
(4) The Sovereign Fund is
composed only of federal government securities. The average remuneration on March 31,
2020 is 95.48% and in 2019 the Sovereign Fund was 97.62% of the variation of the
Interbank Deposit Certificate - CDI.
(5) It is represented by:
Debentures, FIDC, Commercial Notes, Promissory Notes, Bank Credit Note.
The parent company
has R$14,365 invested in FIC units (R$12,167 as of December 31,
2019).
6 Trade accounts
receivable
These are financial assets measured at
amortized cost, and 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”) up to the balance sheet
date. Accounts receivable from clients are initially
recognized at fair value and subsequently measured at amortized cost using the
effective interest rate method less the provision for expected credit losses
("impairment").
The provision for expected credit losses was recognized as a
reduction in accounts receivable based on the profile of the subscriber
portfolio, the aging of overdue accounts receivable, the economic situation, the
risks involved in each case and the collection curve, at an amount deemed
sufficient by Management, as adjusted to reflect current and prospective
information on macroeconomic factors that affect the customers’ ability to
settle the receivables.
The fair value of trade accounts
receivable is equal to the book value recorded on March 31, 2020 and December
31, 2019.
The non-current portion includes the
amount of R $ 34,320 (R $ 68,639 as of December 31, 2019) referring to accounts
receivable with other telephone operators, recorded at their present value
considering the term and interest rate implicit in the operation.
42
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The change in the provision for loss on
expected settlement credits, accounted for as an asset reduction account, was as
follows:
|
Consolidated
|
|
03/2020
|
|
12/2019
|
Accounts receivable from customers
|
3,279,690
|
|
3,287,855
|
|
|
|
|
Gross accounts
receivable
|
4,041,678
|
|
4,061,932
|
|
|
|
|
Billed services
|
2,135,106
|
|
2,076,569
|
Billing services (“unbilled”)
|
827,118
|
|
858,418
|
Network usage
|
440,968
|
|
438,168
|
SALE OF GOODS
|
620,476
|
|
670,573
|
Contractual assets (note
23)
|
16,272
|
|
15,142
|
Other accounts
receivable
|
1,738
|
|
3,062
|
|
|
|
|
Losses on expected settlement
credit
|
(761,988)
|
|
(774,077)
|
|
|
|
|
Current portion
|
(3,123,849)
|
|
(3,184,780)
|
Non-current portion
|
155,841
|
|
103,075
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
(3 months)
|
|
(12
months)
|
|
|
|
|
Opening balance
|
774,077
|
|
686,928
|
|
|
|
|
Constitution of provision (note
28)
|
188,588
|
|
748,291
|
Provision write-offs
|
(200,677)
|
|
(661,142)
|
|
|
|
|
Closing Balance
|
761,988
|
|
774,077
|
The age of accounts receivable is as follows:
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
|
|
|
Total
|
4,041,678
|
|
4,061,932
|
|
|
|
|
Unmatured
|
2,643,907
|
|
2,576,307
|
Due within 30 days
|
315,229
|
|
328,457
|
Past due up to 60 days
|
155,678
|
|
146,200
|
Due within 90days
|
181,286
|
|
149,852
|
Expired more than 90 days ago
|
745,578
|
|
861,116
|
7 Inventory
43
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Inventories are stated at average
acquisition cost. A loss is recognized to adjust the cost of handsets and
accessories to their net realizable value (selling price) when this amount is
less than the average acquisition cost.
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
|
|
|
Total inventories
|
268,547
|
|
203,278
|
|
|
|
|
Inventory
|
281,696
|
|
214,889
|
Mobile handsets and
tablets
|
198,096
|
|
146,295
|
Accessories and prepaid
cards
|
68,932
|
|
61,436
|
TIM chips
|
14,668
|
|
7,158
|
|
|
|
|
Losses on adjustment to realizable
amount
|
(13,149)
|
|
(11,611)
|
8. Indirect taxes, charges and
contributions recoverable
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
|
|
|
Indirect taxes, charges and contributions
recoverable
|
1,254,418
|
|
1,243,633
|
|
|
|
|
ICMS
|
1,212,229
|
|
1,201,502
|
Others
|
42,189
|
|
42,131
|
|
|
|
|
Current portion
|
(419,074)
|
|
(420,284)
|
Non-current portion
|
835,344
|
|
823,349
|
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 over 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.
9. Direct taxes, charges and
contributions recoverable
|
Parent
Company
|
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
|
Indirect taxes, charges and contributions
recoverable
|
28,474
|
|
28,383
|
|
3,524,142
|
|
3,762,800
|
|
|
|
|
|
|
|
|
Income tax (IR) and social contribution (CS)
(i)
|
‐
|
|
‐
|
|
313,888
|
|
428,443
|
PIS / COFINS (ii)
|
‐
|
|
‐
|
|
3,114,733
|
|
3,244,549
|
Others
|
28,474
|
|
28,383
|
|
95,521
|
|
89,808
|
|
|
|
|
|
|
|
|
Current portion
|
(28,474)
|
|
(28,383)
|
|
(1,137,312)
|
|
(1,395,193)
|
Non-current portion
|
‐
|
|
‐
|
|
2,386,830
|
|
2,367,607
|
44
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
i) The amounts corresponding to income
and social contribution taxes are substantially related to: (a) advances made
over the period during which the use will take place at the closing of the
current year and any balances in the next year; and (b) other income and social
contribution tax credits from previous years whose current estimated period of
use will be more than 12 months later.
(ii) The PIS/COFINS amounts recoverable
mainly refer to credits from a legal proceedings filed by TIM Celular S.A.
(ultimately merged into TIM S.A., as well as TIM S.A. itself, with a favorable
final decision in Higher Courts which discussed the exclusion of the ICMS from
the PIS and COFINS tax bases. According to the Company's internal evaluation, we
expect to use such credits within the statute of limitations of up to 5
years.
In March 2017, the Federal Supreme Court (“STF”) recognized the
unconstitutionality of including ICMS amounts in the calculation base of PIS and
COFINS contributions. TIM S.A. (previously named “Intelig Telecomunicações
Ltda.”), as the surviving company from the merger of TIM Celular S.A. and other
entities existing in the Group in the past, which had filed proceedings of the
same nature), has been challenging this issue in court since 2006, with effects
retroactive to five years, as permitted by the legislation.
In June 2019, by reason of a final and without appeal decision
and calculation of values, the amount of R$2,875 million was recorded, being
R$1,720 million of which corresponds to the principal, and R$1,155 million to
monetary adjustments (amounts relating to TIM Celular S.A., which merged into
TIM S.A. in October 2018).
In September 2019, because a final, non-appealable judgment was
entered and amounts were awarded, the amount of R$148 million was recorded, of
which R$75 million corresponds to the principal, and R$73 million to monetary
adjustments, and such amounts being related to TIM S.A. itself (when it still
did business under the name Intelig Telecomunicações Ltda.).
The amount recorded are updated monthly at the interest rate
equivalent to the reference rate of the Special Settlement and Custody System
(Selic), available on the website of the Brazilian Federal Revenue.
In March 2020, after using part of TIM
SA’s credit stock, totaling R $ 206 million, the amounts of R $ 2,737 million
are recorded, of which R $ 1,621 million is principal and R $ 1,116 million
monetary restatement (amounts related to TIM Celular SA); and R $ 149 million,
of which R $ 75 million of principal and R $ 74 million of monetary restatement
(former Intelig Telecomunicações Ltda.).
10. Deferred income tax and
social contribution
Deferred income tax and
social contribution are recognized on: (1) accumulated income tax
carried forward losses and negative basis of social contribution, and (2)
temporary differences arising from differences between the tax bases of assets
and liabilities and their carrying values in the quarterly information.
Deferred income tax is determined using the tax rates (and tax laws) enacted, or
substantially enacted, up to the balance sheet date. Subsequent changes in tax
rates or tax legislation may modify the deferred tax credit and debit
balances.
45
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Deferred tax assets on income tax and
social contribution are recognized only in the event of a profitable track
record and/or when the annual forecasts prepared by the Company, examined by the
Supervisory Board and Statutory Audit Committee and approved by other Management
bodies, indicate the likelihood of the future realization of those tax
balances.
The balances of deferred income tax and
social contribution assets and liabilities are shown in the balance sheet at
their net amounts, when there is both a legal right and an intention to offset
them at the time when the current taxes are ascertained, usually in relation to
the same legal entity and the same taxation authority. Thus, deferred tax assets
and liabilities belonging to different entities are in general shown separately,
not at their net amounts.
As at March 31, 2020 and March 31, 2019,
the prevailing tax rates were 25% for income tax and 9% for social contribution.
In addition, there is no statute of limitation in regard to the income tax and
social contribution carried forward losses, which it can be offset by up to 30%
of the taxable profit reached at each period, according to the current tax
legislation.
The amounts recorded are as follows:
|
Parent
Company
|
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
|
Losses carried forward – income tax and social
contribution
|
-
|
|
-
|
|
815,525
|
|
800,711
|
Temporary differences:
|
|
|
|
|
|
|
|
Provision for legal and administrative
proceedings
|
18.931
|
|
18.931
|
|
306,527
|
|
295,853
|
Losses from doubtful accounts
|
-
|
|
-
|
|
267,808
|
|
271,611
|
Adjustments to present value – 3G license
|
-
|
|
-
|
|
6,696
|
|
7,182
|
Deferred income tax on accounting
adjustments
|
53,569
|
|
53,569
|
|
55,362
|
|
56,208
|
Lease of LT Amazonas infrastructure
|
-
|
|
-
|
|
27,917
|
|
27,434
|
Profit sharing
|
165
|
|
165
|
|
34,401
|
|
23.704
|
Taxes with suspended enforceability
|
-
|
|
-
|
|
12,872
|
|
12,872
|
Amortized goodwill – TIM Fiber
|
-
|
|
-
|
|
(370,494)
|
|
(370,494)
|
Derivative financial instruments
|
-
|
|
-
|
|
(106,916)
|
|
(13,139)
|
Capitalized interest on 4G authorization
|
-
|
|
-
|
|
(284,489)
|
|
(291,783)
|
Deemed costs – TIM S.A.
|
-
|
|
-
|
|
(64,113)
|
|
(67,748)
|
Exclusion of ICMS from PIS and COFINS calculation bases
|
‐
|
|
‐
|
|
(1,030,100)
|
|
(1,023,928)
|
IFRS16 Lease
|
|
|
|
|
222,562
|
|
209,234
|
Other
|
-
|
|
-
|
|
31,014
|
|
87,214
|
|
72,665
|
|
72,665
|
|
(75,428)
|
|
24,931
|
|
|
|
|
|
|
|
|
Unrecognized deferred income tax and social contribution
Taxes with suspended enforceability
|
(72,665)
|
|
(72,665)
|
|
(71,013)
|
|
(72,665)
|
|
‐
|
|
‐
|
|
(146,441)
|
|
(47,734)
|
|
|
|
|
|
|
|
|
Deferred tax assets portion
|
‐
|
|
‐
|
|
‐
|
|
‐
|
Deferred tax liabilities portion
|
‐
|
|
‐
|
|
(146,441)
|
|
(47,734)
|
46
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
TIM S.A.
As previously communicated to the market, TIM Celular S.A.
merged into TIM S.A. (previously named “Intelig Telecomunicações Ltda.”) on
October 31, 2018 with the main objective of reducing the operating costs of the
companies involved, creating synergies and enabling the achievement of the
corporate purposes of the two companies.
Thus, after the merger, tax credits may also
arise from tax losses and negative social contribution base on the income of TIM
S.A., considering that the latter, based on the consolidated results of TIM
Celular after the said merger, estimates that the taxable income will be
sufficient to use the said deferred credits.
On September 30, 2018 the Company recorded total deferred tax
assets of R$952,368 arising from amounts that may be used as tax losses
(R$702,619) and the negative base of social contribution on income (R$249,749),
since all of the factors required for the merger were controlled by Management,
such as: (i) the feasibility studies regarding the use of tax benefits was
completed and approved by the Company’s governance bodies, as provided for in
CVM 371/02; (ii) definition of the actual corporate restructuring schedule upon
the merger; (iii) obtaining of approvals and/or consent of third parties (ANATEL
and BNDES) by the Company, among other factors.
As a result of the final and
unappealable decision in Courts Superior to TIM Celular SA (merged by TIM SA) in
a proceeding that discussed the exclusion of ICMS from the calculation basis of
PIS and COFINS contributions, there was accounting recognition in June. of the
tax credit subject of the discussion in 2019 in the amount of R $ 2,875 million
(R $ 2,737 million on March 31, 2020), consisting of principal and monetary
restatement.
In September 2019, due to its final and
unappealable decision, the amount of R $ 148 million (R $ 149 million on March
31, 2020) was recorded, amounts related to TIM SA itself
For the purposes of IRPJ and CSLL
taxation, the Company’s management, also supported by external legal opinions,
decided to defer it until the moment of the effective financial availability of
the credit. Accordingly, deferred tax liabilities were recorded for the full
amount, in the amount of R $ 1,039.7 million. The updated amount as of March 31,
2020 is R$ 1,030,100.
Expectation of recovery of tax
credits
47
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The estimates regarding the recovery of
tax assets were calculated taking into account the financial and business
assumptions available at the close of the tax year of 2019.
Based on these projections, the Company
expects to recover the credits as follows:
|
Deferred income tax and social
contribution
|
2020
|
229,151
|
2021
|
275,425
|
2022
|
310,948
|
Tax losses and
negative base
|
815,524
|
|
|
Temporary
differences
|
(961,965)
|
|
|
Total
|
(146,441)
|
The subsidiary has set up deferred
income and social contribution tax credits on its total tax losses, negative
basis of social contribution and temporary differences, based on the history of
profitability and projected future taxable earnings.
The subsidiary used credits from tax
losses and a negative social contribution base in the amount of R $ 20,215
during the period ended March 31, 2020 (R $ 91,731 on December 31,
2019).
Unrecognized deferred tax
assets
Considering that TIM Participações SA
does not have activities that can generate taxable income tax and social
contribution bases, deferred tax credits on tax losses, negative social
contribution bases and temporary differences were not recognized, totaling R $
129,625 on March 31, 2020 (R $ 125,876 on December 31, 2019).
11. Prepaid expenses
|
|
|
|
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
474,892
|
|
245,524
|
|
|
|
|
Fistel Fee (1)
|
170,448
|
|
‐
|
Advertisements not served
(2)
|
71,259
|
|
854
|
Network Swap
|
75,071
|
|
75,809
|
Incremental costs for obtaining
customer contracts (3)
|
146,190
|
|
158,093
|
Others
|
11,924
|
|
10,768
|
|
|
|
|
Current portion
|
(411,720)
|
|
(175,868)
|
Non-current portion
|
63,172
|
|
69,656
|
(1) The Fistel rate, which is
appropriated monthly to the result.
(2) Represent advance payments of
advertising expenses for TIM brand products and services that are recognized in
the income statement according to the advertising period.
(3) It is substantially represented by
the incremental costs related to sales commissions paid to / partners to obtain
customer contracts resulting from the adoption of IFRS 15 / CPC 47, which are
deferred to the result in accordance with the contract term and / or economic
benefit, usually 2 years.
48
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
12. Judicial deposits
These are recorded at their historical costs and updated
according to the legislation in force:
|
Parent
Company
|
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
|
|
85,617
|
|
87,049
|
|
969,556
|
|
1,006,899
|
|
|
|
|
|
|
|
|
Civil
|
7,400
|
|
7,203
|
|
357,806
|
|
355,093
|
Labor
|
40,810
|
|
(38,238)
|
|
226,513
|
|
245,928
|
Tax
|
10,015
|
|
1,828
|
|
198,972
|
|
203,110
|
Regulatory
|
‐
|
|
‐
|
|
111
|
|
111
|
Online Attachment (*)
|
27,392
|
|
39,780
|
|
186,154
|
|
202,657
|
(*) Refers to blocked judicial deposits
directly on the Company´s bank accounts and financial investments related to
certain judicial proceedings. This amount is analyzed periodically and, when
identified, is reclassified to one of the other specific accounts of judicial
deposits.
Civil
These are court deposits to guarantee
the execution of civil proceedings where the Company is challenging the amounts
involved. Most of these proceedings refer to lawsuits filed by customers,
involving issues of consumer rights, among others.
There are some legal proceedings
challenging the amounts fixed by ANATEL to leave certain transmission sub-bands
to allow the implementation of 4G technology. In this case, the updated court
deposit amounted to R$69,784 (R$69,326 as at December 31, 2019).
Labor
49
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
These are amounts deposited in court as
guarantees for the execution and the filing of appropriate appeals, where the
relevant matters or amounts involved are still being discussed. The total amount
has been allocated between the various claims filed by registered employees and
third-party service providers.
The reduction is substantially due to
the closure of several court cases offset by the corresponding court
deposits.
Tax
The Company and its
subsidiary have made court deposits related to various current tax court
proceedings. These deposits refer mainly to the following matters:
(i) Use of
credit for the purchase of electricity used directly by the companies for
production purposes. The court is likely to give a favorable judgment. The
current value of these deposits is R$53,128 (R$73,326 as at December 31, 2019).
(ii) Liability
for CPMF on the Company’s capitalization of loans; recognition of the right not
to pay contributions allegedly due on mere changes in the ownership of current
accounts as a result of a takeover. The current value of these deposits is
R$10,397 (R$10,342 as at December 31, 2019).
(iii) Constitutionality
of the collection of the Operations Monitoring Charge (“TFF”) by a number of
municipal authorities. The current value of these deposits is R$18,811 ((R$ 18,401 as at December 31, 2019).
(iv) Failure to
approve the offsetting of federal debts against credits for withholding tax
(“IRRF”) because it is alleged that the credits are insufficient, as well as the
deposit placed to ensure the issue of a Tax Clearance Certificate. The current
value of these deposits is R$11,226 (R$11,173 as at December 31, 2019).
(v) Liability
for ISS (Tax on Services) on import services and outsourced services; alleged
failure to pay for land clearance and Base Transceiver Station (“BTS”)
maintenance services, for ISS on the Company’s services and for ISS on
co-billing services and software licensing (Blackberry). The Company´s right is
to take advantage of the benefit of spontaneous declaration in order to reverse
confiscatory fines for late payment. The current value of these deposits is
R$7,927 (R$7,878 as at December 31, 2019).
(vi) Ancillary
services provided for in ICMS Agreement 69/98 related to ICMS levied on amounts
related to communications services charged for access, subscription, activation,
habilitation availability, subscription and use of services, among others. The
updated amount of deposits related to this discussion is R $ 3,469 (R $ 3,457 on
December 31, 2019).
(vii) Requirement by ANATEL of the
Public Price Referring to the Administration of Numbering Resources. The updated
amount of deposits related to this
discussion is R $ 3,487 (R $ 3,471 as of December 31, 2019).
50
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(viii) Deposit
made by TIM S.A. related to the unconstitutionality and illegality of charging
by the Telecommunications Services Universalization Fund (“FUST”). Plea for the
recognition of the right not to pay FUST, and not to include in its calculation
base interconnection and Industrial Exploration of Dedicated Line (“EILD”)
revenue, as well as for the right not to be charged retroactively for
differences arising from failure to comply with ANATEL Ruling 7/2005. The
updated amount of deposits related to this discussion is R $ 57,943 (R $ 57,943
as of December 31, 2019).
(ix)
ICMS -
Miscellaneous. Deposits made in several processes that discuss ICMS charges,
mainly related to discussions on lending, DIFAL, exempt and non-taxed services,
CIAP and Agreement 39. The updated amount of deposits related to this discussion
is R $ 14,483 (R $ 7,984 as of December 31, 2019).
