Telecom Italia S.p.A. · MIL:TIT
Telecom Italia — TIM Group — Q3 2018 Earnings Presentation
25 slides from Telecom Italia's earnings presentation, Nov 9, 2018
Slide 1: TIM Group 3Q 2018 Results
TIM Group 3Q 2018 Results November 9th, 2018 Amos Genish Piergiorgio Peluso
Slide 2: Safe Harbour
Safe Harbour This presentation contains statements that constitute forward Such forward looking statements are not guarantees of future looking statements regarding the intent, belief or current performance and involve risks and uncertainties, and actual results expectations of future growth in the
Slide 3: 3Q'18 Results agenda
3Q’18 Results 1 Highlights and Main Trends 2 Financial Update 3 Closing Remarks 3Q’18 Results 2
Slide 4: Resilient top line, cash flow growth
3Q’18 Main Results Resilient top line, cash flow growth Organic data (1), €mln Group Domestic Brazil 3Q’17 3Q’18 3Q’17 3Q’18 3Q’17 3Q’18 4.391 -0.3% 4.380 3.553 -1.0% 3.518 Stable group revenues: Italy SERVICE meeting well all challenges, REVENUES 845 +3.3% 872 Brazil confirming steady growth Stable
Slide 5: Domestic transformation is building value
3Q’18 Domestic Domestic transformation is building value Main 3Q Domestic Achievements Operational Improvements Financial Results Unlimited mobile data for value customers Consumer: strengthening convergence (KPIs, D YoY) Building New consumer app (with self care messaging) +1.2m retail FTTx lin
Slide 6: Improving service revenues and ARPU
3Q’18 Domestic Wireline Improving service revenues and ARPU Consumer Wireline Revenues Organic data, € mln Premium Position IoTIM TIM vision Positive ARPU effect Launched new IoT ~1.6mln customers. from repricing(1), app and services New partners: Wireline Domestic 2.632 -0,9% 2.607 while more-for-
Slide 7: Healthy FTTx conversion continues
3Q’18 Domestic Wireline Healthy FTTx conversion continues Accesses (1) Retail and wholesale customers are migrating to fiber and FTTx adoption is growing: 19.281 -65 19.216 ▪ +12% customers upgraded to FTTx (QoQ) Total Accesses 8.078 +36 8.114 WHOLESALE ▪ +2.3m total FTTx lines YoY, o/w +1.2m retail
Slide 8: Limited revenue impact from a complex quarter
3Q’18 Domestic Mobile Limited revenue impact from a complex quarter Consumer Mobile Revenues Organic data, € mln Loyalty & Convergence TIM PERSONAL TIM 100% F-M 1.334 flat 1.328 package: 600k Upgraded Handsets 132 +20.7% 159 activations to-date customer app providing new TIM Party loyalty services (
Slide 9: New entrant effects minimized through proactive commercial approach
3Q’18 Domestic Mobile New entrant effects minimized through proactive commercial approach € Mln, organic data Customer Base k, Rounded numbers 2-Tier strategy paying-off Total 31.629 +1,2% 31.994 Human 23.132 -1,7% 22.738 o/w Active 19.621 -1.6% 19.299 Loyalty & Convergence o/w LTE 10.424 78% 10.417
Slide 10: TIM Brasil: Steady growth in top line and EBITDA
3Q’18 TIM Brasil Steady growth in top line and EBITDA Organic Performance, R$mln, Rounded numbers 3Q’17 3Q’18 Total 4,083 +4.4% 4,261 Double-digit mobile and fixed ultra Mobile REVENUES R$ 3.8 Bln TIM Live R$ 0.10 Bln broadband ARPU growth Service Service 3.905 +3.3% 4.033 Revenues +2.9 % YoY Revenu
Slide 11: 5G will redefine competitive landscape, strengthening TIM position
Focus on 5G 5G will redefine competitive landscape, strengthening TIM position 5G spectrum leadership further enables seamless experience of TIM ultra broadband access- agnostic service all-over Italy Enhanced Ultra Broadband Lower Costs, Higher Quality, Spectrum Leadership Access New Services 3.7GH
Slide 12: Financial Update
3Q’18 Results 1 Highlights and Main Trends 2 Financial Update 3 Closing Remarks 3Q’18 Results 11
Slide 13: OPEX: stable YoY trend despite increased commercial activity
