We have audited the individual and consolidated financial statements of
Tim S/A (the “Company”), identified as Individual and Consolidated, respectively, which comprise the statement of financial
position as at December 31, 2022, and the statements of profit or loss, of comprehensive income, of changes in equity and cash flows for
the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in
all material respects, the individual and consolidated financial position of TIM S/A as at December 31, 2022, and its individual and consolidated
financial performance and cash flows for the year then ended in accordance with the accounting practices adopted in Brazil and with the
International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
We conducted our audit in accordance with Brazilian and International Standards
on Auditing. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the individual and consolidated financial statements section of our report. We are independent of the Company and its subsidiaries in
accordance with the relevant ethical principles set forth in the Code of Professional Ethics for Accountants, the professional standards
issued by the Brazil’s National Association of State Boards of Accountancy (CFC) and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Key audit matters are those matters that, in our professional judgment,
were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context
of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter, including any commentary
on the findings or outcome of our procedures, is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s
responsibilities for the audit of the individual and consolidated financial statements section of our report, including in relation to
these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters
below, provide the basis for our audit opinion on the accompanying financial statements.
As disclosed in the note 25 to the financial statements, the Company is
a party to numerous tax claims and proceedings at different jurisdictional levels, which amounted to R$18,644 million, as of December
31, 2022, for which a provision amounting to R$473 million was recorded in the financial statements, while the remaining R$18,171 million
was disclosed as possible losses, in accordance with CPC 25 (IAS 37) Provisions, Contingent Liabilities and Contingent Assets. The determination
of the provision and disclosures related to the tax contingencies involves significant judgment from management, including their analysis
of the matters in dispute, the opinion of internal and external legal counsel and the estimation surrounding their ultimate resolution.
In addition, in view of the magnitude of the amounts involved, any changes
in estimates or assumptions that impact the determination of the loss prognosis may have significant impacts on the Company’s financial
statements. Accordingly, this was considered a key audit matter.
Our audit procedures included, among others: (a) obtaining an understanding
and evaluation of the design of controls over the identification and evaluation of tax claims, including management’s process to
determine whether the technical merits are more-likely-than-not to be sustained in court and over the generation of the report produced
by the information technology system that support this process; (b) involving our tax professionals to assess the Company’s technical
merits regarding certain matters in dispute, obtaining and analyzing external legal opinions, obtaining internal and external legal counsel
confirmation letters, meeting with internal legal counsel to discuss certain tax disputes, and obtaining a representation letter from
the Company’s internal legal counsel; and (c) assessing the adequacy of the disclosures made by the Company in note the 25 in respect
of provision for tax related contingencies.
Based on the result of audit procedures performed in the provision
for tax contingencies and related disclosures, which is consistent with management’s assessment, we understand that the measurement
of tax claims assessed as probable and possible loss, as well as the respective disclosures in the note 25 are acceptable in the context
of the financial statements taken as a whole.
As disclosed in the note 1.2 to the consolidated financial statements, the
Company acquired 100% of the shares of the SPE Cozani for a purchased consideration of R$7,212 million. The acquisition was accounted
for as a business combination. Therefore, the Company estimated the fair value of assets acquired and liabilities assumed as well as estimated
its contingent consideration using valuation models and assumptions about future business performance (including revenue growth rates
and annual churn).
Auditing the Company’s business combination accounting is complex
and involved significant auditor judgment due to the significant estimation uncertainty related to the assumptions used by management
in determining the fair value of assets acquired and liabilities assumed, mainly with reference to customer relationship. Management projections
and underlying assumptions are forward looking and could be affected by future economic events and market conditions.
We obtained an understanding and evaluated the design of controls over the
Company’s accounting process for business combination, including controls over the identification, recognition and measurement of
the fair value of assets acquired and liabilities assumed and we also management´s controls over evaluation of underlying assumptions
such as revenue growth and annual churn.
To test the estimated fair value of assets acquired and liabilities assumed,
our audit procedures included, among others, assessing the Company's financial information forecast model and the significant assumptions
used by the Company, testing the completeness and accuracy of the underlying data, comparing significant assumptions to market and economic
trends and industry benchmarks and involving our valuation specialists to assist with the evaluation of the methodologies and models applied
by management. We also assessed the disclosures made by the Company with respect to the business combination disclosed in the note 1.2.
Based on the result of the audit procedures performed in the acquisition
of the SPE Cozani and related disclosures, which is consistent with management’s assessment, we understand that the measurement
of sale as well as the respective disclosures in note the 1.2 are acceptable in the context of the financial statements taken as a whole.
The individual and consolidated statements of value added (SVA) for year
ended December 31, 2022, prepared under the responsibility of Company management, and presented as supplementary information for purposes
of IFRS, were submitted to audit procedures conducted together with the audit of the Company’s financial statements. To form our
opinion, we evaluated if these statements are reconciled to the financial statements and accounting records, as applicable, and if their
form and content comply with the criteria defined by NBC TG 09 – Statement of Value Added. In our opinion, these statements of value
added were prepared fairly, in all material respects, in accordance with the criteria defined in abovementioned accounting pronouncement
and are consistent in relation to the overall individual and consolidated financial statements.
Management is responsible for such other information, which comprise the
Management Report.
Our opinion on the individual and consolidated financial statements does
not cover the Management Report and we do not express any form of assurance conclusion thereon.
In connection with our audit of the individual and consolidated financial
statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent
with the financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the
work we have performed, we conclude that there is a material misstatement of the Management Report, we are required to report that fact.
We have nothing to report in this regard.
Management is responsible for the preparation and fair presentation of the
individual and consolidated financial statements in accordance with the accounting practices adopted in Brazil and with the International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free of material misstatement, whether due to fraud
or error.
In preparing the individual and consolidated financial statements, management
is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations,
or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s
and its subsidiaries’ financial reporting process.
Our objectives are to obtain reasonable assurance about whether the individual
and consolidated financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with Brazilian and International standards on Auditing will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Brazilian and International Standards
on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
We communicate with those charged with governance regarding, among other
matters, the scope and timing of the planned audit procedures and significant audit findings, including potential significant deficiencies in internal control that we may have
identified during our audit.
We also provided those charged with governance with a statement that we
have complied with relevant ethical requirements, including applicable independence requirements, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determined
those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Rio de Janeiro, February 9, 2023.
Auditores Independentes S/S Ltda.
Fernando Alberto S. Magalhães
The explanatory notes are an integral part of the financial statements.
The explanatory notes are an integral part of the financial statements.
The explanatory notes are an integral part of the financial statements.
The explanatory notes are an integral part of the financial statements.
The explanatory notes are an integral part of the financial statements.
The explanatory notes are an integral part of the financial statements.
The explanatory notes are an integral part of the financial statements.
The explanatory notes are an integral part of the financial statements.
The Management of TIM S.A. (“TIM S.A.”,
“Company” or “TIM”) hereby presents its Management Report and 2022 Earnings Analysis, along with the Individual
and Consolidated Financial Statements accompanied by the Independent Auditors’ Report for the fiscal year ended December 31, 2022.
The financial statements were prepared in accordance
with accounting practices adopted in Brazil, which include the Brazilian Corporate Law, the rules of the Brazilian Securities and Exchange
Commission (CVM) and the pronouncements of the Accounting Pronouncement Committee (CPC) and International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB).
The operating and financial information for the
year ended in December 31, 2022, unless otherwise stated, is presented in Brazilian reais (R$), based on consolidated amounts and pursuant
to the Brazilian Corporation Law.
TIM S.A. is a publicly held company, with shares
listed on the São Paulo Stock Exchange (B3), and American Depositary Receipts (ADRs) listed on the New York Stock Exchange (NYSE).
In 2022, TIM confirmed that, for the 15th year in a row, has maintained its status as one of a select group of companies that
comprise the ISE portfolio (B3’s Corporate Sustainability Index), reinforcing its commitment to economic, social and environmental
sustainability. Additionally, since 2011 TIM has been listed on B3’s Novo Mercado, a segment recognized for maintaining the
highest level of corporate governance. Starting in 2021, it became part of the following indexes: S&P-B3 Brasil ESG, Refinitiv Diversity
& Inclusion, and Bloomberg Gender Equality.
TIM S.A. is controlled by TIM Brasil Serviços
e Participações S.A., a subsidiary of the Telecom Italia group. TIM operates in the mobile, landline, long-distance, and
data transmission markets throughout Brazil, as well as in the ultra-broadband market covering several Brazilian states.
The year 2022 was marked by two major transformations
of the sector, of which TIM is the protagonist: the launch of 5G technology and the end of the cycle of consolidation of the mobile phone market. In this context, we
stand out, because we lead the implementation of the 5G network, quickly becoming the largest and best coverage in key markets such as
São Paulo, Rio de Janeiro, Curitiba and Recife. Within the M&A process, we execute our strategy of integrating Oi Móvel's
acquired assets at an excellent pace, quickly capturing synergies and creating value for our shareholders and customers.
This last year presented great challenges and
opportunities regarding the external environment of the Company and the sector. If on the one hand, the polarized political environment,
and heated emotions due to the majority elections caused a lot of noise, uncertainty, and volatility. On the other hand, what was seen
was a continuity in the process of economic recovery in the post-pandemic, with several macroeconomic indicators presenting good performance,
such as maintenance of the low unemployment rate, reduction of inflationary pressures and growth of the economy.
TIM, always focused on the execution of its strategic
plan, managed to navigate well in this environment of ups and downs, capturing the opportunities offered and circumventing the obstacles
that were placed in front of it.
As previously mentioned, the major sectoral transformations,
which began in 2021, took shape in 2022 with: (i) the launch of 5G coverage in the country's capitals; (ii) the closing of the Oi Móvel
purchase transaction and subsequent start of integration of the acquired assets; and (iii) start of broadband operation under the asset-light
model after the creation of the fiber optic infrastructure company i-Systems.
With so many fundamental fronts for TIM's future
and a very complex external environment, it was necessary to redouble the focus on executing the strategy that we outlined and communicated
to the market during our TIM Brasil Day in May. As a result, we achieved great achievements throughout 2022: we were recognized for our
excellence in handling complaints through Reclame Aqui; we received the Great Place To Work certification; we innovated in the
launch of 5G in social impact partnerships with Gerando Falcões and brand impact as the sponsorship of Rock in Rio; we were
the first operator to cover 100% of the country's municipalities with mobile telephony service; our inclusion policies were recognized
with leadership in Refinitiv's ranking of the most diverse telecom company in the world; in addition to several other important brands.
In terms of numbers, throughout 2022, we had an
outstanding performance. Our net revenue grew close to 20% when compared to 2021. EBITDA reached 10 billion Reais growing solidly (excluding
the extraordinary effects of 2021) double digits. The margin remained high at around 47%. And we ended the year with a profit of close
to 1.7 billion Reais. With this solid performance, it was possible to increase the level of distribution to shareholders, having already
announced and paid approximately 1.4 billion Reais and proposing another 600 million, still referring to 2022, to be approved at the next
annual meeting.
Our ability to stay focused and execute the plans
we set out helped us to meet all the goals we had for 2022, including meeting all the goals we communicated to the market.
The expectation for 2023 is to consolidate the
transformation process of TIM and the sector with the completion of the integration of the assets purchased from Oi Móvel, the
expansion of the “real” 5G coverage and the change in the broadband paradigm fixed for neutral networks. We also hope to capitalize
more on initiatives on the digital transformation and new business fronts, creating great opportunities for efficiency and growth for
TIM.
With a scenario of uncertainties, mainly in a
year of elections that would become totally polarized, which was confirmed, the prospects for the year 2022 were not so positive for Brazil.
Despite initial expectations, Brazil recorded
a decrease in the unemployment rate (8.7%[1] in the third quarter of the year), registering the lowest number since 2015 and
continuing a series of declines over the last quarters, impacted by the process of immunization against COVID-19 started in the previous
year. Government measures on the eve of elections, such as the expansion of the Auxílio Brasil program, were factors that
helped boost economic activity. Thus, the projection of the Brazilian Gross Domestic Product (GDP) ended the year at 3.04%, according
to the latest FOCUS report[2] for the year, compared to the 0.28% growth forecast in the first FOCUS report[3] of
2022.
Inflation, measured by the Extended Consumer Price
Index (IPCA), ended 2022 at 5.62%[4], above the estimated target for the year (3.5%). Among the factors that impacted such
result, the food industry recorded an increase of 11.6%, compared to 7.9% in the previous year, as a result of worse weather conditions
during the period. Increases in commodity prices, mainly oil, also played a role in pushing inflation above the target ceiling for the
second year in a row.
In 2022, the exchange rate recorded great volatility,
with the Real appreciating against the US dollar in relation to the end of the previous year. At the last closing period, the American
currency ended quoted at R$ 5.28, accounting for a decrease of 5.2%. Uncertainties regarding American inflation and external factors
such as the War between Russia and Ukraine contributed to the oscillation scenario presented by the currency. In relation to the Brazilian
Real, the American currency recorded a high of R$ 5.68 against a low of R$ 4.60 during the year, accounting for a change of
23.5% in a scenario of domestic uncertainties, fiscal risks and many discussions about, for example, the Transition Constitution Amendment
Proposal (PEC), not allowing a better performance of the Brazilian currency against the US dollar. The trade balance ended the year with
a surplus of US$ 62 billion, accounting for an increase of 1.6% compared to the end of 2021. Exports closed the year at US$ 355 billion
and recorded a positive change of 19.3% compared to 2021. Imports recorded US$ 272.7 billion, accounting for a growth of 24.3% in
the annual comparison. The export and import values represent the highest records of the entire historical series.
The international scenario was marked by many
uncertainties and volatility with high inflation rates, led by commodity, food, and logistical and production bottleneck, as well as a
reduction in GDP growth rates in most countries. The United States showed a slowdown in the inflation rate to 7.8%, a percentage that
reached 9.1% at the maximum level for the year, and GDP growth of 2.1% compared to an expansion of 5.9% in 2021. The economy in Europe
shows a low pace of growth, greatly impacted by the effects of the war between Russia and Ukraine, affected the pace of the resumption
of the post-pandemic economy. China suffered from new lockdowns due to the COVID-19 pandemic, impacting its economic activity, which
showed an improvement in the third quarter. The GDP of the Organization for Economic Co-operation and Development (OECD) member countries
increased 0.4% in the third quarter. The International Monetary Fund (IMF) points to a forecast of 3.2% [5]growth
for the global economy in 2022.
The telecommunications sector in Brazil is marked
by the high degree of competition and by the effective regulation of the National Telecommunications Agency (ANATEL), which has the mission
of “promoting the development of telecommunications in Brazil, in order to provide it with a modern and efficient telecommunications
infrastructure, capable of offering society appropriate and diversified services at fair prices nationwide”.
Throughout its trajectory, the sector has always
been impacted by fierce competition on the Brazilian market, which can be seen by the presence of very aggressive offers from the viewpoint
of the content available to customers and the reduced level of prices charged by operators in general. However, in recent years, this
competition has moved more towards issues related to quality and service, becoming more rational from the point of view of prices. In
the last year, it is possible to say that we had a process of continuity of this transition to a new model of competition.
During the year 2022, the acquisition process
of the mobile operation assets of Oi Móvel S.A. was completed by TIM, Telefônica Brasil S.A. and Claro S.A., after all the
precedent conditions provided for by the National Telecommunications Agency (ANATEL) and by the Administrative Council for Economic Defense
(CADE) were fulfilled. However, the buyers initiated an Arbitration Proceeding regarding the Adjusted Closing Price, after understanding
that there were differences in assumptions and calculation criteria in some terms of the operation, which they only had access to after
the conclusion of the operation. The sale of the mobile operation was part of the Court-Ordered Reorganization Process of Oi S.A., which,
after 6 and a half years, was closed by the judge in charge, who understood that the Company fulfilled all the obligations assumed during
the process.
Finally, the year 2022 was marked by the start
of the implementation and expansion of 5G technology in Brazil, which seeks to meet the demand for higher connection speeds. In this context,
TIM ended 2022 having implemented 5G technology in all 27 capital cities of the country, with a much higher number of antennas than required
by ANATEL, thus providing a better experience for the user.
TIM is recognized for its strong brand and its
reputation as an innovative and disruptive company, capable of meeting new consumption patterns on the market. The proactive approach
has allowed the Company to be in a leading position in the transformation of the telecommunications business model. Changes in customers’
usage profiles and the emergence of new technologies have fostered a rupture in the industry, based on the consumption of data, content,
and digital services.
TIM’s pioneering spirit and innovative offerings
are hallmarks of the Company, which has a complete portfolio both for individual customers and corporate solutions for small, medium,
and large enterprises. In addition to the traditional mobile voice and data services, TIM offers the fixed ultra-broadband service, and
continues to pursue new sources of revenue, with pioneering initiatives in new business fronts, such as financial services and monetization
of the client base, mobile advertising, and IoT.
Also in its portfolio, the Company offers several
services and digital content in its packages, increasing the functionality of mobile devices in its customers’ daily lives. The
ability to manage a complete and wide-ranging portfolio makes it possible for TIM to offer tailored packages to its customers and to propose
convergent offers in certain regions.
Demonstrating this differential, TIM started a
partnership in 2022 focused on the digital security and entertainment segments, offering reading plans to TIM customers, through access
to digital books through applications. TIM remains focused on opportunities that can generate fast growth and develop partnerships in
different segments, with the purpose of continuing to generate value for the Company’s customers, shareholders, and partners. Innovation
in offers and consistency in the operation have ensured the portfolio’s differential and a higher quality in the acquisition of
new customers.
With the update of the Company’s strategic
plan, TIM reinforces the search for sustainable business growth considering all stakeholders and aiming to create value for each of them.
In this context, the plan designed by the Company is centered on strategies of evolution of the existing business with incremental innovations
and initiatives that improve TIM's relative position. At the same time, new fronts are opened seeking business transformation with more
disruptive changes, entry into new markets and capture opportunities that go beyond TIM's core business. Among the levers to achieve our
aspiration, we can mention the following:
All the strategic pillars are directly related
to our commitment to the User Experience, which is one of our three mainstays of the TIM brand (also including innovation and quality),
in addition to being aimed at strengthening our core and building the company’s future.
The Human Resources Executive Board, which has
been renamed People, Culture and Organization Executive Board as of July 2022, is structured with the purpose of ensuring the best practices
related to people management to support the evolution of the Company, aligned with technological transformations and business challenges,
the commitment to sustainability and the appreciation of diversity and inclusion. In addition to always seeking the evolution of the work
model, the construction of ecosystems for the continuous development of skills, the promotion of care and well-being for our employees
in all dimensions.
Having an engaged team is essential to overcoming
challenges and achieving better results. At TIM, the relationship of transparency and respect with all levels of the company strengthens
our pride and sense of belonging, as well as a clarity as to the direction we are heading. These factors are differentiators in the development
of our employer brand and employee experience.
In 2022, we had a (96%) participation in the Climate
and Engagement Survey, confirming the consistency of this process as one of the most important means of listening to people and providing
the opportunity to contribute toward the evolution of our company.
The result of the 2022 Climate and Engagement
Survey was 86% (+3%), placing TIM 14% above the Global Telecom Market and 11% above the Mercer General Market, a consulting partner responsible
for the survey methodology and application.
In 2022, we recorded growth in all 9 dimensions
of the survey, with emphasis on Fair Reward (+8pp) and Healthy Environment (+5pp), which are ranked among the Best Practices according
to the favorability achieved. Among the questions with the highest growth, those related to the Benefits offered (+19pp), Recognition
(+9pp) and Balanced life (+7pp) stand out, in line with the action
plan implemented in 2022, such as the launch of the Wellbeing Connection program, the evolution of health care plans, among other initiatives.
The integrity culture remains the most recognized
dimension, reaching a 90% favorability, with +2pp growth and needing a further 1pp to rank in the Best Practices market. Emphasis on the
promotion of an inclusive environment (96% | +1pp) and an environment free of harassment and discrimination (94% | +3pp), thus corroborating
the focus on Diversity & Inclusion and the strengthening of the Reporting Channel.
In 2023, we will continue implementing structured
actions for the well-being of employees and readiness for change, through actions that favor organizational agility, aiming to maintain
care for people and the search for innovation.
TIM ended the year 2022 with 9,406 employees across
Brazil. These employees – with their histories and knowledge – represent the Company’s intellectual capital and act
as engines for business development.
Around 68.3% of our employees have a college degree
or are currently attending college, and 9.4% have postgraduate degrees. The numbers and results show that TIM has a diversified and highly
qualified staff to meet the Company’s challenges. The workforce is rounded out by 237 interns and 141 young apprentices.
In 2022, TIM once again evolved in people development
practices, focusing on digitization, customization, and inclusion.
Through surveys, benchmarking, and discussions
with internal stakeholders, we evolved the performance management process to add even more value to our employees. Throughout the year
2022, three evaluation cycles were launched, involving over 5,600 people.
In July, we launched the first evaluation of peers/customers
by project, opening the 2022 cycle with improvements in the experience of our internal customers.
At the end of 2022, we made further progress on
improvements, bringing new elements beyond the skills to ensure a more comprehensive view of people: motivation and social reputation.
In two years, we went from a process that reinforced an evaluative culture to building a culture of development and feedforward, with
a fully customized, focused, and nimble process. In our people development strategy, we use the same assumptions: customization and added
value. All learning practices and development programs are based on TIM’s strategy, business priorities and the evolution of people’s
areas and skills.
For example, for leadership development, new editions
of the E-Coaching and Intercompany Mentoring programs were launched, reaching over 270 leaders.
In the E-Coaching program, around 85 senior management
leaders experienced a 5-session short-coaching digital journey with a certified coach and/or by the International Coaching Federation
(ICF), with the purpose of accelerating their growth and facing their management challenges. So far, over 340 leaders have participated
in this program since 2020.
Another relevant program was Intercompany Mentorship,
in partnership with the “Positive Women” initiative. In this program, 193 female leaders from 23 different companies participated
in the third wave of this innovative initiative, with the purpose of promoting reflection, awakening empowerment and accelerating the
career development of women.
For Talent Management, we evolved in the design
of a new model that segments the company into four large clusters: Strategic Talents, Leadership Talents, Professional Talents and Critical
Knowledge Talents.
For senior leadership, we continue mapping the
executives who will ensure the long-term continuity of the business. Another wave of the Top Executive Assessment in partnership with
an external Leadership Advisory firm helped us mapping and accelerating the development of senior executives who will feed into the company’s
succession plan.
For middle management and professional talent,
a new mapping cycle is planned for 2023 and will help us to have visibility of the key people who will feed the pipelines and make the
difference in the areas.
For critical knowledge talent, over 300 people
who work in New Capabilities were mapped this year. For them, retention, recognition, and education actions were prioritized, contributing
to the reduction of turnover in this group.
In terms of education and learning initiatives,
TIM’s strategy and focus in 2022 was to support the evolution and transformation of the business based on the development of new
skills through upskilling/reskilling programs.
TIM also developed/supported customized learning
journeys for the different areas based on different needs related to the activity. In all, 11 events were launched with over 840
people impacted in the different areas of the business.
Based on the strategic plan and on the innovation
targets, TIM reinforced the brand positioning in the innovation ecosystem and launched initiatives to promote the development of digital
and technological skills of people in society, improve talent attraction and increase the effectiveness in professional acquisition.
To qualify technology professionals, we have established
partnerships with big techs, innovation institutes and universities to develop relevant education and employability programs. We also
intensified talent attraction strategies aimed at professionals with the new capabilities, strengthening our employer brand in the technology
market.
As part of this strategy, TIM partnered with big
techs, such as Google Cloud and Microsoft, to encourage and develop technology training, offer free professional courses and attract qualified
people to our team. We also offer a technical knowledge journey for students and researchers from 5Girls, a project by Universidade Federal
Fluminense (UFF) that encourages the study of 5G technology and the participation of women in technological careers.
We also participated in the most important events
and innovation trade fairs, where we present our company and technology cases and make vacancies available for application. At Hacking
Rio, the largest hackathon in Latin America with over 1,700 participants, we held a lecture and a challenge on the future of 5G, which
was among the 10 finalists of the marathon. At the Sci Biz Conference, an important global science and business conference, TIM offered
5G experiences and promoted conferences on technology, in addition to cloud computing, agribusiness and data science.
Furthermore, we held roadshows and lectures at
10 universities for over 890 students, sharing technical knowledge aligned with TIM’s business and career tips, converting 40% of
students to the Internship Program website.
Our Internship and Young Apprentice programs are
the major gateway for potential talent at TIM:
In recruitment practices, we improved the way
we advertise our job opportunities in 2022 to a format in line with market practices, using better job descriptions, requirements, and
responsibilities. Moreover, we also started to give candidates visibility to all the benefits that make up TIM’s Conecta Bem+Estar
program, providing transparency, attractiveness, and engagement for opportunities. Such improvements are reflected in over 2.7 million
views of our opportunities on talent attraction platforms (LinkedIn, Vagas.com and Success Factors). Following the evolution of the Recruitment
processes, we also started the Project to implement a new Applicant Tracking System (ATS), enabling more intelligent tools based on data
and artificial intelligence to increase agility and assertiveness in the recruitment processes, in addition to providing a more positive
experience for candidates during the Recruitment and Selection journey.
Since the creation (in 2019) of an area dedicated
to Diversity and Inclusion (D&I), TIM has been maintaining its efforts to disseminate a culture of respect and inclusion in
the company and in Brazilian society, pursuant to its Diversity and Inclusion strategic plan and with the ESG Business Plan. Thus, the
company creates a healthy work environment and gains a competitive advantage in the market.
In line with our Diversity and Inclusion strategies,
we invested in hiring people with disabilities, reaching 62% of the Brazilian Legal Quota by August 2022, and we developed actions to
hire minority groups such as transgender people, women, black people, and professionals aged 45 years or more.
Moreover, throughout 2022 and together with our
Affinity Groups, other initiatives/actions were developed:
The Long-Term Incentive Plan aims to grant TIM
S.A. shares or stock options to employees of the Company and its subsidiaries, thereby seeking to promote the expansion, achievement and
success of corporate goals and ensuring the alignment of interests of shareholders and TIM Management.
On April 10, 2014, April 19, 2018 and March 30,
2021, the Annual Shareholders’ Meeting of TIM S.A. (TIM Participações S.A. before the merger by TIM S.A. on August
31, 2020) approved the long-term incentive plans, “2014-2016 Plan”, “2018-2020 Plan” and “2021-2023 Plan”,
respectively, granted to senior directors and to those who occupy key positions in the Company.
The 2014-2016 Plan addresses the granting of stock
options, while the 2018-2020 and 2021-2023 Plans provides for the granting of shares (performance shares and/or restricted shares).
The exercise of the options of the 2014-2016 Plan
assumes the achievement of specific performance targets that could affect only the acquisition price of the shares. The strike price is
calculated by applying a plus or minus adjustment to the Base price of the share as a result of shareholder performance, taking into account
the criteria provided for in each plan.
The 2018-2020 and 2021-2023 Plans propose to grant
participants shares issued by the Company, subject to the participant’s permanence in the Company (achievement of specific goals).
The number of shares may vary, for more or for less, as a result of the performance and possibly of the dividend award, considering the
criteria provided for in each Grant. Generally, performance objectives are linked to economic-financial indicators and equity performance
metrics (for example: Total Shareholder Return) and ESG - Environmental, Social & Governance indicators (for example: % of women in
leadership positions and ecoefficiency), always in line with the objectives presented to shareholders for the Triennial Plan.
The term of validity of the options of 2014-2016
Plan is 6 years and TIM S.A. has no legal or non-formalized obligation to repurchase or settle the options in cash. For the 2018-2020
and 2021-2023 plan, the term of validity has the same periodicity of 3 years related to its vesting. In turn, the new Plans, in addition
to considering the transfer of shares, also provides for the possibility of making payment to participants of the equivalent amount in
cash.
As approved by the Company’s General Meeting
of Shareholders, the Plans are managed under the responsibility of the Board of Directors, subject to the Company’s Articles of
Organization.
Current Plans have a Clow Back clause which considers
the return of payment, in whole or in part, obtained as a result of fraudulent behavior, attributable misconduct and/or error, without
which the objective would not have been achieved or would have been achieved at a lower level. This clause can be invoked within three
years following the transfer of shares or payment in cash.
Specifically for 2017, due to the fact that the
Company started the process of restructuring its long-term incentive plan, on an exceptional basis and duly approved by the Board of Directors,
the long-term incentive plan took the form of a bonus, with payment conditioned to the achievement of certain financial indicators of
TIM, and was divided into three annual installments.
Infrastructure is one of the Company’s strategic
pillars, and throughout 2022 TIM reaffirmed its commitment to invest, seeking to offer more and better services. Recent changes in consumption
patterns, as well as the growing expectations of users regarding the quality of services provided, demand a structured plan for network
expansion, supported by more robust technical analyses regarding the consumption pattern and the needs of its customers, in addition to
a major cultural transformation.
In terms of spectrum use, TIM continues its successful
refarming project, expanding to the 2.1 GHz frequency, aimed at better and more efficiency performance. Regarding fiber optics, the Company
continues the network expansion project, to support the convergent ultra-broadband network, increasing the availability of FTTH and FTTS.
TIM maintained the Biosites expansion project,
reaching 1,829 active biosites at the end of 2022. Biosites are sustainable structures of lower cost, easier to install, and do not cause
visual impact in cities, to increase site density. In the context of Big Data, the Company continues to evolve its analytics tools based
on more complete bases and a proactive approach, aimed at a more efficient targeting of investments.
Regarding corporate culture, new technologies
and customer expectations cause a rupture in the traditional model of telecommunications operators. In this scenario, TIM aims to develop,
motivate, and engage its employees to work in a dynamic, innovative and collaborative environment, based on a streamlined and flexible
operating model.
TIM’s infrastructure has a national reach,
becoming the first operator to cover 100% of the Brazilian urban population, with a presence in 5,570 cities. The Company also has extensive
data coverage, maintaining its leading position in 4G coverage in Brazil.
In 2022, TIM continued to concentrate most of
its investments in network and information technology, in line with what was practiced during previous years, with the aim of meeting
the growing evolution of data consumption. The improvement and growth of the infrastructure are supported by different projects, among
them the expansion of the fiber optic network (backbone, backhaul, and FTTH), site densification, frequency refarming, and aggregation
of carriers in two or three frequencies (according to location). Moreover, TIM has been advancing in the sharing of initiatives focused
on 4G and network transport. TIM also reinforces its 5G expansion, already covering all capital cities in the country. The Company has
also taken the same technology from the city to the countryside, being the leading company in the agribusiness segment, with 12 million
hectares covered with 4G.
Regarding the main ongoing projects focused on
the modernization and ongoing improvement of our infrastructure, we highlight the following:
Additionally, the use of the 700 MHz frequency
in the development of the LTE network continues to evolve, providing significant improvement in customers’ usage experience, both
in terms of performance – with higher download and upload speeds and lower latency – as well as in indoor coverage –
with greater penetration.
Fixed broadband coverage reached a total of 4.5
million homes passed by FTTH in 2022, while FTTC ended the year with 3.0 million. This represents a total of 6.1 million homes passed
in 41 cities.
For another year, TIM reinforced its commitment
to the enhancement of its services and continuous quality improvement to ensure the best user experience for its clients. The focus on
the expansion and improvement of its network infrastructure remains a pivotal pillar in our business plan.
The year 2022 was marked by the merger of the
customers acquired from Oi Móvel and, as a result, at the end of 4Q22, TIM had 62.5 million mobile accesses, generating
an increase of 20.0% YoY compared to 4Q21 (reaching a market share of 24.8%). The effective migration of these customers, which started
in August 2022, totaled 8.7 million migrated customers at the end of January 2023, of which 7.8 million in Prepaid and 900 thousand
in Postpaid segments[6]. The conclusion of the process is expected to occur in April 2023. The integration and subsequent disconnection
of inactive customers from Oi Móvel in TIM’s base impacted both Postpaid and Prepaid segments. In the quarter, we disconnected
1.4 million postpaid customers and 3.7 million inactive prepaid customers that came from Oi.
TIM Live, the 6 times elected best broadband in
Brazil by Estadão, is currently called TIM UltraFibra. The brand change follows the Company’s strategy of focusing
on the expansion of fiber optic to more cities, taking the differentiated quality of TIM’s service to new regions and providing
higher speeds for customers.
*The Customer Platform includes revenues from new
initiatives such as Financial and Educational Services and Mobile Advertising.
Interconnection Revenue (ITX) decreased by
15.6% YoY, as a result of the reduction in incoming traffic for the period. The incidence of MTR on Net Service Revenues reached 1.9%
in 2022.
The Other Revenues line recorded an annual
growth of 11.8% YoY, explained by the growth in revenue generated by sharing contracts and network swaps, reflecting the Company’s
strategy to expand the fiber transport infrastructure (backbone and backhaul) with greater efficiency of capital allocation (Capex and
Opex).
Income Tax and Social Contribution totaled R$
50 million in 2022, compared to R$ 146 million in 2021, pointing to a 65.7% YoY reduction, mainly explained by a drop in the tax base
as a result of the related effect the sale of control of I-Systems in 2021. In 2022, the effective rate was 2.9% vs. 4.7% in 2021.
Total Debt (post-hedge) at the end of 2022 was
R$ 18,575 million, a R$ 5,055 increase YoY. The amount considers the recognition of financial leases merged with the acquisition
of Oi’s mobile assets, in the total amount of approximately R$ 2.9 billion. Moreover, in the fourth quarter, the Company carried
out a new disbursement of part of the credit facility already available with BNDES (Finem) of R$ 319 million at the cost of TJLP
+ 1.95% and a term of 2.8 years.
At the end of the year, the amount of financing
(post-hedge) totaled R$ 5,086 million. The average cost of debt, excluding leases and licenses related to the 5G frequencies auction,
was 14.2% pa (103.69% of CDI) in the quarter, accounting for an increase when compared to the cost of 9.5% pa (116. 35% of the CDI) in
4Q21, mainly impacted by the increase in the DI rate in the second semester of 2022.
TIM is a pioneer in ESG (Environmental, Social
& Governance) topics in the Telecommunications sector in Brazil. The Company has been part of the B3 Sustainability Index Portfolio
(ISE-B3) for 15 years, being the company in the sector that has been part of the Index for the longest time. In February 2023, TIM was
once again recognized as one of the most sustainable companies in the world by S&P Global ESG, the organization responsible for the
Dow Jones Sustainability Index (DJSI), and was included in the Sustainability Yearbook.
As a signatory of the UN Global Compact since
2008 and UN Women since 2021, TIM develops projects connected to the Sustainable Development Goals (SDGs) and recognizes the rights to
data privacy, secure internet, access to information and freedom of speech as essential and non-negotiable.
TIM has become a benchmark in the promotion of
diversity and inclusion at national and international level, with targets, commitments, and implementation of several initiatives on gender,
race, LGBTI+ people, generations, people with disabilities, among others. In 2021, the Company became the first Brazilian operator to
integrate the Refinitiv Diversity & Inclusion Index, holding the 1st position in Telecom at a global level, a highlight
that it also maintained in 2022. TIM was also the first operator to win the GSMA’s Diversity in Tech international award, which
recognizes worldwide organizations with practices in favor of equality, diversity, and human rights in the technology sector. In 2023,
TIM continued to be part of the Bloomberg Gender Equality Index, which gathers 485 companies from 45 countries, and only 16 from Brazil.
Recognized with the Top Employers certification
seal for the second consecutive year, TIM is also consolidated as one of the companies with the best HR practices. The certification is
the result of an independent audit by the Top Employer Institute, an international institute with 30 years of experience in 120 countries.
In January 2023, the Company also joined B3’s GPTW Index, which considers companies certified by the Great Place to Work (GPTW)
as the best work environments in Brazil.
TIM responds to the Carbon Disclosure Project
(CDP) – the world’s largest database on Greenhouse Gases related to Climate Change – since 2010 and records its emissions
in the Public Emissions Registry of the Brazilian GHG Protocol Program.
Since 2004, TIM has been presenting its performance
through sustainability indicators and it has been publishing reports in accordance with the guidelines of the Global Reporting Initiative
(GRI) for 14 years. As of 2021, the Company started calling this publication the ESG Report and continues with its commitment to transparency
and accountability to its stakeholders, organizing the report in the three pillars: Environmental, Social and Governance. The Report is
also assured by an independent third party.
Our Policies on Social Responsibility, Human Rights,
Diversity, Environment, Climate Change Management, Corporate Risk Management, Anti-Corruption, Relationship with Suppliers, Occupational
Health and Safety, Privacy, among others, are publicly available for free consultation by our stakeholders.
In compliance with the General Data Protection
Law, in force in Brazil since 2020, TIM works to ensure customer privacy, protect their personal data and maintain an increasingly transparent
relationship. For further information, please consult the Privacy Center on the TIM website.
In 2013, TIM founded the TIM Institute with the
mission of democratizing access to science, technology, and innovation to foster human development in Brazil. Over 700,000 people from
all states and the Federal District have already benefited from the Institute’s education and inclusion projects, including internationally
awarded prizes (Governorte Award – IDB 2015).
In 2022, TIM renewed its materiality matrix based
on the new trends, which consider impacts on the financial and socio-environmental perspectives, the so-called double materiality. The
construction of the new head office included the phases of definition, identification, prioritization, analysis and validation, with 1,040
consultations being carried out with various stakeholders of the Company. At the end of the process, eight material topics for TIM were
identified, as shown in the table below:
2022 MANAGEMENT REPORT AND EARNINGS ANALYSIS |
Material topic |
ODS |
Innovation and technology |
8, 9, 11 |
Digital inclusion and connectivity |
1, 5, 9.10, 11 |
Data privacy and security |
16 |
Energy efficiency |
7, 12, 13 |
Quality of services |
9 |
Health, wellness and safety |
3, 5, 8 |
Ethics, integrity and compliance |
16 |
Transparency and relationship with priority audiences |
12, 16 |
9. Corporate Governance
9.1. Company listed on the
Novo Mercado (New Market) for 15 years
On August 3, 2011, TIM joined the “Novo
Mercado”, a segment that concentrates companies committed to the best corporate governance practices.
