FY '20 RESULTS AND 2021-23 PLAN - Beyond Connectivity 24 February 2021 - Gruppo TIM
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TIM GROUP FY ‘20 RESULTS AND 2021-23 PLAN Beyond Connectivity 24 February 2021
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 FY20, Q4’20 and for 2021-2023 Plan 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.
As of today, the audit work by our independent auditors on the FY20 results have 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;
* 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.
FY ‘20 RESULTS AND 2021-23 PLAN
2
Agenda
▪ Promised, delivered
▪ 2020 achievements
▪ Solid Q4 financials
▪ What next? A better macro and telco outlook
▪ TIM ready to ride all opportunities in connectivity and beyond in Italy and Brazil
▪ Financial and ESG Guidance. Closing remarks
▪ Q&A
FY ‘20 RESULTS AND 2021-23 PLAN
3
PROMISED, DELIVERED
TIM Group
Promised, delivered…
Foundations of transformation set in 2019 Customer base stabilization reached in Q4
2019 plan: “Deliver & Delever” 2020 plan: “Operations TIMe”
Equity Free Stabilized ▪ Fixed CB growing in Q4 ’20 for the first time since
▪ € 1.6bn in ‘20 and € 1.5bn in ’19(1)
Cash Flow customer 2001
generation ▪ Reinstated dividends on ordinary shares base ▪ Mobile MNP stabilized
Debt Improving
▪ €4.7bn debt reduction(1) in 2 years ▪ Upper end mobile since Q1 ’19, low end since Q1 ‘21
reduction pricing
▪ Fixed acquisition prices on healthy trend
environment
Stabilized ▪ Positive dynamics in board
governance ▪ Exiting BOD proposed its slate for next 3 years
▪ OPEX(3) -15% in ‘19-20
Cost cutting
▪ Addressable costs(3) -9.5% YoY in ’20
▪ Acquisition of Oi mobile assets with Vivo and Claro(2)
Developed
▪ Strengthened the core
Brazil
▪ Network sharing partnership with Vivo ▪ Richest content platform in Italy: partnerships
TIM Vision
with Netflix, Disney+, DAZN, NowTV
Created
▪ Inwit-Vodafone towers merger
optionality
▪ Co-investing in FiberCop with KKR and Fastweb ESG plan ▪ Ecoefficiency hikes monetized (white certificates)
for value
▪ Google partnership, cloud/data centers carve out executed ▪ Inaugural Sustainability Bond issued
creation
(1) After lease
(2) Pending regulatory approval FY ‘20 RESULTS AND 2021-23 PLAN
5
(3) Domestic
TIM Group
…and created optionality by developing, sharing and monetizing infrastructure
2 years of evolutionary revolution for TIM’s key infrastructures…
Infrastructure sharing Creation of the leading
through merger with Italian fiber company
Vodafone Towers and mobile fixed and partial monetization
partial monetization €2.3bn €1.8bn
proceeds ‘21
proceeds ‘20
cloud & data
centers
Strong partnership Carve out of the leading
with world class public Italian Cloud and Data
€1bn
cloud provider Revenues ’24 (1) Centers company
€0.4bn
EBITDA (1)
…and more specialized “factories” to create optionality are being developed
(1) TIM forecast
FY ‘20 RESULTS AND 2021-23 PLAN
6
TIM Group
The new plan raises the bar: “beyond connectivity” towards growth
2019 2020 2021 2022 2023 “Beyond Connectivity” - plan’s pillars
Unique
Best
plan 2021-2023 commercial
“Beyond Connectivity” technological
proposition
infrastructure
to drive growth
plan 2020-2022 Further improved Leaner
“Operations time” operational organizational
excellence model
Main focus: execution and evolution of the
operating model to stabilize the core
plan 2019-2021 Central role of
“Deliver & Delever” environmental, social and corporate
governance (ESG) objectives
Main focus: capturing cash conversion and
creating the basis for future business optionality
FY ‘20 RESULTS AND 2021-23 PLAN
7
2020 ACHIEVEMENTS
TIM Domestic
Stabilized the core: service revenues and EBITDA flattened YoY in Q4 2020
2019 2020
Fixed Services Mobile Services Domestic Service Revenues
3.2 3.2 3.1 3.1 2.9 2.9 2.9 3.0
Domestic
Service Revenues
(€ bn) -2.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -3.9% -3.8%
-8.0% -8.2%
-8.6% -8.8% -9.1%
Domestic
1.4 1.4 1.5 1.3 1.2 1.3 1.3 1.3
EBITDA
After Lease YoY change
(€ bn)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 '19 Q2 Q3 Q4 Q1 '20 Q2 Q3 Q4
In 2018 In ‘19/20 TIM took tough decisions to make revenues sustainable for L/T In 2021 ready for improving landscape
Telco market ▪ No price increases on CB Reasons for 2020 service revenue Mobile market: positive signs in the
became decline now mostly over, namely: low-end of the market (upper-end
▪ CSP(1) cleaning in mobile
irrational already healthier)
▪ Stricter commercial ▪ ~50% due to sustainable
commercial conduct(2) & COVID (3) Fixed market: back to growth after
conduct years leaving space for all players, BB
▪ ~50% CB decline, now stabilized penetration still below Europe
(1) Content Service Provider
(2) Including CSP cleaning, Consip renegotiation al lower prices, SME loyalty program and retention campaign
FY ‘20 RESULTS AND 2021-23 PLAN
(3) Including roaming revenues 9TIM Domestic
“Fix the fixed” delivered results: line losses turned positive in Q4 for the first
time since 2001. Convergence helping mobile as well
Higher quality, lower churn Positive net adds and Fixed Service Revenues
Increased coverage
in fix and mobile accelerating UBB take-up flat in Q4
CSI fixed CSI mobile Retail fixed net adds YoY change
-0.2%
85% HHs UBB covered, +5
+2.1% +3.2%
+4pp increase YoY -5.4%
(91% of families with a fixed line) -60
-8.5%
-160
Q4 '19 Q4 '20 Q4 '19 Q4 '20 -216
-185 -10.4% -10.1%
+18.1k FTTx cabinets (1)
Q4 '19 Q1 '20 Q2 Q3 Q4
opened in 2020 Churn fixed -5.2pp YoY
‘20 FY mobile -1.8pp YoY UBB retail net adds Q4 '19 Q1 '20 Q2 Q3 Q4
Enhanced convergent +172%
portfolio Push on digital services +135% MNP balance improving
TIM UNICA fixed & mobile Q4 '19 Q3 '20 Q4 '20
ICT Q4 -47 -57 -43 -35
Unlimited giga +28% YoY -118 -114
for the family revenues UBB customer base
-166
(retail+wholesale)
