TIM’s Board of Directors met today under the chairmanship of Alberta Figari and approved the additional interim financial report at September 30, 2024.
During the quarter, TIM finalized the sale of NetCo to Kohlberg Kravis Roberts & Co. L.P. (“KKR”), completing the transformation process begun over the last two years, which has resulted in a significant reduction in financial debt and the adoption of a new business model that will allow the Group to compete more effectively in the market, thanks to a greater focus on industrial components.
In order to provide an indication on TIM Group’s business performance, below is reported operating and financial information which, for the quarters prior to the closing of the NetCo transaction, simulates the effects of the disposal of NetCo, as if its sale had taken place on January 1, 2023. The financial information also considers the effects arising from the business relationships with FiberCop S.p.A., which result from the MSA (Master Service Agreement) including, from the third quarter of 2024 the Transitional Services Agreement, as well as the impacts deriving from the simultaneous reorganization of the domestic activities into TIM Consumer and TIM Enterprise.
[1] TIM Domestic’s financial results for the nine months ended September 30, 2024 are based on preliminary and “like-for-like” management information for the first half of 2024, calculated by simulating the impact of the relationship between TIM and NetCo, governed by the Master Service Agreement (MSA), while, for the third quarter, the results reflect the actual accounting impact of the MSA and the Transitional Services Agreement (TSA). The nine months of 2023 used as a comparison are also based on “like-for-like” information, simulating the effects of the TIM/NetCo relationship as if the NetCo sale had taken place on January 1, 2023.
“LIKE-FOR-LIKE” RESULTS IN THE FIRST NINE MONTHS OF 2024
- Group total revenues amounted to 10.7 billion euros, up by 3.4% year-on-year (+1.8% in domestic to 7.4 billion euros, +7.2% in Brazil to 3.3 billion euros); Group service revenues rose by 4.1% year-on-year to 10 billion euros (+2.7% in domestic to 6.8 billion euros, +7.1% in Brazil to 3.2 billion euros);
- Group EBITDA grew significantly, increasing by 8.7% year-on-year to 3.3 billion euros (+8.3% domestic to 1.6 billion euros, +9.0% in Brazil to 1.6 billion euros);
- Group EBITDA After Lease grew remarkably, rising 11.1% year-on-year to 2.7 billion euros (+8.3% in domestic to €1.5 billion, +14.4% in Brazil to €1.3 billion);
- TIM Consumer[1] reported stable total revenues at 4.5 billion euros and service revenues of 4.2 billion euros (+0.2% year-on-year), continuing the stabilization course achieved in the previous quarters. Factors supporting the trend included the positive effects of the repricing activities carried out since the beginning of the year, the steady increase in the ARPU of TimVision (+23% year-on-year), the stable churn, and the positive performance of MVNO and roaming revenues. Broadband connectivity and entertainment combined offers also grew;
- TIM Enterprise2 reported total revenues of 2.3 billion euros (+5.8% year-on-year) and service revenues of 2.1 billion euros (+8.0% year-on-year), continuing to outperform the reference market thanks to the defensive strategy on the connectivity business and growth in IT revenues, which accounted for 62% of the total. In particular, the solid performance in Cloud services (+22% year-on-year, also thanks to the boost from National Strategic Hub), Security (+84% year-on-year) and IoT (+27% year-on-year) continued. The value of contracts signed during the nine months was up 67% year-on-year to 3.5 billion euros;
- TIM Brasil reported revenues of 3.3 billion euros (+7.2% year-on-year), service revenues of 3.2 billion euros (+7.1% year-on-year) and EBITDA of 1.6 billion euros (+9.0% year-on-year), continuing the growth trajectory of the last two years thanks to the momentum from the mobile segment. EBITDA After Lease also grew significantly to 1.3 billion euros, +14.4% year-on-year.
The Group’s positive trend continued in the third quarter, the first since the completion of the NetCo sale.