13 Investment – Parent
Company
The equity interest in the subsidiary is
valued using the equity method only in the individual quarterly
information.
(a)Interest in subsidiary
|
|
|
Consolidated
|
|
|
|
03/2020
|
|
12/2019
|
|
|
|
TIM
SA
|
|
TIM
SA
|
|
|
|
|
|
|
Number of shares
held
|
|
|
42,296,789,606
|
|
42,296,789,606
|
|
|
|
|
|
|
Interest in total
capital
|
|
|
100%
|
|
100%
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
22,384,699
|
|
22,209,626
|
|
|
|
|
|
|
Net income for the
period
|
|
|
172,873
|
|
3,865,255
|
|
|
|
|
|
|
Equity in income from subsidiaries
|
|
|
172,873
|
|
3,865,255
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment amount
|
|
|
22,384,699
|
|
22,209,626
|
51
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(b) Changes in investments in
subsidiaries:
|
|
TIM
SA
|
|
|
|
Investment balance on December 31,
2018
|
|
19,526,515
|
|
|
|
Income from equity
accounting
|
|
3,865,255
|
Stock options
|
|
2,791
|
Retirement Supplement
|
|
(1,935)
|
Interest on net
equity
|
|
1,183,000
|
Investment balance on December 31,
2019
|
|
22,209,626
|
|
|
|
|
|
|
Result of equity
pickup
|
|
172,873
|
Calls on shares
|
|
2,200
|
Investment balance as of March 31,
2020
|
|
22,384,699
|
14 Property, plant and
equipment
Property, plant and equipment are stated
at acquisition and/or construction cost, less accumulated depreciation and
impairment losses (the latter only if applicable). Depreciation is calculated
based on the straight-line method over terms that take into account the expected
useful lives of the assets and their residual values. At March 31, 2020 and
December 31, 2019, the Company has no indication of impairment in its fixed
assets.
The estimated costs of dismantling
towers and equipment on rented properties are capitalized and depreciated over
the estimated useful lives of these assets. The Company recognizes the present
value of these costs in property, plant and equipment with a counter-entry to
the liability “provision for future asset retirement”. Interest incurred on
updating the provision is classified within financial expenses.
Gains and losses on disposal are
determined by comparing the amounts of these disposals with the carrying values
at the time of the transaction and are recognized in “other operating expenses
(revenue), net” in the statement of income.
52
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(a)
Changes in
property, plant and equipment
|
Consolidated
|
|
Balance as
of Dec / 19
|
Additions
|
Write-off
|
Transfers
|
Balance in
Mar / 20
|
|
|
|
|
Total Cost
of property, plant and equipment,
gross
|
43,353,099
|
1,197,357
|
(61,075)
|
‐
|
44,489,381
|
Commutation/transmission
equipment
|
22,812,029
|
-
|
(56,397)
|
723,995
|
23,479,627
|
Fiber-Optic Cables.
|
813,589
|
‐
|
‐
|
20,497
|
834,086
|
Leased handsets
|
2,489,995
|
266
|
(2,202)
|
32,320
|
2,520,379
|
Infrastructure
|
6,096,847
|
‐
|
(1,084)
|
35,118
|
6,130,881
|
Informatics assets
|
1,721,251
|
1
|
(991)
|
22,558
|
1,742,819
|
Use assets
|
859,505
|
1
|
(104)
|
13,871
|
873,273
|
Right of use in leases
|
6,933,416
|
638,094
|
‐
|
‐
|
7,571,510
|
Land
|
40,794
|
‐
|
‐
|
‐
|
40,794
|
Construction in progress
|
1,585,673
|
558.995
|
(297)
|
(848.359)
|
1,296,012
|
|
|
|
|
|
|
Total Accumulated
Depreciation
|
(25,740,935)
|
(930,344)
|
56,084
|
‐
|
(26,615,195)
|
Commutation/transmission
equipment
|
(16,383,561)
|
(461,700)
|
53,404
|
‐
|
(16,791,857)
|
Fiber-Optic Cables.
|
(410.567)
|
(17,601)
|
‐
|
‐
|
(428,168)
|
Leased handsets
|
(2,256,863)
|
(35,300)
|
580
|
‐
|
(2,291,583)
|
Infrastructure
|
(3,593,833)
|
(107,680)
|
1.005
|
‐
|
(3,700,508)
|
Informatics assets
|
(1,565,309)
|
(15,692)
|
991
|
‐
|
(1,580,010)
|
General Purpose Goods
|
(590,658)
|
(11,730)
|
104
|
‐
|
(602,284)
|
Right of use in leases
|
(940,144)
|
(280,641)
|
‐
|
‐
|
(1,220,785)
|
|
|
|
|
|
|
Total fixed net
assets
|
17,612,164
|
267,013
|
(4,991)
|
‐
|
17,874,186
|
Commutation/transmission
equipment
|
6,428,468
|
(461.700)
|
(2,993)
|
723.995
|
6,687,770
|
Fiber-Optic Cables.
|
403,022
|
(17,601)
|
‐
|
20,497
|
405,918
|
Leased handsets
|
233,132
|
(35,034)
|
(1,622)
|
32,320
|
228,796
|
Infrastructure (i)
|
2,503,014
|
(107,680)
|
(79)
|
35,118
|
2,430,373
|
Informatics assets
|
155,942
|
(15,691)
|
‐
|
22,558
|
162,809
|
General Purpose Goods
|
268,847
|
(11,729)
|
‐
|
13,871
|
270,989
|
Right of use in leases
|
5,993,272
|
357,453
|
‐
|
‐
|
6,350,725
|
Land
|
40,794
|
‐
|
‐
|
‐
|
40,794
|
Works in progress
|
1,585,673
|
558.995
|
(297)
|
(848.359)
|
1,296,012
|
Works in progress represent the cost of
ongoing projects related to the construction of networks and / or other tangible
assets during the period of their construction and installation, until the
moment they start operating, when they will be transferred to the corresponding
accounts of these assets.
Represented by the lease contracts for
identifiable assets, framed in the new rule of IFRS16 / CPC 06 (R2). Basically:
network infrastructure leasing, vehicle leasing, store leasing and property
leasing, as shown below:
53
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND SUBSIDIARY
NOTES TO THE QUARTERLY INFORMATION - continued
As at March 31
(In thousands of Reais, except as otherwise stated)
|
|
|
|
- commercial leasing
|
Leasing - vehicles
|
Leasing - Shops & Kiosks and real estate
|
Leasing - Land (Rede)
|
Leasing - Fiber
|
Total
|
Balances on December 31st, 2019
|
3,172,142
|
6,988
|
479,472
|
1,539,913
|
794,757
|
5,993,272
|
Additions in the period, net of cancellation
|
329,932
|
4,418
|
56,696
|
184.153
|
62,895
|
638,094
|
Depreciation
|
(116,771)
|
(1,445)
|
(26,943)
|
(50,169)
|
(85,313)
|
(280,641)
|
Balances on March 31, 2020
|
3,385,303
|
9,961
|
509,225
|
1,673,897
|
772,339
|
6,350,725
|
|
|
|
|
|
|
|
Useful Life
|
12.63
|
38.92
|
19,19
|
10.92
|
30.95
|
|
|
|
|
|
|
|
|
(a)Depreciation rates
|
|
Annual Rate %
|
Switching / transmission equipment
|
|
8 to 14.29
|
Fiber-Optic Cables.
|
|
4 to 10
|
Lending devices
|
|
14.28 to 50
|
Infrastructure
|
|
4 TO 20
|
COMPUTER EQUIPMENTS
|
|
10 to 20
|
General Purpose Goods
|
|
10 to 20
|
In 2019, in accordance with IAS 16 / CPC 27, approved by CVM Resolution, the Company and its subsidiaries carried out assessments of the useful life applied to their fixed assets and concluded that there was no significant change or change in the circumstances in which the estimates were based in order to justify changes in the useful life currently used.
15. Intangible assets
Intangible assets are measured at historical cost less accumulated amortization and impairment losses (if applicable) and reflect: (i) the purchase of authorizations and rights to use radio frequency bands, and (ii) software in use and/or development. Intangibles also include: (i) the purchase of the right to use the infrastructure of other companies, and (ii) goodwill on expectation of future profits in purchases of companies.
Amortization charges are calculated using the straight-line method over the estimated useful life of the assets contracted and over the terms of the authorizations. The useful life estimates of intangible assets are reviewed regularly.
Any financial charges on funds raised (that is, without a specific destination) and used to obtain a qualifying asset, meaning an asset that requires a significant time to be ready for use, are capitalized as a portion of the cost of the asset when it is likely to bring future economic benefits to the entity and such costs can be accurately measured. These costs are amortized throughout the estimated useful lives of the assets. As at March 31, 2020 and December 2019, the Company has no indication of impairment in its intangible assets of defined and indefinite useful life.
The amounts of the SMP authorizations and rights to use radio frequencies,
as well as software, goodwill
and other items, were recorded as follows:
54
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(a) Changes in intangibles
|
Consolidated
|
|
Balance as
of Dec / 19
|
Additions /
Amortization
|
Write-off
|
Transfers
|
Balance in
Mar / 20
|
|
|
|
Total Cost of Gross
Intangible
|
30,229,359
|
344,409
|
(9)
|
‐
|
30,573,759
|
Right to Use software
|
18,184,382
|
‐
|
‐
|
228,838
|
18,413,220
|
Authorizations
|
9,811,793
|
‐
|
‐
|
11,702
|
9,823,495
|
Goodwill
|
1,527,219
|
‐
|
‐
|
‐
|
1,527,219
|
Right to use infrastructure - LT
Amazonas
|
169,328
|
‐
|
‐
|
‐
|
169,328
|
Other assets
|
327,362
|
‐
|
‐
|
552
|
327,914
|
Intangible assets under
development
|
209,275
|
344,409
|
(9)
|
(241,092)
|
312,583
|
|
|
|
|
|
|
Total Accumulated
Amortization
|
(20,561,033)
|
(473,309)
|
‐
|
‐
|
(21,034,342)
|
Right to Use SOFTWARE
|
(15,093,166)
|
(329,142)
|
‐
|
‐
|
(15,422,308)
|
Authorizations
|
(5,278,413)
|
(135,949)
|
‐
|
‐
|
(5,414,362)
|
Right to use infrastructure - LT
Amazonas
|
(60,204)
|
(1,940)
|
‐
|
‐
|
(62,144)
|
Other assets
|
(129,250)
|
(6,278)
|
‐
|
‐
|
(135,528)
|
|
|
|
|
|
|
Total net intangible
assets
|
9,668,326
|
(128,900)
|
(9)
|
‐
|
9,539,417
|
Right to use software (c)
|
3,091,216
|
(329,142)
|
‐
|
228,838
|
2,990,912
|
Authorizations
|
4,533,380
|
(135,949)
|
‐
|
11,702
|
4,409,133
|
Goodwill (d)
|
1,527,219
|
‐
|
‐
|
‐
|
1,527,219
|
Right to use infrastructure - LT Amazonas
(e)
|
109,124
|
(1,940)
|
‐
|
‐
|
107,184
|
Other assets
|
198,112
|
(6,278)
|
‐
|
552
|
192,386
|
Intangible assets under development
(f)
|
209,275
|
344,409
|
(9)
|
(241,092)
|
312,583
|
Intangible assets under development
represents the cost of projects in progress related to the acquisition of 4G
authorizations and/or other intangible assets during the period of their
construction and installation, up to the moment when they enter into operation,
whereupon they will be transferred to the corresponding accounts for these
assets. In addition, these intangible assets were assessed for impairment as at
March 31, 2019 and 2019, with no necessary adjustment.
(b) Amortization rates
|
Annual rate
%
|
|
|
Right to use software
|
20
|
Authorizations
|
5 to 50
|
Right to use infrastructure
|
5
|
Other assets
|
7 to
10
|
(c) Right to use software
The costs associated with maintaining
software are recognized as expenses as they are incurred. Identifiable and
unique development costs that are directly attributable to the design and
testing of software products controlled by the Group are recognized as
intangible assets when all capitalization criteria are met.
Directly attributable costs, which are
capitalized as part of the software product, include costs for
employees directly allocated to its development.
55
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(d) Goodwill from previous
years
The Company and its subsidiary have the
following goodwill based on expectations of future profitability as at March 31,
2020 and December 31, 2019:
Goodwill on acquisition of TIM
S.A. - The
goodwill arising from the acquisition of TIM S.A. (formerly Intelig) in December
2009 in the amount of R$210,015 is based on the subsidiary’s expected
profitability. The recoverability of goodwill is tested annually through
impairment testing.
Goodwill from TIM Fiber SP and TIM Fiber
RJ acquisitions - At the end of 2011, the subsidiary acquired Eletropaulo
Telecomunicações Ltda. (which subsequently had its trade name changed to TIM
Fiber SP Ltda. – “TIM Fiber SP”) and AES Communications Rio de Janeiro S.A.
(which subsequently had its trade name changed to TIM Fiber RJ S.A. – “TIM Fiber
RJ”). These companies were SCM providers in the main municipalities of the
Greater São Paulo and Greater Rio de Janeiro areas, respectively.
TIM Fiber SP Ltda. and TIM Fiber RJ.
S.A. were merged into the subsidiary TIM S.A. on August 29, 2012.
The subsidiary recorded the goodwill
allocation related to the purchase of the companies TIM Fiber SP and TIM Fiber
RJ, at the end of the purchase price allocation process, in the amount of
R$1,159,648.
Goodwill from the acquisition of
minority interests in TIM Sul and TIM Nordeste - In 2005, the Company acquired all the
shares of the minority shareholders of TIM Sul and TIM Nordeste, in exchange for
shares issued by TIM Participações, converting these companies into full
subsidiaries. The goodwill resulting from this transaction amounted to
R$157,556.
Impairment
test
As required by the accounting standards, the Company tests
goodwill on business combinations involving TIM Group companies annually for
impairment, and the methods and assumptions used by Management in the impairment
testing of goodwill mentioned above are summarized below:
The Company’s Management understands that the smaller cash
generating units, for the purposes of testing the impairment of goodwill on the
purchase of the aforementioned companies, refer to the business at a
consolidated level, and therefore should be assessed at the level of TIM
Participações. This methodology is aligned with the strategic direction of the
Company and its subsidiary.
In 2019 the impairment test was
performed comparing the carrying amount with the fair value less the costs of
disposal of the asset, as provided in IAS 36 / CPC 01.
The fair value calculation considered
the hierarchy level within which the fair value measurement of the asset (cash
generating unit) is classified. For TIM Participações as there is only one CGU
this was classified in its entirety as Level 1, for the disposal costs we
consider that it is irrelevant considering the
variation between the fair value level 1 and the carrying amount of the cash
generating unit.
56
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The fair value of Level 1 instruments
comprises instruments traded in active markets and based on quoted market prices
at the balance sheet date. A market is viewed as active if quoted prices are
readily and regularly available from an exchange, distributor, broker, industry
group, pricing service or regulatory agency, and those prices represent actual
and regularly occurring market transactions on a purely commercial
basis.
In the case of TIM Participações, its
securities are traded on BOVESPA with a code (TIMP3) and have a regular trading
volume that allows the measurement (Level 1) as the product between the quoted
price for the individual asset or liability and the quantity held by the
entity.
The measurement was made based on the
share value on the balance sheet date and sensitivity tests were also performed
and in none of the scenarios was identified any indication of impairment, with
the fair value being higher than the carrying amount. Therefore, as the fair
value is higher than the carrying amount, it is not necessary to calculate the
value in use.
As of March 31, 2020, the Company did not identify any
indicators of
impairment and therefore, there is no need to review the impairment in the period.
(e) Infrastructure use rights - LT
Amazonas
The subsidiary signed agreements for the
right to use the infrastructure of companies that operate electric power
transmission lines in Northern Brazil. Such agreements fell within the scope of
IFRIC 4 / ICPC 3 and are classified as financial leases.
Additionally, the subsidiary entered
into network infrastructure sharing contracts with Telefônica Brasil S.A. also
in the Northern region. In these contracts, both operators optimize resources
and reduce their operational costs (Note 16).
(f)
Auction and payment of 4G License 700 MHz
In 2018 the
Intangible assets in progress are substantially represented by costs for the
development of 4G technology, which included: (i) amounts paid to obtain 4G
Licenses; (ii) costs for cleaning the 700 MHZ frequency band; and (iii)
financial costs capitalized on qualifiable assets, as detailed below:
(i)
On September 30,
2014, the subsidiary purchased Lot 2 in the Auction of the 700 MHz band in the
amount of R$1,739 million. In December 2014, the Company made the payment of R$
1,678 million, recording the remaining balance payable in the amount of R$ 61
million as a liability (note 19), as provided for in the
announcement.
The subsidiary is contesting this
remaining balance before ANATEL and is subject to interest of 1% pm and indexed
to the IGP-DI, such amounts being capitalized by the Company. The impact in the
period ended March 31, 2019 was R $ 1,032 of interest and R $ -539 of monetary
restatement on the balance. In 2020, there was
no capitalization, as the asset was considered in operation by
Management.
57
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(ii)
Additionally, as
determined in the call notice, the Company has borne the costs for the cleaning
of the frequency band purchased. The nominal amount due from the Company in
relation to the cleaning of the 700 MHZ frequency of the lot purchased was R$904
million. The Company also had an additional cost of R$295 million related to the
portion that has not been bought in the auction, and that was subsequently split
by ANATEL among the companies that won the auction, totaling R$1,199
million.
In order to perform the spectrum
cleaning activities, in March 2015 TIM, together with other companies that won
the auction, have constituted a Redistribution and
Digitalization Management Entity for TV and RTV Channels, named “Entidade Administradora da
Digitalização", or "EAD”. From 2015 to 2018, TIM, along with the other
companies that won the auction, will disburse amounts in accordance with the
schedule provided for in the public notice to cover the EAD costs related to
these cleaning activities. Because the amount payable of R$1,199 million relates
to a long-term obligation, it was reduced by R$47 million through an adjustment
to Net Present Value (“NPV”).
The Company made the payments as at
April 9, 2015, January 26, 2017 and January 16, 2018 in the amounts of
R$370,379, R$858,991 and R$142,862, respectively.
The aforementioned license is part of
the qualifying asset concept. Consequently, financial charges on funds raised
without specific destination, used for the purpose of obtaining a qualifying
asset, are capitalized at the average rate of 6.90% per year of loans and
financing in force during the year.
In September 2019, the assets were
considered in operation by Management and from this date on, the capitalization
of interest and charges on this asset was closed
16 Finance leases
Leases in which the Company, as the
lessee, substantially holds all of the risks and benefits of ownership, are
classified as financial leases, which are capitalized at the beginning of the
lease at the lower of the fair value of the leased item and the present value of
the payments provided for in the agreement. Interest related to the leases is
taken to income as financial costs over the term of the contract.
The subsidiary entered into tower lease
agreements, as a lessee, arising from a sale and financial leaseback operation
involving the sale of an asset and the concomitant
lease of the same asset by the purchaser to the seller.
58
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The subsidiary recognized a liability
corresponding to the present value of the compulsory minimum installments under
the agreement.
Leases in which the Company, as lessor,
substantially transfers the risks and benefits of the ownership to the other
party (the lessee) are classified as financial leases. These lease values are
transferred from the intangible assets of the Company and are recognized as a
lease receivable at the lower of the fair value of the leased item and/or the
present value of the receipts provided for in the agreement. Interest related to
the lease is taken to income as financial income over the contractual
term.
Asset leases are financial assets
registered and/or measured at amortized cost.