Certified WiFi -260
Cloud +24%
TIMVISION revenues +21% YoY Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Smart home FY ‘20
2019 2020 2019 2020
(1) Equivalent to 14.6k excluding sub-cabinets, 10k in white areas
FY ‘20 RESULTS AND 2021-23 PLAN
10TIM Domestic
Change in customers habits inverted fixed-to-mobile substitution trend…
…and Telcos will play an even bigger role in the “after COVID” reconstruction
In 2020 fixed lines stopped falling YoY… …and public funding is yet to boost connectivity / digital services
▪ +44% fixed network Phase 1: kick off in mid-November,
Traffic €0.2bn
▪ +40% mobile network >75% still available for ‘21
on Network Vouchers
▪ 10x video communication Phase 2: available for ‘21 – Pending EU
€0.9bn
Remote
approval, kick-off expected by the end of Q1
▪ ~5.4m smart workers in Italy (+9.4x YoY)(1)
Working
Received approval from the EU Commission
Schools € 0.4bn
Digital “Risorgimento digitale” project Public tender being assigned (3)
Skills for teaching digital skills to the population
Italian wireline market (2) Grey
€ 1.1bn Public tender expected in 2021
Million lines Areas
Inversion of
F-M 20.6 20.8
20.2
substitution 19.6 19.6
trend -0.4 -0.6 = +1.2 Next Gen. Resources directly allocated to digital in
EU € 46.3bn the National Recovery and Resiliency
DIGITAL Plan
2017 '18 '19 '20 2023e
1) Source: Osservatori Politecnico di Milano
2) Source: AGCOM and internal elaborations on Analysis Mason’s estimates FY ‘20 RESULTS AND 2021-23 PLAN
11
3) Preliminary assignment to TIM, Fastweb and Intred (Regional player wholesaling on TIM)TIM Domestic
Leaner organization/processes for better engagement and CSI with lower costs
Headcount reduced
▪ Voluntary exits and staff rejuvenation
Leaner -11%
▪ Processes reengineering in E2E perspective 6.5k exits
organization
▪ Selective implementation of “Agile” models 1.3k hirings
Examples of process improvement initiatives 2018 2020
▪ Channel mix optimization: push to pull IT & ▪ Legacy decommissioning
Commercial Technology ▪ Simplification
Improved ▪ Increased penetration of digital
processes ▪ Enhanced self-care ▪ Commercial policies review
Operations Bad debt
▪ Diffused AI for faults prediction ▪ New “Early Warning System”
Greater operational performance
Channel mix Mobile offers Bad Debt Overall CSI FTTx activations Energy consumption
# of mobile offers drop rate
Stores
-31% +3.2%
KPIs 9% -65% -16pp -
21% Digital
-€124m
Pull
2019 2020 +19pp YoY
2019 2020 2019 2020 2019 2020 2019 2020 2019 2020
FY ‘20 RESULTS AND 2021-23 PLAN
12TIM Domestic
2020 addressable cost base -9.5%: 3-year target reached in 1 year
3-year plan’s target
2020 addressable baseline Key OPEX variation drivers
reached in 1 year
€ bn Delta YoY P&L view
▪ VAS content -34% YoY mainly for CSP € bn
Commercial 1.3 (14.2%) cleanup -10% 3-year plan’s target (1)
▪ Commissioning -3% YoY for increased web -9.5%
Industrial 1.0 (4.5%)
sales
▪ Caring -5% YoY for process digitization
▪ Bad debt -31% YoY for improved process
G&A 0.3 (12.5%)
▪ Energy costs -11% YoY: lower energy prices
and volumes
Labour 1.9 (6.6%) ▪ Real estate -24% YoY for rightsized office
space
Tot. addressable
4.6* (9.5%) ▪ Lower headcount: -2.6k YoY (after -2.7k last
baseline
year, o/w 3.6k exits) plus 1k hirings
* ~63% of total 2020 OPEX baseline
(1) Upgraded from -8% in 2019-21 plan
FY ‘20 RESULTS AND 2021-23 PLAN
13TIM Group
€4.7bn debt cut in 2 years. 2020 EFCF fully on track for upgraded guidance
Historical trend of Equity FCF and Net Debt
90% of ‘19-21 1/3 of upgraded
initial guidance
IAS 17 After Lease
‘20-22 guidance Equity FCF
Group 1,534 1,615
90% of 3-year
Equity FCF
target for ‘19-21
€m (€ 3.5bn) reached in
2 years
2015 ‘16 ‘17 ‘18 ‘19 ‘20
20.5 initial
guidance
< 18.0 upgraded
Group 24.9
22.5 22.9 23.3 21.9 guidance Net Debt AL
Net Debt AL 18.6 ~ 16.5 new
Adjusted, € bn guidance -€ 3.3bn in 2020
2015 ‘16 ‘17 ‘18 ‘19 ‘20 ’21
Guidance (2)
Net Debt AL / EBITDA AL (1) 3.2x 3.0x
(1) Adjusted debt AL / organic EBITDA AL
FY ‘20 RESULTS AND 2021-23 PLAN
(2) Initial guidance: 2019-21; upgraded guidance: 2020-22; new guidance: 2021-23 14TIM Group
2020 ESG guidance met or beaten. On track on all L/T targets
Targets (1) 2020 actions and achievements
Eco-efficiency +50% Increased infrastructure energy efficiency
▪ White certificates program
Renewable energy ▪ Optimizing fixed and mobile networks
+5pp/yr 2025
on total energy (%) ▪ Circular economy for infrastructure and
▪ Transforming data centers
workplaces
Indirect emissions (2) -70%
Sparkle data center
Carbon Neutrality (2) 2030 certified for renewable energy
Employees ▪ Engagement over performed, 3-year target topped
+14pp ▪ Increased digital inclusion
Engagement
in one year
Reskilled people 2,000
▪ Agile & sustainable building
Churn of 2022
15% 2024
On track on all targets Inaugural Sustainability Bond issued: € 1bn, 8 year maturity, 1.625% coupon
(1) “Operation Time” plan targets, baseline 2019. Domestic, except for indirect emissions and carbon neutrality (Group)
FY ‘20 RESULTS AND 2021-23 PLAN
(2) Group target 15SOLID Q4 FINANCIALS
TIM Group
Strong topline and EBITDA trends improvement vs. Q3, Equity FCF +57% YoY
Organic data (1), IFRS 16, € m
Q4 ‘20 FY ‘20 Equity FCF After Lease
D% YoY D% YoY +57%
11,441 -5.6%
Service 3,669 -1.2% FX &
+0.4% one offs
Brazil
Revenues +1.9%
Domestic 2,992 11,643 -7.0%
-2.0%
Q4 '20 FY '20 Net Debt After Lease (2)
-0.8%
6,249
1,571 -6.1%
FY '19 21,893
+3.0%
EBITDA Brazil +2.5% -3,299
5,135 9M '20 20,741 -15.1% YoY
After Lease Domestic 1,270 -1.7% -7.8%
-2,147
FY '20 18,594
Margin 37.9% 39.4%
Service revenues and EBITDA AL trends improved both in Italy and Brazil. Q4 Equity Free Cash Flow AL € 622m (+57% YoY)
Q4 domestic EBITDA AL +0.4% YoY like for like: no solidarity in Q4 ‘20 (vs. 4 Net Debt AL down €2.1bn QoQ in Q4
days in Q4 ‘19) implies 2.1pp YoY drag.