The migration to the Novo Mercado resulted in
benefits for all shareholders. The required rules, in line with the best corporate governance practices in markets such as the United
States and Europe, leverage greater liquidity and share appreciation, thus allowing broader access to international markets, in addition
to further strengthen the institutional image and increase confidence in the Company.
Moreover, TIM belongs to the select group of companies
that make up the portfolios of the Corporate Governance Index (IGC), the B3 Differentiated Tag Along Stock Index (ITAG) and, for 15 years,
the Corporate Sustainability Index (ISE), made up of companies that are committed to managing the risks arising from economic, environmental
and social developments, in addition to being the first and only telecommunications operator named as a Pro-Ethics company by the Brazilian
Office of the Comptroller General (CGU).
9.2. Corporate Governance at
TIM
TIM is a publicly-held company, managed by a Board
of Directors and a Statutory Executive Board, and supervised by a Tax Council. The Board of Directors is assisted by advisory committees,
namely, the Statutory Audit Committee, the Control and Risk Committee, the Remuneration Committee and the Environmental, Social &
Governance Committee.
The duties and responsibilities of the
members of the Board of Directors, the Statutory Executive Board, the Tax Council and the advisory committees to the Board of
Directors are provided for in the Brazilian legislation,
in the Company’s Bylaws, in the Novo Mercado Listing Regulation, in the Board of Directors Internal Regulations, in the Statutory
Executive Board Internal Regulations, in the Tax Council Internal Regulations and in the Internal Regulations of the advisory committees
to the Board of Directors.
2022 MANAGEMENT REPORT AND EARNINGS ANALYSIS |
As active and responsible members of the community
in which they operate, the Company and its management must base their actions on legality and ethics, based on three fundamental principles:
transparency, honesty and loyalty.
In conducting its business based, in addition
to ethics and loyalty, in good faith, the Company seeks to: (i) act with transparency in its business, (ii) promote fair competition;
(iii) excellence in market competitiveness; (iv) serve the well-being and growth of the community in which it operates; (v) improve its
human resources; and (vi) promote sustainable development.
9.3. Board of Directors
The Board of Directors (BoD) is composed of a
minimum of five (5) and a maximum of nineteen (19) members, with a term of office of two years, with reelection being permitted. As of
December 31, 2022, the BoD consisted of ten (10) members, four (4) of them independent. In 2022, the BoD met eleven (11) times in the
exercise of its functions.
All decisions taken by the BoD are recorded in
minutes, published and recorded in the minutes book of the BoD, filed at the Company’s headquarters.
The BoD meets ordinarily at least six times a
year and twelve times at most, and, extraordinarily, upon call made by its Chairman, or by any two Board Members, or by the Company’s
Chief Executive Officer. The Chairman of the BoD may invite any member of the Statutory Executive Board, other executives of the Company,
as well as third parties who may contribute with opinions or recommendations related to the matters to be addressed, to participate in
the meetings of the body. Those invited to attend BoD meetings do not have the right to vote.
The Board of Directors has four (4) advisory committees,
all directly linked to it: the Statutory Audit Committee, with rules provided for in the Company’s Bylaws, the Remuneration Committee,
the Control and Risk Committee and the Environmental, Social & Governance Committee, with one or more members being able to participate
in the Committees simultaneously.
9.4. Statutory Board of Officers
The Statutory Board of Officers (Board of Officers)
is the Company’s representative and executive management body, comprising a minimum of three (3) and a maximum of twelve (12) directors,
elected by the Board of Directors for a two-year term, with reelection permitted, and may be removed by the same body at any time. As
of December 31, 2022, the Company’s Board of Officers was composed by eight (8) board members. In 2022, the Board of Officers met forty-four
(44) times in the exercise of its functions.
2022 MANAGEMENT REPORT AND EARNINGS ANALYSIS |
9.5. Fiscal Council
The Fiscal Council (CF) is the body that oversights
the acts of the Company’s management and provides information to shareholders and must operate permanently. The Fiscal Council is
composed of a minimum of three (3) and a maximum of five (5) effective members, all independent professionals recognized by the market,
who do not maintain any other relationship with the Company, each with a respective alternate member, either a shareholder or not, elected
by the General Meeting. As of December 31, 2022, the Company’s Fiscal Council was composed of three (3) effective members and an
equal number of alternate members. In 2022, the CF met nine (9) times in the exercise of its functions.
9.6. Statutory Audit Committee
The Statutory Audit Committee (CAE) is a collegiate
advisory body, directly linked to the Board of Directors, composed of at least three (3) and at most five (5) members, all of whom are
independent. Currently, the Statutory Audit Committee is composed of three (3) members.
The purpose of the Statutory Audit Committee is
to supervise the quality and integrity of financial reports, compliance with legal, regulatory and statutory standards, the adequacy of
processes related to risk management and the activities of auditors, both internal and independent, as well as to supervise and evaluate
the signing of contracts of any nature between the Company or its subsidiaries, on the one hand, and the controlling shareholder or its
subsidiaries, affiliates, subject to common control or controlling companies of the latter, or that otherwise constitute related parties
to the Company, on the other hand. In addition to its ordinary duties, the Statutory Audit Committee also serves as the Company’s
Audit Committee, in accordance with the provisions of the Sarbanes-Oxley Act, to which the Company is subject, as it is a company registered
with the US Securities and Exchange Commission – SEC. In 2022, the Statutory Audit Committee met fifteen (15) times in the exercise
of its functions.
The members of the Statutory Audit Committee analyzed
the Financial Statements, accompanied by the Independent Auditor’s Report and the Annual Management Report, for the year ended December
31, 2022 (“2022 Annual Financial Statements”). Considering the information provided by the Company’s Statutory Executive
Board and by the external audit firm Ernst & Young Auditores Independentes S/S. (“EY”), as well as the proposed allocation
of income for the year 2022, the Statutory Audit Committee assessed that this information and documents adequately reflect, in all material
respects, the financial positions of the Company and its subsidiaries. For this reason, they unanimously recommended the approval of the
aforementioned documents by the Company’s Board of Directors, for submission to the Annual Shareholders’ Meeting, pursuant
to the Brazilian Corporation Law.
2022 MANAGEMENT REPORT AND EARNINGS ANALYSIS |
9.7. Control and Risk Committee
The Control and Risk Committee (CCR) is a collegiate
advisory body, directly linked to the Board of Directors, and must be composed of at least three (3) and at most five (5) members of the
Company’s Board of Directors, and, among other duties, must advise the Board of Directors in the evaluation of internal control
and risk management measures, and compliance with governance rules. As of December 31, 2022, the CCR was composed of five (5) members,
two (2) of which are independent. Throughout 2022, the CCR met eight (8) times in the exercise of its functions.
9.8. Remuneration Committee
The Remuneration Committee (CR) is a collegiate
advisory body, directly linked to the Board of Directors, and must be composed of at least three (3) and at most five (5) members of the
Company’s Board of Directors, and, among other duties, must advise the Board of Directors in the evaluation of proposals for apportioning
the global remuneration approved by the General Meeting, and the criterion for the remuneration of Statutory Directors and senior executives
of the Company. As of December 31, 2022, the CR was composed of three (3) members, one (1) of which is independent. Throughout 2022, the
CR met four (4) times in the exercise of its functions.
9.9. Environmental, Social & Governance Committee
The Environmental, Social & Governance Committee
(CESG) is a collegiate advisory body, directly linked to the Board of Directors, and must be composed of at least three (3) and at most
five (5) members of the Company’s Board of Directors, and, among other duties, must advise the Board of Directors in development
and implementation of the Environmental, Social & Governance strategy and principles, including, among other activities, the recommendation
of the Company's guidelines and strategy applicable to the management of environmental, social and governance issues. As of December 31,
2022, the CESG was composed of five (5) members, two (2) of which are independent. Throughout 2022, the CESG met four (4) times in the
exercise of its functions.
9.10. Shareholding structure
The Company’s share capital ended the year
2022 in the amount of R$ 13,477,890,507.55, represented by 2,420,804,398 common shares. TIM Brasil Serviços e Participações
S.A. holds a controlling interest in TIM with approximately 67% of its shares.
2022 MANAGEMENT REPORT AND EARNINGS ANALYSIS |
![](https://content.edgar-online.com/edgar_conv_img/2023/02/10/0001292814-23-000377_timbfs4q226k_011.jpg)
9.11. Dividend policy
According to the Bylaws and Policy on allocation
of income, approved on July 26, 2021, by the Board of Directors, the Company must distribute as a mandatory dividend each year ending
December 31, provided that there are amounts available for distribution, an amount equivalent to 25% of Adjusted Net Profit.
It is mandatory to maintain a legal reserve, to
which the Company must allocate 5% of net profit for each fiscal year, until the amount of this reserve is equivalent to 20% of capital.
The distribution of annual dividends is decided
by the Annual Shareholders’ Meeting.
On March 22, June 15, September 12 and December
12, 2022, TIM S.A. announced that its Board of Directors approved the distribution of R$ 195 million, R$ 270 million, R$ 480
million and R$ 455 million, respectively, as Interest on Shareholders’ Equity (“JSCP”). The payments occurred on
April 27, 2022, July 20, 2022, October 31, 2022, January 24, 2023 and January 31, 2023, and the dates of March 28, June 23, September
21 and December 21, 2022 served to identify shareholders entitled to receive such amounts. Thus, the shares acquired after those dates
were ex-Interest on own capital rights. Accordingly, TIM declared a total amount of R$ 1,400 million of interest on own capital in
2022.
2022 MANAGEMENT REPORT AND EARNINGS ANALYSIS |
9.12. Events for the Year and
Subsequent Events
COMPLETION OF THE PURCHASE
OF THE ASSETS OF OI’S MOBILE TELEPHONY OPERATION
On April 20, 2022, TIM, together with Telefônica
Brasil S.A. and Claro S.A., after complying with the precedent conditions established by CADE and Anatel, announced the completion of
the acquisition process of the mobile assets of Oi Móvel S.A. (“Oi Móvel”). With the conclusion of the transaction,
TIM now holds 100% of the share capital of Cozani RJ Infraestrutura e Rede de Telecomunicações S.A., a company that corresponds
to the part of the unit of assets, rights and obligations of Oi Móvel acquired by Company. For further details on the process completion,
please access the Material Fact.
TIM OBTAINS THE RIGHT TO EXERCISE
THE 8TH TRANCHE OF THE SUBSCRIPTION WARRANT AT C6 BANK
In October 2022, TIM obtained the right to vesting
of the 8th tranche of the subscription warrant to indirectly take part to the C6 share capital as due to the achievement of
8th level of goals agreed in the ambit of partnership, which means the accumulated indirect potential interest of roughly 5.52%
of C6’s share capital, subject to the outcome of the ongoing arbitration.
CHANGES TO THE ADJUSTED CLOSING
PRICE FOR THE ACQUISITION OF OI’S MOBILE ASSETS AND START OF THE ARBITRATION PROCEDURE
In a Material Fact released on September 19, 2022,
TIM S.A. communicated that the “Buyers” (TIM, Telefônica Brasil S.A. and Claro S.A.) of the mobile assets of Oi Móvel
S.A. (“Seller”) identified differences in the assumptions and calculation criteria that, under the terms of the Share Purchase
and Sale Agreement and Other Covenants (“SPA”), justify a proposal to change the Adjusted Closing Price (“ACP”)
on behalf of TIM in approximately R$ 1.4 billion. In addition to the differences regarding the ACP, differences have been identified
regarding the SPE Cozani contracts with companies providing mobile infrastructure services (lease of sites/towers), which, under the terms
of the SPA, give rise to an indemnity from the Seller to TIM of approximately R$ 231 million. As a result of the differences, the
amount of R$ 634 million that was retained by TIM was not transferred to the Seller.
In a Material Fact released on October 3, 2022,
considering the Seller’s express violation of the dispute resolution mechanisms provided for in the SPA, TIM communicated that the
Buyers had no alternative but to file an arbitration procedure with the Market Arbitration Chamber of B3 S.A. - Brasil, Bolsa, Balcão
against the Seller to determine the effective amount of the adjustment to the ACP, in the form of the SPA.
In a Material Fact released on October 4, 2022,
the Company was surprised by news published by the press and by a Material Fact released by the Seller on the aforementioned date that
a preliminary decision had been handed down by the 7th Business Court of the Judicial District of Rio de Janeiro determining
the deposit in court by the Buyers of approximately R$ 1.53 billion
– of which approximately R$ 670 million by TIM – in an account linked to the Seller’s court-ordered reorganization
process, where it will be safeguarded until a later decision by the arbitration court.
2022 MANAGEMENT REPORT AND EARNINGS ANALYSIS |
TIM appealed against the decision and, on October
17, 2022, the Superior Court of Justice, in a monocratic decision, rejected the appeal by TIM and the other Purchasers. Thus, on October
19, 2022, TIM deposited the amount of R$ 670 million in guarantee for the Judgment of the 7th Corporate Court of the Judicial District
of Rio de Janeiro.
NEW INTERIM CFO/ IRO
In January 2023, TIM announced that the Company’s
Board of Directors elected Mr. Alberto Mario Griselli, Chief Executive Officer (“CEO”) of the Company, to assume the positions
of Chief Financial Officer (“CFO”) and Investor Relations Officer (“IRO”), on an interim basis, as of February
1, 2023. Thus, the positions of CEO, CFO and IRO will be temporarily accumulated by Mr. Griselli.
10. Independent Audit Firm
– CVM Normative Instruction 381
In 2021, Ernst & Young Auditores Independentes
Ltda. provided audit services of our financial statements and other non-audit services, which are related to the review of the Company’s
Sustainability Report.
Such services did not exceed the level of 5% of
the total fees related to the external audit service.
In line with the external auditors’ understanding,
the provision of other professional services not related to the external audit, as described above, does not affect the independence or
objectivity in conducting the audit exams carried out. The independent auditors have internal processes to ensure that these other services
are assessed internally, as well as pre-approved before submitting any proposal to TIM.
The Company also highlights that it is subject
to a policy, approved by the Board of Directors as of September 24, 2021, which regulates the process of hiring external auditors, as
well as any services not related to the audit of the financial statements, establishing, among other aspects, that the contracting must
be submitted to the prior analysis of the Statutory Audit Committee of the Parent Company. This document also defines an illustrative
list of services not related to audit whose contracting is prohibited.
11. Capital Market
TIM S.A.’s common shares are traded on the
São Paulo Stock Exchange (B3) under the ticker TIMS3 and the ADRs, American Depositary Receipts, on the New York Stock Exchange
(NYSE), under the ticker TIMB.
2022 MANAGEMENT REPORT AND EARNINGS ANALYSIS |
The São Paulo Stock Exchange Index (Ibovespa)
ended 2022 at 109,735 points, accumulating an increase of 4.49% when compared to the previous year, with a market value of R$ 3.5
trillion.
![](https://content.edgar-online.com/edgar_conv_img/2023/02/10/0001292814-23-000377_timbfs4q226k_012.jpg)
The Company ended 2022 with its common shares
quoted at R$ 12.40 on the B3, accounting for a decrease of 5.7% YoY, while the ADRs on the NYSE closed at US$ 11.73, accounting
for an increase of 0.3% YoY. In terms of market value, TIM ended the year valued at R$ 30.0 billion or US$ 5.7 billion.
Final Considerations
TIM S.A., with the permanent objective of maintaining
continuous, balanced and sustainable growth, would like to thank its customers for their loyalty and reiterates its commitment to tirelessly
seek mechanisms to reciprocate the preference through quality and differentiated service. We would also like to thank our commercial partners,
suppliers and financial institutions for their support and trust and, particularly, our employees, without whom the objectives would not
have been achieved and, finally, the shareholders for their support and trust in the company’s management.
The Management
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
1. Operations
1.1. Corporate Structure
TIM S.A. (“TIM” or “Company”) is a public limited
company with Registered office in the city of Rio de Janeiro, RJ, and a subsidiary of TIM Brasil Serviços e Participações
S.A. (“TIM Brasil”). TIM Brasil is a subsidiary of the Telecom Italia Group that held 66.59% of the share capital of TIM S.A.
on December 31, 2022 (66.59% on December 31, 2021).
The TIM group (“Group”) comprises TIM, its subsidiary and associated
company, Cozani and I-Systems, respectively.
The Company holds an authorization for Landline Switched Telephone Service
(“STFC”) in Local, National Long-Distance and International Long-Distance modes, as well as Personal Mobile Service (“SMP”)
and Multimedia Communication Service (“SCM”), in all Brazilian states and in the Federal District.
The Company’s shares are traded on B3 – Brasil, Bolsa, Balcão
(“B3”). Additionally, TIM has American Depositary Receipts (ADRs), Level II, traded on the New York Stock Exchange
(NYSE) – USA. As a result, the company is subject to the rules of the Securities and Exchange Commission (“CVM”) and
the Securities and Exchange Commission (“SEC”). In order to comply with good market practices, the company adopts as
a principle the simultaneous disclosure of its financial information in both markets, in reais, in Portuguese and English.
As of December 31, 2022, TIM holds a 49% equity interest (49% as of December
31, 2021) in the companies I-Systems (associate), formerly FiberCo Soluções de Infraestrutura S.A. (“FiberCo”),
and 100% (it had no interest as of December 31, 2021) in the company Cozani RJ Infraestrutura e Rede de Telecomunicações
S.A. (“Cozani”) - subsidiary. We describe below the processes in the corporate reorganization regarding these two companies:
1.2. Corporate Reorganization
1.2.1. Business combination - Cozani
On April 14, 2022, TIM, Telefônica Brasil S.A. and Claro S.A. (“Buyers”)
delivered to Oi Móvel S.A. – Under court-ordered reorganization (“Seller”, “Assignor” or “Oi
Móvel”) the closing notification regarding the process of acquisition of the Seller’s mobile assets, based on the approvals
by the Administrative Council for Economic Defense (CADE), upon signature of an Agreement on Control of Concentrations, whose decision
has already become final and unappealable, and by the National Telecommunications Agency (ANATEL), particularly with the publication of
Acts 4.949/2022, 4.950/2022 and 4.951/2022, in addition to meeting or waived by the Buyers, as the case may be, all precedent contractual
conditions.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
On April 20, 2022, TIM S.A., together with the Buyer companies, after complying
with the previous conditions established by CADE and ANATEL, concluded the acquisition transaction, with TIM, which currently holds 100%
of the share capital of Cozani, a company that corresponds to the part of the unit of assets, rights and obligations of Oi Móvel
acquired by Company.
The Company has been complying with all the measures provided for in Anatel’s
conditions and in the Concentration Control Agreement (“ACC”) entered into with CADE, mainly, among others:
On April 19, 2022, TIM made the Product Reference Offer available in the
wholesale ROAMING market (“ORPA – National Roaming”), which was approved by Anatel on September 21, 2022. On the same
date, it made the Reference Offer for Mobile Virtual Network Operators (“Reference Offer – MVNO”) available, which was
approved by Anatel on September 26, 2022.
On July 4, 2022, TIM independently made public offers for the disposal
of up to 50% of Radio Base Stations (“RBDs”) acquired from Oi Móvel (“Public Offerings of RBSs”). It has
not been possible to conclude any sales proposal related to the offer so far.
On August 15, 2022, TIM signed an Radiofrequency Availability Agreement
with Oi l in order to allow Oi, to achieve the targets for implementation of fixed wireless access systems set forth in the General Plan
of Universalization Targets for the Universalization of the Switched Fixed Telephone Service Provided in the Public Regime (PGMU-IV),
approved by Decree 9.619/2018. The purpose of this agreement, as determinated by Anatel, is to enable the continuity of targets already
met, and the fulfillment of non-complied and enforceable targets. This agreement is valid until the end of Oi’s STFC concession
on December 31, 2025, and it registered as the service becomes available.
On July 5, 2022, TIM and Oi Móvel signed a Letter of Intent to guarantee
the maintenance and continuity of the mobile services provided at the Comandante Ferraz Antarctic Station (EACF) until the end of the
term, on February 21, 2024 of Cooperation Agreement 12.000/2019-001/00, signed on February 21, 2019 by the Federal Government, through
the Navy Command, and by Telemar Norte Leste and Oi Móvel. The signing arrangements for the First Amendment to the Cooperation
Agreement, which formalizes the result of these negotiations, were concluded on December 9, 2022.
On October 20, 222, TIM published Offers intended to enable the signing
of an Industrial Network Exploration Agreement (“Offer – Industrial Network Exploration”) and Temporary and Onerous
Assignment of Rights of Use of Radiofrequency (“Offer – Radiofrequency”), under the terms defined by the ACC (Agreement
on Control of Concentrations) signed with CADE. The offers were published on TIM’s website and presented to CADE, on the same date,
within the period established by ACC (up to 6 months from Closing and should be available for 36 months. No contracts have been signed
so far
On December 20, 2022, TIM published offers intended to enable the signing
of a Contract for the Temporary and Onerous Assignment of Rights of Use of the 900 MHz Radiofrequency, having as its object the radio
frequencies acquired from Oi Móvel in said frequency band (“Offer – 900 MHz Radiofrequency”), under the terms
defined by ACC signed with CADE. The ACC awaits dispatch order by CADE. The offers were published on TIM’s website and presented
to CADE on the same date, within the period established by ACC (up to 8 months from Closing) and must be available for 36 months. No contracts
have been signed so far.
The acquisition price of 100% of Cozani’s shares, after all the adjustments
provided for in the Share Purchase Agreement, was R$ 7,014.6 million.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Adjusted Closing Price:
| (i) | R$ 634.3 million reais were withheld by TIM,
as provided for in the purchase agreement, mainly to meet the possible need for additional price adjustments to be made, which could be
identified in the 120 days after the acquisition date. According to the material fact disclosed on September 19, 2022, as a result of
the differences found in the assumptions for calculating the topics: (i) Working Capital and Net Debt, (ii) Capex and (iii) Net Additions,
the amount of R$ 634.3, (R$ 671 updated on December 31, 2022) remained fully retained by the Company until the date of October
4, 2022, when a preliminary decision had been handed down by the 7th Business Court of the Judicial District of Rio de Janeiro
determining the deposit in court by the Buyers, with TIM being responsible for depositing the updated amount up to that date of R$ 670
million in an account linked to the court-ordered reorganization process of Oi Móvel S.A. Said deposit will remain in an account
linked to the Court pending the installation of the Court of Arbitration. For further details, see Note 12; |
| (ii) | The amount of R$ 2,057.4 million was transferred
directly to BNDES - National Bank for Social and Economic Development, as per the contractual provision; and |
| (iii) | The balance of R$ 4,285.9 million was transferred
directly to the Assignor on the acquisition date. |
| (iv) | The amount of R$ 1.8 million related to termination
amounts related to the Seller’s personnel, agreed as part of the amount paid for the acquisition by the Buyers. |
In addition to the above amounts, the Seller may be entitled to receive
up to an additional R$ 230 million from TIM, conditioned to the achievement, up to March 31, 2023, of certain targets related
to the radio frequencies and customer base involved in the Transaction. Of this amount, R$ 120 million have already been paid due
to the fulfillment of part of the established targets. Of the remaining amount not yet paid (R$ 110 million), the Company understands
that it is expected to disburse the amount of R$ 77 million up to the described term recognized as contingent consideration on the
date of disclosure of this financial information.
TIM also paid, on April 20, 2022, on behalf of SPE Cozani, the amount
of R$ 250.7 million to the Seller, as remuneration, for up to 12 months of service provision in the transition phase, recorded under
“Prepaid expenses” and signed an annual contract term for the use of transport infrastructure capacity with Brasil Telecom
Comunicação Multimídia S.A., involving the payment of decreasing amounts which, at present value, total approximately
R$ 476 million.
As of December 31, 2022, the total consideration transferred for the acquisition
of Cozani was R$ 7,211.6 million.
Identifiable assets acquired and liabilities assumed
On December 31, 2022, the fair value of the identifiable assets acquired
and liabilities assumed from Cozani on the date of acquisition by TIM S.A. is finalized, according to the purchase price allocation
report (“Price purchase allocation”). On this date, the analysis indicates assets and liabilities presented below:
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
|
|
Fair
values recognized on acquisition |
Assets
|
|
|
Cash
and cash equivalents |
|
193,382 |
Trade
accounts receivable |
|
362,379 |
Prepaid
expenses |
|
165,111 |
Recoverable
taxes |
|
13,535 |
Deferred
income tax and social contribution |
|
705,388 |
Property,
plant and equipment (Note 15) |
|
3,518,477 |
Intangible
assets (Note 16) |
|
3,599,811 |
|
|
8,558,083 |
|
|
|
Liabilities |
|
|
Suppliers
|
|
(183,227) |
Lease
liabilities (Note 17) |
|
(2,929,449) |
Taxes
payable |
|
(157,595) |
Deferred
revenues |
|
(95,135) |
Other
liabilities |
|
(617,518) |
|
|
(3,982,924) |
Total net identifiable assets at fair value |
4,575,159 |
Goodwill on acquisition (Note 16) |
2,636,426 |
Total consideration |
7,211,585 |
The assets acquired and liabilities assumed related
to Cozani (“net assets”) by TIM on the acquisition date and the impacts on the Company’s consolidated results, which
reflect the results of the Company acquired as of April 30, 2022, are summarized below:
|
Cozani
|
Equity interest of the acquiree |
100% |
Shareholders’ equity of Cozani at book value on 04/30/2022 |
1,282,579 |
Shareholders’ equity of Cozani at fair value on 04/30/2022 |
4,575,159 |
Surplus of radio frequencies (i) |
3,038,951 |
Surplus of customers’ portfolio (ii) |
253,629 |
|
|
Contribution to the net revenue Group as of the date of acquisition |
1,231,518 |
Contribution to the Group with loss since the acquisition date |
(626,258) |
Net revenue from the acquiree since the beginning of the year |
2,297,351 |
Loss from the acquiree since the beginning of the year |
(1,910,638) |
|
|
| (i) | The intangible asset value refers
to the adjustment in the authorizations item reflecting the fair value of the acquired grants and the spectrum
assessment was carried out using the market approach, with the application of a transaction multiple. The average useful life is 17.68
years; |
| (ii) | The evaluation of the customer portfolio was conducted using the profitability
approach, using the MPEEM (Multi-period excess earning method) method based on a calculation
of cash flows from future economic benefits attributable to the customer base. The average useful life is 8.67 years. |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The goodwill paid of R$ 2,636,426
comprises the value of future economic benefits arising from synergies expected from the acquisition. Goodwill is allocated on a consolidated
basis as the assets acquired and liabilities assumed bring benefits to the business as a whole. There is no expectation that the goodwill
recognized will be deductible for tax purposes until the corporate merger of the company Cozani takes place, which should occur throughout
2023.
Other contractual obligations
As a result of certain contractual provisions upon the acquisition of Cozani,
TIM withheld the amount equivalent to 10% of the transaction Closing Price. On December 31, 2022, this amount reached R$ 671 million
and, due to the preliminary decision of the 7th Corporate Court of the Judicial District of Rio de Janeiro, the amount is in
a judicial deposit account until further decision by the Court of Arbitration.
Also, at the time of the acquisition of Cozani, there were certain contractual
provisions linked to the fulfillment of migration targets by the Oi Group, in the amount of R$ 77 million. The fulfillment of these
targets is under the evaluation of the Company’s Management.
On December 31, 2022, both obligations reached the total amount of R$ 748
million.
1.2.2 Sale of 51% of I-Systems (formerly FiberCo) to IHS
In December 2020, FiberCo was established by the Company to segregate
network assets and provide infrastructure services. FiberCo was born to implement, operate and maintain last-mile infrastructure for broadband
access to be offered in the wholesale market. Nevertheless, the terms of the agreement define TIM as current main customer, having the
prerogative of 6 months of exclusivity after entering new areas.
On May 5, 2021, the Company disclosed the decision of its Board of
Directors on the sale by TIM of 51% of the share capital of FiberCo in favor of IHS Fiber Brasil - Cessão de Infraestruturas Ltda.
(“IHS”), with the remaining 49% remaining under the control of the Company upon closing of the transaction.
According to the valuation report of the net assets and liabilities, the
calculated amount of R$ 1,211,789 was paid-in as share capital of I-Systems on November 1, 2021.
The process for acquisition of equity interest at FiberCo, later named
I–Systems, by IHS was completed on November 16, 2021. As a result, IHS currently holds 51% of the share capital of I-Systems, with
TIM having a minority (non-controlling) interest of 49% in I-Systems. As of this moment, TIM ceased the line-by-line consolidation of
I-Systems (formerly FiberCo).
For the conclusion of the sale, IHS made a capital contribution of R$ 582,498
(primary) in the new company (I-Systems) and the payment of R$ 1,096,294 (secondary) directly to TIM, thus totaling R$ 1,678,792
for the acquisition of a 51% equity interest. The fair value calculated for 100% of the new company was R$ 3,291,794.
Upon closing, the remaining non-controlling interest of 49% in the investee
was recorded by TIM at fair value in the amount of R$ 1,612,957, as provided for by IFRS 10 (CPC 36). As provided for in IAS 28
(CPC 18), the sale of an investment with loss of control must be recognized by the total write-off of the investment and recognition
of part of the associated company’s investment at fair value.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Subsequently, the interest in the investee started to be valued under the
equity method, as defined in IAS 28 (CPC 18).
Currently, due to the closing of the transaction and loss of I- Systems’s
control, TIM wrote-off about 90% of the total goodwill recorded in the acquisition of TIM Fiber SP Ltda. and TIM Fiber RJ S.A. in the
amount of R$ 1,051,477.
The effects of the transaction are detailed below:
Description |
|
|
|
|
|
Transaction price |
1,096,294 |
Record of the remaining interest in the investment at fair
value
|
1,612,957 |
|
|
Cost of assets |
|
Write-off
of investment |
(1,211,472) |
Write-off
of goodwill at Fiber RJ/Fiber SP acquisition |
(1,051,477) |
Write-off
of deferred tax on amortized goodwill |
335,935 |
|
|
Gain on transaction
|
782,237 |
Income tax and social contribution
|
(509,245) |
Net gain on transaction
|
272,992 |
|
|
Gain before income tax and social contribution on remeasurement
of investment to fair value
|
668,720 |
Gain before income tax and social contribution on asset disposal
|
113,517 |
2. Preparation basis and presentation of the
individual and consolidated financial statements
The individual and consolidated financial statements were prepared and
are being presented according to the accounting practices adopted in Brazil, which comprise the CVM standards and pronouncements, guidance
and interpretations issued by the Accounting Pronouncement Committee (“CPC”) and in compliance with the International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
Additionally, the Company considered the guidelines provided for in Technical
Guideline OCPC 07 - Evidencing upon Disclosure of General Purpose Financial-Accounting Reports in the preparation of its financial statements.
Accordingly, relevant information of the financial statements is being evidenced and corresponds to the information used by management
when administrating.
The significant accounting policies applied in the preparation of these
financial statements are below and/or presented in its respective notes. Those policies were consistently applied in the years presented.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
a. General criteria for preparation and disclosure
The individual and consolidated financial statements were prepared considering
the historical cost as value basis and financial assets and liabilities (including derivative financial instruments) measured at fair
value.
Assets and liabilities are classified 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 provision for lawsuits and administrative proceedings that are fully classified as non-current.
The Company had a profit of R$ 1,670,755 as of December 31, 2022.
The Company’s current liabilities exceeded total current assets by R$ 2,229,118, caused by the acquisition of Cozani and payment
of obligations related to the 5G license. The Company understands that the aforementioned investments will bring relevant benefits and
operational efficiency. On December 31, 2022, the Company’s shareholders’ equity is positive by R$ 25,397,365.
In connection with the preparation of these financial statements, Company’s
Management made analyses and concluded that as there is no evidence of uncertainties about the going concern.
The presentation of the Statement of Value Added is required by Brazilian
corporate law and the accounting practices adopted in Brazil applicable to publicly-held 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. Accordingly, in conformity with IFRS, this statement is presented as supplementary information, without prejudice to
financial statements as a whole.
Interests paid are classified as financing cash flow in the statement of
cash flows as it represents costs of obtaining financial resources.
b. Functional and presentation currency
The currency of presentation of the financial statements is the Real (R$),
which is also the functional currency of the Company, its associated company and subsidiary.
Foreign currency transactions are recognized at the exchange rate on the
date of the transaction. Monetary items in foreign currency are translated into Brazilian reais at the foreign exchange rate prevailing
on the balance sheet date, informed by the Central Bank of Brazil. Foreign exchange gains and losses linked to these items are recorded
in the statement of income.
Operating segments are components of the entity that carry out business
activities from which revenues can be obtained and expenses incurred. Its operating results are regularly reviewed by the entity's main
operations manager, who makes decisions on resource allocation and evaluates segment performance. For the segment to exist, individualized
financial information is required.
The main operational decision maker in the Company, responsible for the
allocation of resources and periodically evaluating performance, is the Executive Board, which, along with the Board of Directors, are
responsible for making the strategic decisions of the company and its management.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The Group's strategy is focused on optimizing results, and all the operating
activities of the Group are concentrated in TIM and its subsidiary Cozani. Although there are diverse activities, decision makers understand
that the company represents only one business segment and do not contemplate specific strategies focused only on one service line. All
decisions regarding strategic, financial planning, purchases, investments and investment of resources are made on a consolidated basis.
The aim is to maximize the consolidated result obtained by operating the SMP, STFC and SCM licenses.
| d. | Consolidation procedures |
Subsidiaries are all the entities in which the Group retains control. The
Group controls an entity when it is exposed to, or has a right over the variable returns arising from its involvement with the entity
and has the ability to interfere in those returns due to its power over the entity. The subsidiaries are fully consolidated as of the
date control is transferred to the Group. Consolidation is interrupted beginning as of the date in which the Group no longer holds control.
If the Group loses control exercised over a subsidiary, the corresponding
assets (including any goodwill) and liabilities of the subsidiary are written-off at their book values on the date the control is lost,
and the write-off of the book value of any non-controlling interests on the date when control is lost (including any components of other
comprehensive income attributed to them) also occurs. Any resulting difference as a gain or loss is recorded in income (loss). Any retained
investment is recognized at its fair value on the date control is lost.
Intercompany transactions, as well as the balances and unrealized gains
and losses in those transactions, are eliminated. The base date of the financial information used for consolidation purposes is the same
for all the companies in the Group.
There are no consolidated balances for the balance sheet as of December 31,
2021 since the comparative consolidated balances in December 2021 were not presented, since the subsidiary I-Systems (formerly FiberCo)
was incorporated in December 2020 and, as described in Note 1, had 51% of its equity interest sold to IHS in November 2021,
when TIM now holds a non-controlling minority interest of 49%. At that moment, TIM started having I-Systems as an associated company and
to record the income (loss) of this company under the equity method, no longer consolidating it.
The Company’s consolidation base on December 31, 2022 includes the
wholly-owned subsidiary Cozani, which is mainly engaged in the provision of telecommunications services, headquartered in Rio de Janeiro,
Brazil. The company holds 100% interest, due to the acquisition of this company, as described in Note 1.
As of December 31, 2021, there are no subsidiaries, so the balances presented
are individual.
| e. | Business combination and goodwill |
Business combinations are accounted for under the acquisition
method. The cost of an acquisition is measured for the consideration amount transferred, which is valuated on fair value basis on the
acquisition date, including the value of any non-controlling interest in the acquiree, regardless of their proportion. For each business
combination, the buyer must measure the non-controlling interest in the acquired business at the fair value of based on its interest in
the net assets identified in the acquired business. Costs directly attributable to the acquisition are accounted for as expense when incurred.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
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 assets acquired, equity instruments (i.e.: shares) and liabilities
incurred or assumed by the acquirer on the date of the change of control. Identifiable assets acquired, contingencies and liabilities
assumed in a business combination are initially measured at fair value on the date of acquisition, regardless of the proportion of any
minority interest. The portion exceeding the transferred consideration of the Company's interest in the acquired identifiable net assets,
is recorded as goodwill. Should the consideration transferred be less than the fair value of the net assets of the acquired subsidiary,
the difference is recognized directly in the statement of income as a revenue once concepts and calculations applied are reviewed.
On acquiring a business, the Group assesses the financial
assets and liabilities assumed in order to rate and to allocate them in accordance with contractual terms, economic circumstances and
pertinent conditions on the acquisition date, which includes segregation by the acquired entity of built-in derivatives existing in the
acquired entity’s host contracts.
Any contingent payments to be transferred by the acquiree
will be recognized at fair value on the acquisition date. Subsequent changes to the fair value of the contingent consideration which is
deemed to be an asset or liability should be recognized in accordance with CPC 48 in the statement of income.
Initially, goodwill is initially measured as being
the excess of consideration transferred in relation to net assets acquired (acquired identifiable assets and assumed liabilities) measured
at fair value on acquisition date. If consideration is lower than fair value of net assets acquired, the difference must be recognized
as gain in bargain purchase in the statement of income on the acquisition date.
After initial recognition, the goodwill is carried at cost
less any accumulated loss for the impairment losses. For impairment testing purposes, goodwill acquired in a business combination is,
from the acquisition date, allocated to each cash-generating units of the Group that are expected to benefit by the synergies of combination,
regardless of other assets or liabilities of the acquiree being allocated to those units.
When the goodwill is part of a cash generating unit and
a portion of this unit is disposed of, the premium associated with the disposed portion should be included in the cost of the operation
when calculating gains or losses in the disposal. The goodwill disposed under these circumstances of this operation is determined based
on the proportional values of the portion disposed of, in relation to the cash generating unit maintained.