Assets
|
|
Consolidated
|
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
Amazonas
|
|
155,514
|
|
156,378
|
|
|
155,514
|
|
156,378
|
|
|
|
|
|
Current portion
|
|
(5,379)
|
|
(4,931)
|
Non-current portion
|
|
150,135
|
|
151,447
|
LT Amazonas
As a result of the agreement entered
into with LT Amazonas, the subsidiary entered into network infrastructure
sharing agreements with Telefônica Brasil S.A. Under these agreements, the
subsidiary and Telefônica Brasil S.A. make joint investments in the Northern
region of Brazil. The subsidiary has receivables against Telefônica Brasil S.A.
that have to be paid on a monthly basis for a period of 20 years. These amounts
are annually restated by IPC-A (Price Index Rate). The consolidated nominal
amount of future installments receivable by the subsidiary is R$310,839 (R$ 316,641 on December 31, 2019).
The table below includes the schedule of
cash receipts for the agreement currently in force. The amounts represent the
cash receipts estimated in the signed agreements and are stated at their nominal
amounts. It is worthwhile noting that these balances differ from those shown in
the books since, in the case of the latter, the amounts are shown at their
present value:
|
|
Rated values
|
|
Amount
present
|
|
|
|
|
|
Until March 2021
|
|
23,206
|
|
5,379
|
April 2021 to March 2025
|
|
92,826
|
|
27,259
|
April 2025 onwards
|
|
194,807
|
|
122,876
|
|
|
310,839
|
|
155,514
|
59
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The present value of installments
receivable is R$155,514 (R$156,379 as at December 31, 2019), consisting entirely of principal and
estimated as at the date of execution of agreements entered into with the
transmission companies, projecting future cash receipts discounted at 12.56% per
annum. In 2019, its value was reassessed to better align it with the methodology
of the new standard IFRS 16 / CPC 06 (R2), removing the component of projected
inflation on future income, in the amount of R$ 48,991.
Liabilities
|
|
Consolidated
|
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
LT Amazonas (i)
|
|
274,851
|
|
276,233
|
Towers for sale (leaseback ) (ii)
|
|
1,190,623
|
|
1,192,596
|
Others (iv)
|
|
117,529
|
|
115,973
|
Sub-total
|
|
1,583,003
|
|
1,584,802
|
|
|
|
|
|
Other leases (Note 2.f) and (iii):
|
|
|
|
|
- commercial leasing
|
|
3,512,801
|
|
3,294,261
|
Leasing - Vehicles
|
|
5,912
|
|
3,005
|
Leasing - Shops &
Kiosks
|
|
278,953
|
|
255,857
|
Leasing - Real
Estate
|
|
259,610
|
|
243,921
|
Leasing - Land (Rede)
|
|
1,749,371
|
|
1,600,456
|
Leasing - Fiber
|
|
778,896
|
|
798,568
|
Sub-total for the adoption of IFRS16 / CPC 06
(R2)
|
|
6,585,543
|
|
6,196,068
|
Total
|
|
8,168,546
|
|
7,780,870
|
|
|
|
|
|
Current portion
|
|
(885,521)
|
|
(873,068)
|
Non-current portion
|
|
7,283,025
|
|
6,907,802
|
Interest paid in the period ended March
31, 2020 regarding IFRS16 / CPC 06 (R2) amounted to R$157,491.
Changes to the financial liabilities of
lease operations are shown in Note 37.
60
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
i) LT Amazonas
The subsidiary executed agreements for
the right to use the infrastructure of companies that operate electric power
transmission lines in Northern Brazil (“LT Amazonas”). The terms of these
agreements are for 20 years, counted from the date on which the assets are ready
to operate. The contracts provide for monthly payments to the electric power
transmission companies, restated annually at the IPCA.
The table below presents the future
payment schedule for the agreements in force. These amounts represent the
estimated disbursements under the agreements executed with distributors and are
shown at their nominal amounts. These balances differ from those shown in the
books since, in the case of the latter, the amounts are shown at present
value:
|
|
Rated
values
|
|
Amount
present
|
|
|
|
|
|
Until March 2021
|
|
44,079
|
|
10,937
|
April 2021 to March 2025
|
|
176,315
|
|
43,663
|
April 2025 onwards
|
|
370,141
|
|
220,251
|
|
|
590,535
|
|
274,851
|
The consolidated nominal value of future
installments due by the subsidiary is R $ 590,535. Its present value is R $
274,851, being composed in its entirety of principal and was estimated, on the
date of signing of the contracts with the transmission companies, projecting
future payments and discounting them at 14.44% per year. In addition to these
balances, the total value of the right to use also includes R $ 70,759 related
to investments in fixed assets made by the subsidiary and later donated to the
electricity transmission concessionaires. Such a donation was already foreseen
in the contracts signed between the parties. In 2019, its value was remeasured
according to the calculation methodology of IFRS 16 / CPC 06 (R2), removing the
projected inflation component on future payments and maintaining the original
discount rate for the calculation of present value.
ii) Sale and leaseback of
Towers
The subsidiary entered into two Sales
Agreements with American Tower do Brasil Cessão de Infraestruturas Ltda. (“ATC”)
in November 2014 and January 2015 for up to 6,481 telecommunications towers then
owned by TIM Celular, for an amount of approximately R$3 billion, and a Master
Lease Agreement (“MLA”) for part of the space on these towers for a period of 20
years from the date of transfer of each tower, under a sale and leaseback
transaction, with a provision for monthly rental amounts depending on the type
of tower (greenfield or rooftop). The sales agreements provide for the towers to
be transferred in tranches to ATC, due to the need to meet certain conditions
precedent.
In total, 5,873 transfers of towers
occurred, being 54, 336 and 5,483 in the years 2017, 2016 and 2015,
respectively. This transaction resulted in a sales amount of R$2,651,247, of
which R$1,088,390 was booked as deferred revenue and will be amortized over the
period of the contract (Note 23).
61
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The discount rate used in the
transaction was determined on the basis of observable market transactions that
the Company (the lessee) would have to pay under a similar lease or loan, as
mentioned below.
The table below includes the schedule of
payments of the agreement in force in relation to the MLA. The amounts represent
the disbursements estimated in the agreement signed with ATC, stated at their
nominal amounts. It should be noted that these balances differ from those shown
in the books since, in the case of the latter, the amounts are shown at their
present values:
|
|
Rated
values
|
|
Amount
present
|
|
|
|
|
|
Until March 2021
|
|
187,720
|
|
27,756
|
April 2021 to March 2025
|
|
750,881
|
|
137,106
|
April 2025 onwards
|
|
1,944,832
|
|
1,025,761
|
|
|
2,883,433
|
|
1,190,623
|
The consolidated nominal value of the
sum of future installments due by the subsidiary is R $ 2,883,433. Its present
value is R $ 1,190,623 and comprises only the principal. The present value was
estimated, projecting future payments, discounted by the discount rates used on
the date of the transactions, which vary from 11.01% to 17.08% per year, which
were determined based on observable market transactions that the Company (the
lessee) would have to pay on a similar lease and / or loan. In 2019, its value
was remeasured according to the calculation methodology of IFRS 16 / CPC 06
(R2), removing the projected inflation component on future payments and
maintaining the original discount rate for the calculation of present
value.
(iii) Other lease operations
In addition to the lease operations
mentioned above, the Company also has lease agreements that qualify within the
scope of IFRS16 / CPC 06 (R2).
The following table shows the payment
schedule of those agreements in effect. The amounts represent the estimated
disbursements within the agreements signed and are shown at their face value.
The balances differ from those shown in the books, since in the latter case the
amounts are shown at present value:
|
Until March
2021
|
April 2021 to March
2025
|
April 2025
onwards
|
Rated
values
|
Present
value
|
Total other leases
|
1,388,106
|
4,366,216
|
3,988,489
|
9,742,811
|
6,585,543
|
- commercial leasing
|
632,147
|
2,295,194
|
2,303,150
|
5,230,488
|
3,512,801
|
Leasing - vehicles
|
6,330
|
4,786
|
-
|
11,117
|
5,912
|
Leasing - Shops & Kiosks
|
87,951
|
187,478
|
51,078
|
326,509
|
278,953
|
Leasing - Real Estate
|
53,999
|
189,191
|
160,763
|
403,953
|
259,610
|
Leasing - Land (Rede)
|
310,058
|
1,094,284
|
1,473,498
|
2,877,840
|
1,749,371
|
Leasing - Fiber
|
297,621
|
595,283
|
-
|
892,904
|
778,896
|
62
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The present value, principal and
interest on March 31, 2020 for the above contracts, was estimated month by
month, based on the average incremental rate of the Company loans of 10.28%.
The lease amounts considered to be of
low value or less than 12 months recognized as a rental expense on March 31,
2020 is R $ 62,375.
(iv) It is mainly represented by financial leasing transactions
in transmission towers.
17. Regulatory credits recoverable
These refer to Fistel credit amounts
arising from the reduction of the client base, which may be offset by future
changes in the base, or used to reduce future obligations, and are expected to
be used toward settlement of the TFF payable to Fistel annually in the month of
March.
As of March 31, 2020, this credit is R $
47,293 (R $ 33,090 as of December 31, 2019).
18. Suppliers
Supplier accounts payable are
obligations to pay for goods or services that were purchased in the normal
course of business. They are initially recognized at fair value and subsequently
measured at amortized cost using the effective interest rate method. Given the
short maturity terms of these obligations, in practice they are usually
recognized at the invoice value.
|
Parent
Company
|
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
|
|
9,680
|
|
6,987
|
|
2,634,800
|
|
3,923,035
|
|
|
|
|
|
|
|
|
National
currency
|
8,211
|
|
6,624
|
|
2,431,500
|
|
3,769,298
|
Material and Service
Providers
|
8,211
|
|
6,624
|
|
2,313,238
|
|
3,667,152
|
Interconnection
(b)
|
-
|
|
-
|
|
85,314
|
|
67,396
|
Roaming
(c)
|
-
|
|
-
|
|
1.164
|
|
441
|
Co-billing
(d)
|
-
|
|
-
|
|
31,784
|
|
34.309
|
|
|
|
|
|
|
|
|
Foreign
currency
|
1,469
|
|
363
|
|
203,300
|
|
153,737
|
Material and Service
Providers
|
1,469
|
|
363
|
|
149,871
|
|
116,057
|
Roaming
(c)
|
-
|
|
-
|
|
53,429
|
|
37.680
|
|
|
|
|
|
|
|
|
Current
installment
|
9,680
|
|
6,987
|
|
2,634,800
|
|
3,923,035
|
(a) Represent
the amounts to be paid to suppliers for acquisitions of materials and for the
provision of services relating to tangible and intangible assets or for consumption in operations, maintenance
and management, as provided for in the agreement between the parties.
63
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(b) This refers
to the use of the networks of other landline and mobile telephone operators,
with calls being initiated from TIM’s network and ending on the networks of
other operators.
(c) This refers to
calls made by customers outside their registration area, who are therefore
considered visitors to other operator networks.
(d) This refers to calls made by a
customer who has used another long-distance operator.
19. Authorizations payable
As at March 31, 2020, the Company and
its subsidiary had the following commitments to ANATEL:
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
|
|
|
Renewal of authorizations (i)
|
199,363
|
|
199,363
|
Updated ANATEL debt (ii)
|
128,987
|
|
126,974
|
|
328,350
|
|
326,337
|
|
|
|
|
Current portion
|
(89,285)
|
|
88,614
|
Non-current portion
|
239,065
|
|
237,723
|
(i)
For the
provision of SMP, the subsidiary obtained Authorizations for the right to use
radio frequencies for a specified period, renewable for another 15 (fifteen)
years. In the option to extend the right of such use, the payment of 2% of the
net revenue of the region covered by the Authorization that ends each biennium
is due. As of March 31, 2020, the subsidiary had outstanding balances related to
the renewal of Authorizations in the amount of R $ 199,363 (R $ 199,363 on
December 31, 2019).
(ii) On December 05, 2014 the
subsidiary signed an Authorization Instrument for the 700 MHz band and paid an
amount equivalent to R$1,678 million, recording the remaining balance of R$61
million as a trade liability, according to the payment method provided for in
the call notice. Due to the absence of bids for some lots in the Call Notice for
the 700 MHZ band, the subsidiary, along with other bidders, had to bear a
proportion of the costs of these lots. Thus, the EAD was organized, with respect
to which the total commitment assumed by the subsidiary was R$1,199 million.
This amount was paid in four installments adjusted by the IGP-DI (Daily General
Price Index) (Note 15.f).
On June 30, 2015, the subsidiary distributed a lawsuit
challenging the collection of the excess nominal value of R $ 61 million (R $
129 million on March 31, 2020), which is still pending judgment.
64
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The authorizations held on a primary
basis by TIM S.A. as at December 31, 2019, as well as their maturity dates, are
detailed below:
|
Maturity
date
|
Authorization instruments
|
450
MHz
|
800 MHz,
900 MHz
and
1,800
MHz
|
Additional
frequencies
1,800
MHz
|
1,900 MHz
and
2,100 MHz
(3G)
|
2,500 MHz
V1 Band
(4G)
|
2,500 MHz
(P** Band
(4G)
|
700 MHz
(4G)
|
Amapá, Roraima,
Pará, Amazonas and Maranhão
|
-
|
March, 2031*
|
April, 2023
|
April, 2023
|
October, 2027
|
Part
of AR92 (PA) – February, 2024*
|
December, 2029
|
Rio de
Janeiro and Espírito Santo
|
October, 2027
|
March, 2031*
|
ES -
April, 2023
|
April, 2023
|
October, 2027
|
Part
of AR21 (RJ) – February, 2024*
|
December, 2029
|
Acre, Rondônia,
Mato Grosso, Mato Grosso do Sul, Tocantins, Distrito Federal, Goiás, Rio
Grande do Sul (except the municipality of Pelotas and region) and the
municipalities of Londrina and Tamarana, in Paraná
|
PR -
October, 2027
|
March, 2031*
|
April, 2023
|
April, 2023
|
October, 2027
|
Part
of AR61 (DF) – February, 2024*
|
December, 2029
|
São
Paulo
|
-
|
March, 2031*
|
Countryside - April, 2023
|
April, 2023
|
October, 2027
|
-
|
December, 2029
|
Paraná (except
the municipalities of Londrina and Tamarana)
|
October, 2027
|
September, 2022*
|
April, 2023
|
April, 2023
|
October, 2027
|
AR41,
except Curitiba and Metropolitan Region - February, 2024*
AR41,
Curitiba and Metropolitan Region - July, 2031
|
December,
2029
|
Santa
Catarina
|
October, 2027
|
September, 2023*
|
April, 2023
|
April, 2023
|
October, 2027
|
-
|
December,
2029
|
Municipality and
region of Pelotas, in the State of Rio Grande do Sul
|
-
|
April, 2024*
|
-
|
April, 2023
|
October, 2027
|
-
|
December,
2029
|
Pernambuco
|
-
|
May,
2024*
|
-
|
April, 2023
|
October, 2027
|
Part of AR81-July,
2031
|
December,
2029
|
Ceará
|
-
|
November, 2023*
|
-
|
April, 2023
|
October, 2027
|
-
|
December,
2029
|
Paraíba
|
-
|
December, 2023*
|
-
|
April, 2023
|
October, 2027
|
-
|
December,
2029
|
Rio Grande do
Norte
|
-
|
December, 2023*
|
-
|
April, 2023
|
October, 2027
|
-
|
December,
2029
|
Alagoas
|
-
|
December, 2023*
|
-
|
April, 2023
|
October, 2027
|
-
|
December,
2029
|
Piauí
|
-
|
March, 2024*
|
-
|
April, 2023
|
October, 2027
|
-
|
December,
2029
|
Minas
Gerais (except the municipalities of the PGO sector 3 for 3G the radio
frequencies and others)
|
-
|
April, 2028*
|
April, 2023
|
April, 2023
|
October, 2027
|
Part
of AR31 - February, 2030*
|
December,
2029
|
Bahia and
Sergipe
|
-
|
August, 2027*
|
-
|
April, 2023
|
October, 2027
|
-
|
December,
2029
|
|
|
|
|
|
|
|
|
*Agreements already renewed for 15 years,
and therefore TIM is not entitled to a further renewal period.
** Only complementary areas in some specific
States.
65
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
20 Borrowing and financing
These are recorded as financial
liabilities measured at amortized cost, being represented by non-derivative
financial liabilities that are not usually traded before maturity.
They are initially recognized at fair
value, and subsequently measured based on the effective interest rate method.
The appropriation of financial expenses based on the effective interest rate
method is recorded in income, under financial expenses.
Description
|
Currency
|
Charges
|
Due date
|
Mar/20
|
Dec/19
|
BNDES (1)
|
URTJLP
|
TJLP to TJLP + 2.52%
pa
|
Jul-22
|
-
|
240,008
|
BNDES (1)
|
UM143
|
SELIC + 2.52%
pa
|
Jul-22
|
-
|
374,461
|
BNDES (PSI) (1)
|
BRL
|
3.50% pa
|
Jan-21
|
-
|
18,071
|
KFW Finnvera (2)
|
USD
|
Libor 6M + 0.75%
pa
|
Jan / 24 to Dec /
25
|
431,953
|
330,217
|
Debentures (2)
|
BRL
|
104.1% CDI
|
July/20
|
1,008,583
|
1,025,965
|
Cisco Capital (3)
|
USD
|
2.50% pa
|
Dec/20
|
52,391
|
40,366
|
BAML (3)
|
EUR
|
0.279% pa
|
Aug/21
|
512,529
|
-
|
Scotia (2)
|
USD
|
1.734% pa
|
Aug/21
|
455,882
|
-
|
Total
|
|
|
|
2,461,338
|
2,029,088
|
Current
|
|
|
|
(1,149,764)
|
(1,384,180)
|
Non-current
|
|
|
|
1,311,574
|
644,908
|
66
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Guarantees:
(1) Guaranteed by the holding company TIM
Participações and collateral of some receivables of the subsidiary.
(2) Guaranteed by the holding company TIM
Participações.
(3) No guarantee.
The Parent Company TIM Participações did
not have borrowing and financing as at December 31, 2019.
The subsidiary’s
financing, contracted with BNDES, was obtained for the expansion of the mobile
telephone network and has restrictive contractual clauses that provide for the
fulfillment of certain financial and non-financial indexes calculated on a
half-yearly basis. In February 2020, the subsidiary made the total prepayment of
financing obtained from BNDES, however there are still contracts in force with
the bank regulating the credit lines available for withdrawal. The parent
company TIM Participações has been complying with the defined financial ratios.
The financial ratios are: (1) Shareholders’ equity on total assets; (2) EBITDA
on net financial expenses; (3) Total financial debt to EBITDA and (4) Short-term
net financial debt to EBITDA.
In May 2018, the Company obtained a new
credit line in the amount of R $ 1,500 million from the BNDES to finance
investments in fixed assets (Capex) for the 2017-2019 three-year period, with
terms to be used until August 2020. As of March 2019, with the contracting of
Finame Direto, the Company replaced sub-credit “B” of this contract (equivalent
to R $ 390 million). This new credit line in the amount of R $ 390 million with
Finame, a company in the BNDES system, aimed at improving the conditions of one
of the sub-credits, of equal
value, contracted with BNDES in May 2018, both in terms of term and cost
The cost of this line is IPCA plus interest of up to 2.99% per year and its
availability extends until March 2021, without any disbursement obligations.