(1) Excluding exchange rate fluctuations, non recurring items and change in consolidation area
(2) Adjusted Net Debt FY ‘20 RESULTS AND 2021-23 PLAN
17TIM Domestic
Fixed retail lines back to growth, one of the strongest quarters ever in retail UBB
Positive balance btw UBB net adds
Retail net adds back to positive in Q4 Retail UBB net adds doubled QoQ and ULL losses grew YoY
Line losses QoQ Net adds FY
UBB Customer Base
k lines
169k positive
k lines +5 k lines +24% YoY balance
+32% YoY
8,190 8,627
-60 1,047 911
+280
4,407 UBB
-160 4,127 +103 in Q4 ’19
-185
-217 -216 +157 -742 ULL
-265 -919
4,063 +233 in Q4 ’19 4,220
-331
-170 in Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q3 '20 Q4 '20 2019 2020 -175 in Q3
2019 2020 Wholesale Retail
Churn improved, lower disconnections UBB growth accelerated
No fixed line losses in Q4, 2 years ahead of from F-M substitution and delinquent clients
target
Churn UBB coverage and take up (1)
Vouchers helped but >75% of first €200m monthly average (2)
85%
tranche still available plus 100% of €900m 81% 81% 82% UBB POP
1.6% 1.7% coverage
tranche
1.3% 1.3%
UBB
Improvement attributable to “Fix the Fixed” plan take up
34% 40% 41% 42% retail &
18.1k cabinets opened to FTTx in 2020 (reaching wholesale
~91% coverage of fixed active lines) Q4 '19 Q4 '20 FY '19 FY '20 Q3 '19 Q4 '19 Q1 '20 Q2 Q3 Q4
(1) UBB take up calculated on technical HHs covered by UBB
(2) Equivalent to 91% of families with a fixed line FY ‘20 RESULTS AND 2021-23 PLAN
18TIM Domestic
FSR flat YoY: QoQ improvement across the board: both retail and wholesale
Fixed Service Revenues Fixed Revenues
Organic data
YoY change
€m 2,548 Total -0.3% 2,539
-0.2%
-5.4% 269 Service 265 Equipment
-10.4% -10.1% -8.5% -0.2%
2,279 2,274 -1.4%
due to
1,515 1,448 lockdown
Q4 '19 Q1 '20 Q2 Q3 Q4 Retail
-4.4%
Fixed Service Revenues flat YoY in Q4 National Wholesale
+9.4% 553
▪ National Wholesale +9.4% vs. +1.7% in Q3 thanks to better 506
Intern. Wholesale
mix in revenues (VULA vs ULL) and OLOs’ deals impact 233 249
+6.9%
▪ International Wholesale +6.9% vs. -1.8% in Q3 thanks to Q4 '19 Q4 '20
data business
ARPU trend improving QoQ
▪ Retail YoY trend improving vs Q3 (-4.4% YoY vs -8.2% in €/month ARPU Consumer ARPU BB
Q3). Positive swing in Q4 vs. Q3 thanks to:
-3.9% -3.0%
- CB evolution: ~ +0.9pp YoY
- Consumer ARPU: ~ +0.7pp -5.9%
-4.1%
- ICT revenues: ~ +1.3pp with 28% YoY growth (+18% in Q3)
mainly for increased cloud services 31.9 25.3 32.9 25.2
Q3 '20 Q4 '20
FY ‘20 RESULTS AND 2021-23 PLAN
19TIM Domestic
Mobile KPIs showing improvements on all fronts
Mobile Customer Base MNP balance keeps improving, TIM still the best among big 3
k lines
TIM MNP balance Market MNP -19% YoY to 2.9m
+5k k lines TIM
30,165 30,170
32 -658 -182
10,272 10,375
-46 -47 -57 -43 -35 -35 Op.1
19,894 19,795 -118 -114
-182 -166 Op.2
-260 Op.3
Q3 '20 Q4 '20 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Human Not Human Q4 ‘20
2018 2019 2020
Further step toward customer Human net adds improved Calling lines net adds improved Churn reduced YoY
base stabilization: impact on
MSR from CB reduction improved Human net adds QoQ Human Calling line losses Churn rate
~1pp QoQ (after ~2pp QoQ in Q3) k lines k lines %
5.5% 5.3% 5.2%
CSI +3.2% YoY in Q4 4.2%
-98 4.0%
Churn reduced 1.0pp QoQ -269 -261 -664
-410
-1263
NPS improving further QoQ and -579
still well above large operators’ Q4 '19Q1 '20 Q2 Q3 Q4 FY '19 FY '20 Q4 '19 Q1 '20 Q2 Q3 Q4
FY ‘20 RESULTS AND 2021-23 PLAN
20TIM Domestic
MSR more than halved YoY decline vs. Q3; discontinuities to fade-off in 2021
MSR improving: -6.4% YoY vs. -13.7% in Q3. YoY fall is Mobile Revenues
explained by:
Organic data
▪ One-off drags(1): ~ -3pp (vs. ~ -6pp in Q3), set to fade €m 1,130 Total
-8.9% 1,029
off in 2021
220 Equipment
▪ CB trend: ~ -3pp (vs. ~ -4pp in Q3) -19.6%
177
910
▪ Price dynamics: > +1pp (vs. ~ -2pp in Q3) Service 852
-6.4%
790 Retail 707
~3.3pp drags affecting Q4 are expectedTIM Domestic
Addressable cost base -7.4% YoY in Q4
OPEX
Organic data, IFRS 16, € m
Q4 ’20 YoY change (1)
▪ Labour -4% YoY for FTE reduction (-2.4k YoY). Fall would be -
9% net of ~€27m drag due to no solidarity in Q4 vs. 4 days of
Interconnection 2,038 -3.4% (-72) solidarity in Q4 ’19
Equipment
CoGS
▪ G&A -18% YoY thanks to lower indirect personnel and
+11% consulting, lower fleet management and civil building costs
Commercial
312
Industrial
-16% ▪ Industrial: lower energy costs (-6% YoY). Higher industrial
G&A & IT building due to mobile sites co-sharing
(2)
327
Labour +38%
Other (3) 208 ▪ Commercial -6% for lower commissioning and bad debt
partly offset by advertising
-6%
355
▪ CoGS increase related to ICT revenue growth
275 +3%
Addressable costs ▪ Equipment down due to Covid-19
88
-7.4% YoY -18% ▪ Interconnection increase for higher international and retail
502 traffic volumes
-4%
-29
(1) Net of deferred costs, on a cash view, the reduction reaches € 74m (-3.3% vs -3.0% in Q3). Net of deferred costs, total OPEX amounts to € 2,194m in Q4 ’20 and €
2,268m in Q4 ’19. On a cash view, YoY changes differ in CoGS (+36%), Commercial (-7%), Industrial (+9%), G&A & IT (-15%) and Labour (-5%)
FY ‘20 RESULTS AND 2021-23 PLAN
(2) Net of capitalized costs 22
(3) Includes other costs/provision and other incomeTIM Group
CAPEX: lower YoY despite push on FTTx
CAPEX: domestic FY guidance achieved Group Operating WC improving € 534m YoY
Organic data, € m
Net Working Capital
IFRS 16, € m
FY ’19 FY ’20 D YoY
1,398 +0.4% 1,403
(26)
Brazil 212 +9.7% 235 (214)
3,118 +534
2,855 2,748 Group (560)
(240)
Domestic 1,186 1,168 (53)
-1.5% +373
(613)
Q4 '19 Q4 '20 FY '18 FY '19 FY '20 Operating WC Non recurring items
Group CAPEX flat YoY
Accelerated expansion in white areas (~10k new Group Operating Working Capital outflow improving €534m YoY
