TIM GROUP
Q2 '20 Results
Lighter debt, improving KPIs, on the path towards the Single Network for Italy
5 August 2020
Disclaimer
This presentation contains statements that constitute forward looking statements regarding the intent, belief or current expectations of future growth in the different business lines and the global business, financial results and other aspects of the activities and situation relating to the TIM Group. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected or implied in the forward looking statements as a result of various factors.
The financial results of the TIM Group are prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board and endorsed by the EU (designated as "IFRS").
The accounting policies and consolidation principles adopted in the preparation of the financial results for Q2 '20 and H1 '20 of the TIM Group are the same as those adopted in the TIM Group Annual Audited Consolidated Financial Statements as of 31 December 2019, to which reference can be made, except for the amendments to the standards issued by IASB and adopted starting from January 1, 2020.
Please note that the limited review by the external auditors (E&Y) on the TIM Group Half-year Condensed Consolidated Financial Statements at 30 June 2020 has not yet been completed.
Alternative Performance Measures
The TIM Group, in addition to the conventional financial performance measures established by IFRS, uses certain alternative performance measures for the purposes of enabling a better understanding of the performance of operations and the financial position of the TIM Group. In particular, such alternative performance measures include: EBITDA, EBIT, Organic change and impact of non-recurring items on revenue, EBITDA and EBIT; EBITDA margin and EBIT margin; net financial debt (carrying and adjusted amount) and Equity Free Cash Flow. Moreover, following the adoption of IFRS 16, the TIM Group uses the following additional alternative performance indicators:
- EBITDA adjusted After Lease ("EBITDA-AL"), calculated by adjusting the Organic EBITDA, net of non-recurring items, of the amounts related to the accounting treatment of lease contracts according to IFRS 16 (applied starting from 2019);
- Adjusted Net Financial Debt After Lease, calculated by excluding from the adjusted net financial debt the liabilities related to the accounting treatment of lease contracts according to IFRS 16 (applied starting from 2019).
- Equity Free Cash Flow After Lease, calculated by excluding from the Equity Free Cash Flow the amounts related to lease payments.
Such alternative performance measures are unaudited.
Q2 '20 Results | 2 |
"Operations TIMe": engaging employees, improving CSI and KPIs
Culture,
engagement
and organization
Domestic
Brazil
Cash generation
What happened in Q2
- Customer Satisfaction Index/Net Promoter Score growing
- New employee shareholding plan launched
- Early retirement plan continues at full speed
- Positive mobile net adds
- Strongly improved fixed KPIs point to H2 FSR YoY better vs. H1
- Enhanced UBB rural coverage and take up
- More digital sales channels and direct payments
- Enhanced OPEX saving offset COVID-19 impact on revenues
- Strong growth in cash generation
- Organic cash generation continues
- Net Debt record level decrease
- EFCF guidance confirmed, debt reduction improved
KPIs
CSI (1) +3% mobile, +2% fixed
CSI wholesale +1%
2.8k exits in H1 / 3.4k planned in FY(2)
Mobile calling net adds +87k ~zero Consumer line losses +1.2m UBB HHs, +0.5m FTTx lines Fixed Web sales +138% YoY Direct payment 75% of gross adds
EBITDA +1.0% YoY
EBITDA-CAPEX+29% YoY
Eq FCF AL € 336m in Q2
Net Debt AL -€0.6bn QoQ
(1) CSI - Customer Satisfaction Index - Q2 '20 vs. Q4 '19 | Q2 '20 Results | |
(2) 2.4k exits accounted plus 0.4k other exits already agreed in H1 | 3 | |
Service portfolio enriched; TIM TV now a key differentiating factor
TIM-Google WiFi calling
Smart
working
First integration of
digital assistant
with legacy F-M networks in EU
New, dedicated bundles introduced:
Netflix and Sports
Launched convergence in the B2B segment
New convergent VPBX solutions
NowTv & Dazn (sport) 29.99 €/month
