Rome, Italy – Organic results:

• 2022 results exceed guidance thanks to a further improvement in operating trends in the fourth quarter
• Over the twelve months, group service revenues come to € 14.6bn, up 1.3% year on year vs guidance “low single-digit decrease” (+3.6% year on year in the fourth quarter)
• Group organic EBITDA equal to € 6.0bn down 6.7% year on year vs guidance “high single-digit decrease” (+2.7% year on year in the fourth quarter) and group organic EBITDA after lease equal to € 5.0bn, down 10.6% year on year vs guidance “low teens decrease” (-1.3% year on year in the fourth quarter)
• Group capex of € 4.0bn, of which domestic € 3.1bn vs guidance, respectively € 4.1bn and € 3.2bn
• Group net financial debt after lease of € 20.0bn, stable on September 30 and up on 2021 only for the extraordinary items
• Strong growth of TIM Brasil confirmed with service revenues at € 3.8bn, up 19.0% year on year (+20.8% in the fourth quarter), organic EBITDA of € 1.9bn, up 16.4% year on year (+16.9% year on year in the fourth quarter)
• 112% of the cost containment target for 2022 reached

TIM’s board of directors met today under the chairmanship of Salvatore Rossi and examined the preliminary data at December 31, 2022. The Board will meet to approve the draft financial statements for the year and the consolidated financial statements on March 15.

The fourth quarter results, which record a further improvement on the previous quarters thanks to the stabilisation and relaunch of the domestic business and the acceleration of the development of TIM Brasil, make it possible to reach or even exceed the objectives set for 2022, which had partly been raised last August.

More specifically, compared with the fourth quarter of 2021, Group total revenues grew by 3.3% YoY to 4.3 billion euros (+1.1% YoY in the third, -1.4% YoY in the second and -4.5% YoY in the first quarter) while Group service revenues increased for the third consecutive quarter, up by 3.6% YoY to 3.9 billion euros (+3.0% YoY in the third, +1.0% YoY in the second and -2.5% YoY in the first quarter) thanks to the positive contribution from Brazil and an improved domestic trend. In Italy the premium positioning strategy ‘Value vs. Volume’ was further strengthened with new measures aiming to increase the rationality of both the fixed and mobile market. More specifically, in light of the recent changes to the macroeconomic context, with reference to the increase in energy and raw material costs, an inflation adjustment mechanism has been introduced which will generate any benefits starting from 2024. In Brazil, on the other hand, the Oi Group’s mobile business continued to be integrated and the organic growth strategy was further pursued on the fixed market.

A net improvement has been seen in Group EBITDA, which reverses the negative trend of previous quarters, recording growth of 2.7% YoY to 1.5 billion euros in the fourth quarter (-6.5% YoY in the third, -8.5% YoY in the second and -13.3% YoY in the first quarter).

Strong improvement is also seen in the Group’s EBITDA After Lease, which is down 1.3% YoY to 1.2 billion euros (-11.2% YoY in the third, -12.3% YoY in the second and -16.3% YoY in the first quarter).

During the quarter, cost containment actions to increase the level of TIM Domestic’s structural efficiency also continued (‘Transformation Plan’, cumulative target of cash cost reduction of 1.5 billion euros by 2024 versus the inertial trend). Over the twelve months, the reduction with respect to the inertial trend was approximately 337 million euros, reaching 112% of the target set for 2022.

Net financial debt after lease at December 31, 2022 came to 20.0 billion euros, up 2.4 billion euros on December 31, 2021, essentially due to payment of the 5G spectrum and the Oi assets, only partly mitigated by collections made as a result of the sale of the indirect share held in INWIT. Net of one-off effects, over the twelve months, net financial debt after lease stabilised, thereby inverting the growth trend. Adjusted Net financial debt came to 25.4 billion euros, up 3.2 billion euros on December 31, 2021.

At December 31, 2022, the liquidity margin came to approximately 9.0 billion euros and covers the debt maturity dates through to 2024. In January 2023, after two years of absence from the debt capital market, TIM successfully placed a fixed-rate unsecured bond of 0.85 billion euros offered to institutional investors.

The Equity free cash flow of the twelve months was essentially nil on an after lease basis (equity free cash flow was positive for approximately 0.6 billion euros).

In terms of strategic initiatives, below is an update of the plan presented on July 7 during the Capital Market Day, with the objective to overcome vertical integration through the separation of the fixed network infrastructure assets (NetCo) from services (ServiceCo with TIM Consumer, TIM Enterprise and TIM Brasil) and reduce debt through the disposal and optimisation of certain assets.

For each of the four entities, a summary of the performance parameters is given:

• In the twelve months, TIM Consumer recorded total revenues and revenues from services down respectively by 9% YoY and 7% YoY.

The year saw positive operating trends with the customer churn rate declining YoY, both on fixed and mobile.

Initiatives to implement the premium positioning strategy ‘Value vs. Volume’. Among the most significant, we would point out the selective re-pricing of the fixed and mobile customer base and the introduction of a mechanism for adjusting the monthly fee of some offers to inflation. The first annual change will be made on April 1, 2024.

• TIM Enterprise confirmed 2022 growth in excess of the market, with an increase in total revenues and services respectively of 8% YoY and 11% YoY. Performance was driven by the Cloud, Security and IoT services, which more than offset the slight reduction in the other business lines.

The revenue trend in the twelve months was in line with expectations:

• Connectivity (-2% YoY)
• Cloud (+54% YoY)
• IoT (+11% YoY)
• Security (+41% YoY)

As a whole, ICT services generated 58% of total revenues, compared with 56% in 2021.

