Telecom Italia S.p.a. · MIL:TIT
Telecom Italia — Investor Day (July 2022)
45 slides from Telecom Italia's investor day presentation, Jul 7, 2022
Slide 1: Capital Market Day 7 July 2022
CAPITAL MARKET DAY 7 JULY 2022 THE STRENGTH OF CONNECTIONS
Slide 2: Disclaimer
Disclaimer This presentation (the “Presentation”) provides an overview of a project, currently under evaluation, aimed at the rationalisation of the TIM Group through the creation of four separate units with different industrial focus and economics (the “Project”). This Presentation comprises the at
Slide 3: The new TIM: unlocking hidden value
The new TIM: unlocking hidden value Key messages we want to convey today Beyond vertical ▪ Reiterate reasons why unprecedented value-accretive actions are required leading to the integration creation of 4 separate entities with different industrial focus and economics The new TIM ▪ Explain why each
Slide 4: Agenda
Agenda #1 Beyond vertical integration #2 The new TIM NetCo TIM Enterprise TIM Consumer TIM Brasil #3 Capital structure and plan execution highlights #4 Closing remarks #5 Annex
Slide 5: The path to a higher value: setting the scene
The path to a higher value: setting the scene A valuable set of assets Relevant challenges going forward External challenges Internal challenges ▪ Top brand: 1st telecom brand in Italy From… ▪ Strongest B2B positioning ▪ Hyper-competitive market dynamics ▪ Capital structure to be improved ▪ Best sui
Slide 6: Beyond vertical integration
Beyond vertical integration To extract the highest value in the M-L term, entities coexisting in TIM would better off being managed separately NetCo TIM Enterprise TIM Consumer TIM Brasil long-term value story strong growth ahead fighting in crowded top performance fixed and mobile and growth The 1s
Slide 7: Agenda
Agenda #1 Beyond vertical integration #2 The new TIM NetCo TIM Enterprise TIM Consumer TIM Brasil #3 Capital structure and plan execution highlights #4 Closing remarks #5 Annex
Slide 8: The new TIM - Clearly identified domestic perimeter
The new TIM - Clearly identified domestic perimeter ServiceCo NetCo TIM Consumer TIM Enterprise Wholesale Brands and legal entities Commercial & Legal Consumer & Small Large corporates & National and International Target markets Medium Enterprises Public Administrations Wholesale Secondary & Cabinet
Slide 9: Agenda
Agenda #1 Beyond vertical integration #2 The new TIM NetCo TIM Enterprise TIM Consumer TIM Brasil #3 Capital structure and plan execution highlights #4 Closing remarks #5 Annex
Slide 10: NetCo - Market context: room for improvement
NetCo - Market context: room for improvement, with broadband market still underpenetrated and change in mix towards ultrabroadband Fixed lines market expected growth Broadband market underpenetrated NRRP initiatives to support FTTH coverage expansion and take-up (5) Million lines Households with fix
Slide 11: NetCo - The largest UBB infrastructure in the country
NetCo - The largest UBB infrastructure in the country, successfully upgrading access network through FiberCop CB, coverage & assets (1) Unparalleled execution capabilities 82% On-track on FiberCop FiberCop Plan presented in August 2020 market share fixed (2) Plan execution 16.4m accesses in 2021, ~2
Slide 12: NetCo - A long-term value story
NetCo - A long-term value story standalone Organic figures, €bn (including Sparkle) 2021 2025 2030 FTTH coverage evolution @ 2028 Million and % of technical units covered by FTTH Revenues (1) 5.3 ~5.2 5.4 Black Grey White Ultra white Including upside from higher commercial flexibility (2) 8.5 9.5 5.