RELAUNCHED IN JUNE | |
Mondo Netflix | 12.99 €/month |
LAUNCHED IN MAY | |
Mondo Disney+ | 3.00 €/month |
TIM EXCLUSIVE | |
NEW PACKAGES TO COME IN
SEPTEMBER
TIMVISION customers growing double digit
TIMVISION CB
Million registered customers
+23% YoY
1.59 1.66 1.75 1.85 1.96
Q2 '19 | Q3 | Q4 | Q1 '20 | Q2 |
Unique partnerships
positioning TIMVISION
as a leading content aggregator
exclusive
TIMVISION Box, enabler of full
TIMVISION experience
Q2 '20 Results | 4 |
COVID-19 update: Italy gradually back to normality
Italy post-lockdown
Thousands | 120 | |
100 | ||
80 | ||
60 | ||
40 | ||
20 | ||
0 | ||
24-Feb24-Mar24-Apr | 24-May24-Jun | |
Total infections | Hospitalized |
Source: Civil Protection website
- Zero new cases in many regions
- Major public intervention for Italian families and businesses (€ 209bn recovery fund)
- New focus and push on digital and connectivity (€ 2.7bn public funding
for vouchers and roll out)
Short-term impacts on TIM
COVID-19 impacting top line and EBITDA
YoY growth, p.p. | ||||
Q1'20 | Q2'20 | |||
Domestic | ||||
Service | -0.3 | -1.7 | ||
Revenue | ||||
Q1'20 | Q2'20 | |||
Domestic | -3.7 | |||
Organic |
EBITDA-1.2
COVID-19 impact (p.p)
Medium/long term
Increased demand for digital services
- Cultural step towards digital
- Inversion of fixed to mobile substitution trend
- FSR expected to benefit starting from H2
Fixed Service Revenue
Organic, YoY change
Q1 '20 Q2 Q3E Q4E
-10.1%-8.5%
Q2 '20 Results | 5 |
Strategic initiatives update
Cash-in | |||||||
ABB and | for TIM | Consortium | |||||
Monetized | €0.65bn | Q2 | 51% | 49% | Total debt | ||
dividends | |||||||
mobile towers, | TIM TOWER | reduction | |||||
FREE FLOAT | >€2bn | ||||||
retaining joint control | HOLD CO | ||||||
c. €1.6bn | Ardian | 30.2% | Joint control | Up to 3% | vs. €1.4bn | ||
Q3 | targeted | ||||||
consortium | Canson Capital | ||||||
owned by | |||||||
deal |
Cloud services
and data centers
on the way
Develop
TIM Brasil
Data center NewCo targets
▪ | Top clients onboard (eg. Intesa Sanpaolo, RCS) | €1bn | Revenues 2024 |
▪ | Data center carve-out confirmed by October '20 | ||
€0.4bn | |||
EBITDA 2024 |
- TIM Brasil, VIVO and Claro have submitted a R$ 16.5 billion binding offer for Oi mobile business subject to certain conditions, including the Offerors selection as "stalking horse"
Q2 '20 Results | 6 |
TIM co-investing with Fastweb & KKR towards the Italian single network
KKR extended its binding offer to 31 August | TIM's BoD strongly welcome Government's will | |
to accelerate the single network project | ||
on Government request to create a broader single network | ||
and mandated the CEO to interact accordingly with Authorities | ||
- The largest passive infrastructure wholesaler in Italy, with key
FiberCop to be the | customers such as TIM and Fastweb and all main OLOs | Carve out and valuation of | |
carve out of TIM's | ▪ | FTTH connecting c.20% of technical units (1), 56% by 2025 (2), | FiberCop key step towards: |
passive secondary | corresponding to 76% of Black and Grey areas | ▪ Co-investment with | |
network | ▪ | FTTC connecting c. 85% of technical units (3) (>100Mbps speed | |
for c. 50%, >50Mbps speed for c. 85%) | OLOs |
…allowing TIM to | ▪ | €4.7bn equity value and €1.8bn cash proceeds for TIM through | ▪ | Multiples rerating |
▪ | Creation of Italy's single | |||
complete fiber roll | the sale of 37.5% to KKR | |||
network | ||||
out while | ▪ TIM to be the exclusive builder and technical supplier for | |||
deleveraging… | FiberCop's network roll out & maintenance |
▪ | TIM at 58% | ||||
…and sharing | Letter received from the Italian | ||||
benefits and risks | ▪ | KKR Infrastructure at 37.5% paid in cash | Government on commitment to | ||
with strong | ▪ | Fastweb at 4.5% through contribution of 20% of Flash Fiber | work on the creation of a single | ||
partners | ▪ | FiberCop €7.7bn enterprise value at start | network for Italy | ||
- By YE 2020; technical units = residential or business sites which have had a fixed line connection in the last 10 years, corresponding to c. 5m occupied premises based on ISTAT
