UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: February 23, 2022

Commission File Number: 001-39570

TIM S.A.
(Exact name of Registrant as specified in its Charter)

João Cabral de Melo Neto Avenue, 850 – North Tower – 12^th floor
22775-057 Rio de Janeiro, RJ, Brazil
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Yes ☐ No ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Yes ☐ No ☒

TIM S.A.

FINANCIAL STATEMENTS on

December 31, 2021

TIM S.A. and TIM S.A. and SUBSIDIARY

FINANCIAL STATEMENTS

December 31, 2021

Contents

INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS

To the shareholders, board members and directors of

TIM S/A

Rio de Janeiro – RJ

Opinion

We have audited the financial statements of TIM S/A (the “Company”), which comprise the statement of financial position as at December 31, 2021, 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 of TIM S/A as at December 31, 2021, and its 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).

Basis for opinion

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 financial statements section of our report. We are independent of the Company 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

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 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 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.

Provision for tax related contingencies

As disclosed in note 24 to the financial statements, the Company is a party to numerous tax claims and proceedings at different jurisdictional levels, which amounted to R$16,739 million, as of December 31, 2021, for which a provision amounting to R$430 million was recorded in the financial statements, while the remaining R$16,309 million was disclosed as losses possible to occur, in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The determination of the provision and disclosures related to the tax contingencies involve 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.

The determination of the amount of the provision and the amounts disclosed depends on critical judgments made by management, based on the analysis of the proceedings and the corresponding prognosis for their final resolution by its legal advisors. The audit of management’s assessment of the likelihood of loss in tax proceedings is complex, highly subjective and based on interpretations of tax legislation and court decisions, since there is significant uncertainty in the estimates as to the outcome of court decisions, how formerly adjudged cases have evolved and the position of the tax authorities.

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.

How our audit conducted this matter

Our audit procedures included, among others: (a) obtained an understanding, evaluated the design and tested the operating effectiveness 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) to test the Company’s assessment of the probability of losses over tax claims, our audit procedures included, among others, 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) assessed the adequacy of the disclosures made by the Company in note nº 24 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 note nº 24 are acceptable in the context of the financial statements taken as a whole.

Sale of 51% equity interest in I-System (formerly FiberCo Soluções Infraestrutura S/A)

As described in Note 1 to the financial statement, on November 16, 2021, the Company sold the 51% of its equity interest held in I-System, generating a gain of R$782 million, which was measured as the difference between the fair value of consideration received and the adjusted carrying value of the net assets of I-System. The determination of the adjusted carrying value of the net assets of I-System involved identifying and measuring the assets, the liabilities and the goodwill allocated to I-System as of the closing date of the transaction.

Auditing the Company’s accounting for the sale of its 51% equity interest in I-System was complex and judgmental due to the nature of the significant judgment exercised by management in determining the amount of goodwill to allocate to I-System, the transaction and significant judgment exercised by management in determining the accounting analysis and implications for the loss of control determination and assessment of the master service agreement.

How our audit conducted this matter

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for I-System sale. For example, we tested controls over management's review of the accounting treatment for the sale and for calculating the gain after tax effect, and controls over the preparation and review of key inputs, data and assumptions used by management to determine the allocation of goodwill to I-System.

To test management´s assessment of the sale, our procedures included, among others: inspecting the transaction agreements, assessing the reasonableness of judgments and testing the accuracy of the gain on the sale after tax effect’s calculation, assessing key inputs, data and assumptions used by management to determine the allocation of goodwill to I-System by examining audit evidence for key inputs, data and assumptions; evaluating management's application of the criteria for the loss of control by evaluating for contrary evidence on related documents for the transaction and management´s assessment of the master service agreement under IFRS 16; we also involved tax professionals to assess the Company´s sale tax implications. We also assessed the adequacy of the disclosures made by the Company with respect to the sale transaction.

Based on the result of the audit procedures performed in the Sale of 51% equity interest in I-System 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 nº 1 are acceptable in the context of the financial statements taken as a whole.

Other matters

Statements of value added

The statements of value added (SVA) for year ended December 31, 2021, 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 financial statements.

Other information accompanying the financial statements and the auditor’s report

Management is responsible for such other information, which comprise the Management Report.

Our opinion on 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 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.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation and fair presentation of the 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 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.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the 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 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 23, 2022.

ERNST & YOUNG

Auditores Independentes S.S.

CRC-2SP015199/O-6

Fernando Alberto S. Magalhães

Contador CRC-1SP133169/O-0

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.

(i) Effects of the 5G acquisition with no cash impact, see note 40.

The explanatory notes are an integral part of the financial statements.

The explanatory notes are an integral part of the financial statements.

COMMENTS ON THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021

Dear Shareholders,

The Management of TIM S.A. (“TIM S.A.,” “Company” or “TIM”) hereby presents its Management Report and 2021 Earnings Analysis, along with the Individual and Consolidated Financial Statements and the Independent Auditors’ Report for the fiscal year ended December 31, 2021.

The Financial Statements have been prepared in accordance with Brazilian and International Financial Reporting Standards (IFRS) as defined by the IASB.

The operating and financial information for 2021, unless otherwise stated, is presented in Brazilian Reais (R$), based on consolidated amounts and pursuant to Brazilian Corporation Law.

Company’s Profile

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 2021, TIM confirmed that, for the fourteenth year in a row, it 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.

1. Message from Management

The year 2021 was still heavily affected by the COVID-19 pandemic, which imposed tremendous challenges on society, with impacts on public health and the economy. Amid increased vaccination, the emergence of new variants of the virus, escalating inflation, and rising interest rates, TIM proved to be resilient in delivering solid results by late 2021, meeting all the targets established with its shareholders and the financial market in general.

Evolution of the Pandemic and Macroeconomic Dynamics

During the first half of the year, the Brazilian economy had been recovering despite the fluctuation in health conditions, and the consequent adoption of new restrictive measures between March and April. The impact of these restrictions on economic activity in general – and on TIM’s activity – was significantly lower than in similar periods in 2020. In the second half of the year, the population started getting vaccinated at a faster rate, but the economic recovery continued to be heterogeneous among the different sectors. Accelerated inflation rates, with the subsequent start of the monetary tightening cycle, limited improvements in the dynamics of the economy. For TIM, such situation materialized mainly in the prepaid mobile telephony segment, because of the availability of household income, which is still heavily pressured by inflation, debt, and a still-shaky job market.

M&A and 5G: Transformations for the Industry and for TIM

In 2021, major industry transformations took shape and began to materialize. On the one hand, the transaction for the purchase of the mobile assets of Oi Móvel S.A. started being analyzed by the telecommunications sector’s regulatory agency (Anatel) and the anti-trust regulatory agency (CADE), which – even without issuing a definitive answer within the year – indicated a that a definition would be forthcoming in early 2022. On the other hand, there has been a proliferation of initiatives in the telecommunications sector to explore the opportunities of ultra-broadband service, either through IPOs of small providers or by creating neutral fiber optic infrastructure vehicles. In the latter case, we chose to enter into an agreement with IHS Brasil for the sale of 51% of a newly created fiber vehicle, to accelerate the development of its coverage of Fiber-To-The-Home (FTTH) services.

In the second half of the year, the frequency auction was held, which provided for the sale of several spectrum lots to be used for 4G and 5G technologies. We participated quite successfully, acquiring a set of frequency bands that will help in the composition of our spectrum portfolio and the evolution of services, with the implementation of new 5G networks and reinforcement of capacity in the 4G network.

Resilience in the Face of Adversity and a Focus on Executing our Strategy

The first half of the year was marked by a stronger recovery, but despite the challenges of the second half, we managed to maintain a good level of annual growth in service revenue (+6% in 1H21 and +4% in 2H21) to close out the year with positive growth of 5% versus 2020. This performance represents a robust recovery vis-à-vis our 2020 performance, where the growth in revenue from services was only 0.4% YoY. Our ability to find solutions amidst adversity and to focus on executing our strategy was key to this evolution in performance.