Slide 13: Agenda
Agenda #1 Beyond vertical integration #2 The new TIM NetCo TIM Enterprise TIM Consumer TIM Brasil #3 Capital structure and plan execution highlights #4 Closing remarks #5 Annex
Slide 14: TIM Enterprise - Sizable market, fast-growing & profitable ICT space
TIM Enterprise - Sizable market, fast-growing & profitable ICT space Italian Business spending for IT and connectivity services, €bn (1) Market CAGR 2021 2025 2030 ‘21-‘25 ‘25-‘30 Total 19.1 35.4 22.3 41.8 27.2 51.4 +4% +4% Connectivity 2.8 6.5 2.9 6.6 3.1 6.9 +1% +1% IoT 2.8 7.9 4.0 11.1 5.6 15.6 +
Slide 15: TIM Enterprise - Unparalleled starting point and unique right-to-win
TIM Enterprise - Unparalleled starting point and unique right-to-win Leading client portfolio and complete e2e ICT offering Unique assets & network infrastructure Clear leadership in Large Complete end-to-end offering, The only network infrastructure ICT player in Italy, Enterprises segment, unique
Slide 16: TIM Enterprise - New integrated model
TIM Enterprise - More than just a "sum-of-parts", new integrated model unlocking full value creation potential From current Enterprise & Factories model… …to new integrated model, larger than just a "sum-of-the-parts"… TIM Enterprise TIM Enterprise BU TIM Enterprise BU End-to-end Connectivity, Cloud
Slide 17: TIM Enterprise - Strong growth ahead
TIM Enterprise - Strong growth ahead Organic figures, €bn 2021 2025 2030 ▪ Steady topline growth above market (4% CAGR ‘21-‘30), with change in revenue mix Revenues (1) 3.0 ≥3.5 ~5.0 Revenues by segment Connectivity Strong multi-year backlog: ~60% of revenues secured 11% 10% on avg. between 2022-’25
Slide 18: TIM Enterprise - Evolutionary steps to accelerate revenue growth
TIM Enterprise - Evolutionary steps to accelerate revenue growth TIM Enterprise BU creation TIM Enterprise full go-to-market Acceleration & growth Steady state Evolution Best-in-class ICT company, reference Foundation 18-24 months player in the Italian market and beyond 6 months Standalone company,
Slide 19: Agenda
Agenda #1 Beyond vertical integration #2 The new TIM NetCo TIM Enterprise TIM Consumer TIM Brasil #3 Capital structure and plan execution highlights #4 Closing remarks #5 Annex
Slide 20: TIM Consumer - Market context: crowded fixed and mobile
TIM Consumer - Market context: crowded fixed and mobile, room for growth ….but rising opportunities Market context is challenging… set the ground for growth Italian TLC revenues (1) Italian TLC CAPEX (1) Fixed Mobile vs +35% ✓ Increase in UBB footprint driving growth of fixed vs -10% in EU in EU mar
Slide 21: TIM Consumer - Turnaround a sustainable value creation
TIM Consumer - Turnaround a sustainable value creation Fix the core Build the future Reposition towards premium / high reliability operator, digital with a “human touch” ▪ Premium brand positioning, also through targeted and digital communication ▪ Service level as key differentiation element ▪ Pric
Slide 22: TIM Consumer - Revenue stabilization and cost optimization
TIM Consumer - Revenue stabilization and cost optimization Revenue stabilization - Ambitions 2026 vs ‘21 Cost optimization - Ambitions 2026 vs ‘21 Addressable OPEX - -30% = Caring cost TIM Consumer CB stabilization, CB fixed + mobile lines TIM -34% Consumer + SMB -55% bad debt '21 '24 '26 - + -20% a
Slide 23: TIM Consumer – A turnaround story
TIM Consumer – A turnaround story Organic figures, €bn 2021 2025 2026 Included in the plan Revenues (1) 6.8 ~6.4 6.5 ▪ Commercial and operative transformation ▪ TIM content transformation for Consumer EBITDA AL (2) 1.2 ≥1.3 >1.4 ▪ ICT offering evolution for SMB % on revenues 17% ~21% 22% ▪ Active sh
Slide 24: TIM Consumer - Execution roadmap
TIM Consumer - Execution roadmap Sustainable growth 2024 onwards Turnaround 12-18 months Restructuring Scale turnaround initiatives and 6 months secure sustainable growth Execute structural turnaround Set-up transformation machine initiatives and 1st wave of cash-oriented ▪ Valorization beyond core
Slide 25: Agenda
Agenda #1 Beyond vertical integration #2 The new TIM NetCo TIM Enterprise TIM Consumer TIM Brasil #3 Capital structure and plan execution highlights #4 Closing remarks #5 Annex
Slide 26: TIM Brasil - The most profitable company in LatAM TLC space
TIM Brasil - The most profitable company in LatAM TLC space Performance-driven market leader… …with a significant upside to be captured (EBITDA-CAPEX)/REVENUE (1) EBITDA margin (1) FCF yield (2) Analysts Consensus (3) 2021, % 2021, % 2021, % TIM 24% 48% 15% Target Price 19.0 R$ Op.#1 23% 38% 10% Ups
Slide 27: TIM Brasil - Next generation telco, clear path to value
TIM Brasil - Set to become the next generation telco, with a clear path to value Strengthening the core to generate cash flow… …in order to accelerate growth beyond connectivity Become the best Accelerate growth Scale-up presence Expand partnerships mobile operator through the new asset light model
Slide 28: TIM Brasil - Enhanced value creation from improvement in all metrics
TIM Brasil - Enhanced value creation from improvement in all metrics Revenues Growth Acceleration EBITDA Growth Acceleration Improved Capex on Revenues From Mid single To High single From Mid Single To Low Double From Mid-twenties To Mid-teens CAGR 21-27 CAGR 21-24 2021 to 2030 NET SERVICE REVENUES
Slide 29: TIM Brasil - Healthy leverage position after OI closing