67
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
In January 2020, a new credit
line in the principal amount of R $ 752 million was secured between Banco do
Nordesde do Brasil SA as a creditor and TIM SA as a borrower, guaranteed by
guarantees and receivables. The agreement has a total term of 8 years, 3 of
which are grace period and 5 of amortization, to subsidize the company’s capex
plan for the next 3 years (2020-2022) in the Northeast region. The Credit Line
is divided into two installments: i) R $ 325 million in the IPCA + 1.44% ay or
IPCA +1.22% considering a 15% compliance bonus; and ii) R $ 427 million in IPCA
+ 1.76% ay or IPCA +1.48% considering 15% compliance bonus. Disbursement in
installments scheduled for 2020, 2021 and 2022.
The table below shows
the position of financing and available credit lines:
|
|
|
|
|
(remaining
Value)
|
|
Type
|
Currency
|
Opening
date
|
Term
|
Total
amount
|
|
Amount used up to March
31, 2020
|
BNDES (i)
|
TJLP
|
May/18
|
Aug/20
|
1,090,000
|
1,090,000
|
-
|
BNDES (ii)
|
TJLP
|
May/18
|
Aug/20
|
20,000
|
20,000
|
-
|
FINAME (iii)
|
IPCA
|
Mar/19
|
Mar/21
|
390,000
|
390,000
|
-
|
BNB (iv)
|
IPCA
|
Jan/20
|
Jun / 23
|
752,479
|
752,479
|
-
|
Total BRL:
|
|
|
|
2,252,479
|
2,252,479
|
-
|
Purpose:
(i) Support to
TIM’s investment plan for the years 2017 to 2019 including, but not limited to,
the acquisition of national equipment;
(ii) Investments in social
projects, within the community;
(iii) Exclusive application
in the acquisition of machinery and equipment, industrial systems and / or other
components of national manufacture.
(iv) Support to TIM’s
investment plan for the years 2020 to 2022 in the region where Banco do Nordeste
do Brasil operates.
As a result of the more
efficient loan and financing management strategy, in February 2020, the Company
prepaid its total debt with BNDES at a cost of 171% of the CDI, replacing it
with new loans with Bank of America Merril Lynch and The Bank of Nova Scotia,
with an average cost of 108.3% of the CDI.
The controlled
company TIM Celular has swap transactions, in order to be protected from the
real devaluation risk with respect to the US dollar and euro in its loans and
financing. However, it does not apply “accounting for hedge” (See
note 37).
Loans and financing on December 31, 2020
due on long-term is in accordance with the following schedule:
68
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
|
|
Consolidated
|
2021
|
|
1,052,733
|
2022
|
|
86,129
|
2023
|
|
43,344
|
2024
|
|
101,854
|
2025
|
|
27,514
|
|
|
1,311,574
|
The nominal value of loans is consistent
with their respective payment schedule.
Borrowing fair value
In Brazil, there is no consolidated
long-term debt market with the characteristics verified in the financing
obtained from KFW Finnvera, which has the Finnish development agency Finnvera as
guarantor. For the purposes of analyzing the fair value, considering the
characteristics of this transaction, the Company believes that its fair value is
equal to that recorded in the balance sheet.
With regard to funding contracted with
Cisco Capital, The Bank of Nova Scotia and Bank of America, the current market
conditions do not indicate the existence of factors that could lead to a fair
value of operations different from that recorded in the accounting
books.
1. Indirect taxes, charges and
contributions payable
|
|
Parent
Company
|
|
Consolidated
|
|
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
|
|
Indirect
taxes, charges and contributions payable
|
|
545
|
|
530
|
|
588,489
|
|
466,603
|
|
|
|
|
|
|
|
|
|
Value
added tax on goods and services - ICMS
|
|
-
|
|
-
|
|
357,780
|
|
377,105
|
ANATEL
taxes and charges
|
|
-
|
|
-
|
|
161,935
|
|
22,009
|
ISS
|
|
539
|
|
525
|
|
60,448
|
|
61,673
|
Others
|
|
6
|
|
5
|
|
8,326
|
|
5.816
|
|
|
|
|
|
|
|
|
|
Current
portion
|
|
(545
|
|
(530)
|
|
(585,453)
|
|
(463,606)
|
Non-current portion
|
|
‐
|
|
‐
|
|
3,036
|
|
2,997
|
22. Direct taxes, charges and contributions
payable
The current income tax and social
contribution charges are calculated based on the tax laws enacted or
substantially enacted up to the balance sheet date.
Brazilian tax legislation allows
companies to choose quarterly or monthly payments of income tax and social
contribution. From 2016 onward, the Company chose to make monthly payments of
income tax and social contribution.
69
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
|
|
Parent
Company
|
|
Consolidated
|
|
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
|
|
Direct taxes, charges and contributions
payable
|
|
190
|
|
25,816
|
|
286,634
|
|
508,615
|
|
|
|
|
|
|
|
|
|
Income
tax and social contribution
|
|
-
|
|
-
|
|
204,809
|
|
346,097
|
PIS/COFINS
|
|
180
|
|
25,813
|
|
46,721
|
|
130,327
|
Other
(*)
|
|
10
|
|
3
|
|
35,104
|
|
32,191
|
|
|
|
|
|
|
|
|
|
Current
portion
|
|
(190)
|
|
(25,816)
|
|
(73,864)
|
|
(296,305)
|
Non-current portion
|
|
‐
|
|
‐
|
|
212,770
|
|
212,310
|
(*) The composition of this account
refers mainly to the subsidiary’s adherence to the Tax Recovery Program – REFIS,
as of 2009. For installment payment of debts due on federal taxes (PIS, COFINS,
IR and CSLL) whose final maturity will be on October 31, 2024.
23. Deferred revenue
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
|
|
|
Deferred revenues
|
1,027,899
|
|
1,109,112
|
|
|
|
|
Prepaid services (1)
|
139,199
|
|
186,310
|
Government grants (2)
|
37,044
|
|
42,159
|
Network swap (3)
|
529
|
|
2,713
|
Anticipated revenue
|
13,154
|
|
11.651
|
Deferred revenue from tower sales
(4)
|
829,493
|
|
843,017
|
Contractual liabilities
(5)
|
8,480
|
|
23,262
|
|
|
|
|
Current portion
|
(219,623)
|
|
(281,930)
|
Non-current portion
|
808,276
|
|
827,182
|
(1) This refers to the reloading of
voice and data credits not yet used by customers involving prepaid system
services, which are appropriated to income when customers actually avail
themselves of these services.
(2) Refers to the release of funds
related to the financing line with the BNDES (Investment Support Program - BNDES
PSI). The sum of grants awarded by BNDES until March 31, 2020 is R $ 203 million
and the amount outstanding at March 31, 2020 and R $ 37,044 (42,159 at December
31, 2019) This amount is being amortized over the term useful life of the asset
being financed and appropriated to the group of “other income (expenses), net”
(note 29).
70
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND SUBSIDIARY
NOTES TO THE QUARTERLY INFORMATION - continued
As at March 31
(In thousands of Reais, except as otherwise stated)
(3) Refers mainly to the transfer of onerous contracts and reciprocal fiber optic infrastructure (Note 11).
(4) Refers to amounts to be appropriated from sales of towers (Note 16).
(5) Contracts with customers.
As of March 31, 2020, the balance of contractual assets and liabilities is as follows:
|
03/2020
|
|
12/2019
|
|
|
|
|
Accounts receivable included in accounts receivable from customers
|
2,270,369
|
|
2,413,865
|
Contractual assets (Note 6)
|
16,272
|
|
15,142
|
Contractual liabilities
|
(8,480)
|
|
(23,262)
|
Contracts with customers gave rise to the allocation of discounts under combined loyalty offers, where discounts may be given on equipment and/or services, generating a contractual asset or liability, respectively, depending on the nature of the offer in question.
Summary of the main changes during the period:
|
Contractual assets (liabilities)
|
|
|
Balance on December 31, 2019
|
(8,120)
|
Additions
|
3,352
|
Write-off
|
12,560
|
Balance March 31, 2020
|
7,792
|
The estimated realization of the balances of contractual assets and liabilities is described below:
|
2020
|
2021
|
2022
|
Contractual assets (liabilities)
|
9,703
|
(1,832)
|
(79)
|
|
|
|
|
In accordance with paragraph 121 of IFRS 15 / CPC 47, the Company is not presenting the effects of the information on contracts with customers that are effective for less than one year.
24. Provision for legal and administrative proceedings
The Company and its subsidiary are parties to legal and administrative proceedings in the civil, labor, tax and regulatory spheres which arise in the normal course of their business.
The provision is set up at an amount deemed sufficient and adequate to cover losses and risks considered probable, based on an analysis by the Company’s legal consultants and by Management. Situations where losses are considered probable or possible are subject to registration and disclosure,
respectively, for their
adjusted amounts, and those where losses are considered remote are not
disclosed.
71
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The updated provision set up for legal and administrative
proceedings is made up as follows:
|
|
Parent Company
|
|
Consolidated
|
|
|
03/2020
|
|
12/2019
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
|
|
Provision for
legal and administrative proceedings
|
|
48,622
|
|
47,423
|
|
885,663
|
|
840,637
|
|
|
|
|
|
|
|
|
|
Civil
(a)
|
|
‐
|
|
‐
|
|
237,126
|
|
212,701
|
Labor
(b)
|
|
45,921
|
|
44,745
|
|
263,491
|
|
261,838
|
Tax
(c)
|
|
2,701
|
|
2,678
|
|
352,506
|
|
333,717
|
Regulatory
(d)
|
|
‐
|
|
‐
|
|
32,540
|
|
32,381
|
|
|
The changes in the provision for legal
and administrative proceedings can be summarized as follows:
|
Dec-19
|
|
Additions, net of
reversals
|
|
Payments
|
|
Monetary
adjustment
|
|
Mar-20
|
|
|
|
|
|
|
|
|
|
|
|
840,637
|
|
98,089
|
|
(117,474)
|
|
64,411
|
|
885,663
|
|
|
|
|
|
|
|
|
|
|
Civil (a)
|
212,701
|
|
63,010
|
|
(65,237)
|
|
26,652
|
|
237,126
|
Labor (b)
|
261,838
|
|
25,138
|
|
(51,424)
|
|
27,939
|
|
263,491
|
Tax (c)
|
333,717
|
|
9,920
|
|
(793)
|
|
9,662
|
|
352,506
|
Regulatory (d)
|
32,381
|
|
21
|
|
(20)
|
|
158
|
|
32,540
|
The Company and its subsidiary are
subject to various legal and administrative proceedings filed against them by
consumers, suppliers, service providers, consumer protection agencies and public
finance agencies, in connection with a number of issues that arise in the
regular course of business of the entities. The main cases are summarized
below:
a. Civil
proceedings
a.1. Consumer lawsuits
The Company is party to lawsuits that
refer to some claims that have been filed by consumers at the legal and
administrative levels. These claims, which amount to R$134,754 (R$135,290 as at December 31, 2019) basically refer to alleged incorrect
collections, contract cancellation, service quality, deficiencies and failures
in equipment delivery, and unjustified inclusion in credit protection
services.
72
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
a.2. Consumer protection
agencies
TIM is a party to court and
administrative lawsuits filed by the Public Prosecutor’s Office, Procon and
other consumer protection agencies arising from consumer complaints that
include: (i) alleged failure to provide network services; (ii) challenges
related to the quality of client assistance; (iii) alleged violation of SAC
Decree; (iv) alleged violation of agreements; (v) alleged false advertising; and
(vi) discussion of the amounts charged by the Company to its customers related
to loyalty fines in the case of handset theft. The amounts involved total
R$44,762 (R$ 31,221 as at December 31,
2019).
a.3. Former trade
partners
TIM is a defendant in lawsuits filed by
former trade partners claiming, among others, amounts on the basis of alleged
non-compliance with agreements. The amounts involved total R$19,043 (R$ 12,812 as at December 31, 2019).
a.4. Others
TIM is a defendant in other non-consumer
lawsuits filed by different agents to challenge, among others: (i) the renewal
of lease agreements; (ii) share subscription; (iii) indemnities; (iv) alleged
non-compliance with agreements; and (v) collection suits. The amounts involved
total R$36,651 (R$31,539 as at December 31, 2019).
a.5 Social, environmental and
infrastructure
The Company is party to lawsuits
involving various agents challenging several licensing aspects, such as
environmental licensing and structure licensing (installation/operation). The
amounts involved total R$567 (R$ 498 as at December 31, 2019).
a.6 ANATEL
The subsidiaries are parties to lawsuits
filed against ANATEL, challenging: (i) a debit related to the collection of 2%
on revenue from value added services (“VAS”) and interconnection; (ii)
pro
rata
monetary restatement applied to the price proposal established in the call
notice for use of 4G frequencies; and (iii) alleged non-compliance with service
quality targets. The amounts involved are equivalent to R$1,349 (R$1,342 as at
December 31, 2019).
b. Labor proceedings
Below is a summary of the key labor
proceedings claims with a likelihood of loss considered probable:
Refer to various labor claims filed by
former employees in relation to issues such as salary differences, parity,
payment of variable compensation/commission,
legal additions, overtime and other provision set forth in the period preceding
the privatization process, and also claims filed by former employees of service
providers who, taking advantage of the labor legislation currently in force,
require the Company and/or its subsidiary to be held liable for labor
obligations not complied with by the service providers contracted.
73
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Of the total of 3,044 labor claims on
March 31, 2020 (2,408 on December 31, 2019) filed against the Company and its
subsidiary, the majority refer to claims involving former employees of service
providers followed by employee suits own. The provision for these claims totals
R $ 254,622 monetarily restated (R $ 252,968 as of December 31, 2019).
A significant portion of this provision
relates to organizational restructuring processes, notably the closure of the
activities of the Customer Relationship Centers (call center) as well as processes related to TIM’s
internal websites, which resulted in the dismissal of employees. As of March 31,
2020, the provision for these claims totals R $ 48,929 monetarily restated (R $
57,859 as of December 31, 2019).
c. Tax processes
Federal
Taxes
|
158,136
|
|
155,495
|
State
Taxes;
|
110,082
|
|
93,790
|
Municipal Taxes
|
8,282
|
|
8,227
|
TIM SA
Proceedings ( Purchase price
allocation )
|
76,006
|
|
76,205
|
|
352,506
|
|
333,717
|
The total provision recorded is
substantially composed of the following proceedings, and the amounts indicated
are estimated using the indices established by the federal government for taxes
in arrears, being linked to the variations in the SELIC rate:
Federal taxes
The provision is substantially composed
of the following proceedings:
a. The provision for TIM SA
supports thirty-seven lawsuits, relating to questions involving the impact on
CIDE, CPMF, CSLL, IRRF operations, spontaneous denunciation of the fine in the
payment of FUST and ancillary obligations. Of this total, we highlight the
amounts involved in the legal proceedings seeking the recognition of the right
not to collect the CPMF allegedly levied on simultaneous operations of purchase
and sale of foreign currency and exchange of account ownership resulting from
corporate incorporation, whose amounts provisioned, updated, equivalent to R $
9,921 (R $ 9,560 on December 31, 2019), as well as the amount related to
the fine and interest on the 2009 FUST contribution, where the benefit of
spontaneous termination is not being recognized, whose provisioned
and updated amount is R $ 14,652 (R $ 14,564 on December 31, 2019).
74
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
b. The company set up a
provision for a proceeding that seeks to collect the social security
contribution withheld at the rate of 11% to which, supposedly, payments made by
the company to other legal entities should be submitted as compensation for
various activities, the amount of which was provisioned and updated is R $
38,202 (R $ 37,977 on December 31, 2019).
c. In addition, in the second
quarter of 2019, the Company constituted the provision for the FUST process,
which seeks the unconstitutionality and illegality of charging the FUST (Fund
for Universalization of Telecommunications Services). Claim for the recognition
of the right not to collect FUST, failing to include in its calculation basis
the revenues transferred as interconnection and EILD (Industrial Exploration of
Dedicated Line), as well as the right not to be retroactively charged for the
differences determined due to not observing ANATEL’s summary 7/2005, in the
amount of R $ 58,440 (R $ 58,116 on December 31, 2019).
State taxes
The provision is substantially composed
of the following proceedings:
The provision for TIM SA supports
forty-two processes, among which we highlight (i) the amounts involved in the
assessments that question the reversal of ICMS debts, as well as the documentary
support for the confirmation of appropriated credits by the Company, whose
values provisioned, restated, amount to R $ 42,568 (R $ 23,558 as of December
31, 2019), (ii) amounts allegedly not offered for taxation for the provision of
telecommunications services, which, updated, amount to R $ 5,074 (R $ 5,037 as
of December 31, 2019), as well as (iii) charges due to alleged differences in
both incoming and outgoing goods, in a quantitative inventory survey procedure,
whose updated values are equivalent to R $ 15,568 (R $ 15,460 in 31 December
2019), (iv) the launching of credits related to the return of cellular handsets
assigned in lending, whose updated values are equivalent to R $ 10,914 (R $
10,826 on December 31, 2019) and ( v) subsidies for handset, whose updated
amounts are equivalent to R $ 8,690 (R $ 8,644 as of December 31,
2019).
Municipal taxes
These include the amounts involved in
assessments questioning the withholding and payment of the ISS-source on
services provided by third parties with no employment relationship, as well as
the payment of own ISS regarding co-billing services.
TIM S.A. PPA
75
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
There are tax proceedings arising from
the acquisition of TIM SA, which comprise the process of allocating the
acquisition price of this Subsidiary and amount to R $ 76,006 (R $ 76,205 on
December 31, 2019).
d. Regulatory processes
ANATEL has brought administrative
proceedings against the Group for: (i) failure to meet certain quality service
indicators; (ii) defaults on certain obligations assumed under the Instruments
of Authorization; and (iii) non-compliance with the regulations of SMP and STFC,
among others.
As of March 31, 2020, the amount
indicated relating to the Procedures for Determination of Non-Compliance with
Obligations (“PADOs”), considering the monetary adjustment, classified as
probable loss risk is R $ 32,540 (R $ 32,381 on December 31, 2019).
e. Legal and administrative processes
involving possible losses
Civil, labor, tax and regulatory actions
have been filed against the Company and its subsidiary involving a risk of loss
classified as possible by the Company’s legal advisors and the Management. No
provision has been set up for these legal and administrative proceedings, and no
materially adverse effects are expected on the quarterly information, as shown
below:
|
Consolidated
|
|
03/2020
|
|
02/12/2019
|
|
|
|
|
|
18,873,591
|
|
18,395,727
|
|
|
|
|
Civil (e.1)
|
1,114,812
|
|
1,032,637
|
Labor and social security (e.2)
|
428,726
|
|
459,020
|
Tax (e.3)
|
16,614,329
|
|
16,196,077
|
Regulatory (e.4)
|
715,724
|
|
707,993
|
The administrative and legal proceedings
assessed as possible losses and monitored by Management are disclosed at their
updated values.