Among the initiatives put into place in 2021 that supported this performance, the following stand out the most; (i) the ongoing evolution of the volume-to-value approach, with continuous growth in ARPU, reduction in churn, and recovery of customer additions; (ii) the revival of the “Music” theme as part of our offer launches and a new brand positioning; (iii) the sound execution in our operation and broadband; (iv) the continuous advancement of our network and IT infrastructure; (v) the incessant pursuit of cost efficiency and investment efficiency; and (vi) the ongoing evolution of the Customer Platform strategy, materialized by yet another partnership forged in the distance-education segment, with the Ampli platform.

The positive impacts of these initiatives were evident in the earnings of the different lines of business:

A Robust Infrastructure to Support a Better Customer Experience

The development of our infrastructure is a mainstay of the strategy to improve customer experience. Accordingly, in 2021 we focused on continuing to improve the quality of our services by strengthening our network and systems.

For yet another year, TIM assured its leadership in 4G, having the largest and best coverage in this technology. We closed out 2021 with more than 4,700 cities and we are getting closer and closer to the target of covering all municipalities in Brazil by 2023. Our wireless network has been attested once again as the leader in 4G availability and the best OpenSignal video streaming and videoconferencing experience. 4.5G coverage exceeded 1,700 cities, and we launched 5G DSS technology and carried out pilot programs with stand-alone 5G.

In the landline network, we surpassed the mark of 112,000 kilometers of fiber optic in backbone and backhaul, which allowed us to connect an additional 1,200 cities with optical fiber. We also expanded our coverage of TIM Live’s residential broadband service, reaching 4.2 million FTTH households and 6.7 million households overall.

On the IT front, we advanced in the Journey to Cloud project to migrate our entire datacenter to the cloud; we had 44% migration by year’s end. This project – and others focused on digitalization – impacts both the Company’s costs and customer satisfaction.

Efficiency and Cash Generation

Our efficiency-oriented culture has been one of TIM’s hallmarks over the last decade. Therefore, in 2021 things were no different; despite inflationary pressures and the energy crisis, we managed to offset a good portion of these effects through initiatives aimed at digital transformation and more traditional cost cuts. The control of delinquency rates also helped growth in spending to remain below 5%, and less than half of official inflation rate (IPCA: 10.06%).

The solid performance on the operational and financial fronts once again produced the highest EBITDA in TIM’s history, reaching more than R$ 8.7 billion, with a margin of 48.4% in the year, as well as an excellent level of operating cash flow of more than R$ 6 billion. As a result, we ended the year in a solid financial position and well-poised to meet the additional outlay obligations that we will have in 2022, i.e., acquisition of Oi Móvel assets and frequency licenses. Our cash position was close to R$ 9.8 billion, with net debt of R$ 3.7 billion (including the impact related to the licenses in the auction of 4G and 5G frequencies in the amount of R$843 million) and even so, the Company maintained its leverage at a healthy level. This scenario gave us the comfort of maintaining the distribution to shareholders at the level of R$ 1 billion through the Equity Interest (JSCP) instrument.

Conclusion and Outlook

The ability to act quickly and assertively – taking advantage of market opportunities and focusing on executing the strategy – was the hallmark of 2021. This combination made it possible for us to deliver all the targets set for the year, even in a scenario of high uncertainty.

Our expectation for 2022 is to speed up the process of transforming TIM and the sector overall, with the approval of the transaction with Oi Móvel, the beginning of the implementation of “real” 5G, and the paradigm shift from fixed broadband to neutral networks. We also expect to further capitalize on our initiatives on the Digital Transformation and New Business fronts, creating major opportunities for efficiency and growth for TIM.

2. Economic and Industrial Overview

2.1. Macroeconomic Environment

Despite the positive expectations for the year, 2021 was still significantly impacted by the Coronavirus/COVID-19 pandemic, which brought with it – aside from an immeasurable human burden – a significant burden for economic activity in Brazil and around the world.

After the start of mass vaccination worldwide in late 2020, and with the advance of vaccination in Brazil throughout 2021, combined with the consequent easing of mobility restrictions and significant reduction in the unemployment rate (11.6% in November 2021), there was an upswing in the nation’s economic activity. This made the projections of growth in Brazil’s Gross Domestic Product (GDP) for the period reach a level of 4.50%, according to the latest FOCUS report^[1] for the year, compared to the forecast growth rate of 3.41% in the first FOCUS report^[2] of 2021.

^[1] Estimated by Focus report issued by the Central Bank of Brazil (BACEN) as of December 31, 2021.

^[2] Estimated by the FOCUS report issued by the Central Bank of Brazil (BACEN) on January 8, 2021.

Inflation, measured by the Broad Consumer Price Index (IPCA), ended 2021 at 10.06%^[3], the highest accumulated annual inflation since 2015. The IPCA recorded for the year was significantly above the target center, which was 3.75%. This result was mainly influenced by the Transportation group, which – within the package of items evaluated – showed the biggest change and closed out the year up 21.03%, as well as the highest impact in the accumulated result for the year. In addition to Transportation, the main highlights are Housing and Food & Beverage. In macro terms, the economy is still beset by the obstruction of supply chains in Brazil and around the world – as a consequence of the measures to combat COVID-19 –, which is still causing a strong shock in the supply of goods and services, and is consequently pushing up inflation worldwide.

On the foreign exchange front, the US Dollar appreciated strongly against the Brazilian Real in 2021, closing the year quoted at 5.57 BRL to 1 USD^[4] (a 7.4% increase), after reaching R$ 5.79^[5] in March of this year, having fluctuated strongly throughout the year vis-à-vis a scenario of increased fiscal risk resulting from the sharp spike in public spending resulting from the pandemic and the stagnation of tax and administrative reforms, thus contributing to a strong exchange rate fluctuation throughout the year. The trade balance ended the year with a surplus of US$ 61 billion^[6]. This amount represents a 21.1% growth compared to 2020 and surpassed the record of US$ 56 billion, set in 2017. The positive balance is the result of US$ 280.4 billion in exports and US$ 219.4 billion in imports. Exports in 2021 grew 34% compared to 2020, while imports were up 38.2%.

Regarding the international scenario, we also saw a major increase in vaccination against COVID-19 in many parts of the world, which also led to a reduction in restrictions on mobility and the gathering of people, consequently leading to partial resumption of economic activity. In the US and other developed countries, the year often featured inflation as a novelty in economic reports, something that had not happened for decades. Particularly in the US, the consumer price index reached 7% in 2021 – the highest since 1982. The GDP of OECD (Organization for Economic Co-operation and Development) member countries increased 0.9% in the 3Q21, compared to the previous quarter, and returned to the pre-pandemic level. Due to the accelerated the resumption of economic activity, the IMF has revised its projection for the growth of the world economy in 2021 to 5.9%^[7].

2.2. Particularities of the Telecommunications Sector

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.”

^[3] Source: Brazilian Institute of Geography and Statistics.

^[4] Source: Central Bank of Brazil.

^[5] Source: Central Bank of Brazil.

^[6] Source: Ministry of Economy.

^[7] Source: International Monetary Fund.

The sector has always been impacted by fierce competition on the Brazilian market, which can be seen by the presence of more aggressive offers from the viewpoint of the content available to customers and the reduced level of prices charged by operators in general, which, in a way, limits the Company’s ability to pass on cost increases or to propose adherence to higher-value offers, leading the entire telecommunications sector to a certain degradation.

On the other hand, the highly competitive environment may have ultimately been one of the triggers for the consolidation of the mobile market, which is expected to end 2022 with the completion of the sale of Oi Móvel, and the consequent division of its assets among the remaining industry players.