TIM Brasil - Maintaining a healthy leverage position after OI closing, rapidly deleveraging afterwards. Value from the deal >2x the amount paid Net Debt / EBITDA evolution OI DEAL NET VALUE CREATION R$ 16-19bn - R$ 7.3bn (acquisition) = R$ 8.7-11.7bn ~2.0x ~1.6x 1 R$ 4-5bn Immediate benefit from inc
Slide 30: Agenda
Agenda #1 Beyond vertical integration #2 The new TIM NetCo TIM Enterprise TIM Consumer TIM Brasil #3 Capital structure and plan execution highlights #4 Closing remarks #5 Annex
Slide 31: The new TIM, not a holding company
The new TIM, not a holding company NetCo ServiceCo TIM Consumer (1) TIM Enterprise Other infra-assets (inc.Primary) TIM Brasil Potential M&A Note: The chart is a simplified representation of the pro-forma group structure Capital Market Day (1) Including Small and Medium Businesses July 7th 2022 31
Slide 32: All preparatory activities ongoing
All preparatory activities ongoing NetCo ServiceCo Perimeter ✓ ✓ Dedicated management team ✓ ✓ FTEs allocation ✓ ✓ Dedicated business plan ✓ ✓ Carve-out financials Ongoing: Big-4 appointed Ongoing: Big-4 appointed Considerable structuring work done Considerable structuring work done Capital Structur
Slide 33: Delayering Plan - Strengthening TIM’s capital structure
Delayering Plan - Strengthening TIM’s capital structure Group Net Financial Position After A Zoom on the next slide Lease €bn 3.7 (1.3) ~20 For illustrative purposes only, do not consider scale effect 17.7 Depending on final structure / outcome of M&A transactions, financial flexibility for: i. Acce
Slide 34: Delayering Plan - Strengthening TIM’s capital structure
Delayering Plan - Strengthening TIM’s capital structure Key highlights Delayering Plan to accelerate deleverage For illustrative purposes only, do not consider scale effect ▪ TIM will no longer be Up to ~€11bn vertically integrated Cash proceeds from: – Deleverage achieved 1 i. NetCo Transaction eit
Slide 35: Options for a sustainable capital structure
Independently from vertical dis-integration, we still have options for a sustainable capital structure TIM is committed to reduce total leverage Liquidity secured until 2024 – no refinancing needs, also in a “continuity” scenario thus flexibility to execute Q1 ‘22 adjusted for: SACE further ▪ € 1.5b
Slide 36: Key objective: reduce leverage and improve rating profile
In any potential M&A structure, a key objective of the Delayering Plan will be the reduction in leverage and strong commitment to improve rating profile Key Pillars Rating Considerations ▪ One of TIM’s key objectives for the Delayering Plan is to ▪ Before committing to any transaction, TIM intends t
Slide 37: Delayering Plan - Execution will take ~15-18 months
Delayering Plan - Execution will take ~15-18 months given the extraordinary nature and complexity of the transaction Focus on NetCo 2022 2023 2024 Perimeter ✓ NetCo Equity story / preparation strategic roadmap ✓ “Carve-out” activities Definition of the transaction Binding Agreement NetCo M&A (Oct-22
Slide 38: Agenda
Agenda #1 Beyond vertical integration #2 The new TIM NetCo TIM Enterprise TIM Consumer TIM Brasil #3 Capital structure and plan execution highlights #4 Closing remarks #5 Annex
Slide 39: Closing remarks
Closing remarks ▪ Delayering TIM is an unprecedented opportunity to unleash the strengths hidden in the integrated model ▪ Running a well-balanced portfolio of distinct entities with different characteristics and at different level of maturity ▪ Identified a clear tailor-made strategy for each entit
Slide 40: Agenda
Agenda #1 Beyond vertical integration #2 The new TIM NetCo TIM Enterprise TIM Consumer TIM Brasil #3 Capital structure and plan execution highlights #4 Closing remarks #5 Annex
Slide 41: NetCo - Perimeter
NetCo - Perimeter Highlights on NetCo perimeter ▪ Copper and fiber infrastructure from central office to client premises, with ServiceCo retaining selected primary fibers ▪ Central offices and junction infrastructure, excluding backbone, IP transport and mobile infrastructure ▪ All real estate asset
Slide 42: NetCo - Key services between NetCo and ServiceCo
NetCo - Key services between NetCo and ServiceCo NetCo Access services needed to implement retail services (1) Accesses Space occupancy and energy for Building & Services to implement wholesale Bandwidth services requiring IP transport (2) industrial and office/commercial use energy Operation and ma
Slide 43: TIM Enterprise - Complete end-to-end ICT offering
TIM Enterprise - Complete end-to-end ICT offering, unparallel in the market 30-40% Managed & Change Run Professional Cloud Cost Systems & Full Managed Managed Assessment Deployment Applications Security & Services Migration Optimization Management outsourcing Audit & Billing Governance 40-50% 25-35%
Slide 44: TIM Enterprise - Operating model
TIM Enterprise - Operating model Commercial Centralized corporate sales / account management ▪ Centralized corporate sales / account management: single point of contact to engage with Sales Governance customers in order to better identify needs and explore opportunities Integrated marketing & produc
Slide 45: For further questions please contact the IR team
For further questions please contact the IR team (+39) 06 3688 2500 Investor_relations@telecomitalia.it www.gruppotim.it www.twitter.com/TIMNewsroom www.slideshare.net/telecomitaliacorporate