The main actions where the risk of loss
is classified as possible are described below:
e.1. Civil
|
Consolidated
|
|
03/2020
|
|
12/2019
|
Actions brought
by consumers (e.1.1)
|
314,059
|
|
374,860
|
ANATEL
(e.1.2)
|
220,627
|
|
220,526
|
Consumer
Protection Bodies (e.1.3)
|
118,179
|
|
32,847
|
Former business
partners (e.1.4)
|
186,956
|
|
180,226
|
Environmental
partner and infrastructure (e.1.5)
|
139,984
|
|
125,201
|
Others (e.1.6)
|
135,007
|
|
98,977
|
|
1,114,812
|
|
1,032,637
|
|
|
|
|
76
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
e.1.1. Actions filed by
consumers
These actions refer particularly to
alleged incorrect billing, contract cancellation, service quality, deficiencies
and failures in equipment delivery, and unjustified inclusion in bad debtors’
lists.
e.1.2. ANATEL
The Company is party to lawsuits filed
against ANATEL, for the following reasons: (i) debit regarding the collection of
2% on revenue obtained from VAS and interconnection; (ii) pro rata monetary restatement applied
to the price proposal established in the call notice for the use of 4G
frequencies; and (iii) alleged non-compliance with service quality
targets.
e.1.3. Consumer Protection
Agencies
TIM is a party to court and
administrative lawsuits filed by the Public Prosecutor’s Office, Procon and
other consumer protection agencies arising from consumer-related complaints that
include: (i) alleged failure to provide network services; (ii) alleged failure
to deliver devices; (iii) alleged non-compliance with state legislation; (iv)
contract model and alleged incorrect charging for VAS; (v) alleged violation of
SAC Decrees; (vi) alleged violation of agreements; and (vii) blocking of
data.
e.1.4. Former trade partners
TIM is a defendant in actions filed by
several former trade partners who are claiming, among other items, amounts
arising from alleged non-compliance with agreements.
e.1.5. Social, environmental and
infrastructure
The Company is party to lawsuits
involving different parties that challenge aspects related to: (1) environmental
licensing and structure licensing (installation/operations), and (2) (i)
electromagnetic radiation emitted by the telecom structures, (ii) renewal of
leasing land agreements to install sites, (iii) eviction from land leased to
install sites, and (iv) presentation of registration data, among
others.
e.1.6 Others
TIM is a party to other lawsuits of an
essentially non-consumer-related nature filed by various agents other than those
described above, in which the discussions involve: (i) renewals of lease
agreements, (ii) share subscription lawsuits, (iii) compensation lawsuits, (iv)
alleged breach of contract, and (v) lawsuits involving charges.
e.2. Labor claims
e.2.1. Social
security
77
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
TIM Celular received Tax
Notification of Debt Entry, referring to the alleged irregularity in the payment
of social security contributions related to the payment of Profit Sharing, in
the amount of updated R $ 508 (R $ 538 on December 31, 2019) and suffered still
tax assessment related to alleged social security contributions on hiring bonus;
unadjusted bonus; consideration for self-employed activities and sales
incentives in the updated amount of R $ 8,828 as of March 31, 2020.
TIM SA received Tax Notices
of Debt Entry, referring to the alleged irregularity in the payment of social
security contributions levied on profit sharing; lack of payment on directors’
fees and lack of proper filling in of the FGTS Collection Guide - GFIP, in
addition to a wrong statement in the GFIP in the total amount of R $ 1,395
updated (R $ 1,559 on December 31, 2019).
e.2.2. Labor
There are 3,843 labor claims on March
31, 2020 (3,976 on December 31, 2019) filed against the Company and its
subsidiary, relating to claims involving ex-employees and employees of service
providers in the amount of updated R $ 437,593 (R $ 459,020 as of December 31,
2019).
A significant portion of the existing
contingency concerns organizational restructuring processes, notably the closure
of the activities of the Customer Relationship Centers (call center), as well as processes
related to TIM’s internal websites, which resulted in the dismissal of
employees. Added to these lawsuits are those brought by third-party service
providers with requests for employment with TIM, whose amounts add up to R $
16,143 updated (R $ 14,349 as of December 31, 2019).
It should also be pointed out that there
is a group of labor claims, particularly in São Paulo and Rio de Janeiro, from
former employees of Gazeta Mercantil, Jornal do Brasil and JB Editora requesting
in court the inclusion in the liability center of Holdco, which before the
merger with TIM Participações, belonged to the Grupo Econômico Docas, of which
Gazeta Mercantil and Jornal do Brasil are part.
The other amounts are related to labor
lawsuits filed by former employees and third companies.
e.3. Tax
|
03/2020
|
|
12/2019
|
Federal taxes
(e.3.1)
|
4,390,769
|
|
4,279,570
|
State Taxes
(e.3.2)
|
8,558,124
|
|
8,221,808
|
Municipal taxes
(e.3.3)
|
711,924
|
|
703,132
|
FUST, FUNTTEL
and EBC (e.3.4)
|
2,953,512
|
|
2,991,567
|
|
16,614,329
|
|
16,196,077
|
|
|
|
|
78
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The amounts are adjusted based on an
estimate of the SELIC rate. The historical amount involved is equivalent to
R$11,549,274 (R$ 11,662,216 as of December 31,
2019).
e.3.1. Federal taxes
The total amount assessed against Grupo
TIM in relation to federal taxes is R $ 4,390,769 as of March 31, 2020 (R $
4,279,570 as of December 31, 2019). Of this value, the following discussions
stand out:
(i) Alleged of alleged incorrect
use of tax credits for carrying out reverse merger, amortization of goodwill
paid on the acquisition of cell phone companies, deduction of goodwill
amortization expenses, exclusion of goodwill reversal, other reflections and
disallowances of compensations and deductions paid by estimate, allegedly
improper use of the SUDENE benefit due to lack of formalization of the benefit
at the Federal Revenue Service (RFB), and failure to pay IRPJ and CSLL due by
estimate. The amount involved is R $ 2,687,503 (R $ 2,672,754 as of December 31,
2019).
(ii)
Method of
offsetting tax losses and negative bases. The amount involved is R $ 200,792 (R
$ 203,302 on December 31, 2019)
(iii)
Collection of
CSLL on monetary variations for swap transactions, recorded on a cash basis. The
amount involved is R $ 66,962 (R $ 66,164 on December 31, 2019).
(iv) Payment of IRRF on revenue
from overseas residents, including those remitted for international roaming and
payments to unidentified beneficiaries, as well as the collection of CIDE on
royalties remitted overseas, including remittances for international roaming.
The amount involved for the subsidiary is R $ 257,452 (R $ 256,833 on December
31, 2019).
(v) Charging of IRPJ, PIS/COFINS
and CSLL debts for the non-approval or partial approval of offsetting carried
out by the Company using credits from withholding tax on financial investments
and negative IRPJ balance. The amount involved is R $ 515,202 (R $ 427,233 on
December 31, 2019).
e.3.2. State taxes
The total amount assessed against Grupo
TIM in relation to state taxes on March 31, 2020 is R $ 8,558,124 (R $ 8,221,808
on December 31, 2019). Of this value, the following discussions stand
out:
(i)
Failure to
include unconditional discounts offered to customers in the ICMS calculation
base, and a fine for alleged failure to comply with related ancillary
obligations, including failure to submit register 60i of the SINTEGRA file. The
amount involved is R $ 1,048,066 (R $ 1,053,411 on December 31,
2019).
(ii) Use of tax benefits under the
Program for Promoting the Integrated and Sustainable Economic Development of the
Federal District granted by the tax authority itself, but subsequently declared
an unconstitutional and alleged incorrect crediting of ICMS on interstate
purchases of goods with tax benefits granted in the state of origin. The amount
involved is R $ 893,337 (R $ 887,637 on December 31, 2019).
79
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(iii) Credit reversal and late use
of credits for purchases of fixed assets. The amount involved for TIM SA is R $
645,677 (R $ 731,864 as of December 31, 2019).
(iv) ICMS credits booked and
debits reversed, as well as the identification and supporting documentation for
amounts and information passed to customer bills, such as tax rates and credit
granted as prepayment of future recharges (special credit), as well as credits
related to transactions involving tax substitution, exempt and non-taxable
transactions. As of March 31, 2020, the amount in the subsidiary is R $
3,310,379 (R $ 3,284,473 as of December 31, 2019).
(v) The use of credit to purchase
electricity for the companies’ production processes. The amount involved is
R$133,269 (R$131,057 as at December 31,
2019).
(vi) Alleged conflict between
ancillary obligation data and the payment of the tax, and specific questioning
regarding the fine charged due to non-compliance with ancillary obligations. The
amount involved is R$505,407 (R$138,684 as at December 31, 2019).
(vii) Alleged failure to pay ICMS
arising from debts reversed regarding prepaid services, incorrect ICMS credits
regarding outgoing goods allegedly benefiting from a reduction in the
calculation base, as well as an alleged failure to include VAS of the ICMS
calculation base. The amount involved is R$200,004 (R$198,505 as at December 31, 2019).
(viii) Credits booked for the
return of cell phones on free lease. The amount involved is R$182,052 (R$180,920 as at December 31, 2019).
(ix) Collection of ICMS tax on
subscription services and the alleged failure to include this in the ICMS
calculation base due to its nature. The amount involved is R$253,871 (R$249,659 as at December 31, 2019).
e.3.3. Municipal taxes
The total assessment against the TIM
Group for municipal taxes was R$711,924 as at December 31, 2020, (R$703,132 as at December 31, 2019).
Of this amount, the following issues stand out:
a.
Payment of ISS
and of a punitive fine for failure to pay the alleged tax on various revenue
accounts of the Company. The amount involved is R$148,482 (R$147,572as at December 31, 2019).
b.
Collection of
ISS on import of services. The amount involved is R$303,282 (R$300,669 as at December 31, 2019).
80
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
c.
Constitutionality of the collection of the TFF by municipal
authorities in several locations. The amount involved is R$122,282 (R$120,503 as at December 31, 2019).
e.3.4. FUST and FUNTTEL
The total amount assessed against Grupo
TIM in relation to contributions to FUST and FUNTTEL is R $ 2,953,512 (R $
2,991,567 as of December 31, 2019). The main discussion involves the collection
of contributions to FUST and FUNTTEL (Fund for Technological Development of
Telecommunications) from the issue by ANATEL of Súmula nº. 07/2005, aiming,
among others, and mainly, the collection of the contribution to the FUST and
FUNTTEL on the interconnection revenues earned by mobile telecommunications
service providers, as of Law no. 9,998 / 2000.
e.4. Regulatory issues
ANATEL has initiated administrative
proceedings against those controlled by: (i) non-compliance with certain quality
indicators; (ii) default on other obligations arising from the Authorization
Terms and; (iii) failure to comply with SMP and STFC regulations, among
others.
As of March 31, 2020, the amount
indicated relating to PADOs (Procedure for Determination of Non-Compliance with
Obligations), considering the monetary adjustment, classified as possible risk
was R $ 715,724 (R $ 707,993 on December 31, 2019). The variation was mainly due
to the processing of the s
PADOs included in the Conduct Adjustment Term “TAC” under negotiation with
ANATEL.
On August 22, 2019, ANATEL’s Board of
Directors unanimously approved TIM’s Conduct Adjustment Term, which had been
negotiated since June 2018 with the regulator. The agreement covers a sanction
reference value of R $ 627 million. The commitment to be assumed by TIM provides
for improvement actions in three performance pillars - customer experience,
quality and infrastructure - through initiatives associated with improvements in
the station licensing process, efficient use of numbering resources, evolution
of digital channels service, reduction of complaint rates, repair of users and
reinforcement of transport and access networks. In addition, it contemplates the
additional commitment to take mobile broadband, through the 4G network, to 366
municipalities with less than 30 thousand inhabitants, thus reaching more than
3.4 million people. The new infrastructure will be implemented in three years -
more than 80% in the first two years - and the sharing regime with other
providers is guaranteed by the Company.
Upon obtaining the term extension of the
authorizations for the use of radio frequencies associated with the SMP, the
subsidiary TIM SA becomes liable for the contractual burden on the net revenue
resulting from the service plans sold under each authorization. However, since
2011 ANATEL started to include in the calculation base of the referred burden
also the revenues obtained with Interconnection, and from 2012, the revenues
obtained with Value Added Services. In the opinion of the Company, the inclusion
of such revenues is undue because it is not expressly provided for in the original
Authorization Terms, so the charges received are discussed at the administrative
and / or judicial level.
81
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
25. Shareholders’ equity
a. Capital stock
Share capital is recorded at the amount
effectively raised from shareholders, net of costs directly linked to the
funding process.
When a Group company buys shares in the
capital of the Company, in order to keep them in treasury, the amount paid,
including any additional costs directly attributable, is deducted from the
Company’s shareholders’ equity until the shares are canceled or reissued. When
these shares are subsequently reissued, any amount received, net of additional
costs directly attributable to the transaction, is included in equity. As of
March 31, 2020, the Company has 625,404 shares in Treasury (210,527 as of
December 31, 2019), in order to comply with the Stock Option Plan (note
26).
The Company is authorized to increase
its share capital, by resolution of the Board of Directors, regardless of
statutory reform, up to the limit of 4,450,000,000 common shares.
The subscribed and
paid up capital is represented as follows:
|
Consolidated
|
|
03/2020
|
|
12/2019
|
|
|
|
|
Net value paid up
|
9,866,298
|
|
9,866,298
|
|
|
|
|
Amount
Paid-up
|
9,913,415
|
|
9,913,415
|
Fundraising
Costs
|
(47,117)
|
|
(47,117)
|
|
|
|
|
Number of common
shares
|
2,421,032,479
|
|
2,421,032,479
|
b. Capital
reserves
The use of capital reserves is in
accordance with the provisions of Article 200 of Law No. 6.404/76, which refers
to corporate entities. These reserves consist of:
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
|
|
410,753
|
|
410,650
|
|
|
|
|
|
Special goodwill reserve
|
|
380,560
|
|
380,560
|
Stock options
|
|
30,193
|
|
30,090
|
b.1 Special goodwill
reserve
The special goodwill reserve arose from
the following transactions:
(i) Takeover of the former subsidiaries TIM
Sul and TIM NE - acquisition of minority
shares
82
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
In 2005, the
Company acquired all the shares held by the minority shareholders of TIM Sul SA
and TIM Nordeste Telecomunicações SA This acquisition was carried out with the
issue of new shares by TIM Participações SA, converting these companies into its
wholly-owned subsidiaries. This transaction was recorded at the time at the book
value of the shares, not recording goodwill arising from the difference in
market value between the shares traded.
When the first IFRS
was adopted, the Company used the exemption that allows a subsidiary, when
adopting international accounting practice after the adoption of IFRS by its
parent company, to consider the balances previously reported to the parent
company for the purposes of its consolidation. In the balance sheet for the
transition to IFRS, the Company recorded the acquisition value based on the
market value of TIM Participações SA shares at that time, recording goodwill in
the amount of R $ 157,556.
(ii) Acquisition of the shares of Holdco
- purchase of TIM S.A (Intelig)
On December 30,
2009, the Extraordinary General Meeting of TIM Participações approved the merger
of Holdco, a company that held 100% of TIM SA’s share capital, into TIM
Participações. As a result of this transaction, the Company issued 127,288,023
shares.
Based on the old
Brazilian accounting practices (“BR GAAP”), the acquisition was recorded at the
net book value of the assets acquired on the base date of November 30,
2009.
When the IFRS was
first adopted, the acquisition was recorded on the base date of December 31,
2009 and the market value of TIM Participações’ common and preferred shares on
December 30, 2009 was considered, totaling R $ 739,729. The difference between
this amount and the book value recorded under the former BR GAAP (R $ 516,725)
generated goodwill, against a capital reserve of R $ 223,004.
b.2 Stock options
The balances
recorded in these captions represent the expenses of the Company and its
subsidiary with stock options granted to employees (note 26).
In the period ended
March 31, 2020 and year ended 2019, the Company sold 305,063 and 668,367 common
shares, respectively, to the beneficiaries of the stock option plan (note 26).
These shares were in the Company’s treasury when the options were exercised at
an average book value of R $ 16.06 and R $ 10.87, respectively. Additionally,
through the Share Buyback Program launched in October 2017, the Company acquired
719,940 in 2020 (210,526 in 2019) shares for the price of R $ 15.57 and R $
15.22 respectively, equivalent to R $ 11,2067 in 2020 (R $ 3,204 in 2019). As a
result, the net effect on the treasury stock repurchase transaction was R $
6,307 (R $ 5,319 in 2019).
83
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
c. Profit reserves
c.1 Legal reserve
Refers to the
allocation of 5% of net income for the year ended December 31 of each year,
until the reserve equals 20% of the share capital, excluding from 2018 the
balance allocated to the tax incentive reserve. Additionally, the Company may
stop constituting the legal reserve when it, added to the capital reserves,
exceeds 30% of the capital.
This reserve can be used only for
capital increases or the offsetting of accumulated losses.
c.2 Statutory reserve for expansion
This reserve is
set up based on paragraph 2, Article 46 of the Company’s bylaws and is intended
for the expansion of the corporate business.
The balance of
income that is not compulsorily allocated to other reserves and that is not
allocated for the payment of dividends, is allocated to this reserve, which may
not exceed 80% of the capital. Once this limit is reached, it is incumbent upon
the shareholders’ meeting to decide on the balance, either distributing this to
shareholders or increasing the capital.
In December 2019, the Reserve for
expansion reached the limit defined in the Company’s bylaws. As a result, the
capital increase through capitalization of the expansion reserve in the amount
of R $ 1,644,013 was approved at the last meeting. This increase may be made
without issuing new shares in proportion to the shareholders’ rights.
c.3 Tax benefit
reserve
The subsidiary enjoys tax benefits that
provide for restrictions on the distribution of profits by this subsidiary.
According to the legislation establishing these tax benefits, the amount of
taxes waived as a result of exemptions and reductions in the tax charge may not
be distributed to shareholders and must be registered as a tax incentive reserve
for the legal entity. This reserve should only be used for offsetting the losses
or capital increases. At March 31, 2020, the accumulated amount of benefits
enjoyed by the subsidiary was R$ 1,612,019 (R$1,612,019 at December 31,
2019).
This tax benefit basically corresponds
to a reduction in the IRPJ on income from exploration, recorded by the units
entitled to this benefit. The subsidiary operates in the area of the former
Superintendence for Development of the Amazon (“SUDENE/SUDAM”), and the tax
benefit reports are granted by the state, for a period of ten years, subject to
extension.
d. Dividends
Dividends are calculated in accordance
with the bylaws and Brazilian Corporate Legislation.
As stated in the most recent bylaws
approved on April 14, 2016, the Company must distribute a mandatory dividend for
each business year ended December 31, provided that funds are
available for distribution, equivalent to 25% of the revised profit.
84
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
As provided for in the Company’s bylaws,
dividends not claimed within three years will be reversed to the
Company.
As at December 31, 2019, dividends and
interest on equity were calculated as shown below:
|
2019
|
|
|
Net income for the year
|
3,622,127
|
(-) Tax incentives not to be distributed
|
(194,161)
|
(-) Legal reserve constitution
|
(171,398)
|
Revised profit
|
3,256,568
|
|
|
Minimum dividends calculated considering 25% of the
revised profit
|
814,142
|
|
|
Breakdown of dividends payable and interest on
equity:
|
|
Interest on shareholders’ equity
|
995,438
|
Total dividends and interest on shareholders’ equity
distributed and proposed
|
995,438
|
IRRF on interest on shareholders’ equity
|
(149,316)
|
Total dividends and interest on shareholders’ equity,
net
|
846,122
|
|
|
Dividends per share (amount in reais), net of
IRRF
|
0.35
|
Interest on shareholders’ equity paid
and/or payable is recorded against financial expenses which, for the purposes of
presentation of the quarterly information, are reclassified and disclosed in the
allocation of net income for the year/period, in changes in shareholders’
equity. Interest on shareholders’ equity received and/or receivable is recorded
against financial revenue, with an impact on the equity accounting income. For
disclosure purposes, the impacts on income are eliminated, and a reduction is
recorded in the investment balance. As of December 31, 2019, the amount
provisioned was R$995,438, of which R$ 313,600 was paid over the year and the
remaining balance is recorded in the Company's current liabilities and paid in
January 2020.
The balance on March 31, 2020 of the
item “dividends and interest on equity payable” is composed of the amounts not
paid in previous years in the amount of R $ 47,834.