Throughout 2021, the sector continued to suffer the impacts arising from the major crisis brought on by the COVID-19 epidemic, and from all the restrictions aimed at curbing its spread. However, the sector maintained the growth trend in terms of data consumption, thereby requiring operators to adapt their networks, facing the challenge of delivering an increasingly robust infrastructure in an environment of greater rationality in investments, including projects such as the densification of sites, frequency refarming, and the aggregation of carriers on two or three frequencies. Furthermore, TIM continues to advance in sharing initiatives focused on 4G and network transport. This evolution of the Company’s network has allowed for a significant expansion of traffic on the 4G network, which provides TIM customers with a better usage experience, both in terms of performance – with higher download and upload speeds and lower latency – as well as in indoor coverage and greater penetration.

Such demand for technological evolution and investments in the sector tends to continue; this can especially be verified considering the 5G auction, which was held in the last quarter of 2021 and established a series of obligations related to the conception of the right-of-use of frequencies, which will surely force the sector to experience a new cycle of investments. The deployment of this new technology will bring very significant advances, enabling the generation of new business models, encouraging an increasingly connected society, and paving the way for the implementation of advancements in research and development.

Lastly, 2021 proved to be a year in which the demand for Fixed Broadband was consolidated. During the year, smaller players launched their Initial Public Offerings (IPOs) and strengthened their financial positions to continue growing. Fixed Broadband is a tremendous opportunity in Brazil, as it still has low penetration outside the major urban centers; but, on the other hand, it can be greatly influenced by the separation of service providers and infrastructure players, as service providers can lease infrastructure from specialized companies seeking to accelerate growth.

3. TIM Services

3.1. Business

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 telecommunications 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 voice and data services, TIM offers the fixed ultra-broadband service, TIM Live, and the fixed broadband service through the mobile network, using WTTx and 5GDDS technology , and continues to pursue new sources of revenue, with pioneering initiatives in new business fronts, such as financial services and monetization of the customer 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, in 2021 TIM started the first partnership between a telecommunications company and an education company. Exclusive offers were launched for customers who enrolled in courses offered on the platform, and TIM customers began receiving discounts on selected courses. In turn, offers launched in a partnership with C6 Bank continue adding advantages to the portfolio, by providing more convenience and adding new experiences to “Controle” and Postpaid plans offers. We continue to offer TIM Black Família plan customers a marketplace for OTT services, greater flexibility in choosing the entertainment content included in the plan and differentiated service from TIM Concierge. Innovation in offers and consistency in the operation have ensured the portfolio’s differential and a higher quality in the acquisition of new customers.

3.2. Strategy

The strategy that TIM adopted for 2021 was based on five fronts indicated below, each of which focused on the Company’s main stakeholders (customers, employees and shareholders), and collectively aim to redesign the customer experience and make TIM the best choice by value on the market, supported by its position as a leader in mobile ultra-broadband and its wide range of innovative offerings:

All five of the foregoing 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.

Throughout 2021, to implement the strategic pillars mentioned above, TIM steered its efforts through two transformational enablers: (i) To drive disruptive efficiencies through digitalization, automation and new operating models, leveraging skills and enhancing capabilities; and (ii) To strengthen and consolidate the ESG proposal by making a positive transformation.

This is the main goal of the proposed structure, in which the customer is at the center of decision making.

4. Human Resources

The Human Resources Department is structured in such a way as to ensure the best practices related to people management to support the Company’s evolution process, in line with technological transformations and business challenges, which include commitment to sustainability and valuing diversity and inclusion.

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.

In 2021, we had a (97%) 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 2021 Climate and Engagement Survey was 83% (down 1% from 2020), placing TIM 10% above the Global Telecom Market established by Mercer, a consulting partner responsible for the methodology and application of the survey.

The main highlights are the consistency in the Diversity & Inclusion acculturation program (which remained at 95%), the increase in leadership performance in team development through feedback (84% | +3%), error tolerance (85% | +2%), consistency in performance evaluation (83% | +3%) and practice of financial and non-financial recognition (71% | +2%), in line with the review of Skills and Performance.

In 2022, it will be necessary to focus more on structured well-being actions and to evolve in our agility and readiness for change, to maintain our stance of caring for people and improving processes for innovation.

The culture of integrity and attractive careers also stand out among the factors most widely recognized by our team, reflecting the high engagement and success of actions such as the “TIM Talks Experience 2021” and “Diversity & Inclusion” campaigns, aimed at the five pillars developed at the company: gender, race, people with disabilities, LGBTI+ people, and generations.

4.1. People

TIM ended the year 2021 with 9,337 employees across Brazil. These employees – with their histories and knowledge – represent the Company’s intellectual capital and act as engines for business development.

Around 70.4% of our employees have a college degree or are currently attending college, and 9.9% 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 216 interns and 128 young apprentices.

4.2. Development and Training

TIM employees have access to a well-structured training and development offer, in order to evolve within the company and build a successful career. TIM invested more than R$ 10 million in the training and development of its employees in 2021.

To guide the careers of its employees, TIM identifies and monitors individual performance to guide activities more assertively. The Company evaluates the dedication and outstanding performance of its professionals through different performance management tools, as well as encourages and provides opportunities for development and learning.

Here at TIM, throughout 2021, as a continuation of the plan started in 2020, we focused on supporting the evolution and transformation of the company towards the TELCO digital model, with a specific focus on the development of new capabilities, necessary to achieve the goals of the company’s strategic and industrial plan.

Also, throughout 2021, TIM implemented several programs and initiatives to manage and support people development in the skills necessary to achieve business strategies:

The main training programs and initiatives are listed below:

In 2021, a training program was implemented, called “Agile Journey,” with the aim of disseminating the culture as well as the methods and tools of Agile Methodologies. The Journey now involves the teams that work in the service creation processes, to bring incremental gains to the business, reduce risks, and make ongoing improvements. More than 170 employees have already started the journey.

Because we believe that diversity and inclusion are essential for valuing and engaging people, and play a fundamental role in the innovation process, we reinforce our positioning and commitment to this issue by creating policies, programs and initiatives regarding diversity and inclusion, aligned with the business strategy, organizational culture, and appreciation of the contribution of each employee at TIM.

In 2021, the Diversity & Inclusion Program continued with the annual calendar of actions, based on the UN calendar and other nationally recognized dates; strategic monitoring of the issue by the Diversity & Inclusion Committee, formed by senior executives; and the performance of affinity groups, made up of employees from all levels, areas and regions, who worked together in the design and deployment of inclusive actions for the pillars of gender, LGBTI+, race, generations, and people with disabilities.

Among the initiatives introduced, we have the Inclusive Internship Program, which gave greater flexibility to the profile and prerequisites of the selection process to expand access to minority social groups, in addition to having no restrictions on age, courses or educational institution; the program set aside 50% of the openings for black people. Regarding the gender pillar, we launched the “Positive Women” Project, aimed at increasing the participation of women in the labor market. The project uses the “Positive Women” (“Mulheres Positivas”) app as a digital platform to support the personal and professional development of women. The movement, spearheaded by TIM, started in July with 10 companies and closed out 2021 with 47 partner companies, which together offer free access to job openings and training courses, as well as intercompany mentoring for women.

Reinforcing the commitment and concrete action focused on the Social pillar of the ESG Plan, TIM established the target of having 35% of leadership positions occupied by women, and 40% of the workforce composed of black people, by 2023. We have also become a signatory to the main ecosystems of pacts and associations. Between March and December, we signed the Women’s Empowerment Principles, issued by UN Women; the Business Coalition for Race and Gender Equity; the Business Network for Social Inclusion; the Business and LGBTI+ Rights Forum, the Forum on Generations and Future of Work, and the Business Coalition to End Violence against Women and Girls.

As part of the commitment to promote an environment that is increasingly inclusive, safe, and free from discrimination, in November TIM launched the “Respeito Gera Respeito” (“Respect Generates Respect”) Program, with new guidelines and policy for the prevention, deterrence, and management of workplace harassment, in addition to educational actions as well as internal and external initiatives to promote environments and relationships free from discrimination and violence.

