Telecom Italia S.p.A. · MIL:TIT
Telecom Italia — TIM Group — FY2018 Earnings Presentation
41 slides from Telecom Italia's earnings presentation, Feb 22, 2019
Slide 1: FY'18 Results and 2019-'21 Plan
TIM Group FY’18 Results and 2019-’21 Plan TIMe to deliver and delever February 22nd, 2019 Luigi Gubitosi Piergiorgio Peluso
Slide 2: Safe Harbour
Safe Harbour This presentation contains statements that constitute forward looking Such forward looking statements are not guarantees of future performance statements regarding the intent, belief or current expectations of future and involve risks and uncertainties, and actual results may differ mat
Slide 3: Agenda: CEO Introduction, 2018 Highlights, Strategic Plan, Outlook
FY’18 Results and 2019-’21 Plan 1 CEO Introduction 2 2018 Highlights 3 2019-’21 Strategic Plan 4 Outlook 2
Slide 4: Where TIM stands today
CEO Introduction Where TIM stands today Unique assets Unresolved issues • Resiliency in top-line at the expense of: Longstanding brand value and awareness – Rising cost structure – Cash-flow erosion Largest customer base in Italy ▫ Working capital absorption ▫ Increasing need for investments Most co
Slide 5: The First 100 Days
CEO Introduction The First 100 Days Revamp • Revamp management team: new managers appointed Culture and • Delivery Units launched: focus on execution Organization • People Accountability • Network sharing partnership with Vodafone Italia on both active and passive infrastructure — Signed non-binding
Slide 6: Network Sharing Partnership with Vodafone Italia
CEO Introduction Network Sharing Partnership with Vodafone Italia Principles of the Transaction • TIM and Vodafone Italia signed a non-binding memorandum of understanding to enter into a new Current status network sharing agreement • Accelerate and enhance the deployment of 5G technology and use net
Slide 7: Network Sharing Partnership with Vodafone Italia
CEO Introduction Network Sharing Partnership with Vodafone Italia Expansion of existing passive sharing agreement and new active network sharing agreement Description Envisaged Benefits • Expansion of current passive sharing agreement • Accelerate deployment of 5G to a nationwide agreement • Increas
Slide 8: Potential Partnership in Fiber Roll-out
CEO Introduction Potential Partnership in Fiber Roll-out Update on Dialogue with Open Fiber • TIM strongly believes in the value potentially generated by a single state-of-the-art network infrastructure, delivering benefits for all the stakeholders: TIM and OF, market, shareholders, Rationale of the
Slide 9: Agenda: 2018 Highlights
FY’18 Results and 2019-’21 Plan 1 CEO Introduction 2 2018 Highlights 3 2019-’21 Strategic Plan 4 Outlook 8
Slide 10: FY'18: Stable revenues and growing Operating Free Cash Flow, despite challenges
FY’18 Main Results FY’18: Stable revenues and growing Operating Free Cash Flow, despite challenges Organic data (1), €mln FY’18 4Q’18 FY’17 FY’18 4Q’17 4Q’18 17,552 +0.4% 17,623 Group service revenues +0.4% on 4,542 -1.8% 4,458 xxx SERVICE a full year basis: Brazil growing Domestic 13,986 -0.6% 13,8
Slide 11: FY'18 Domestic Wireline
FY’18 Domestic Wireline 4Q FSR +1.2% yoy, driven by consumer ARPU growth, business, wholesale Wireline Revenues Organic data, € mln Consumer Wireline Domestic 10,689 -0.7% 10,611 ▪ Positive net effect on revenues from two price increases (€1.95 net of VAT in July and €1.2 in Nov) led to strong ARPU
Slide 12: Strong fixed ARPU growth from FTTx conversion and repricing
FY’18 Domestic Wireline Strong fixed ARPU growth from FTTx conversion and repricing Strong migration to fiber: TIM retail fiber subs +47% yoy (42% Accesses penetration on BB customer base, +14 p.p. yoy); wholesale fiber lines +129% 19,216 -289 18,927 Consumer ARPU growth accelerating to 8.7% yoy (+6
Slide 13: TIM best-in-class in defending its customer base from new entrant/MVNOs
FY’18 Domestic Mobile TIM best-in-class in defending its customer base from new entrant/MVNOs € Mln, organic data Customer Base Mobile Revenues k, Rounded numbers Organic data, € mln % Human active Total 5,275 -1.3% 5,205 31,994 -176 31,818 Handsets 620 692 +11.6% Not Human 9,256 +114 9,370 84% Serv
Slide 14: TIM Brasil: Strong Results in a Year of Many Challenges