2022 saw TIM Enterprise reinforce its market leadership position as operator able to supply an integrated platform of connectivity, cloud, security and IoT services, as confirmed by the award - amongst others - of the tender for the National Strategic Hub, which has now entered the development phase with the signing of the first contracts, the start of migration to the cloud by certain public administrations and the consequent contribution to fourth quarter revenues.

• In the twelve months, NetCo recorded total revenues and revenues from services down respectively by 4% YoY and 4% YoY. The reduction is mainly due to one-off transactions recorded in the accounts in the first half of the previous year.

At December 31, NetCo managed approximately 16.0 million fixed accesses (of which approximately 72% in FTTx technology) with a market share of approximately 80%. The technical units covered by FTTH technology numbered 7.7 million, giving a coverage of approximately 32%, up by 7 percentage points on the end of 2021.

On February 2, 2023, TIM reported having received a non-binding offer from KKR for the purchase of a stake in a newco being established, coinciding with the managerial and infrastructural scope of the fixed network, including the assets and business of FiberCop, as well as the equity investment held in TI Sparkle. The non-binding offer, which lasts for four weeks from the start date (February 1), refers to a share to be defined, without prejudice to the fact that the purchase would result in the loss of vertical integration with respect to TIM. The Board of Directors will meet this coming February 24, to decide on the non-binding offer, without prejudice to the fact that TIM remains open to assessing any alternatives that may arise in the meantime and will continue talking to its stakeholders.

• In the twelve months, TIM Brasil recorded total revenues and revenues from services up respectively by 19.2% YoY and 19.0% YoY and an EBITDA of +16.4% YoY. Significant growth was also seen in the fourth quarter of total revenues (+21.4% YoY), service revenues (+20.8% YoY) and EBITDA (+16.9% YoY) thanks to a solid organic performance and the contribution made to the Oi assets.

MAIN DOMESTIC OPERATING INDICATORS FOR THE FOURTH QUARTER

During the fourth quarter, the churn rate in the mobile segment reduced compared with the same period of 2021 (3.3%, -0.3pp YoY) and was essentially stable in fixed (3.4%, -0.1pp YoY).

The total number of TIM mobile lines was 30.4 million, stable on end 2021. In a market that is still competitive in the low end (low-spending customers), the stabilisation trend of the customer base continued: in terms of “mobile number portability” (i.e. the migration to other operators) TIM again posted the best result among infrastructure operators with a net balance of -41 thousand lines. At the same time the sector saw the portability flows reduce overall by 10% YoY, demonstration of the cooling of the competitive intensity in the high end of the market (high-spending customers).

The number of fixed lines reduced by approximately 350 thousand units compared with end 2021. Average revenues of retail customers (ARPU BB+ICT) are up 11% YoY. In 2022, 545 thousand new retail and wholesale Ultrabroadband lines were activated, reaching 10.6 million units, up by approximately 5% YoY.

The 2022 results will be presented to the financial community during the webcast and audio conference on February 15, 2023. The event will start at 11.00 a.m. (Italian time). The presentation will be followed by a Q&A session. Reporters can follow the presentation by telephone and via the web, without the option to ask questions, by calling +39 06 33444 and following the instructions for assisted conferences or by connecting to the following link. The presentation slides will be available at link.

ESG performance

TIM Domestic

In 2022, ESG activities characterised every area of the company, with more than 40 projects aimed at achieving targets.

In NetCo, TIM carried out asset efficiency measures to absorb increases in data centre traffic and consumption. This activity resulted in the issuance of energy efficiency certificates for about EUR 3.8 million. In Italy, the company increased the use of renewable energy up to about 46%, reduced waste by boosting the recycling and resale of products and materials, and achieved revenues of about EUR 2.4 million, also thanks to the implementation of the 'circular economy ratio' indicator that links waste management to its economic value.

For individuals and families, TIM has strengthened its TIM Green range, offering over 60% of products with sustainable features, and launched the Fibre up to 10 Gbps offer, the most powerful in terms of speed and stability, where fibre optics covers the entire route from the TIM network to the customer’s home. 

Through TIM Enterprise, the aim is to guide the Italian business system and public administrations towards more efficient, secure and faster processes and activities. In 2022, through the Polo Strategico Nazionale company set up with SOGEI, Leonardo and Cassa Depositi e Prestiti, TIM signed the Convention for the design, implementation and management of the Cloud infrastructure that will host the Public Administration’s critical and strategic data and services. TIM also supported the business of Italian companies, recording an increase in revenues from IoT and Security Services and activations of Digital Identity Services (SPID, PEC, digital signature).

TIM also aims to strengthen all aspects of a sustainable working environment. The Group has launched a new smartworking model, whereby company offices are closed on Fridays, with significant results for work-life balance and the environment. Among the Group’s main commitments are also those related to bridging the gender gap and the reskilling and upskilling of employees, through ad hoc training paths.

During the year, TIM signed a strategic partnership with Eni - Openes concerning the transformation of supply chains into sustainable supply chains. The Group has also implemented a short and medium-term ESG incentive policy to guide management’s activities. To maximise ESG results, TIM has implemented a platform that combines data and projects and monitors performance.

The results are in line with the targets of the 22-24 plan and the reporting will take place with the publication of the non-financial statement.

Brazil

Environment

The company has taken various initiatives to improve the efficiency of its infrastructures, which have led to a significant improvement in the eco-efficiency indicator, which now reaches +127% of traffic data (bit/joule).

Use of 100% renewable energy (achieved in 2021) is also confirmed, with self-generated sources used for approximately 50%.

Social

TIM Brasil has confirmed that it is the first mobile operator to cover 100% of Brazilian municipalities with its 4G network.

Governance

TIM Brasil has obtained certifications for the management of cyber security and transparency, like ISO 27001 and Transparency - Pro Ethics and has been included on the ISE sustainability index for 15 years running.