The Group measures the lease liabilities
assumed at the present value of the remaining payments as if the lease agreement acquired were a new lease agreement at the acquisition
date. Right-of-use assets were measured at an amount equivalent to the lease liabilities and adjusted to reflect the favorable or unfavorable
terms of these leases compared to market terms. Considering that the off-market nature of said lease is reflected in the right-of-use
asset, the Group does not recognize separately an intangible asset or liability relating to favorable or unfavorable terms in relation
to market value.
| f. | Approval of financial statements |
These individual and consolidated financial statements were approved by
the Board of Directors of the Company on February 9, 2023.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
| g. | New standards, amendments and interpretations of standards |
The following new standards/amendments were issued by the Accounting
Pronouncement Committee (“CPC”) and International Accounting Standards Board (IASB), are effective for the year ended December
31, 2022.
Amendments to CPC 37 (R1), CPC 48, CPC 29, CPC 27,
CPC 25 and CPC 15 (R1).
The changes to the above pronouncements are due to the
annual changes related to the cycle of improvements between 2018 and 2020, such as:
| • | Onerous Contracts – Cost of Fulfilling a
Contract; |
| • | Property, Plant and Equipment – Proceeds
before Intended Use; and |
| • | References to Conceptual framework. |
The validity of these proposed changes must be established
by regulatory agencies that approve them and to fully comply with international accounting standards, the entity must apply them in annual
periods beginning on or after January 01, 2022.
Onerous Contracts – Cost of Fulfilling a Contract
An onerous contract is a contract under which the unavoidable
costs of fulfilling the obligations arising from the contract (i.e., costs that the Group cannot avoid since it has the contract) exceed
the expected economic benefits to be received.
The amendments specify that, when assessing whether a contract
is onerous or loss-making, an entity needs to include costs that directly relate to a contract to supply goods or services, including
incremental costs (for example, direct labor costs and materials) and an allocation of costs directly related to contract activities (for
example, depreciation of equipment used to fulfill the contract and costs of managing and supervising the contract). General and administrative
costs are not directly related to a contract and are excluded unless explicitly charged to the counterparty under the terms of the contract.
The Group evaluated the contracts and did not identify
material changes in the financial statements.
Property, Plant and Equipment – Proceeds before Intended
Use;
The amendment preclude entities from deducting from
the cost of a property, plant and equipment item any proceeds from sales of produced items in bringing that asset to the location and
condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the products
of selling the items, and the costs of producing the items, in the statement of income.
Under the transition rules, the Group applies the
amendments retrospectively only to property, plant and equipment items available for use or after the beginning of the earliest period
presented when the entity first applies the amendment (the date of first-time adoption).
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
These changes had no impact on the Group’s individual
and consolidated financial statements as there were no sales of such items produced by property, plant and equipment made available for
use or after the beginning of the earliest period presented.
References to the Conceptual Framework
The amendments replace a reference to an earlier version
of the IASB Conceptual Framework with a reference to the current version issued in March 2018, without materially changing its requirements.
The amendments add an exception to the recognition
principle of IFRS 3/CPC 15 (R1) Business Combinations to avoid issuing potential ‘day 2’ gains or losses arising
from liabilities and contingent liabilities that would be within the scope of IAS 37/CPC 25 Provisions, Contingent Liabilities
and Contingent Assets or IFRIC 21 Levies, if incurred separately. The exception requires entities to apply the criteria in IAS 37
or IFRIC 21, respectively, rather than the Conceptual Framework, to determine whether a present obligation exists at the acquisition date.
The amendments also add a new paragraph to IFRS 3
to clarify that contingent assets do not qualify for recognition on the acquisition date.
Pursuant to the interim provisions, the Group applies
the amendments prospectively, i.e., for business combinations that occur after the start of the annual reporting period in which it first
applies the amendments (the date of first-time adoption).
These changes had no impact on the Group’s consolidated
financial statements since there were no assets, liabilities or contingent liabilities within the scope of these changes that arose during
the period.
IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary
as first-time adopter
The amendment allows a subsidiary that chooses to
apply paragraph D16(a) of IFRS 1/CPC 37 (R1) - First-time Adoption of International Accounting Standards to measure cumulative
translation differences using the amounts reported in the consolidated financial statements of the parent company, based on the parent
company’s transition date to IFRS, if no adjustments have been made for consolidation procedures and for the effects of the business
combination in which the parent company acquired the subsidiary. This amendment also applies to an associate or joint venture that elects
to apply paragraph D16(a) of IFRS 1.
These changes had no impact on the Group’s
consolidated financial statements as it is not a first-time adopter.
IFRS 9/CPC 48 Financial Instruments - Rates in the ’10 percent’
test for writing-off financial liabilities
The amendment clarifies the rates that an entity includes
when assessing whether the terms of a new or modified financial liability are materially different from the terms of the original financial
liability. These rates include only rates paid or received between the borrower and the lender, including rates paid or received by the
borrower or the lender on behalf of the other.
In accordance with the interim provisions, the Group
applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period
in which the entity first applies the amendment
(the date of first-time adoption). These changes had no impact on the Group’s consolidated financial statements, as there were no
changes to the Group’s financial instruments during the period.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The following new standards were issued by Comitê de Pronunciamentos
Contábeis [Accounting Pronouncement Committee] (CPC) and the International Accounting Standards Board (IASB), but are
not in effect for the period ended on December 31, 2022.
| · | Amendments to IAS 1: Classification of Liabilities as Current or Non-current
(equivalent to revision 20 of the Accounting Pronouncements Committee) |
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS
1, related to CPC 26, aiming to specify the requirements for classifying the liabilities as current or non-current. The amendments clarify
the following:
| • | What a right to postpone settlement means; |
| • | That the right to postpone settlement must exist
on the base date of the report; |
| • | That this classification is not affected by the likelihood
that an entity will exercise its right to postpone settlement |
| • | That the terms of a liability would not affect its
classification only if a derivative embedded in a convertible liability was an equity instrument |
Amendments are valid for periods started on January 1, 2023 and must be
applied on a retrospective basis. The Group currently assesses the impact that the changes will have on current practice and whether existing
loan agreements may require renegotiation.
| · | Amendments to IAS 8: Definition of Accounting Estimates |
(equivalent to revision 20 of the Accounting Pronouncements Committee)
In February 2021, IASB issued amendments to IAS 8/CPC 23, in
which the definition of ‘accounting estimates’ is introduced. The amendments clarify the difference between changes in accounting
estimates and changes in accounting policies and errors. Additionally, they clarify how entities use measurement and input techniques
to develop accounting estimates.
The amendments will become effective for periods beginning on or after
January 1, 2023 and will be applied to changes in accounting policies and estimates that occur on or after the beginning of that period.
If disclosed, early adoption is allowed.
Amendments are not expected to have a significant impact on the Group’s
financial statements.
| · | Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of
Accounting Policies (equivalent to revision 20 of the Accounting Pronouncements Committee) |
In February 2021, IASB issued amendments to IAS 1/CPC 26 (R1))
and IFRS Practice Statement 2 Making Materiality Judgments, in which guides and examples are provided to help entities to apply
materiality judgment to the disclosure of accounting policies. The aim of amendments is to assist entities in the disclosure of accounting
policies that are most useful by replacing the requirement for disclosure of significant accounting policies to material accounting policies
and adding guides about how entities should apply the concept of materiality
to make decisions about the disclosure of accounting policies.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The amendments to IAS 1 are applicable for periods started as
of or after January 1, 2023, with early adoption allowed. Since the amendments to Practice Statement 2 provide non-mandatory guides about
the application of material definition to the accounting policy information, an adoption date is not required for this amendment.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The Group is currently revisiting the accounting policy
disclosures to confirm that they are consistent with the required changes.
| · | Amendments to IAS 12: Deferred Tax Related to Assets and Liabilities
Arising from a Single Transaction (equivalent to the Committee’s revision 20 of accounting pronouncements) |
In May 2021, the Board released amendments to IAS 12,
which narrow the scope of the initial recognition exception under IAS 12 so that it no longer applies to transactions that give rise
to equal taxable and deductible temporary differences.
The amendments shall apply to transactions occurring in annual
periods beginning on or after the earliest comparative period presented. Furthermore, at the beginning of the earliest comparative period
presented, a deferred tax asset (provided there is sufficient taxable profit available) and a deferred tax liability must also be recognized
for all deductible and taxable temporary differences associated with leases and decommissioning obligations.
The Group is currently assessing the impact of these changes.
COVID-19 impacts
Since March 2020 a pandemic was declared by the World Health Organization
due to the outbreak of the new Coronavirus (COVID-19). The main impacts and first cases were recorded in Brazil and in the world also
in the first quarter of 2020.
The Company has a robust infrastructure and is part of an extremely important
segment in this period of crisis, essential for the population, government and health system since 2020. After an internal analysis,
there was no indication of impairment of assets or risks associated with the fulfillment of obligations, since the Company is not highly
leveraged and still has credit lines available to be used in the event of a significant reduction in cash volume.
In September 2021, the country showed a significant evolution in vaccination
levels, with a reduction in the transmission rate and number of cases. Thus, there was a slight improvement in economic activities. In
June, the stores returned with activities with a positive impact on device sales.
Currently, we have not identified material impacts on the Company’s
individual and consolidated financial statements.
3. Estimates and areas where judgment is significant
in the application of the Company's accounting policies
Accounting estimates and judgments are continuously assessed. They are
based on the Company's historical experience and on other factors, such as expectations of future events, considering the circumstances
present on the base date of financial statements.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
By definition, the resulting accounting estimates will rarely be the same
as the actual results. The estimates and assumptions that present a significant risk, with the probability of causing a material adjustment
to the book values of assets and liabilities for the fiscal period, are covered below.
(a) Impairment loss on non-financial assets
and investments in subsidiary and associated company.
Impairment losses occur when book value of an asset or cash generating
unit exceeds its recoverable value, which is the highest of fair value less selling costs and value in use. Calculation of fair value
less selling costs is based on information available on similar assets’ selling transactions or market prices less additional costs
to dispose of the asset. The calculation of value in use is based on the discounted cash flow model.
Any reorganization activities with which the Company is not committed to
on the reporting date of the Presentation of financial statements or significant future investments that could improve the asset base
of the cash generating unit under test are excluded for impairment testing purposes.
The main non-financial assets for which this assessment was made are goodwill
recorded by the Company (Note 16) and its tangible and intangible assets.
Net investments in the subsidiary and associated company are valued after
applying the equity method to determine whether there is any objective evidence of impairment. The recoverable amount of an investment
in an associated company must be determined for each investment, unless the associated company does not generate cash inflows on an ongoing
basis that are largely independent of those generated by the entity’s other assets. The investment in an associated company was
valued as described in Note 14.
(b) Income tax and social contribution (current
and deferred)
Income tax and social contribution (current
and deferred) are calculated according to interpretations of current legislation and CPC 32 / IAS 12. This process typically involves
complex estimates to determine taxable income and temporary differences. In particular, the deferred assets on tax losses, negative basis
of social contribution and temporary differences is recognized in proportion to the probability that future taxable income is available
and can be used. The measurement of the recoverability of deferred income tax on tax losses, negative basis of social contribution and
temporary differences takes the history of taxable income into account, as well as the estimate of future taxable income (Note 10).
(c) Provision for legal and administrative
proceedings
The legal and administrative proceedings are analyzed by the Management
along with its legal advisors (internal and external). The Company considers factors in its analysis such as hierarchy of laws, precedents
available, recent court judgments, their relevance in the legal system and payment history. These assessments involve Management’s
judgment (note 25).
(d) Fair value of derivatives and other financial
instruments
The financial instruments presented in the balance sheet at fair value
are measured using valuation techniques that consider observable data or observable data derived from market (Note 39).
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(e) Unbilled revenues
Since some cut dates for billing occur at intermediate dates within the
months of the year, as the end of each month there are revenues earned by the Company, but not actually invoiced to its customers. These
unbilled revenues are recorded based on estimate that takes into consideration historical consumption data, number of days elapsed since
the last billing date, among others (note 29).
(f) Leases
The Company has a significant number of the lease contracts in which it
acts a lessee (Note 17), and with the adoption of the accounting standard IFRS 16 / CPC 06 (R2) – Leases, on January
1, 2019, certain judgments were exercised by Company’s management in measuring lease liabilities and right-of-use assets, such as:
(i) estimate of the lease term, considering non-cancellable period and the period covered by options to extend the contract term, when
the exercise depends only from the Company, and this exercise is reasonably certain; and (ii) using certain assumptions to calculate the
discount rate.
The company is not able to readily determine the interest rate implicit
on the lease and, therefore, considers its incremental rate on loans to measure lease liabilities. Incremental rate on the lessee’s
loan is the interest rate that the lessee would have to pay when borrowing, for a similar term and with a similar guarantee, the resources
necessary to obtain the asset with a value similar to the right of use asset in a similar economic environment. The company estimates
the incremental rate using observable data (such as market interest rates) when available and considers aspects that are specific to the
Company (such as the cost of debt) in this estimate.
(g) Fair value of the intangible assets
Intangible assets are measured at historical cost less accumulated amortization
and impairment losses.
The cost of intangible assets acquired in a business combination corresponds
to their fair value at acquisition date. After the initial recognition, the intangible assets are stated at cost, less accumulated amortization
and impairment losses.
(h) Business combination
Business combinations are accounted for under the acquisition
method. The cost of an acquisition is measured for the consideration amount transferred, which is valuated on fair value basis on the
acquisition date, including the value of any non-controlling interest in the acquiree, regardless of their proportion. For each business
combination, the buyer must measure the non-controlling interest in the acquired business at the fair value of based on its interest in
the net assets identified in the acquired business. Costs directly attributable to the acquisition are accounted for as expense when incurred.
For further information, see Notes 1.2.1 and 2.e.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
4. Cash and cash equivalents
They are financial assets measured at amortized cost using the effective
interest rate method.
The Company’s Management determines the classification of its financial
assets upon initial recognition.
|
|
Parent
Company |
|
Consolidated |
|
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
|
Cash
and banks |
|
59,679 |
|
99,821 |
|
59,959 |
Free availability financial investments
cash and cash equivalents: |
|
|
|
|
|
|
CDB’s
/ Repurchases |
|
1,725,421 |
|
5,128,794 |
|
2,488,754 |
|
|
|
|
|
|
|
|
|
1,785,100 |
|
5,228,615 |
|
2,548,713 |
Bank certificates of deposit (“CDBs”) and committed transactions
are nominative securities issued by banks and sold to the public as a form of fund raising. Such securities may be traded during the contracted
term, at any time, without significant loss in their value and are used for the fulfilment of short-term obligations by the company.
The decrease in the cash position is explained by the acquisition
of an equity interest in Cozani (Note 1.2.1). and payments for 5G licenses and related obligations (Notes 16.f and 20).
The average annual remuneration of investments referring to CDB’s
and committed operations is 100.12% p.a. of the variation of the Interbank Deposit Certificate - CDI in the Parent Company (101.57% on
December 31, 2021) and 100.12% pa of change of the Interbank Deposit Certificate - CDI in the Consolidated on December 31, 2022.
5. Marketable securities
Comprise financial assets measured at fair value through profit or loss.
|
|
Parent
Company |
|
Consolidated |
|
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
|
FUNCINE
(i) |
|
12,929 |
|
11,508 |
|
12,929 |
Fundo
Soberano (ii) |
|
179 |
|
9,624 |
|
179 |
FIC:
(iii) |
|
|
|
|
|
|
Government
bonds (a) |
|
1,323,409 |
|
2,975,613 |
|
1,323,409 |
CDB
(b) |
|
20,371 |
|
40,496 |
|
20,371 |
Financial
bills (c) |
|
398,879 |
|
703,118 |
|
398,879 |
Other
(d) |
|
447,797 |
|
839,169 |
|
447,797 |
|
|
2,203,564 |
|
4,579,528 |
|
2,203,564 |
|
|
|
|
|
|
|
Current
portion |
|
(2,190,635)
|
|
(4,568,020) |
|
(2,190,635)
|
Non-current
portion |
|
12,929 |
|
11,508 |
|
12,929 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The decrease in the marketable securities’ position is explained
by the acquisition of an equity interest in Cozani (Note 1.2.1). and payments for 5G licenses and related obligations (Notes 16.f
and 20).
(i)As
of December 2017, the Company, with the aim of using tax deductibility benefit for income tax purposes, started investing in the
National Film Industry Financing Fund (FUNCINE). The average remuneration in 2022 is 0.09% p.a. (-0.06% p.a. in 2021).
(ii)
Fundo Soberano is composed only of federal government bonds. The average remuneration in 2022 was 99.94%
p.a. of the variation of the Interbank Deposit Certificate - CDI (95.13% on December 31, 2021).
(iii) In
August 2017, the Company invested in open FIC's (Quota Investment Fund). Funds are mostly made up of federal government bonds and papers
from financial institutions, mostly AAA (highest quality). The average remuneration of FICs in 2022 was 107.19% p.a. of the variation
of the Interbank Deposit Certificate - CDI (122.76% p.a. on December 31, 2021).
(a) Government
bonds are fixed income financial instruments issued by the National Treasury to finance the activities of the Federal Government.
(b) The
CDB operations are emitted by the banks with the commitment of stock buyback by the bank itself and with predetermined taxes.
(c) The
Financial bills is a fix income tittle emitted by financial institutions with the objective of a long-term fund raising.
(d) Is
represented by: Debentures, FIDC, commercial notes, promissory notes, bank credit note.
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. Trade accounts receivable are initially recognized at fair
value and, subsequently, measured at amortized cost using the effective interest rate method less 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 close to the book value
recorded on December 31, 2022 and December 31, 2021.
The average rate considered in calculating the present value of accounts
receivable recorded in the long term is 0.58% (0.19% p.m. on December 31, 2021).
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
Trade accounts receivable |
3,978,135 |
|
3,253,207 |
|
3,659,777 |
|
|
|
|
|
|
Gross accounts receivable |
4,540,225 |
|
4,000,026 |
|
4,241,515 |
|
|
|
|
|
|
Billed services |
2,055,009 |
|
2,107,682 |
|
2,149,579 |
Unbilled services |
909,760 |
|
849,762 |
|
929,669 |
Network use (i) |
981,978 |
|
504,333 |
|
550,416 |
Goods sold |
572,103 |
|
521,362 |
|
590,476 |
Contractual assets (note 24) |
19,828 |
|
15,340 |
|
19,828 |
Other accounts receivable |
1,547 |
|
1,547 |
|
1,547 |
|
|
|
|
|
|
Provision for expected credit losses |
(562,090) |
|
(746,819) |
|
(581,738) |
|
|
|
|
|
|
Current portion |
(3,739,452) |
|
(3,066,906) |
|
(3,421,094) |
Non-current portion |
238,683 |
|
186,301 |
|
238,683 |
(i) The change in the parent company is mainly represented by the assignment
of rights of use of network elements with its subsidiary Cozani, in the amount of R$ 451,454.
The movement of the provision for expected credit losses, accounted for
as an asset reduction account, was as follows:
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
746,819 |
|
651,260 |
|
746,819 |
Supplement to expected losses, net of reversal |
585,699 |
|
544,642 |
|
626,218 |
Balance in the acquisition of subsidiary |
- |
|
- |
|
33,284 |
Write-off of provision |
(770,428) |
|
(449,083) |
|
(824,583) |
|
|
|
|
|
|
Closing Balance |
562,090 |
|
746,819 |
|
581,738 |
In 2022, the change in the closing balance of the provision for expected credit losses occurred
due to the supplement to expected losses, net of reversal and write-off of already accrued invoices.
The aging of accounts receivable is as follows:
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Total |
4,540,225 |
|
4,000,026 |
|
4,241,515 |
|
|
|
|
|
|
Undue |
3,351,886 |
|
2,895,999 |
|
2,998,074 |
Overdue up to (days): |
|
|
|
|
|
30 |
262,644 |
|
246,195 |
|
286,324 |
60 |
81,939 |
|
100,027 |
|
82,533 |
>90 |
68,391 |
|
77,280 |
|
73,581 |
>90 |
775,365 |
|
680,525 |
|
801,003 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
7. Inventory
Inventories are presented at the average acquisition cost. A loss is recognized
to adjust the cost of Handsets and accessories to the net realizable value (selling price), when this value is less than the average acquisition
cost.
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Total Inventory |
236,117 |
|
202,553 |
|
236,117 |
|
|
|
|
|
|
Inventory |
248,768 |
|
214,605 |
|
248,768 |
Mobile handsets and tablets |
138,951 |
|
140,934 |
|
138,951 |
Accessories and prepaid cards |
78,330 |
|
53,791 |
|
78,330 |
TIM chips |
31,487 |
|
19,880 |
|
31,487 |
|
|
|
|
|
|
Losses on adjustment to realizable amount |
(12,651) |
|
(12,052) |
|
(12,651) |
8. Indirect taxes, charges and contributions
recoverable
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Indirect taxes, chargesand contributions recoverable |
1,358,817 |
|
1,259,932 |
|
1,367,610 |
|
|
|
|
|
|
ICMS (i) |
1,314,811 |
|
1,216,912 |
|
1,323,604 |
Other |
44,006 |
|
43,020 |
|
44,006 |
|
|
|
|
|
|
Current portion |
(469,345) |
|
(354,620) |
|
(472,202) |
Non-current portion |
889,472 |
|
905,312 |
|
895,408 |
(i) The amounts of recoverable ICMS (state VAT) are mainly comprised by:
(a) credits on the acquisition of property, plant
and equipment directly related to the provision of telecommunication services (credits divided over 48 months).
(b) 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 |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Direct taxes, charges and contributions recoverable |
1,230,220 |
|
2,042,361 |
|
1,238,686 |
|
|
|
|
|
|
Income tax (IR) and social contribution (CS) (i) |
879,227 |
|
807,096 |
|
879,227 |
PIS / COFINS (ii) |
194,449 |
|
1,164,772 |
|
194,452 |
IRRF (Withholding income tax) on interest earning bank deposits |
111,962 |
|
37,738 |
|
120,417 |
Other |
44,582 |
|
32,755 |
|
44,590 |
|
|
|
|
|
|
Current portion |
(712,342) |
|
(1,311,906) |
|
(720,808) |
Non-current portion |
517,878 |
|
730,455 |
|
517,878 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(i) In September 2021, the Federal Supreme Court (STF), with general
repercussions, established an understanding for the non-levy of Corporate Income Tax (IRPJ) and Social Contribution (CSLL) on the monetary
restatement using the SELIC rate in cases of undue payment. The specific TIM lawsuit is still pending judgment, TIM recorded its best
estimate to date, in the amount of R$ 607 million recorded in current and non-current assets (R$ 547 million on December 31,
2021) since the likelihood of a favorable outcome for the Company becomes probable. The Company is awaiting the final decision.
(ii) The Recoverable PIS/COFINS amounts mainly refer to credits
from a legal proceeding 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 calculation bases. According to the Company’s
internal assessment, the Company expects to use these credits in the next 12 months.
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. The total amount recorded in 2019 related to these credits
was R$ 3,023 million, of which R$ 1,795 million relates to principal and R$ 1,228 million was inflation adjustment.
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 May 2021, the Brazilian
Supreme Court (STF) ended the discussion regarding the credit rights of the companies, defining in the judgment of Motions for Clarification
that the exclusion of ICMS from the PIS and COFINS calculation basis is valid as of March 15, 2017, when the general repercussion thesis
(Topic 69) was established, in the judgment of Special Appeal (RE) No. 574706.
Considering that the judges
ratified that the ICMS not included in the PIS/COFINS calculation basis is highlighted in the invoice, we confirm that the procedures
adopted by TIM S.A., when providing for PIS/COFINS credits, are adequate.
In 2021, TIM had utilized credits arising from the process of exclusion of ICMS from
the calculation bases of PIS and COFINS, for payments of federal taxes, in the total amount of R$ 957 million. In 2022, total offsetting
of R$ 619 million was made for said PIS and COFINS credits.
10. Deferred income tax and social contribution
Deferred income tax and social contribution are recognized on (1) tax losses
and accumulated tax loss carryforwards; and (2) temporary differences arising from differences between the tax basis of assets and liabilities
and their book values in the financial statements. 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.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (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.
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.
On December 31, 2022 and 2021, the prevailing tax rates were 25% for
income tax and 9% for social contribution. In addition, there is no statute of limitation regarding 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 fiscal year, according to the current
tax legislation.
The amounts recorded are as follows:
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Losses carried forward – income tax and social contribution |
95,928 |
|
219,876 |
|
225,882 |
Temporary differences: |
|
|
|
|
|
Provision for legal and administrative proceedings |
381,865 |
|
330,627 |
|
381,865 |
Provision for expected credit losses |
198,933 |
|
257,529 |
|
220,911 |
|
|
|
|
|
|
Lease of LT Amazonas infrastructure |
34,657 |
|
32,377 |
|
34,657 |
Deferred income tax on accounting adjustments: |
|
|
|
|
|
Profit sharing |
49,989 |
|
40,177 |
|
49,989 |
Taxes with enforceability suspended (i) |
642,479 |
|
437,950 |
|
711,897 |
Amortized Goodwill – TIM Fiber (ii) |
(34,560) |
|
(34,560) |
|
(34,560) |
Derivative financial instruments |
(161,174) |
|
(143,948) |
|
(161,174) |
Capitalized interest - 4G and 5G |
(281,468) |
|
(233,433) |
|
(281,468) |
Deemed cost – TIM S.A. |
(32,177) |
|
(42,617) |
|
(32,177) |
Adjustments of standard IFRS 16 (iii) |
468,113 |
|
369,521 |
|
596,495 |
Accelerated depreciation (iv) |
(663,303) |
|
(466,863) |
|
(715,041) |
Fair value adjustment I–Systems (former FiberCo) (v) |
(249,477) |
|
(249,477) |
|
(249,477) |
Impairment loss (vi) |
- |
|
- |
|
557,932 |
Amortization of surplus |
45,591 |
|
|
|
45,591 |
Other |
31,304 |
|
19,729 |
|
146,218 |
|
526,700 |
|
536,888 |
|
1,497,540 |
|
|
|
|
|
|
Deferred income tax and social contribution on tax losses and negative bases not recognized yet |
- |
|
- |
|
(129,954) |
|
|
|
|
|
|
Deferred active tax portion |
526,700 |
|
536,888 |
|
1,367,586 |
(i) Mainly
represented by the Fistel fee (TFF) for the financial years 2020, 2021 and 2022 of TIM S.A. at a parent company level and, at a consolidated
level, the TFF referring to Cozani's 2022 financial year is also added. The Operating Inspection Fee (TFF) for the years 2020, 2021 and
2022 of TIM S.A. and TFF for 2022 of Cozani had its payments suspended by virtue of an injunction and,
therefore, still do not have a specific date for payment. See Note 22 for details.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(ii) Represented
by the goodwill on the business combination of companies TIM Fiber RJ and SP acquired by TIM in 2012, partially realized in November 2021
after the completion of the transaction for the sale of 51% of the equity interest in I-Systems to IHS, as described in Note 1.
(iii) Represents
the addition of new contracts, mainly due to the acquisition of Cozani. The temporary difference of the IFRS 16 contracts is due
to the difference in the timing of recognition of the accounting and tax expense, under the terms of the current legislation.
(iv) As
of the 1Q20, TIM S.A. excludes the portion of acceleration of depreciation of movable assets belonging to property, plant and equipment
from the calculation basis of the IRPJ and CSLL, due to their uninterrupted use in three operating shifts, supported by technical expert
report, as provided for in Article 323 of the RIR/2018, or by the adequacy to the tax depreciation provided for in IN 1700/2017.
Such tax adjustment generated a deferred liability of R$ 663 million until December 31, 2022 (R$ 467 million up to December
31, 2021) and applied as of January 1, 2020.
(v) Refers
to deferred charges on the fair value of the non-majority interest calculated in the sale transaction described in Note 1 that took
place in November 2021 between TIM S.A. and IHS Fiber Brasil - Cessão de Infraestruturas Ltda.
(vi) Represents
the deferred charges constituted, mainly due to the impairment of tangible assets, onerous capacity contracts and deferred taxes
Expectation of recovery of tax credits
The estimates of recoverability of tax credits were calculated taking into
consideration financial and business assumptions available on December 31, 2022.
Based on these projections, the company has the following expectation of
recovery of credits:
Parent Company
Deferred income tax and social contribution |
Tax losses and negative basis |
|
Temporary differences |
|
Total |
2023 |
80,475 |
|
263,659 |
|
|
2024 |
15,453 |
|
373,500 |
|
|
2025 |
- |
|
(72,984) |
|
|
>2026 |
- |
|
(133,403) |
|
|
Total |
95,928 |
|
430,772 |
|
526,700 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Consolidated
Deferred income tax and social contribution |
Tax losses and negative basis |
|
Temporary differences |
|
Total |
2023 |
80,475 |
|
504,340 |
|
|
2024 |
15,453 |
|
515,457 |
|
|
2025 |
- |
|
385,264 |
|
|
>2026 |
- |
|
(133,403) |
|
|
Total |
95,928 |
|
1,271,658 |
|
1,367,586 |
The company based on a history of profitability and based on projections
of future taxable results, constitutes deferred income tax credits and social contribution on all of its tax losses, negative social contribution
basis and temporary differences.
Considering that Cozani does not have a history of taxable base, deferred
tax credits on tax losses and negative basis of social contribution in the amount of R$ 129,954 referring to Cozani were not recognized.
The Company used credits from tax losses and the negative basis of social
contribution in the amount of R$ 123,948 throughout 2022 (R$ 255,252 in 2021).
11. Prepaid expenses
|
Parent company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Prepaid expenses |
278,764 |
|
358,287 |
|
359,109 |
Advertisements not released (i) |
2,361 |
|
86,154 |
|
2,361 |
Rentals and insurance |
64,544 |
|
67,034 |
|
64,544 |
Incremental costs for obtaining contracts with customers (ii) |
178,543 |
|
153,988 |
|
178,543 |
IT Services (iii) |
21,500 |
|
28,626 |
|
21,500 |
Prepaid contractual expenses (iv) |
- |
|
- |
|
77,810 |
Other |
11,816 |
|
22,485 |
|
14,351 |
|
|
|
|
|
|
Current portion |
(198,506) |
|
(275,148) |
|
(278,851) |
Non-current portion |
80,258 |
|
83,139 |
|
80,258 |
(i) Represent prepaid payments of advertising expenses for products and
services of the TIM brand that are recognized in the result according to the period of serving the advertisement.
(ii) It is substantially represented by incremental costs related to sales
commissions paid to partners for obtaining customer contracts arising from the adoption of IFRS 15/ CPC 47, which are deferred to the
result in accordance with the term of the contract and/or economic benefit, usually from 1 to 2 years.
(iii) They represent prepayments of IT services expenses for network and
migration of information to the “cloud”.
(iv) It refers to the payment in April 2022 (acquisition date of Cozani)
of TSA (Transition Service Agreement), in the amount of R$ 250,722 as remuneration, for up to 12 months of service provision in Cozani’s
transition phase. As of December 31, 2022, the balance of the remaining amount related to the TSA was R$ 77,810.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
12. Judicial deposits
They are recorded at historical cost and updated according to current legislation.
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Judicial deposits |
1,377,560 |
|
718,773 |
|
1,377,560 |
|
|
|
|
|
|
Civil |
974,482 |
|
285,583 |
|
974,482 |
Labor |
117,583 |
|
128,607 |
|
117,583 |
Tax |
184,435 |
|
178,914 |
|
184,435 |
Regulatory |
113 |
|
111 |
|
113 |
Online attachment (i) |
100,947 |
|
125,558 |
|
100,947 |
(i) Refer to legal blockages directly in the company's current accounts
and financial investments linked to certain legal proceedings. This amount is periodically analyzed and when identified, reclassification
is made to one of the other specific accounts of the legal deposit item.
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 processes with differentiated matters, for instance, in
which the value set by ANATEL for vacating certain transmission sub-bands is discussed, enabling the implementation of 4G technology.
In this case, the amount deposited updated in court under discussion is R$ 77,854 (R$ 72,533 on December 31, 2021).
In a Material Fact released on October 4, 2022, a preliminary decision
had been handed down by the 7th Business Court of the Judicial District of Rio de Janeiro determining the deposit in court
by the Buyers (TIM, Telefônica Brasil S.A. and Claro S.A.) of approximately R$ 1.53 billion – of which approximately
R$ 670 million by TIM – in an account linked to the court-ordered reorganization process of Oi Móvel S.A., where it
will be safeguarded until a later decision by the arbitration court. Said deposit will remain in an account linked to the Court pending
the installation of the Court of Arbitration.
On October 19, 2022, TIM deposited the amount of R$ 670 million in
guarantee for the Judgment of the 7th Corporate Court of the Judicial District of Rio de Janeiro.
Labor
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.
Tax
The Company has legal deposits, relating to tax matters, made to support
several ongoing legal discussions. Such deposits mainly relate to the following discussions:
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
| (a) | Use of credit in the acquisition of electricity directly
employed in the production process of companies, matter with positive bias in the judiciary. The current value of the deposits referring
to this discussion is R$ 36,417 (R$ 34,289 as of December 31, 2021). |
| (b) | CPMF levy on loan conversion operations into the
Company’s equity; recognition of the right not to collect the contribution allegedly levied on the simple change of ownership of
current accounts due to merger. The current value of the deposits referring to this discussion is R$ 5,295 (R$ 9,073 as of December
31, 2021). |
| (c) | Constitutionality of the collection of the functioning
supervision fee (TFF -Taxa de Fiscalização do Funcionamento) by municipal authorities of different localities. The
current value of the deposits referring to this discussion is R$ 22,178 (R$ 20,022 as of December 31, 2021). |
| (d) | Non-homologation of compensation of federal debts
withholding income tax credits (IRRF) for the alleged insufficiency of credits, as well as the deposit made for the purposes of release
of negative Certificate of debts. The current value of the deposits referring to this discussion is R$ 11,557 (R$ 11,254 as
of December 31, 2021). |
| (e) | Incidence of ISS on import services and third parties;
alleged lack of collection in relation to ground cleaning and maintenance service of BRS (Base Radio Station), the ISS itself, the ISS
incident on co-billing services and software licensing (blackberry). Guarantee of the right to take advantage of the benefit
of spontaneous denunciation and search for the removal of confiscatory fines in the case of late payment. The current value of the deposits
referring to this discussion is R$ 8,651 (R$ 8,048 as of December 31, 2021). |
| (f) | Accessory services provided for in the agreement
69/98 ICMS incident on the provision of communication services of the amounts charged for ACCESS, Membership, Activation, qualification,
availability, subscription and use of the services, among others. The current value of the deposits referring to this discussion is R$ 3,623
(R$ 3,478 as of December 31, 2021). |
| (g) | Requirement by ANATEL of the public price for the
administration of numbering resources. The current value of the deposits referring to this discussion is R$ 3,766 (R$ 3,582
as of December 31, 2021). |
| (h) | Deposit made by TIM S.A. – Unconstitutionality
and illegality of the collection of FUST (Fund for Universalisation of Telecommunications Services). The right not to collect FUST, failing
to include in its calculation base the revenues transferred by way of interconnection and EILD (Industrial Exploitation of Dedicated Line),
as well as the right not to suffer the retroactive collection of the differences determined in function of not observing sum 7/2005 of
ANATEL. The current value of the deposits referring to this discussion is R$ 63,967 (R$ 61,752 as of December 31, 2021). |
| (i) | ICMS - Miscellaneous. Deposits made in several processes
that discuss ICMS charges, mainly related to discussions on loan, DIFAL, exempt and non-taxed services, ICAP and Covenant 39. The current
value of the deposits referring to this discussion is R$ 7,691 (R$ 9,960 as of December 31, 2021). |
| (j) | Charges related to cases of Jornal do Brasil
that were directed to the company. The current value of the deposits referring to this discussion is R$ 11,524 (R$ 9,730 as
of December 31, 2021). |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
13. Other assets
|
Parent company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Other assets |
265,661 |
|
216,159 |
|
265,042 |
|
|
|
|
|
|
Advances to employees |
7,092 |
|
6,795 |
|
7,092 |
Advances to suppliers |
31,422 |
|
48,755 |
|
31,437 |
Amounts receivable from TIM Brasil (Note 37) |
22,790 |
|
23,069 |
|
22,790 |
Amounts receivable from incentivized projects |
63,034 |
|
13,613 |
|
63,034 |
Recoverable INSS |
69,794 |
|
66,386 |
|
69,794 |
Other |
71,529 |
|
57,541 |
|
70,895 |
Current portion |
(200,264) |
|
(197,251) |
|
(199,644) |
Non-current portion |
65,397 |
|
18,908 |
|
65,398 |
14. Investment
The ownership interest in associated company or subsidiary is valued using
the equity accounting method.
Cozani
As mentioned in Note 1, on April 20, 2022, TIM S.A., Telefônica
Brasil S.A. and Claro S.A., after complying with the precedent conditions established by the Administrative Council for Economic Defense
(CADE) and ANATEL, concluded the process of acquiring the mobile assets of Oi Móvel S/A – Under court-ordered reorganization.
With the conclusion of the Transaction, TIM S.A. now holds 100% of the
share capital of Cozani, a company that corresponds to the part of the unit of assets, rights and obligations of Oi Móvel acquired
by the Company. Therefore, Cozani is a company controlled by TIM S.A. as of December 31, 2022.
I-Systems
As mentioned in note 1, in December 2020, the company Fiber Co (current
I-Systems) was established and was 100% controlled by TIM S.A. In November 2021, as a result of the spin-off of net assets of the
broadband business and the creation of I-Systems (formerly FiberCo) with subsequent sale of 51% of its equity interest on behalf of IHS,
TIM S.A. assessed the transaction as a loss of control and stopped consolidating it, recording the investment in an associated company,
in the amount of R$ 1,612,957 at fair value for the remaining minority interest (non-controlling) of 49%.