Dividends not claimed – As provided for
in the Brazilian Corporate Law, dividends and interest on shareholders’ equity
that are declared but not claimed by shareholders for a period of three years
are reversed to the shareholders’ equity according to the statute of
limitations.
Regarding the statement of cash flow,
interest on shareholders’ equity and dividends paid to shareholders were
classified as “financing activities”.
26. Long-term incentive
plan
2011-2013 Plan, 2014-2016 Plan and
2018-2020 Plan
85
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
At the annual meeting on August 5, 2011,
April 10, 2014 and April 19, 2018, the shareholders of TIM Participações S.A.
approved the long-term incentive plans, respectively the “2011-2013 Plan”, the
“2014-2016 Plan” and the "2018-2020 Plan" for the senior Management and key
executives of the Company and its subsidiary.
The 2011-2013 and 2014-2016 Plans
involve granting options, while the 2018-2020 Plan provides for the granting of
shares.
The exercise of options under the
2011-2013 Plan depends on the achievement of specific performance targets, while
the exercise of options of the 2014-2016 Plan is not subject to this condition.
The Exercise Price is calculated with an upward or downward adjustment to the
Base Share Price, according to share performance, as provided for in each Plan.
The 2018-2020 Plan, in turn, proposes
granting to the participants shares issued by the Company, subject to certain
time and/or performance conditions (attainment of specific targets). The number
of shares may vary up or down depending on performance and possible declarations
of dividends, considering the criteria specified for each Grant.
Share options of the 2011-2013 and the
2014-2016 Plans are effective for six years, and TIM Participações has no legal
or informal obligation to repurchase or settle the options in cash. In the case
of the 2018-2020 Plan, the effectiveness period is the same as the vesting
period of three years. The 2018-2020 Plan, in turn, besides allowing for the
transfer of shares, also provides for the possibility of making payments to the
participants of the equivalent cash value.
The total amount of the expense is
recognized during the vesting period: that is, the period during which specific
vesting conditions must be met. On the date of each balance sheet, the Group
reviews its estimates for the number of options that will vest, considering
vesting conditions not related to the market and time with the
company.
It should also be taken into account
that in 2017 there were no new grants, only the calculations of the vesting
period from past grants.
The variations in the quantity of
shares/options are presented below:
Date
of grant
|
Granted shares options
|
Expiration date
|
Base
Price
|
Balance at beginning of year
|
Granted during the period
|
Exercised during the period
|
Expired during the period
|
Overdue during the period
|
Balance at the end of the
period
|
|
|
|
|
|
|
|
|
|
|
2018-2020 Plan - 2nd
Grant
|
930,662
|
Jul-22
|
R $
11.28
|
897,244
|
-
|
-
|
-
|
-
|
897,244
|
2018-2020 Plan - 1st
Grant
|
849,932
|
apr-21
|
R $
14.41
|
253,337
|
-
|
-
|
-
|
-
|
253,337
|
2014-2016 Plan - 3rd
Grant
|
3,922,204
|
Nov /
22
|
R$8.10
|
419,340
|
-
|
(124,277)
|
-
|
-
|
295,063
|
2014-2016 Plan - 2nd
Grant
|
3,355,229
|
Oct /
21
|
R $
8.45
|
132,848
|
-
|
(111,077)
|
-
|
-
|
21,771
|
2014-2016 Plan - 1st
Grant
|
1,687,686
|
Sept/20
|
R $
13.42
|
378,286
|
-
|
(69,708)
|
-
|
-
|
308,578
|
2011-2013 Plan - 3rd
Grant
|
3,072,418
|
July/19
|
R $
8.13
|
-
|
-
|
-
|
-
|
-
|
-
|
2011-2013 Plan - 2nd
Grant
|
2,661,752
|
Sept/18
|
R $
8.96
|
-
|
-
|
-
|
-
|
-
|
-
|
2011-2013 Plan - 1st
Grant
|
2,833,595
|
Aug/17
|
R $
8.84
|
-
|
-
|
-
|
-
|
-
|
-
|
Total
|
19,313,478
|
|
|
2,081,055
|
-
|
(305,062)
|
-
|
-
|
1,775,993
|
Weighted average price for the period
|
R$
11.23
|
|
|
|
|
|
|
86
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Below are the significant data included
in the model:
Date of
grant
|
Weighted average base
price of shares during the vesting period of the grant
|
Volatility
|
Expected useful life
of the option
|
Annual interest rate
without risk
|
2011 Grant
|
R $ 8.84
|
51.73%
pa
|
6 years
|
11.94%
pa
|
2012 Grant
|
R $ 8.96
|
50.46%
pa
|
6 years
|
8.89%
pa
|
2013 Grant
|
R $ 8.13
|
48.45%
pa
|
6 years
|
10.66%
pa
|
2014 Grant
|
R $
13.42
|
44.60%
pa
|
6 years
|
10.66%
pa
|
2015 Grant
|
R $ 8.45
|
35.50%
pa
|
6 years
|
16.10%
pa
|
2016 Grant
|
R$8.10
|
36.70%
pa
|
6 years
|
11.73%
pa
|
2018 Grant
|
R $
14.41
|
NA
|
3 years
|
NA
|
2019 Grant
|
R $
11.28
|
NA
|
3 years
|
NA
|
The Base Share Price was calculated
using the weighted prices of the shares of TIM Participações, during the
following periods:
-
2011-2013 Plan – 1st
Grant -
Volume traded and the trading price of the shares in TIM Participações in the
30 day period prior to July 20, 2011 (the date when the Board of Directors of
TIM Participações approved the benefit).
-
2011-2013 Plan– 2nd
Grant -
Volume traded and the trading price of TIM Participações shares during the
period July 1, 2012 to August 31, 2012.
-
2011-2013 Plan– 3rd Grant -
Volume
traded and the trading price of TIM Participações shares during the 30 day
period preceding July 20, 2013.
-
2014-2016 Plan– 1st Grant -
Volume
traded and the trading price of TIM Participações shares during the 30 day
period preceding the date determined by the Board of Directors of TIM
Participações (September 29, 2014).
-
2014-2016 Plan– 2nd Grant -
Volume
traded and the trading price of TIM Participações shares during the 30 day
period preceding the date determined by the Board of Directors of TIM
Participações (September 29, 2015).
-
2014-2016 Plan– 3rd Grant -
Volume
traded and the trading price of TIM Participações shares during the 30 day
period preceding the date determined by the Board of Directors (September 29,
2016).
-
2018-2020 Plan – 1st Grant
- Volume
traded and the trading price of TIM Participações shares during the period
from March 1, 2018 to March 31, 2018.
87
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
-
2018-2020 Plan – 2nd Grant
- Volume
traded and the trading price of Tim Participações shares during the period
from June 1, 2019 to June 30, 2019.
The Group recognizes the impact of
review of its initial estimates, if any, in the statement of income, with a
contra-entry in shareholders’ equity. As of December 31, 2019, expenses linked
to said long-term benefit plans totaled R $ 1,796 (R $ 2,359 as of December 31,
2019).
27. Net revenue
Revenue from services
rendered
The principal service revenue derives
from monthly subscription, the provision of separate voice, SMS and data
services, and user packages combining these services, roaming charges and
interconnection revenue. The revenue is recognized as the services are used, net
of sales taxes and discounts granted on services. This revenue is recognized
only when the amount of services rendered can be estimated reliably.
Revenues are recognized monthly, through
billing, and revenues to be billed between the billing date and the end of the
month (unbilled) are identified, processed, and recognized in the month in which
the service was provided. These non-billed revenues are recorded on an estimated
basis, which takes into account consumption data, number of days elapsed since
the last billing date.
Interconnection traffic and roaming
revenue are recorded separately, without offsetting the amounts owed to other
telecom operators (the latter are accounted for as operating costs).
The minutes not used by customers and/or
reload credits in the possession of commercial partners regarding the prepaid
service system are recorded as deferred revenue and allocated to income when
these services are actually used by customers.
Revenue from product
sales
Revenues from product sales (telephones,
mini-modems, tablets and other equipment) are recognized when the performance
obligations associated with the contract are transferred to the buyer. Revenues
from sales of devices to trading partners are accounted for at the time of their
physical delivery to the partner, net of discounts, and not at the time of sale
to the end customer, since the Company has no control over the product
sold.
Contract Identification
88
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The Company reviews all current
commercial contracts in order to identify the main contractual clauses and other
elements present in the contracts that could be relevant in the application of
the new accounting pronouncement.
Identification of performance
obligation
Based on the review of its contracts,
the Company verified the existence of two performance obligations:
(i) sale of equipment; and
(ii) provision of mobile, fixed and
internet telephony services.
Therefore, the Company began to
recognize revenues when, or as, the performance obligation is met when
transferring the good or service promised to the customer; the asset is
considered transferred when or as the customer obtains control of this
asset.
Determining and Allocating the
Transaction Price to the Performance Obligation
The Company understands that its
commercial packages that combine services and sale of cellular handsets with
discounts. In accordance with IFRS 15 (CPC 47), the Company is required to
perform the discount allocation and recognize revenues related to each
performance obligation based on their standalone selling prices.
Prior to the adoption of the standard,
the Company recognized revenue from each element identified based on its
contractual price, with the discount on the sale of handsets being allocated
completely to the price of the handset.
As a consequence of the adoption of the
new standard, an additional portion of the revenue was allocated to revenues
from sale of handsets at the beginning of the contract, representing an increase
in revenues from the sale of equipment in relation to previously adopted
accounting practice. The difference between the amount of revenue and the amount
of equipment sales revenue at the beginning of the contract was recognized at
the time each as a contractual asset, allocated to service revenue along the
contract period.
Cost to obtain contract
All incremental costs related to
obtaining a contract (sales commissions and other costs of acquisition from
third parties) are recorded as prepaid expenses and amortized over the same
period as the revenue associated with this asset. Similarly, certain contract
compliance costs are also deferred to the extent that they relate to performance
obligations under the customer agreement, i.e. when the customer obtains control
over the asset.
|
Consolidated
|
|
03/2020
|
|
03/2019
|
|
|
|
|
Net operational revenue
|
4,215,308
|
|
4,190,826
|
|
|
|
|
Gross operating
revenue
|
6,091,892
|
|
6,104,070
|
|
|
|
|
Service revenue
|
5,850,560
|
|
5,833,801
|
Service revenue – Mobile
|
5,426,617
|
|
5,437,748
|
Service revenue – Landline
|
423,943
|
|
396,053
|
|
|
|
|
Goods
sold
|
241,332
|
|
270,269
|
|
|
|
|
Deductions from gross revenue
|
(1,876,584)
|
|
(1,913,244)
|
Taxes
|
(1,196,711)
|
|
(1,254,637)
|
Discounts given
|
(676,842)
|
|
(654,130)
|
Returns and
other
|
(3,031)
|
|
(4,477)
|
89
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
28. Operating costs and expenses
|
03/2020
|
|
03/2019
|
|
Cost of services
rendered and goods sold
|
Selling
expenses
|
General and
administrative expenses
|
Total
|
|
Cost of services
rendered and goods sold
|
Selling
expenses
|
General and
administrative expenses
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
(1,961,448)
|
(1,209,040)
|
(438,164)
|
(3,608,652)
|
|
(1,957,381)
|
(1,277,046)
|
(405,348)
|
(3,639,775)
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
(14,877)
|
(157,945)
|
(87,984)
|
(260,806)
|
|
(11,470)
|
(155,168)
|
(82,389)
|
(249,027)
|
Third-party services
|
(161,764)
|
(492,564)
|
(139,475)
|
(793,803)
|
|
(154,172)
|
(531,216)
|
(116,921)
|
(802,309)
|
Interconnection and means of
connection
|
(374,214)
|
‐
|
‐
|
(374,214)
|
|
(427,170)
|
‐
|
‐
|
(427,170)
|
Depreciation and amortization
|
(1,160,368)
|
(60,455)
|
(187,782)
|
(1,408,605)
|
|
(1,088,972)
|
(56,144)
|
(189,094)
|
(1,334,210)
|
Taxes, fees and contributions
|
8,334
|
(179,973)
|
(9,375)
|
(197,682)
|
|
(7,192)
|
(198,453)
|
(5,116)
|
(210,761)
|
Rentals and insurance
|
(81,889)
|
(37,409)
|
(242)
|
(119,540)
|
|
(69,167)
|
32,940
|
(6,117)
|
(108,224)
|
Cost of goods sold
|
(158,743)
|
‐
|
‐
|
(158,743)
|
|
(198,633)
|
‐
|
‐
|
(198,633)
|
Publicity And Advertising
|
‐
|
(87,816)
|
‐
|
(87,816)
|
|
‐
|
(125,085)
|
‐
|
(125,085)
|
Losses on allowance for loan
losses
|
‐
|
(188,588)
|
‐
|
(188,588)
|
|
‐
|
(172,610)
|
‐
|
(172,610)
|
Others
|
1,259
|
(4,290)
|
(13,306)
|
18,855
|
|
(605)
|
5,430
|
(5,711)
|
$
11,746
|
|
Parent
Company
|
|
03/2020
|
|
03/2019
|
|
Cost of
services rendered and goods sold
|
Selling
expenses
|
General and
administrative expenses
|
Total
|
|
Cost of
services rendered and goods sold
|
Selling
expenses
|
General and
administrative expenses
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
‐
|
‐
|
(8,476)
|
(8,476)
|
|
‐
|
‐
|
(9,094)
|
(9,094)
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
‐
|
‐
|
(4,008)
|
(4,008)
|
|
‐
|
‐
|
(6,674)
|
(6,674)
|
Third-party services
|
‐
|
‐
|
(3,401)
|
(3,401)
|
|
‐
|
‐
|
(2,294)
|
(2,294)
|
Taxes, fees and contributions
|
‐
|
‐
|
(1,035)
|
(1,035)
|
|
‐
|
‐
|
(102)
|
(102)
|
Rent and insurance
|
‐
|
‐
|
(7)
|
(7)
|
|
‐
|
‐
|
(5)
|
(5)
|
Other
|
‐
|
‐
|
(25)
|
(25)
|
|
‐
|
‐
|
(19)
|
(19)
|
|
|
|
|
|
|
|
|
|
|
90
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND SUBSIDIARY
NOTES TO THE QUARTERLY INFORMATION - continued
As at March 31
(In thousands of Reais, except as otherwise stated)
The Company and its subsidiary contribute to public and private pension insurance plans in a mandatory, contractual or voluntary manner during the time when employees are working at the Company and its subsidiary. These plans do not originate any additional obligation for the Company. When an employee leaves the Company or its subsidiary during the period required for entitlement to receive the contributions made by the sponsors, the amounts to which the employee ceased to be entitled, and that may represent a reduction in future contributions of the Company and its subsidiary to active employees, or a refund in cash of these amounts, are recorded in assets.
29. Other income (expenses), net
|
Parent Company
|
|
Consolidated
|
|
03/2020
|
|
03/2019
|
|
03/2020
|
|
03/2019
|
Income
|
|
|
|
|
|
|
|
Subsidy income, net
|
-
|
|
-
|
|
5,115
|
|
5,782
|
Fines on telecommunications services
|
-
|
|
-
|
|
12,748
|
|
12.458
|
Revenue from disposal of assets
|
-
|
|
-
|
|
439
|
|
494
|
Other income (a)
|
1,839
|
|
‐
|
|
17,032
|
|
15,418
|
|
1,839
|
|
‐
|
|
35,334
|
|
34,152
|
Expenses
|
|
|
|
|
|
|
|
FUST / FUNTTEL (i)
|
|
|
-
|
|
(33,911)
|
|
(34,056)
|
Taxes, fees and contributions
|
|
|
-
|
|
(330)
|
|
(345)
|
Provision for judicial and administrative proceedings, net of reversal
|
|
|
|
|
|
|
|
1,085
|
(45,938)
|
|
(78,791)
|
|
(88,164)
|
Expense on disposal of assets
|
‐
|
|
-
|
|
(6,059)
|
|
3,963
|
Other expenses
|
(32)
|
|
(34)
|
|
(7,777)
|
|
10,020
|
|
(1,117)
|
|
(45,972)
|
|
(126,868)
|
|
(136,548)
|
|
|
|
|
|
|
|
|
Other revenues (expenses), net
|
722
|
|
(45,972)
|
|
(91,534)
|
|
(102,396)
|
(i) Represent expenses incurred with contributions on the various telecommunications revenues owed to ANATEL, in accordance with current legislation.
30. Financial income
|
Parent Company
|
|
Consolidated
|
|
03/2020
|
|
03/2019
|
|
03/2020
|
|
03/2019
|
|
|
|
|
|
|
|
|
Financial income
|
2.519
|
|
(640)
|
|
365,217
|
|
62,557
|
Interest on financial investments
|
334
|
|
450
|
|
17,441
|
|
24,590
|
Interest from clients
|
-
|
|
-
|
|
8,709
|
|
8,582
|
Interest
|
-
|
|
-
|
|
4,840
|
|
-4,690
|
Interest on leasing
|
-
|
|
-
|
|
4.937
|
|
6,422
|
Inflation accounting
|
2,183
|
|
(1,090)
|
|
27,507
|
|
7,127
|
Exchange variation (1)
|
‐
|
|
‐
|
|
301,321
|
|
8,754
|
Other revenues
|
2
|
|
-
|
|
462
|
|
2,392
|
(1) It is mainly represented by changes in derivative financial instruments.
91
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
31. Financial expenses
|
Parent
Company
|
|
Consolidated
|
|
03/2020
|
|
03/2019
|
|
03/2020
|
|
03/2019
|
|
|
|
|
|
|
|
|
Financial expenses
|
(5,797)
|
|
(41,227)
|
|
(619,792)
|
|
(325,105)
|
Interest on loans and funding
|
|
|
|
|
(33,824)
|
|
(18,604)
|
Interest on taxes and fees
|
(16)
|
|
(11)
|
|
(3,157)
|
|
3,111
|
Interest
|
‐
|
|
-
|
|
(6,787)
|
|
8,122
|
Interest on mercantile lease
|
‐
|
|
-
|
|
(166,414)
|
|
(210,001)
|
Inflation accounting
|
(4,765)
|
|
(40,426)
|
|
(68,641)
|
|
(42,850)
|
Discounts granted
|
‐
|
|
‐
|
|
(5,858)
|
|
(6,296)
|
Exchange variation
|
(79)
|
|
(6)
|
|
(294,102)
|
|
(8,228)
|
Other Expenses
|
(937)
|
|
(784)
|
|
41.009
|
|
(27,893)
|
32. Income tax and social contribution expenses
|
Consolidated
|
|
03/2020
|
03/2019
|
Current income tax and social contribution
|
|
|
|
Income tax for the period
|
‐
|
|
(76,664)
|
Social contribution for the period
|
‐
|
|
(28,429)
|
Tax incentive - SUDENE / SUDAM
|
‐
|
|
36,846
|
|
‐
|
|
(68,247)
|
Deferred income tax and social contribution
|
|
|
|
Deferred income tax
|
(72,578)
|
|
1,233
|
Deferred social contribution
|
(26,128)
|
|
443
|
|
(98,706)
|
|
1,676
|
Provision for income tax and social contribution
contingencies
|
|
|
|
‐
|
498
|
|
(98,706)
|
|
2,174
|
|
(98,706)
|
|
(66,073)
|
|
|
|
|
92
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The reconciliation of income tax and
social contribution expenses calculated by applying the tax rates combined with
the amounts reflected in the result is shown below:
|
Parent
Company
|
|
Consolidated
|
|
03/2020
|
|
03/2019
|
|
03/2020
|
|
03/2019
|
Income before income tax and social
contribution
|
|
|
|
|
|
|
|
161,841
|
116,789
|
260,547
|
186,107
|
|
|
|
|
|
|
|
|
Combined tax rate
|
34%
|
34%
|
34%
|
34%
|
Income tax and social contribution at the
combined
|
|
|
|
|
|
|
|
55,026
|
(39,708)
|
(88,586)
|
(63,276)
|
(Additions) / Exclusions:
|
|
|
|
|
|
|
|
Tax losses and temporary (unrecognized)
differences recognized
|
|
|
|
|
|
|
|
(3,750)
|
(31,847)
|
(3,750)
|
31,847
|
Result of equity pickup
|
58,877
|
|
72,665
|
|
‐
|
|
-
|
Permanent additions
(exclusions):
|
|
|
|
|
|
|
|
Non-deductible expenses for
tax purposes
|
(1)
|
|
(6)
|
|
(7,661)
|
|
3,626
|
Impact of financial
leasing
|
‐
|
|
‐
|
|
‐
|
|
(6,763)
|
Tax incentives (i)
|
‐
|
|
‐
|
|
1,333
|
|
36,846
|
Other amounts
|
‐
|
|
2,142
|
|
(42)
|
|
2,593
|
|
55,026
|
|
42,954
|
|
(10,120)
|
|
2,797
|
Income and social contribution taxes recorded
in income for the period
|
|
|
|
|
|
|
|
‐
|
3,246
|
(98,706)
|
(66,073)
|
Effective tax rate
|
‐
|
|
‐
|
|
37.88%
|
|
35.50%
|
(i) As mentioned in note 25 c.3, so that
investment grants are not included in taxable income, they must be recorded as a
tax incentive reserve, which can only be used to absorb losses or be
incorporated into the share capital. The subsidiary TIM SA has tax benefits
(SUDENE / SUDAM) that fall under these rules.
