Telecom Italia S.p.A. · MIL:TIT
Telecom Italia — TIM Group — FY2017 Earnings Presentation
37 slides from Telecom Italia's earnings presentation, Mar 7, 2018
Slide 1: TIM Group FY'17 and 2018-'20 Plan
TIM Group FY’17 and 2018- Milan, March 7 2018 20 Plan
Slide 2: Forward-looking statements
This presentation contains statements that Such forward looking statements are not constitute forward looking statements regarding guarantees of future performance and involve the intent, belief or current expectations of future risks and uncertainties, and actual results may growth in the different
Slide 3: FY'17 and 2018-'20 Plan agenda
FY’17 and 2018-’20 Plan What CEO asked and what we did 4Q’17 and FY Main Results 2018-’20 Plan: Key Drivers and KPI Evolutio n Targets and Take-Aways Appendix FY’17 and 2018-’20 Plan Milan, March 7 2018 2
Slide 4: Group targets delivered: revenues and EBITDA
Organic data(1), figures in €mln, % YoY Service Revenues EBITDA Service Revenues EBITDA 17,915 +1.9% 18,263 8,291 +4.6% 8,673 Group 4,516 4,666 +3.3% 2,149 2,238 +4.1% FY'16 FY'17 FY'16 FY'17 4Q'16 4Q'17 4Q'16 4Q'17 Domestic 13,871 +0.9% 14,000 6,878 +2.5% 7,053 Targets 3,524 3,607 +2.4% 1,744 1,777
Slide 5: FY'17 and 4Q'17 revenue performance by business
€mln, %YoY, Organic Performance(1) TIM Group Domestic Brazil Sparkle Group Inwit (+6.8%) Mobile Total Revs.(2) +0.4% ~1% & others Mobile +1.9% 19,828 +2.7% Nat. WHS ~11% ~9% +3.9% 33% FY’17 o/w Domestic -5.1% 15,354 +2.4% 95% 5% Fixed o/w Brasil +5.3% Business ~30% 4,502 +4.0% 67% Fixed +2.8% Consum
Slide 6: Domestic Mobile revenues, ARPU and customer base
Revenues & ARPU Customer Base Organic data, €mln, % YoY, ARPU €/month K, Rounded numbers, % YoY, 4Q’17 %QoQ 4Q’17 Net Adds/Losses 5,275 +1.9% TOT. CB 29,617 +3.8% 30,755 +470, +1.6% 620 TOT. ACTIVE 25,651 +5.2% 26,992 +405, +1.5% Total -0.6% NOT HUMAN(2) +21.9% +517, +7.5% 4,655 +1.6% 199 Product HU
Slide 7: Domestic Fixed revenues, ARPU and accesses
Revenues & ARPU Fixed Accesses & Customer Base Organic data, €mln, % YoY, ARPU €/month k, % YoY, 4Q’17 %QoQ 4Q’17 Net Adds/Losses Total Fixed 10,689 +1.8% Accesses(1) 11,285 11,044 -93, -0.8% Total Revenues up 737 by €194 mln YoY +451 7,641 +82, +1.1% UBB+BB CB 7,191 Stable Service UBB: 997 +1,172 2
Slide 8: Network coverage: fiber and LTE
% Total Fiber Coverage FTTx Penetration(2) % FTTC(1) • 111 k cabinets passed % FTTH ~77% ~73% 281 k FTTH OTB installed ~70% • ~60% ~65% 29% ~74% • 18.7 mln HH passed FTTC Fixed ~66% ~70% ~56% ~60% in ~ 3,600 cities 14% speed up to 200 Mbit/s ~6% ~7% ~10% • 2.3 mln HH connected FTTH ~4% ~5% in 30 mai
Slide 9: Brazil: delivering growth and record EBITDA margin
R$mln, Organic Performance, ARPU in R$, Rounded numbers Delivering Growth Record Ebitda Margin Service EBITDA 15,474 +5.1% Full year EBITDA 5,894 +14.0% Revenues Margin at 36.3% 4,075 +6.1% 1,758 +13.5% -3.4% ROBUST 4Q'17 FY'17 4Q'17 FY'17 IMPROVEMENT IN REVENUE QUALITY Mobile ARPU +14.0% Fixed BB A
Slide 10: 2017 Domestic OPEX
2017 Domestic OPEX Organic data, €mln Total OPEX 8,121 +2.2% YoY 8,301 4Q’17 Volume Driven Volume • Interconnection (40%) Volume Driven 3,356 Driven • Devices & Other COGs (55%) +12.6% YoY 3,779 (COGs) • Content e VAS (5%) 1,128 +9.7% OPEX Net of Volume Driven 4,765 Market Driven -5.1% YoY 4,522 • A
Slide 11: 2017 Domestic CAPEX
2017 Domestic CAPEX Organic data, €mln 3,921 Total CAPEX(1) 3,709 +212 YoY Domestic Capex evolution composed by: • UBB network roll-out costs, driving the 212 Mln€ total Domestic Capex increase for the Year Network(2) 2,587 +422 YoY 3,009 • Lower Procurement costs & Transformational projects • Stead
Slide 12: Net debt evolution
€mln Flash Fiber Exchange Rate Impact (216) TIM Spa 166 Domestic 630 Ebitda (7,790) capital injection IAS17 Brazil (68) Inwit 35 Brazil 257 Capex 5,071 DOWC&Others (664) from third parties Brazil 30 Persidera 4 OpFCF (3,383) 68 (16) (266) 235 887 1,113 (3,383) (21) 1,572 24,186 FY'16 Op.FCF M&A Tota
Slide 13: Cash flow FY17 vs FY16