TIM S.A. has 49% (49% on December 31, 2021) in the share capital of
I-Systems. Therefore, between December 2020 and October 2021, Fiber Co was a subsidiary of TIM S.A., becoming an associated
company as of November 2021, a condition that remains until now. The following table represents summarized financial information
about the investments of I-Systems:
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
|
2022 |
2021 |
Assets |
1,820,223 |
1,533,233 |
Current and non-current assets |
291,799 |
232,281 |
Tangible and intangible assets |
1,528,424 |
1,300,952 |
|
|
|
Liabilities and shareholders’ equity |
1,820,223 |
1,533,233 |
Current and non-current liabilities |
398,189 |
110,668 |
Shareholders’ equity |
1,422,034 |
1,422,565 |
|
|
|
Company’s proportional interest |
49% |
49% |
Investment value (Note 14.b) |
1,540,116 |
1,601,703 |
|
2022 |
2021 |
Net loss for the year |
(126,979) |
(22,968) |
Company’s proportional interest |
49% |
49% |
Company’s interest in the associated company’s income (loss) |
(61,587) |
(11,254) |
| a) | Interest in subsidiaries and associated company |
|
|
|
Associated companies |
|
Subsidiary |
|
Total |
|
|
|
2022
I-Systems |
|
2021
I-Systems |
|
2022
Cozani |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of shares |
|
|
1,794,287,995 |
|
1,794,287,995 |
|
3,002,872 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Interest in total capital |
|
|
49% |
|
49% |
|
100% |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
1,549,014 |
|
1,794,288 |
|
4,199,623 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year (i) |
|
|
(125,687) |
|
(22,968) |
|
(626,258) |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings |
|
|
(61,587) |
|
(11,254) |
|
(626,258) |
|
(687,845) |
|
(11,254) |
|
|
|
|
|
|
|
|
|
|
|
|
Investment amount |
|
|
1,540,116 |
|
1,601,703 |
|
4,199,623 |
|
5,739,739 |
|
1,601,703 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
| b) | Changes in investment in subsidiaries and associated
companies: |
|
I-Systems (associated company) |
|
Cozani
(subsidiary) |
|
Total |
|
|
|
|
|
|
Balance of investment on December 31, 2021 |
1,601,703 |
|
- |
|
1,601,703 |
Net identifiable assets at fair value
|
- |
|
4,575,159 |
|
4,575,159 |
Capital increase |
- |
|
250,722 |
|
250,722 |
Equity in earnings and amortization of surplus |
(61,587) |
|
(626,258) |
|
(687,845) |
Balance of investment on December 31, 2022 |
1,540,116 |
|
4,199,623 |
|
5,739,739 |
|
FiberCo
(current I-Systems)
(subsidiary) |
|
|
Balance of investment at December 31, 2020 |
1 |
Equity in earnings until October 2021 |
(318) |
Capital increase |
1,211,789 |
Write-off of investment |
(1,211,472) |
Balance of investment on November 16, 2021 |
- |
|
I-Systems
(associated company) |
|
|
Balance of investment on December 31, 2020 |
- |
Revaluation of minority interest at fair value |
1,612,957 |
Equity in earnings - November 2021 and December 2021 |
(11,254) |
Balance of investment on December 31, 2021 |
1,601,703 |
(i) The subsidiary’s results show the changes from the acquisition
date. The date of acquisition and transfer of control was April 20, 2022 and the results of the subsidiary were consolidated as of April
30, 2022, as the financial information available is closest to the date of transfer of control.
Cozani’s shareholders’ equity as of April 30, 2022 was adjusted
to comply with the Company’s accounting practices, reflecting a decrease of approximately R$ 1,641 million, mainly related
to the impairment of tangible assets, recording of onerous capacity contract and deferred taxes.
15. 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. On December 31, 2022 and 2021,
the Company does not present indications of impairment in its property, plant and equipment. Property, plant and
equipment values recorded in the acquisition of Cozani were adjusted to its recoverable values as described in Note 14.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
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 book value at the time of the transaction and are recognized in “other operating expenses (revenue), net”
in the statement of income.
| · | Changes in property, plant and equipment |
|
Parent Company |
|
Balance in 2021 |
Additions |
Write-offs |
Transfers |
Balance in 2022 |
Total cost of property, plant and equipment, gross |
49,159,678 |
5,665,928 |
(295,589) |
- |
54,530,017 |
Commutation/transmission equipment |
25,854,454 |
(4,788) |
(128,439) |
3,028,504 |
28,749,731 |
Fiber optic cables |
778,512 |
- |
- |
4,884 |
783,396 |
Leased handsets |
2,806,454 |
752 |
(17,149) |
166,099 |
2,956,156 |
Infrastructure |
6,443,285 |
- |
(14,967) |
493,409 |
6,921,727 |
Informatics assets |
1,756,340 |
- |
(6,720) |
31,032 |
1,780,652 |
General use assets |
916,845 |
- |
(952) |
41,503 |
957,396 |
Right of use in leases |
9,779,327 |
1,839,693 |
(125,958) |
- |
11,493,062 |
Land |
40,794 |
- |
(992) |
- |
39,802 |
Construction in progress |
783,667 |
3,830,271 |
(412) |
(3,765,431) |
848,095 |
|
|
|
|
|
|
Total Accumulated Depreciation |
(30,851,278) |
(4,116,298) |
212,819 |
- |
(34,754,757) |
Commutation/transmission equipment |
(18,187,994) |
(2,040,925) |
127,697 |
- |
(20,101,222) |
Fiber optic cables |
(522,205) |
(61,649) |
- |
- |
(583,854) |
Leased handsets |
(2,534,691) |
(154,843) |
11,694 |
- |
(2,677,840) |
Infrastructure |
(4,043,155) |
(376,048) |
14,343 |
- |
(4,404,860) |
Informatics assets |
(1,629,730) |
(52,579) |
6,704 |
- |
(1,675,605) |
General use assets |
(649,229) |
(49,728) |
509 |
- |
(698,448) |
Right of use in leases |
(3,284,274) |
(1,380,526) |
51,872 |
- |
(4,612,928) |
Total property, plant and equipment, net |
18,308,400 |
1,549,630 |
(82,770) |
- |
19,775,260 |
Commutation/transmission equipment |
7,666,460 |
(2,045,713) |
(742) |
3,028,504 |
8,648,509 |
Fiber optic cables |
256,307 |
(61,649) |
- |
4,884 |
199,542 |
Leased handsets |
271,763 |
(154,091) |
(5,455) |
166,099 |
278,316 |
Infrastructure |
2,400,130 |
(376,048) |
(624) |
493,409 |
2,516,867 |
Informatics assets |
126,610 |
(52,579) |
(16) |
31,032 |
105,047 |
General use assets |
267,616 |
(49,728) |
(443) |
41,503 |
258,948 |
Right of use in leases |
6,495,053 |
459,167 |
(74,086) |
- |
6,880,134 |
Land |
40,794 |
- |
(992) |
- |
39,802 |
Construction in progress (II) |
783,667 |
3,830,271 |
(412) |
(3,765,431) |
848,095 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Parent Company
|
Balance
in December 2020 |
Additions |
Write-offs
(i) |
Transfers |
Balance
in December 2021 |
|
Total cost of
property, plant and equipment, gross |
47,429,167 |
5,572,362 |
(3,841,851) |
- |
49,159,678 |
Commutation/transmission
equipment |
25,875,916 |
26,905 |
(2,920,511) |
2,872,144 |
25,854,454 |
Fiber optic cables |
878,100 |
- |
(125,366) |
25,778 |
778,512 |
Leased handsets |
2,643,336 |
805 |
(13,495) |
175,808 |
2,806,454 |
Infrastructure |
6,436,572 |
- |
(511,635) |
518,348 |
6,443,285 |
Informatics assets |
1,770,386 |
- |
(46,584) |
32,538 |
1,756,340 |
General use assets |
902,287 |
- |
(43,401) |
57,959 |
916,845 |
Right of use in leases |
8,367,895 |
1,591,307 |
(179,875) |
- |
9,779,327 |
Land |
40,794 |
- |
- |
- |
40,794 |
Construction in progress |
513,881 |
3,953,345 |
(984) |
(3,682,575) |
783,667 |
|
|
|
|
|
|
Total Accumulated
Depreciation |
(29,328,469) |
(3,951,760) |
2,428,951 |
- |
(30,851,278) |
Commutation/transmission
equipment |
(18,130,526) |
(1,983,589) |
1,926,121 |
- |
(18,187,994) |
Fiber optic cables |
(482,613) |
(65,669) |
26,077 |
- |
(522,205) |
Leased handsets |
(2,398,217) |
(145,661) |
9,187 |
- |
(2,534,691) |
Infrastructure |
(4,018,854) |
(408,540) |
384,239 |
- |
(4,043,155) |
Informatics assets |
(1,617,970) |
(58,209) |
46,449 |
- |
(1,629,730) |
General use assets |
(637,903) |
(48,204) |
36,878 |
- |
(649,229) |
Right of use in leases |
(2,042,386) |
(1,241,888) |
- |
- |
(3,284,274) |
Total property,
plant and equipment, net |
18,100,698 |
1,620,602 |
(1,412,900) |
- |
18,308,400 |
Commutation/transmission
equipment |
7,745,390 |
(1,956,684) |
(994,390) |
2,872,144 |
7,666,460 |
Fiber optic cables |
395,487 |
(65,669) |
(99,289) |
25,778 |
256,307 |
Leased handsets |
245,119 |
(144,856) |
(4,308) |
175,808 |
271,763 |
Infrastructure |
2,417,718 |
(408,540) |
(127,396) |
518,348 |
2,400,130 |
Informatics assets |
152,416 |
(58,209) |
(135) |
32,538 |
126,610 |
General use assets |
264,384 |
(48,204) |
(6,523) |
57,959 |
267,616 |
Right of use in leases |
6,325,509 |
349,419 |
(179,875) |
- |
6,495,053 |
Land |
40,794 |
- |
- |
- |
40,794 |
Construction in progress
(II) |
513,881 |
3,953,345 |
(984) |
(3,682,575) |
783,667 |
(i) In the year 2021, net write-offs are mainly represented by:
. R$ 1,218,340 as write-off of property, plant and equipment, which
makes up part of the balance of R$ 1,211,789 of net assets that was paid-in as share capital of I-Systems (formerly FiberCo) on November
1, 2021, as described in note 1.
. R$ 179,875 in rights of use in leases due to remeasurement of contracts,
including changes in the term and scope of rentals.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(ii) The construction in progress represents the cost of projects in progress
related to the construction of networks and/or other tangible assets in the period of their construction and installation, until the moment
they come into operation, when they will be transferred to the corresponding accounts of these assets.
|
Consolidated |
|
Additions
/ depreciation |
Write-offs |
Balance
in December 2022 |
|
Total
cost of property, plant and equipment, gross |
49,159,678 |
5,805,705 |
(737,939) |
- |
11,302,035 |
65,529,479 |
Commutation/transmission
equipment |
25,854,454 |
(4,788) |
(129,957) |
3,028,504 |
6,313,024 |
35,061,237 |
Fiber optic
cables |
778,512 |
- |
- |
4,884 |
- |
783,396 |
Leased handsets |
2,806,454 |
752 |
(17,149) |
166,099 |
920,690 |
3,876,846 |
Infrastructure |
6,443,285 |
- |
(16,296) |
493,409 |
789,657 |
7,710,055 |
Informatics
assets |
1,756,340 |
- |
(342,843) |
31,032 |
336,161 |
1,780,690 |
General
use assets |
916,845 |
- |
(4,840) |
41,503 |
13,054 |
966,562 |
Right of
use in leases |
9,779,327 |
1,979,473 |
(225,446) |
- |
2,929,449 |
14,462,803 |
Land |
40,794 |
- |
(992) |
- |
- |
39,802 |
Construction
in progress |
783,667 |
3,830,268 |
(416) |
(3,765,431) |
- |
848,088 |
|
|
|
|
|
|
|
Total
Accumulated Depreciation |
(30,851,278) |
(4,764,239) |
530,748 |
- |
(7,783,558) |
(42,868,327) |
Commutation/transmission
equipment |
(18,187,994) |
(2,234,345) |
129,196 |
- |
(5,941,968) |
(26,235,111) |
Fiber optic
cables |
(522,205) |
(61,649) |
- |
- |
- |
(583,854) |
Leased handsets |
(2,534,691) |
(155,902) |
11,694 |
- |
(919,560) |
(3,598,459) |
Infrastructure |
(4,043,155) |
(390,832) |
15,654 |
- |
(573,680) |
(4,992,013) |
Informatics
assets |
(1,629,730) |
(78,418) |
369,807 |
- |
(337,265) |
(1,675,606) |
General
use assets |
(649,229) |
(50,097) |
4,397 |
- |
(11,085) |
(706,014) |
Right of
use in leases |
(3,284,274) |
(1,792,996) |
- |
- |
- |
(5,077,270) |
Total
property, plant and equipment, net |
18,308,400 |
1,041,466 |
(207,191) |
- |
3,518,477 |
22,661,152 |
Commutation/transmission
equipment |
7,666,460 |
(2,239,133) |
(761) |
3,028,504 |
371,056 |
8,826,126 |
Fiber optic
cables |
256,307 |
(61,649) |
- |
4,884 |
- |
199,542 |
Leased handsets |
271,763 |
(155,150) |
(5,455) |
166,099 |
1,130 |
278,387 |
Infrastructure |
2,400,130 |
(390,832) |
(642) |
493,409 |
215,977 |
2,718,042 |
Informatics
assets |
126,610 |
(78,418) |
26,964 |
31,032 |
(1,104) |
105,084 |
General
use assets |
267,616 |
(50,097) |
(443) |
41,503 |
1,969 |
260,548 |
Right of
use in leases |
6,495,053 |
186,477 |
(225,446) |
- |
2,929,449 |
9,385,533 |
Land |
40,794 |
- |
(992) |
- |
- |
39,802 |
Construction
in progress |
783,667 |
3,830,268 |
(416) |
(3,765,431) |
- |
848,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The lease rights of use are represented by leased agreements of identifiable
assets within the scope of IFRS16 / CPC 06 (R2) standard. These rights refer to leases of network infrastructure, stores and kiosks, real
estate, land (Network) and fiber, as below:
|
Parent Company |
Right-of-use in lease |
Network infrastructure |
Shops & kiosks & real estate |
Land (Network) |
Fiber |
Total |
Balances at December 31, 2021 |
3,048,509 |
541,312 |
1,504,233 |
1,400,999 |
6,495,053 |
Additions |
1,159,120 |
243,162 |
348,860 |
88,551 |
1,839,693 |
Remeasurement |
(27,867) |
(14,715) |
(26,740) |
(4,764) |
(74,086) |
Depreciation |
(541,802) |
(130,549) |
(229,471) |
(478,704) |
(1,380,526) |
Balances at December 31, 2022 |
3,637,960 |
639,210 |
1,596,882 |
1,006,082 |
6,880,134 |
|
|
|
|
|
|
Useful life – % |
11.55% |
11.25% |
11.50% |
7.41% |
|
|
Consolidated |
Right-of-use in lease |
Network infrastructure |
Shops & kiosks & real estate |
Land (Network) |
Fiber |
Total |
Balances at December 31, 2021 |
3,048,509 |
541,312 |
1,504,233 |
1,400,999 |
6,495,053 |
Opening balance |
2,143,142 |
- |
786,307 |
- |
2,929,449 |
Additions |
1,087,005 |
243,162 |
560,755 |
88,551 |
1,979,473 |
Remeasurement |
(122,757) |
(14,715) |
(83,210) |
(4,764) |
(225,446) |
Depreciation |
(809,450) |
(130,549) |
(374,293) |
(478,704) |
(1,792,996) |
Balances at December 31, 2022 |
5,346,449 |
639,210 |
2,393,792 |
1,006,082 |
9,385,533 |
|
|
|
|
|
|
Useful life – % |
12.25 |
11.25% |
12.12 |
7.41% |
|
|
|
Annual fee % |
Commutation / transmission equipment |
|
08–14.29 |
Fiber optic cables |
|
4–10 |
Leased handsets |
|
14.28–50 |
Infrastructure |
|
4–20 |
Informatics assets |
|
10–20 |
General use assets |
|
10–20 |
In 2022, pursuant to IAS 16 / CPC 27, approved by a CVM Deliberation 73,
the Company assessed the useful life estimates for their property, plant and equipment, concluding that there were no significant changes
or alterations to the circumstances on which the estimates were based that would justify changes to the useful lives currently in use.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
16. 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. Intangible assets also include: (i) infrastructure right-of-use 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.
Financial charges on funds raised generically (with no specific allocation),
used to obtain a qualifying asset, which is an asset that necessarily demands a substantial period of time to become ready for intended
use is capitalized as part of this asset’s cost when it is probable that will result in future economic benefits to the Entity and
such costs can be reliably measured. Within this concept, we had the capitalization of charges for the 700MHz 4G license between 2014
and 2019 and we currently have the capitalization of charges on the acquisition of the 5G license for the radio frequency not readily
available and other obligations related to such radio frequency. Said capitalization occurs until the asset is considered available for
use by Management, and as of that date onwards, capitalization of interest and charges on this asset ends. These costs are amortized over
the estimated useful lives.
The values of permits for the operation of SMP and rights to use radio
frequencies, as well as software, goodwill and others are demonstrated as follows:
The cost of intangible assets acquired in a business combination corresponds
to their fair value at acquisition date. After the initial recognition, the intangible assets are stated at cost, less accumulated amortization
and impairment losses.
Intangible assets with undefined useful lives are not amortized but tested
for impairment on an annual basis, individually or at cash generating unit level.
(a) Changes in intangible
|
|
|
Parent Company |
|
Balance in 2021 |
Additions/ Amortization |
Write-offs |
Transfers |
|
|
Balance in 2022 |
|
|
|
Capitalized interest |
|
Total cost of intangible assets, gross |
34,630,541 |
3,846,603 |
(3,200) |
- |
|
258,961 |
38,732,905 |
|
Right to use software |
19,911,004 |
- |
- |
965,373 |
|
- |
20,876,377 |
|
Authorizations |
11,151,497 |
75,526 |
(3,200) |
26,787 |
|
- |
11,250,610 |
|
Goodwill (i) |
475,743 |
2,636,426 |
- |
- |
|
- |
3,112,169 |
|
Infrastructure right-of-use - LT Amazonas |
186,221 |
- |
- |
15,557 |
|
- |
201,778 |
|
Other assets |
333,116 |
- |
- |
6,301 |
|
- |
339,417 |
|
Intangible assets under development |
2,572,960 |
1,134,651 |
- |
(1,014,018) |
|
258,961 |
2,952,554 |
|
|
|
|
|
|
|
|
|
|
Total Accumulated Amortization |
(24,045,462) |
(1,687,862) |
3,200 |
- |
|
- |
(25,730,124) |
|
Right to use software |
(17,432,018) |
(1,022,040) |
- |
- |
|
- |
(18,454,058) |
|
|
|
|
|
|
|
|
|
|
|
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Authorizations |
(6,357,666) |
(630,464) |
3,200 |
- |
|
- |
(6,984,930) |
Infrastructure right-of-use - LT Amazonas |
(76,697) |
(9,791) |
- |
- |
|
- |
(86,488) |
Other assets |
(179,081) |
(25,567) |
- |
|
|
- |
(204,648) |
|
|
|
|
|
|
|
|
Total intangible assets, net |
10,585,079 |
2,158,741 |
- |
- |
|
258,961 |
13,002,781 |
Right to use software (c) |
2,478,986 |
(1,022,040) |
- |
965,373 |
|
- |
2,422,319 |
Authorizations (f) |
4,793,831 |
(554,938) |
- |
26,787 |
|
- |
4,265,680 |
Goodwill (d) |
475,743 |
2,636,426 |
- |
- |
|
- |
3,112,169 |
Infrastructure right-of-use - LT Amazonas (e) |
109,524 |
(9,791) |
- |
15,557 |
|
- |
115,290 |
Other assets |
154,035 |
(25,567) |
- |
6,301 |
|
- |
134,769 |
Intangible assets under development |
2,572,960 |
1,134,651 |
- |
(1,014,018) |
|
258,961 |
2,952,554 |
Parent Company
|
Balance in December 2020 |
Additions/ Amortization |
Write-offs |
Transfers |
Balance in December 2021 |
|
Total cost of intangible assets, gross |
31,444,050 |
4,352,331 |
(1,165,840) |
- |
34,630,541 |
Right to use software |
19,117,515 |
- |
(112,626) |
906,115 |
19,911,004 |
Authorizations |
9,931,248 |
50,408 |
(1,737) |
1,171,578 |
11,151,497 |
Goodwill (i) |
1,527,220 |
- |
(1,051,477) |
- |
475,743 |
Infrastructure right-of-use - LT Amazonas |
177,866 |
- |
- |
8,355 |
186,221 |
Other assets |
329,626 |
- |
- |
3,490 |
333,116 |
Intangible assets under development |
360,575 |
4,301,923 |
- |
(2,089,538) |
2,572,960 |
|
|
|
|
|
|
Total Accumulated Amortization |
(22,416,975) |
(1,739,937) |
111,450 |
- |
(24,045,462) |
Right to use software |
(16,378,487) |
(1,164,210) |
110,679 |
- |
(17,432,018) |
Authorizations |
(5,816,241) |
(542,196) |
771 |
- |
(6,357,666) |
Infrastructure right-of-use - LT Amazonas |
(67,966) |
(8,731) |
- |
- |
(76,697) |
Other assets |
(154,281) |
(24,800) |
- |
|
(179,081) |
|
|
|
|
|
|
Total intangible assets, net |
9,027,075 |
2,612,394 |
(1,054,390) |
- |
10,585,079 |
Right to use software (c) |
2,739,028 |
(1,164,210) |
(1,947) |
906,115 |
2,478,986 |
Authorizations (f) |
4,115,007 |
(491,788) |
(966) |
1,171,578 |
4,793,831 |
Goodwill (d) |
1,527,220 |
- |
(1,051,477) |
- |
475,743 |
Infrastructure right-of-use - LT Amazonas (e) |
109,900 |
(8,731) |
- |
8,355 |
109,524 |
Other assets |
175,345 |
(24,800) |
- |
3,490 |
154,035 |
Intangible assets under development |
360,575 |
4,301,923 |
- |
(2,089,538) |
2,572,960 |
The intangible assets in progress represent the cost of projects in progress
related to the intangible assets in the period of their construction and installation, until the moment they come into operation, when
they will be transferred to the corresponding accounts of these
assets. As of December 2021, includes 5G License acquisition values, pursuant to Note 16.f.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(i) In 2022, with the acquisition of Cozani (see Note 1.2.1 and 15.d.1),
goodwill was recorded in the business combination of R$ 2,636,426. In June 2021, due to the sale transaction of FiberCo described
in Note 1.2.2, we had the reclassification of items related to intangible assets to the group of assets held for sale.
|
|
Consolidated |
|
Balance in December 2021 |
Additions/ Amortization |
Write-offs |
Transfers |
|
Acquisitions of subsidiary (Note 1.2) |
Balance in December 2022 |
|
Capitalized interest |
Total cost of intangible assets, gross |
34,630,541 |
3,846,601 |
(3,200) |
- |
258,961 |
6,446,789 |
45,179,692 |
Right to use software |
19,911,004 |
- |
- |
701,387 |
|
1,366,860 |
21,979,251 |
Authorizations |
11,151,497 |
75,525 |
(3,200) |
17,123 |
|
4,598,839 |
15,839,784 |
Goodwill |
475,743 |
2,636,426 |
- |
- |
|
- |
3,112,169 |
Infrastructure right-of-use - LT Amazonas |
186,221 |
- |
- |
15,557 |
|
- |
201,778 |
Other assets |
333,116 |
- |
- |
5,001 |
|
481,090 |
819,207 |
Intangible assets under development |
2,572,960 |
1,134,650 |
- |
(739,068) |
258,961 |
- |
3,227,503 |
|
|
|
|
|
|
|
|
Total Accumulated Amortization |
(24,045,462) |
(1,873,904) |
3,200 |
- |
- |
(2,846,978) |
(28,763,144) |
Right to use software |
(17,432,018) |
(1,142,824) |
- |
- |
- |
(1,347,360) |
(19,922,202) |
Authorizations |
(6,357,666) |
(664,909) |
3,200 |
- |
- |
(1,384,432) |
(8,403,807) |
Infrastructure right-of-use - LT Amazonas |
(76,697) |
(9,791) |
- |
- |
- |
- |
(86,488) |
Other assets |
(179,081) |
(56,380) |
- |
- |
- |
(115,186) |
(350,647) |
|
|
|
|
|
|
|
|
Total intangible assets, net |
10,585,079 |
1,972,697 |
- |
- |
258,961 |
3,599,811 |
16,416,548 |
Right to use software (c) |
2,478,986 |
(1,142,824) |
- |
701,387 |
- |
19,500 |
2,057,049 |
Authorizations (f) |
4,793,831 |
(589,384) |
- |
17,123 |
- |
3,214,407 |
7,435,977 |
Goodwill (d) |
475,743 |
2,636,426 |
- |
- |
- |
- |
3,112,169 |
Infrastructure right-of-use - LT Amazonas (e) |
109,524 |
(9,791) |
- |
15,557 |
- |
- |
115,290 |
Other assets |
154,035 |
(56,380) |
- |
5,001 |
|
365,904 |
468,560 |
Intangible assets under development |
2,572,960 |
1,134,650 |
- |
(739,068) |
258,961 |
- |
3,227,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Amortization rates
|
Annual fee % |
|
|
Software licenses |
20 |
Authorizations |
5–50 |
Right to use infrastructure |
5 |
Other assets |
7–10 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(c) Software licenses
The costs associated with maintaining software are recognized as
expense, as incurred. Development costs that are directly attributable to software product design and testing, and are identifiable and
exclusive, controlled by the Group, are recognized as intangible assets when the capitalization criteria are met.
Directly attributable costs that are capitalized as part of the software
product are related to employee costs directly allocated in its development.
(d) Goodwill registered
(d.1) Goodwill on the acquisition of Cozani
As described in Note 1.2.1, in April 2022 the
Company acquired 100% of Cozani, with a total consideration paid of R$ 7,211,585 and identifiable assets, net of liabilities assumed,
at a fair value of R$ 4,575,159. Therefore, having a remaining amount of goodwill allocated from R$ 2,636,426,
which is recorded on December 31, 2022.
The Company
describes the accounting practice adopted in business combinations in the Note 2e that initially, goodwill is initially measured
as being the excess of consideration transferred in relation to net assets acquired (acquired identifiable assets and assumed liabilities).
After initial
recognition, the goodwill is carried at cost less impairment losses (if any). For purposes of impairment testing, goodwill acquired in
a business combination is, as of the acquisition date, allocated to the respective cash-generating units that are expected to benefit
from the combination. In the case of the TIM group, the goodwill was allocated to the mobile cash generating unit, which is the only one
identified so far.
(d.2) Goodwill registered in previous years
The Company has the following goodwill based on expectation
of future profitability at December 31, 2022 and 2021.
Goodwill from TIM Fiber SP and TIM Fiber RJ acquisitions
– TIM Celular S.A. (merged by Intelig, current TIM S.A.) acquired, at the end of 2011, the companies 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 TIM Celular S.A. on August 29, 2012. TIM Celular S.A. 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$ 1,159,649.
In November 2021, the Company concluded the drop-down of liquid assets
related to the residential broadband business linked to the secondary network infrastructure to the wholly-owned subsidiary FiberCo and
sold 51% of the equity interest in FiberCo, currently named I- Systems, on behalf of IHS. Currently, due to the closing of the transaction,
TIM S.A. wrote-off about 90% of the total goodwill recorded in the acquisition of TIM Fiber SP Ltda. and TIM Fiber RJ S.A. in the
amount of R$ 1,051,477. As a result, IHS currently holds 51% of the share capital of I-Systems, with TIM S.A. having a minority
(non-controlling) interest of 49% in I-Systems. Consequently, with the closing of this deal in November
2021, the goodwill initially recorded on the acquisition of the companies Fiber RJ and Fiber SP was reduced to R$ 108,171 and this
balance was recorded on December 31, 2022 and 2021.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
On August 31, 2020, with the merger of TIM Participações
S.A. by TIM S.A., the Company recorded the goodwill arising from the merger of the net assets of TIM Participações, which
were originated in acquisition transactions as described below:
Goodwill acquisition of "Intelig" by
TIM Participações – the goodwill arising from the acquisition of TIM S.A. (formerly ”Intelig")
in December 2009 in the amount of R$ 210,015 is represented/based on the expectation of future profitability of the Company. Its
recoverability is tested annually, through the impairment testing.
Goodwill from the acquisition of minority interests in TIM Sul and TIM
Nordeste – TIM Participações S.A. (merged by TIM S.A. in August 2020) acquired in 2005, 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 standard, the Company tests goodwill
on business combinations.
The methodology and assumptions used by Management for the aforementioned
impairment test is summarized below:
The management of the Company understands that the smallest unit generating
cash for impairment testing of goodwill in the acquisition of the companies previously described covers the business at the consolidated
level, therefore it covers the consolidated group. This methodology is aligned with the company's strategic direction. It is important
highlighting that the group’s results are essentially represented by TIM S.A., but with the acquisition of Cozani in 2022, it started
generating results in the TIM S.A. as of April 30, 2022. The Company understands that the consolidated results of TIM S.A. represent a
single cash-generating unit for purposes of impairment testing of assets with indefinite useful lives, in accordance with IAS 36/CPC 01.
On December 31, 2022, the impairment test was performed by comparing
the book value with the fair value minus the disposal costs of the asset, as foreseen in IAS 36 / CPC 01.
For the calculation of fair value, the level of hierarchy within which
the measurement of the fair value of the asset (cash generating unit) is classified was considered. For the company, 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 book value of the cash generating unit.
The fair value of Tier 1 instruments comprises instruments traded on active
markets and based on market prices quoted at the balance sheet date. A market is considered active when the quoted prices are readily
and regularly available from an Exchange, distributor, broker, industry group, pricing service or regulatory agency, and these prices
represent actual market transactions which occur regularly on a purely commercial basis.
Company’s shares are traded on B3 – Brasil, Bolsa, Balcão
(“B3”) with code (TIMS3) 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 amount held by the entity.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
In 2022, the measurement was made based on the value of the share at the
balance sheet closing date and sensitivity tests were also performed and in none of the scenarios was identified any indication of impairment,
being the fair value determined higher than the book value. Therefore, being the fair value higher than the book value, it is not necessary
to calculate the value in use. The effects of TIM Participações (holding incorporated by TIM S.A.) on the value of the book
value in 2021 were irrelevant and, also, its effects on the result of the Company. Therefore, the calculations carried out at the consolidated
level essentially contemplate the results and accounting balances of TIM S.A., so the management of the Company concludes that the
use of the fair value less of cost of sales methodology is adequate to conclude that there is no provision for impairment since the fair
value less the cost of sales is higher than the total book value of the cash generating unit.
On December 31, 2022, the Company carried out the analysis of all tangible,
intangible assets and investments and did not identify any impairment indicators .
(e) Infrastructure right-of-use - LT Amazonas
The company has signed infrastructure rights agreements with companies
that operate electricity transmission lines in the Northern Region of Brazil. These contracts fall within the scope of IFRIC 4 / ICPC
3 as financial commercial leases.
Additionally, the Company has signed network infrastructure sharing agreements
with Telefónica Brasil S.A., also in the North Region. In these, the two operators optimize resources and reduce their respective
operating costs.
(f) Authorizations
4G License
In this item are recorded the values related to the
acquisition of Lot 2 in the auction of the 700 MHz band in the amount of R$ 1,739 million, in addition to the costs related to the cleaning
of the frequency of the 700 MHZ band acquired, which totaled R$1,199 million, in nominal values. As it is a long-term obligation, the
amount payable of R$ 1,199 million was reduced by R$ 47 million by applying the concept of adjustment to present value (“AVP”).
The aforementioned license fell under the concept of qualifying asset. Consequently, the financial charges on resources raised without
a specific destination, used for the purpose of obtaining a qualifying asset, were capitalized between the years 2014 and 2019.
5G License
In 2021, there was a record regarding the acquisition
of the 5th Generation (“5G”) mobile telephony radio frequencies.
In November 2021, TIM participated in the 5G Auction
and was the winner of several lots in the 2.3GHz, 3.5Ghz and 26Ghz radio frequency bands. These licenses will be paid over a period of
10 to 20 years, subject to restatement at the Selic rate. In December 2021, the Company signed the Terms of Authorization for these radio
frequencies, generating the accounting of an intangible asset related to the licenses in the amount of R$ 884 million and the obligations
related to said licenses (among them, disbursements with costs of the public notice and disbursement obligations with the management entities
described below) in the amount of R$ 2,680 million.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Aiming
to fulfill the additional obligations, the Company foresees, according to the notice, that there will the constitution of managing entities,
which are only intended to fulfill the commitments provided for in the Auction. The companies that win the Auction must disburse only
the amounts provided for in the public notice so that such entities comply with the defined obligations. There are additional obligations
provided for related to 3.5GHz radio frequency (the band cleaning obligation, interference solution, among others), which must be complied
with by the Band Management Entity (“EAF”), and related to 26GHz radio frequency (connectivity project for public schools),
which must be complied with by the Entity Managing the Connectivity of Schools (“EACE”).
On the signature date of the terms, in December 2021,
the 2.3GHz and 26GHz radio frequencies were readily available for use by the Company (operating assets), generating the registration in
2021 in “Authorizations” of the amounts related to the licenses (R$ 614 million) and the obligations related to the 26GHz
license, which will be fulfilled through EACE (R$ 550 million). The disbursements with EACE (R$ 633 million), provided for in
the Public Notice, will occur in 5 semi-annual installments between 2022 and 2024, and are monetarily restated by the IGP-DI. The Company
evaluated the application of the concept of adjustment to present value (“AVP”) upon initial recognition (R$ 83 million).
The 3.5GHz radio frequency was not readily available, requiring spectrum
cleaning activities to be available for use, and, thus, it was registered in assets in progress (R$ 270 million). Therefore, the
obligations related to this activity, to be carried out by EAF (R$ 2,104 million) were also recorded under assets in progress. The
disbursements with the EAF, as provided for in the Public Notice, were restated by the IGP-DI until the disbursement dates. Such disbursements
took place in 2 installments in 2022 (R$ 1,090 million in February and R$ 1,133 million in May) to EAF.
Furthermore, as described above, the Company capitalizes loan costs for
qualifying assets that require a substantial period of time to be in a condition for use as intended by Management. This concept includes
the 3.5GHz radio frequency. On December 31, 2022, the Company recorded R$ 290 million in intangible assets referring to Selic interest
(R$ 1 million in 2021) incurred on the 3.5GHz radio frequency, and R$ 99 million related to the inflation adjustment of amounts
due to the EAF (R$ 19 million in 2021). Said balances are recorded under assets in progress.
Thus, the total effect on the Company’s intangible
assets on December 31, 2022 referring to 5G radio frequencies and related obligations was R$ 3,866 million (R$ 3,584 million
in 2021), of which R$ 2,753 in assets in progress (R$ 2,394 in 2021) and R$ 1,113 million in Authorizations (R$ 1,190
million in 2021).
17. Leases
When entering into a contract, the Company assesses whether the contracts
signed are (or contain) a lease. An agreement is (or contains) a lease if it transmits the right to control the use of an identified asset
for a period of time in exchange for consideration.
Leases whose the Company is a lessee are capitalized at the lease's commencement
at the lower of the fair value of the leased asset (right-of-use) and the present value of payments provided for in contract, and lease
liability as a counterparty. Interest related to the leases is taken to income as financial costs over the term of the contract.
Leases in which the Company, as a lessor, transfers substantially all the
risks and rewards of ownership to the other party (lessee) are classified as finance 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 revenue over the contractual term.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Asset leases are financial assets or liabilities classified and/or measured
at amortized cost.
Assets
|
|
Parent Company |
|
Consolidated |
|
|
2022 |
|
2021 |
|
2022 |
LT Amazonas |
|
179,305 |
|
166,944 |
|
179,305 |
Sublease “resale stores” – IFRS 16 |
|
59,341 |
|
76,177 |
|
59,341 |
|
|
238,646 |
|
243,121 |
|
238,646 |
|
|
|
|
|
|
|
Current portion |
|
(30,643) |
|
(30,076) |
|
(30,643) |
Non-current portion |
|
208,003 |
|
213,045 |
|
208,003 |
The table below presents the schedule of cash receipts for the agreement
currently in force, representing the estimated receipts (nominal values) in the signed agreements. These balances differ from those shown
in the books since, in the case of the latter, the amounts are shown at present value.
The amounts below represent the parent company and consolidated balances.
|
Up to Dec 2023 |
Jan 2024–Dec 2028 |
Jan 2028 onwards |
Nominal values |
Present value |
|
33,936 |
127,757 |
226,662 |
388,355 |
238,646 |
LT Amazonas (i) |
29,354 |
119,410 |
168,503 |
317,267 |
179,305 |
Sublease “resale stores” – IFRS 16 |
4,582 |
8,347 |
58,159 |
71,088 |
59,341 |
(i) LT Amazonas
As a result of the contract signed with LT Amazonas, the Company signed
network infrastructure sharing agreements with Telefónica Brasil S.A. In these agreements, the company and Telefónica Brasil
S.A. share investments made in the Northern Region of Brazil. The company has monthly amounts receivable from Telefónica Brasil
S.A. for a period of 20 years, adjusted annually by the IPC-A. The discount rate used to calculate the present value of the installments
due is 12.56% per annum, considering the date of signing the agreement.