FY’18 TIM Brasil Strong Results Rewarding a Year of Many Challenges in the Brazilian market Organic Performance, R$mln, Rounded numbers FY’18 4Q’18 FY’17 FY’18 xxx 4Q’17 4Q’18 Total 15,474 +4.7% 16,205 Total 4,075 +3.7% 4,225 Service Revenues up 3.7% YoY in 4Q and +4.7% in 2018 SERVICE REVENUES Mobi
Slide 15: OPEX: one-offs affect YoY comps; action taken to improve underlying performance
FY’18 Domestic OPEX: one-offs affect YoY comps; action taken to improve underlying performance Organic data, €mln Commercial: higher COGS and commissioning to support revenue generation, 2017 2018 Δ ‘18 vs. ‘17 higher bad debt and credit costs(1). New plan envisages new commercial structure 8,290 8,
Slide 16: CAPEX on a decreasing trend. 5G spectrum provides competitive advantage
FY’18 Domestic CAPEX on a decreasing trend. 5G spectrum provides competitive advantage Organic data, €mln, Δ YoY UBB coverage extended in line with Plan. Further expansion will now continue in synergy with 5G (FWA) 4,551 5,634 4G access CAPEX will benefit from up-and-coming VRAN technology Heavy tra
Slide 17: Net financial position affected by license payments and NWC absorption
FY’18 TIM Group Net financial position affected by license payments and NWC absorption €mln; (-) = Cash generated, (+) = Cash absorbed, excluding call-outs Ebitda (7,713) Capex 4,159 ΔWC & Others ex spectrum 964(1) Operating FCF (2,590) -551 -38 FY’17 Op.FCF Financial Cash Taxes Dividends & Other FY
Slide 18: Key Take-aways on 2018
FY’18 TIM Group Key Take-aways on 2018 • Competition: Iliad launch, competitors reaction to Iliad’s launch, aggressive fiber promos A challenging year • Comparability: positive 2017 and adverse effect of non linear items • Regulatory: 28 days billing roll-back, wholesale prices, roam-like-at-home •
Slide 19: Agenda: 2019-'21 Strategic Plan
FY’18 Results and 2019-’21 Plan 1 CEO Introduction 2 2018 Highlights 3 2019-’21 Strategic Plan 4 Outlook 18
Slide 20: 2019-'21 Strategic Plan: TIMe to deliver and delever
2019-’21 Plan 2019-’21 Strategic Plan: TIMe to deliver and delever Revamp domestic ROIC Technology • Boost return on Commercial capital invested Modernization, simplifica- Quality positioning (stabilize revenues, tion and intelligence cut costs and NWC Operations Efficiency absorption) Execution Qua
Slide 21: Commercial – Consumer: Quality is the name of the game
2019-’21 Plan Commercial – Consumer: «Quality is the name of the game» Our assets Key Strategic Priorities KPIs evolution • From “number of GB” to “quality of service and speed” UBB penetration(1), % on mobile (premium connectivity on video, gaming) +35 pp. • Premium positioning with “best speed and
Slide 22: Commercial – Business: evolution towards a solution provider
2019-’21 Plan Commercial – Business: evolution towards a solution provider Key Strategic Priorities KPIs evolution • 5G leadership positioning: Large – ICT revenues, % – Maintain leadership in connectivity (e.g. FWA, flexible Large connectivity packages, premium profiles based on network +9 pp. Evol
Slide 23: Commercial – Wholesale: maintain access market leadership, grow in not regulated
2019-’21 Plan Commercial – Wholesale: maintain access market leadership, grow in not regulated Key Strategic Priorities KPIs evolution • UBB take-up by new pricing models and service rules (e.g. pay Not Regulated Revenues, per use UBB for vacation houses) % on Total Wholesale Revenues Regulated • Fa
Slide 24: Technology – Modernization, simplification & intelligence
2019-’21 Plan Technology – Modernization, simplification & intelligence Key Strategic Priorities KPIs evolution • New 5G and vRAN(1) stacks, complete migration to Modernization all-IP for both core and transport -8 & innovation • Automation of activities at scale on target platforms 23 Data centers,
Slide 25: Efficiency – Cost Base Resizing: Main Optimization Initiatives and Impacts
2019-’21 Plan Efficiency – Cost Base Resizing: Main Optimization Initiatives and Impacts Addressable baseline Main initiatives Impact 2018 € mln • Sales channels optimization and partners consolidation OPEX view (IAS) • Self caring (i.e. IVR , APP), back office automation and (1) Commercial 1,511(2)
Slide 26: ROIC-driven focused CAPEX Allocation
2019-’21 Plan ROIC-driven focused CAPEX Allocation FY’18 Results and 2019-’21 Plan 25