33. Earnings per
share
(a) Basic
93
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The
basic earnings per share is calculated by dividing the profit attributable to
shareholders of the Company, by the weighted average number of common shares
outstanding during the period, excluding ordinary treasury shares.
|
|
|
|
|
|
|
03/2020
|
|
03/2019
|
|
|
|
|
|
Income attributable to shareholders of the
Company
|
|
161,841
|
|
120,034
|
|
|
|
|
|
Weighted average number of common shares issued
(thousands)
|
|
2,420,947
|
|
2,420,861
|
|
|
|
|
|
Basic earnings per share (expressed in R$)
|
|
0.07
|
|
0.05
|
(b) Diluted
Diluted earnings per share are
calculated by adjusting the weighted average number of shares outstanding to
assume the conversion of all dilutive potential shares.
|
|
03/2020
|
|
03/2019
|
|
|
|
|
|
Income attributable to shareholders of the
Company
|
|
161,841
|
|
120,034
|
|
|
|
|
|
Weighted average number of common shares issued
(thousands)
|
|
2,420,947
|
|
2,421,378
|
|
|
|
|
|
Diluted earnings per share (expressed in R$)
|
|
0.07
|
|
0.05
|
The calculation of diluted earnings per
share considered 200 thousand shares (R $ 517 thousand shares in 2019) related
to the grants of the 2011-2013 Plan and the 2014-2016 Plan, as mentioned in note
26.
34. Balances and transactions with related
parties
The consolidated balances of
transactions with companies of the Telecom Italia Group are as
follows:
|
|
Assets
|
|
|
03/2020
|
|
12/2019
|
Telecom Italia Sparkle (1)
|
|
3,445
|
|
1,949
|
TI Sparkle (3)
|
|
3,039
|
|
2,007
|
TIM Brasil (4)
|
|
5,902
|
|
5,429
|
Gruppo Havas (6)
|
|
70,920
|
|
-
|
Other
|
|
1.512
|
|
1,035
|
Total
|
|
84,818
|
|
10,420
|
|
|
Liabilities
|
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
Telecom Italia
S.p.A. (2)
|
|
106,518
|
|
80,825
|
Telecom Italia Sparkle (1)
|
|
11,798
|
|
6,531
|
TI Sparkle (3)
|
|
4,366
|
|
3,731
|
TIM Brasil (4)
|
|
6,056
|
|
6.
056
|
Vivendi Group (5)
|
|
1.163
|
|
1.164
|
Gruppo Havas (6)
|
|
24,881
|
|
11,049
|
Other
|
|
7,330
|
|
2,467
|
Total
|
|
(162,112)
|
|
111,823
|
|
|
|
|
|
94
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
|
|
Revenue
|
|
|
03/2020
|
|
03/2019
|
|
|
|
|
|
Telecom Italia S.p.A. (2)
|
|
586
|
|
109
|
Telecom Italia Sparkle (1)
|
|
903
|
|
1,936
|
TI Sparkle (3)
|
|
1,042
|
|
42
|
Total
|
|
2,531
|
|
2.087
|
|
|
|
|
|
Costs/Expenses
|
|
|
03/2020
|
|
03/2019
|
|
|
|
|
|
Telecom Italia S.p.A. (2)
|
|
26,814
|
|
22,660
|
Telecom Italia Sparkle (1)
|
|
2,759
|
|
8,139
|
TI Sparkle (3)
|
|
4,794
|
|
4,510
|
Vivendi Group (5)
|
|
1.163
|
|
1,180
|
Gruppo Havas (6)
|
|
54,159
|
|
75,951
|
Others
|
|
5,461
|
|
(4,496)
|
Total
|
|
95,150
|
|
116,936
|
(1) Indirect parent company.
The values refer to roaming, value-added services - VAS, assignment of means and
international voice-wholesale according to contractual conditions between the
parties.
(2) The values refer to roaming service, technical assistance
and value-added services - VAS.
On May 17, TIM Participações and Telecom
Italia entered into a trademark license agreement, formally granting TIM Part
and its subsidiaries the right to use the "TIM" trademark for the payment of
royalties in the amount of 0.5 % of the company's net revenue. Payment is made
quarterly.
(3) The values refer to
rental of links, EILD rental, rental of means (submarine cable) and signaling
service according to contractual conditions between the parties.
(4) Direct controller of the Company.
Amounts refer mainly to judicial deposits made due to labor claims.
(5) Shareholder of TIM SpA The
values refer to value added services - VAS.
(6) Of the values described above,
in the result, refer to advertising services, of which, R $ 53,134 (R $ 72.387
on March 31, 2019), are related to media transfers.
The balance sheet account balances are
recorded in the following groups:
95
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
trade accounts receivable,
prepaid expenses, suppliers and other current assets and liabilities.
The Company has social investment
actions that include donations, projects developed by Instituto TIM and
sponsorships. As of March 31, 2020, there was no investment (R $ 1,690 as of
March 31, 2019) with own resources for social benefit.
35. Management remuneration
Key Management personnel includes the
statutory officers and the Board of Directors. The compensation of key
Management personnel for services rendered is shown below:
|
03/2020
|
|
03/2019
|
|
|
|
|
Short-term
benefits
|
4,951
|
|
4.192
|
Long-term
benefits
|
818
|
|
-
|
Share-based
payments remuneration
|
1,099
|
|
1,283
|
|
6,868
|
|
5,475
|
36. Financial instruments
and risk management
The financial instruments registered by
the Company and its subsidiary include derivatives, which are financial
liabilities measured at fair value through profit or loss. At each balance sheet
date they are measured at their fair value. Interest, monetary adjustments,
exchange variations and variations arising from measurement at fair value, where
applicable, are recognized in income as they are incurred, under financial
income or expenses.
Derivatives are initially recognized at
fair value as at the date of the derivative agreement and subsequently revised
to fair value. The method used to recognize any gain or loss depends on whether
or not the derivative is assigned as a hedge instrument in cases where hedge
accounting is adopted.
Through its subsidiary, the Company performs non-speculative
derivative transactions, to: i) reduce the exchange variation risks, and ii)
manage exposure to the interest risks involved. The Company’s derivative
financial transactions consist specifically of swap contracts.
The Company’s financial instruments are presented, through its
subsidiary, in compliance with IFRS 9 / CPC 48.
The major risk factors to which the Company and its subsidiary
are exposed are as follows:
(i) Exchange variation risks
Exchange variation risks refer to the
possibility of the subsidiary incurring: i) losses on unfavorable exchange rate
fluctuations, which would increase the outstanding balances of borrowing and
financing taken in the market along with the related cost expenses, or ii) an
increase in the cost of commercial agreements affected by exchange variations.
In order to reduce this kind of risk, the subsidiary enters into swap contracts
with financial institutions for
the purpose of avoiding the impact of foreign exchange fluctuations on the
financial results, and trade agreements containing sections that provide for
foreign exchange bands with the purpose of partially reducing exchange rate
risks, or US Dollar stock options intended to reduce foreign exchange exposure
risks in business contracts.
96
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
As at March 31, 2020, the borrowing and
financing of the subsidiary indexed to foreign currency were fully hedged by
swap contracts in terms of time and amount. Any gains or losses arising from
these swap contracts are recorded in the results of the subsidiary.
Besides the risks mentioned above, no
other significant financial assets and liabilities are indexed to foreign
currencies.
(ii) Interest rate risks
Interest rate risks relate
to:
- The possibility of variations in the
fair value of financing obtained by the subsidiary indexed to TJLP, IPCA and /
or TLP, when such rates do not proportionally follow the rates referring to
Interbank Deposit Certificates (CDI). As of March 31, 2019, the subsidiary did
not have any swap operations linked to TJLP, IPCA and / or TLP.
- The possibility of an unfavorable
movement in interest rates would cause an increase in the financial expenses of
the subsidiary, due to the portion of debt and the liability positions that the
subsidiary has in swap contracts linked to floating interest rates (percentage
of CDI). However, on March 31, 2020, the subsidiary maintains its financial
resources invested in Interbank Deposit Certificates (CDI), which substantially
reduces this risk.
(iii) Credit
risk inherent to providing services
The risk is related to the possibility
of the subsidiary calculating losses arising from the subscribers’ inability to
honor the payments of the amounts billed. In order to minimize this risk, the
subsidiary performs preventive credit analyzes of all orders charged by the
sales areas and monitors accounts receivable from subscribers, blocking the
ability to use services, among other actions, if customers do not pay their
debts. There are no customers who have contributed more than 10% of net accounts
receivable as of March 31, 2020 and December 31, 2019 or revenue from services
provided.
(iv) Credit
risk inherent to sales of handsets and prepaid phone cards
The Group’s policy for the sale of
handsets and the distribution of prepaid phone cards is directly related to the
credit risk levels accepted during the normal course of business. The selection
of partners, the diversification of the accounts receivable portfolio, the
monitoring of loan conditions, the positions and order limits established for
traders, the constitution of collateral are procedures adopted by the
subsidiaries to minimize possible collection problems with their business
partners. There are no customers who
have contributed more than 10% of merchandise sales revenue during the period
ended March 31, 2020 and 2019. There are no customers who have contributed more
than 10% of accounts receivable net of sale of goods on March 31, 2020 and
December 31, 2019.
97
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
(v) Liquidity
risk
- Liquidity risk arises from the need
for cash to meet the Company's obligations. The Company structures the maturity
dates of its non-derivative financial instruments and of its respective
derivative financial instruments so as not to affect liquidity.
- The Company’s liquidity and cash flow
management is performed on a daily basis in order to ensure that the operating
cash generation and prior funding, whenever necessary, are sufficient to
maintain its schedule of operational and financial commitments.
- All
financial investments of the Company have daily liquidity, and Management may,
in specific cases: i) review the dividend payment policy, ii) issue new shares,
and/or iii) sell assets in order to improve liquidity.
(vi) Financial credit risk
The cash flow estimate is made and
aggregated by the Finance and Treasury department of the Company. This
department monitors the continuous liquidity requirements estimate to ensure
that the Company has sufficient cash to meet its operating needs. This estimate
takes into account investment plans, debt financing, compliance with contractual
clauses, compliance with internal goals and, if applicable, compliance with
regulatory, external or legal requirements.
This risk relates to the possibility of
the Company and its subsidiary incurring losses due to difficulties in realizing
their short-term investments and swap contracts due to bankruptcy of the
counterparties. The subsidiary minimizes the risk associated with these
financial instruments by operating only with sound financial institutions and
adopting policies that establish maximum risk concentration levels per
institution.
Fair value of derivative financial
instruments
The
consolidated derivative financial instruments are shown as follows:
|
|
03/2020
|
|
|
12/2019
|
|
|
|
Assets
|
Liabilities
|
Net
|
|
Assets
|
Liabilities
|
Net
|
|
|
|
|
|
|
|
|
|
Transactions involving derivatives
|
|
322,071
|
(4,146)
|
317,925
|
|
46,511
|
(4,405)
|
42,106
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
49,444
|
(4,146)
|
45,298
|
|
16,602
|
(858)
|
(15,744)
|
Non-current portion
|
|
272,627
|
-
|
272,627
|
|
29,909
|
(3,547)
|
26,362
|
98
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The consolidated financial derivative
instruments with long-term maturities as at December 31, 2019 were as
follows:
|
|
Assets
|
|
Liability
|
|
|
|
|
|
2021
|
|
194,532
|
|
-
|
2022
|
|
27,207
|
|
-
|
2023 onwards
|
|
50,888
|
|
-
|
|
|
272,627
|
|
-
|
Non-derivative financial
liabilities mainly represent suppliers, dividends payable and other obligations
maturing in the next 12 months, except for borrowing and financing and financial
leases, whose nominal payment flows are disclosed in Notes 20 and 16.
Consolidated financial assets and liabilities valued at fair
value:
|
03/2020
|
|
Level
1
|
|
Level
2
|
|
TOTAL
|
|
|
|
|
|
|
Total of
assets
|
43,205
|
|
322,071
|
|
365,276
|
|
|
|
|
|
|
Financial assets at
fair value through income or loss
|
43,205
|
|
322,071
|
|
365,276
|
|
|
|
|
|
|
Derivatives used for
hedge
|
-
|
|
322,071
|
|
322,071
|
Bond and
securities
|
43,205
|
|
-
|
|
43,205
|
|
|
|
|
|
|
Total
liabilities
|
-
|
|
4,146
|
|
4,146
|
|
|
|
|
|
|
Financial liabilities
at fair value through profit or loss
|
-
|
|
4,146
|
|
4,146
|
|
|
|
|
|
|
Derivatives used for
hedge
|
-
|
|
4,146
|
|
4,146
|
|
12/2019
|
|
Level
1
|
|
Level
2
|
|
TOTAL
|
|
|
|
|
|
|
Total of
assets
|
658,328
|
|
46,511
|
|
704,839
|
|
|
|
|
|
|
Financial assets at
fair value through income or loss
|
658,328
|
|
46,511
|
|
704,839
|
|
|
|
|
|
|
Derivatives used for
hedge
|
-
|
|
46,511
|
|
46,511
|
Bond and
securities
|
658,328
|
|
-
|
|
658,328
|
|
|
|
|
|
|
Total
liabilities
|
-
|
|
4,405
|
|
4,405
|
|
|
|
|
|
|
99
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
The fair value of financial instruments
traded on active markets is based on quoted market prices as at the balance
sheet date. A market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry group, pricing
service or regulatory agency, and those prices represent actual and regularly
occurring market transactions on an arm’s length basis. These instruments are
included in Level 1. The instruments included in Level 1 mainly comprise
investments in CDBs and repurchases classified as trading securities.
The fair value of financial instruments
that are not traded on an active market (for example, over-the-counter
derivatives) is determined using valuation techniques. These valuation
techniques maximize the use of observable market data when available and rely to
the minimum extent possible on entity specific estimates. If all significant
inputs required to fair value an instrument are observable, the instrument is
included in Level 2.
If one or more of the significant inputs
is not based on observable market data, the instrument is included in Level
3.
Specific valuation techniques used to
value financial instruments include:
·
Quoted market
prices or financial institutions quotes or dealer quotes for similar
instruments.
·
The fair value
of interest rate swaps is calculated as the present value of the estimated
future cash flow based on observable yield curves.
·
Other
techniques, such as discounted cash flow analysis, are used to determine fair
value for the remaining financial instruments.
The fair values of derivative financial
instruments of the subsidiaries were determined based on the future cash flow
(asset and liability position), taking into account the contracted conditions
and bringing this flow to its present value by means of the discounted future
interest rates disclosed in the market. The fair values were estimated at a
specific time, based on the information available and on the Company’s own
valuation methodologies.
Financial instruments by
category
The Company’s financial instruments by category can be
summarized as follows:
March 31, 2020
|
Measured At
Amortized Cost
|
|
Fair value
through profit and income
|
|
Total
|
|
|
|
|
|
|
Assets, according to balance sheet
|
6,142,980
|
|
365,275
|
|
6,508,255
|
|
|
|
|
|
|
Derivative Financial Instruments
|
-
|
|
322,071
|
|
322,071
|
Accounts receivable from customers and other accounts
receivable, excluding prepayments
|
3,379,690
|
|
-
|
|
3,379,690
|
Bond and securities
|
-
|
|
43,204
|
|
43,204
|
Cash and cash equivalent
|
1,590,927
|
|
-
|
|
1,590,927
|
Leasing - leasing
|
155,514
|
|
-
|
|
155,514
|
Judicial deposits
|
969,556
|
|
-
|
|
969,556
|
Other amounts to be offset
|
47,293
|
|
-
|
|
47,293
|
100
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
|
Measured at amortized cost
|
|
Fair
value through profit and income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, according to the balance sheet
|
13,312,519
|
|
4,146
|
|
13,316,665
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financings
|
2,461,339
|
|
-
|
|
2,461,339
|
Derivative Financial Instruments
|
-
|
|
4,146
|
|
4,146
|
Suppliers and other obligations, excluding legal
obligations
|
2,634,800
|
|
-
|
|
2,634,800
|
Leasing
|
8,168,546
|
|
-
|
|
8,168,546
|
Dividends payable
|
47,834
|
|
-
|
|
47,834
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Measured at amortized cost
|
|
Fair value through profit or loss
|
|
Total
|
Assets per balance sheet
|
6,769,033
|
|
704,839
|
|
7,473,872
|
|
|
|
|
|
|
Derivative financial instruments
|
-
|
|
46,511
|
|
46,511
|
Trade accounts receivable and other accounts
receivable, excluding prepayments
|
3,287,855
|
|
-
|
|
3,287,855
|
Marketable securities
|
-
|
|
658,328
|
|
658,328
|
Cash and cash equivalents
|
2,284,810
|
|
-
|
|
2,284,810
|
Leasing
|
156,379
|
|
-
|
|
156,379
|
Judicial deposits
|
1,006,899
|
|
-
|
|
1,006,899
|
Other assets to offset
|
33,090
|
|
-
|
|
33,090
|
101
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
|
Measured at amortized cost
|
|
Fair
value through profit and income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, according to the balance sheet
|
14,310,830
|
|
4,405
|
|
14,315,235
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financings
|
2,029,088
|
|
-
|
|
2,029,088
|
Derivative Financial Instruments
|
-
|
|
4,405
|
|
4,405
|
Suppliers and other obligations, excluding legal
obligations
|
3,923,035
|
|
-
|
|
3,923,035
|
Leasing
|
7,780,870
|
|
-
|
|
7,780,870
|
Dividends payable
|
577,837
|
|
|
|
577,837
|
The regular
purchases and sales of financial assets are recognized as at the trade date -
the date on which the Company undertakes to buy or sell the asset. Investments
are initially recognized at fair value. After initial recognition, changes in
the fair value are booked in income for the year as finance income and
expenses.
Financial risk
hedge policy adopted by the Company – Synthesis
The Company’s policy states that
mechanisms must be adopted to hedge against financial risks arising from
borrowing in foreign currency, so as to manage the exposure to the risks
associated with exchange variations.