(ii) Subleases - Stores - IFRS 16
The Company, due to sublease agreements for third parties in some of its
stores, recognized the present value of short and long term receivables, which are equal in value and term to the liability cash flows
of the contracts called “resale stores”. The impact on lease liabilities is reflected in the group “Leases - Shops &
Kiosks and Real Estate”.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Liabilities
|
|
Parent Company |
|
Consolidated |
|
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
|
LT Amazonas (i) |
|
327,505 |
|
302,091 |
|
327,505 |
Sale of Towers (leaseback) (ii) |
|
1,730,214 |
|
1,507,629 |
|
1,730,214 |
Other (iv) |
|
158,314 |
|
142,458 |
|
158,314 |
Sub-total |
|
2,216,033 |
|
1,952,178 |
|
2,216,033 |
|
|
|
|
|
|
|
Other leases (iii): |
|
|
|
|
|
|
Leases – Network Infrastructure |
|
4,084,433 |
|
3,345,930 |
|
6,123,914 |
Leases - Shops & kiosks & real estate |
|
746,028 |
|
653,422 |
|
746,028 |
Leases - Land (Network) |
|
1,820,803 |
|
1,657,345 |
|
2,664,315 |
Leases – Fiber |
|
1,081,576 |
|
1,454,664 |
|
1,081,575 |
Subtotal lease IFRS 16 / CPC 06 (R2) |
|
7,732,840 |
|
7,111,361 |
|
10,615,832 |
Total |
|
9,948,873 |
|
9,063,539 |
|
12,831,865 |
|
|
|
|
|
|
|
Current portion |
|
(1,353,869) |
|
(1,269,878) |
|
(2,257,211) |
Non-current portion |
|
8,595,004 |
|
7,793,661 |
|
10,574,654 |
The amount of interest paid in the year ended December 31, 2022 related
to IFRS 16 / CPC 06 (R2)in the parent company was R$ 743,907 (R$ 599,296 in the year ended December 31, 2021) and in consolidated,
R$ 1,001,311.
In accordance with CPC 15 (R1), in a business combination, lease liabilities
must be measured at the present value of the remaining lease balance as if the lease agreement acquired was a new lease agreement on the
acquisition date. The impact on Lease Liabilities on the acquisition date is R$ 2,929,449 (Note 1.2.1).
The consolidated network infrastructure lease amounts and right of use
include, on December 31, 2022, R$ 755 million referring to contract cancellation penalties provided for in the lease agreements.
Changes to the lease liabilities are shown in Note 39.
The table below presents the future payment schedule for the agreements
in force, representing the estimated disbursements (nominal values) in the signed agreements. These nominal balances differ from those
shown in the books since, in the case of the latter, the amounts are shown at present value:
Parent Company
|
Up to Dec 2023 |
Jan 2024–Dec 2028 |
Jan 2029 onwards |
Nominal values |
Present value |
Total - Lease liability |
2,393,245 |
7,017,952 |
6,782,069 |
16,193,266 |
9,948,873 |
|
|
|
|
|
|
LT Amazonas (i) |
65,620 |
226,810 |
320,214 |
612,644 |
327,505 |
Sale and leaseback of Towers (ii) |
291,462 |
1,168,828 |
2,223,774 |
3,684,064 |
1,730,214 |
Other (iii) |
36,365 |
132,035 |
43,125 |
211,525 |
158,314 |
|
|
|
|
|
|
Total other leases (iv) |
1,999,798 |
5,490,279 |
4,194,956 |
11,685,033 |
7,732,840 |
Leases – Network infrastructure |
875,618 |
3,038,957 |
2,493,766 |
6,408,341 |
4,084,433 |
Leases - Shops & kiosks & real estate |
206,017 |
505,493 |
491,755 |
1,203,265 |
746,028 |
Leases - Land (Network) |
378,551 |
1,290,365 |
1,209,435 |
2,878,351 |
1,820,803 |
Leases – Fiber |
539,612 |
655,464 |
- |
1,195,076 |
1,081,576 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Consolidated
|
Up to Dec 2023 |
Jan 2024–Dec 2028 |
Jan 2029 onwards |
Nominal values |
Present value |
Total - Lease liability |
3,109,546 |
8,468,542 |
8,295,305 |
19,873,393 |
12,831,865 |
|
|
|
|
|
|
LT Amazonas (i) |
65,620 |
226,810 |
320,214 |
612,644 |
327,505 |
Sale and leaseback of Towers (ii) |
291,462 |
1,168,828 |
2,223,774 |
3,684,064 |
1,730,214 |
Other (iii) |
36,365 |
132,035 |
43,125 |
211,524 |
158,314 |
|
|
|
|
|
|
Total other leases (iv) |
2,716,099 |
6,940,869 |
5,708,192 |
15,365,161 |
10,615,832 |
Leases – Network infrastructure |
1,324,986 |
3,942,271 |
3,411,227 |
8,678,483 |
6,123,914 |
Leases - Shops & kiosks & real estate |
206,017 |
505,493 |
491,755 |
1,203,265 |
746,028 |
Leases - Land (Network) |
645,485 |
1,837,641 |
1,805,210 |
4,288,337 |
2,664,315 |
Leases – Fiber |
539,611 |
655,464 |
- |
1,195,076 |
1,081,575 |
i) LT Amazonas
The Company 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 discount rate used to calculate the present value of the installments
due is 14.44% per annum, considering the signing date of agreements with transmission companies.
ii) Sale and leaseback of Towers
The Company 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 provided for
the towers to be transferred in tranches to ATC, due to the need to meet certain conditions precedent.
In total, 5,873 towers were transferred, 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 24).
The discount rates used at the date of the transactions, ranging from 11.01%
to 17.08% per annum, were determined based on observable market transactions that the company (the lessee) would have to pay on a similar
lease and/or loan.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(iii) It is substantially represented by lease transactions in transmission towers.
(iv) Other leases:
In addition to lease agreements mentioned above, the Company also has lease
agreements that qualify within the scope of IFRS 16 / CPC 06 (R2).
The present value, principal and interest value on December 31, 2022 for
the above contracts was estimated month-to-month, based on the average incremental rate of the Company’s loans, namely 13.24% (8.94%
in 2021).
Lease agreements within the scope of IFRS 16/CPC 06 (R2) acquired
through the acquisition from Cozani were remeasured on the acquisition date to reflect the Company’s expectation of the lease term
and average incremental rate of loans. The amount recorded on the acquisition date was R$ 2,929,449.
The lease amounts considered low-value or short-term (less than 12 months)
were recognized as rental expenses and totaled R$ 40,723 in 2022 (R$ 36,310 in 2021).
18. Other amounts recoverable
These refer to Fistel credit amounts arising from the reduction of the
customer base, which may be offset by future changes in the base, or used to reduce future obligations, and are expected to be used in
the reduction of the TFF contribution (operating supervision fee) due to Fistel.
As of December 31, 2022, this credit is R$ 26,519 (R$ 28,661
as of December 31, 2021).
19. Supplier
Accounts payable to suppliers are obligations payable for goods or services
that were acquired in the usual course of business. They are initially recognized by fair value and subsequently measured by amortized
cost using the effective interest rate method. Given the short maturity of these obligations, in practical terms, they are usually recognized
at the value of the corresponding invoice.
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Supplier |
4,385,356 |
|
3,267,404 |
|
4,237,229 |
|
|
|
|
|
|
Local currency |
4,089,977 |
|
3,063,458 |
|
3,940,624 |
Suppliers of materials and services (i) |
4,003,003 |
|
2,966,897 |
|
3,842,435 |
Interconnection (ii) |
64,228 |
|
65,464 |
|
67,724 |
Roaming (iii) |
603 |
|
212 |
|
1,857 |
Co-billing (iv) |
22,143 |
|
30,885 |
|
28,608 |
|
|
|
|
|
|
Foreign currency |
295,379 |
|
203,946 |
|
296,605 |
Suppliers of materials and services (i) |
161,042 |
|
153,082 |
|
161,042 |
Roaming (iii) |
134,337 |
|
50,864 |
|
135,563 |
|
|
|
|
|
|
Current portion |
4,385,356 |
|
3,267,404 |
|
4,237,229 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(i) Represents the amount to be paid to suppliers in the acquisition of
materials and in the provision of services applied to the tangible and intangible asset or for consumption in the operation, maintenance
and administration, in accordance with the terms of the contract between the parties.
(ii) Refers to as the use of the network of other fixed and mobile operators
such cases where calls are initiated on the TIM network and terminated on the other operators.
(iii) Refers to calls made when the customer is outside their registration
area and is considered a visitor on the other network.
(iv) Refers to calls made by the customer when choosing another long-distance
operator.
The company entered into contracts with banks to assist its suppliers who
requested drawee risk operations. In such operations, suppliers transfer their credit rights against the Company to the banks, with no
right of recourse, aiming to receive them in advance by applying a discount. After carrying out the operations, the Company currently
has the banks as creditors of the notes assigned by the suppliers in the original value and term of the assigned credit rights, without
any associated financial charge or benefit. Trade notes payable related to these operations remain classified under “suppliers”. As
of December 31, 2022, the Company has approximately R$ 260 million (R$ 350 million as of December 31, 2021) related to the drawee
risk operation.
20. Authorizations payable
On December 31, 2022 and 2021, the Company and its subsidiary have
the following commitments with ANATEL:
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Renewal of authorizations (i) |
216,627 |
|
191,329 |
|
231,801 |
Updated ANATEL liability (ii) |
186,307 |
|
164,269 |
|
186,307 |
Authorizations payable (iii) |
1,255,282 |
|
3,525,489 |
|
1,255,282 |
|
1,658,216 |
|
3,881,087 |
|
1,673,390 |
|
|
|
|
|
|
Current portion |
(507,685) |
|
(2,630,169) |
|
(507,685) |
Non-current portion |
1,150,531 |
|
1,250,918 |
|
1,165,705 |
| (i) | To provide the SMP, the Company obtained authorizations
of the right to use radio frequency for a fixed term, renewable.[10] In the option for the extension of the right of this use,
it is due the payment of the amount of 2% on the net revenue of the region covered by the authorization that ends each biennium. On December
31, 2022, the Company had balances falling due related to renovation of Authorizations in the amount of R$ 216,627 (R$ 191,329
on December 31, 2021). |
[10] The renewal time varies according to the bid notice and extension conditions
approved by the Agency.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
| (ii) | On December 5, 2014, the company signed the authorization
term of the 700 MHz band and paid the equivalent of R$1,678 million, recording the remaining balance in the amount of R$ 61 million as
commercial liability, according to the payment method provided for in the notice. |
On June 30, 2015, the company filed a lawsuit questioning the
collection of the excess nominal value of R$ 61 million, restated at GP-DI totaling R$ 186 million as of December 31, 2022,
which is still pending trial.
| (iii) | As described in Note 16.f, in November 2021,
TIM participated in the 5G Auction of the 2.3GHz, 3.5Ghz and 26Ghz radio frequency bands for the deployment of the 5th Generation mobile
telephony, winning several lots in these radio frequencies. In December 2021, the Terms of Authorization were signed, characterizing the
actual acquisition of the right over the lots of these radio frequencies. |
For the amounts related to radio frequencies (R$ 884 million
upon initial registration), Selic rate interest is levied, and the Company will make annual payments for a period of 20 years (1st
installment paid in December 2021 and 2nd installment paid in December 2022 in the amounts of R$ 46,274 and R$ 52,005,
respectively). Regarding amounts related to disbursement obligations with EAF and EACE entities (R$ 2,737 million upon initial registration,
of which R$ 2,654 million net of adjustment do present value), there is a monetary restatement by IGP-DI, and disbursements will
occur between 2022 and 2024. The contributions to EAF were fully made in 2022 (R$ 1,090 million in February and R$ 1,133 million
in May). The first contribution to EACE took place in April 2022, in the amount of R$ 137 million, while the second contribution
took place in October 2022, in the amount of R$ 134 million (the two contributions totaled R$ 271 million).
As of December 31, 2022, the outstanding balance, considering
the amounts related to radio frequencies and contributions to be made in the EACE entity, is R$ 1,255 million (R$ 3,525 million
as of December 31, 2021).
The authorizations payable on December 31, 2022 due in long-term is in
accordance with the following schedule:
|
|
Parent Company |
|
Consolidated |
|
|
2022 |
|
2022 |
2024 |
|
360,029 |
|
375,203 |
2025 |
|
52,296 |
|
52,296 |
2026 |
|
52,296 |
|
52,296 |
2027 |
|
52,296 |
|
52,296 |
2028 |
|
52,296 |
|
52,296 |
2029 |
|
52,296 |
|
52,296 |
2030 |
|
52,296 |
|
52,296 |
>2031 |
|
476,726 |
|
476,726 |
|
|
1,150,531 |
|
1,165,705 |
The primary authorizations held by TIM S.A. on December 31, 2022, as well
as their expiration dates, are shown in the table below:
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
|
|
Maturity date |
Authorization instruments |
800 MHz,
900 MHz and
1,800 MHz |
Additional frequencies
1800 MHz |
1900 MHz and
2100 MHz
(3G) |
2500 MHz
V1 band
(4G) |
2500 MHz
(P band**)
(4G) |
700 MHz
(4G) |
2.3 GHz
(5G) |
3.5 GHz
(5G) |
26 GHz
(5G) |
Amapá, Roraima, Pará, Amazonas and Maranhão |
Mar 2031* |
Apr 2023 |
Apr 2023 |
Oct 2027 |
Part of AR92 (PA), Feb 2024* |
Dec 2029 |
- |
Dec 2041 |
Dec 2031 |
Rio de Janeiro and Espírito Santo |
Mar 2031* |
ES, Apr 2023 |
Apr 2023 |
Oct 2027 |
Part of AR21 (RJ), Feb 2024* |
Dec 2029 |
Dec 2041 |
Dec 2041 |
Dec 2031 (lots I&J) & Dec 2041 (lot H) |
Acre, Rondônia, Mato Grosso, Mato Grosso do Sul, Tocantins, Distrito Federal, Goiás, Rio Grande do Sul (except county of Pelotas and region) and municipalities of Londrina and Tamarana in Paraná |
Mar 2031* |
Apr 2023 |
Apr 2023 |
Oct 2027 |
Part of AR61 (DF), Feb 2024* |
Dec 2029 |
South – Dec 2041 |
Dec 2041 |
Dec 2031 (lots I&J) & Dec 2041 (lot H) |
São Paulo |
Mar 2031* |
Countryside, Apr 2023 |
Apr 2023 |
Oct 2027 |
- |
Dec 2029 |
- |
Dec 2041 |
Dec 2031 (lots I&J) & Dec 2041 (lot H) |
Paraná (except counties of Londrina and Tamarana) |
November 2028 (800MHz); December 2032 (900 and 1800MHz)* |
Apr 2023 |
Apr 2023 |
Oct 2027 |
AR41, except Curitiba and the Metropolitan Region, Feb 2024*
AR41, Curitiba and Metropolitan Region, July 2031 |
Dec 2029 |
Dec 2041 |
Dec 2041 |
Dec 2031 (lots I&J) & Dec 2041 (lot H) |
Santa Catarina |
800 MHz – November 2028 1800 MHz – December 2032 |
Apr 2023 |
Apr 2023 |
Oct 2027 |
- |
Dec 2029 |
Dec 2041 |
Dec 2041 |
Dec 2031 (lots I&J) & Dec 2041 (lot H) |
|
|
|
|
|
|
|
|
|
|
|
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Municipality and region of Pelotas, in the state of Rio Grande do Sul |
800 MHz – November 2028 1800 MHz – December 2032 |
- |
Apr 2023 |
Oct 2027 |
- |
Dec 2029 |
Dec 2041 |
Dec 2041 |
Dec 2031 (lots I&J) & Dec 2041 (lot H) |
Pernambuco |
800 MHz – November 2028 1800 MHz – December 2032 |
- |
Apr 2023 |
Oct 2027 |
Part of AR81, July 2031 |
Dec 2029 |
- |
Dec 2041 |
Dec 2031 |
Ceará |
800 MHz – November 2028 1800 MHz – December 2032 |
- |
Apr 2023 |
Oct 2027 |
- |
Dec 2029 |
- |
Dec 2041 |
Dec 2031 |
Paraíba |
800 MHz – November 2028 1800 MHz – December 2032 |
- |
Apr 2023 |
Oct 2027 |
- |
Dec 2029 |
- |
Dec 2041 |
Dec 2031 |
Rio Grande do Norte |
800 MHz – November 2028 1800 MHz – December 2032 |
- |
Apr 2023 |
Oct 2027 |
- |
Dec 2029 |
- |
Dec 2041 |
Dec 2031 |
Alagoas |
Dec 2023* |
- |
Apr 2023 |
Oct 2027 |
- |
Dec 2029 |
- |
Dec 2041 |
Dec 2031 |
Piauí |
800 MHz – November 2028 1800 MHz – December 2032 |
- |
Apr 2023 |
Oct 2027 |
- |
Dec 2029 |
- |
Dec 2041 |
Dec 2031 |
Minas Gerais (except the counties of Sector 3 of the PGO for 3G radio frequencies, leftovers and 5G) |
800 MHz – November 2028 1800 MHz – December 2032 |
Apr 2023 |
Apr 2023 |
Oct 2027 |
Part of AR31, Feb 2030* |
Dec 2029 |
Dec 2041 |
Dec 2041 |
Dec 2031 (lots I&J) & Dec 2041 (lot H) |
Bahia and Sergipe |
800 MHz – November 2028 1800 MHz – December 2032 |
- |
Apr 2023 |
Oct 2027 |
- |
Dec 2029 |
- |
Dec 2041 |
Dec 2031 |
* Terms already renewed for 15 years.
** Only complementary areas in specific states.
* Terms already renewed for 15 years.
** Only complementary areas in specific states.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The primary authorizations held by Cozani on December 31, 2022, as well
as their expiration dates, are shown in the table below:
|
Maturity date |
Authorization instruments |
900 MHz |
1,800 MHz |
Additional frequencies
1800 MHz |
1,900 MHz and
2,100 MHz |
2,500 MHz
V2 band |
SP (except AR 11) |
- |
Dec 2032 |
- |
- |
Oct 2027 |
SP (AR 11) |
|
Dec 2032 |
- |
- |
Oct 2027 |
Paraná and Santa Catarina |
Dec 2032 * |
Dec 2032 * |
- |
- |
Oct 2027 |
Acre, Rondônia, Mato Grosso, Tocantins, Distrito Federal |
Dec 2032 * |
Dec 2032 * |
December 2032 |
Apr 2038 |
Oct 2027 |
Rio Grande do Sul |
Dec 2032 * |
- |
December 2032 |
- |
Oct 2027 |
Mato Grosso do Sul (Sector 22) and Goiás (Sector 25) |
Dec 2032 * |
Dec 2032 * |
- |
Apr 2038 |
Oct 2027 |
Mato Grosso do Sul (except Sector 22) and Goiás (except Sector 25) |
Dec 2032 * |
Dec 2032 * |
December 2032 |
Apr 2038 |
Oct 2027 |
Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas |
Mar 2031 * |
Mar 2031 * |
- |
- |
Oct 2027 |
Rio de Janeiro and Espírito Santo |
Mar 2031 * |
- |
- |
- |
Oct 2027 |
Amazonas, Roraima, Amapá, Pará, Maranhão, Minas Gerais and Espírito Santo |
- |
Mar 2031 * |
- |
- |
Oct 2027 |
Bahia, Sergipe, Rio de Janeiro and Minas Gerais |
- |
- |
- |
Apr 2038 |
Oct 2027 |
|
|
|
|
|
|
|
* Terms already renewed for 15 years.
21. Loans and financing
They are classified as financial liabilities measured at the amortized
cost, and represented by non-derivative financial liabilities that are usually traded before maturity.
In the initial recognition, they are recorded at the fair value and after
the initial recognition they are measured based on the effective interest rate method. Appropriations of financial expenses according
to the effective interest rate method are recognized in income, under financial expenses.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
|
|
|
|
Parent Company |
|
Consolidated |
Description |
Currency |
Charges |
Maturity |
2022 |
2021 |
|
2022 |
KFW Finnvera (ii) |
USD |
Libor 6M+ 0.75% p.a. |
Jan 2024–Dec 2025 |
173,381 |
278,176 |
|
173,381 |
Scotia¹ (ii) |
USD |
1.2410–3.2300% p.a. |
Dec 2023–Apr 2024 |
1,568,683 |
559,650 |
|
1,568,683 |
BNP Paribas (ii) |
USD |
2.8220% p.a. |
Jan 2022 |
- |
428,793 |
|
- |
BNP Paribas (ii) |
BRL |
7.0907% p.a. |
Jan 2024 |
515,265 |
515,166 |
|
515,265 |
Debêntures² (ii) |
BRL |
IPCA + 4.1682% p.a. (i) |
June 2028 |
1,771,797 |
1,667,399 |
|
1,771,797 |
BNDES (i) |
BRL |
IPCA + 4.2283% p.a. |
Nov 2031 |
394,139 |
396,281 |
|
394,139 |
BNB³ (i) |
BRL |
IPCA + 1.2228%–1.4945% |
Feb 2028 |
249,400 |
- |
|
249,400 |
BNDES (i) |
BRL |
TJLP + 1.95% p.a. |
Aug 2025 |
297,160 |
- |
|
297,160 |
Total |
|
|
|
4,969,825 |
3,845,465 |
|
4,969,825 |
|
|
|
|
|
|
|
|
Current |
|
|
|
(1,264,967) |
(538,450) |
|
(1,264,967) |
Non-current |
|
|
|
3,704,858 |
3,307,015 |
|
3,704,858 |
|
|
|
|
|
|
|
|
|
¹ Rates on outstanding debts on 12/31/2022 with Scotia Bank are between
1.4748% and 3.2300% p.a.
² The
automatic decrease of up to 0.25 bps is estimated in remunerative interest and will comply with sustainable targets established in the
indenture.
³ BNB interest rates already include a 15% discount for payment.
Insurances
(i) Certain receivables from TIM S.A.;
(ii) Do not have a guarantee.
The Company's financing, contracted with BNDES, was obtained for the
expansion of the mobile telephone network and has restrictive contractual clauses that provide for the fulfilment of certain financial
and non-financial rates calculated every six months. Financial indices are: (1) Shareholders' equity over total assets; (2) EBITDA on
net financial expenses; (3) Total financial debt on EBITDA and (4) Short-term net financial debt to EBITDA. The Company has been complying
with all the established ratios.
The table below shows the position of financing and available lines
of credit:
|
|
|
|
|
Remaining amount |
|
Type |
Currency |
Date of opening |
Term |
Total value |
Amount used up to December 31, 2022 |
BNDES (i) |
TJLP |
May 2018 |
N/A |
1,090,000 |
778,595 |
311,405 |
BNDES (ii) |
TJLP |
May 2018 |
N/A |
20,000 |
12,190 |
7,810 |
FINAME (iii) |
IPCA |
Mar 2019 |
N/A |
390,000 |
- |
390,000 |
BNB (iv) |
IPCA |
Jan 2020 |
June 2023 |
752,479 |
503,351 |
249,128 |
Total R$: |
|
|
|
2,252,479 |
1,294,136 |
958,343 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Objective:
| (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 of operation of Banco do Nordeste do Brasil. |
Loans and financing on December 31, 2022 due in long-term is in accordance
with the following schedule:
Parent company Consolidated
2024 |
|
1,282,496 |
|
1,282,496 |
2025 |
|
202,506 |
|
202,506 |
2026 |
|
698,866 |
|
698,866 |
2027 |
|
698,866 |
|
698,866 |
2028 |
|
659,624 |
|
659,624 |
2029 |
|
55,714 |
|
55,714 |
2030 |
|
55,714 |
|
55,714 |
2031 |
|
51,072 |
|
51,072 |
|
|
3,704,858 |
|
3,704,858 |
The nominal value of the loans and financing is consistent with their respective
payment schedule.
|
|
Nominal value |
|
|
|
2023 |
|
1,264,968 |
2024 |
|
1,282,496 |
2025 |
|
202,506 |
2026 |
|
698,866 |
2027 |
|
698,866 |
2028 |
|
659,624 |
2029 |
|
55,714 |
2030 |
|
55,714 |
2031 |
|
51,071 |
|
|
4,969,825 |
Fair value of loans
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. Both are financing
for the purchase of equipment and, therefore, have a character of subsidy and promotion of commercial activity between the company and
certain suppliers. For the purposes of fair value analysis, considering the characteristics of this transaction,
the company understands that its fair value is equal to that recorded on the balance sheet.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
With respect to proceeds contracted with the Bank of Nova Scotia, BNP Paribas,
Debentures and BNDES and BNB, the fair value of these loans is considered to be the present value of the active tip of the swap contracts
that protect the Company from changes in exchange rates and interest. The fair value of the operations on December 31, 2022 is, respectively,
R$ 1,519,742, R$ 59,199, R$ 1,670,839, R$ 361,828 and R$ 219,697.
22. Indirect taxes, fcharges and contributions
payable
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Indirect taxes, charges and contributions payable |
1,986,293 |
|
1,421,955 |
|
2,097,468 |
|
|
|
|
|
|
Value added tax on goods and services - ICMS |
212,043 |
|
303,721 |
|
222,120 |
ANATEL’s taxes and fees (i) |
1,698,025 |
|
1,042,933 |
|
1,798,967 |
Imposto sobre Serviço [Service tax] - ISS |
65,881 |
|
66,075 |
|
65,664 |
Other |
10,344 |
|
9,226 |
|
10,717 |
|
|
|
|
|
|
Current portion |
(1,982,559) |
|
(1,418,682) |
|
(2,093,734) |
Non-current portion |
3,734 |
|
3,273 |
|
3,734 |
(i) In 2020, to minimize the impacts of the pandemic, Provisional Act 952,
dated April 15, 2020, was enacted, authorizing the postponement of payment of taxes, such as TFF, Condecine and CFRP, in the amount of
R$ 790 million, to August 31, 2020. In the third quarter of 2020, the Company made a partial payment in the amount of R$ 300
million referring to CFRP and Condecine, but due to a preliminary injunction in court, there was no need to pay the Fistel (TFF), which
remains outstanding until the final and unappealable decision.
In 2021, there was the partial payment of fees of approximately R$ 300
million related to CFRP and Condecine and the remaining amount of R$ 480 million related to 2021 Fistel (TFF) remains suspended,
with no defined date for payment based on injunction also issued by the Regional Court of the 1st Region.
During 2021, there was the recognition of R$ 51.2 million in default
interest on Fistel (TFF) amounts related to fiscal years 2020 and 2021 with suspended payment by preliminary injunction.
In 2022, there was the partial payment of fees of approximately R$ 300
million related to CFRP and Condecine and the remaining amount of R$ 361.6 million related to 2022 Fistel (TFF) remains suspended,
with no defined date for payment based on injunction also issued by the Regional Court of the 1st Region.
In 2022, there was the recognition of R$ 163.0 million in default
interest on Fistel (TFF) amounts related to fiscal years 2020, 2021 and 2022 with suspended payment by preliminary injunction.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
23. Direct taxes, charges and contributions
payable
Current income tax and social contribution charges are calculated on the
basis of the tax laws enacted, or substantially enacted, up to the balance sheet date.
The legislation allows companies to opt for quarterly or monthly payment
of income tax and social contribution. In 2022, the Company has chosen to make the quarterly payment of income tax and social contribution.
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Direct taxes, charges and contributions payable |
232,276 |
|
258,340 |
|
272,150 |
|
|
|
|
|
|
Income tax and social contribution |
78,351 |
|
186,294 |
|
78,351 |
PIS/COFINS [Social integration program/Social security] |
62,324 |
|
41,916 |
|
102,157 |
IRRF on interest on shareholders’ equity |
65,311 |
|
- |
|
65,311 |
Other (i) |
26,290 |
|
30,130 |
|
26,331 |
|
|
|
|
|
|
Current portion |
(222,470) |
|
(245,113) |
|
(262,344) |
Non-current portion |
9,806 |
|
13,227 |
|
9,806 |
(i) The breakdown of this account mainly refers to the company's adhesion
to the Tax Recovery Program – REFIS from 2009 for payment of installments of the outstanding debts of federal taxes (PIS –
Social Integration Program, COFINS – Contribution to Social Security Financing, IRPJ – Corporate Income Tax and CSLL –
Social Contribution on Net Profit), whose final maturity will be on October 31, 2024.
24. Deferred revenues
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Deferred revenues |
889,441 |
|
886,340 |
|
932,029 |
|
|
|
|
|
|
Prepaid services (i) |
151,355 |
|
118,795 |
|
193,943 |
Government grants (ii) |
860 |
|
11,184 |
|
860 |
Anticipated revenue |
43,561 |
|
8,522 |
|
43,561 |
Deferred revenues on sale of towers (iii) |
680,731 |
|
734,826 |
|
680,731 |
Contractual liabilities (iv) |
12,934 |
|
13,013 |
|
12,934 |
|
|
|
|
|
|
Current portion |
(222,829) |
|
(197,179) |
|
(265,417) |
Non-current portion |
666,612 |
|
689,161 |
|
666,612 |
(i) Referring to the recharge of voice credits and data not yet used by
customers relating to prepaid system services that are appropriate to the result when the actual use of these services by customers.
(ii) Referring to the release of resources related to the financing line
with BNDES (Investment Support Program-BNDES PSI). The sum of grants granted by BNDES up to December 31, 2022 is R$ 203 million and
the outstanding amount on December 31, 2022 is R$ 860 (R$ 11,184
on December 31, 2021). This amount is being amortized by the lifespan of the asset being financed and appropriated in the group of “other
net revenues (expenses)” (note 31).
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(iii) Referring to the amount of revenue to be appropriated by the sale
of the towers (note 17).
(iv) Contracts with customers. The table below includes information on
the portion of trade accounts receivable, from which contractual assets and liabilities originate.
The balances on December 31, 2022, presented below, represent the individual
and consolidated amounts.
|
2022 |
|
2021 |
|
|
|
|
Accounts receivable included in trade accounts receivable |
2,182,403 |
|
2,051,120 |
Contractual assets |
19,828 |
|
15,340 |
Contractual liabilities |
(12,934) |
|
(13,013) |
The contracts with customers gave rise to the allocation of discounts under
combined loyalty offers, where the discount may be given on equipment and / or service, generating a contractual asset or liability, respectively,
depending on the nature of the offer in question.
Summary of the main variations in the year.
|
Contractual assets (liabilities) |
|
|
Balance at January 1, 2022 |
2,326 |
Additions |
12,188 |
Write-offs |
(7,620) |
Balance at December 31, 2022 |
6,894 |
|
Contractual assets (liabilities) |
|
|
Balance at January 1, 2021 |
7,288 |
Additions |
8,800 |
Write-offs |
(13,761) |
Balance at December 31, 2021 |
2,327 |
The balances of contractual assets and liabilities that represent the individual and consolidated
balances are expected to be realized according to the table below:
The amounts below represent the Parent Company and Consolidated balances.
|
2023 |
2024 |
2025 |
Contractual assets (liabilities) |
7,210 |
(316) |
- |
|
|
|
|
The Company in line with paragraph 121 of IFRS 15, is not presenting
the effects of information on customer contracts with terms of duration of less than 1 year.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
25. Provision for judicial and administrative
proceedings
The Company is an integral part in judicial and administrative
proceedings in the civil, labor, tax and regulatory spheres, which arise in the normal course of its business.
The provision is constituted based on the opinions of the company's legal
advisors and management, for amounts considered sufficient and adequate to cover losses and risks considered probable. Situations where
losses are considered probable and possible are recorded and disclosure, respectively, by their updated values, and those in which losses
are considered remote are not disclosed.
The amounts below represent individual and consolidated balances.
The provision for judicial and administrative proceedings constituted,
updated, is composed as follows:
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Provision for judicial and administrative proceedings |
1,112,153 |
|
960,881 |
|
1,112,156 |
|
|
|
|
|
|
Civil (a) |
392,972 |
|
309,019 |
|
392,975 |
Labor (b) |
214,450 |
|
192,132 |
|
214,450 |
Tax (c) |
473,391 |
|
429,951 |
|
473,391 |
Regulatory (d) |
31,340 |
|
29,779 |
|
31,340 |
The changes in the provision for judicial and administrative proceedings
are summarized below:
|
December 2021 |
|
Additions, net of reversals |
|
Payments |
|
Currency update |
|
December 2022 |
|
|
|
|
|
|
|
|
|
|
|
960,881 |
|
247,227 |
|
(242,597) |
|
146,642 |
|
1,112,153 |
|
|
|
|
|
|
|
|
|
|
Civil (a) |
309,019 |
|
130,164 |
|
(133,649) |
|
87,438 |
|
392,972 |
Labor (b) |
192,132 |
|
79,613 |
|
(84,165) |
|
26,870 |
|
214,450 |
Tax (c) |
429,951 |
|
35,978 |
|
(21,192) |
|
28,654 |
|
473,391 |
Regulatory (d) |
29,779 |
|
1,472 |
|
(3,591) |
|
3,680 |
|
31,340 |
|
December 2020 |
|
Additions, net of reversals |
|
Payments |
|
Currency update |
|
December 2021 |
|
|
|
|
|
|
|
|
|
|
|
886,947 |
|
278,789 |
|
(316,804) |
|
111,949 |
|
960,881 |
|
|
|
|
|
|
|
|
|
|
Civil (a) |
245,432 |
|
175,715 |
|
(194,501) |
|
82,373 |
|
309,019 |
Labor (b) |
213,026 |
|
71,961 |
|
(98,730) |
|
5,875 |
|
192,132 |
Tax (c) |
399,288 |
|
31,078 |
|
(23,539) |
|
23,124 |
|
429,951 |
Regulatory (d) |
29,201 |
|
35 |
|
(34) |
|
577 |
|
29,779 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The Company is subject to several legal actions and administrative procedures
proposed by consumers, suppliers, service providers and consumer protection agencies and treasury agencies, which deal with various matters
that arise in the normal course of the entities’ business. The main processes are summarized below:
a.1 Consumer lawsuits
The company is a party in lawsuits related to various claims filed by consumers,
in the judicial and administrative spheres. The aforementioned actions in the amount provisioned of R$ 179,132 (R$ 150,881 on
December 31, 2021) refer mainly to alleged improper collection, cancellation of contract, quality of services, unilateral contract
amendment and undue negative entry.
a.2 Consumer Protection Agencies
TIM is a party to legal and administrative lawsuits filed by the Public
Prosecutor's Office, Procon and other consumer protection agencies, arising from consumer complaints, in which, and among other topics,
discusses: (i) alleged failures in the provision of network services; (ii) questions of quality in service; (iii) alleged violations of
the SAC [customer service hotline] decree; (iv) alleged contractual violations; (v) alleged misleading advertising; and (vi) discussion
of the collection of loyalty fines, in cases of robbery and theft of the device. The amount provisioned is equivalent to R$ 168,987
(R$ 116,985 as of December 31, 2021).
a.3 Former trading partners
TIM is a defendant in lawsuits proposed by former trade partners claiming,
among others, amounts on the basis of alleged non-compliance with agreements. The provisioned amount is R$27,740 (R$ 20,708 on December
31, 2021).
a.4 Other
TIM is a defendant in other actions of essentially non-consumer objects
proposed by the most diverse agents from those described above, in which, among others, it is discussed: (i) share subscription; (ii)
claims for civil liability indemnification; (iii) upon the alleged breach of the contract, the provisioned amounts are equivalent to R$ 14,642
(R$ 20,089 as of December 31, 2021).
a.5 Social and environmental and infrastructure
The Company is a party to lawsuits involving various agents who discuss
aspects related to licensing, among which environmental licensing and infrastructure licensing (installation/operation). The amounts involved
and provisioned are equivalent to R$ 2,471 (R$ 356 on December 31, 2021).
a.6 ANATEL
The Company is a party to lawsuits in front of ANATEL, in which it is discussed:
(i) debit related to the collection of 2% of revenues from Value - Added Services–VAS and interconnection; (ii) pro-rata inflation
adjustment applied to the price proposal defined in the notice for the use of 4G frequencies; and (iii) alleged non-compliance with service
quality targets. There is no provisioned amount corresponding to these lawsuits as of December 31, 2022 and 2021.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
b. Labor and social security lawsuits
These are processes involving several labor claims filed by both former
employees, in relation to matters such as overtime, differences in variable remuneration and legal overcome in other contract funds, as
well as by former employees of service providers, all of whom, taking advantage of the labor laws in force require it to keep the Company
in compliance with labor obligations does not abide by contractors hired for that purpose. Regarding social security claims, the amounts
refer to the legal difference in the levy of social security contributions on certain payments made by the company’s employees.
From the total of 1,628 Labor claims on December 31, 2022 (1,314 on December
31, 2021) filed against the company, the majority relate to claims involving former employees of service providers followed by lawsuits
from employees of their own and social security lawsuits. The provisioning of these claims totals R$ 214,450 updated monetarily (R$ 192,132
as of December 31, 2021).
c. Tax proceedings
|
|
2022 |
|
2021 |
Federal Taxes |
260,206 |
|
202,743 |
State Taxes |
130,816 |
|
145,436 |
Municipal Taxes |
8,550 |
|
7,626 |
TIM S.A. proceedings (Purchase price allocation) |
73,819 |
|
74,146 |
|
473,391 |
|
429,951 |
|
|
|
|
|
The total recorded provision is substantially composed of the following
processes whose indicated values are estimated by the indices established by the federal government for late taxes, being linked to the
variation in the SELIC rate.
Federal taxes
The provision supports99 proceedings and is mainly composed of the following
lawsuits:
| (i) | Sixty-four proceedings, relating to questions involving
the impact on operations of CIDE, CPMF, CSLL, IRRF, spontaneous denunciation of the fine in the payment of FUST and ancillary obligations.