We kept the Integrated Communication and Training Plan in the program, with more than 40 actions in all, and over 3,900 employees trained. “TIM Convida” (“TIM Invites”), a 100% digital event open to society with the aim of generating dialogue and reflection on diversity and inclusion, presented seven editions throughout the year, totaling more than 386,000 views on YouTube.

With the consistency of the Diversity & Inclusion Program, TIM has become one of the leaders in promoting diversity and inclusion. In 2021 we were the first telco worldwide to receive GSMA’s Diversity in Tech award, which recognizes companies that promote equality and diversity in the technology sector, and the only Brazilian company to be part of and to lead the Refinitiv Diversity & Inclusion Index, which globally measures the performance of companies in diversity and inclusion initiatives.

4.3. Long-Term Incentive Plan

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 August 5, 2011, 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; “2011-2013 Plan”, “2014-2016 Plan” and “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 2011-2013 and 2014-2016 Plans 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 2011-2013 Plan is conditioned on the achievement of specific performance targets that could prevent the exercise of options, while when in the exercise of the options of the 2014-2016 Plan, the achievement of goals may 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, always in line with the objectives presented to shareholders for the Triennial Plan.

The term of validity of the options of the 2011-2013 and 2014-2016 plans 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 By-laws.

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.

4.3.1. 2011-2013 Stock Option Cycle

4.3.2. 2014-2016 Stock Option Cycle

4.3.3. 2018-2020 Share Cycle

4.3.4. 2021-2023 Share Cycle

5. Network

Infrastructure is one of the Company’s strategic pillars, and TIM reaffirmed its commitment to invest in this area in 2021, 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.

By the end of 2021, TIM had 1,766 Biosites and plans to expand their use. These 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.

5.1. National Coverage

TIM’s infrastructure has nationwide reach, covering approximately 98% of the Brazilian urban population, present in approximately 4,715 cities. The Company also has extensive data coverage, maintaining its leading position in 4G coverage in Brazil.

In 2021, 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.

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.

By the end of the year, TIM had a total of 23,206 sites with the highest percentage connected through high-capacity backhaul.

In terms of transport infrastructure, the Company reached 112,000 km of fiber optic for backbone and backhaul – a 3.8% increase YoY.

Fixed broadband coverage also continued to expand throughout 2021, surpassing 4.2 million homes passed by FTTH at year’s end, while FTTC reached 3.4 million. This represents a total of 6.7 million homes passed in 28 cities and seven administrative regions of the Federal District (FTTH + FTTC)^[8].

Finally, with 1,766 active Biosites at the end of 2021, the development of Biosite installation projects is also aligned with the company's corporate social responsibility values. These structures provide a solution for the densification of the mobile access network (antennas/towers) with an extremely low visual and urban impact. Biosites also contribute to the harmonization with the environment and urban infrastructure – having a multifunctional capability of aggregating telecommunications transmission, lighting and security cameras -, besides being cheaper and faster to install.

Currently, the Company is authorized to use more than 120 MHz in frequencies ^[9] distributed as follows:

^[8] (+) Rio de Janeiro (RJ), São Gonçalo (RJ), Nilópolis (RJ), Nova Iguaçu (RJ), São João do Meriti (RJ), Duque de Caxias (RJ), São Paulo (SP), Mauá (SP), Poá (SP), Suzano (SP), Francisco Morato (SP), Franco da Rocha (SP), Diadema (SP), Salvador (BA), Lauro de Freitas (BA), Camaçari (BA), Feira de Santana (BA), Recife (PE), Olinda (PE), Jaboatão dos Guararapes (PE), Paulista (PE), Goiânia (GO), Aparecida de Goiânia (GO), Anápolis (GO), Manaus (AM), Belo Horizonte (MG), Betim (MG), Contagem (MG), Brasília (DF), Taguatinga (DF), Samambaia (DF) and Ceilândia (DF).

^[9] Excluding spectra related to 5G.

5.2. 4G and 5G auction result

The frequency auction for 4G and 5G was held by Anatel on November 4 and 5, 2021. TIM won a total of 11 lots in the 3.5GHz, 2.3GHz and 26Ghz frequencies, with a total offered amount of R$ 1.05 billion.

The acquired bands have a set of obligations that must be met with financial contributions or with the construction of mobile and fixed network infrastructure. For further details on the obligations involving each band, please consult the Notice to the Market released by TIM on November 5, 2021.

5.3. Quality

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 customers. The focus on the expansion and improvement of its network infrastructure remains a pivotal pillar in our business plan.

In late 2021, TIM obtained the best score in the item “video and video-conferencing experience” in a report issued by OpenSignal^[10], in partnership with Anatel. The Company scored 66 points in the video and video-conferencing experience (rated as “very good”), in a score from 0 to 100, above other major operators in the sector. According to the report, the video experience calculation directly measures video streaming on user terminals, using an ITU-based approach that takes into account criteria such as image quality, loading time and crash rate, on 3G and 4G networks.

Additionally, in the report, TIM once again confirmed the superior quality of its network, again standing out as a leader in 4G availability. This means that TIM customers browsed via 4G more frequently – 90% of their connected time.

The other Network and Quality highlights for this quarter and for the year were as follows:

^[10] Article linked to Telesíntese (12/15/2021).

6. Operational Performance

6.1. Brazilian Market Overview

The mobile market recorded a growth of 1.2% YoY at the end of 2021, reinforcing the positive evolution of the base in the last quarter. In the last 12 months, postpaid registered net additions of 16.7 million accesses, 58% of this volume were human lines. Prepaid had 4.1 million new accesses.

6.2. TIM’s Performance

The postpaid segment closed out 2021 with 22.9 million accesses (up 4.7% YoY). Segment mix on a total basis was 44%, up 1.5% YoY. The net additions of the last 12 months accumulated a positive balance of more than 1.0 million new accesses. The monthly disconnection rate on postpaid remains at the lowest levels (2.7% in 4Q21), as recorded in recent quarters.

At the end of the quarter, Postpaid Human had a base of 18.9 million accesses (up 4.7% YoY), with net additions of 847,000 accesses in the last 12 months.

The prepaid segment ended 2021 with 29.2 million accesses, down 1.4% YoY. The base accumulated 403,000 disconnections in the last 12 months. The segment is the most highly impacted by the deterioration of the economy, mainly in the last two years.

Details of customer base per technology:

·        The 4G base ended the period with 46.3 million accesses, once again accelerating and maintaining the double-digit growth level (up 10.2% YoY);

·        The M2M base ended the year with 4 million lines, a 5.0% increase compared to the same period the previous year.

6.3. Fixed segment

The TIM Live base closed out 2021 with 685,000 connections, maintaining the pace of growth (up 6.1% YoY). In the last 12 months, the service’s net additions reached roughly 40,000 accesses; the FTTH base was the main driver. The higher-value plans, with speeds above 100 Mbps, continue to gain more and more relevance, reaching a 62% share of the total base in the quarter.

Despite limiting entry into new markets, FTTH network coverage continued to grow, prioritizing the consolidation of already active clusters. Accordingly, the total number of homes passed by optic fiber grew 29.0% YoY, with presence in 28 cities and seven administrative regions of the Federal District.

7. Financial Performance

To better represent the financial performance and commercial trends, TIM normalizes some of the lines of its Income Statement, eliminating the impact of non-recurring elements. These changes are indicated when required.

7.1. Operating Revenue

*The Customer Platform includes revenues from new initiatives such as Financial and Educational Services and Mobile Advertising. Reallocation of taxes between the Customer-Generated Revenue and Customer Platform lines, impacting these openings since early 2021.

In 2021, Total Net Revenue reached R$ 18,058, compared to R$ 17,268 in 2020, a 4.6% increase YoY, driven by the consistent performance of Service Revenue. This growth was also impacted by a lower comparative base since the main impacts of the COVID-19 pandemic occurred in 2Q20. Despite the challenging macroeconomic context imposed by the pandemic, Net Service Revenue closed the year with a growth of 5.0%; the primary levers of this performance were: (i) the performance of mobile postpaid; and (ii) revenue from the Customer Platform.