(2) Corresponding to c. 16.5m occupied premises based on ISTAT | Q2 '20 Results | 7 |
(3) Corresponding to c. 25m occupied premises based on ISTAT | ||
Unlocking hidden value and rerating path through FTTH/UBB adoption/deployment
Business rationale
Key benefits
for TIM
- Lead Italy's accelerated adoption and deployment of top-quality UBB networks
- Accelerate migration of TIM's customer base from copper to fiber
- Equity finance the FTTH roll-out
- Co-investwith Fastweb according to EU Telecommunication Code art. 76 (regulation eased): FiberCop supplier to Fastweb for secondary network
- Close digital divide, rolling out fiber in grey areas and FTTC in white areas
- Consolidate TIM's position in the creation of the National fiber network
- Unlock hidden value
- Multiple accretive transaction
- Path to rerating for secondary network from shift to fiber from copper whilst retaining strong control
- Set-upa partnership with one of the world's most reputable financial investors, with relevant experience in the infrastructure and TLC space
- Strongly enhance cash generation profile after the roll-out period (2025), with CAPEX on sales <10% at regime
- Accelerate deleverage
Q2 '20 Results | 8 |
Overview of the Transaction structure, as per KKR Infrastructure binding offer
Transaction structure | Key terms of KKR entry | |
Pre Transaction(1) | Step 1: Carve-out | Step 2: Partner's entry | FiberCop | |||
Enterprise Value | ||||||
Debt allocated | ||||||
to FiberCop | ||||||
58.0% | 37.5% | 4.5% | (TIM intercompany loan) | |||
100.0% | ||||||
FiberCop | ||||||
FiberCop S.p.A | FiberCop S.p.A | Equity Value | ||||
80.0%(2) | 100.0% | Stake acquired | ||||
20.0% | 80.0%(2) | by KKR | ||||
Flash Fiber S.r.l. | Flash Fiber S.r.l. | Flash Fiber S.r.l. | Cash-in | |||
for TIM |
- 7.7bn
- 3bn
- 4.7m
37.5%
€ 1.8bn
Unlocking rerating opportunity whilst retaining strong control
(1) Before the carve-out TN Fiber to be merged in TIM | Q2 '20 Results | |
(2) 20% stake in Flash Fiber owned by Fastweb to be contributed in exchange of FiberCop shares | 9 | |
FiberCop at a glance
Simplified FiberCop perimeter
Including all of TIM's passive secondary network infrastructure, both copper and fiber, from the cabinet to the home, (ducts, secondary network, sockets, etc. with cabinet excluded)
FiberCop Perimeter
passive only | ||||||||
Fiber | ||||||||
Backbone | Fiber | Central | Fiber | Cabinet | Home | |||
Office | ||||||||
Copper | ||||||||
Home | ||||||||
100% owned by | 58.0% | 37.5% | 4.5% |
FiberCop operating model very lean
- FiberCop to own TIM's secondary network infrastructure
- Complete fiber secondary network roll out in Black & Grey areas
- Provide passive access services to TIM and other OLOs
- Number of employees <100
FIBERCOP
- TIM to execute all operational activities for FiberCop, from design to network construction, maintenance and assurance
- Perform general services, from corporate affairs to treasury and procurement
- Be customer of FiberCop on equal terms vs. Fastweb and other OLOs
Q2 '20 Results | 10 |
Financial Update
Q2 '20 Results | 11 |
TIM Group
Q2 Highlights: Record quarterly deleverage
Organic data (1), IFRS 16, € m
Service
Revenues
Q1 '20 | Q2 '20 | |||||||||
% YoY | % YoY | |||||||||
3,702 | -6.6% | 3,559 | -8.2% | |||||||
Brazil | +1.6% | -3.4% | Equity FCF | |||||||
Domestic 2,876 | -8.8% | 2,919 | -9.1% | |||||||
After Lease | ||||||||||
EBITDA | 1,541 | -8.5% | 1,563 | -6.4% | ||||
Brazil | -0.5% | |||||||
After Lease | +6.6% | 1,309 | -7.5% | |||||
Domestic | 1,239 -11.6% | |||||||
Margin | 38.7% | 40.9% |
Net Debt | FY '19 | |
Q1 '20 | ||
After Lease (2) | H1 '20 | |
21,893 | -798 |
21,711 | |
-616 | |
21,095 | |
Impact of COVID-19 on Revenues mitigated by accelerated cost cutting both in Italy and Brazil, leading to Group and domestic EBITDA trend better than Q1
Record high quarterly Net Debt reduction thanks to strong organic and inorganic cash generation (-€616mQoQ After Lease)
Equity Free Cash Flow AL of €336m. In H1 Equity FCF reaches €788m, in line with 2019 excluding FX and one-off payments
Under IFRS16, debt reduction reaches €774m and EFCF €511m in Q2