Of this total, the amounts involved in the legal proceedings that seek recognition of the right not to collect the CPMF allegedly incident
on simultaneous transactions of purchase and sale of foreign currency and exchange of account ownership arising from corporate incorporation,
whose provisioned values, updated, equal to R$ 4,303 (R$ 8,510 on December 31, 2021), as well as the amount related to the fine
and interest 2009, where the benefit of spontaneous denunciation is not being recognized, whose provisioned and updated value is R$ 16,169
(R$ 15,149 on December 31, 2021). |
| (ii) | The Company constituted a provision for a process
aimed to collecting the pension contribution withheld at the rate of 11% to which, allegedly, payments made by the company to other legal
entities should have been submitted as remuneration for various activities, whose provisioned and updated value is R$ 42,171 (R$ 39,554
on December 31, 2021). |
| (iii) | Additionally, in the second quarter of 2019, the
Company supplemented to expected losses for the FUST process, which seeks the unconstitutionality and illegality of the collection of
FUST (Telecommunications Services Universalization Fund). Lawsuit
for the recognition of the right not to collect Fust, failing to include in its calculation base the revenues transferred by way of interconnection
and EILD (Dedicated Line Industrial Exploitation), as well as the right not to suffer the retroactive collection of the differences determined
due to not observing sum 7/2005 of ANATEL, in the amount of R$ 64,140 (R$ 60,382 on December 31, 2021). |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
| (iv) | The Company recorded a provision for federal compensation
processes arising from a repurchase carried out in 2006, for which the documentary support was not robust enough after appraisals carried
out. The provisioned and updated value is R$ 67,815 (R$ 18,579 on December 31, 2021). |
State Taxes
The provision is substantially composed of the following processes:
The provision, in support of ninety-one cases, among which the following
stand out: (i) the amounts involved in the proceedings, that the question of the reversal of the amounts payable for the ICMS tax, as
well as the supporting documentation for the verification of the loan are appropriate for a Company whose values are recorded up-to-date,
amounting to R$ 24,811 (R$ 41,352 on December 31, 2021), (ii) the amount not offered to tax for the provision of telecommunications
services, which is up-to-date, equals to R$ 6,757 (R$ 5,291 on December 31, 2021), as well as (iii) the charges on the
grounds of supposed differences in both the inputs as the output of goods in the process of the withdrawal amount of the inventory, whose
values are updated to the equivalent of R$ 17,471 (R$ 16,216 on December 31, 2021); (iv) amounts allegedly improperly credited
relating to CIAP credits, whose updated amounts are equivalent to R$ 11,943 (R$ 16,374 as of December 31, 2021) and (v)
credits related to tax substitution operations, whose updated amounts are equivalent to R$ 10,392 (R$ 22,183 on December 31,
2021) and (vi) alleged lack of collection or alleged misappropriation of credits related to ICMS rate difference (DIFAL), whose restated
amounts are equivalent to R$ 16,220 (R$ 13,963 on December 31, 2021).
Municipal Taxes
It is also worth noting the amounts involved in the assessments that questions
the withholding and collection of the ISS-source of third-party services without employment relationship, as well as the collection of
its own ISS corresponding to services provided in co-billing.
TIM S.A. proceedings (Purchase price allocation)
There are tax lawsuits arising from the acquisition of former Intelig (current
TIM S.A.) due to the former parent company of the TIM Participações group, which comprise the process of allocating the
acquisition price of the former Intelig and amount to R$ 73,819 (R$ 74,146 as of December 31, 2021).
d. Regulatory processes
ANATEL filed administrative proceedings against the Company for: (i) non-compliance
with certain quality indicators; (ii) non-compliance with other obligations derived from the terms of authorization and; (iii) non-compliance
with the SMP, SCM and STFC regulations, among others.
On December 31, 2022, the amount indicated for the procedures for the determination
of non-compliance with obligations (“PADOs”), considering the inflation adjustment, classified with risk of probable loss
is R$ 31,340 (R$ 29,779 on December 31, 2021).
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
e. Judicial and administrative proceedings whose losses are assessed
as possible
The company has actions of a civil, labor, tax and regulatory nature involving
risks of loss classified by its legal advisers and the administration as possible, for which there is no provision for legal and administrative
proceedings constituted, and no adverse material effects are expected in the financial statements, according to the values presented below:
|
|
|
2022 |
|
2021 |
|
|
|
|
|
20,123,806 |
|
18,140,556 |
|
|
|
|
Civil (e.1) |
1,418,874 |
|
1,292,202 |
Labor and Social Security (e.2) |
360,942 |
|
392,035 |
Tax (e.3) |
18,171,345 |
|
16,309,439 |
Regulatory (e.4) |
172,645 |
|
146,880 |
Legal and administrative proceedings whose losses are assessed as possible
and monitored by Management are disclosed at their updated values.
The main lawsuits with risk of loss classified as possible, are described below:
e.1. Civil
|
|
2022 |
|
2021 |
Consumer lawsuits (e.1.1) |
141,858 |
|
160,696 |
ANATEL (e.1.2) |
293,203 |
|
258,683 |
Consumer protection bodies (e.1.3) |
455,481 |
|
493,806 |
Former trading partners (e.1.4) |
230,360 |
|
216,054 |
Social and environmental and infrastructure (e.1.5) |
116,613 |
|
99,743 |
Other (e.1.6) |
181,359 |
|
63,220 |
|
1,418,874 |
|
1,292,202 |
|
|
|
|
|
e.1.1 Consumer lawsuits
They mainly refer to actions for alleged improper collection, cancellation
of contract, quality of services, defects and failures in the delivery of devices and undue negative entry.
e.1.2 ANATEL
The Company is a party to lawsuits in front of ANATEL, in which it is discussed:
(i) debit related to the collection of 2% of revenues from Value - Added Services–VAS and interconnection; (ii) pro-rata inflation
adjustment applied to the price proposal defined in the notice for the use of 4G frequencies; and (iii) alleged non-compliance with service
quality targets.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
e.1.3 Consumer protection agencies
TIM is a party to legal and administrative lawsuits filed by the Public
Prosecutor's Office, Procon and other consumer protection agencies, arising from consumer complaints, in which, and among other topics,
discusses: (i) alleged failures in the provision of network services; (i) alleged failure in the delivery of handsets; (iii) alleged non-compliance
with state laws; (iv) hiring model and alleged improper charges of Value-Added Services-VAS; (v) alleged violations of the SAC decree;
(vi) alleged contractual violations; and (vii) blocking of data.
e.1.4 Former Trading Partners
TIM is a defendant in actions proposed by several former trading partners
in which are claimed, among others, values based on alleged contractual defaults.
e.1.5 Social and environmental and infrastructure
The Company is a party to lawsuits involving various agents that discuss
aspects related to (1) environmental licensing and structure licensing (installation/operation) and (2) (i) electromagnetic radiation
emitted by Telecom structures; (ii) renewal of land leases for site installation; (iii) dumping on leased land for site installation;
(iv) presentation of registering data, among others.
e.1.6 Other
TIM is a defendant in other actions of essentially non-consumer objects
proposed by the most diverse agents from those described above, in which, among others, it is discussed: (i) amounts supposedly due as
a result of share subscription; (ii) claims for civil liability indemnification; (iii) alleged breach of contract.
e.2. Labor and Social Security
e.2.1. Social Security
The Company is a defendant in proceedings referring to the legal difference
regarding the levy of social security contributions in certain payments of the company’s employees in the years 2005 to 2011, in
the total restated amount of R$ 80,456 (R$ 85,720 on December 31, 2021).
e.2.2. Labor
There are 3,384 Labor claims as of December 31, 2022 (3,067 as of December
31, 2021) filed against the company and with possible risk, concerning claims involving former employees and employees of service providers
in the amount of updated R$ 289,354 (R$ 306,315 as of December 31, 2021).
e.3. Tax
|
2022 |
|
2021 |
|
|
|
|
|
18,171,345 |
|
16,309,439 |
|
|
|
|
Federal taxes (e.3.1) |
3,275,840 |
|
3,026,326 |
State taxes (e.3.2) |
9,640,939 |
|
8,782,114 |
Municipal taxes (e.3.3) |
1,587,910 |
|
1,234,618 |
FUST, FUNTTEL and EBC (e.3.4) |
3,666,656 |
|
3,266,381 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The values presented are corrected, in an estimated way, based on the SELIC
rate. The historical amount involved is R$ 13,014,078 (R$ 12,133,168 as of December 31, 2021).
e.3.1. Federal Taxes
The total amount assessed against TIM in relation to federal taxes
is R$ 3,275,840 on December 31, 2022 (R$ 3,026,326 on December 31, 2021). Of this value, the following discussions stand out
mainly:
| (i) | Allegation of alleged incorrect use of tax credits
for carrying out a 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 Internal Revenue Service (RFB), and failure to pay
IRPJ and CSLL due by estimate. The amount involved is R$ 1,579,257 (R$ 1,467,409 on December 31, 2021). The Company was notified
of the decision on April 28, 2021 and, as a result, the partial payment of R$ 1.4 billion was confirmed. |
| (ii) | Offset method for tax losses and negative bases.
The amount involved is R$ 265,163 (R$ 231,810 on December 31, 2021). |
| (iii) | Collection of CSLL on currency changes arising from
swap transactions accounted for by the cash regime. The amount involved is R$ 73,307 (R$ 69,124 on December 31, 2021). |
| (iv) | Collection of IRRF [withholding income tax] on income
of residents abroad, including those remitted by way of international roaming and payment to unidentified beneficiaries, as well as the
collection of CIDE on payment of royalties on remittances abroad, including remittances by way of international roaming. The amount involved
is R$ 292,662 (R$ 268,170 on December 31, 2021). |
| (v) | Collection of IRPJ, PIS/COFINS and CSLL debits arising
from non-homologation or partial homologation of compensations made by the company from credits of withholding taxes on financial investments
and negative balance of IRPJ. The amount involved is R$ 437,419 (R$ 410,662 on December 31, 2021). |
e.3.2. State Taxes
The total assessed amount against TIM Group regarding state taxes on December
31, 2022 is R$ 9,640,939 (R$ 8,782,114 on December 31, 2021). Of this value, the following discussions stand out mainly:
| (i) | Non-inclusion in the ICMS calculation basis of unconditional
discounts offered to customers, as well as a fine for the alleged failure to comply with a related accessory obligation, including for
the failure to present the 60i record of the SINTEGRA file. The amount involved is R$ 1,236,502 (R$ 1,140,553 on December 31,
2021). |
| (ii) | Use of tax benefit (program for the promotion
of integrated and sustainable economic development of the Federal District - PRÓ-DF) granted by the taxing entity itself, but
later declared unconstitutional, as well as alleged improper credit of ICMS arising from the interstate purchase of goods with tax benefit granted in the state
of origin. The amount involved is R$ 394,834 (R$ 356,251 on December 31, 2021). |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
| (iii) | Credit reversal and extemporaneous credit related
to acquisitions of permanent assets. The amount involved is R$ 694,479 (R$ 654,011 on December 31, 2021). |
| (iv) | Credits and chargebacks of ICMS, as well as the identification
and documentary support of values and information released in customer accounts, such as tax rates and credits granted in anticipation
of future surcharges (special credit), as well as credits related to tax substitution operations and exempt and untaxed operations. On
December 31, 2022, the involved amount is R$ 3,835,583 (R$ 3,449,439 on December 31, 2021). |
| (v) | Use of credit in the acquisition of electricity directly
employed in the production process of companies. The amount involved is R$ 154,673 (R$ 138,242 on December 31, 2021). |
| (vi) | Alleged conflict between the information contained
in ancillary obligations and the collection of the tax, as well as specific questioning of fine for non-compliance with ancillary obligations.
The amount involved is R$ 900,731 (R$ 727,057 as of December 31, 2021). |
| (vii) | Alleged lack of collection of ICMS due to the gloss
of chargebacks related to the prepaid service, improper credit of ICMS in the outputs of goods allegedly benefited with reduction of the
calculation base, as well as an allegation of improper non-inclusion of Value-Added Services (VAS) of the ICMS calculation base. The amount
involved is R$ 625,202 (R$ 547,575 on December 31, 2021). |
| (viii) | Launch of credits related to the return of mobile
devices lent on loan. The amount involved is R$ 136,243 (R$ 116,700 on December 31, 2021). |
| (ix) | Collection of ICMS related to subscription services
and their alleged improper non-inclusion in the ICMS calculation base due to their nature. The amount involved is R$ 330,805 (R$ 286,519
on December 31, 2021). |
e.3.3. Municipal taxes
The total assessed amount against TIM Group regarding municipal taxes with
possible risk is R$ 1,587,910 on December 31, 2022 (R$ 1,234,618 on December 31, 2021). Of this value, the following discussions
stand out mainly:
| (i) | Collection of ISS, as well as the punitive fine for
the absence of the supposed tax due, on several revenue accounts of the company. The amount involved is R$ 1,281,547 (R$ 618,343
on December 31, 2021). |
| (ii) | Collection of ISS on importation of services or services
performed in other municipalities. The amount involved is R$ 86,520 (R$ 399,141 on December 31, 2021). |
| (iii) | Constitutionality of the collection of the functioning
supervision fee (TFF -Taxa de Fiscalização do Funcionamento) by municipal authorities of different localities. The
amount involved is R$ 149,764 (R$ 137,944 on December 31, 2021). |
e.3.4. FUST and FUNTTEL
The total amount charged against the TIM Group in relation to the contributions
to FUST and FUNTTEL with a possible risk rating is R$ 3,666,656 (R$ 3,266,381 on December 31, 2021). The main discussion involves
the collection of the contribution to FUST and FUNTTEL (Fund for the technological development of Telecommunications) from the issuance
by ANATEL of Sum no. 07/2005, aiming, among others, and mainly, the collection of the contribution to FUST and FUNTTEL on interconnection
revenues earned by mobile telecommunications service providers, from the validity of Law 9998/2000.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
e.4. Regulatory
ANATEL filed administrative proceedings against the Company for: (i) non-compliance
with certain quality indicators; (ii) non-compliance with other obligations derived from the terms of authorization and; (iii) non-compliance
with the SMP, SCM and STFC regulations, among others.
On December 31, 2022, the value indicated for the PADOs (procedure for
determining non-compliance with obligations), considering the inflation adjustment, classified with possible risk was R$ 172,645
(R$ 146,880 on December 31, 2021).
On August 22, 2019, ANATEL's Board of Directors unanimously approved TIM's
conduct adjustment term (TAC) 001/2020, which had been negotiated since 2014 with the regulator. The agreement covers a sanctions
reference value of R$ 627 million (restated at the time).
On June 19, 2020 the Board of Directors of the company approved the said
TAC after final deliberation of the regulator and the signing of the term took place on June 25 of the same year. The agreement covers
sanctions totaling approximately R$ 639 million (updated at the time), filed as a result of commitments represented in improvement actions
related to the macro-topics “Quality”, “Access Expansion”, “Rights and Guarantees of Users” and “Inspection”.
The Term includes actions to improve three pillars of action-customer experience,
quality and infrastructure - through initiatives associated with improvements in the licensing process of stations, efficient use of numbering
resources, evolution of digital service channels, reduction of complaint rates, repair of users and strengthening of transport and access
networks, among others. In addition, it contemplates the additional commitment to bring mobile broadband, through the 4G network, to 350
municipalities with less than 30 thousand inhabitants thus reaching more than 3.4 million people. The new infrastructure was implemented
in three years – more than 99% of the municipalities were served in the first two years and the remaining three municipalities were
served in November 2022 – with the Company guaranteeing the sharing regime with the other operators.
With the closing of the 1st TAC Year, the following commitments were certified
by the Agency: Reparation, Fund for the Defense of Diffuse Rights – FDD (phase 1) and Notifications; Numbering; Interconnection;
INCOME TAX; IGQ; Impediment; Internal controls; LTE 700 MHz; New 4G; Backhaul; Licensing backlog; Scope Commitment; Personal assistance;
Digital Relationship; and Additional Commitments.
In June 2022, TIM concluded the 2nd year of the Conduct
Adjustment Term (TAC) entered into with Anatel, having carried out the activities planned for strict compliance with the purpose of achieving
the associated targets. In September 2022, the Impediment Commitments, Internal Controls and Additional Commitments received certificates
from the Agency related to the 2nd year target.
In October 2022, TIM and Anatel signed the Amendment to renegotiate the
commitment related to Quality Indicators. Thus, the Perceived Quality Index (IQP) will be adopted to replace the General Quality Index
(IGQ), discontinued by the Agency.
The Company will continue fully implementing the internal monitoring mechanisms
through the quarterly report on the evolution of the schedules by the Governance Office in Management and Board of Directors. The Company
has been complying with the TAC implementation schedule without the need for any additional obligations.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Regarding the extension of the term of the authorizations to use the radio
frequencies associated with the SMP, the Company becomes liable for the contractual burden on the net revenue arising from the service
plans marketed under each authorization. However, since 2011 ANATEL began to include in the basis of calculation of said burden also the
revenues obtained with interconnection, and from 2012, and subsequent years, the revenues obtained with Value-Added Services, among others.
In the company's opinion, the inclusion of such revenues is improper because it is not expressly provided for in the terms of original
authorizations, so the collections received are discussed in the administrative and/or judicial sphere.
26. Other liabilities
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Other liabilities |
192,884 |
|
74,971 |
|
732,367 |
|
|
|
|
|
|
Provision for future asset decommissioning |
23,659 |
|
31,512 |
|
289,606 |
Advance from customers |
12,887 |
|
8,355 |
|
15,068 |
Onerous capacity contract (i) |
- |
|
- |
|
178,532 |
Other provisions for risk |
- |
|
- |
|
83,923 |
Other (ii) |
156,338 |
|
35,104 |
|
165,238 |
Current portion |
(21,327) |
|
(12,951) |
|
(132,954) |
Non-current portion |
171,557 |
|
62,020 |
|
599,413 |
(i) As part of the Cozani acquisition, a transferred capacity contract
was identified in the transaction, where there is a take or pay obligation for a defined term. The amount recorded refers to the portion
of capacity that will not be used for the remaining contractual term.
(ii) On June 23, 2022, Complementary Law 194 was enacted, which, in short,
amended Law 5172, of October 25, 1966 (National Tax Code), and Complementary Law 87, of September 13, 1996 (Kandir Law), to consider essential
goods and services related to fuels, electric power, communications and collective transport and, as a consequence, pointed to the reduction
of ICMS on revenues earned by companies in such industries.
The Company will proactively transfer its effects to its customers, according
to the nature of its plans. However, such transfer depends on systemic developments that are in progress and will be concluded during
the course of 2023. On December 31, 2022, the amount of R$ 117 million is recorded under “Other”, referring to
the difference between the amount of the tax rate reduction defined in the Complementary Law and the amounts previously due, corresponding
to the period necessary to carry out said systemic developments.
27. Shareholders’ equity
a. Share Capital
The share capital is recorded by the amount effectively raised from the
shareholders, net of the costs directly linked to the funding process.
The subscribed and paid-up share capital on December 31, 2022, is represented
by 2,420,804,398 common shares (2,420,804,398 common shares on December 31, 2021).
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 ordinary shares.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
b. Capital reserves
The use of the capital reserve complies with the precepts of Law 6404/76,
article 200, which provides for Joint-Stock Companies. This reserve is composed as follows:
|
2022 |
|
2021 |
|
|
|
|
|
408,602 |
|
401,806 |
|
|
|
|
Special Reserve of goodwill |
353,604 |
|
353,604 |
Long-term incentive plan |
54,998 |
|
48,202 |
b.1 Special Reserve of goodwill
The special reserve of goodwill was constituted from the incorporation
of the net assets of the former parent company Tim Participações S.A. (note 16.d).
b.2 Long-term incentive plan
The balances recorded under these items represent the Company's expenses
related to the long-term incentive program granted to employees (Note 28).
c. Profit reserves
c.1 Legal Reserve
It refers to the allocation of 5% of the net profit 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. In addition, the company may cease to constitute the legal reserve when this, added to the capital reserves, exceeds 30% of the
share capital.
This Reserve may only be used to increase capital or offset accumulated
losses.
c.2 Statutory reserve for expansion
The formation of this reserve is foreseen in Paragraph 2 of art. 46 of
the bylaws of the company and is aimed at the expansion of social business.
The balance of profit that is not compulsorily allocated to other reserves
and is not intended for the payment of dividends is allocated to this reserve, which may not exceed 80% of the share capital. Reaching
this limit, it will be up to the General Meeting to decide on the balance, distributing it to shareholders or increasing capital.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
c. 3 Tax Benefit Reserve
The Company enjoys tax benefits that provide for restrictions on the distribution
of profits. According to the legislation that establishes these tax benefits, the amount of tax that is no longer paid due to exemptions
and reductions in the tax burden may not be distributed to members and will constitute a reserve of tax incentive of the legal entity.
Such a reserve may only be used to absorb losses or increase the share capital. As of December 31, 2022, the cumulative value of the benefits
enjoyed by the Company amounts to R$ 2,124,411 (R$ 1,958,301 as of December 31, 2021).
The said tax benefit basically corresponds to the reduction of the
Corporate Income Tax (IRPJ) incident on the profit of the exploitation calculated in the units encouraged. The Company operates in the
area of the defunct Superintendence of development of the Amazon (SUDENE / SUDAM), being the tax incentive awards granted by state of
the Federation, for a period of 10 years, subject to renewal.
d. Dividends
Dividends are calculated in conformity with the bylaws and the Brazilian
Corporate Law.
According to its latest bylaws, approved on August 31, 2020, the company
must distribute as a mandatory dividend each year ending December 31, provided that there are amounts available for distribution, an amount
equivalent to 25% of Adjusted Net Profit.
As provided in the company's bylaws, unclaimed dividends within 3 years
will revert to the company.
As of December 31, 2022 and 2021, dividends and interest on shareholders'
equity were calculated as follows:
|
2022 |
|
2021 |
|
|
|
|
Net profit for the year |
1,670,755 |
|
2,957,174 |
(-) Non-distributable tax incentives |
(166,110) |
|
(176,741) |
(-) Constitution of legal reserve |
(75,233) |
|
(139,021) |
Adjusted Net Profit |
1,429,412 |
|
2,641,412 |
|
|
|
|
Minimum dividends calculated on the basis of 25% of adjusted profit |
357,353 |
|
660,353 |
|
|
|
|
Breakdown of dividends payable interest on shareholders’ equity: |
|
|
|
Interest on shareholders’ equity |
1,400,000 |
|
1,047,500 |
Total dividends and interest on shareholders’ equity distributed and proposed |
1,400,000 |
|
1,047,500 |
Income tax withheld (IRRF) on shareholders´ equity |
(196,970) |
|
(142,977) |
Total dividends and interest on shareholders’ equity, net |
1,203,030 |
|
904,523 |
Interest on Shareholders' Equity paid and/or payable is accounted for against
financial expenses which, for the purposes of presenting the quarterly information, are reclassified and disclosed as allocation of net
profit for the year, in changes in shareholders' equity.
During the years 2022, the amounts of R$ 1,400,000 were distributed
and additional amounts of R$ 600,000 which will be approved for distribution in a Meeting as of March 30, 2023, totaling R$ 2,000,000.
Moreover, in 2021, the amounts of R$ 1,047,500 were distributed, as presented below:
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Approval |
|
Payment |
|
Interest on shareholders’ equity |
|
|
|
|
|
06/09/2021 |
|
07/20/2021 |
|
350,000 |
09/24/2021 |
|
10/27/2021 |
|
137,500 |
12/15/2021 |
|
01/25/2022 |
|
560,000 |
|
|
|
|
1,047,500 |
|
|
|
|
|
03/22/2022 |
|
04/27/2022 |
|
195,000 |
06/15/2022 |
|
07/20/2022 |
|
270,000 |
09/12/2022 |
|
10/31/2022 |
|
235,000 |
09/12/2022 |
|
01/24/2023 |
|
245,000 |
12/12/2022 |
|
01/24/2023 |
|
455,000 |
02/09/2023 |
|
04/18/2023 |
|
600,000 |
|
|
|
|
2,000,000 |
The balance on December 31, 2022 of the item “dividends and interest
on shareholders' equity payable” totaling R$ 661,494 (R$ 533,580 on December 31, 2021) is composed of the outstanding
amounts of previous years in the amount of R$ 61,187 (R$ 49,955 on December 31, 2021) in addition to the paid amount of
R$ 600,307, net in 2022 upon approval expected at the Annual Shareholders’ Meeting in the beginning of 2023.
As set forth in the Law 6404/76 and the Bylaws of the Company, unclaimed
dividends - as established in the Joint Stock Company Law, dividends and Interest on Shareholders' Equity declared and unclaimed by shareholders
within 3 years, are reverted to shareholders' equity at the time of its prescription and allocated to a supplementary reserve to expand
businesses.
For the statement of cash flows, Interest on Shareholders' Equity and dividends
paid to its shareholders are being allocated in the group of “financing activities”.
28. Long-Term Incentive Plan
2014-2016 Plan, 2018-2020 Plan and 2021-2023 Plan
On April 10, 2014, April 19, 2018 and March 30, 2021, they were approved
by the General Meeting of shareholders of TIM S.A. (TIM Participações S.A. before the merger by TIM S.A. on August 31, 2020),
long-term incentive plans: “2014-2016 Plan”, “2018-2020 Plan” and “2021-2023 Plan” respectively, granted
to senior directors and to those who occupy the position of key positions in the Company.
The 2014-2016 Plan addresses the granting of stock options, while the 2018-2020
and 2021-2023 Plans provides for the granting of shares (performance shares and/or restricted shares).
The exercise of the options of the 2014-2016 Plan is conditioned on the
achievement of specific performance targets that could affect only the acquisition price of the shares. The strike price is calculated
by applying a plus or minus adjustment to the Base price of the share as a result of shareholder performance, taking into account the
criteria provided for in the Plan.
The 2018-2020 and 2021-2023 Plans propose to grant participants shares
issued by the Company, subject to the participant’s permanence in the Company (achievement of specific goals). The number of shares
may vary, for more or for less, as a result of the performance and possibly of the dividend award, considering the criteria provided for
in each Grant.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The term of validity of the options of 2014-2016 Plan is 6 years and TIM
S.A. has no legal or non-formalized obligation to repurchase or settle the options in cash. For the 2018-2020 and 2021-2023 plan, the
term of validity has the same periodicity of 3 years related to its vesting. In turn, the new Plans, in addition to considering the transfer
of shares, also provides for the possibility of making payment to participants of the equivalent amount in cash.
The total amount of the expense was calculated considering the fair value
of the options and the value of the shares and is recognized in the results over the vesting period.
Stock Options Program Table
|
|
|
|
|
|
|
|
Grant date |
Options granted |
Expiry date |
Base Price |
Balance at the beginning of the year |
Granted during the year |
Exercised during the year |
Expired during the year |
Overdue during the year |
Balance at the end of the year |
|
|
|
|
|
|
|
|
|
|
2014–2016 Plan – 3rd Grant |
3,922,204 |
Nov 2022 |
R$ 8.10 |
112,552 |
- |
(112,552) |
- |
- |
- |
2014–2016 Plan – 2nd Grant |
3,355,229 |
Oct 2021 |
R$ 8.45 |
- |
- |
- |
- |
- |
- |
2014–2016 Plan – 1st Grant |
1,687,686 |
Sep 2020 |
R$ 13.42 |
- |
- |
- |
- |
- |
- |
Total |
8,965,119 |
|
|
112,552 |
- |
(112,552) |
- |
- |
- |
Weighted average price of the balance of grants |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant date |
Options granted |
Expiry date |
Base Price |
Balance at the beginning of the year |
Granted during the year |
Exercised during the year |
Expired during the year |
Overdue during the year |
Balance at the end of the year |
|
|
|
|
|
|
|
|
|
|
2014–2016 Plan – 3rd Grant |
3,922,204 |
Nov 2022 |
R$ 8.10 |
295,063 |
- |
(182,511) |
- |
- |
112,552 |
2014–2016 Plan – 2nd Grant |
3,355,229 |
Oct 2021 |
R$ 8.45 |
21,771 |
- |
(21,771) |
- |
- |
- |
2014–2016 Plan – 1st Grant |
1,687,686 |
Sep 2020 |
R$ 13.42 |
- |
- |
- |
- |
- |
- |
2011–2013 Plan – 3rd Grant |
3,072,418 |
July 2019 |
R$ 8.13 |
- |
- |
- |
- |
- |
- |
2011–2013 Plan – 2nd Grant |
2,661,752 |
Sep 2018 |
R$ 8.96 |
- |
- |
- |
- |
- |
- |
2011–2013 Plan – 1st Grant |
2,833,595 |
Aug 2017 |
R$ 8.84 |
- |
- |
- |
- |
- |
- |
Total |
17,532,884 |
|
|
316,834 |
- |
(204,282) |
- |
- |
112,552 |
Weighted average price of the balance of grants |
R$ 8.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Stock Program Table (Performance Shares and Restricted
Shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identification of grant |
Shares granted |
Expiry date |
Grant Price |
Balance at the beginning of the year |
Granted during the year |
Transferred during the year * |
Paid in cash* |
Canceled during the year |
Balance at the end of the year |
Volume Vested |
Performance change |
Additional
Dividends |
Volume Vested |
Performance change |
Additional
dividends |
|
|
2021-2023 Plan
2022 Grant(s) |
1,227,712 |
Apr 2025 |
R$ 13.23 |
- |
1,227,712 |
- |
- |
- |
- |
- |
- |
(44,565) |
1,183,147 |
2021-2023 Plan
2021 Grant(s) |
3,431,610 |
May 2024 |
R$ 12.95 |
3,119,734 |
- |
(1,043,059) |
(87,605) |
(43,880) |
(2,883) |
(473) |
(130) |
(49,639) |
2,024,153 |
2018-2020 Plan
2020 Grant(s) |
796,054 |
Apr 2023 |
R$ 14.40 |
519,098 |
- |
(252,024) |
(63,029) |
(22,884) |
(2,593) |
(649) |
(236) |
(3,641) |
260,840 |
2018-2020 Plan
2019 Grant(s) |
930,662 |
July 2022 |
R$ 11.28 |
427,030 |
- |
(419,188) |
(137,064) |
(62,243) |
(7,842) |
(2,537) |
(1,195) |
- |
- |
2018-2020 Plan
2018 Grant(s) |
849,932 |
Apr 2021 |
R$ 14.41 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Total |
7,235,970 |
|
|
4,065,862 |
1,227,712 |
(1,714,271) |
(287,698) |
(129,007) |
(13,318) |
(3,659) |
(1,561) |
(97,845) |
3,468,140 |
Weighted average price of the balance of grants |
R$ 13.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identification of grant |
Shares granted |
Expiry date |
Grant Price |
Balance at the beginning of the year |
Granted during the year |
Transferred during the year* |
Paid in cash* |
Canceled during the year |
Balance at the end of the year |
Volume Vested |
Performance change |
Additional
Dividends |
Volume Vested |
Performance change |
Additional
dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021-2023 Plan
2021 Grant(s) |
3,431,610 |
May 2024 |
R$ 12.95 |
- |
3,431,610 |
- |
- |
- |
- |
- |
- |
(311,876) |
3,119,734 |
2018-2020 Plan
2020 Grant(s) |
796,054 |
Apr 2023 |
R$ 14.40 |
796,054 |
- |
(206,578) |
(51,634) |
(8,933) |
- |
- |
- |
(70,378) |
519,098 |
2018-2020 Plan
2019 Grant(s) |
930,662 |
July 2022 |
R$ 11.28 |
687,895 |
- |
(207,859) |
(78,111) |
(23,252) |
- |
- |
- |
(53,006) |
427,030 |
2018-2020 Plan
2018 Grant* |
849,932 |
Apr 2021 |
R$ 14.41 |
199,594 |
- |
(187,039) |
(42,854) |
(22,250) |
(9,101) |
(2,305) |
(1,094) |
(3,454) |
- |
Total |
6,008,258 |
|
|
1,683,543 |
3,431,610 |
(601,476) |
(172,599) |
(54,435) |
(9,101) |
(2,305) |
(1,094) |
(438,714) |
4,065,862 |
Weighted average price of the balance of grants |
R$ 12.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The significant data included in the model, for the Stock Option Grants, was as follows:
Grant date |
Base price - weighted average share in the period of measurement of the grant |
Volatility |
Expected option life |
Risk-free annual interest rate |
2014 Grant |
R$ 13.42 |
44.60% p.a. |
6 years |
10.66% p.a. |
2015 Grant |
R$ 8.45 |
35.50% p.a. |
6 years |
16.10% p.a. |
2016 Grant |
R$ 8.10 |
36.70% p.a. |
6 years |
11.73% p.a. |
Note: Significant data is characteristic of an option-based plan, considering
the use of fair value as the appropriate method for calculating expenses with option remuneration.
The base price of the share of each share was calculated using the weighted
averages of TIM S.A.’s share price. (TIM Participações S.A. before the merger by TIM S.A. on August 31, 2020), considering
the following periods:
| · | 2014–2016 Plan – 1st Grant
- traded volume and trading price of TIM Participações in the 30 days prior to the date defined by the Board of Directors
of TIM Participações (September 29, 2014). |
| · | 2014–2016 Plan – 2nd Grant
- traded volume and trading price of TIM Participações in the 30 days prior to the date defined by the Board of Directors
of TIM Participações (September 29, 2015). |
| · | 2014–2016 Plan – 3rd Grant
- traded volume and trading price of TIM Participações in the 30 days prior to the date defined by the Board of Directors
of TIM Participações (September 29, 2016). |
| · | 2018-2020 Plan – 1st Grant-traded
volume and trading price of TIM Participações shares for the period 03/01/2018–03/31/2018. |
| · | 2018-2020 Plan – 2nd Grant-traded
volume and trading price of TIM Participações shares for the period 06/01/2019–06/30/2019. |
| · | 2018-2020 Plan – 3rd Grant-traded
volume and trading price of TIM Participações shares for the period 03/01/2020–03/31/2020. |
| · | 2021-2023 Plan – 1st Grant-traded
volume and trading price of TIM S.A. shares for the period 03/01/2021–03/31/2021. |
| · | 2021–2023 Plan – 2nd Grant
- traded volume and trading price of TIM S.A. shares in the period from March 01, 2022 to March 31, 2022. |
On December 31, 2022, expenses pegged to these long-term benefit plans
totaled R$ 47,815 (R$ 22,212, on December 31, 2021).
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
29. 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 and 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.
The net service revenue item also includes revenue from new partnership
agreements (financial, education and advertising), and the amount of revenue recognized in the year ended December 31, 2022 is R$ 153,348
(R$ 119,457 on December 31, 2021).
Regarding the financial partnership, the Arbitration Procedure No. 28/2021/SEC8
was filed before the Arbitration and Mediation Center of the Brazil-Canada Chamber of Commerce (“CCBC” and “Arbitration
Procedure”, respectively), by TIM against Banco C6 S.A., Carbon Holding Financeira S.A. and Carbon Holding S.A (together, “Defendants”),
through which the interpretation of certain clauses in the contracts that rule the partnership between the parties will be discussed.
In case of loss, the partnership may be terminated.
Revenues from sales of goods
Revenues from sales of goods (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 good sold.
Contract identification
The Company monitors 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 accounting rule IFRS
15 / CPC47 – Revenue from Contracts with Customers.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Identification of the performance obligation
Based on the review of its contracts, the Company mainly verified the existence of the
following performance obligations:
(i) sale of equipment; and
(ii) provision of mobile, fixed and internet telephony services.
Thus, the Company started to recognize revenues when (or as) the Company
meets the performance obligation by transferring the asset or service promised to the customer; and the asset is considered transferred
when or as the customer obtains control of that 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.
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 (as described in Note 11) 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.