Breakdown of Mobile Segment (net of taxes and deductions):

Mobile Services Revenue (MSR) grew by 4.7% YoY, reaching R$ 16,349 million in the fiscal year ended December 31, 2021. In YTD, it maintains a consistent evolution, reflecting the company’s strategy of monetizing its customer bases through two pillars: (i) offer differentiation; and (ii) migration of its customer base to higher-value plans. For the year overall, ARPU in 2021 increased 5.9%, reaching R$ 26.4.

Breaking down each mobile segment in the fourth quarter:

(i)               In Prepaid, we observed a slow-down during the second half of the year, reflecting the worsening of macroeconomic indicators and the end of the government’s emergency aid in October, which put more pressure on the segment and reversed the resumption of the growth trajectory seen in the first half of the year. Nonetheless, the Company continues to focus on the differentiation of offers and more efficient management of the base, which contributed to the growth of Prepaid ARPU^[11] in 2021 – up 2.5% versus 2020.

(ii)              Revenue from Postpaid Customers was up 5.4% YoY compared to 2020 Human Postpaid ARPU^[12] (ex. M2M) in 2021 increased 1.7% vis-à-vis 2020. This performance is driven by the Company’s focus on the value approach, with an emphasis on efficient management of the customer base, reduction of disconnections, and evolution of the portfolio of offers, with specific benefits for each segment. Additionally, it is worth noting that, during this quarter, we had an increase in sales in the “Controle” and “Pós-puro” plans, boosted by the year-end campaigns, Black Friday and Christmas, despite the challenges imposed by the less intense commercial activity in the nation.

^[11] Prepaid ARPU excludes Other Mobile Revenue and Customer Platform lines.

^[12] Human Post-Paid ARPU excludes the Other Mobile Revenue and Customer Platform lines.

Interconnection (ITX) Revenue was practically stable YoY, reaching R$ 135 million in 4Q21. The incidence of VU-M on Net Service Revenue reached 2.3% in the quarter. For the year, this line increased 0.9% in the YoY comparison, mainly due to the impact of the increase in the VU-M fee (Mobile Termination Fee) at the beginning of the year.

The Customer Platform Revenue – for the year overall, totaled R$ 119 million, with R$ 83 million from Financial Services, R$ 36 million from Mobile Advertising, and R$ 342,000 from Educational Services.

The Other Revenues line recorded an annual growth of 19.1% YoY, primarily explained by the growth in revenue generated by network sharing and swap contracts. It is also worth noting that capacity sharing and exchange are important elements of the Company’s strategy of expanding fiber transport infrastructure (backbone and backhaul), with higher efficiency in resource allocation (Capex and Opex).

Breakdown of Fixed Segment (net of taxes and deductions):

In 2021, Fixed Service Revenue totaled R$ 1,147 million, an 8.8% increase YoY; revenues from TIM Live were the main driver of this performance, recording 14.7% growth Year-over-Year.

TIM Live is still mostly responsible for this performance, which increased 9.8% YoY in 4Q20, accounting for more over 63% of fixed service revenue. The other services of the fixed segment showed a recovery and grew 2.8% YoY.

The slowdown in TIM Live’s performance in the second half is explained by a combination of: (i) a greater focus on preparing the creation of I-Systems (formerly FiberCo), and the resulting separation of assets, which caused a slowdown in entry into new markets; (ii) a localized increase in competition in certain areas of activity; and (iii) a downturn in performance in areas where TIM still operates with FTTC. In 2022, TIM Live is expected to return to new localities with FTTH, in order to further increase the share of this technology in the result of Fixed Service Revenue.

7.2. Operating Costs and Expenses

*Normalized operating costs by: sale of control over the investment in the company I-Systems (-R$ 782,2 million in 4Q21), specialized legal and administrative services (+R$ 34.8 million in 4Q21, +R$ 7,7 million in 3Q21, and +R $13,7 million in 2Q21), expenses for the project to acquire Oi's mobile assets (+R$ 4,3 million in 4Q21), and adjustments to the tower sale-leaseback agreement (+R$ 2,6 million in 1Q20).

Operating Costs and Expenses reported in 2021 totaled R$ 8,599 million, a 3.7% improvement compared to costs reported in 2020. This performance reflects our efficiency in cost control, despite a scenario of high inflation rates in Brazil and amid a process adopted by the Company to improve its internal infrastructure. Normalized Operating Costs and Expenses rose, but to a limited extent (+4.8% YoY), given the inflation registered in Brazil at year’s end (IPCA 2021: 10.06%). Additionally, the YoY comparison is affected by the resumption of variable and fixed costs, which recorded a decrease in the months of reduced economic activity in Brazil – mainly in 2Q20 – due to the pandemic.

Breakdown of Normalized Costs and Expenses Performance:

Personnel reached R$ 1,126 million in 2021, an increase of 12.2% against 2020. Such performance was influenced by: (i) adjustments to salaries, bonuses and incentives in the mid to high single-digit range; (ii) higher level of provision related to employee profit sharing; and (iii) unfavorable comparative base due to the recovery of charges in social security-related processes in 4Q20, and in part due to an atypical YoY comparison in 2Q20 because of the lower expenses on sales personnel due to the closing of physical sales channels during the pandemic.

The Selling and Marketing line increased 4.1% YoY, reaching R$ 3,135 million, mainly impacted by the return of more frequent advertising campaigns and higher expenses on sales commissions.

Network and Interconnection – this line increased 7.0% YoY compared to 2020. This result was influenced by the increase in the mobile termination fee (VU-M) and by higher Network costs, because of higher expenses on infrastructure maintenance, sharing and rent.

Normalized General and Administrative Expenses (G&A) closed the year 2021 with growth of 15.8% in relation to 2020. This increase is primarily explained by: (i) higher expenses on maintenance services, resulting from the migration of the IT infrastructure to the Cloud; and (ii) engagement of specialized services from consulting firms for recurring projects.

The Cost of Goods Sold (COGS) was R$ 731 million, a 3.3% decrease compared to 2020, following the downturn in Product Revenue caused by the lower volume of handsets sold, despite the increase in the higher-value product mix.

Allowances for Doubtful Accounts (ADA) reached R$ 545 million, a 1.5% decrease compared to the 2020, partly affected by the recognition of ADA with a wholesale customer, reaching 2.1% of Gross Revenue (against 2.3% in 2020). The result has been reflecting the continuous efforts to enhance client acquisition through more robust credit models and policies, and higher efficiency in collection and recovery.

Other Normalized Operating Revenues^[13] (Expenses) totaled R$ 284 million, a 19.7% decrease YoY, in YTD, primarily explained by the lower expenses relating to losses in civil lawsuits. This line’s share in the total normalized Costs and Expenses was 2.7%.

Customer Acquisition Costs (SAC = subsidy + commission + advertising expenses) reached R$ 58.9 per gross addition in 2021, a 28.9% increase YoY, due to higher expenses on commissions generated by: (i) positive net addition in the Postpaid segment; (ii) migration of customers to higher-value segments; and (iii) higher expenses on advertising in 1H21.

The SAC/ARPU ratio, which indicates the payback per customer, reached 2.3 months in 2021, compared to 1.7 months in 4Q21.

^[13] The Other Operating Expenses (Revenues) line recorded a negative non-recurring impact of R$ 782.2 million in 4Q21, which refers to the sale of control over the investment in the company I-Systems, and a positive non-recurring impact of R$ 2.6 million in 1Q20 resulting from adjustments to the tower sale-leaseback agreement.