cabinets opened in FY) offset by improved efficiencies Brazilian tax benefits and FX more than offsetting domestic negative
Brazilian CAPEX increased in Q4 to catch up plans one offs(1) (€209m)
affected by COVID in previous quarters €373m YoY improvement excluding YoY swing in non recurring items
(1) SKY payment, litigations and settlements, increased payments to personnel for exits ex. art. 4 Fornero Law
FY ‘20 RESULTS AND 2021-23 PLAN
23TIM Group
Deleverage: €4,342m debt cut in 2020 (-€3,299m YoY After Lease view)
€ m; (-) = Cash generated, (+) = Cash absorbed, excluding call-outs
EBITDA 1,621
CAPEX (1,403)
ΔWC & Others 712
Op.FCF ex. Licence 930
Lease
impact
Lease Lease
impact impact
21,095 20,741
Lease
impact
-€ 798m -€ 354m -€ 2,147m
FY ’19 FY ’19 OFCF Financial Cash Dividends H1 ‘20 OFCF Financial Cash Dividends 9M ‘20 OFCF Financial Cash Dividends FY ‘20 FY ’20
Net Debt Net Debt Expenses Taxes & & Change Expenses Taxes & & Change Net Debt Expenses Taxes & & Change Net Debt Net Debt
Net Debt
Other (1) in Equity (2) Other in Equity Other in Equity
After Lease After Lease
FY ’18 +2,398 FY ‘19
2019 25,270 (1,819) 707 3,929* 241 28,328 (990) 324 228 1 27,891 (1,016) 341 425 27 27,668 (5775) 21,893
*o/w 3,553 FTA IFRS 16
Δ vs. 2019 274* (103) -5,033 107 (2,357) 51 (24) (87) (5) (2,422) 86 (59) (602) (1,345) (4,342) 1,043 (3,299)
*204 ex Inwit
(1) Includes Inwit deconsolidation and monetization
(2) Cash taxes and other includes license payments FY ‘20 RESULTS AND 2021-23 PLAN
24TIM Group
FY Net Income grew €6.3bn YoY, +€0.4bn net of tax asset value realignment
Reported data, € m, Rounded numbers
€78m net of realignment Net Income
COVID-19 impact (108) Inwit gain following the merger 452 of intangible asset tax post minorities
Personnel and other (216) Inwit equity share 18 value +6,308m YoY
Net financial expenses (1,179)
FY ‘20
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
FY ‘19 7,505 646 8,151 (4,976) 3,175 (1,420) (513) 1,242 (326) 916
Δ vs. FY ‘19 (442) (970) (1,412) 341 (1,071) 713 6,468 6,110 198 6,308
FY ‘20 RESULTS AND 2021-23 PLAN
25TIM Group
Realignment of intangible asset tax value
▪ Decree-Law 104/2020 allows for realignment of intangible asset tax value to the book
value
Realignment
of the tax 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 ▪ Overall tax benefit: € 5.9bn (28.5% of tax basis) net of substitute tax
redeemed ▪ 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
FY ‘20 RESULTS AND 2021-23 PLAN
26WHAT NEXT? A BETTER MACRO AND TELCO OUTLOOK
Macro context: 2021 GDP growth swing YoY expected one of the largest in
modern history. EU recovery fund set to boost economy and telco sector
Next Generation EU fueling economic recovery and digitization:
€ 209bn funds allocated to Italy
On top of >€ 150bn allocated by the Government for liquidity and solvency measures
Digitalization Transition 4.0
€ 18.8bn GDP expected to grow in 2021-23 (1)
€ 46.3bn
Culture & Tourism
€ 8.0bn
Green revolution
PA digitalization 2020 2021 2022 2023
€ 69.8bn
€ 8.0bn
UBB, 5G & satellites
Infrastructure Italy GDP growth
3.5% 3.8%
€ 4.2bn YoY % 2.4% 2.3%
€ 32bn 1.2%
Supply chain & internationalization
€ 2.0bn
Education Justice
€ 28.5bn € 2.3bn Including Next Generation EU contribution
PA modernization -8.9%
Social € 1.5bn
€ 27.6bn SMEs digitalization
€ 0.8bn
Health Microprocessors +2.5pp expected GDP impact from Next Generation EU
€ 19.7bn € 0.8bn over 2021-23 vs. base scenario
1) Source: Banca d'Italia, "Proiezioni macroeconomiche per l’economia Italiana" as of July 2020 and January 2021
FY ‘20 RESULTS AND 2021-23 PLAN
28Telco context: new reasons to close the penetration gaps vs. Europe and grow
Fixed market growth expected to become structural
New habits and needs bring mobile-only BB users back to fixed, closing >10pp gap vs. other EU Countries
Growing fixed market... ...pushed by B2C... ...and B2B demand
Fixed market (1) PayTV OTT 2019 value ’19-24
Million lines
Fixed 1.6% CAGR pool, € bn CAGR, %
BB 2.7% CAGR
1.8x
Cloud 3.3 +19.0%
o/w 2020 '23
BB lines IOT Urban
Smart Home services 4.3 +10.8%
2020 '21 '22 '23
1.7x IOT Industrial
services 5.7 +7.6%
Broadband «Mobile-only» families
2020 '23
IOT Merchant
services 9.1 +4.5%
Cloud Gaming
4.7x
Cyber-security 1.6 +8.4% (2)
2020 '23
Source: Eurostat Source: Polimi/Statista, Analysis Mason, OMDIA Source: Gartner, IDC, Assintel, PoLiMi
1) Source: AGCOM, internal elaborations on Analysis Masons’ estimates FY ‘20 RESULTS AND 2021-23 PLAN
2) Overall market growth rate (CAGR ’19-22) 29TIM READY TO RIDE ALL OPPORTUNITIES
IN CONNECTIVITY AND BEYOND
- ITALY -TIM Group
2021-23 TIM Strategic plan
plan 2021-23
“Beyond Connectivity”
Unique Best Further Leaner
commercial technological improve organizational
proposition infrastructure operational model
Connectivity quality leader
provider in Italy
Further UBB deployment & excellence Superior capabilities
technological upgrading and efficiency
Integrated platform to develop Improved KPIs and
new digital services through an reduced cost structure
ecosystem of tech partners
Central role of ESG objectives
FY ‘20 RESULTS AND 2021-23 PLAN
31TIM Domestic
The growth engine: TIM and its specialized “factories” exploiting adjacent
markets with tech partners for digital transformation (and optionality)
Service Company Ambition Target KPIs Factories
revenue target (2)
▪ € 1bn revenues in ‘24
Leading Italian cloud and 2.2x
Cloud infrastructure provider
▪ €0.4bn EBITDA in ‘24
company ▪ 300+ clients addressed with Google
2020 2023
Cyber Reference partner for ▪ 10-12% market share in ‘23
security Enterprise and Government
▪ New specialized
offering in most
▪ 80-100k merchants reached by ‘23 relevant digital
Integrated Leading Italian E2E business
services solution provider ▪ 10-15 smart city projects services
IoT
▪ 4-5 core Italian manufacturing value chains ▪ Integrated commercial
approach, product
Leading E2E connectivity