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Net Revenue |
20,759,080 |
|
18,058,027 |
|
21,530,801 |
|
|
|
|
|
|
Gross revenue |
28,650,398 |
|
25,357,429 |
|
29,713,383 |
|
|
|
|
|
|
Service revenue |
27,331,986 |
|
24,264,246 |
|
28,394,971 |
Service revenue-Mobile |
25,435,736 |
|
22,433,225 |
|
26,498,745 |
Service revenue - Landline |
1,896,250 |
|
1,831,021 |
|
1,896,226 |
|
|
|
|
|
|
Goods sold |
1,318,412 |
|
1,093,183 |
|
1,318,412 |
|
|
|
|
|
|
Deductions from gross revenue |
(7,891,318) |
|
(7,299,402) |
|
(8,182,582) |
Taxes incidents |
(4,190,169) |
|
(4,679,722) |
|
(4,471,342) |
Discounts granted |
(3,692,038) |
|
(2,610,388) |
|
(3,702,129) |
Returns and other |
(9,111) |
|
(9,292) |
|
(9,111) |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
30. Operating costs and expenses
|
Parent Company |
|
2022 |
|
2021 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
(9,934.765) |
(5,175,582) |
(1,801,836) |
(16,912.183) |
|
(8,443,023) |
(4,621,788) |
(1,723,384) |
(14,788,195) |
|
|
|
|
|
|
|
|
|
|
Personnel |
(50,271) |
(786,725) |
(441,503) |
(1,278,499) |
|
(62,214) |
(676,479) |
(387,735) |
(1,126,428) |
Outsourced services |
(609,432) |
(2,013,162) |
(821,144) |
(3,443,738) |
|
(560,039) |
(1,763,360) |
(668,641) |
(2,992,040) |
Interconnection and means of connection |
(2,781,893) |
- |
- |
(2,781,893) |
|
(1,840,139) |
- |
- |
(1,840,139) |
Depreciation and amortization |
(5.113,029) |
(292,385) |
(460,292) |
(5,865,706) |
|
(4,847,995) |
(265,565) |
(578,136) |
(5,691,696) |
Taxes, fees and contributions |
(36,629) |
(763,860) |
(22,853) |
(823,342) |
|
(34,732) |
(777,819) |
(29,388) |
(841,939) |
Rentals and insurance |
(467,527) |
(133,148) |
(18,032) |
(618,707) |
|
(362,171) |
(109,781) |
(20,082) |
(492,034) |
Cost of goods sold |
(870,978) |
- |
- |
(870,978) |
|
(731,007) |
- |
- |
(731,007) |
Advertising and advertising |
- |
(565,263) |
- |
(565,263) |
|
- |
(459,811) |
- |
(459,811) |
Losses on doubtful accounts receivable |
- |
(585,699) |
- |
(585,699) |
|
- |
(544,642) |
- |
(544,642) |
Other |
(5,006) |
(35,340) |
(38,012) |
(78,358) |
|
(4,726) |
(24,331) |
(39,402) |
(68,459) |
|
Consolidated |
|
2022 |
|
Cost of services rendered and goods sold |
Selling expenses |
General and administrative expenses |
Total |
|
|
|
|
|
|
(10,655,981) |
(5,596,211) |
(1,808,735) |
(18,060,927) |
|
|
|
|
|
Personnel |
(50,271) |
(786,725) |
(441,503) |
(1,278,499) |
Outsourced services |
(634,498) |
(2,248,966) |
(828,007) |
(3,711,471) |
Interconnection and means of connection |
(2,511,779) |
- |
- |
(2,511,779) |
Depreciation and amortization |
(6,074,238) |
(292,644) |
(460,292) |
(6,827,174) |
Taxes, fees and contributions |
(36,972) |
(907,895) |
(22,856) |
(967,723) |
Rentals and insurance |
(471,998) |
(133,150) |
(18,032) |
(623,180) |
Cost of goods sold |
(870,978) |
- |
- |
(870,978) |
Advertising and advertising |
- |
(565,272) |
- |
(565,272) |
Losses on doubtful accounts receivable |
- |
(626,218) |
- |
(626,218) |
Other |
(5,247) |
(35,341) |
(38,045) |
(78,633) |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
The company makes contributions to public or private pension insurance
plans on a mandatory, contractual or voluntary basis while the employee is on the staff of the company. Such plans do not bring any additional
obligations to the Company. If the employee ceases to be part of the company's staff in the period necessary to have the right to withdraw
contributions made by sponsors, the amounts to which the employee is no longer entitled and which may represent a reduction in the company's
future contributions to active employees, or a cash refund of these amounts, are released as assets.
31. Other revenues (expense), net
|
Parent company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
Revenues |
|
|
|
|
|
Revenue from grant, net |
10,324 |
|
13,548 |
|
10,324 |
Fines on telecommunications services |
68,408 |
|
58,793 |
|
72,903 |
Revenue on disposal of assets (ii) |
23,747 |
|
2,711,535 |
|
23,747 |
Other revenue |
60,876 |
|
65,482 |
|
62,256 |
|
163,355 |
|
2,849,358 |
|
169,230 |
Expenses |
|
|
|
|
|
FUST/FUNTTEL (i) |
(141,994) |
|
(134,962) |
|
(151,485) |
Taxes, fees and contributions |
(1,500) |
|
(2,274) |
|
(1,526) |
Provision for legal and administrative proceedings, net of reversal |
|
|
|
|
|
(219,229) |
|
(248,987) |
|
(219,241) |
Expenses on disposal of assets (ii) |
(23,443) |
|
(1,942,791) |
|
(23,443) |
Other expenses |
(20,367) |
|
(22,573) |
|
(21,906) |
|
(406,533) |
|
(2,351,587) |
|
(417,601) |
|
|
|
|
|
|
Other revenues (expenses), net |
(243,178) |
|
497,771 |
|
(248,371) |
(i) Representing the expenses incurred with contributions on the various
telecommunications revenues due to ANATEL, according to current legislation.
(ii) In 2021, it represents the revenue from the sale of 51% equity interest
in I-Systems (formerly FiberCo) to IHS, which is composed of the (secondary) cash paid to TIM S.A. in the amount of R$ 1,096,294
and the fair value of the minority interest of 49% that remained with TIM S.A. in the amount of R$ 1,612,957.
In expenses, the amount of R$ 1,927,014 is represented by the net
assets written-off at TIM S.A. and paid-in as share capital at I-Systems, in addition to the write-off of goodwill and deferred income
tax related to goodwill due to the sale of 51% of I -Systems (formerly FiberCo). The gain on this transaction before income tax and social
contribution was R$ 782,237. For further information, see Note 1.2.2.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
32. Financial revenues
|
Parent company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Financial revenues |
1,267,501 |
|
1,091,748 |
|
1,318,948 |
Interest on financial investments |
498,170 |
|
339,681 |
|
546,763 |
Interest received from customers |
26,426 |
|
28,427 |
|
27,916 |
Swap interest |
299,096 |
|
203,852 |
|
299,096 |
Interest on lease |
28,101 |
|
24,788 |
|
28,101 |
Inflation adjustment (i) |
213,949 |
|
208,029 |
|
213,949 |
Other derivatives (ii) |
187,097 |
|
285,009 |
|
187,097 |
Other revenues |
14,662 |
|
1,962 |
|
16,026 |
(i) A substantial part is related to the monetary restatement on tax credits
and judicial deposits.
(ii) This is mainly the difference between the market value and the cost
of the share subscription options related to the operational partnership with Banco C6, started in 2020, to which the Company was entitled
in the period due to the achievement of targets. Until December 31, 2022, the Company obtained the subscription right for the 5th,
6th, 7th and 8th contractual targets, generating an effect of R$ 160,514 (R$ 285,009 in December
31, 2021). The market value was calculated based on information available in the last investment transaction carried out by the partner
and disclosed in the market. The disclosures of this derivative financial instrument are detailed in Note 39, which was measured
at fair value, and will subsequently be measured in the Company’s income, considering the risks related to arbitration disclosed
in Note 29.
33. Financial expenses
|
Parent company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Financial expenses |
(2,466,068) |
|
(1,745,213) |
|
(2,762,963) |
Interest on taxes and fees |
(174,351) |
|
(61,745) |
|
(187,778) |
Swap interest |
(644,280) |
|
(352,029) |
|
(644,280) |
Interest on lease |
(1,075,603) |
|
(845,033) |
|
(1,333,007) |
Inflation adjustment (i) |
(313,552) |
|
(247,200) |
|
(336,046) |
Discounts granted |
(47,644) |
|
(52,509) |
|
(48,774) |
Other expenses |
(210,638) |
|
(186,697) |
|
(213,078) |
(i) A major portion related to: (i) inflation adjustment of lawsuits, in
the amount of R$ 146,642 - see Note 25 (R$ 111,949 as of December 31, 2021); and (ii) inflation adjustment on loans and financing
and authorizations, in the amount of R$ 166,411 (R$ 114,980 on December 31, 2021).
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
34. Foreign exchange variations, net
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
Income |
|
|
|
|
|
Loans and financing (i) |
47,552 |
|
215,262 |
|
47,552 |
Suppliers |
34,586 |
|
13,190 |
|
34,586 |
Swap |
28,006 |
|
275,836 |
|
28,006 |
Other |
30,923 |
|
16,640 |
|
30,923 |
|
141,067 |
|
520,928 |
|
141,067 |
Expenses |
|
|
|
|
|
Loans and financing (i) |
(27,984) |
|
(275,724) |
|
(27,984) |
Suppliers |
(21,109) |
|
(20,061) |
|
(21,109) |
Swap (ii) |
(47,460) |
|
(215,262) |
|
(47,460) |
Other |
(39,507) |
|
(9,222) |
|
(39,507) |
|
(136,060) |
|
(520,269) |
|
(136,060) |
|
|
|
|
|
|
Foreign exchange variations, net |
5,007 |
|
659 |
|
5,007 |
(ii) It mainly refers to foreign exchange variation on loans and financing in foreign currency.
(ii) Referring to derivative financial instruments to mitigate risks of foreign exchange variations
related to foreign currency debts (Note 39).
35. Expense with current and deferred income
tax and social contribution
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
Current income tax and social contribution taxes |
|
|
|
|
|
Income tax for the period |
(247,492) |
|
9,697 |
|
(247,492) |
Social contribution for the period |
(85,452) |
|
26,538 |
|
(85,452) |
Tax incentive – SUDENE/SUDAM (i) |
157,254 |
|
167,118 |
|
157,254 |
|
(175,690) |
|
203,353 |
|
(175,690) |
Deferred income tax and social contribution |
|
|
|
|
|
Deferred income tax |
(3,512) |
|
(255,972) |
|
95,583 |
Deferred social contribution |
(6,450) |
|
(93,432) |
|
29,954 |
|
(9,962) |
|
(349,404) |
|
125,537 |
Provision for contingencies of income tax and social contribution |
|
|
|
|
|
- |
- |
- |
|
(9,962) |
|
(349,404) |
|
125,537 |
|
(185,652) |
|
(146,051) |
|
(50,153) |
The reconciliation of income tax expense and social contribution calculated
by applying the combined tax rates with the values reflected in the result is shown below:
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Profit before income tax and social contribution |
1,856,407 |
|
3,103,225 |
|
1,720,908 |
Combined tax rate |
34% |
|
34% |
|
34% |
Combined tax rate on income tax and social contribution |
|
|
|
|
|
(631,178) |
(1,055,097) |
(585,109) |
(Additions) / deletions: |
|
|
|
|
|
Equity in earnings |
(188,276) |
|
(3,935) |
|
(20,939) |
Permanent additions and exclusions: |
|
|
|
|
|
Non-taxable revenues |
35,508 |
|
135,465 |
|
152,277 |
Non-deductible expenses for tax purposes |
(39,236) |
|
(53,505) |
|
(120,682) |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Tax incentive – SUDENE/SUDAM (i) |
157,254 |
|
167,118 |
|
157,254 |
Tax benefit related to interest on shareholders’ equity |
476,000 |
|
356,150 |
|
476,000 |
Sale I – Systems (formerly FiberCo) (ii) |
- |
|
(335,935) |
|
- |
IR/CS credit on Selic related do tax overpayment (iii) |
- |
|
534,804 |
|
- |
Reversal of Provision for IR/CS - TIM Nordeste (iv) |
- |
|
87,565 |
|
- |
Tax losses and temporary differences not recognized |
- |
|
- |
|
(129,954) |
Other amounts |
4,276 |
|
21,319 |
|
21,000 |
|
|
|
|
|
|
|
445,526 |
|
909,046 |
|
534,956 |
Income tax and social contribution recorded in income (loss) for the year |
(185,652) |
|
(146,051) |
|
(50,153) |
Effective rate |
10.00% |
|
4.71% |
|
2.91% |
(i) As
mentioned in Note 27 c.3, in order for investment grants not to be computed 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 Company has tax benefits that fall under
these rules.
(ii) Refer to deferred taxes on goodwill written-off, according to the
sale transaction described in Note 1.2.2, which took place in November 2021 between TIM S.A. and IHS.
(iii) As
mentioned in note 9, in September 2021, the Federal Supreme Court (STF), with general repercussions, established an understanding for
the non-levy of Corporate Income Tax (IRPJ) and Social Contribution (CSLL) on the monetary restatement using the SELIC rate in cases of
undue payment. Although the aforementioned decision is still pending publication, as well as the specific TIM lawsuit is still pending
judgment, TIM recorded its best estimate in the amount of R$ 534.8 million, since the likelihood of a favorable outcome for the Company
becomes probable.
(iv) In
the second quarter of 2021, there was a positive impact of R$ 87 million arising from the write-off of assets and reversal of the
provision for income tax and social contribution, set up in 2009, due to the partial success in an administrative proceeding related to
the merger of the company TIM Nordeste by TIM Celular.
36. Earnings per share
The balances presented below represent the Parent Company and Consolidated
amounts.
(a) Basic
Basic earnings per share are
calculated by dividing profit attributable to Company’s shareholders by the weighted average number of shares issued during the
year.
|
|
2022 |
|
2021 |
|
|
|
|
|
Income attributable to the shareholders of the company |
|
1,670,755 |
|
2,957,174 |
|
|
|
|
|
Weighted average number of common shares issued (thousands) |
|
2,419,961 |
|
2,420,314 |
|
|
|
|
|
Basic earnings per share (expressed in R$) |
|
0.69 |
|
1.22 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(b) Diluted
Diluted earnings per share are calculated by adjusting the weighted average
amount of shares outstanding to assume the conversion of all potential dilutive shares.
|
|
2022 |
|
2021 |
|
|
|
|
|
Income attributable to Company's shareholders |
|
1,670,755 |
|
2,957,174 |
|
|
|
|
|
Weighted average number of common shares issued (thousands) |
|
2,420,245 |
|
2,420,638 |
|
|
|
|
|
Diluted earnings per share (in R$) |
|
0.69 |
|
1.22 |
The calculation of diluted earnings per share considered 284 thousands
(324 thousands on December 31, 2021) shares related to the long-term, as mentioned in Note 28.
37. Balances and transactions with related parties
The balances of transactions with Telecom Italia Group companies, subsidiaries
and associated companies are as follows:
Assets
|
|
Parent company |
|
Consolidated |
|
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
|
Telecom Italia Sparkle (i) |
|
2,770 |
|
1,414 |
|
2,770 |
Gruppo Havas (vi) |
|
- |
|
83,613 |
|
- |
TI Sparkle (iii) |
|
1,494 |
|
5,084 |
|
1,494 |
TIM Brasil (vii) |
|
22,790 |
|
23,069 |
|
22,790 |
Telecom Italia S.p.A. (ii) |
|
2,086 |
|
1,502 |
|
2,086 |
I-Systems (ix) |
|
14,762 |
|
5,879 |
|
14,762 |
Cozani (x) |
|
456,185 |
|
- |
|
- |
Other |
|
674 |
|
674 |
|
674 |
Total |
|
500,761 |
|
121,235 |
|
44,576 |
|
Liabilities |
|
Parent company |
|
Consolidated |
|
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
|
Telecom Italia S.p.A. (ii) |
|
85,845 |
|
71,288 |
|
85,845 |
Telecom Italia Sparkle (i) |
|
4,436 |
|
3,689 |
|
4,436 |
TI Sparkle (iii) |
|
9,445 |
|
10,205 |
|
9,445 |
TIM Brasil (iv) |
|
10,858 |
|
6,558 |
|
10,858 |
|
|
|
|
|
|
|
Vivendi Group (v) |
|
3,457 |
|
1,238 |
|
3,457 |
Gruppo Havas (vi) |
|
65,618 |
|
19,794 |
|
65,618 |
I-Systems (viii) |
|
49,391 |
|
31,596 |
|
49,391 |
Cozani (x) |
|
383,621 |
|
- |
|
- |
Other |
|
22,210 |
|
4,585 |
|
22,210 |
|
|
|
|
|
|
|
Total |
|
634,881 |
|
148,953 |
|
251,260 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
|
|
Revenue |
|
|
Parent Company |
|
Consolidated |
|
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
|
Telecom Italia S.p.A. (ii) |
|
2,874 |
|
1,112 |
|
2,874 |
Telecom Italia Sparkle (i) |
|
3,887 |
|
353 |
|
3,887 |
TI Sparkle (iii) |
|
1,968 |
|
3,347 |
|
1,968 |
I-Systems (ix) |
|
36,090 |
|
5,881 |
|
36,090 |
Cozani (x) |
|
459,797 |
|
- |
|
- |
Total |
|
504,616 |
|
10,693 |
|
44,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost / Expense |
|
|
Parent Company |
|
Consolidated |
|
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
|
Telecom Italia S.p.A. (ii) |
|
108,792 |
|
105,137 |
|
108,792 |
Telecom Italia Sparkle (i) |
|
12,409 |
|
19,219 |
|
12,409 |
TI Sparkle (iii) |
|
18,095 |
|
20,533 |
|
18,095 |
Vivendi Group (v) |
|
4,319 |
|
1,271 |
|
4,319 |
Gruppo Havas (vi) |
|
382,275 |
|
206,349 |
|
382,275 |
I-Systems (viii) |
|
365,875 |
|
31,596 |
|
365,875 |
Cozani (x) |
|
392,133 |
|
- |
|
- |
Other |
|
16,983 |
|
22,597 |
|
16,983 |
Total |
|
1,300,881 |
|
406,702 |
|
908,748 |
|
|
|
|
|
|
|
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(i) amounts refer to roaming, Value-Added
Services – VAS, transfer of means and international voice-wholesale.
(ii) The amounts refer to international
roaming, technical assistance and value added services – VAS and licensing for the use of a registered trademark, granting TIM. S.A.
the right to use the “TIM” brand upon payment of royalties in the amount of 0.5% of the Company’s net revenue, with
payment made on a quarterly basis.
(iii) Values refer to link rental,
EILD rental, media rental (submarine cable) and signaling service.
(iv) Mainly refer to judicial deposits
made on account of labor claims and transfers of employees.
(v) the values refer to Value Added Services-VAS.
(vi) From the values described above,
in the result, they refer to advertising services, of which R$ 345,597 (R$ 181,440 on December 31, 2021) are related to media
transfers.
(vii) Refer to judicial deposits
made on account of labor claims.
(viii) The amounts refer to fiber
infrastructure capacity services.
(ix) The amounts are related to services
provided by TIM S.A., mainly related to network operation and maintenance in the scope of Transition Service Agreement, signed when closing
the transaction.
(x) Refer to contracts related to
the operation of telecommunications services, including interconnection, roaming, assignment of means and use of radio frequencies, in
addition to co-billing agreements.
The company has social investment actions that include donations,
projects developed by the Tim Institute and sponsorships. As of December 31, 2022, the Company invested R$ 5,787 (R$ 9,147 on
December 31, 2021).
Sales and purchases involving related parties are carried out
at prices equivalent to those practiced in the market. Outstanding balances at the end of the year are not linked to guarantees and are
settled in cash. There were no guarantees provided or received in connection with any accounts receivable or payable involving related
parties.
Balances on equity accounts are recorded in the groups: trade accounts
receivable, prepaid expenses, suppliers and other current assets and liabilities.
38. Management remuneration
The key management personnel includes: statutory directors and the Board
of Directors. The payment of key management personnel for the provision of their services is presented below:
|
2022 |
|
2021 |
|
|
|
|
Short-term benefits |
35,717 |
|
31,494 |
Other long-term benefits |
- |
|
1,052 |
Share-based remuneration |
33,926 |
|
15,176 |
|
69,643 |
|
47,722 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
39. Financial instruments and risk management
Among the financial instruments registered in the Company, there are derivatives
that are financial assets or liabilities measured at fair value through profit or loss. At each balance sheet date such assets/liabilities
are measured at their fair value. Interest, monetary correction, foreign exchange variation and variations arising from the fair value
measurement, where applicable, shall be recognized in the result when incurred, under the line of financial revenues or expenses.
Derivatives are initially recognized at fair value on the date the
derivative agreement is entered into, and are subsequently remeasured at fair value. The Company does not apply “hedge accounting”.
The
company carries out transactions with derivative financial instruments, without speculative purposes, only with the aim of i) reducing
risks related to foreign exchange variation and ii) managing interest rate exposure. The Company's derivative financial instruments are
specifically represented by swap and options contracts.
The
company's financial instruments are being presented in compliance with IFRS 9 / CPC 48.
The
main risk factors that the company is exposed to are as follows:
(i)
Exchange rate risks
The exchange rate risks relate to the possibility of the Company computing
i) losses derived from fluctuations in exchange rates by increasing the balances of debt with loans and financing obtained in the market
and the corresponding financial expenses or ii) increase in cost in commercial contracts that have some type of link to foreign exchange
variation. In order for these types of risks to be mitigated, the company performs: swap contracts with financial institutions with the
aim of canceling the impacts arising from the fluctuation of exchange rates on the balance sheet and financial result and commercial contracts
with foreign exchange band clauses with the aim of partially mitigating foreign exchange risks or derivative financial instruments to
reduce the remaining risks of foreign exchange exposure in commercial contracts.
As of December 31, 2022 and 2021, the Company's loans and financings indexed
to the variation of foreign currencies are fully protected, both in terms and in value, by swap contracts. Gains or losses on these swap
contracts are recorded in the company's earnings.
(ii)
Interest rate risks
Interest rate risks relate to:
The possibility of variations in the fair value of the loans obtained by
the company indexed to TJLP, IPCA, fixed rate and/or TLP, when such rates pose a risk to the company’s perspective of not corresponding
proportionally to the rates relating to Interbank Certificates of Deposit (CDI). The Company opted to hedge the exposure linked to the
IPCA arising from the issuance of debentures, financing to BNDES (FINAME) and BNB and the exposure to a fixed rate linked to the debt
with BNP Paribas, all of them until maturity.
The possibility of an unfavorable movement in interest rates would cause
an increase in the financial expenses of the Company, as a result of the share of the debt and the passive positions that the Company
has in swap contracts linked to floating interest rates (percentage of the CDI). However, on December 31, 2022 and December 31,
2021, the Company maintains its financial resources applied to Interbank Certificates of Deposit (CDI), which substantially reduces this
risk.
(iii)
Credit risk inherent in the provision of services
The risk is related to the possibility of the company computing
losses derived from the inability of the subscribers to honor the payments of the invoiced amounts. To minimize this risk, the
company preventively performs credit analysis of all orders imputed by the sales areas and monitors the accounts receivable of
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 on December 31, 2022 and
December 31, 2021 or revenues from services rendered during the years ended December 31, 2022 and December 31, 2021.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(iv)
Credit risk inherent in the sale of telephone sets and prepaid telephone cards
The group's policy for the sale of telephone devices and the distribution
of prepaid telephone cards is directly related to the credit risk levels accepted during the normal course of business. The selection
of partners, the diversification of the portfolio of accounts receivable, the monitoring of loan conditions, the positions and limits
of orders established for traders, the formation of collateral are procedures adopted by the company to minimize possible collection problems
with its trading partners. There are no customers who contributed more than 10% of merchandise sales revenue during the years ended December 31,
2022 and December 31, 2021. There are no customers who contributed more than 10% of the net accounts receivable from the sale of
goods on December 31, 2022 and December 31, 2021.
(v) Liquidity
risk
Liquidity risk arises from the need for cash before the obligations assumed.
The company structures the maturities of its non-derivative financial instruments and their respective derivative financial instruments
so as not to affect liquidity. See Notes 17 and 21.
The liquidity and cash flow management of the Company are carried out daily
to ensure that the operational cash generation and prior fund raising, when necessary, are sufficient to maintain its schedule of operational
and financial commitments.
All financial investments of the Company have daily liquidity and the Management
may, even in specific cases: i) revise the dividend payment policy; ii) issue new shares; and/or iii) sell assets to increase liquidity.
(vi)
Financial credit risk
The cash flow forecast is performed by the Finance Executive Board, which
monitors the continuous forecasts of the liquidity requirements to ensure that the Company has enough cash to satisfy its operating needs.
This forecast takes into account investment plans, debt financing, compliance with contractual clauses, compliance with internal goals
and, if applicable, external regulatory or legal requirements.
The risk is related to the possibility of the Company posting losses resulting
from difficulties in the redemption of short-term interest earning bank deposits and swap contracts, due to possible insolvency of counterparties.
The company minimizes the risk associated with these financial instruments by maintaining operations only with financial institutions
of recognized market strength, in addition to following a policy that establishes maximum levels of risk concentration per financial institution.
Fair value of derivative financial instruments:
The derivative financial instruments are presented below:
|
|
2022 |
|
2021 |
|
|
Assets |
Liabilities |
|
Assets |
Liabilities |
|
|
|
|
|
|
|
Derivative transactions |
|
276,951 |
393,372 |
|
198,027 |
208,787 |
Other derivatives (i) |
|
624,671 |
- |
|
457,892 |
- |
|
|
901,622 |
393,372 |
|
655,919 |
208,787 |
|
|
|
|
|
|
|
Current portion |
|
(239,189) |
(343,142) |
|
(134,292) |
(194,837) |
Non-current portion |
|
662,433 |
50,230 |
|
521,627 |
13,950 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(i) Other derivatives are instruments of
share subscription options represent the option of the Company to subscribe 5.52% of the shares of C6 capital, where the Group/Company
paid a share subscription premium in the amount of R$ 23.9 million. As required by IFRS 9 / CPC 48, the financial instrument
must be valued at its fair value that on December 31, 2022 and December 31, 2021 corresponds to R$ 624 million and R$ 458 million,
respectively. The impact of the mark-to-market of the stock conversion option calculated, of R$ 600.1 million, represents the difference
in the fair value of the option less the amount paid for the share subscription premium. This financial instrument was measured at fair
value and will be subsequently revaluated and recorded in the Company’s results for the year, considering the arbitration risks
disclosed in Note 29.
The long-term derivative financial instruments on December
31, 2022 are due in accordance with the following schedule:
|
|
Assets |
|
|
|
2024 |
|
32,141 |
2025 |
|
630,292 |
>2026 |
|
- |
|
|
662,433 |
Non-derivative financial liabilities are substantially composed of accounts
payable with suppliers, dividends payable and other obligations, the maturity of which will occur in the next 12 months, except for loans
and financing and leases, the nominal flows of payments of which are disclosed in Notes 21 and 17.
Financial instruments measured at fair value:
|
2022 |
|
Level 1 |
|
Level 2 |
|
TOTAL |
|
|
|
|
|
|
Total assets |
2,203,564 |
|
901,623 |
|
3,105,187 |
|
|
|
|
|
|
Financial assets at fair value through profit or loss |
2,203,564 |
|
901,623 |
|
3,105,187 |
|
|
|
|
|
|
Derivative financial instruments |
- |
|
276,952 |
|
276,952 |
Other derivatives |
|
|
624,671 |
|
624,671 |
Marketable securities |
2,203,564 |
|
- |
|
2,203,564 |
|
|
|
|
|
|
Total liabilities |
- |
|
393,372 |
|
393,372 |
|
|
|
|
|
|
Financial liabilities at fair value through profit or loss |
- |
|
393,372 |
|
393,372 |
|
|
|
|
|
|
Derivative financial instruments |
- |
|
393,372 |
|
393,372 |
|
|
|
|
|
|
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
|
2021 |
|
Level 1 |
|
Level 2 |
|
TOTAL |
|
|
|
|
|
|
Total assets |
4,579,528 |
|
655,919 |
|
5,235,447 |
|
|
|
|
|
|
Financial assets at fair value through profit or loss |
4,579,528 |
|
655,919 |
|
5,235,447 |
|
|
|
|
|
|
Derivative financial instruments |
- |
|
198,027 |
|
198,027 |
Other derivatives |
- |
|
457,892 |
|
457,892 |
Marketable securities |
4,579,528 |
|
- |
|
4,579,528 |
|
|
|
|
|
|
Total liabilities |
- |
|
208,787 |
|
208,787 |
|
|
|
|
|
|
Financial liabilities at fair value through profit or loss |
- |
|
208,787 |
|
208,787 |
|
|
|
|
|
|
Derivative financial instruments |
- |
|
208,787 |
|
208,787 |
The fair value of financial instruments traded on active markets is based
on market prices quoted on the balance sheet date. A market is seen as active if quoted prices are ready and regularly available from
a stock exchange, distributor, broker, industry group, pricing service, or regulatory agency, and those prices represent real market transactions
and that occur regularly on purely commercial basis. These instruments are included in Level 1. The instruments included in Level 1 mainly
comprise the equity investments of bank certificates of deposit (CDB) and committed classified as securities for trading.
The fair value of financial instruments that are not traded on active markets
(e.g. over-the-counter derivatives) is determined through the use of valuation techniques. These valuation techniques maximize the use
of data adopted by the market where it is available and rely as little as possible on entity-specific estimates. If all relevant information
required for the fair value of an instrument is adopted by the market, the instrument is included in Level 2.
If relevant information is not based on data adopted by the market, the
instrument is included in Level 3.
Specific evaluation techniques used to measure the financial instruments
include:
| · | Quoted market prices or quotes of financial institutions
or brokers for similar instruments. |
| · | The fair value of interest rate swaps is calculated
by the present value of estimated future cash flows based on the yield curves adopted by the market. |
| · | Other techniques, such as analysis of discounted
cash flows, available data of the last relevant transaction and analysis of results based on multiples of similar companies, are used
to determine the fair value of the remaining financial instruments. |
The fair values of currency derivative financial instruments and interest
rates of the Company were determined by means of future cash flows (active and passive position) using the contracted conditions and bringing
these flows to present value through discounts for the use of future interest rate disclosed by market sources. Fair values were estimated
at a specific time, based on available information and own evaluation methodologies.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Financial assets and liabilities by category
The financial instruments of the company by category can be summarized as follows:
December 31, 2022
|
Measured
at amortized cost |
|
Fair
value through profit or loss |
|
Total |
|
|
|
|
|
|
Assets,
as per balance sheet |
8,169,573 |
|
3,105,187 |
|
11,274,760 |
|
|
|
|
|
|
Derivative
financial instruments |
- |
|
276,952 |
|
276,952
|
Other
derivatives |
- |
|
624,671 |
|
624,671
|
Trade
accounts receivable and other accounts receivable, excluding prepayments |
3,978,135 |
|
- |
|
3,978,135 |
Marketable
securities |
- |
|
2,203,564 |
|
2,203,564
|
Cash
and cash equivalents |
2,548,713 |
|
- |
|
2,548,713
|
Leases |
238,646 |
|
- |
|
238,646
|
Judicial
deposits |
1,377,560 |
|
- |
|
1,377,560 |
Other
amounts recoverable |
26,519 |
|
- |
|
26,519 |
|
|
|
|
|
|
|
Measured
at amortized cost |
|
Fair
value through profit or loss |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities,
as per balance sheet |
22,848,540 |
|
393,372 |
|
23,241,912 |
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and financing |
4,969,825
|
|
|
|
4,969,825
|
Derivative
financial instruments |
-
|
|
393,372
|
|
393,372
|
Suppliers
and other obligations, excluding legal obligations |
4,385,356 |
|
- |
|
4,385,356 |
Lease
liabilities |
12,831,865
|
|
-
|
|
12,831,865
|
Dividends
and interest on shareholders' equity payable |
661,494 |
|
- |
|
661,494 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
December 31, 2021
|
Measured
at amortized cost |
|
Fair
value through profit or loss |
|
Total |
|
|
|
|
|
|
Assets,
as per balance sheet |
9,472,377 |
|
5,235,447 |
|
14,707,824 |
|
|
|
|
|
|
Derivative
financial instruments |
- |
|
198,027 |
|
198,027 |
Other
derivatives |
- |
|
457,892 |
|
457,892 |
Trade
accounts receivable and other accounts receivable, excluding prepayments |
3,253,207 |
|
- |
|
3,253,207 |
Marketable
securities |
- |
|
4,579,528 |
|
4,579,528 |
Cash
and cash equivalents |
5,228,615 |
|
- |
|
5,228,615 |
Leases |
243,121 |
|
- |
|
243,121 |
Judicial
deposits |
718,773 |
|
- |
|
718,773 |
Other
amounts recoverable |
28,661 |
|
- |
|
28,661 |
|
|
|
|
|
|
|
Measured
at amortized cost |
|
Fair
value through profit or loss |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities,
as per balance sheet |
16,709,988 |
|
208,787 |
|
16,918,775 |
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and financing |
3,845,465 |
|
- |
|
3,845,465 |
Derivative
financial instruments |
- |
|
208,787 |
|
208,787 |
Suppliers
and other obligations, excluding legal obligations |
3,267,404 |
|
- |
|
3,267,404 |
Lease
liabilities |
9,063,539
|
|
- |
|
9,063,539
|
Dividends
and interest on shareholders' equity payable |
533,580 |
|
- |
|
533,580 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Regular purchases and sales of financial assets are recognized on the trading
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 fair value are recorded in the profit and loss for the year, in the financial revenues and expenses’ group.
Financial
risk hedge policy adopted by the Company
The Company's policy establishes that mechanisms must be adopted to protect
against financial risks arising from the contracting of financing in foreign currency or indexed to the interest rate, in order to manage
said exposure.
The contracting of derivative financial instruments against foreign exchange
exposure shall occur simultaneously with the contracting of the debt that gave rise to such exposure. The level of coverage to be contracted
for such foreign exchange exposures shall be 100% of the risk, both in terms and in value. To cover interest rates, it is up to the Company
to elect or not to contract a hedging mechanism, as provided for in the internal policies.
On December 31, 2022, there are no margins or guarantees applied to transactions
with derivative financial instruments of the Company.
The selection criteria of financial institutions follow parameters that
take into account the rating provided by renowned risk analysis agencies, shareholders’ equity and levels of concentration
of operations and resources.
The operations with derivative financial instruments contracted by the
company and in force on December 31, 2022 and December 31, 2021 are shown in the following table:
December 31, 2022
|
|
COUNTERPARTY |
|
|
% Coverage |
AVERAGE SWAP RATES |
Currency |
Type of SWAP |
Debt |
SWAP |
Total Debt |
Total swap
(Long position)¹ |
|
Long position |
Short position |
USD |
LIBOR x DI |
KFW/
Finnvera |
JP Morgan and Bank of America |
175,589 |
175,589 |
100% |
LIBOR 6M + 0.75% p.a. |
79.00–92.59% CDI |
BRL |
IPCA x DI |
BNB |
XP and ITAU |
249,400 |
249,166 |
100% |
IPCA + 1.22–1.49% p.a. |
67.73–69.50% CDI |
USD |
PRE x DI |
The Bank of Nova Scotia |
Scotiabank |
1,568,683 |
1,569,829 |
100% |
1.73–3.80% p.a. |
CDI + 1.05–108.95% CDI |
BRL |
PRE x DI |
BNP Paribas |
BNP Paribas |
515,265 |
517,727 |
100% |
8.34% p.a. |
CDI + 1.07% |
BRL |
IPCA x DI |
DEBENTURE |
ITAU |
1,796,843 |
1,796,843 |
100% |
IPCA + 4.17% p.a. |
CDI + 0.95% |
BRL |
IPCA x DI |
BNDES |
XP |
394,139 |
394,139 |
100% |
IPCA + 4.23% p.a. |
96.95% CDI |
|
|
|
|
|
|
|
|
|
|
1 In certain swap contracts, active tip includes the cost of income tax (15%). After
related taxes, coverage remains at 100%.
December 31, 2021
|
|
COUNTERPARTY |
|
|
|
% Coverage |
AVERAGE SWAP RATES |
Currency |
Type of SWAP |
Debt |
SWAP |
Total Debt |
Total swap
(Long position)¹ |
|
Long position |
Short position |
USD |
LIBOR x DI |
KFW/
Finnvera |
JP Morgan and Bank of America |
282,474 |
282,474 |
100% |
LIBOR 6M + 0.75% p.a. |
79.00–92.59% CDI |
USD |
PRE x DI |
BNP Paribas |
BNP Paribas |
428,793 |
429,247 |
100% |
3.32% p.a. |
155% CDI |
USD |
PRE x DI |
The Bank of Nova Scotia |
Scotiabank |
559,650 |
559,933 |
100% |
1.73% p.a. |
CDI + 1.05% |
BRL |
PRE x DI |
BNP Paribas |
BNP Paribas |
515,166 |
517,843 |
100% |
8.34% p.a. |
CDI + 1.07% |
BRL |
IPCA x DI |
DEBENTURE |
ITAU |
1,696,999 |
1,696,999 |
100% |
IPCA + 4.17% p.a. |
CDI + 0.95% |
BRL |
IPCA x DI |
BNDES |
XP |
396,281 |
396,281 |
100% |
IPCA + 4.23% p.a. |
96.95% CDI |
|
|
|
|
|
|
|
|
|
1 In certain swap contracts, active tip includes the cost of income tax (15%). After
related taxes, coverage remains at 100%.
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
In March 2022, the Company entered into a call option transaction in the
total notional amount of USD 63 million. The purpose of the operation is to hedge the Company from the effects of foreign exchange
variation arising from its commercial contracts starting at R$ 4.96/USD 1.00. The operation consists of 9 options in the amount
of US$ 7 million each and with maturity from April to December 2022. The options were acquired for the amount of R$ 17.1
million. The operation was completed on December 31, 2022.
Position showing 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 performed considering the variables
CDI, US dollar (USD), Libor and IPCA, individually, in three distinct scenarios (probable, possible and remote), and their respective
impacts on the results obtained.
Our assumptions basically observed the individual effect of the CDI, USD,
Libor and IPCA variation used in the transactions as the case may be, and for each scenario the following percentages and quotes were
used:
Sensitivity scenario |
Fair value in USD, EUR, BRL and IPCA (1) |
A) ∆ Accumulated variation in debt |
Fair value of the active tip of the swap (+) |
Fair value of the passive tip of the swap (-) |
Swap result |
B) ∆ Accumulated variation in swap |
C) Final Result (B-A) |
|
|
|
|
|
|
|
|
|
|
Dec 2022 |
4,006,850 |
- |
4,006,850 |
(4,123,508) |
(116,658) |
- |
- |
|
|
|
|
|
|
|
|
|
CDI |
probable |
4,006,850 |
- |
4,006,850 |
(4,123,508) |
(116,658) |
- |
- |
possible |
4,005,860 |
(989) |
4,005,860 |
(4,150,476) |
(144,616) |
(27,957) |
(26,968) |
remote |
4,004,918 |
(1,931) |
4,004,918 |
(4,176,904) |
(171,986) |
(55,327) |
(53,396) |
USD |
probable |
4,006,850 |
- |
4,006,850 |
(4,123,508) |
(116,658) |
- |
- |
possible |
4,430,671 |
423,822 |
4,430,671 |
(4,123,508) |
307,163 |
423,822 |
- |
remote |
4,854,493 |
847,644 |
4,854,493 |
(4,123,508) |
730,985 |
847,644 |
- |
Libor |
probable |
4,006,850 |
- |
4,006,850 |
(4,123,508) |
(116,658) |
- |
- |
possible |
4,009,675 |
2,826 |
4,009,675 |
(4,123,508) |
(113,833) |
2,826 |
- |
remote |
4,012,501 |
5,652 |
4,012,501 |
(4,123,508) |
(111,007) |
5,652 |
- |
IPCA |
probable |
4,006,850 |
- |
4,006,850 |
(4,123,508) |
(116,658) |
- |
- |
possible |
3,883,686 |
(123,164) |
3,883,686 |
(4,123,508) |
(239,822) |
(123,164) |
- |
remote |
3,769,695 |
(237,154) |
3,769,695 |
(4,123,508) |
(353,813) |
(237,154) |
- |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
(1) (KFW Finnvera, Scotia, BNB, BNP Paribas, Debenture and BNDES.