(1) Excluding exchange rate fluctuations, non recurring items and change in consolidation area | Q2 '20 Results | |
(2) Adjusted Net Debt | 12 | |
TIM Group
€3.8bn debt cut in 20 months
Group Net Debt After Lease
Adjusted, € bn
€1.9bn organic debt reduction | >2€bn deleverage through INWIT | Additional €1.8bn from KKR | ||
achieved in 18 months | monetization (€1.6bn in Q3) | transaction expected by H1 2021 | ||
Q2 '20 Results | 13 |
TIM Domestic
Mobile: calling customer base back to growth for the first time in 2 years
Customer Base
k lines, Rounded numbers
Market MNP shrunk further in Q2 | Mobile Customer Satisfaction | |
-20vs. | |||||
30,522 | -373k in Q1 | 30,502 | |||
10,098 | +249 vs. | 10,347 | |||
+206k in Q1 | |||||
20,424 | -269vs. | 20,155 | |||
-579k in Q1 | |||||
Q1 '20 | Q2 '20 | ||||
Human | Not Human | ||||
CSI improved. Net Promoter Score well above large operators'
Stabilization of customer base (CB) key for turnaround: CB decline explains >5pp of MSR decline in Q2
MNP market volumes (1)
Million lines
-36%-42% | -5%1% -9% |
YoY | |
3.6 | ||||||||
2.6 | 3.3 | 3.0 | ||||||
2.3 | ||||||||
Q2 '19 | Q3 | Q4 | Q1 '20 | Q2 |
Source: intra operator database
Churn further reduced QoQ
Churn rate
%
5.4% 5.5% 5.3%
4.3%4.0%
Q2 '19 | Q3 | Q4 | Q1 '20 | Q2 |
CSI mobile (2)
+3%
Q4 '19 | Q2 '20 |
«Calling» net adds
positive
Human Calling net adds QoQ
k lines
87
-474
Q1 '20 | Q2 |
(1) Source: intra operator database | Q2 '20 Results | |
(2) CSI is an established methodology based on ACSI (American Customer Satisfaction Index) developed by University of Michigan's School of Business | 14 | |
TIM Domestic
Mobile revenues: ARPU growth mitigates one off drags
Mobile ARPU on an improving path | Mobile Revenues | |||
TIM human ARPU | Organic data | |||
1,101 | ||||
€ m | 939 | |||
€ / line / month | Equipment | |||
168 |
-1.3% | -1.0% | 933 | -42.0% | 97 | ||||
-4.4% | YoY | -5.1% | ||||||
-5.0% | Service | 842 | ||||||
-7.7% | Underlying MSR | |||||||
830 | -9.8% | 752 | ||||||
CSP impact | Retail | (-2.3% in Q1) | ||||||
-9.3% | ||||||||
12.7 | 12.6 | 12.8 | 103 | Wholesale | ||||
& Other (1) | 89 | |||||||
-2.3% YoY | +1.6%YoY | +2.0%YoY | Q2 '19 | -13.5% | Q2 '20 | |||
12.5 | 12.9 | MSR: underlying trend -5.1% YoY entirely volume-related | ||||||
12.4 | 12.3 | 12.4 | ||||||
One off items: COVID-19 impact on roaming (ca. -2.2pp) and CSP (content | ||||||||
Q2' 19 | Q3 | Q4 | Q1 '20 | Q2 | service providers) cleanup (c. -2.5pp) | |||
MTR price reduction explains another -1.3pp drag and the renewal of the | ||||||||
ARPU almost flat YoY; +2.0% underlying (ex. 3pp CSP drag) | mobile Consip contract at lower prices another -0.9pp, both in line with Q1 | |||||||
~6pp drags affecting Q2 and Q3 will disappear from 2021 | ||||||||
Lower handsets sales due to the lockdown |
(1) Wholesale & Other explain -3.2pp decline YoY (vs. -0.7pp in Q1), affected by Visitors | Q2 '20 Results | |
15 | ||
TIM Domestic
Fixed KPIs strong across the board. Line losses close to zero
Total Accesses (1) | Retail line losses significant reduction QoQ | UBB strong growth despite lockdown | ||||||||||||||||||||||||||||||
k lines | ||||||||||||||||||||||||||||||||
+20 vs. | Line losses QoQ | UBB Customer Base | (2) | +7% QoQ | ||||||||||||||||||||||||||||
16,984 | 17,004 | k lines | k lines | |||||||||||||||||||||||||||||
+24% YoY | ||||||||||||||||||||||||||||||||
-233k in Q1 | Consumer line losses close to zero in Q2 | |||||||||||||||||||||||||||||||
8,981 | -60vs. | 8,921 | 7,338 | +219 vs. | 7,870 | |||||||||||||||||||||||||||
-185k in Q1 | ||||||||||||||||||||||||||||||||
-60 | +119k in Q1 | |||||||||||||||||||||||||||||||
3,789 | 4,008 | |||||||||||||||||||||||||||||||
8,003 | +80 vs. | 8,083 | -185 | |||||||||||||||||||||||||||||
-48k in Q1 | -217 | -216 | 3,549 | +313 vs. | 3,862 | |||||||||||||||||||||||||||
-331 | +240k in Q1 | |||||||||||||||||||||||||||||||
Q1 '20 | Q2 '20 | |||||||||||||||||||||||||||||||
Q1 '20 | Q2 '20 | |||||||||||||||||||||||||||||||
Q2 '19 | Q3 | Q4 | Q1 '20 | Q2 | ||||||||||||||||||||||||||||
Wholesale | Retail | Consumer | Business | Wholesale | Retail | |||||||||||||||||||||||||||
Early benefits from "fix the fixed" initiatives.
