Investor Presentation • Oct 27, 2021
Investor Presentation
Open in ViewerOpens in native device viewer
TIM GROUP
Leading the Country's digitalization
28 October 2021
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 Q3'21 and 9M'21 of the TIM Group are the same as those adopted in the TIM Group Annual Audited Consolidated Financial Statements as of 31 December 2020, to which reference can be made, except for the amendments to the standards issued by IASB and adopted starting from 1 January, 2021.
Please note that the limited review by the external auditors (E&Y) on the TIM Group Consolidated Financial Statements at 30 September 2021 has not yet been completed.
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;
* Adjusted Net Financial Debt After Lease, calculated by excluding from the adjusted net financial debt the net liabilities related to the accounting treatment of lease contracts according to IFRS 16;
* 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.
| What happened in Q3 | KPIs | |
|---|---|---|
| ESG | ▪ Fixed CSI improved, alongside higher NPS TIM included in new MIB ESG index (1) ▪ ▪ More pre-retirements; hiring in beyond connectivity businesses |
CSI fixed +1.6% QoQ NPS fixed +1 ~1.2k exits YTD |
| Domestic | ▪ Serie A + Champions league launch supporting strong fiber net adds and QoQ churn reduction despite seasonality ▪ MSR materially improving, churn at record low, Opensignal award as fastest 5G mobile network in EU (2) ▪ Cloud growth above expectations |
9M retail UBB net adds 0.7m, 1.8x 9M '19 MSR YoY performance +4.1pp QoQ Cloud revenues +25% YoY |
| Brazil | ▪ Mobile postpaid and fixed fuel Revenues and EBITDA growth ▪ Outperforming competitors on ARPU growth ▪ Key events expected in Q4: Oi clearance, FiberCo acceleration |
Service revenues +4.2% YoY ARPU +4.4% YoY EBITDA (3) +4.4% YoY |
| Group | ▪ Service revenues trend improving QoQ ▪ Investing for growth ("good CAPEX and OPEX") ▪ Net debt AL -€ 3.1bn YoY, on track for '23 2.6x leverage target |
Service revenues change YoY -1.4% -1.7% -2.5% -6.4% -6.6% -8.2% Q1 Q2 Q3 Q1 Q2 Q3 2020 2021 |
(1) In 2021 TIM was also reconfirmed in: FTSE4Good Index, Refinitiv Diversity and Inclusion Index, Euronext Vigeo Eiris Indexes (World 120, Eurozone 120, Europe 120), GEI and ISS ESG (2) TIM awarded by OpenSignal for highest 5G mobile network download speed in Europe and placed in the world's top 30 for uplift between 4G and 5G networks in download/upload speeds and user experience in video and gaming (3) Net non-recurring items
Q3 '21 RESULTS
4
| 1 | Fiber to the Football (FTTF) |
Customers progressively switching from satellite to fiber |
Football users market |
~5m Paying Piracy Total TV users users |
|---|---|---|---|---|
| 2 | Mobile only returning to fixed BB |
Italy's fixed market grows | Market broadband net adds (1) |
2x YoY 9M '20 9M '21 |
| 3 | Beyond connectivity |
Digital companies grow double-digit in Q3, on-track to reach >2x in 3 years |
Cloud services growth |
+25%YoY Q3 '20 Q3 '21 |
| 4 | Public Funds |
Macro context improving. NRRP(2) generating optimism |
Updated GDP estimate |
6.0% -8.9% 2020 2021e |
Q1 '20 Q2 Q3 Q4 Q1 '21 Q2 Q3
9M '19 9M '20 9M '21
Q1/Q2 avg. Q3 '21
7
8
Italian Government aim: National Cloud Hub to
Timing
National Recovery and Resilience Plan € 235.1bn
Italy's GDP growth projection - update (2)
(1) Recovery and Resilience Facility (2) Source: Economic Outlook Europe S&P, September 2021 (3) National Strategic Hub (NSH) (4) Open Radio Access Network
Organic data (1), IFRS 16, € m
Domestic service revenues YoY performance +1.3pp QoQ, Group +0.4pp
Lower equipment sales in Italy and Brazil for tough comps (strong rebound in Q3 2020 sales after Q2 lock down)
Domestic EBITDA AL like for like -2.4% YoY:
Fixed Service Revenues improving YoY performance +1.2pp vs. Q2 net of 1.5pp QoQ swing in ICT contribution to growth
Equipment sales -3.3% YoY for tough comps (rebound in Q3 2020 after Q2 lock down)