Risk variable |
Sensitivity scenario |
CDI |
USD |
Libor |
IPCA |
|
|
|
|
|
|
|
|
|
|
|
|
CDI |
Probable |
13.65% |
5.2177 |
5.15% |
5.78% |
Possible |
17.06% |
5.2177 |
5.15% |
5.78% |
Remote |
20.48% |
5.2177 |
5.15% |
5.78% |
USD |
Probable |
13.65% |
5.2177 |
5.15% |
5.78% |
Possible |
13.65% |
6.5221 |
5.15% |
5.78% |
Remote |
13.65% |
7.8266 |
5.15% |
5.78% |
Libor |
Probable |
13.65% |
5.2177 |
5.15% |
5.78% |
Possible |
13.65% |
5.2177 |
6.44% |
5.78% |
Remote |
13.65% |
5.2177 |
7.73% |
5.78% |
IPCA |
Probable |
13.65% |
5.2177 |
5.15% |
5.78% |
Possible |
13.65% |
5.2177 |
5.15% |
7.23% |
Remote |
13.65% |
5.2177 |
5.15% |
8.67% |
As the Company has derivative financial instruments for the purposes of
protection of its respective financial liabilities, the changes in the scenarios are accompanied by the respective object of protection,
thus showing that the effects related to the exposure generated in the swaps will have their counterpart reflected in the debt.
For these transactions, the Company discloses the fair value of the object (debt) and the protective derivative financial instrument on
separate lines, as demonstrated above in the sensitivity analysis demonstration table, in order to report the company's net exposure in
each of the scenarios mentioned.
It is noteworthy that the operations with derivative financial instruments
contracted by the company have as sole objective the patrimonial protection. In this way, an improvement or worsening in their respective
market values will be equivalent to an inverse movement in the corresponding portions of the value of the financial debt contracted, object
of the derivative financial instruments of the company.
The sensitivity analyses for derivative financial instruments in force
on December 31, 2022 were carried out considering, basically, the assumptions related to changes in market interest rates and the change
in the US dollar used in swap contracts. The use of these assumptions in the analysis is due exclusively to the characteristics of derivative
financial instruments, which have exposure only to changes in interest and exchange rates.
Chart of gains and losses with derivatives during the year
|
|
2022 |
|
2021 |
Net income from derivative operations |
|
(364,638) |
|
(87,603) |
Income (loss) from operations with other derivatives |
|
160,414 |
|
285,009 |
Capital Management
The Group's objectives in managing its capital are to safeguard its business
continuity capacity to offer return to shareholders and benefits to the other stakeholders besides maintaining a capital structure to
reduce this cost. To maintain or adjust the group's capital structure, management may review the dividend payment policy, return capital
to shareholders, or issue new shares or sell assets to reduce, for example, the level of debt. The financial leverage ratios on December
31, 2022 and December 31, 2021 can be summarized as follows:
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
|
Parent Company |
|
Consolidated |
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Total loans and derivatives (Note 21 and 39) |
4,461,574 |
|
3,398,333 |
|
4,461,574 |
Leases - Liabilities (Note 17) |
9,948,873 |
|
9,063,539
|
|
12,831,865 |
Leases - Assets (Note 17) |
(238,646) |
|
(243,121)
|
|
(238,646) |
Less: Cash and cash equivalents (note 4) |
(1,785,100) |
|
(5,228,615) |
|
(2,548,713) |
FIC (note 5) |
(2,203,564) |
|
(4,568,020) |
|
(2,203,564) |
Net debt |
10,183,137 |
|
2,422,116 |
|
12,302,516 |
Other derivatives (Note 39) |
624,671 |
|
457,892 |
|
624,671 |
Financing of 5G License |
895,094 |
|
843,020 |
|
895,094 |
Adjusted net debt |
11,702,902 |
|
3,723,028 |
|
13,822,281 |
EBITDA (i) (last 12 months) |
8,781,580 |
|
9,447,727 |
|
9,987,091 |
|
|
|
|
|
|
Leverage ratio |
1.33 |
|
0.39 |
|
1.38 |
|
|
|
|
|
|
Reconciliation, net profit for the year: |
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year |
1,670,755 |
|
2,957,174 |
|
1,670,755 |
Finance income (cost), net |
1,193,560 |
|
652,806 |
|
1,439,008 |
Income tax and social contribution |
185,652 |
|
146,051 |
|
50,153 |
Depreciation and amortization |
5,731,613 |
|
5,691,696 |
|
6,827,175 |
LAJIDA (EBITDA) (i) |
8,781,580 |
|
9,447,727 |
|
9,987,091 |
(i) Lajida: income before interest, taxes, depreciation and amortization.
EBITDA:
Earnings before interest, tax, depreciation and amortization (it is not an accounting metric)
Changes in financial liabilities
Changes in liabilities arising from financing activities such as loans
and financing, lease liabilities lease and financial instruments are presented below:
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Parent Company
|
Loans and financing |
|
Lease liabilities |
|
Derivative financial instruments (Assets) Liabilities |
|
|
|
|
|
|
December 31, 2021 |
3,845,465 |
|
9,063,539 |
|
(447,132) |
Inflows |
1,568,343 |
|
2,195,915 |
|
(166,779) |
Cancellations |
- |
|
(84,915) |
|
- |
Financial expenses |
298,718 |
|
1,072,435 |
|
345,184 |
Foreign exchange variations, net |
(19,567) |
|
- |
|
19,454 |
Payment |
(723,134) |
|
(2,298,101) |
|
(258,978) |
|
|
|
|
|
|
December 31, 2022 |
4,969,825 |
|
9,948,873 |
|
(508,251) |
Consolidated
|
Loans and financing |
|
Lease liabilities |
|
Derivative financial instruments (Assets) Liabilities |
|
|
|
|
|
|
December 31, 2021 |
3,845,465 |
|
9,063,539 |
|
(447,132) |
Inflows |
1,568,343 |
|
2,472,827 |
|
(166,779) |
Cozani acquisition – opening balance 04/30/2022 |
- |
|
2,929,448 |
|
- |
Cancellations |
- |
|
(93,491) |
|
- |
Financial expenses |
298,718 |
|
1,329,839 |
|
345,184 |
Foreign exchange variations, net |
(19,567) |
|
- |
|
19,454 |
Payment |
(723,134) |
|
(2,870,297) |
|
(258,978) |
|
|
|
|
|
|
December 31, 2022 |
4,969,825 |
|
12,831,865 |
|
(508,251) |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Parent Company
|
Loans and financing |
|
Lease liabilities |
|
Derivative financial instruments (Assets) Liabilities |
|
|
|
|
|
|
December 31, 2020 |
2,345,032 |
|
8,378,835 |
|
(465,922) |
Inflows |
3,062,000 |
|
2,041,474 |
|
(296,464) |
Cancellations |
- |
|
(202,379) |
|
- |
Financial expenses |
167,857 |
|
858,260 |
|
148,177 |
Foreign exchange variations, net |
60,463 |
|
- |
|
(60,574) |
Payment |
(1,789,887) |
|
(2,012,651) |
|
227,651 |
|
|
|
|
|
|
December 31, 2021 |
3,845,465 |
|
9,063,539 |
|
(447,132) |
40. Defined benefit pension plans and other
post-employment benefits
|
|
2022 |
|
2021 |
|
|
|
|
|
PAMEC/asset policy and medical plan |
|
5,825 |
|
6,492 |
ICATU, SISTEL and VIVEST
The Company sponsors defined benefit private pension and contribution plans
for a group of employees from the former TELEBRÁS system, which are currently under the administration of ICATU FUNDO MULTIPATROCINADO
and Fundação Sistel de Seguridade Social. In addition to the plans coming from the TELEBRÁS system, there is also
the plan administered by the VIVEST foundation resulting from the incorporation of AES Atimus.
Such supplementary pension plans, as well as medical plans, are briefly
explained below:
PBS assisted (PBS-Tele Celular Sul and PBS-Tele Nordeste Celular): SISTEL
benefit plan with a defined benefit feature. It includes retired employees who were part of the plans sponsored by the companies of the
old TELEBRÁS system;
PBS (PBS Tele Celular Sul and PBS Tele Nordeste Celular): pension plan for
active and assisted employees with defined benefit characteristics. These benefit plans are managed by the ICATU Fundo MULTIPATROCINADO;
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
TIMPREV Plan (South and Northeast): pension plan for active and assisted employees
with defined contribution characteristics. These benefit plans are managed by the ICATU Fundo MULTIPATROCINADO;
Administration agreement: administration agreement for retirement payment
to retirees and pensioners of the company's predecessors. Said plan is managed by ICATU Fundo MULTIPATROCINADO;
PAMEC/Asset Policy: complementary health care plan for retirees of the Company's
predecessors;
AES Telecom: Complementary pension plan managed by Vivest,
which is the responsibility of TIM, due to the acquisition of AES Atimus, a company that belonged to the former Eletropaulo. Currently,
the plan is in the process of Withdrawal of Sponsorship with the National Superintendence of Complementary Pensions (PREVIC).
Fiber medical plan: Provision for maintenance of health plan as 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.
The actuarial position of liabilities and assets related to retirement
and health care plans, on December 31, 2022, in accordance with the rules provided for by CPC 33/IAS 19 is presented below.
a) Effects on the base date of December 31:
|
Plans |
Total |
|
PBS |
PBS Assisted |
Administration agreement |
PAMEC/
Asset Policy |
AES Telecom |
Medical plan |
2022 |
2021 |
|
Reconciliation of assets and liabilities |
(*) |
|
(*) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of the actuarial obligations |
35,189 |
8,624 |
105 |
776 |
12,536 |
3,210 |
60,440 |
66,167 |
Fair value of the plan assets |
(54,337) |
(14,977) |
(360) |
- |
(10,697) |
- |
(80,371) |
(83,133) |
Present value of the obligations exceeding the fair value of the assets |
(19,148) |
(6,353) |
(255) |
776 |
1,839 |
3,210 |
(19,931) |
(16,966) |
|
|
|
|
|
|
|
|
|
Amount recognized in other comprehensive income |
7,983 |
1,674 |
203 |
- |
- |
- |
9,860 |
2,495 |
Net actuarial liabilities/(assets) |
(11,165) |
(4,679) |
(52) |
776 |
1,839 |
3,210 |
(10,071) |
(14,471) |
(*) No asset was recognized by the sponsors, due to the impossibility
of reimbursing this surplus, and the fact that the sponsor’s contributions will not be reduced in the future.
b) Changes in net actuarial liabilities (assets)
|
Plans |
|
PBS |
PBS Assisted |
Administration agreement |
PAMEC/
Asset Policy |
AES Telecom |
Medical plan |
|
|
|
|
|
|
|
Actuarial liabilities (assets) on 12/31/2021 |
(17,609) |
(3,236) |
(118) |
672 |
2,589 |
3,231 |
Expense (revenue) recognized in income |
(1,552) |
(284) |
(10) |
57 |
234 |
411 |
Contributions of the sponsor |
- |
- |
- |
(44) |
- |
(34) |
Recognized actuarial (gains) or losses |
7,996 |
(1,159) |
76 |
91 |
(984) |
(398) |
Unrecognized actuarial (gains) or losses |
- |
- |
- |
- |
- |
- |
Net actuarial liabilities (assets) on 12/31/2022 |
(11,165) |
(4,679) |
(52) |
776 |
1,839 |
3,210 |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
c) Reconciliation of present value of obligations
|
Plans |
|
PBS |
PBS Assisted |
Administration agreement |
PAMEC/
Asset Policy |
AES Telecom |
Medical plan |
|
|
|
|
|
|
|
Value of obligations on 12/31/2021 |
38,869 |
9,176 |
119 |
672 |
14,100 |
3,231 |
Cost of current service |
4 |
- |
- |
- |
- |
121 |
Interest on actuarial obligation |
3,289 |
769 |
10 |
57 |
1,242 |
290 |
Benefits paid in the year |
(3,103) |
(772) |
(9) |
(44) |
(718) |
(34) |
Contributions paid by participants |
- |
- |
- |
- |
- |
- |
(Gains)/losses in obligations |
(3,870) |
(549) |
(15) |
(198) |
(2,088) |
(398) |
|
|
|
|
|
|
|
Value of obligations on 12/31/2022 |
35,189 |
8,624 |
105 |
487 |
12,536 |
3,210 |
d) Reconciliation of the fair value of the assets
|
Plans |
|
PBS |
PBS Assisted |
Administration agreement |
PAMEC/
Asset Policy |
AES Telecom |
Medical plan |
|
|
|
|
|
|
|
Fair value of assets on 12/31/2021 |
56,478 |
14,739 |
405 |
- |
11,511 |
- |
Benefits paid in the year |
(3,103) |
(772) |
(9) |
- |
(718) |
- |
Actual earnings from assets during the year |
4,841 |
1,257 |
35 |
- |
1,008 |
- |
Company’s contributions / (returns) |
- |
- |
(73) |
- |
- |
- |
Actuarial gain (loss) on plan assets |
(3,879) |
(247) |
2 |
- |
(1,104) |
- |
Fair value of assets on 12/31/2022 |
54,337 |
14,977 |
360 |
- |
10,697 |
- |
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
e) Expenses planned for 2023
|
Plans |
|
PBS |
PBS Assisted |
Administration agreement |
PAMEC/
Asset Policy |
AES Telecom |
Medical plan |
|
|
|
|
|
|
|
Current service cost (with interest) |
7
|
- |
- |
- |
- |
97 |
Interest on actuarial obligations |
3,389 |
769 |
10 |
57 |
923 |
323 |
Earnings expected from assets |
(5,326) |
(1,257) |
(32) |
- |
(737) |
- |
Interest on the effect of the (asset)/liability limit |
1,128 |
284 |
5 |
- |
- |
- |
|
|
|
|
|
|
|
Total unrecognized net expense (revenue) |
(802) |
(204) |
(17) |
57 |
186 |
420 |
Actuarial assumptions adopted in the calculations
The main actuarial assumptions adopted in the calculation were as follows:
Nominal discount rate for the actuarial obligation: |
PBS South: 10.11% / 6.39%;
PBS Nordeste: 10.11% / 6.39%;
CA: 10.11% / 6.39%;
PBS-A: 10.12% / 6.40%;
AES: 10.16% / 6.43%;
PAMEC: 10.11% / 6.39%;
FIBER: 10.14% / 6.42%; |
Salary growth rate - nominal: |
PBS: 3.50%/ 0.00%
CA, PBS-A, AES, PAMEC and FIBER: Not
applicable |
Biometric general mortality table: |
PBS, CA, PAMEC and FIBER: AT-2000 segregated per sex, decreased by 10%;
|
Biometric table of new disability benefit vested: |
PBS and FIBER: Álvaro Vindas;
CA, PBS-A, AES and PAMEC: Not applicable |
Expected turnover rate: |
PBS: Null;
CA, PBS-A, AES and PAMEC: Not applicable;
FIBER: 0.15/ (length of service + 1), being null as of 50 years old |
Probability of retirement: |
PBS and FIBER: 100% at 1st eligibility;
CA, PBS-A, AES and PAMEC: Not applicable |
Estimated long-term inflation rate |
PAMEC and FIBER: 6.60% / 3.00%
|
Determination method |
Projected Unit Credit Method |
41. Insurance
The Company maintains a policy of monitoring the risks inherent in its
operations. As a result, on December 31, 2022, the company had insurance contracts in force to cover operational risks, civil liability,
cyber risks, health, among others. The management of the company understands that the policies represent sufficient amounts to cover any losses. The main assets, liabilities or
interests covered by insurance and their maximum indemnity limits are as follows:
TIM S.A. and TIM S.A. and SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS December 31, 2022 (In thousands of Reais, except as otherwise stated) |
Modalities |
|
Maximum indemnity limits |
Operational Risks |
|
R$550,000 |
General Civil Liability - RCG |
|
R$ 80,000 |
Cyber risks |
|
R$ 30,000 |
Automobile (executive and operational fleet) |
|
R$ 1,000 for optional civil liability (property damage and bodily harm) and R$ 100 for moral damages. |
42. Supplementary information to the cash flow
|
Parent Company |
|
Consolidated |
|
|
2022 |
|
2021 |
|
2022 |
|
|
|
|
|
|
Non-cash transactions
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment and intangible assets - with no effect on cash |
2,026,706 |
|
1,929,392 |
|
2,303,608 |
Additions to intangible assets / acquisition of licenses (i)
|
- |
|
2,682,469 |
|
- |
(i) TIM participated in the 5G Auction of the 2.3GHz, 3.5Ghz and 26Ghz
radio frequency bands for the deployment of the 5th Generation mobile telephony, winning several lots in these radio frequencies. As of
December 2021, Capex recorded for licenses and related obligations is R$ 3,584 million. With the amount of R$ 2,682 million
as a contra entry to authorizations payable and R$ 902 million with impact on cash.
43. Subsequent events
Distribution of interest on shareholders’ equity
The Company’s Board of Directors approved the distribution
of
R$ 455,000 of interest on shareholders’ equity as of December 12, 2022. The payment took place on January 24, 2023, and the
date for identification of shareholders entitled to receive such amounts took place on December 21, 2022.
The payment of the 2nd installment of interest on shareholders’ equity, approved on September
12, 2022, in the amount of R$ 245,000, took place on January 24, 2023.
FISCAL COUNCIL’S OPINION
The Fiscal Council, in compliance with legal
and statutory provisions, examined the Management’s Report and the individual and consolidated Financial Statements of TIM S.A.
("Company"), dated as of December 31st, 2022.
Our examinations were conducted in accordance
with the legal provisions and included the: (i) analysis of the financial statements prepared periodically by the Company; (ii) the Management’s
Proposal for the allocation of results related to the year of 2022 and the distribution of dividends by the Company; (iii) monitoring
of the work done by independent and internal auditors; and (iv) questions about relevant actions and transactions made by the Management.
Based on our examinations, the information provided
and the clarifications received and, also, considering the Company's Independent Auditors’ Report, Ernst & Young Auditores Independentes
S/S (“EY”), unqualified, issued on February 9th, 2023, the Fiscal Council, unanimously, is of the opinion that:
(i) the Management’s Report and the Financial Statements above mentioned, adequately reflect the information contained in them;
and (ii) the Management’s Proposal for the allocation of results related to the year of 2022 and the distribution of dividends by
the Company, are all in conditions to be submitted to the Annual General Shareholders Meeting.
Rio de Janeiro, February 9th, 2023.
WALMIR KESSELI
Chairman of the Fiscal Council |
Anna Maria
Cerentini Gouvêa Guimarães
Member of the Fiscal Council |
ELIAS DE MATOS BRITO
Member of the Fiscal Council |
STATUTORY AUDIT COMMITTEE ANNUAL REPORT
1. About the Committee
The Statutory Audit Committee (“CAE”)
was created by the Extraordinary Shareholders’ Meeting of TIM Participações S.A. (“TPART”) held on December
12th, 2013. On August 31st, 2020, aiming to simplify the corporate structure of the group in Brazil, TPART was merged
into its wholly-owned subsidiary, TIM S.A. (“Company” or “TIM”), which succeeded it in all of its rights and obligations,
maintaining the same structure of corporate governance, internal controls, systems, and the same legal framework. As a consequence of
this corporate reorganization movement, TIM’s CAE maintained the same structure of TPART’s CAE, and proceeded with the activities,
working plan and evaluations that were being conducted by the latter.
TIM’s CAE is a permanent statutory body
which seeks to adopt the best Corporate Governance practices, as recommended, and governed by the Normative Resolution No. 23 of the Comissão
de Valores Mobiliários (“CVM”), of February 25th, 2021, and other applicable regulations.
The CAE is composed of at least three (3) and
no more than five (5) independent members, elected by the Board of Directors, for a 2-year term of office, which shall coincide with the
term of office of the members of the Board of Directors, re-election being limited to a maximum period of ten (10) years.
It should be clarified that the role of CAE
member can not be delegated, and must be exercised exclusively by the elected members.
The election of the new Board members occurred
at the Annual and Extraordinary Shareholders’ Meeting held on March 30th, 2021. For the 2021/2023 mandate, the Board
of Directors elected the following members to compose the CAE: Messrs. Gesner José de Oliveira Filho (Coordinator), Flavia Maria
Bittencourt and Herculano Aníbal Alves (corporate accounting expert), all of them characterized as independent according to the
criteria defined by B3’s Novo Mercado Regulation.
The CAE has as ordinary attributions the supervision
of the quality and integrity of the financial statements, and their compliance with legal, regulatory and statutory terms, the adequacy of proceedings related to risk management
and for the activities of the independent and internal auditors, as well as the supervision and assessment of contracts of any kind, to
be executed between the Company or its subsidiary, on one side, and the majority shareholder or its subsidiaries, associated companies,
or companies under common control or which may control the said shareholder, or parties related in some other way to the Company, on the
other side.
In addition to its ordinary duties, the CAE
also performs as the Audit Committee of the Company, in accordance with the provisions of the Sarbanes-Oxley Act (“SOx), to which
the Company is subject to, as it is registered at the US Securities and Exchange Commission (“SEC”) as holder of American
Depositary Receipts (ADRs) on The New York Stock Exchange (“NYSE”) since November 16th, 1998.
The CAE has an annual budget, within the limits
approved by the Company's Board of Directors, to conduct or determine consultations, evaluations and investigations within the scope of
its activities, including the engagement of services and use of independent external experts.
This Report is issued in compliance with Section
14, IX, of the Internal Rules of the CAE, and according to Section 27, VII, Paragraph 1st, of CVM Resolution No. 80 of March
29th, 2022.
2. Activities of the Statutory Audit Committee
of TIM in 2021
The CAE will meet whenever necessary, but at
least bi-monthly, so that financial information is always assessed before becoming public.
Upon establishment of an annual plan to fulfill
its duties, during the period from January 1st to December 31st, 2022, fifteen (15) ordinary meetings of the CAE
were held, which included eighty nine (89) items of Agenda (topics). The meetings lasted an average of one (1) hour and fifty-three (53)
minutes each and, during the discussions, the Chairman of the Board of Directors, the Chief Executive Officer, the Diretor Financeiro
(Chief Financial Officer) and the Diretor de Relações com Investidores (Investor Relations Officer), in addition
to the other members of the Executive Board, the Directors of the Internal Audit and Compliance areas, and the Independent Auditors, were
directly involved. At each Board of Directors’ meeting, the CAE reports the activities carried out in the respective month.
Among the subjects addressed throughout the
annual program referenced above, it is noted that the topics submitted at CAE meetings were classified as follows: (i) ordinary topics
(resulting from the applicable legislation/regulation); (ii) recurrent topics (arising from the work plan programmed for the CAE throughout
the year); and (iii) extraordinary topics (not provided for in the previous items and submitted at the request of the Company's management
or the CAE members themselves).
Within the organization indicated above, it
is worth highlighting the statistical data on the productivity of CAE activities, with special emphasis on some topics highlighted in
yellow, flagged as topics of strategic potential for evaluation by CAE members, as shown below:
![](https://content.edgar-online.com/edgar_conv_img/2023/02/10/0001292814-23-000377_timbfs4q226k_013.jpg)
![](https://content.edgar-online.com/edgar_conv_img/2023/02/10/0001292814-23-000377_timbfs4q226k_014.jpg)
![](https://content.edgar-online.com/edgar_conv_img/2023/02/10/0001292814-23-000377_timbfs4q226k_015.jpg)
Among the activities carried out during the
financial year, the following should be highlighted:
I. Analyzed the annual work plan
of the Independent Auditors and discussed the results of their activities in twelve (12) topics during the year of 2022. Ernst & Young
Auditores Independentes S/S (“EY”) was the firm responsible for auditing the financial statements for the fiscal year ended
on December 31st, 2022, and for the planning and execution of the audits regarding the quarterly reports ("ITRs"),
according to the recognized standards, as well as responsible for the special revision of the ITRs (quarterly reports), submitted to the
CVM. Their opinion should ensure that these Financial Statements adequately represent the Company's equity and financial position, in
accordance with accounting practices adopted in Brazil, the Brazilian Corporate Law, the CVM Rules and the International Financial Reporting
Standards (IFRS) issued by the International Accounting Standard Board (IASB). The EY was also the auditor firm responsible for reviewing
Form 20-F (SEC) of the Company.
II. Supervised the Company's Internal
Audit activities, in eight (8) topics during the year of 2022, analyzing the annual work plan and discussing the results of the activities
performed and the reviews carried out, and evaluated, through an evaluation questionnaire previously approved by the CAE, the performance
of the Company’s Internal Auditors.
III. Supervised and analyzed the effectiveness,
quality and integrity of internal control mechanisms in seven (7) topics during the year of 2022, in order to, among other purposes, monitor
compliance with the provisions relating to: (a) the presentation of the Financial Statements, including quarterly reports and other interim
statements; and (b) the information and valuation released based on adjusted accounting data and non-accounting data that add elements
that were not on the structure of the usual reports of the Financial Statements, especially regarding the internal controls which support
the Sarbanes-Oxley (“SOx”) certification.
With regards to the internal controls,
the following main issues were monitored and recommended by the CAE: (i) monitoring of the internal control system as to its effectiveness and improvement processes;
(ii) analysis of the process of certification of internal controls - SOx with the Management and Independent Auditors; (iii) Company procedures
for full compliance with SOx requirements and intensive monitoring of remediation plans related to the deficiencies pointed out by the
Independent Audit in relation to the process of SOx Certification in the Company.
The CAE found that the internal controls
are implemented in accordance with the nature, complexity and necessity of the operations and, in view of the information provided by
the Executive Board, the Internal Audit and the independent auditors, verified that there are no relevant facts or of a serious nature
that could put at risk the compliance with the applicable legal and regulatory rules.
IV. The CAE was informed of the main
processes within the Company, evaluating its quality and the commitment of the members of the top management with its continuous improvement.
As a result of the meetings with the Company's internal areas, the CAE was able to offer suggestions to the Board of Directors to improve
processes, as well as to monitor their implementation, and the execution of recommendations for improvement which were identified during
the audit activities and in discussions with the business and control areas. Based on the information to which the CAE had access to,
the CAE believes that the internal controls system of the Company is adequate to the size and complexity of its business, as well as structured
to ensure the efficiency of its operations, of the systems that issue the financial reports and is in accordance with the internal and
external rules to which the transactions are subject to. The CAE has noted the importance of continuous improvement in the internal control
system.
V. Followed-up and supervised the
work carried out by the Company's Compliance area in eight (8) topics, with emphasis on issues related to: (i) SOx Compliance through
monitoring the deficiencies pointed out by the Independent Auditor and the management of the Company; (ii) Compliance with Information
Technology and Corporate Security, highlighting the risks of Cyber Security and discussing the implementation in the Company of the adaptations
required by the General Law of Personal Data Protection (“LGPD”); (iii) Compliance of general and Commercial Processes of
the Company; fraud and corruption, ensuring adherence to laws, rules, standards and internal and external regulations. Within the Company's
Integrity and Anticorruption Program, the CAE also
monitored the activities for maintenance of the ISO 37001 Certification obtained in 2020.
VI. The CAE was informed of the main
amendment proposals related to the regulatory framework and to expected institutional changes, as well as of the main aspects of the political
and economic scenarios, with emphasis on the risks and challenges of the current situation which may affect the Company. To this end,
the CAE has monitored the main macro indicators that assist in an assessment of the risks of the external environment for the Company
at the limit of what is predictable by the best quantitative and qualitative techniques, always seeking to recommend mechanisms that provide
the Company with the necessary agility and resilience to adapt to rapid changes in macroeconomic scenarios.
VII. During the performance of its
activities, the CAE regularly monitored issues related to: (i) customer satisfaction and the quality of services and staff contact; (ii)
incentives for innovation applied to products and services; (iii) transparency and accountability to stakeholders; (iv) ethical conduct
in business; (v) digital inclusion; (vi) dialogues and communication with stakeholder groups; (vii) management of electronic products;
(viii) investment in infrastructure; and (ix) development of new technologies.
VIII. Throughout the year of 2022,
the CAE analyzed the Company's Enterprise Risk Management (“ERM”) reports, focusing on the monitoring of the work plan to
review and update risk factors disclosed by the Company, management of financial risks, risk appetite of the Company and adequacy of risk
factors contained in the Company's Formulário de Referência, on SOx/CVM risk inventory. This issue was brought in
four (4) topics during the year 2022. The Company's risk management structure foresees the analysis, by the CAE, based on the examination
performed by the Control and Risks Committee ("CCR"). Both are bodies of governance associated to the Board of Directors as
defined by the Company's By-laws.
IX. Within its attributions, provided
by the Company's By-laws and the CAE’s Internal Rules, the CAE previously examined, evaluated and opined on twelve (12) agreements
of different types between the Company, on one side, and related parties, on the other side. All the agreements entered into, strictly
followed the governance process required to comply
with both the internal rules of the Company's Compliance area and the standards of CVM and SEC regulations. The relevant information on
the agreements are duly disclosed in the Company's Formulário de Referência.
X. As part of its duties, the CAE
analyzed, in seven (7) topics during the year 2022, the reports regarding the complaints received by the Company’s Whistleblowing
Channel its respective envisaged actions for improvement. The reports, which are divided by typology, are filed at the Company's headquarters.
XI. In addition to the fifteen (15)
reported meetings for the proper performance of their duties, the CAE members participated in at least four (4) private meetings, of one
(1) hour each, with the Internal Audit area of the Company, and one (1) private meeting with the Independent Auditors, of thirty (30)
minutes, without the participation of the top management or other managers of the organization, to assess possible retrenchment or risk
of a breach of independence, of any kind of interference by management, giving to the Committee the opening to express any concerns that
need to be assessed in the development of the audit work.
3. Items discussed with the Independent
Auditors considering the Audit Report (ISA 701) presentation form
As determined by the auditing standards (ISA
260), which provide for communication with those charged with the Company's governance, the auditor must communicate, among other matters,
the following: (i) their responsibilities in relation to the audit of the financial statements; (ii) overview of its Audit Plan for the
fiscal year; (iii) its view on the significant qualitative aspects of the Company's accounting practices, including accounting policies
and estimates, and disclosures in the financial statements; (iv) significant difficulties encountered during the audit, if any; (v) aspects
of independence, including formal confirmation of its independence from the Company; (vi) written notice to the persons in charge of governance
of the significant findings arising from the audit; and (vii) as determined by ISA 701, communicate which Key Audit Matters (“KAMs”)
to be considered in the Independent Auditor's Report.
In view of the foregoing, in order to comply
with the protocol and/or request for communication between the auditors and those in charge with the Company's governance, the CAE held
periodic meetings with the Company's Independent Auditors in order to monitor the progress of the auditors' work in relation to the Company's
financial statements and internal financial reporting controls (SOx),
so that all of the above, among others, were formally evaluated by the CAE with the Independent Auditors.
Specifically, in relation to the KAMs, the
CAE interacted with the Independent Auditors in order to understand the judgment of the auditors to determine these matters as KAMs, as
well as an understanding of the audit approach defined by the Independent Auditors as an audit response to these KAMs.
Finally, in addition to all interaction with
the Independent Auditors, the CAE carried out the following activities throughout the year to evaluate the areas considered as KAMs by
the Independent Auditors:
3.1. Provision for tax contingencies (explanatory
note 25 - “Provision for tax judicial and administrative lawsuits”)
The CAE reviewed quarterly the evolution of
tax contingencies and followed up the forecasts provided by those responsible for the Tax, Civil, Labor and Regulatory areas of the Company.
3.2. Acquisition of Cozani RJ Infraestrutura
e Rede de Telecomunicações S.A. (“SPE Cozani”)
The CAE maintained several interactions with
the Company's management to assess and monitor the accounting impacts caused by the closing of the transaction.
4. Other Activities
4.1. Review of Form 20-F and the Formulário
de Referência
With regards to the revision work of Form
20-F (SEC) and the Formulário de Referência (CVM), the members of the CAE met, formally, in the total of three (3)
times with Company’s executives, over the months of March and June, 2022.
4.2. Evaluation of the Report on the Brazilian
Code of Corporate Governance – Publicly-held Companies
The members of the CAE met with
executives of the Company to evaluate the Company's adherence to certain governance practices set forth in the Brazilian Code of
Corporate Governance – Publicly-held Companies,
in compliance with CVM Resolution No. 80, of March 29th, 2022, which amended and added provisions to CVM Resolution No. 168,
2022.
4.3. Self-assessment of the CAE
The members of the CAE submitted themselves
to a self-assessment questionnaire on the performance of their activities, in accordance with the best governance practices in the domestic
and foreign markets. Based on the answers presented, the CAE members sought to improve and make more efficient the activities developed
during the year 2022, aiming at a process of constant and permanent evolution.
4.4. Assessment of Independent Auditors
and Internal Audit
The members of the CAE evaluated the quality
of the work of the Company's Independent Auditors and Internal Audit, by means of an evaluation questionnaire previously approved by the
CAE.
5. Conclusions and recommendations
The Company's CAE members, in the exercise
of their duties and legal responsibilities, analyzed the Financial Statements, together with the Independent Auditors' report and the
annual management report for the fiscal year ended December 31st, 2022 ("Annual Financial Statements of 2022").
Considering the information provided by the
Company's management and EY, and the proposed allocation of the results for the year 2022, the CAE concluded that this information and
documents adequately reflect, in all material respects, the Company's equity and financial positions.
For this reason, they unanimously recommended
the approval of the aforementioned documents by the Company's Board of Directors for referral to the Annual Shareholders' Meeting, pursuant
to the Brazilian Corporation Law.
Rio de Janeiro, February 9th, 2023.
Gesner
José de Oliveira Filho
Coordinator of the Statutory Audit Committee
|
HERCULANO ANÍBAL ALVES
Member of the Statutory Audit Committee |
FLAVIA
MARIA BITENCOURT
Member of the Statutory Audit Committee |
STATUTORY OFFICERS’ STATEMENT
Alberto Mario Griselli (Chief Executive
Officer, Chief Financial Officer and Investor Relations Officer), Bruno Mutzenbecher Gentil (Business Support Officer), Fabio
Mello de Avellar (Chief Revenue Officer), Maria Antonietta Russo (People, Culture & Organization Officer), Mario Girasole
(Regulatory and Institutional Affairs Officer), Leonardo de Carvalho Capdeville (Chief Technology Information Officer) and
Fabiane Reschke (Legal Officer), as Statutory Officers of TIM S.A., declare, in accordance with Section 27, paragraph 1, item V
of CVM Resolution Nr. 80 of March 29th, 2022, 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 year ended December 31st,
2022.
Rio de Janeiro, February 9th, 2023.
ALBERTO MARIO GRISELLI
Diretor Presidente,
Diretor Financeiro e Diretor de Relação com Investidores (Chief Executive Officer, Chief Financial Officer and Investor
Relations Officer) |
FABIO MELLO DE AVELLAR
Chief Revenue Officer |
MARIO GIRASOLE
Regulatory and Institutional Affairs Officer |
LEONARDO DE CARVALHO CAPDEVILLE
Chief Technology Information Officer |
BRUNO MUTZENBECHER GENTIL
Business Support Officer |
MARIA ANTONIETTA RUSSO
People, Culture & Organization Officer |
FABIANE RESCHKE
Legal Officer |
|
|
|
STATUTORY OFFICERS’ STATEMENT
Alberto Mario Griselli (Chief Executive
Officer, Chief Financial Officer and Investor Relations Officer), Bruno Mutzenbecher Gentil (Business Support Officer), Fabio
Mello de Avellar (Chief Revenue Officer), Maria Antonietta Russo (People, Culture & Organization Officer), Mario Girasole
(Regulatory and Institutional Affairs Officer), Leonardo de Carvalho Capdeville (Chief Technology Information Officer) and
Fabiane Reschke (Legal Officer), as Statutory Officers of TIM S.A., declare, in accordance with article 27, paragraph 1, item VI
of CVM Resolution Nr. 80 of March 29th, 2022, that they have reviewed, discussed and agreed with the Company’s Financial
Statements for the year ended December 31st, 2022.
Rio de Janeiro, February 9th, 2023.
ALBERTO MARIO GRISELLI
Diretor Presidente,
Diretor Financeiro e Diretor de Relação com Investidores (Chief Executive Officer, Chief Financial Officer and Investor
Relations Officer) |
FABIO MELLO DE AVELLAR
Chief Revenue Officer |
MARIO GIRASOLE
Regulatory and Institutional Affairs Officer |
LEONARDO DE CARVALHO CAPDEVILLE
Chief Technology Information Officer |
BRUNO MUTZENBECHER GENTIL
Business Support Officer
FABIANE RESCHKE
Legal Officer |
MARIA ANTONIETTA RUSSO
People, Culture & Organization Officer
|
SIGNATURES
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 S.A. |
Date:
February 9, 2023 |
|
By: |
/s/ Alberto Mario Griselli |
|
|
|
Alberto Mario Griselli |
|
|
|
Chief Executive Officer, Chief Financial Officer and Investor Relations Officer |
Grafico Azioni TIM (NYSE:TIMB)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni TIM (NYSE:TIMB)
Storico
Da Giu 2023 a Giu 2024