More expected in coming quarters
7k new FTTC cabinets opened in white areas contributed to increased migrations from copper to fiber (+70% QoQ) and to Wholesale performance
FTTC cabinets expected to grow >10% by YE (another 8-10k by YE)
Churn improving thanks to lower | Wholesale UBB net adds far | |||||||||||||
disconnections | above ULL losses | |||||||||||||
Churn | Net adds QoQ | |||||||||||||
monthly average | k lines | 143 | ||||||||||||
4 | 17 | 48 | 13 | |||||||||||
2.0% | 1.6% | 1.6% | 253 | 207 | 233 | 240 | 313 | |||||||
1.5% | (249) | (190) | (185) | (227) | (170) | |||||||||
1.0% | ||||||||||||||
Q2 '19 | Q3 | Q4 | Q1 '20 | Q2 | ||||||||||
Q2 '19 Q3 | Q4 | Q1 '20 Q2 | UBB(2) | ULL | ||||||||||
(1) On TIM infrastructure, retail VoIP excluded | Q2 '20 Results | |
(2) FTTx and Fixed Wireless Accesses (FWA) | 16 | |
TIM Domestic
FSR on an improving path with H2 expected better than H1
Fixed Service Revenues improved QoQ (-8.5% vs. -10.1% in Q1) with better CSI. Further improvement expected for H2
- Better Wholesale performance (+1.3% YoY vs. +0.6% in Q1): lines growing thanks to VULA well above ULL
- Better International Wholesale as revenue repositioning is almost done (-3.9% YoY vs. -8.8% in Q1)
- Retail revenues growth rate in line with Q1. Trend expected to improve in coming quarters thanks to:
- Customer base (CB) YoY fall explains c. 80% of Q2 FSR YoY fall. CB fall YoY expected to halve by YE
- ARPU uplift from new services (more for more)
- Free services (trial & COVID-19 related) start to be paid
- Washing machine clean up annualization
Market discipline in Q2: competitors acquisition prices on an increasing path
Organic data | Fixed Revenues | ||
€ m | |||
2,588 | -8.6% | 2,365 | |
170 | Service | ||
152 | |||
2,418 | -8.5% | Equipment | |
2,213 | |||
-10.4% | |||
1,609 | 1,408 | ||
Retail | |||
-12.5% | |||
National Wholesale | |||
560 | +1.3% | 567 | |
233 | Intern. Wholesale | 224 | |
-3.9% | |||
Q2 '19 | Q2 '20 | ||
Fixed pricing | Customer Satisfaction |
Price benchmark | CSI fixed (1) | ||||||||||
€/month | Retail | Wholesale | |||||||||
30 | |||||||||||
27 | +2% | +1% | |||||||||
30 | 28 | 26 | 27 | ||||||||
TIM | Op.2 | Op.3 | Op.4 | Q4 '19 Q2 '20 | Q4 '19 Q2 '20 | ||||||
(1) CSI is an established methodology based on ACSI (American Customer Satisfaction Index) developed by University of Michigan's School of Business | Q2 '20 Results | |
17 | ||
TIM Domestic
Cost reduction accelerating: -13% YoY
Addressable costs down 13.6% vs. -5.6% in Q1 | OPEX reduction accelerated in Q2: -13.0% vs. -10.2% in Q1 | |
OPEX | ||
Organic data, IFRS 16, € m | Q2 '20 | YoY change (1) |
1,732 | -13%(-259) | |
Interconnection | 261 | -5% |
Equipment | 192 | -31% |
CoGS | 142 | +17% |
Commercial | 306 | -21% |
Industrial | 254 | |
-8% | ||
G&A & IT | 85 | |
Labour (2) | -8% | |
483 | ||
-11% | ||
Other (3) | ||
9 | ||
- Interconnection mirrors new strategy for Sparkle
- Equipment mirrors lower handset sales following lockdown
- CoGS increase related to IT revenue growth
- Commercial costs benefit from stopped CSP services, streamlined wholesale processes and efficiencies in customer care. Lower advertising costs due to shift of sponsorships on sport events (due to COVID-19)
- Industrial costs down thanks to decrease in energy (lower prices and consumption) and industrial spaces cost
- G&A down thanks to lower civil building costs
- Labour positively impacted by Full Time Equivalent reduction (-2k YoY)
- Net of deferred costs, on a cash view, the reduction reaches € 268m (-12.6% vs. -11.0% in Q1). Net of deferred costs, total OPEX amounts to € 1,852m in Q2 '20 and € 2,121m in Q2 '19.