3Q’18 Domestic OPEX: stable YoY trend despite increased commercial activity Organic data, €mln, Δ YoY 3Q17 3Q18 Sales-related costs up YoY, supporting Addressable Cost Base 1,677 flat 1,680 commercial performance in a very competitive environment. Caring cost sub-cluster showing Commercial and Carin
Slide 14: Capital intensity reduced, ultra broadband coverage improved
9M’18 Domestic Capital intensity reduced, ultra broadband coverage improved Organic data, €mln, Δ YoY Traffic Growth CAPEX/sales 22.5% -5.0p.p. 17.5% +46% +45% 2,547(1) -572 CPE & success based 379 -22.5% Mobile Fixed 1,975 34 9/'17 9/'18 9/'17 9/'18 Capacity, run and 726 413 maintain -25 Coverage 7
Slide 15: Operating free cash flow generation
9M’18 TIM Group Operating free cash flow generation Reported, €mln Group Domestic 3.457 2.983 EBITDA- EBITDA- +1,105 2.332 +1,125 CAPEX CAPEX 1.878 (2,000) (1,677) DOWC (1,334) -666 DOWC (795) -882 OpFCF 998 +459 1.457 OpFCF 1.083 +223(1) 1.306 9M’17 9M’18 9M’17 9M’18 Brazil Δ operating working capi
Slide 16: Net financial position has been reduced from 3Q'17 and YE'17
9M’18 TIM Group Net financial position* has been reduced from 3Q’17 and YE’17 €mln; (-) = Cash generated, (+) = Cash absorbed, excluding call-outs +49 -118 -1,038 NFP NFP Op.FCF Financial Dividends & Other NFP Op.FCF Financial Other NFP 9M’17 FY17 Expenses & Change in Impacts 1H18 Expenses & Impacts
Slide 17: 5G auction payments are back-end loaded in 2022
Focus on 5G 5G auction payments are back-end loaded in 2022, and will not increase group net financial position until cash-out occurs MHz 700 3600-3800* 26000 800 900 1450 1800 2100 2600 TOTAL MHz 5G LTE GSM/UMTS Band “L” (SDL) GSM/LTE UMTS LTE EXCLUDING 26GHz 2x10 80 200 2x10 2x10 20 2x20 2x15 5 2x
Slide 18: Actively managing refinancing needs to keep a strong liquidity margin
TIM Group Actively managing refinancing needs to keep a strong liquidity margin €mln (1) 12,843 28.421 Liquidity margin improved by € 500 Mln QoQ, supported by new bilateral loans(2) at a cost below TIM secondary market bond yields, covering any cash requirement from debt renewals until 2021 11.186
Slide 19: Closing Remarks
3Q’18 Results 1 Highlights and Main Trends 2 Financial Update 3 Closing Remarks 3Q’18 Results 18
Slide 20: Closing remarks
Closing remarks 3Q’18 operational achievements: ▪ Domestic transformation leads to strong operational KPIs in a challenging context ▪ Resilient performance in Italy, growth confirmed in Brazil 5G auction financial undertakings will be met with the firmest determination to deleverage: ▪ Debt reductio
Slide 21: Annex
Annex 3Q’18 Results 20
Slide 22: Service revenues breakdown
3Q’18 TIM Group Organic data(1), €mln, % YoY Service revenues breakdown Group Domestic Brazil By Technology By Business Segment By Technology Mobile -2.8% Sparkle Total Service Inwit/others Mobile -11.7% ~3% Revenues (2) +4.3% +2.9% 4,380 -0.3% 32% Nat. WHS ~8% 95% +5.6% ~12% -4% Domestic Other & El
Slide 23: Ultra broadband network
TIM Domestic Ultra broadband network Fixed UBB Mobile UBB % FTTC passed % LTE passed 77% 78,3% 79,8% ~80% >98% >98% >96% ~60% 88% 42% 2015 2016 2017 1Q'18 2Q'18 3Q'18 2015 2016 2017 1Q'18 2Q'18 3Q'18 ▪ ~113 k cabinets passed ▪ >19.7k LTE nodes ▪ ~366 k FTTH OTB installed ▪ 7,367 cities LTE with comm
Slide 24: Well diversified and hedged debt
TIM Group Well diversified and hedged debt €mln Maturities and Risk Management Op. leases and long rent 2,141 Banks & EIB Other 7,1% 5,365 2,4% 17,9% Average m/l term maturity: 704 7.67 years (bond only 7.78 years) Bonds 72,6% Fixed rate portion on gross debt 21,791 approximately 70.3% Around 31% of
Slide 25: IFRS 9-15 impacts
TIM Group IFRS 9-15 impacts Reported data, € mln, Rounded numbers As from January 1, 2018, IFRS 9 (Financial Instruments) IFRS 9 impacts the determination of expected losses and IFRS 15 (Revenues from Contracts with on trade receivables and other financial assets Customers) have to be applied. In or