€mln FY17 FY16 YoY 4Q 2017 4Q 2016 YoY Adjusted EBITDA (1) 8,673 8,199 474 2,460 2,168 292 CAPEX (ex-Spectrum) -5,071 -4,876 -195 -1,820 -1,769 -51 Adjusted ∆WC (2) -219 -467 248 858 549 309 OpFCF (ex-Spectrum) 3,383 2,856 527 1,498 948 550 (4) Total Financial Expenses -1,572 -1,659 87 -413 -386 -27
Slide 14: A record year, driven by ultra broadband
A record year, driven by ultra broadband growing penetration Strong performance from main subsidiaries Networks in Italy and Brazil faster and wider than ever TIM recognized as most successful Italian brand among the top 500 in the world(1) (1) Brand Finance Global 500: TIM ranking #178, +60 positio
Slide 15: FY'17 and 2018-'20 Plan agenda
FY’17 and 2018-’20 Plan What CEO asked and what we did 4Q’17 and FY Main Results 2018-’20 Plan: Key Drivers and KPI Evolutio n Targets and Take-Aways Appendix FY’17 and 2018-’20 Plan Milan, March 7 2018 14
Slide 16: Plan priorities
Best in class customer engagement through digital and agile customer journey redesign Leadership positioning by sustaining premium customer base and capturing new growth opportunities in and outside the core Acceleration of cash-flow generation to strengthen balance sheet and increase total sharehol
Slide 17: Best in class customer engagement by business unit
Best in class customer engagement Domestic 1 Consumer 2 Business 3 Wholesale • Sustain premium base through convergence • Sustain traditional revenue base through • Sustain traditional revenues through fiber (data and exclusive content) convergence, fiber and VOIP migration migration (e.g., NetCo) •
Slide 18: Domestic Consumer strategic actions
Strategic actions Impact by 2020 • Simplified, flexible fixed and mobile portfolios Maintain #1 position Consolidate and extend • Digitally enabled, intuitive customer journeys for Best quality to Fixed #1 position in • Network leadership: Fiber, 4.5G, VoLTE, 5G early adoption Network in Italy (1) C
Slide 19: Domestic Business strategic actions
Strategic actions Impact by 2020 • Large: automatization to reduce order-to-delivery time -15% Order-to-delivery time • SME’s: new digital commercial and caring engagement to +5p.p. CSI for Medium & Large in improve service level 2020 • Evolution towards “ICT company” IT & Cloud Revenues Fiber CB (M
Slide 20: Wholesale strategic actions
Strategic actions Impact by 2020 • Improved, faster delivery process of core services through new 60% faster E2E FTTC delivery time digital and automation tools -32p.p. claim rate • Upgraded and modernized assurance process, with improved self-solution options and site information quality • Fixed Ac
Slide 21: TIM Brasil strategic actions
Strategic actions Impact by 2020 >4K Cities covered by 4G (96% of • Continued expansion of the best fixed and mobile infrastructure (4G, Fiber) to differentiate experience Urban Population) • Improve Customer engagement through increased >2X growth of e-bill and e-pay penetration of digital interact
Slide 22: Inwit and Sparkle strategic actions
Strategic actions Impact by 2020 • Focus on winning new stakes of MNO’s tower ~400 New sites demand, leveraging on high quality portfolio ~1k Fiber Links • Extend leadership to next generation infrastructures (e.g., 5G, small cells) ~10k Small cells 2.1x Tenancy ratio • Enhance cost base through rev
Slide 23: Commercial and industrial cost savings
€mln Cost area Addressable Domestic baseline 2017 Strategic actions Impact by 2020 Devices & other COGS 2,030 • Optimize specifications & vendor portfolio, Content & VAS 170 apply procurement excellence practices 20% Online fixed • Shift to digital channels (acquisition & top- acquisitions (1) Acqui
Slide 24: Capital intensity mix
CPE and IT Transformation success based IT Transformation CPE and success 12% 11% based 15% 24% Mobile expansion 12% ~25% Mobile ~19% expansion 21% capital Transport capital intensity 27% capacity, run intensity Transport and maintain capacity, run 34% (mobile and 14% 31% and maintain Fixed fixed) F
Slide 25: Technology strategic actions
Strategic actions Impact by 2020 • Mobile capacity and coverage improvement to enable 3x Mobile capacity increase new revenue streams (e.g. content usage, 4G indoor VoLTE) ~ 80% Households FTTx • “Smart” Ultra Broad Band coverage and capacity coverage (own network) upgrade through smart capex deploy