- Group total revenues amounted to 3.6 billion euros, up by 3.2% year-on-year (+2.1% in domestic to 2.5 billion euros, +6.0% in Brazil to 1 billion euros); service revenues rose by 4.3% year-on-year to 3.4 billion euros (+3.6% in domestic to 2.4 billion euros, +6.0% in Brazil to 1 billion euros);
- Group EBITDA increased, up by 7.6% year-on-year to 1.1 billion euros (+7.9% in domestic to 0.6 billion euros, +7.3% in Brazil to 0.5 billion euros);
- Group EBITDA After Lease also increased, up 7.6% year-on-year to 0.9 billion euros (+7.2% in domestic to 0.5 billion euros, +8.5% in Brazil to 0.4 billion euros).
[1] The revenues of TIM Consumer and TIM Enterprise and the related growth percentages are shown net of the ratios between the two areas and include the effects of the Master Service Agreement signed with FiberCop and, from the third quarter, also the Transitional Services Agreement.
During the quarter, cost containment actions aimed at increasing the level of structural efficiency of the domestic perimeter continued (“Transformation Plan, reduction target of over 0.2 billion in 2024”) and approximately 80% of the target set for the current year was achieved.
The Group’s Adjusted Net Financial Debt After Lease as at September 30, 2024 was below 8 billion euros, down by more than 0.1 billion euros compared to the value immediately following the completion of the sale of NetCo.
The expected evolution of the net financial position in the last quarter of the year will allow the Group to achieve the announced deleverage target, with a ratio of Adjusted Net Financial Debt After Lease to organic EBITDA After Lease[2] less than or equal to 2x.
The target does not include incomes from the sale of the remaining stake in INWIT, the closing of which is expected on November 29, with a price of 10.43 euros per share and expected proceeds of about 250 million euros.
Based on the results at September 30, 2024, TIM confirms the guidance provided to the market for the current year.
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INTRODUCTION
TIM voluntarily prepares and publishes periodic financial information for the first and third quarters of each financial year as part of the Company’s policy to regular report its financial and operating performance to the market and investors in line with best market practices.
In order to provide a better understanding of the performance of the business, a section has been included containing organic economic and financial information relating to the operating performance in the first nine months of 2024 and the first nine months of 2023 for the scope of “TIM Group ServCo”, reworked on the basis of management information. Such organic like-for-like information is prepared by simulating the separation operation of the fixed network, with the creation of the NetCo component and the consequent definition of the (new) TIM Group ServCo perimeter, as if it had taken place at the beginning of the reference period (January 1).
The consolidated data included in the TIM Group’s periodic financial information as at September 30, 2024 have been prepared in accordance with the accounting standards, the recognition and measurement criteria, and the consolidation criteria and methods adopted for the preparation of the Consolidated Financial Statements for the year ended December 31, 2023 (to which reference should be made for a more extensive discussion), except as regards the amendments to accounting standards issued by the IASB and effective from January 1, 2024. These figures have not been audited.
In particular, it should be noted that the economic results relating to the domestic fixed network component (primary network and wholesale activities of TIM S.p.A.), to FiberCop S.p.A. and to Telenergia S.r.l. (“NetCo”) have been classified as Assets sold/Available-for-sale assets pursuant to IFRS 5. Further details are given in the annexes.
In addition, as a result of this classification by NetCo, the figures in the consolidated separate income statement and the consolidated cash flow statement for the first nine months of 2023 have been consistently reclassified, as required by IFRS 5.
TIM Group, in addition to the conventional financial performance measures established by the IFRS Accounting Standards, uses certain alternative performance measures in order to present a better understanding of the trend of operations and financial condition.
Specifically, these alternative performance measures refer to: EBITDA; EBIT; organic change and impact of non-recurring items on revenues, EBITDA and EBIT; EBITDA margin and EBIT margin; Net financial debt carrying amount and adjusted net financial debt; Equity Free Cash Flow, Cash flow from operations; Cash flow from operations (net of licenses). Following the adoption of IFRS 16, the TIM Group also presents the following additional alternative performance measures: EBITDA After Lease (“EBITDA-AL”), Adjusted net financial debt After Lease, Equity Free Cash Flow After Lease.