Q2 '20 Q3 Q4 Q1 '21 Q2 Q3
Calling human net adds
Churn reduced further
CSP cleaning offset by roaming / visitors partial rebound (high seasonality of roaming in Q3)
Total Mobile Revenues -4.5% YoY, due to lower equipment sales (-12.2% YoY vs. +29.8% in Q2) for tough comps (rebound in Q3 2020 after Q2 lock down)
OPEX increasing 0.9% YoY, with addressable base down 0.4% YoY mainly for:
CAPEX CAPEX YoY increase (+€160m in Q3 after +314m in H1) due to anticipation of Q4 investments and higher growth CAPEX: FTTH, Cloud, football
Working Capital swing YoY in Q3 '21 (-€309m or -€239m After Lease) mainly related to payments of H1 incremental CAPEX vs. historical average (normally skewed towards Q4)
EFCF swing YoY in Q3 '21 largely attributable to incremental CAPEX for growth:
Equity free cash flow after lease
Closing expected on mid-November
Smart lightning project signed, tests on smart grid carried out. Highway coverage under negotiation
Final phase of partner selection, launch expected in Q1 '22
Financial & Education R\$26m revenues in Q3, +140% YTD
Mobile Ads & Data R\$11m revenues in Q3, +83% YTD
TIM industrial transformation continues, with additional portfolio optimization on the way to exploit synergies as well as opportunities offered by the new digital businesses
(1) 15% economic interest: 30.2% stake in the share capital of INWIT owned by Daphne 3, a holding company controlled by TIM with 51% (2) Pending approval
| YoY growth rates, IFRS 16 / After Lease |
Group | Domestic | (1) Brazil |
|||
|---|---|---|---|---|---|---|
| 2021 | 2022-'23 | 2021 | 2022-'23 | 2021 | 2022-'23 | |
| Organic Service revenues |
Low single digit decrease |
Low to mid single digit growth |
Low single digit decrease |
Low to mid single digit growth |
Mid single digit growth |
Mid single digit growth High single digit growth (CAGR '20-'23) with Oi |
| Organic EBITDA AL |
Mid single digit decrease |
Mid single digit growth |
High single digit decrease |
Mid single digit growth |
Mid single digit growth |
Mid single digit growth Double digit growth (CAGR '20-'23) with Oi |
| CAPEX | ~€ 3.0-3.1 bn according to football take-up |
~€ 2.9 bn per year |
~R\$ 13.5 bn | ~R\$ 13.0 bn with Oi |
||
| Eq FCF AL | Cumulated ~€ 3.5 bn | |||||
| Adjusted Net Debt AL |
~€ 17 bn Oi (2) excluding |
2.6x Net Debt AL / EBITDA AL by 2023 |
(3) | |||
| Dividend | savings: €2.75 cents per share throughout 2021-23 | ordinary: floor of € 1 cent per share, aim to distribute 20-25% of yearly Equity FCF subject to deleverage execution |
IFRS 16/After Lease – Group figures @ average exchange-rate actual 6.3 REAIS/€ (1) Guidance based on IFRS 16 for Brazil's EBITDA
(2) Excluding Oi's mobile acquisition
(3) Based on Organic EBITDA AL; 2.7x based on Reported EBITDA AL
Targets (1)
| Eco-efficiency | +50% | |
|---|---|---|
| Renewable energy (2) on total energy (%) |
100% | 2025 |
| Indirect emissions (3) | -100% | |
| (4) Carbon Neutrality |
2030 | |
| Employees engagement |
+19pp | |
| Hours of training for reskilling and upskilling |
6.4m hrs |
|
| Churn of young employees |
<15% | 2023 |
| New VC fund size | € 60m | |
| IoT and Security service revenues (CAGR) | +20% | |
| Green Smartphone | >15% | 2024 |
(1) "Beyond Connectivity" plan targets were upgraded vs. previous plan, baseline 2019. Domestic, except for indirect emissions and carbon neutrality (Group) (2) Electricity (3) Scope 2, TIM Group (4) TIM Group
| Realignment of the tax value |
▪ Decree-Law 104/2020 allows for realignment of intangible asset tax value to the book value ▪ 3% substitute tax to be paid on the amount redeemed ▪ Future income taxes will benefit from intangible asset tax amortization |
|---|---|
| TIM SpA intangible assets redeemed |
▪ Overall tax benefit: € 5.9bn (28.5% of tax basis) net of substitute tax ▪ Benefit will occur over 18 years |
| Substitute tax (3%): € 0.7bn | ▪ To be paid in 3 annual instalments (€ 0.2bn per year), from June 2021 |