7.3. From EBITDA to Net Profit

*Normalized EBITDA according to the items mentioned in the Costs section (-R$ 743,1 million in 4Q21, +R$ 7,7 million in 3Q21, +R$ 13,7 million in 2Q21, and +R$ 2,6 million in 1Q20). Net Profit normalized by: the impact of deferred and current taxes on the revenue generated by the I-Systems transaction (+R$ 509,2 million in 4Q21), tax credits and other effects (-R$ 13,3 million in 4Q21, -R$ 526,8 million in 3Q21, and -R$ 4,6 million in 2Q21).

Normalized EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization)

Normalized EBITDA totaled R$ 8,738 million in 2021, an increase of 4.4% YoY. The main lever for this growth was the performance of Mobile Services Revenue, with an emphasis on the favorable performance of the Postpaid segment and generation of revenue from partnerships classified in the Customer Platform line.

The Normalized EBITDA Margin closed out 2021 at 48.4%. Excluding the effects related to the I-Systems operation, completed in November 2021, the EBITDA Margin would have been 48.5%.

Depreciation and Amortization (D&A) / EBIT

The D&A line increased by 3.0% YoY in 2021, totaling R$ 5,692 million, primarily explained by the increase in the Depreciation of 4G Transmission Equipment and the increase in the Depreciation of tower infrastructure and rights-of-use, due to a larger base of leasing agreements, partially offset by a lower amount of Amortization of software.

In the year, Normalized EBIT totaled R$ 3,034 million, representing a growth of 6.7% YoY.

Net financial income (loss)

In the year, Net Financial Earnings were negative by R$ 653 million, compared to -R$ 807 million in 2020, because of:

Income tax and social contribution

Normalized Income Tax and Social Contribution was negative by R$ 182 million in 2021, compared to -R$ 166 million in 2020. In 2021, the effective rate in the normalized view was -7.6% vs. -8.2% in 2020, mainly explained by the greater use of tax benefits in 2021.

Net Profit

In the year, Normalized Net Profit totaled R$ 2,200 million, a 17.6% increase compared to 2020, with EPS of R$ 0.32.

7.4. Cash flow, Debt and CAPEX

* Normalized EBITDA according to the items mentioned in the Costs section (-R$ 743,1 million in 4Q21, +R$ 7,7 million in 3Q21, +R$ 13,7 million in 2Q21, and +R$ 2,6 million in 1Q20). Normalized Capex excludes the impacts related to the acquisition of licenses in the frequency auction (R$ 3,585 million in 4Q21).

** Effects of the 5G acquisition with no cash impact (Note 40 of the Standardized Financial Statement).

Normalized Free Operating Cash Flow (FOCF)¹⁰ was positive, at R$ 6,084 million, up 32.0% YoY, while Reported FOCF totaled R$ 5,182 million.

For the year, Normalized EBITDA-Capex totaled R$4,356 million.

In 2021, Normalized EBITDA-AL-Capex totaled R$ 2,385 million, a decrease of 13.8% compared to 2020.

The R$ 902 million change between the view of the Normalized FOCF and the Reported FOCF is mainly due to the amount linked to the license acquired in the last auction (R$ 843 million), having a characteristic of financial debt (since it is subject to the Selic rate) and is considered in the financing flow. Regarding the obligations related to the EAF [Band Management Entity] and the EACE [School Connectivity Management Entity] (R$ 2,682 million), they are subject to correction for inflation defined in the Call for Bids, according to the IGP-DI inflation index. Therefore, these obligations have the characteristic of commercial commitment, and impact the operational flow.

CAPEX

* Normalized Capex excludes impacts related to the acquisition of licenses in the frequency auction (R$ 3,585 million in 4Q21).

In the results for the year, Normalized Capex, which excludes the impacts of the auction – totaled R$ 4,382 million, representing a 12.6% increase YoY, explained by the projects related to the preparation of infrastructure for integration with Oi’s mobile assets. In 2021, Total Capex, including auction impacts, was R$ 7,966 million.

DEBT AND CASH

Debt Profile

Net Debt

Debt by Maturity

Normalized Debt (post-hedge) in 4Q21 was R$ 13,520 million, representing a R$ 2,419 increase million YoY. The total includes: (i) lease recognition in the total amount of R$ 8,820 million (related to the sale of towers, the LT Amazonas project and leasing contracts with terms exceeding 12 months pursuant to IFRS 16); (ii) bank debt in the amount of R$ 3,845 million; (iii) hedge derivatives position^[14] in the amount of R$ 11 million (excluding the effects of Banco C6); and (iv) the impact related to licenses in the auction for 4G and 5G frequencies in the amount of R$ 843 million.

^[14] The derivatives position is also composed of the subscription warrants in the capital of Banco C6, pursuant to Note 37 in the Standardized Financial Statement (DFP) of TIM S.A.

At the end of December, the amount of financing (post-hedge) totaled R$ 3,845 million. The average cost of debt excluding leases and licenses was 9.5% p.a. in the quarter, an increase when compared to 2.5% p.a. cost in 4Q20, impacted by the increase in CDI in the period.

Following the company’s financing program, approved by TIM’s Board of Directors in March 2021, for the acquisition of Oi’s mobile assets, the company raised R$ 3.0 billion in new debts throughout 2021:

At the end of the quarter, Cash and Marketable Securities totaled R$ 9,797 million, an increase of R$ 5,151 million YoY.

The average financial yield was 8.8% pa in 4Q21, an increase of 6.4 pp compared to 4Q20, due to the latest increases in the Selic rate and a better allocation of funds.

8. Environmental, Social & Governance

ESG Journey

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 14 years, being the company in the sector that has been part of the Index for the longest time. In February 2022, TIM was 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). The company was included in the Sustainability Yearbook 2022 for the evolution of its performance in the DJSI submission process, with a growth of 24%.

Since 2011, TIM has voluntarily been part of the Novo Mercado (New Market), the highest level of corporate governance on the Brazilian Stock Exchange, in addition to being the first and only telecommunications operator named as a Pro-Ethic (Pró-Ética Seal) company by the Brazilian Office of the Comptroller General (CGU).

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 one of the leaders in fostering diversity and inclusion, with goals, commitments and joining various initiatives related to gender, race, LGBTI+, age, among others. The Company became the first Brazilian operator to integrate the Refinitiv Diversity & Inclusion Index in 2021, becoming the Brazilian and telecom benchmark worldwide. It also became part of the Bloomberg Gender Equality Index in 2022, which brings together 418 companies from 45 countries, 13 of which are from Brazil.

Recognized with the Top Employers certification seal, 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.

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 sustainability performance and it has been publishing reports in accordance with the guidelines of the Global Reporting Initiative (GRI) for 13 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).

Due to its sound performance in ESG, TIM integrates national and international indices and ratings, such as the Corporate Sustainability Index (ISE-B3), Carbon Efficient Index (ICO2-B3), Brazil ESG Index (S&P/B3), CDP Brazil Index of Climate Resilience (ICDPR-70), Refinitiv Diversity & Inclusion, Bloomberg’s Gender Equality Index (GEI), FTSE4GOOD Emerging Markets, FTSE4GOOD Latin America, MSCI ACWI ESG Leaders, MSCI Emerging Markets ESG Leaders, Teva Indices ESG Women on the Board, Women on Board seal, among others, in addition to being ISO 9001 (since 2000), ISO 14001 (since 2010) and ISO 37001 (since 2021) certified.

Material Topics

Due to the COVID-19 pandemic, TIM conducted a new stakeholder consultation process, with the purpose of reviewing its materiality, a good practice encouraged by experts.

After further interviews and studies, four material themes were complemented and a new theme emerged, “Promotion of Diversity and Equal Opportunities,” as presented in the updated table (bold) below:

Throughout 2021, TIM continued to focus on meeting the goals of the ESG Plan, as shown in the 4Q21 highlights below.

ENVIRONMENTAL

SOCIAL

^[15] TIM exceeded the goal of reducing GHG emissions by 100% compared to 2019, reaching the percentage of -153% through distributed generation projects, contracting energy in the free market and offsetting the portion acquired from the System National Interconnected, with the acquisition of renewable energy certificates.