In line with the ESMA guidance on alternative performance measures (Guidelines ESMA/2015/1415), the meaning and contents of such are explained in the annexes, where the analytical detail of the amounts of the reclassifications introduced and of the methods for determining indicators is also provided.
Finally, it should be noted that the section “Business Outlook for the year 2024” contains forward-looking statements regarding the Group’s intentions, beliefs and current expectations in relation to the Group’s financial results and other aspects of the Group’s activities and strategies. Readers of this publication should not place undue reliance on such forward-looking statements, as the actual results could differ materially from those contained in the forecasts as a result of risks and uncertainties arising from a variety of factors, most of which are beyond the Group’s control. For further details, please refer to the “Main risks and uncertainties” chapter, as well as to the Annual Financial Report for the year ended December 31, 2023, which details the main risks relating to the TIM Group’s business activities which could affect, including considerably, the ability to achieve the objectives set.
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The main economic and financial results of the TIM Group for the first nine months of 2024 and 2023 are shown below. It should be noted that NetCo was sold on July 1, 2024, therefore the economic contribution for the first six months of 2024 (until the sale date) and for the first nine months of 2023 is classified under Profit/Loss related to Discontinued Operations, under IFRS 5.
TIM Group (NetCo Discontinued Operations) financial highlights
(million euros) - reported data | | 9 months to 9/30/2024 | 9 months to 9/30/2023 | % Change |
|---|
| | (a) | (b) | (a-b) |
|---|
Revenues | | 10,630 | 10,441 | 1.8 |
EBITDA | (1) | 3,739 | 3,406 | 9.8 |
EBITDA Margin | (1) | 35.2% | 32.6% | 2.6pp |
EBIT | (1) | 1,322 | 926 | 42.8 |
EBIT Margin | (1) | 12.4% | 8.9% | 3.5pp |
Profit (loss) for the period attributable to owners of the Parent | | (509) | (1,124) | 54.7 |
Capital Expenditures & spectrum | | 1,372 | 1,481 | (7.4) |
(million euros) - reported data | | 9 months to 9/30/2024 | 9 months to 9/30/2023 | % Change |
|---|
| | (a) | (b) | (a-b) |
|---|
Equity Free Cash Flow | (1) | (368) | (238) | 54.6 |
Equity Free Cash Flow After Lease | (1) | (835) | (907) | (7.9) |
Adjusted Net Financial Debt (2) | (1) | 10,903 | 26,338 | (58.6) |
Net Financial Debt After Lease(2) | (1) | 7,988 | 21,184 | (62.3) |
(1) For details, please refer to the “Alternative performance indicators” chapter.
(2) The change in the fair value of derivatives and related financial liabilities/assets is adjusted by the booked Net Financial Debt with no monetary effect.
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The following are the main financial results of the like-for-like TIM Group (“like-for-like TIM Group ServCo”) in which the organic economic and financial information relating to the operating performance for the first nine months of 2024 and the first nine months of 2023 have been reworked based on management information. Such organic like-for-like information is prepared by simulating the separation operation of the fixed network, with the creation of the NetCo component and the consequent definition of the (new) TIM Group ServCo perimeter, as if it had taken place at the beginning of the reference period (January 1).
Specifically, the TIM Group’s “like-for-like” financial results for the first nine months of 2024 are based on:
- a first half “like-for-like” estimate of revenues, OPEX and CAPEX divided between the TIM and NetCo components, considering the final perimeter and simulating the impact of the relationship between TIM and NetCo, as regulated by the Master Service Agreement (MSA);
- the third quarter results based on the actual impact of the relationship between TIM and NetCo as regulated by the MSA and the Transitional Services Agreement (TSA).