(1) € 23,324m is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 555m) and current financial liabilities (€ 589m), the gross debt figure of € 24,468m is reached
32 Q3 '21 RESULTS
* Including cost of all leases
(1) € 27,933m is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 586m) and current financial liabilities (€ 589m), the gross debt figure of € 29,107m is reached
| NFP adjusted |
Fair value |
NFP accounting |
Gross Debt | ||
|---|---|---|---|---|---|
| GROSS DEBT | |||||
| Bonds Banks & EIB Derivatives Op. leases and long rent Other |
20,467 3,491 173 4,639 337 |
237 - 1,379 - - |
20,704 3,491 1,552 4,639 337 |
Bonds Banks & EIB 70.3% 12.0% Op. leases and long rent 15.9% |
|
| TOTAL | 29,107 | 1,616 | 30,723 | Other 1.8% |
|
| FINANCIAL ASSETS Liquidity position Other (1) |
5,820 1,123 |
- 1,288 |
5,820 2,411 |
Average m/l term maturity: 6.6 years (bond 6.3 years only) |
|
| TOTAL | 6,943 | 1,288 | 8,231 | Fixed rate portion on medium-long term debt ~81% | |
| NET FINANCIAL DEBT | 22,164 | 328 | 22,492 | Around 26% of outstanding bonds (nominal amount) denominated in USD and GBP and fully hedged |
€ m; (-) = Cash generated, (+) = Cash absorbed, excluding call-outs
(2) Including financial investments, 5G licence, cash taxes & other
(3) Includes Inwit deconsolidation
Reported data, € m, Rounded numbers
(2) Non-recurring items include personnel provisions (2021-26 layoffs ex art.4 Fornero Law), legal and COVID related costs
| Merchant Services | IoT Smart Services | Cybersecurity | Crypto | ||
|---|---|---|---|---|---|
| Electronic cash registers and POS, business management software and digital payments |
Industrial IoT: IoT services and sensors for prioritized verticals Urban IOT: city control platforms |
B2B managed security services offering including specialized consulting and high growth/ margin products |
B2G innovative systems capable of securing and encrypting communications |
||
| Addressable market |
~5 bn€ in 2024 4-5% CAGR |
~4.5 bn€ in 2024 10% CAGR |
~1.9 bn€ in 2024 7% CAGR |
~€20m in 2024 20% CAGR |
|
| Margin | 25-30% | 10-15% | 25-30% | ~€40-50% | |
| Market share ambition 2024 |
5% | 5% | 12% | 60-80% |
FiberCop value to grow over time thanks to switch in the mix from copper towards fiber
| Vouchers | €500 voucher (€200 for connectivity,€300 for devices) to families with <€ 20k ISEE |
|---|---|
| €500 voucher for >30 Mbps to SMEs, €2k for >1 Gbps; €200 for >30Mbps to families with <€ 50k ISEE | |
| Connected schools (phase1) | Up to 1Gbps connectivity in 35k schools |
| Connected schools (phase2) | 1 Gbps connectivity in 9k schools |
| Schools cabling | Internal cabling of schools (LAN/WAN) + equipment |
| Italia 1 Giga | 1 Gbps connectivity (200 Mbps upload) in Grey and Black NGA market failure areas (~6,2m HHs) |
| Italia 5G | 150 Mbps connectivity (50 Mbps upload) through 5G corridors, 5G-ready extra urban roads and market failures 5G areas |
| NSH & cloud migration (1) | Infrastructure for cloud-based management of Public Administration's data and applications |
| INPS/INAIL digitalization | Back and front-end digitization |
| Connected health care | 1 Gbps connectivity to ~12.3k public health care facilities |
| Digital health care | Proximity networks, facilities and telemedicine for territorial health care assistance |
| Smart City | Smart city urban plans |
| Smart Roads | Dynamic monitoring system for remote control of roads |
| Green Ports | Implementation of efficiency and energy reduction measures on ports' structures and activities |
| Industry 4.0 | Tax credit on 2021-'23 investments, tangible and intangible (software and IT systems) for digital transformation and R&D |
| Cyber Security | Implementation of the National Cyber Security Perimeter (NCSP) |
| ORAN & Cloud Edge | Creation and development of an industrial supply chain on ORAN & Cloud technical solutions |
| Agri-tech | Innovation and mechanization of agriculture |
(+39) 06 3688 1 // (+39) 02 8595 1
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.