International partner for operators, MNOs, OTTs ▪ Enterprise: +200 Customers by ‘23 development and
wholesale content providers, enterprises. ▪ Targeting to be in Gartner MQ for Global SP(1) resource allocation for
Building and selling infrastructure TIM and its “factories”
▪ Factories likely
Easiest, most complete and recipients of Recovery
▪ +21pp paying clients weight on BB CB by
Contents affordable entertainment hub
‘23 fund
in the Italian market
1) Gartner Magic Quadrant for Global Service Providers
FY ‘20 RESULTS AND 2021-23 PLAN
2) Beyond connectivity revenues from Noovle, Telsy, Olivetti and Tim Vision (Sparkle excluded) 32TIM Domestic
Consumer: best convergent solutions for UBB & content for the household
Key strategic priorities KPIs expected evolution in 2020-23
fixed CB mobile (1)
Quadruple Play ▪ Enlarged 4P (fixed + mobile + contents + smart home)
=/+ -/+
TIM Vision ▪ Improved TIM Vision offering: new services and partnerships with
enhanced offer best-in-class players (Netflix, Disney+, DAZN, NowTV, Discovery+)
2020 2023 2020 2023
Line balance MNP
▪ Data-driven Customer Value Management (CVM) for ++ +
CVM
segmented campaigns
UBB penetration Convergent CB
Digital sales ▪ From Push to Pull and digital +31pp +37pp
Channel
channels and remix ▪ Increase stores’ productivity: convergent products,
stores redesign new compensation 2020 2023 2020 2023
fixed ARPU mobile
Sales ▪ “Industrialization” across all channels
excellence -/= =/+
▪ Dedicated go-to-market to accelerate FTTH take-up
2020 2023 2020 2023
▪ AI to enhance customer experience and reduce human intervention Channel mix Caring
Touchpoints
▪ Redesigned Customer Journey (e.g. order tracking for fixed and 36% 41% Stores Non-human
digitization 21% addressed tickets
mobile prospects, new booking process) 29% Digital
Push 80% share of tot.
2020 2023
1) Human calling slight growth, M2M growing strongly
FY ‘20 RESULTS AND 2021-23 PLAN
33TIM Domestic
TIM’s networks: the largest coverage at the highest speed, HD Video ready
Mobile, FWA
FTTC FTTH
& satellite
coverage
Already 91%(1) of
99%
active lines 85% Already 99%
and 85% of 56% with 4G
technical units 20%
2020 2020 2025 2020
speed Mbps 30-200 >1,000 >40 4G >200 5G
VIDEO HD
contemporary 6-40 >200 >8 4G >40 5G
streams (2)
1) To reach 93% in 2023
FY ‘20 RESULTS AND 2021-23 PLAN
2) Note: 5 Mbps for Video HD bandwidth requirements (YouTube/Netflix) 34TIM Domestic
Business: new offering / new channels for SME and SOHO. End-to-end
IoT/Cloud solutions for Enterprise and P.A.
Key strategic priorities for TOP Key strategic priorities for SME KPIs expected evolution in 2020-23
▪ Turnkey ICT offering, jointly Revenue share of digital services
▪ Comprehensive cloud solution
Unique developed with “factories” and Enterprise SME
package and end-to-end IoT
one-stop-shop solution solutions
partners: Payments, VoIP, +10pp +12pp
Cybersecurity, Cloud
2020 2023 2020 2023
▪ Capability building program ▪ Push convergence and ICT Enterprise sales per representative
Sales products
excellence ▪ New Sales & Marketing tools:
account planning, CRM, ▪ Improve segmentation with +15%
& CVM
marketing campaigns dedicated loyalty offerings
Evolved
distribution 2020 2023
model
Faults closed in next business day
Channel ▪ Re-engineered salesforce ▪ New dedicated SoHo channel SME
remix channel to win in ICT ▪ New incentives scheme
81% 90%
2020 2023
▪ Dedicated support for high- ▪ Redesigned caring processes
Improved
value accounts with “1-to-1” and systems to sustain Enterprise resources
caring and assistance approach premium positioning 2,000 to be trained
FY ‘20 RESULTS AND 2021-23 PLAN
35TIM Domestic
Wholesale: UBB/solutions provider in regulated and non regulated markets
Key strategic priorities KPIs expected evolution in 2020-23
Fiber accesses Not regulated
CB protection ▪ Co-investment: commercial agreements to VULA + BTS NGA, Percent of Wholesale
through develop FTTH with both existing and new million accesses revenues
UBB expansion customers
1.6x +8pp
and offer breadth ▪ “Turn-key” offers (One-Step) to increase
(suits different level of customer satisfaction
infrastructure and
▪ Increase competitiveness of Bitstream/NGA 2020 2023 2020 2023
geographical footprint)
National
GEA Giganet
Wholesale
'000 links '000 links
▪ Strengthen TIM's offering and role as
+48% +56%
Growth of backhaul provider
not regulated ▪ Review commercial offer of High Quality
services Connectivity (Gea and Giganet)
2020 2023 2020 2023
▪ Expand offering to Data Center Services
Sparkle gross revenues
% on total gross revenues
▪ Core Connectivity and E2E Enterprise partner
with new integrated portfolio of Security, IoT 8% 16%
Data Enterprise
Growth targeting and Cloud services
28%
37%
new segments Data Wholesale
▪ Cross segment enablers: e.g. co-building 64% 47%
and geographies Voice/Mobile
partnerships with Hyperscalers/OTTs and
2020 2023
collaboration with TIM Factories
FY ‘20 RESULTS AND 2021-23 PLAN
36TIM Domestic
Addressable cost base to be further optimized. Some initiatives yet to
unfold full potential
Addressable base evolution Main initiatives Example of initiatives not yet showing their full benefit
Costs on revenues % White certificates(1): revenues generated from eco-
▪ Continue using early retirement
schemes
efficiency improvements (see details in Apendix)
P&L view Approved FIXED - Copper to fiber switch
▪ Optimize channel mix (web sales projects ▪ FTTC 60% more efficient than ADSL
+8pp by 2023),
▪ FTTH 20x more efficient than ADSL
-1pp
-1pp ▪ Keep working on bad debt (-32% MOBILE - 4G upgrade and 5G roll-out
planned by ‘23)
▪ Evolved 4G 20% more efficient vs 4G (2)
▪ Increase self-care and faults ▪ 5G (5x more efficient than 4G)
prediction through AI Potential ▪ Data Centers
2019 '20 '23 ▪ Optimize real estate footprint next steps ▪ Special projects