GOVERNANCE

To access the quarterly ESG report, please visit: ESG Quarterly Report

9. Corporate Governance

9.1. Company listed on the Novo Mercado (New Market) for over 10 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 14 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 Fiscal 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 Fiscal 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 Fiscal Council Internal Regulations and in the Internal Regulations of the advisory committees to the Board of Directors.

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. Disclosure Policy

In 2002, TIM adopted a NYSE Disclosure/Trading and Corporate Governance Differences Policy, to which the Company’s management adhered by signing the Term of Adhesion. As part of this policy, a code of conduct was established to be followed by all employees with access to privileged information, in addition to restrictions on trading involving Company’s securities during certain periods.

The Company’s Disclosure Policy provides for the use of the Agência Estado Portal, which can be accessed through the link: http://economia.estadao.com.br/fatos-relevantes/, pursuant to CVM Instruction 547/2014, which allowed the disclosure of material facts on free access news portals.

9.4. Board of Directors

The Board of Directors (CDA) 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, 2021, the Board of Directors consisted of ten (10) members, four (4) of them independent. In 2021, the Board of Directors met fifteen (15) times in the exercise of its functions.

All decisions taken by the Board of Directors are recorded in minutes, published and recorded in the minutes book of the Board of Directors, filed at the Company’s headquarters.

The Board 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 Board 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 Board 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.

9.5. Executive Board of Officers

The Executive 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. At December 31, 2021, the Company’s Executive Board of Officers was composed by eight (8) board members. In 2021, the Executive Board of Officers met forty-three (43) times in the exercise of its functions.

9.6. 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. On December 31, 2021, the Company’s Fiscal Council was composed of three (3) effective members and an equal number of alternate members. In 2021, the TC met eight (8) times in the exercise of its functions.

9.7. 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 2021, the Statutory Audit Committee met twenty (20) 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, 2021 (“2021 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 2021, 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.

9.8. 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, 2021, the CRC was composed of five (5) members, two (2) of which are independent. Throughout 2021, the CRC met ten (10) times in the exercise of its functions.

9.9. Compensation Committee

The Compensation 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, 2021, the RC was composed of three (3) members, one (1) of which is independent. Throughout 2021, the RC met five (5) times in the exercise of its functions.

9.10. 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 others 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, 2021, the ESCC was composed of five (5) members, two (2) of which are independent. Throughout 2021, the ESCC met five (5) times in the exercise of its functions.

9.11. Shareholding structure

The Company’s share capital ended the year 2021 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.

9.12. Dividend policy

According to the Bylaws and Results Allocation Policy, 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 General Shareholders’ Meeting.

On June 6, September 24 and December 15, 2021, TIM S.A. announced that its Board of Directors approved the distribution of R$ 350 million, R$ 137.5 million and R$ 560 million, respectively, as Interest on Own Shareholders’ Equity (“JSCP”). The payments occurred on July 20, 2021, October 27, 2021 and January 25, 2022 and the dates June 21, September 29 and December 20, 2021, to identify shareholders entitled to receive such values. Thus, the shares acquired after those dates were ex-Interest on own capital rights. Accordingly, TIM declared a total amount of R$ 1,047.5 million of interest on shareholders’ equity in 2021 (the total of the amount in 4Q21).

9.13. Events for the Year and Subsequent Events

Tax contingency

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 on the matter, TIM recorded its best estimate to date, in the amount of R$ 547 million since the likelihood of a favorable outcome for the Company becomes probable.

Partnership between TIM and Cogna

On July 7, 2021, the Company informed its shareholders, the market in general and other stakeholders that, together with Anhanguera Educacional Participações S.A. (“AESAPAR”), a subsidiary of Cogna Educação S.A. (“Cogna”), jointly referred to as “Partners”, completed the negotiations regarding a strategic partnership (“Partnership”) with the objective of developing offers combined with special benefits aimed at providing distance education through the Ampli platform.

The Partners highlighted the innovative nature of the agreement they signed, by joining a digital teaching platform developed in a mobile-first concept, with the largest 4G infrastructure in Brazil. This is a powerful combination that will expand and encourage access to university and free courses for all TIM customers. This approach provides great potential to generate value for both companies through customer base growth and revenue growth.

The Partnership fits into the Customer Platform strategy that the Company has been working on since 2020. This strategy seeks to monetize the assets that TIM holds as a mobile operator through strategic partnerships that generate value for our customers and for the company.

This decision does not create a joint venture and, therefore, TIM maintains the independence of its operations. Through a compensation mechanism based on objectives and depending on the results of the partnership, TIM will become a minority partner of AESAPAR in a new company to be established because of the separation of assets from the Ampli platform (“Ampli Co”). The establishment and operation of Ampli Co will be submitted by AESAPAR to the competent authorities, especially to the Ministry of Education (MEC).

TIM's interest in Ampli Co may reach up to 30% of its capital and the subscription of shares must be previously approved by the Brazilian Antitrust Enforcement Agency (CADE). In the defined plan, Ampli Co is expected to conduct an IPO.

TIM obtains the right to exercise the 3rd and 4th tranches of subscription warrants at Banco C6

In July 2021, within the scope of the strategic partnership (“Partnership”) signed with Banco C6 S.A. (“C6” or “Bank”), TIM obtained the right to exercise the 3rd tranche of the subscription warrants of the share capital of C6, as a result of reaching the 3rd level of the agreed targets. Thus, bonuses equivalent to approximately 0.7% of the bank’s capital were recorded in the Company’s balance sheet, totaling 3.6%.

In October 2021, TIM obtained the right to vesting of the 4th tranche of the Subscription Bonus to indirectly take part to the C6 share capital as due to the achievement of 4th level of goals agreed in the ambit of partnership, which means the accumulated indirect interest of roughly 4.08% of C6’s share capital.

TIM elects new CFO/IRO

In August 2021, TIM announced Ms. Camille Loyo Faria to the positions of Chief Financial Officer (CFO) and Investor Relations Officer (IRO). Camille arrives at TIM with extensive experience in executive roles in the telecommunications and infrastructure sector, having worked at companies in the industry. In her career, she also accumulates important positions in the Investment Banking area and in the energy sector.

Completion of the transaction between IHS and I-Systems

On November 16, 2021, TIM S.A. (“TIM”) and IHS Fiber Brasil (“IHS”, after regulatory authorizations from ANATEL and CADE, the transaction was completed with a view to the acquisition, by IHS, of equity interest in FiberCo Soluções de Infraestrutura S.A. (“FiberCo”), a company incorporated by TIM to segregate network assets and provide infrastructure services.

As a result of the Transaction closing, IHS Brasil currently holds 51% of FiberCo’s share capital, with the remaining 49% remaining under the control of TIM.

FiberCo starts its operation with approximately 15,000 km of fiber in a secondary network, covering approximately 6.4 million homes (homes passed), 3.5 million of which in FTTH and 3.4 million in FTTC, which constitute the initial base of assets transferred by TIM. The homes connected account for approximately 700 thousand over which FiberCo will provide operation and maintenance services to TIM. Moreover, approximately 140 employees were transferred to FiberCo, as well as other assets and contracts, all exclusively related to the scope of its activities.

With the completion of the acquisition, FiberCo changed its corporate name to I-Systems, and began its journey as an infrastructure vehicle with the mission of deploying, operating and maintaining last-mile infrastructure for broadband access to be offered in the wholesale market, having TIM as an anchor customer.

ANATEL grants prior consent to transfer control of Oi’s mobile telephony activities

On January 31, 2022, ANATEL – the National Telecommunications Agency, unanimously granted prior consent to the implementation of the corporate transaction referring to the full transfer of control of the three specific purpose entities (“Mobile Assets SPE” or “SPE”)^[16], which correspond to the mobile telephony activities of Oi Móvel S.A. – Under Judicial Reorganization (“Oi Móvel”), for the companies TIM, Telefônica Brasil S.A. and Claro S.A. (“Transaction”).