On a cash view, YoY changes differ in CoGS (+17%), Industrial (-5%), G&A & IT (-11%) and Labour (-12%) | Q2 '20 Results | ||
(2) | Net of capitalized costs | 18 | |
(3) | Includes other costs/provision and other income |
TIM Group
Strong efficiencies in CAPEX; NWC outflow reduced €492m YoY
CAPEX | Group Operating WC improving € 492m YoY | |
Organic data, € m
Net Working Capital
IFRS 16, € m | |||||||||||||||
807 | -19% | H1 '19 | H1 '20 | YoY | |||||||||||
Brazil | 162 | -29% | 655 | ||||||||||||
107 | 332 | ||||||||||||||
Group | (599) | +492 | |||||||||||||
(1,091) | |||||||||||||||
Domestic | 645 | -15% | (137) | ||||||||||||
549 | (736) | ||||||||||||||
+23 | |||||||||||||||
(759) | |||||||||||||||
Q2 '19 | Q2 '20 | Operating WC | Non recurring items | ||||||||||||
CAPEX down 19% YoY for COVID-19 related | Group Operating Working Capital +€ 492m YoY despite € 393m of |
delays and for efficiency gains both in Italy | one-offs and non-comparable items(1) offset by a positive exchange |
and Brazil | rate impact in Brazil (€ 211m) and by postponement of 2020 Fistel |
payment to August, as allowed post COVID-19 (€ 161m) |
(1) SKY payment, litigations and settlements, increased payments to personnel for exits ex. art. 4 Fornero Law and for bonuses and incentives (payments delayed to H2 in 2019) | Q2 '20 Results | |
19 | ||
TIM Group
Deleverage: €1,697m debt cut in 6 months (€798m After Lease)
- m; (-) = Cash generated, (+) = Cash absorbed, excluding call-outs
EBITDA | 1,735 | EBITDA | 1,663 | |||||||||||||
CAPEX | (599) | o/w: | CAPEX | (655) | ||||||||||||
ΔWC & Others | (348) | Inwit deconsolidation | 461 | ΔWC & Others | (251) | |||||||||||
Operating FCF | 788 | Cash taxes | (26) | Operating FCF | 757 | |||||||||||
o/w: | |
Inwit ABB | (400) |
Extraordinary dividend | (214) |
Inwit ordinary dividend | (42) |
Lease impact
21,711
-€ 182m | -€ 616m |
FY '19 | Lease | FY '19 | Operating | Financial | Cash Taxes | Dividends | Q1 '20 | Operating | Financial | Cash Taxes | Dividends | H1 '20 | Lease | H1 '20 |
Net Debt | impact | Net Debt | FCF | Expenses | & Other | & Change | Net Debt | FCF | Expenses | & Other | & Change | Net Debt | impact | Net Debt |
After Lease | in Equity | in Equity | After Lease |
FY '18 | +3,058 | H1 '19 | ||||||||||||
2019 | 25,270 | (690) | 346 | 3,632 | 25 | 25,583 | (1,129) | 361 | 297 | 216 | 28,328 | (5,510) | 22,818 | |
o/w 3,553 FTA IFRS 16 | ||||||||||||||
vs. 2019 | (98) | (51) | (4,102) | 15 | (1,838) | 372* | (52) | (931) | 92 | (2,357) | 634 | (1,723) | ||
*302 ex. Inwit | o/w 1,117 Inwit | |||||||||||||
Q2 '20 Results | 20 | |||||||||||||
TIM Group
Liquidity margin - After Lease view
Cost of debt ~3.4%, flat QoQ, -0.3p.p. YoY
Liquidity Margin | Debt Maturities | |
8.3 | 24.7 (1) |
8.3 | |
2.6
3.5 | 2.0 | 20.4 | |||||||
11.2 | 0.6 | ||||||||
3.1 | 3.3 | ||||||||
Covered until 2023 | |||||||||
0.2 | |||||||||
4.5 | 4.3 | 2.4 | |||||||
3.1 | 0.7 | ||||||||
2.2 | |||||||||
6.7 | 0.8 | 1.2 | |||||||
0.6 | 4.4 | ||||||||
0.7 | 0.1 | 1.7 | |||||||
FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | FY 2025 | Beyond 2025 | Total M/L Term | ||
Debt |
Cash & cash equivalent | Undrawn portions of committed bank lines | Bonds | Loans |
(1) € 24,732m is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 547m) and current | Q2 '20 Results | |
financial liabilities (€ 1,365m), the gross debt figure of € 26,644m is reached | 21 | |
TIM Brasil
TIM Brasil: improving EBITDA thanks to strong cost efficiencies
Reported data, R$m
Service Revenues down 3.4% YoY mainly due to COVID-19 impact causing lower gross adds and top-ups
