TIM: Board of directors approves financial report at December 31, 2021

TIM’s Board of Directors met today chaired by Salvatore Rossi and approved the Consolidated Financial Statements of the TIM Group, the draft Separate Financial Statements of TIM S.p.A. and the Consolidated Non-Financial Statement/Sustainability Report at December 31, 2021.

In the fourth quarter, on the one hand. double digit growth of the ICT business continued and on the other hand the competitive environment led various market operators to continue leveraging on price and discounts, thereby reducing operating performances.

The company also redefined its top management structure in the quarter and embarked on an in-depth organizational and strategic review.

Net financial debt at December 31, 2021 stood at 22.2 billion euros (17.6 billion euros on an after lease basis) a drop of 1.1 billion euros compared to the last financial year (1 billion euros on an after lease basis).

In terms of strategic initiatives, the main changes are:

• National Strategic Hub: the Government has published the call for tenders and selected as a reference the project submitted by TIM together with CDP Equity, Leonardo and Sogei to create the National Strategic Hub (NSH). If it wins (the announcement is expected by H1), the new company would provide Cloud services and infrastructure to the Public Administration, acquiring them mainly from industrial partners.
• Fiber Network: work to develop the FTTH network of the new company FiberCop continues, increasing the FTTH coverage of property units by 36% in the last year. The TIM Group brought broadband to around 94% of fixed lines. The set of agreements between TIM, KKR and Fastweb relating to the establishment of the company FiberCop has been definitively approved by the Italian Competition Authority with the acceptance of the undertakings presented by the Parties.
• Noovle: revenues up by 20% YoY, in line with the plan objectives, thanks to development of the cloud and data centers business in partnership with Google Cloud and the main sector operators.
• Magnifica was launched at the end of October. It is the highest performing ultrabroadband offer portfolio on the Italian market with speeds of up to 10 Gbps in download thanks to TIM’s fiber.
• In Brazil, local authorities (Anatel and Cade) have green lighted the project for TIM Brasil, Claro and Vivo to acquire Oi’s mobile business.
• As regards Sustainability, the company has respected all the year’s targets, in both Italy and Brazil, increasing the weight of renewable energy on the Group’s total electricity consumption by 36% YoY, improving domestic energy eco-efficiency by a further 25% and bringing the increase to over 90% compared to 2019. Employees’ engagement in Italy, +20% since 2019, has already surpassed the objective set for 2023.

Performance in the fourth quarter 2021

The churn rate continued to improve in both fixed (3.5%, -0.5pp YoY) and mobile (3.6%, -0.6pp YoY), stabilizing at the lowest level in the last 14 years.

In mobile, total lines performance (30.5 million) and ARPU were stable, in a phase of partial return to rationality in the market, also visible in the slowdown of customer flows between operators (market mobile number portability -21% YoY).

In fixed, total lines performance slowed in the quarter (-82 thousand compared to the previous quarter) also due to the end of the first phase of the voucher program and the delayed launch of the second phase; however customer satisfaction improved by 4.1 percentage points. Consumer customers ARPU was down for the increased competitive pressure.

The ultrabroadband segment exceeded 10 million lines (retail and wholesale) for the first time, with an increase in the quarter of 300 thousand lines (compared with the previous quarter).

Innovative services strong revenues growth continued, with cloud recording a 17% YoY increase in the quarter (+20% YoY in the twelve months) and total ICT revenues up by 21% YoY in the quarter (+23% YoY in the year).

Overall, the Domestic Business Unit recorded revenues from services down by 4.5% YoY in the quarter (-3.8% YoY in the year), partly offset by the good performance of TIM Brasil, with revenues from services up by 4.0% YoY in the quarter and 5.0% in the year.

Group revenues in the quarter stood at 4.0 billion euros down by -4.4% YoY (15.3 billion euros down by 1.9% YoY in the twelve months), while revenues from services amounted to 3.6 billion euros down by 2.8% YoY (13.9 billion euros down by 2.1% YoY in the twelve months).

The Group’s organic EBITDA in the quarter stood at 1.4 billion euros down by -21.9% YoY (6.2 billion euros, -9.6% YoY in the twelve months), with the Domestic Business Unit at 1.0 billion euros down by -28.5% YoY (4.9 billion euros, -12.8% YoY in the twelve months) and TIM Brasil at 0.4 billion euros up by 3.4% YoY (1.4 billion euros, +4.7% YoY in the twelve months). The drop in the domestic margin was mainly due, in addition to the aforementioned revenue trend, to the impact of the football business on the company’s performances, higher start-up costs for new digital businesses and other provisions for commercial risks.

The Group’s EBITDA After Lease stood at 1.2 billion euros, down by -25.7% YoY (5.4 billion euros,
-11.6% YoY in the twelve months), while at domestic level it was 0.9 billion euros with a drop of -31.5% YoY (4.4 billion euros, -14.2% in the twelve months).

At Group level, the investments stood at 1.3 billion euros with a reduction of -3.8% YoY excluding licenses (3.8 billion euros up by 14.1% YoY in the twelve months excluding licenses).

The net result attributable to the Owners of the Parent was negative for 8.6 billion euros (-8.7 billion euros in the year). This result was also impacted by the impairment of domestic goodwill for 4.1 billion euros and the writing off, for 3.8 billion euros, by the Parent Company TIM S.p.A., of the deferred tax assets.

In detail, the impairment of domestic goodwill was carried out with reference to the flows of the 2022-2024 Industrial Plan and the projections up to 2026 for the domestic market in its current conditions and using a discount rate updated to the financial market conditions as at December 31, 2021. The new Industrial Plan is based on the results of the 2021 final accounting, reflects realistic expectations on future developments and outlines the actions to create value for the shareholders. The write-off of deferred tax assets is linked to the extension to 50 years of the period of tax asset absorption introduced by Art. 160 of the 2022 Budget Law (Law 234/2021) and the changed assessment of the time frame for recoverability of deferred tax assets of TIM S.p.A.

The Board of Directors therefore proposes to the Shareholders’ Meeting the non-distribution of dividends.

CT Bureau