Prior consent provides for certain conditions, in line with a transaction of this nature, which mainly aim to guarantee access by small providers to nationwide networks, maintain commitments linked to the transferred radio frequencies, establish the minimum parameters of the communication plan linked to the Transaction and grant users certain rights in the migration phases.

TIM elects new Chief Executive Officer (CEO)

On January 31, 2022, the Company’s Board of Directors announced Mr. Alberto Mario Griselli to replace Mr. Pietro Labriola in the positions of CEO and Board member. Mr. Griselli, who held the position of Company’s Chief Revenue Officer (CRO) since July 2019, holds a degree in Electronic Engineering from La Sapienza University in Rome and a FMBA from Columbia University. With over 20 years of experience in the telecommunications industry, he has held relevant positions such as Vice-President for Latin America at TIMwe, a global provider of mobile engagement solutions for telecom operators, and Managing Director for Latin America at Value Partners, a management consulting firm.

CADE approves the acquisition of most of the Oi mobile assets by TIM

On February 09, 2022, the Administrative Court of the Administrative Council for Economic Defense (CADE) under the of Concentration Act 08700.000726/2021-08, approved the implementation of the corporate transaction referring to the full transfer of control (“Transaction”) of the three special purpose entities (“Mobile Assets SPE” or “SPE”), which correspond to the mobile telephony activities of Oi Móvel S.A. – Under Judicial Recovery (“Oi Móvel,” “Seller”), for the companies TIM, Telefônica Brasil S.A. and Claro S.A. (“Buyers”).

The approval provides for a set of conditions, mostly behavioral, and which comprised a proposal for a Concentration Control Agreement (“ACC”) made by the Buyers to CADE. These conditions have a modular character and can be used by new entrants and smaller operators to reduce entry barriers and leverage the exploration of different business models, without affecting TIM’s main objective of strengthening its infrastructure, closing the capacity gap spectrum compared to its main competitors. Thus, the Company understands that a balance has been achieved between creating value and mitigating competition concerns for the industry, addressed by the ACC.

^[16] Cozani RJ Infraestrutura e Rede de Telecomunicações S.A. (SPE TIM), Garliava RJ Infraestrutura e Rede de Telecomunicações S.A. (SPE Telefônica) and Jonava RJ Infraestrutura e Rede de Telecomunicações S.A. (SPE Claro).

The actual Transaction completion, which will define an infrastructure balance between the three main competitors in the industry, still depends on the fulfillment of certain steps provided for in the Purchase and Sale Agreement. However, once it has taken place, it will bring broad benefits, maintaining a high degree of sectorial competition and ensuring the necessary investments for the development of Brazilian telecommunications and the country’s digital advancement.

10. Independent Audit Firm – CVM Normative Instruction 381

In 2021, Ernst & Young Auditores Independentes S.S. 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 external audit exams carried out. The 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 Controlling 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.

The São Paulo Stock Exchange Index (Ibovespa) ended 2021 at 104,822 points, accumulating a drop of 11.92% when compared to the previous year, with a market value of R$ 3.7 trillion.

The Company ended 2021 with its common shares quoted at R$ 13.15 on the B3, accounting for a decrease of 7.1% YoY, while the ADRs on the NYSE closed at US$ 11.29, accounting for a reduction of 13.5 YoY. In terms of market value, TIM ended the year valued at R$ 31,8 billion or US$ 5,6 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

Corporate structure

TIM S.A. (“TIM” “Company” and/or “Enterprise”) 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, 2021 (66.58% on December 31, 2020).

The Company provides 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 (formerly BM&F/Bovespa). Additionally, TIM S.A. 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.

In December 2020, TIM’s Board of Directors, after analyzing the studies prepared and the non-binding proposals received, approved, in a meeting held on December 10, 2020, the incorporation of a company, as preparation for future segregation of assets and provision of infrastructure services for residential fiber optic of TIM S.A., called FiberCo Soluções de Infraestrutura Ltda.

On May 5, 2021, TIM S.A. informed its shareholders and the market in general that, at a meeting of the Company’s Board of Directors held on the same day, an agreement between TIM S.A. and IHS Fiber Brasil - Cessão of Infrastructures Ltd. (“IHS”) was approved for the acquisition, by IHS, of an equity interest in FiberCo Soluções de Infraestrutura S.A. (“FiberCo”).

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 S.A. having a minority (non-controlling) interest of 49% in I-Systems.

The details of the sale of FiberCo’s equity interest are described below.

Corporate Reorganization

Sale of 51% of I-Systems (formerly FiberCo) to IHS

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 to IHS, with the remaining 49% remaining under the control of the Company upon closing of the transaction.

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.

In November 2021, as a result of the spin-off of net assets from the broadband business and with the subsequent disposal of 51% of its equity interest on behalf of IHS, TIM S.A. recorded an 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%.

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.

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 of selling the 51% equity interest in the new company, I-Systems, to IHS was completed on November 16, 2021. 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 S.A., 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 interest in the investee was recorded at fair value as provided for by IFRS 10 (CPC 36), and evaluated by the equity method subsequently, as defined in IAS 28 (CPC 18).

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.

The effects of the transaction are detailed below:

Merger of TIM Participações by TIM S.A.

On July 29, 2020, the Board of Directors of the Company approved the submission to the Extraordinary General Meeting of the proposed merger of TIM Participações by TIM S.A.

The Extraordinary General Meeting was held on August 31, 2020, and approved, by a majority of votes, the incorporation of TIM Participações by TIM S. A, in accordance with the protocol and justification of Incorporation concluded between the administrations of the Companies on July 29, 2020.

As a result the Company’s Management proceeded with the merger on August 31, 2020, based on the net book assets of TIM Participações, in the amount of R$ 355,323.

The changes in TIM Participações’s equity between the date of the report (March 31, 2020) and the merger (August 31, 2020) were transferred, absorbed and incorporated into the operating income of TIM Participações S.A. (incorporated), as set forth in the protocol of incorporation. As a result of the merger, all operations of TIM Participações were transferred to TIM S.A., which succeeded it in all its assets, rights and obligations, universally and for all purposes of law. This transaction had no economic or tax impact and the incorporated goodwill will not be used for the purposes of any tax offsets.

This corporate reorganization aimed to provide greater efficiency and simplification of the organizational structure of the TIM Group, making the structure of internal controls more efficient. In addition, the corporate reorganization provides a better tax efficiency in future distributions of Interest on Shareholders’ Equity, and also, greater integration of administrative and financial unities allowing a cut-off in operational costs and expenses, as well as improvement of synergies, which shall result in a more efficient operation. As a result from this transaction, there was no impact on the controlling and non-controlling shareholders.

After the merger, TIM S.A. started to be traded with the codes TIMS3 on B3 and TIMB on the NYSE.

For the purposes of presenting the comparative balance, TIM S.A.’s asset and financial information remains unchanged, meeting the concept of legal entity for the presentation of the individual and consolidated financial statements.

Net assets on merger date on September 01, 2020 are summarized as follows:

The individual and consolidated financial statements were prepared according to the accounting practices adopted in Brazil, which comprise the resolutions issued by the Brazilian Securities and Exchange Commission (CVM) and pronouncements, guidance and interpretations issued by the Accounting Pronouncement Committee (CPC) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and evidence all information of financial statements, and only them, which are consistent with those used by Management in its administration. 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.

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 long-term.

The presentation of the Statement of Added Value 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 Added Value”. 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 currency and presentation currency

The currency of presentation of the financial statements is the Real (R$), which is also the Company´s functional currency.

Foreign currency transactions are recognized at the exchange rate on the date of the transaction. Monetary items in foreign currency are converted into reais at the exchange rate on the balance sheet date, informed by Banco Central do Brasil [Central Bank of Brazil]. Foreign exchange gains and losses linked to these items are recorded in the statement of income.