Derivative financial instruments hedging against exchange
variations must be acquired simultaneously with the closing of the debt that
gave rise to that exposure. The coverage level for this exchange exposure is
100% of the risk, both in terms of maturity date and amount.
As of March 31, 2020, there are no types
of margins or guarantees applied to operations with derivative financial
instruments of the Company and its subsidiary.
The criteria for choosing the financial
institutions abide by parameters that take into account the rating provided by
reliable risk analysis agencies, shareholders’ equity and concentration levels
of transactions and funding.
The operations with derivative financial
instruments contracted by the subsidiaries and in force on March 31, 2020 and
December 31, 2019 are shown in the table below:
March 31, 2020
|
|
COUNTERPARTY
|
|
|
|
AVERAGE RATES SWAP
|
Currency
|
Kind of
SWAP
|
Debt
|
SWAP
|
Total
Debt
|
Total
Swap (Active
Tip)
|
Coverage
|
Asset
position:
|
Liability
Position
|
USD
|
LIBOR X
DI
|
KfW
Finnvera
|
JP Morgan and Bank of
America
|
442,578
|
442,578
|
100%
|
LIBOR 6M + 0.75%
pa
|
85.03% of the
CDI
|
USD
|
PRE X DI
|
CISCO
|
JP Morgan
|
52,391
|
52,391
|
100%
|
2.50% pa
|
84.50% of
CDI
|
EUR
|
PRE X DI
|
Bank of
America
|
Bank of
America
|
512,529
|
512,529
|
100%
|
0.33% pa
|
108.05% of the
CDI
|
USD
|
PRE X DI
|
The Bank of Nova
Scotia
|
Scotiabank
|
455,882
|
455,882
|
100%
|
2.04% pa
|
108.70 %d the
CDI
|
|
|
|
|
|
|
|
|
|
102
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
December 31, 2019
|
|
COUNTERPARTY
|
|
|
|
AVERAGE RATES SWAP
|
Currency
|
Kind of
SWAP
|
Debt
|
SWAP
|
Total
Debt
|
Total
Swap (Active
Tip)
|
Coverage
|
Asset
position:
|
Liability
Position
|
USD
|
LIBOR X DI
|
KfW
Finnvera
|
JP Morgan and
BOFA
|
330,217
|
330,217
|
100%
|
LIBOR 6M + 0.75% pa
|
85.50% of CDI
|
USD
|
PRE X DI
|
CISCO
|
Santander and JP
Morgan
|
(40,366)
|
(40,366)
|
100%
|
2.50% pa
|
84.50% of
CDI
|
|
|
|
|
|
|
|
|
|
Demonstrative table the sensitivity
analysis – effect of variations in the fair value of the swaps
For the purpose of identifying possible
distortions arising from operations with consolidated derivative financial
instruments currently in force, a sensitivity analysis was carried out
considering the variables CDI, US Dollar (USD), Euro (EUR) and Libor,
individually, in three different scenarios (probable, possible and
remote), and their respective impacts on the results obtained.
Our assumptions basically observed the
individual effect of the variation of the CDI, USD, EUR and Libor, used in
operations as appropriate, and for each scenario, the percentages and quotations
indicated below were used:
CDI Sensitivity Scenario
Description
|
|
03/2020
|
|
Probable Scenario
|
|
Scenario
Possible
|
|
Scenario
Remote
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value in UDS
and EUR (Cisco, KFW Finnvera, Scotia, BofA)
|
|
1,467,327
|
|
1,467,327
|
|
1,467,327
|
|
1,467,327
|
A) ∆ Accumulated Debt Variation
|
|
|
|
|
|
-
|
|
-
|
Fair value of active tip of swap (+)
|
|
1,467,327
|
|
1,467,327
|
|
1,467,327
|
|
1,467,327
|
Fair value of the
passive
swap (-)
|
|
1,148,883
|
|
1,148,883
|
|
1,149,942
|
|
1,151,028
|
Result swap
|
|
318,444
|
|
318,444
|
|
317,385
|
|
316,299
|
B) ∆ Cumulative Swap Variation
|
|
|
|
|
|
(1,058)
|
|
(2.,144)
|
C) Final result (BA)
|
|
|
|
|
|
(1. 058
)
|
|
(2. 144
)
|
103
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Risk
variable
|
Probable
scenario
|
Possible
scenario
|
Remote
scenario
|
|
(current)
|
|
|
CDI
|
3.75%
|
4.69%
|
5.63%
|
USD
|
5.1987
|
5.1987
|
5.1987%
|
EUR
|
5.7264
|
5.7264
|
5.7264
|
Libor
|
1.9213%
|
1.9213%
|
1.9213%
|
USD Sensitivity Scenario
Description
|
|
03/2020
|
|
Probable Scenario
|
|
Scenario
Possible
|
|
Scenario
Remote
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value in UDS
and EUR (Cisco, KFW Finnvera, Scotia, BofA)
|
|
1,467,327
|
|
1,467,327
|
|
1,698,548
|
|
1,926,984
|
A) ∆ Accumulated Debt Variation
|
|
|
|
|
|
231,222
|
|
459,658
|
Fair value of active tip of swap (+)
|
|
1,467,327
|
|
1,467,327
|
|
1,698,548
|
|
1,926,984
|
Fair value of the
passive
swap (-)
|
|
1,148,883
|
|
1,148,883
|
|
1,148,883
|
|
1,148,883
|
Result swap
|
|
318,444
|
|
318,444
|
|
549,665
|
|
778,101
|
B) ∆ Cumulative Swap Variation
|
|
|
|
|
|
231,222
|
|
459,658
|
C) Resultado final (B-A)
|
|
|
|
|
|
-
|
|
-
|
Risk
variable
|
Probable
scenario
|
Possible
scenario
|
Remote
scenario
|
|
(atual)
|
|
|
CDI
|
3.75%
|
3.75%
|
3.75%
|
USD
|
5.1987
|
6.4984
|
7.7981
|
EUR
|
5.7264
|
5.7264
|
5.7264
|
Libor
|
1.9213%
|
1.9213%
|
1.9213%
|
EUR Sensitivity Scenario
Description
|
|
03/2020
|
|
Probable Scenario
|
|
Scenario
Possible
|
|
Scenario
Remote
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value in UDS and
EUR (Cisco, KFW Finnvera, Scotia, BofA)
|
|
1,467,327
|
|
1,467,327
|
|
1,585,165
|
|
1,699,258
|
A) ∆ Accumulated Debt Variation
|
|
|
|
|
|
117,838
|
|
231,931
|
Fair value of active tip of swap (+)
|
|
1,467,327
|
|
1,467,327
|
|
1,585,165
|
|
1,699,258
|
Fair value of the
passive
swap (-)
|
|
1,148,883
|
|
1,148,883
|
|
1,148,883
|
|
1,148,883
|
Result swap
|
|
318,444
|
|
318,444
|
|
436,282
|
|
550,375
|
B) ∆ Cumulative Swap Variation
|
|
|
|
|
|
117,838
|
|
231,931
|
C) Final result (BA)
|
|
|
|
|
|
-
|
|
-
|
104
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Risk
variable
|
Probable
scenario
|
Possible
scenario
|
Remote
scenario
|
|
(current)
|
|
|
CDI
|
3.75%
|
3.75%
|
3.75%
|
USD
|
5.1987
|
5.1987
|
5.1987
|
EUR
|
5.7264
|
7.1580
|
8.5896
|
Libor
|
1.9213%
|
1.9213%
|
1.9213%
|
|
|
|
|
Libor Sensitivity
Scenario
Description
|
|
03/2020
|
|
Probable Scenario
|
|
Scenario
Possible
|
|
Scenario
Remote
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value in UDS and
EUR (Cisco, KFW Finnvera, Scotia, BofA)
|
|
1,467,327
|
|
1,467,327
|
|
1,469,411
|
|
1,471,496
|
A) ∆ Accumulated Debt Variation
|
|
|
|
|
|
2,085
|
|
4,169
|
Fair value of active tip of swap (+)
|
|
1,467,327
|
|
1,467,327
|
|
1,469,411
|
|
1,471,496
|
Fair value of the
passive swap (-)
|
|
1,148,883
|
|
1,148,883
|
|
1,148,883
|
|
1,148,883
|
Result swap
|
|
318,444
|
|
318,444
|
|
320,528
|
|
322,613
|
B) ∆ Cumulative Swap Variation
|
|
|
|
|
|
2,085
|
|
4,169
|
C) Final result (BA)
|
|
|
|
|
|
-
|
|
-
|
Risk
variable
|
Probable
scenario
|
Possible
scenario
|
Remote
scenario
|
|
(current)
|
|
|
CDI
|
3.75%
|
3.75%
|
3.75%
|
USD
|
5.1987
|
5.1987
|
5.1987
|
EUR
|
5.7264
|
5.7264
|
5.7264
|
Libor
|
1.9213%
|
2.4016%
|
2.8819%
|
As the subsidiaries hold derivative
financial instruments to hedge their respective financial debt, the variations
in the scenarios are monitored from the respective subject of the hedge, thereby
showing that the counterpart of the effects involving the exposure created by
the swaps will be reflected in the debt. In the case of these transactions, the
subsidiaries disclosed the fair value of the subject matter (debt) and the
derivative financial instrument of the hedge in separate lines, as shown in the
sensitivity analysis position above, so as to reveal the net exposure of its
subsidiaries in each of the three scenarios mentioned.
Attention is drawn to the fact that the
sole purpose of the transactions entered into by the subsidiaries involving
derivative financial transactions is to protect their balance sheet positions.
Therefore, any improvement or deterioration in their respective market values
will represent an inverse movement
in the corresponding installments of the financial debt contracted, which is the
subject matter of the subsidiaries’ derivative financial instruments.
105
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Sensitivity analyses referring to the
derivative financial instruments outstanding as at March 31, 2020 were conducted
basically taking into account the assumptions surrounding the variations in
market interest rates and the variation of the US Dollar used in the swap
agreements. The use of those assumptions in the analyses was exclusively due to
the characteristics of the derivative financial instruments, which represent
exposure to interest rate and exchange variations only.
Table with gains and losses with derivatives in the
period
|
|
03/2020
|
Net result on USD x CDI
operations
|
|
275,818
|
Capital management
The Group’s objectives when managing
capital are to safeguard the Group’s ability to continue as a going concern in
order to provide returns to shareholders and benefits to other stakeholders, in
addition to maintaining an optimal capital structure to reduce the cost of
capital. In order to maintain or adjust its capital structure the Company can
review its policy on paying dividends, returning capital to the shareholders or
issuing new shares or selling assets to reduce its level of indebtedness, for
example.
Changes in financial
liabilities
Changes in liabilities due to financing
activities, such as borrowing and financing, financial leasing and financial
instruments are presented below:
|
Borrowing and financing
|
|
Financial
leasing
|
|
Derivative financial instruments
(assets) liabilities
|
December 31, 2019
|
2,029,088
|
|
7,780,870
|
|
(42,106)
|
Adoption of IFRS 16/CPC 06
(R2)
|
-
|
|
|
|
-
|
Inflows
|
800,000
|
|
645,828
|
|
-
|
Financial expenses
|
53,746
|
|
166,413
|
|
1,947
|
Foreign exchange variations, net
|
277,765
|
|
-
|
|
(277,765)
|
Payments
|
(699,261)
|
|
(424,565)
|
|
-
|
Remeasurement IAS 17 (i) /
IFRS16
|
-
|
|
|
|
-
|
March 31, 2020
|
2,461,338
|
|
8,168,546
|
|
(317,924)
|
(i) As mentioned in Note 2.f, the Company decided to adopt the
pronouncement IFRS 16/CPC 06(R2) – Lease, retroactively with the effect of the
application as at January 1, 2019. Therefore, the lease previously classified as
a financial lease, using CPC 06 (IAS 17), the book value of the right-of-use
asset and of the lease liability on the date of initial application of the
standard, comprised the book value of the lease asset and of the lease liability
immediately prior to the application of this new standard, in accordance with
CPC 06 (IAS 17). However, for such leases, as determined by the new standard, the Company is required to
become to measure the right-of-use asset and the lease liability as from the
initial application based on the new standard. Thus, the lease previously
measured in accordance with IAS 17/CPC 06 was remeasured as at March 31, 2019,
specifically with respect to the exclusion of variable lease payments that
depend on an index or a rate, given that the projected inflation took into
account for the period of the agreements previously measured in accordance with
IAS 17/CPC 06.
106
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
37. Defined benefit pension plans and other
post-employment benefits
|
|
03/2020
|
|
12/2019
|
|
|
|
|
|
PAMEC/ asset policy and medical plan
|
|
5,782
|
|
5,782
|
ICATU, SISTEL and FUNCESP
The Company has been sponsoring a
private pension plan with defined benefits for a group of employees from the
former TELEBRÁS system under the administration of the Fundação Sistel de
Seguridade Social – SISTEL and of ICATU Multi-sponsored fund. In addition to the
plans coming from the Telebrás System, there is also a plan managed by Fundação
CESP resulting from the merger of AES Atimus.
The pension plans mentioned, as well as
the medical plans, are briefly explained below:
PBS Assisted (PBS-A Tele Celular Sul and
PBS-A Tele Nordeste Celular): SISTEL's benefit plan, which has defined benefit
characteristics and includes inactive employees who were part of the plans
sponsored by the companies of the former TELEBRÁS System;
PBS (PBS Tele Celular Sul and PBS Tele
Nordeste Celular): pension plan for inactive employees, such plan being
multi-sponsored, under administration of ICATU Multi-sponsored fund;
Management Agreement: management agreement for the
payment of pensions to retirees and pensioners, for the retirees of the
Company's predecessors, under administration of ICATU Multi-sponsored
fund;
PAMEC/Asset Policy: health care plan to the
supplemented, for the retirees of the Company's predecessors;
AES Telecom: Part of the supplementary pension and
pension plan PSAP, managed by the CESP Foundation, which is the Company's
responsibility, in view of the acquisition of Eletropaulo Telecomunicações Ltda
(AES Atimus), succeeded by TIM Fiber SP LTDA, later incorporated to TIM Celular
which was incorporated by the Company.
107
TIM PARTICIPAÇÕES S.A. AND
TIM PARTICIPAÇÕES AND
SUBSIDIARY
NOTES
TO THE QUARTERLY INFORMATION - continued
As at
March 31
(In
thousands of Reais, except as otherwise stated)
Medical Plan Fiber: Provision for the
maintenance of a health plan as a post-employment benefit to former employees of
AES Atimus (as established in law 9656/98, articles 30 and 31), which was
acquired and incorporated by TIM Celular and later incorporated by the
Company.
38. Insurance
The Company and its subsidiary maintain
a policy for monitoring the risks inherent in its operations. As a result, on
March 31, 2020, the Company and its subsidiaries had insurance contracts in
place to cover operational risks, civil liability, cyber risks (cyber), health,
among others. The Management of the Company and its subsidiary believes that the
policies represent sufficient amounts to cover possible losses. The main assets,
liabilities or interests covered by insurance and the respective amounts are
shown below:
Types
|
|
Amount
Insured
|
Operating risk
|
|
R$ 32,893,730
|
General Liability - RCG
|
|
R$
80,000
|
Cybernetic risks (cyber)
|
|
R$
28,521
|
Vehicles (executive and operational fleets)
|
|
R$1,000 for civil liability optional (property damages and
personal injury) and R$100 for moral
damages.
|
39. Subsequent
Events
On April 7, 2020, due to global
macroeconomic uncertainty regarding COVID-19 and its possible impacts, TIM S.A.
executed a new credit agreement with The Bank of Nova Scotia in the amount of
R$574 million denominated in U.S. dollars, guaranteed by TIM Participações. The
cost post-hedge is 155.0% and disbursement occurred on April 22, 2020, with a
one year maturity.
108
FISCAL COUNCIL’S OPINION
The Members
of the Fiscal Council of TIM Participações S.A. ("Company"), in the exercise of
their attributions and legal duties, as provided in Article 163 of the Brazilian
Corporate Law, conducted a review and analysis of quarterly financial
statements, along with the limited review report of Ernst & Young Auditores
Independentes S/S (“EY”), for the period that ended on March 31st,
2020 and taking into account the information provided by the Company's
management and the Independent Auditors, consider the information appropriate
for presentation to the Board of Directors of the Company, in accordance to the
Brazilian Corporate Law.
Rio de
Janeiro, May 5th, 2020.
WALMIR KESSELI
Chairman of the Fiscal Council
|
JARBAS T. BARSANTI RIBEIRO
Member of the Fiscal Council
|
ELIAS DE MATOS BRITO
Member of the Fiscal
Council
|
109
STATUTORY OFFICERS’
STATEMENT
Pietro
Labriola (Chief Executive Officer), Adrian Calaza
(Chief Financial Officer and Investor Relations
Officer), Bruno Mutzenbecher Gentil (Business Support Officer), Mario
Girasole (Regulatory and Institutional Affairs
Officer), Leonardo de Carvalho Capdeville (Chief Technology Information Officer),
Jaques Horn (Legal
Officer) and Alberto Mario
Griselli (Chief Revenue
Officer), as Statutory Officers of TIM Participações S.A.,
declare, in accordance with article 25, paragraph 1, item VI of CVM Instruction
Nr. 480 of December 7th, 2009, that they have: reviewed, discussed
and agreed with the Company’s Financial Statements for the period ended on March
31th, 2020.
Rio de
Janeiro, May 5th, 2020.
PIETRO LABRIOLA
Chief Executive Officer
|
ADRIAN CALAZA
Chief Financial Officer and Investor Relations
Officer
|
MARIO GIRASOLE
Regulatory and Institutional Affairs
Officer
|
LEONARDO DE CARVALHO CAPDEVILLE
Chief Technology Information
Officer
|
BRUNO MUTZENBECHER GENTIL
Business Support Officer
|
ALBERTO MARIO GRISELLI
Chief Revenue Officer
|
JAQUES HORN
Legal
Officer
|
110
STATUTORY OFFICERS’ STATEMENT
Pietro Labriola (Chief Executive Officer), Adrian Calaza (Chief Financial Officer and Investor Relations Officer), Bruno Mutzenbecher Gentil (Business Support Officer), Mario Girasole (Regulatory and Institutional Affairs Officer), Leonardo de Carvalho Capdeville (Chief Technology Information Officer), Jaques Horn (Legal Officer) and Alberto Mario Griselli (Chief Revenue Officer), as Statutory Officers of TIM Participações S.A., declare, in accordance with Section 25, paragraph 1, item V of CVM Instruction Nr. 480 of December 7th, 2009, that they have: reviewed, discussed and agreed with the opinion expressed on the Company’s Independent Auditors’ Report regarding the Company’s Financial Statements for the period ended March 31th, 2020.
Rio de Janeiro, May 5th, 2020.
PIETRO LABRIOLA
Chief Executive Officer
|
ADRIAN CALAZA
Chief Financial Officer and Investor Relations Officer
|
MARIO GIRASOLE
Regulatory and Institutional Affairs Officer
|
LEONARDO DE CARVALHO CAPDEVILLE
Chief Technology Information Officer
|
BRUNO MUTZENBECHER GENTIL
Business Support Officer
|
ALBERTO MARIO GRISELLI
Chief Revenue Officer
|
JAQUES HORN
Legal Officer
|
111
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
TIM PARTICIPAÇÕES S.A.
|
|
|
|
|
|
Date: May 5, 2020
|
By:
|
/s/ Adrian Calaza
|
|
|
|
|
|
|
|
Name: Adrian Calaza
|
|
|
|
Title: Chief Financial Officer and Investor Relations Officer
TIM Participações S.A.
|
|
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will a ctually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
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