▪ Think our of the box, e.g. white White certificates P&L benefit estimate
Cash view certificates
Progressive yearly accruals based on internal accounting of the actual
▪ Extend adoption of new operating efficiency vs 2019 baseline, first settlement and TEE issue on 2023
-1pp models (automation,
-2pp
remotization, consolidation) Approval pending Cumulated P&L
Already approved benefit in 6 years
▪ Streamline procurement through ∑ = €0.25-0.4bn
massive insourcing, demand before data centers
2019 '20 '23 shaping, Should-Cost and Design- 2021 '22 '23 '24 '25 '26 and special projects
to-Value
(1) Issued by GSE to certify energy savings (1 certificate per ton of oil equivalent saved), con be traded (current value € 250 -260)
FY ‘20 RESULTS AND 2021-23 PLAN
(2) 2020-22 plan’s targets based on IFRS 9-15 accounting standards 37TIM Domestic
CAPEX: ~€2.9bn p.a. for strong FTTH/5G coverage expansion
Grow & Transform Capex evolution and mix
Co-investment scheme
▪ ROI-driven mobile/fixed access ~2.7 ~2.9 ~2.9 ~2.9
development (4G and 5G, FWA, according to EU Telecommunication
FTTx) to close digital divide at Code art.76 (regulation eased)
regime
FiberCop
▪ FTTH roll out with new model
delivery, assurance, deployment
2020 ‘21 ‘22 ‘23 In Jan 2021 TIM published a public offer for
▪ Decommissioning of legacy Run (TIM) Grow & transform (TIM) co-investment:
Run (FiberCop) Grow & transform (FiberCop)
systems. Getting ready for 3G
switch off during 2022 ▪ Scope: FTTH secondary access network
Extensive FTTH roll-out plan through FiberCop
▪ Coverage: 1,610 municipalities, reaching
Coverage of technical units (1)
▪ Enable B2B use cases with low 76% of technical units (12.9m), in black
FTTC FTTH Coverage
latency (e.g. connected cars) @2025 and grey areas
85% White
56% Areas ▪ Target: operators taking volume
FTTH Italy
5G coverage commitments (pay per use or IRU)
56%
51% 76%
Grey
42% Areas ▪ Timing: 2021-25
▪ 2020: 10 cities (90% Milan) 33%
Black+Grey Areas
▪ 2021: all major cities, tourist 25% 100%
Black Areas
Black
areas and industrial districts Areas
▪ 2025: national coverage 2019 '20 '21 '22 '23 '24 '25 '26
Black Areas FTTH Grey Areas FTTH FTTC
(1) 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
FY ‘20 RESULTS AND 2021-23 PLAN
Black areas = high density urban areas; grey areas = mid density urban areas 38TIM Group
Strategic initiatives update
▪ Carve-out finalized
▪ Co-investment scheme published and open to all operators
FiberCop ▪ 2021 revenues E1.2-1.3bn, EBITDA c. 0.9bn, debt/EBITDA 3.4x
▪ EBITDA – CAPEX positive from 2025; CAPEX/salesTIM READY TO RIDE ALL OPPORTUNITIES
IN CONNECTIVITY AND BEYOND
- BRAZIL -TIM Brasil
TIM Brasil: Delivering growth in a more challenging macro scenario
Reported data
Service Revenues improved (+0.4% YoY in FY ‘20) EBITDA1 expansion with the highest Latam margin, leading to cash flow and
with positive contributions from both mobile postpaid and fixed net debt improvement: Net Cash on b/sheet more than doubled YoY
Net Service Revenues
(YoY) Postpaid
flat MSR YoY
1.7% 1.3% 1.9% +1.9% YoY
FSR driven by
-3.4% +11.1% YoY TIM Live
1Q20 2Q20 3Q20 4Q20
Mobile TIM Live Special Projects
Infrastructure Development
Human Postpaid CB +14.0% YoY
ARPU ARPU +3.4% YoY to 645k FTTH coverage +43% YoY
Revenues (3.2 mln HHs covered)
Signing with Oi
+4.9% YoY
Prepaid ARPU +27.9% YoY ARPU +7.8% YoY Fiber Co: Network last mile
to 24.9 R$/month
+4.9% YoY to R$ 87.2 Best 4G coverage experience and carveout
availability
(95% urban pop. coverage in 3.9k cities)
OPEX below inflation ESG
Focus on value and service Massive MIMO rollout
(+1.0% YoY vs IPCA2 4.5%) (200 cities implemented) One of the best ranked stocks in
quality driving churn rate
Bad debt back on track the B3 and S&P ESG index
reduction Network Sharing Agreement
(2.3% of gross revenues) (3G/4G expansion: 730 cities in 1H21e) New ESG committee
(1) Normalized
(2) Last 12M IPCA as of December 2020 FY ‘20 RESULTS AND 2021-23 PLAN
41TIM Brasil
Better macro and telecoms outlook
Mobile market Acceleration in Wave of asset Monetization of Paving the way for IoT and M2M
consolidation digital consumption separation Consumer Platform 5G technology
Moving from 5 to 4 Data demand growth Increasing initiatives Increasing numbers Preparation to launch Exponential number
after Nextel for mobile and fixed, of network of digital business 5G, with 5G DSS as of use cases in
acquisition and from 4 further accelerated by separation (InfraCo leveraging Telco’s marketing positioning, several industries
Dynamic to 3 after deal with Oi Covid-19 vs. ServCo) Consumer Platform auction and vendor (e.g. agribusiness,
mobile is completed (e.g. digital wallet, analysis connected cars,
data monetization) utilities, health)
Foster more balanced Revenue growth on Partnership New revenue sources Focus on 5G network Expand business
competitive data monetization negotiation to finance for telco operators rollout with proposed beyond connectivity
Implications landscape (e.g. Increase pressure network expansion leveraging new digital auction framework, (e.g. applications,
and pairing spectrum gap) over network cash and modernization disruptors (e.g. Release 16 as catch data monetization,
costs fintech, data provider, up for the country implementation)
Opportunities
OTT content)
Geographical
expansion of fiber
FY ‘20 RESULTS AND 2021-23 PLAN
42TIM Brasil
Solid results in 2020 confirm the consistency of our strategic plan
Strategic Paths Enhance and accelerate the transition from volume to value, to
sustain mobile business growth, focusing on customer experience
Strengthen Capture ultrabroadband market growth opportunity with new
the core financial and business models
Fill current infrastructure gap with M&A, also fostering inorganic
growth and capturing potential synergies
Expand new sources of value (e.g. IoT, C6, Mobile Advertising,
