Earnings Release • Jul 27, 2016
Earnings Release
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2Q'16 Results Milan - July 27, 2016
Flavio Cattaneo - Piergiorgio Peluso
This presentation contains statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations, estimates regarding future growth in the different business lines and the global business, financial results and other aspects of the activities and situation relating to the Telecom Italia 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. Consequently, Telecom Italia makes no representation, whether expressed or implied, as to the conformity of the actual results with those projected in the forward looking statements.
Forward-looking information is based on certain key assumptions which we believe to be reasonable as of the date hereof, but forward looking information by its nature involves risks and uncertainties, which are outside our control, and could significantly affect expected results. Analysts and investors are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telecom Italia undertakes no obligation to publicly release the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telecom Italia business or acquisition strategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and investors should consult the Company's Annual Report on Form 20-F as well as filings made from time to time on Form 6-K, which are on file with the United States Securities and Exchange Commission which may identify factors that affect the forward looking statements included herein.
The financial and operating data, with the exception of some data, have been extracted or derived from the Condensed Consolidated Financial Statements as of and for the six months ended 30 June 2016 which have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board and endorsed by the European Union (designated as IFRS). Please note that the limited review on the Telecom Italia Group Half-Year Condensed Consolidated Financial Statements at 30 June 2016 has not yet been completed.
The comparative financial information as of 31 December 2015 and for the six months period ended 30 June 2015 have been revised (segment information included) as a result of the prior years' incorrect accounting entries, already disclosed to the market, identified by the TIM Brasil's Management in connection with the recognition of service revenue from the sale of prepaid traffic. Such revision did not have any material impact on the consolidated income statement for the six month period ended 30 June 2015.
Persidera, as a result of the change in its operational mission, is included, starting from 1 January 2016, in the Domestic Business Unit.
Furthermore, the Sofora - Telecom Argentina group, which was disposed of on 8 March 2016, is classified as Discontinued operations.
Action Plan Progress and Outlook - Flavio Cattaneo
2Q'16 Results - Piergiorgio Peluso
Take-Aways - Flavio Cattaneo
Back-up
TI is moving on with its fiber plan, while broadening and improving its LTE footprint
| Technology | Current coverage |
YE'16 Target | ||||
|---|---|---|---|---|---|---|
| FttH/B up to 1Gbps |
528,000 households, optical cable being deployed to and beyond the building in 14 cities |
During August / September, work extended st- to all of the 30 1 wave cities. At YE, coverage increased to 900,000 households** |
||||
| FttC up to 200 Mbps |
• 12,529,000 households passed • Sellable in 1,250 cities |
• 13,600,000 households passed • Sellable in 1,600 cities |
||||
| 4,000 Construction Sites in operation | ||||||
| LTE up to 150 Mbps* |
93.7% population coverage in 6,285 cities |
Coverage increased to 94.5%, reaching 6,350 cities |
No change in 2018 Capex Efficiency run rate of € 800mln
| 2018 Cash Costs | Maintain | Innovative & | Faster and Wider |
|---|---|---|---|
| Efficiency Target | Focus | Differentiated | Mobile BroadBand |
| increased by R\$1.6bln* | on Mobile | Offers | Coverage** |
| Cumulated 2016-'18 cash costs savings vs previous Plan: R\$4.5bln Organization rightsizing Improve E2E processes & systems Digital penetration in key commercial processes |
Fully exploit Tim Mobile positioning Operate in line with a more rational market, ready to seize a rebound Effective and efficient Quality Selective roll-out of residential wireline UBB: focus on MSAN occupancy |
Data at core of offers Multimedia & digital service hub strategy "Mass customization" Data content delivery optimization platform Pay per use vs. recurring Bundle segmentation Data-only plans Improved Customer Experience as key factor in Postpaid |
Expand 4G coverage leadership (1H'16: 64%; cities: 579 1H'16 ~1.000 YE'16) Fast upgrade of 3G coverage (1H'16: 83%; cities: 1,963 1H'16 ~3.000 YE'16) Better use of infrastructure and spectrum Ahead with FTTS plan |
€bln
~€2.1bln cum. 3-yr Organic FCF supported by Efficiencies and Top Line Outlook
Action Plan Progress and Outlook - Flavio Cattaneo
2Q'16 Results - Piergiorgio Peluso
Take-Aways - Flavio Cattaneo
Back-up
Business Plan enriched with > € 0.15 bln mobile infrastructure Capex in 2016-'18
Capex: € 1.0 bln
€mln
Action Plan Progress and Outlook - Flavio Cattaneo
2Q'16 Results - Piergiorgio Peluso
Take-Aways - Flavio Cattaneo
Back-up
Action Plan Progress and Outlook - Flavio Cattaneo
2Q'16 Results - Piergiorgio Peluso
Take-Aways - Flavio Cattaneo
Organic*, €mln, % YoY
€mln, % YoY
* Before non-recurring items and excluding exchange rate fluctuations ** Other activities & eliminations included
€mln, Reported, % YoY
Telecom Italia Group Results - 2Q'16
€mln
(1) € 29,931 mln is the nominal amount of outstanding medium-long term debt. By adding Mandatory Convertible Bond (€ 1,300 mln), IAS adjustments (€ 1,100 mln) and current financial liabilities (€ 589 mln), the gross debt figure of € 32,290 mln is reached
(2) Committed Bank lines are undrawn
Maturities and Risk Management
Average m/l term maturity: 7.94 years (bond only 8.35 years)
Around 38% of outstanding bonds (nominal amount) denominated in USD and GBP and is fully hedged
Cost of debt: ~5.1 %
N.B. The figures are net of the adjustment due to the fair value measurement of derivatives and related financial liabilities/assets, as follows: - the impact on Gross Financial Debt is equal to 2,316 €/mln (of which 392 €/mln on bonds)
Therefore, the Net Financial Indebtedness is adjusted by 556 €/mln.
The difference between total financial assets (€ 5,406 mln) and C&CE and marketable securities (€ 3,790 mln) is equal to € 1,616 mln and refers to positive MTM derivatives (accrued interests and exchange rate) for € 1,430 mln, financial receivables for lease for € 112 mln and other credits for € 74 mln.
Telecom Italia Group Results - 2Q'16
000, €mln, % YoY
Telecom Italia Group Results - 2Q'16
5,9%
4,7%
1.3%
11,775
+11.4%
| Run rate @2018 |
Original '16-'18 Efficiency Target |
Additional Efficiency '16-'18 Target |
New Efficiency '16-'18 Target |
|---|---|---|---|
| Process Driven Costs |
0.2 bln€ | +0.12 bln€ | 0.32 bln€ |
| Market Driven Costs |
0.1 bln€ | +0.13 bln€ | 0.23 bln€ |
| Labour Costs |
0.1 bln€ | +0.1 bln€ | 0.2 bln€ |
| Other Costs |
- | +0.05 bln € |
0.05 bln€ |
| Total Opex | 0.4 bln€ | +0.4 bln€ | 0.8 bln€ |
| Traditional | 0.2 bln€ | +0.3 bln€ | 0.5 bln€ |
| NGN Optimization | - | +0.15 bln€ | 0.15 bln€ |
| Real Estate & Other | - | +0.15 bln€ | 0.15 bln€ |
| Total Capex | 0.2 bln€ | +0.6 bln€ | 0.8 bln€ |
| Total Cash Cost Efficiency |
0.6 bln€ | +1.0 bln€ | 1.6 bln€ |
R\$mln, % YoY
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