EBITDA(1) up 1.0% YoY despite topline pressure thanks to strong execution on cost efficiencies (OPEX -12.8% YoY)
4,063 | -3.4% | 3,926 | MSR affected by the pandemic: | ||
224 | 12.9% | 253 | Prepaid down 13.0% and Postpaid | ||
down 1.6% | |||||
3,839 | -4.3% | 3,673 | |||
FSR +12.9% YoY driven by TIM Live | |||||
Q2 '19 | Q2 '20 | ||||
Mobile | TIM Live | |
ARPU +0.9% YoY | Revenues +29% YoY | |
to 23.4 R$/month | ||
>600k clients milestone | ||
Prepaid ARPU -1.4% YoY | ||
ARPU +7.6% YoY to 83.9 R$ | ||
Postpaid ARPU +1.2.% YoY(2) |
Digital Journey Project
100+ initiatives accelerated to prioritize digital experience
TIM APP | DIGITAL SELF | CUSTOMER SERVICE | 1-CLICK BUY | WEBSITE | NAKED |
IMPROVEMENT | SERVICE | SCHEDULING | RECHARGE | REDESIGN | SIM |
Margin | 45.7% +3.6p.p. | 49.3% |
1,948 1.0% 1,967
Q2 '19 | Q2 '20 |
Solid network development
FTTH coverage +77% YoY 2.8m HHs in 27 cities
New clusters : Brasília and Belo Horizonte
New initiatives launched
to increase capacity and coverage
Leadership in 4G coverage
88.2% availability
EBITDA margin (Pro-forma)(3)
31.5% 35.3% 37.6% 38.6% 42.0%
Q2'16 Q2'17 Q2'18 Q2'19 Q2'20
Beyond the core
~200k new accounts 3 weeks from launch
8x daily average
- Normalized
(2) | Excluding M2M | Q2 '20 Results | 22 |
(3) | Pro-forma excludes the effects of the adoption of IFRS 9, 15 and 16 | ||
TIM Group
Deleverage guidance improved for INWIT transaction, EqFCF unchanged
Estimated COVID-19 impact now reflected
YoY growth rates,
IFRS 16 / After Lease
Organic
Service revenues
Organic
EBITDA AL
CAPEX
Eq FCF AL
Adjusted
Net Debt AL
Dividend
Group | Domestic | Brasil | |||||||||||
2020 | 2021-'22 | 2020 | 2021-'22 | 2020 | 2021-'22 | ||||||||
Mid single | Low single digit | Mid to High | Stable to Low | Mid single digit | |||||||||
digit decrease | growth | single digit decrease | single digit growth | growth | |||||||||
Mid single | Low to Mid single | Mid to High | Low single digit | EBITDA-Capex | EBITDA margin | ||||||||
digit decrease | digit growth | single digit decrease | growth | growth confirmed | ≥ 40% in '22 | ||||||||
~€ 2.7bn in 2020
~€ 2.9bn in 2021-22
Cumulated € 4.5 - 5.0 bn
To be enhanced through inorganic actions
presently not included
<€ 18bn by 2021, stable in 2022
ordinary: floor of € 1 cent per share, aim to distribute 20-25% of yearly Equity FCF subject to deleverage execution
savings: €2.75 cents per share throughout 2020-2022
- Figures @ Avg Exchange Rate Actual 5,71 REAIS/EUR | Q2 '20 Results | |
23 | ||
TIM Group
Closing remarks
Executing Operations TIMe plan and extraordinary initiatives at
full speed despite COVID-19. Debt cut €3.8bn in 20 months
FiberCop to open the way for new opportunities for TIM, its shareholders and the Country
Letter received from the Italian Government on commitment to work on the creation of the Single Network for Italy
The improvement of KPIs and CSI in both fixed and mobile are early signs of effectiveness of the turnaround started in 2019
2020-22 cumulated Equity FCF confirmed
2021 debt guidance improved €2bn, to <€18bn thanks to INWIT
transaction
Q2 '20 Results | 24 |
Q&A
Q2 '20 Results | 25 |
Annex
Q2 '20 Results | 26 |
TIM Group
H1 Net Income +23% YoY
Reported data, € m, Rounded numbers
COVID-19 impact | (69) | ||||
Personnel and other | (68) | ||||
Inwit gain following the merger | 448 | ||||
Inwit equity share | 2 | ||||
Net financial expenses | (603) | ||||
H1 '20
Net Income post minorities +127m YoY
EBITDA | Non | EBITDA | Depreciation & | EBIT | Net Interest & | Taxes | Net Income | Minorities | Net Income | ||
Organic | recurring | Reported | Amortization | Net Income/ | before | Reported | |||||
items | & Other | Equity/ Disc. | Minorities | ||||||||