Slide 26: Digital strategic actions
Strategic actions Impact by 2020 • End-to-end digital customer lifecycle management From website to eCommerce catalogue • Personalized experience with smart targeting Single Convergent App for fixed and mobile -80% Lead time for • New omni-channel CRM (BSS) and billing systems, based new offer creat
Slide 27: Organization and people strategic actions
Strategic actions Impact by 2020 • New organization structure simplified and delayered -20% Organizational units • From silos to agile organization to enable fast decision ~500 new “digital” talents making autonomy & accountably to hire • Introduction of new digital competences (e.g., big data, ~100
Slide 28: Transformation Office and implementation
A grid of 10 Workstreams, 40+ Themes(1), 250+ Initiatives A solid Implementation Machine running across the Company to drive Transformation Number of themes • Dedicated Transformation Office with 20+ full time resources Transformation Office • 250+ initiatives articulated in 3,200+ Market Caring Con
Slide 29: FY'17 and 2018-'20 Plan agenda
FY’17 and 2018-’20 Plan What CEO asked and what we did 4Q’17 and FY Main Results 2018-’20 Plan: Key Drivers and KPI Evolutio n Targets and Take-Aways Appendix FY’17 and 2018-’20 Plan Milan, March 7 2018 28
Slide 30: Group targets 2018-2020
GOALS DRIVERS TARGETS / KPIs • Focus on value maximization via accelerated • Domestic Service Revenues : convergence and new services Over 2018-2020 Broadly Stable • Plan Period Sustain Drive digital and analytics as core differentiators (both • Domestic EBITDA: Top Line & cost and revenues) Low sin
Slide 31: Take-aways
• Best in class customer engagement through digital and agile customer journey redesign • Leadership positioning by sustaining premium customer base and capturing new growth opportunities in and outside the core • Acceleration of cash-flow generation to strengthen balance sheet and increase total sh
Slide 32: FY'17 and 2018-'20 Plan agenda
FY’17 and 2018-’20 Plan What CEO asked and what we did 4Q’17 and FY Main Results 2018-’20 Plan: Key Drivers and KPI Evolutio n Targets and Take-Aways Appendix FY’17 and 2018-’20 Plan Milan, March 7 2018 31
Slide 33: TIM Brasil goals, drivers and targets
SHORT TERM LONG TERM GOALS DRIVERS TARGETS / KPIs TARGETS / KPIs Sustain • Further improve Mobile Service Service Revenues Growth: Service Revenues Growth: Revenue Share Top Line Growth • Expand Residential BB Revenues 5-7% in 2018 Mid to High Single Digit contribution CAGR ‘17-’20 Improve • Zero Ba
Slide 34: Inwit goals, drivers and targets
SHORT TERM LONG TERM GOALS DRIVERS TARGETS / KPIs TARGETS / KPIs • Maintain top-of-mind positioning on Tenancy Ratio: Revenues Growth: Maintain asset quality leadership • Additional tenants on existing towers 1.9x tenants per site in Mid single Digit 2018 CAGR ‘17-’20 • Lead network densification ph
Slide 35: Fixed and Mobile broadband ARPU and customer base
€/month, k lines Fixed Mobile BroadBand ARPU Reported ARPU 13.3 24.9 24.9 12.5 12.8 24.5 12.0 13.0 23.0 22.4 12.7 21.9 22.3 12.1 2016 21.5 11.6 2017 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q BroadBand Customer Base BroadBand Customer Base +7.9% 13,176 +7.3% 12,969 Total 7,195 7,278 7,425 7,510 +6.2% 12,509 YoY YoY FT
Slide 36: Liquidity margin covered until 2020
€mln 14,763 29,345(1) Liquidity Margin 12,694 21,775 3,884 2,069 3,087 1,305 9,568 1,983 797 Covered until 2020 564 1,267 741 4,269 4,568 716 2,424 3,141 1,845 7,570 5,000(2) 1,739 1,402 Liquidity margin FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Beyond 2022 Total M/L Term Debt (1)€29,345mln is the nom
Slide 37: Debt maturities and risk management
€mln Op. leases and long rent Banks & EIB Maturities and Risk Management 2,430 7.8% 5,981 Other 736 2.4% 19.2% Average m/l term maturity: 7.75 years (bond only 8.07 years) Bonds Fixed rate portion on gross debt approximately 71.3% 70.6% 22,002 Around 33% of outstanding bonds (nominal amount) Gross d