Customer Data Monetization, Health, Education) leveraging the
Build customer base platform through ecosystem and partnerships
Imagine as possibilidades
the future
Implement transformational projects on infrastructure (e.g. 5G,
ORAN, M-MIMO, cloudification)
Transformational Boost Boost disruptive efficiencies through digitalization, automation
Enablers disruptive and new operating models, leveraging skills and capabilities
efficiencies enhancement
Strengthen Strengthen and consolidate ESG proposition making a positive
sustainability transformation
FY ‘20 RESULTS AND 2021-23 PLAN
43TIM Brasil
“Imagine as possibilidades”: Our aspirations for 2023 reflect market
opportunities and trends
Fill the spectrum frequency
gap
Increase share in the growing Become the preferred mobile
FTTH market player for customers
Imagine as possibilidades
Develop distinctive IoT value
Turn into an ESG
propositions, creating
reference in Brazil
ecosystems
Set industry benchmarks, scaling Create at least 3 new businesses as a
digitization and improving processes Consumer Platform
FY ‘20 RESULTS AND 2021-23 PLAN
44TIM Brasil
Oi’s assets integration could transform TIM Brasil by 2023
(1) Includes Oi assets integration, IFRS15/16, and does not include 5G related capex (e.g. spectrum license and cleaning, network capex rollout)
and last mile carveout project (FiberCo) FY ‘20 RESULTS AND 2021-23 PLAN
45
(2) Incremental due to both Oi's assets incorporation and new market dynamicsTIM Brasil
Market guidance 21-23 shows Revenue and EBITDA growth, and positive
impact coming from M&A
SHORT TERM TARGETS
GOALS LONG TERM TARGETS
(2021)
Service Revenues Growth (CAGR ‘20-’23):
Revenue Growth Service Revenues Growth:
Mid single digit standalone
Sustainability Mid single digit (YoY)
High single digit combining Oi’s assets
EBITDA Growth: EBITDA Growth (CAGR ‘20-’23):
Improve
Mid single digit (YoY) Mid single digit standalone
Profitability
(Including preparation costs) Double digit combining Oi’s assets
Capex (cumulated 2021-’23):
Capex:
Infrastructure ~R$ 13.0 bln standalone
~R$ 4.4 bln
Development ~R$ 13.5 bln combining Oi’s assets
(including preparation investments)
(Capex on revenues declining starting in 2022 combining Oi’s assets)
EBITDA-Capex on Revenues:
Expand Cash EBITDA-Capex on Revenues:
~24%
Generation ≥ 29% in 2023 combining Oi’s assets
(including preparation costs and investments)
Note: Oi’s assets expected impacts refer to the portion of the assets that would be transferred to TIM after the closing and considers split assumptions FY ‘20 RESULTS AND 2021-23 PLAN
contained in the SPA contract. 46FINANCIAL AND ESG GUIDANCE
CLOSING REMARKSTIM Group
New plan confirms cash generation, dividend guidance and deleverage
Cumulated Equity Free Cash Flow guidance
for 2021-23 similar to 2020-22
Anticipating a few payments
€ bn, after lease
▪ €0.7bn to be spent in 2021-23 as tax realignment cost
(€5.9bn tax asset net of realignment cost to be used
mostly after the plan period)
Tax realignment
cost (~€ 0.7bn)
and FX impact
4.5-5.0 ▪ ~€0.3bn anticipation of 2100 MHz spectrum prepayment
3.5 ~4.0
with €40m financial benefit, affecting 2021 net debt (not
Equity Free Cash Flow)
2019-’21 2020-’22 2021-’23
EFCF guidance EFCF guidance EFCF guidance
Dividend distribution guidance unchanged
▪ ordinary: floor of €1 cent per share, aiming at distributing 20-25% of yearly Long term ambition: distribute
2021-23 organic Equity FCF. Payout policy above floor subject to deleverage execution >2023 50% of yearly organic Equity
▪ savings: €2.75 cents per share throughout 2021-23 Free Cash Flow
FY ‘20 RESULTS AND 2021-23 PLAN
48TIM Group
Guidance 2021-23: proceeds from FiberCop included, Oi’s acquisition not yet
reflected
YoY growth rates,
Group Domestic Brazil (1)
IFRS 16 / After Lease
2021 2022-23 2021 2022-23 2021 2022-23
Organic Stable to Low Low single digit Stable to Low Mid single digit Mid single digit growth
Stable High single digit growth
Service revenues single digit growth growth single digit growth growth
(CAGR ‘20-’23) with Oi
Mid single digit growth
Organic Stable to Low Low to Mid single Low single digit Mid single digit
single digit growth Stable Double digit growth
EBITDA AL digit growth growth growth (CAGR ‘20-’23) with Oi
~R$ 13.0 bn
CAPEX ~€ 2.9 bn per year ~R$ 13.5 bn with Oi
Net of ~€0.7bn
Eq FCF AL Cumulated ~€ 4.0 bn tax realignment cost
Adjusted ~€ 16.5 bn 2.6x
excluding Oi (2) Net Debt AL / EBITDA AL (3)
Net Debt AL by 2023
ordinary: floor of € 1 cent per share, aim to distribute 20-25% of yearly Equity FCF subject to deleverage execution
Dividend savings: €2.75 cents per share throughout 2021-23
(1) Guidance based on IFRS 16 for EBITDA in Brazil
(2) Including proceeds from FiberCop (€1.8bn), including anticipation of 2100 MHz spectrum prepayment (~€0.3bn), and excluding Oi’s mobile acquisition FY ‘20 RESULTS AND 2021-23 PLAN
(3) Based on Organic EBITDA AL; 2.7x based on Reported EBITDA AL 49
P/L figures @ average exchange-rate actual 5,9 REAIS/EURTIM Group
ESG plan and guidance confirmed or raised
Incremental actions 2021-23 Targets (updated)(1)
E Climate strategy E Circular economy S Digital inclusion Eco-efficiency +50%
Carbon free energy for Carbon calculator tool for Reduce digital Divide and Renewable energy
on total energy (%) +5pp/yr 2025
infrastructures (data centers, business clients social exclusion through
fixed and mobile networks) extensive infrastructure Indirect emissions(2)
Sustainable supply chain -70%
Science Based Targets improvement 5G development to push
initiative validated goals adoption green and social
Circular economy standards Carbon Neutrality(3) 2030
IoT services
Scope 3 calculation for infrastructure and
workplaces Digital initiatives in Employees
Carbon offsetting engagement
NEW +19pp
response to COVID-19
of CO2 emissions by ‘23 Agile and sustainable emergency, on top of Hours of training for