Operations | |||||||||||
H1 '19 | 3,779 | 592 | 4,391 | (2,504) | 1,887 | (755) | (392) | 740 | (189) | 551 | |
vs. H1 '19 | (264) | (729) | (993) | 148 | (845) | 602 | 226 | (17) | 144 | 127 | |
Q2 '20 Results | 27 |
TIM Group
Liquidity margin - IFRS 16 view
Cost of debt ~3.8%*, -0.1p.p. QoQ, -0.5p.p. YoY
* Including cost of all leases
Liquidity Margin | Debt Maturities | |
10.4 | 29.6 (1) | |||||||||
8.3 | ||||||||||
3.0 | 2.1 | 20.4 | ||||||||
4.0 | 2.0 | |||||||||
0.6 | ||||||||||
11.2 | 3.6 | 3.3 | 0.4 | |||||||
4.8 | 2.4 | 0.2 | ||||||||
4.5 | Covered until 2022 | 0.4 | ||||||||
3.1 | 0.7 | 4.4 | ||||||||
2.9 | 0.5 | |||||||||
6.7 | 1.2 | |||||||||
1.0 | 0.6 | |||||||||
0.5 | 4.9 | |||||||||
0.7 | 1.7 | 0.6 | ||||||||
0.1 | ||||||||||
0.2 | ||||||||||
FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | FY 2025 | Beyond 2025 | Total M/L Term | |||
Debt | ||||||||||
Cash & cash equivalent | Undrawn portions of committed bank lines | Bonds | Loans | Finance Leases |
(1) € 29,600m is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 579m) and current | Q2 '20 Results | |
financial liabilities (€ 1,365m), the gross debt figure of € 31,544m is reached | 28 | |
TIM Group
Well diversified and hedged debt
NFP | Fair | NFP | ||||
adjusted | value | accounting | ||||
GROSS DEBT | ||||||
Bonds | 20,505 | 311 | 20,816 | |||
Banks & EIB | 5,699 | 5,699 | ||||
Op. leases and long rent | 4,900 | 4,900 | ||||
Other | 440 | 1,714 | 2,154 | |||
TOTAL | 31,544 | 2,025 | 33,569 | |||
FINANCIAL ASSETS | ||||||
Liquidity position | 4,479 | 4,479 | ||||
Other (1) | 1,094 | 2,042 | 3,136 | |||
TOTAL | 5,573 | 2,042 | 7,615 | |||
NET FINANCIAL DEBT | 25,971 | (17) | 25,954 |
- Refers to positive MTM derivatives (accrued interests and exchange rate) for € 944m, financial receivables for lease for € 84m and other credits for € 67m
Gross Debt
Banks & EIB | ||
18.1% | Bonds | |
Op. leases | 65.0% | |
and long rent | ||
15.5% | Other | |
1.4% | ||
Average m/l term maturity:
7.8 years (bond 7.1 years only)
Fixed rate portion on medium-long term debt ~70%
Around 26% of outstanding bonds (nominal amount)
denominated in USD and GBP and fully hedged
Q2 '20 Results | 29 |
TIM Group
After Lease view
EBITDA After Lease | Net Debt After Lease |
€ m, organic | (-6.4%) | € m, reported | |||||||||
(-6.4%) | |||||||||||
1,882 | (212) | 1,670 | 1,563 | 198 | 1,761 | (1,723) | (2,357) | ||||
28,328 | |||||||||||
Group | (5,510) | 22,818 | 21,095 | 4,876 | 25,971 | ||||||
Q2 '19 | Lease | Q2 '19 | Q2 '20 | Lease | Q2 '20 | ||||||
EBITDA | impact | EBITDA | EBITDA | impact | EBITDA | Net Debt | IFRS 16 | Net Debt AL | Net Debt AL | IFRS 16 | Net Debt |
AL | AL | 1H '19 | & IAS17 | 1H '19 | 1H '20 | & IAS17 | 1H '20 |
€ m, organic | Equity Free Cash Flow After Lease |
(-7.8%) | |||||||||||
(-7.5%) | € m, reported | ||||||||||
1,558 | (143) | 1,415 | 1,309 | 127 | 1,436 | (208) | |||||
Domestic | (213) | 512 | |||||||||
720 | (171) | 549 | 336 | 176 | |||||||
Q2 '19 | Lease | Q2 '19 | Q2 '20 | Lease | Q2 '20 | EFCF | IFRS 16 | EFCF AL | EFCF AL | IFRS 16 | EFCF |
EBITDA | impact | EBITDA- | EBITDA- | impact | EBITDA | Q2 '19 | & IAS17 | Q2 '19 | Q2 '20 | & IAS17 | Q2 '20 |
AL | AL |
Q2 '20 Results | 30 |
For further questions please contact the IR team
(+39) 06 3688 1 // (+39) 02 8595 1
Investor_relations@telecomitalia.it
www.gruppotim.it
www.twitter.com/TIMNewsroom
www.slideshare.net/telecomitaliacorporate
Q2 '20 Results | 31 |
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Telecom Italia S.p.A. published this content on 05 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 August 2020 16:26:12 UTC