Slide 27: TIM Brasil: Key Strategic Priorities for 2019-2021 Plan
2019-’21 Plan TIM Brasil: Key Strategic Priorities for 2019-2021 Plan Areas Key Strategic Priorities Growth waves ARPU 22.4 • Mobile Pre Paid – offer simplification to improve CEx while evolving digital channels Mid to high Blended single digit • Mobile Post Paid consumer (“the controle wave”) (R$)
Slide 28: Agenda: Outlook
FY’18 Results and 2019-’21 Plan 1 CEO Introduction 2 2018 Highlights 3 2019-’21 Strategic Plan 4 Outlook 27
Slide 29: Outlook – pre IFRS 9/15 and IFRS 16
Outlook Outlook – pre IFRS 9/15 and IFRS 16 Group Domestic Brasil YoY growth rates 2019 2020-21 2019 2020-21 2019 2020-21 Organic Low single Low single Low single +3% - +5% Mid single Almost stable Service revenues digit decrease digit growth digit decrease (YoY) digit growth Low to Mid Mid to High
Slide 30: Q&A Session
Q&A Session 29
Slide 31: Annex
Annex 30
Slide 32: TIM Group IFRS 9-15 impacts
Annex TIM Group IFRS 9-15 impacts IFRS 9 impacts the determination of expected losses As from January 1, 2018, IFRS 9 (Financial Instruments) and IFRS on trade receivables and other financial assets 15 (Revenues from Contracts with Customers) have to be applied. (change from the incurred loss model
Slide 33: TIM Brasil - Outlook
Annex TIM Brasil - Outlook GOALS DRIVERS SHORT TERM TARGETS (2019) LONG TERM TARGETS • Further improve mobile ARPU Service Revenues Service Revenues Revenue Growth: Growth • Expand Residential BB Revenues Growth: contribution Mid single digit Sustainability 3% – 5% (YoY) • Tap B2B opportunity (CAGR
Slide 34: 2018 Domestic EBITDA performance net of non-linear items
Annex 2018 Domestic EBITDA performance net of non-linear items FY’18 Results and 2019-’21 Plan 33
Slide 35: EBITDA-CAPEX (ex licenses) growing, but Equity Free Cash Flow affected by DNWC
Annex EBITDA-CAPEX (ex licenses) growing, but Equity Free Cash Flow affected by DNWC TIM Group Domestic Focus on mln € 2017 2018 Domestic EBITDA 7.790 7.713 CAPEX (5.701) (6.558) • ΔNWC inflow thanks to licence mln € 2017 2018 Licences (630) (2.399) payment over 5 years and EUR Operating WC & Other
Slide 36: Well diversified and hedged debt
Annex Well diversified and hedged debt €mln Maturities and Risk Management Op. leases and long rent 1,948 Banks & EIB Other 6.6% 5,545 2.3% 18.8% Average m/l term maturity: 658 7.62 years (bond 7.75 years only) Bonds 72.3% Fixed rate portion on gross debt 21,282 approximately 71% Around 33% of outst
Slide 37: Liquidity margin
Annex Liquidity margin €mln 12,843 27,341 (2) Cost of debt: ~4.4 % 11,238 21,021 2,880 1,345 4,038 2,419 461 3,087 8,043 (1) Covered until 2021 2,079 564 951 3,043 1,832 3,929 1,515 1,267 565 5,000 2,446 6,320 1,483 Liquidity margin FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Beyond 2023 Total M/L Term
Slide 38: Sparkle: Multiple Strategic Options for Transformation and Growth
Annex Sparkle: Multiple Strategic Options for Transformation and Growth Our Vision Key Strategic Priorities Main KPIs • Scale up Sparkle infrastructure presence and Italian role in the Mediterranean • ~6,000 km submarine cable New and Africa/Middle East: • Up to 120/ 160 Terabit Infrastructure – Lev
Slide 39: Ultra Broadband network
Annex Ultra Broadband network Fixed UBB Mobile UBB % FTTC passed % LTE passed 77% ~80% ~99% >98% >96% ~60% 88% 42% FY'15 FY'16 FY'17 FY'18 FY'15 FY'16 FY'17 FY'18 ▪ ~19.4 mln HH passed FTTC ▪ >22,6k LTE nodes ▪ ~113,5 k cabinets passed ▪ 7,401 LTE cities with commercial active service, o/w: ▪ ~429 k
Slide 40: FY'18 service revenues: Brazil, domestic wholesale and business, INWIT grew yoy
Organic data(1), €mln, % YoY Annex FY’18 service revenues: Brazil, domestic wholesale and business, INWIT grew yoy Domestic Brazil By Technology By Business Segment By Technology Mobile Sparkle Inwit/others Mobile -3.1% -4.7% ~3% +3.4% +4.5% Nat. WHS ~9% 31% 95% +2.6% ~13% -4% Other & Eliminations ~
Slide 41: For further questions please contact the IR Team
For further questions please contact the IR Team Investor Relations Contact Details Phone Contact details for all E-mail IR representatives: +39 06 3688 1 Investor_relations@telecomitalia.it www.telecomitalia.com/ircontacts +39 02 8595 1 TIM IR Webpage TIM Twitter Slideshare www.telecomitalia.com/in