buildings “Operazione Risorgimento reskilling and upskilling
NEW 6.4m hrs
Renewable energy increase(4)
Digitale”
Churn of young employees NEW 15% 2024
(1) New “Beyond Connectivity” plan targets, baseline 2019. Domestic, except for indirect emissions and carbon neutrality (Group)
(2) Scope 2, TIM Group
FY ‘20 RESULTS AND 2021-23 PLAN
(3) TIM Group 50
(4) Through a mix of GO, PPA, including direct sourcing from windfarm reblading and photovoltaic power plantsTIM Group
Closing remarks
▪ Revenues and EBITDA stabilized in Q4
▪ ESG and financial guidance delivered
▪ Improving macro scenario for Italy and the telco sector
▪ TIM ready to ride all opportunities in connectivity and beyond, both in
Italy and in Brazil
▪ Confident with our guidance of domestic and group revenue growth
▪ Making the world a better place to live in
FY ‘20 RESULTS AND 2021-23 PLAN
51Q&A
ANNEX
TIM Group
IFRS 16 and IFRS 16 After Lease view
EBITDA After Lease Net Debt After Lease
€ m, organic € m, reported
(1.5%)
(0.8%)
1,790 (206)
1,584 193 1,764 (4,342)
1,571 (3,299)
27,668 (5,775) 4,732 23,326
21,893 18,594
Group
Q4 ’19 Lease Q4 ‘19 Q4 ‘20 Lease Q4 ‘20
impact impact
EBITDA EBITDA AL EBITDA AL EBITDA Net Debt IFRS 16 Net Debt AL Net Debt AL IFRS 16 Net Debt
FY ‘19 & IAS17 FY ‘19 FY ’20 & IAS17 FY ’20
€ m, organic Equity Free Cash Flow After Lease
(2.5%)
€ m, reported
(1.7%)
1,432 (140) 1,292 +109
1,270 126 1,396 +225
Domestic
639 (242) 126 748
397 622
Q4 ‘19 Lease Q4 ‘19 Q4 ‘20 Lease Q4 ‘20 EFCF IFRS 16 EFCF AL EFCF AL IFRS 16 EFCF
impact impact & IAS17 & IAS17
EBITDA EBITDA AL EBITDA AL EBITDA Q4 ’19 Q4 ’19 Q4 ’20 Q4 ’20
FY ‘20 RESULTS AND 2021-23 PLAN
54TIM Group
Liquidity margin - After Lease view
Cost of debt ~3.4%, flat QoQ, -0.2p.p. YoY
Liquidity Margin Debt Maturities
(2)
8.3 23.7
7.9
2.6
0.3
12.6 3.4 2.0 19.2
Covered until 2023 0.6
3.1 3.2
5.9
0.2
4.4 2.4
0.6
3.1
6.7 (1) 2.0 1.3
0.6 4.5
1.5
Liquidity margin 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) Includes €1.7 bn bridge loan facility cancelled on January 19th 2021. As of January 18th 2021 TIM issued a new sustainability bond for € 1bn expiring in 2029
(2) € 23,716m is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 496m) FY ‘20 RESULTS AND 2021-23 PLAN
55
and current financial liabilities (€ 1,151m), the gross debt figure of € 25,363m is reachedTIM Group
Liquidity margin - IFRS 16 view
Cost of debt ~3.7%*, flat QoQ, -0.4p.p. YoY
* Including cost of all leases
Liquidity Margin Debt Maturities
(2)
10.4 28.5
7.9
3.0 19.2
2.2
2.0
3.9 0.6
12.6 … 0.4
3.6
Covered until 2023 0.2
5.9 4.9 2.4 0.5
0.6
4.5
3.1 0.5
6.7 (1) 2.6 1.3
0.6
0.6 4.8
1.5 0.6
Liquidity margin 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) Includes €1.7 bn bridge loan facility cancelled on January 19th 2021. As of January 18th 2021 TIM issued a new sustainability bond for € 1bn expiring in 2029
(2) € 28,487m is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 555m) FY ‘20 RESULTS AND 2021-23 PLAN
56
and current financial liabilities (€ 1,151m), the gross debt figure of € 30,193m is reachedTIM Group
Well diversified and hedged debt
NFP Fair NFP Gross Debt
adjusted value accounting
GROSS DEBT
Bonds 19,541 303 19,844 Banks & EIB
Banks & EIB 5,279 5,279 17.5% Bonds
Derivatives 240 1,666 1,906 64.7%
Op. leases and long rent 4,830 - 4,830 Op. leases
Other 303 - 303 and long rent
16.0%
TOTAL 30,193 1,969 32,162 Other
1.8%
FINANCIAL ASSETS
Liquidity position 5,921 - 5,921 Average m/l term maturity:
(1) 9.7 years (bond 6.8 years only)
Other 946 1,581 2,527
TOTAL 6,867 1,581 8,448 Fixed rate portion on medium-long term debt ~71%
NET FINANCIAL DEBT 23,326 388 23,714 Around 25% of outstanding bonds (nominal amount)
denominated in USD and GBP and fully hedged
(1) Refers to positive MTM derivatives (accrued interests and exchange rate) for € 580m, financial receivables for lease for € 98m and other credits for € 268m
FY ‘20 RESULTS AND 2021-23 PLAN
57TIM Brasil
TIM Brasil: Q4 results in a nutshell
Reported data, R$m
Service Revenues improved further (+1.9% YoY), EBITDA(1) expansion supported by revenue trend and strict cost control,
with positive contributions from both mobile postpaid and fixed leading to the highest margin in TIM’s history and best in the market
EBITDA margin (Pro-forma) (3)
2,380
4,357 +1.9% 4,441 MSR +1.5% YoY (vs. +0.4% in Q3), 2,311 +3.0%
256 +8.0% 277 with Prepaid –4.9% (vs. -2.0% in
Q3) and Postpaid +3.6% (vs. +1.2% 39.8% 40.9%
4,101 +1.5% 4,164 38.5%
in Q3) 33.5% 36.6%
Q4 ’19 Q4 ’20
Q4 ’19 Q4 ’20 FSR +8.0% YoY driven by TIM Live Q4’20 EBITDA margin: 50.9% 2016 ‘17 ‘18 ‘19 ‘20
Mobile TIM Live
Infrastructure Development Beyond the core
ARPU +4.9% YoY Revenues +27.9% YoY
to 24.9 R$/month FTTH coverage +43% YoY
CB +14.0% YoY to 645k 3.2m HHs covered
Prepaid ARPU +3.4% YoY
Postpaid ARPU +4.9% YoY(2) ARPU +7.8% YoY to 87.2 R$ >1.1m open accounts
Best 4G coverage experience
and availability Partnership signed: Telcos + Central
95% urban pop. coverage in 3.9k cities
bank to integrate PIX and prepaid
ESG ARPU growth
Massive MIMO rollout recharge wallet and invoice payments
One of the best ranked stocks in in all segments
the B3 and S&P ESG index 200 cities implemented
>120k payments in the 1st month
Board members new ESG
Lower churn through >0,5m by February
better value proposition Conduct Adjustment Term >=70% reduction in collection costs
Committee
2021 commitment delivered
(1) Normalized
(2) Excluding M2M FY ‘20 RESULTS AND 2021-23 PLAN
(3) Pro-forma excludes the effects of the adoption of IFRS 9, 15 and 16 58For further questions please contact the IR team
(+39) 06 3688 1 // (+39) 02 8595 1
Investor_relations@telecomitalia.it
www.gruppotim.it
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FY ’20 RESULTS AND 2021-23 PLAN
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