Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Telecom Italia SpA (TIIAY, Financial) successfully completed the NetCo disposal, achieving significant deleverage and credit rating improvement.
- H1 performance was robust, with financials in line or ahead of full-year guidance.
- Domestic business grew as expected in both revenues and EBITDA, with positive drivers anticipated for H2.
- TIM Brazil delivered strong growth, contributing significantly to the group's overall performance.
- The transformation plan execution is ongoing, with more than EUR100 million in EBITDA after lease minus CapEx savings in H1.
Negative Points
- The competitive environment in Italy remains tough, with aggressive pricing from new players, especially from the energy sector.
- Despite the positive outlook, there are concerns about the impact of currency depreciation in Brazil on the company's financials.
- The company faces ongoing challenges in stabilizing the consumer segment, which is performing around 0% growth.
- There is uncertainty regarding the regulatory approval of NetCo's new status, which may not be effective until the second half of 2025.
- The company still needs to address potential cross-subsidy risks from aggressive pricing by newcomers in the market.
Q & A Highlights
Q: Can you provide insights on the progression of debt in the second half and any risks from the depreciation of the Brazilian currency?
A: (Pietro Labriola, CEO) We have hedged 50% of the equity free cash flow of the year of Brazil at BRL5.57 per euro. This should cover almost the entire equity free cash flow from Brazilian operations, mitigating risks from currency depreciation.
Q: Will there be a dedicated management for TIM Enterprise and TIM Consumer, or will they remain business units without separate legal incorporation?
A: (Pietro Labriola, CEO) There will be no change in the management team. Elio and Andrea will continue to lead their respective units. We do not foresee creating separate companies at this time.
Q: Are you considering outsourcing call centers to save on personnel costs?
A: (Pietro Labriola, CEO) We are internalizing activities currently outside our perimeter, including call centers. This is part of our transformation plan to improve cash costs by EUR400 million.
Q: Can you comment on the competitive environment in Italy, particularly in the fixed-line and mobile sectors?
A: (Andrea Rossini, Chief Consumer, Small and Medium Market Office) We see signs of rationalization among major players in both fixed and mobile sectors. However, new players, especially from the energy sector, are aggressive. We expect the merged entity of Fastweb and Vodafone to adopt a more rational approach.
Q: What are your plans for the front-end ServiceCo bond with Telecom Italia?
A: (Adrian Calaza, CFO) We are monitoring the market for opportunities. Currently, we are comfortable with our liquidity position, covering debt maturities until 2028.
Q: Can you elaborate on the cash flow dynamics for the second half and any key movements for H1 2025?
A: (Adrian Calaza, CFO) We expect positive net cash flow of approximately EUR0.6 billion in the second half, driven by favorable seasonality and reduced financial charges. For H1 2025, we anticipate working capital absorption similar to H1 2024.
Q: What is the outlook for TIM Enterprise, particularly in the cloud segment?
A: (Elio Schiavo, Chief Enterprise and Innovative Solutions Office) Cloud revenues are expected to grow significantly, driven by the National Strategic Hub program. By the end of 2024, cloud revenues will surpass connectivity revenues by 15%.
Q: Are you considering any M&A activities or stake sales in the enterprise business?
A: (Pietro Labriola, CEO) We are evaluating opportunities for growth, both organic and inorganic. Any potential M&A activities will be considered to create value for the company.
Q: How do you plan to leverage the commercial flexibility post-NetCo sale?
A: (Andrea Rossini, Chief Consumer, Small and Medium Market Office) We have already implemented changes in our commercial policy, including bundling content with connectivity. We plan to introduce more flexibility in our commercial offerings in the second half of 2024.
Q: What are the components of the earn-outs linked to the NetCo sale?
A: (Pietro Labriola, CEO) The earn-outs are linked to the application of an RAB model, a merger or combination between Open Fiber and NetCo, and potential changes in energy regulation. The highest probability is for the merger or combination between Open Fiber and NetCo.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