The TIM Group’s financial results for the first nine months of 2023 are based on a “like-for-like” estimate of revenues, OPEX and CAPEX split between the TIM and NetCo components, considering the final perimeter simulating the effect of transactions as if they had occurred in January 2023 (to ensure a like-for-like comparison on an annual basis).
Like-for-like TIM Group ServCo results
(million euros) - organic data (*) | 3rd Quarter 2024 | 3rd Quarter 2023 | % Change | 9 months to 9/30/2024 | 9 months to 9/30/2023 | % Change |
|---|
Revenues | 3,569 | 3,458 | 3.2 | 10,681 | 10,329 | 3.4 |
TIM Domestic | 2,531 | 2,478 | 2.1 | 7,404 | 7,274 | 1.8 |
of which TIM Consumer | 1,540 | 1,542 | (0.1) | 4,510 | 4,512 | — |
of which TIM Enterprise | 787 | 731 | 7.7 | 2,294 | 2,168 | 5.8 |
of which Sparkle | 247 | 257 | (3.9) | 740 | 748 | (1.1) |
TIM Brasil | 1,047 | 989 | 6.0 | 3,304 | 3,083 | 7.2 |
Service revenues | 3,367 | 3,228 | 4.3 | 10,025 | 9,632 | 4.1 |
TIM Domestic | 2,360 | 2,278 | 3.6 | 6,849 | 6,669 | 2.7 |
of which TIM Consumer | 1,420 | 1,424 | (0.3) | 4,151 | 4,141 | 0.2 |
of which TIM Enterprise | 739 | 665 | 11.1 | 2,123 | 1,966 | 8.0 |
of which Sparkle | 244 | 240 | 1.7 | 715 | 714 | 0.1 |
TIM Brasil | 1,016 | 959 | 6.0 | 3,203 | 2,991 | 7.1 |
EBITDA | 1,111 | 1,033 | 7.6 | 3,250 | 2,989 | 8.7 |
TIM Domestic | 586 | 543 | 7.9 | 1,632 | 1,507 | 8.3 |
TIM Brasil | 527 | 492 | 7.3 | 1,622 | 1,488 | 9.0 |
EBITDA AL | 943 | 877 | 7.6 | 2,745 | 2,472 | 11.1 |
TIM Domestic | 538 | 502 | 7.2 | 1,499 | 1,385 | 8.3 |
TIM Brasil | 407 | 377 | 8.5 | 1,250 | 1,093 | 14.4 |
CAPEX (net of telecommunications licenses) | 371 | 442 | (16.1) | 1,334 | 1,423 | (6.3) |
TIM Domestic | 228 | 281 | (18.9) | 776 | 859 | (9.7) |
TIM Brasil | 143 | 161 | (10.2) | 558 | 564 | (1.1) |
EBITDA AL - CAPEX (net of telecommunications licenses) | 572 | 435 | 31.6 | 1,411 | 1,049 | 34.5 |
TIM Domestic | 310 | 221 | 40.5 | 723 | 526 | 37.5 |
TIM Brasil | 264 | 216 | 23.0 | 692 | 529 | 30.9 |
(*) The organic results exclude non-recurring items and the comparable base is calculated net of the foreign currency translation and the change in the scope of consolidation.
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TIM GROUP’S ESG PERFORMANCE
- The implementation of Legislative Decree No. 125 of September 6, 2024 is currently underway. The Decree transposes the new rules contained in the European Union’s Corporate Sustainability Reporting Directive (CSRD).
- As required by this legislation, alongside the 2024 Annual Financial Report, the sustainability report will be included in a special section of the Report on Operations and will illustrate sustainability issues both in terms of TIM’s impact on the environment and society, and the risks and opportunities that may affect TIM’s results. The report will be prepared according to the new European Sustainability Reporting Standards (ESRS), which are designed to highlight the link between ESG and financial dimensions so as to facilitate the assessment of impacts, risks and opportunities.
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MAIN CHANGES IN THE SCOPE OF CONSOLIDATION OF THE TIM GROUP
During the first nine months of 2024, the TIM Group:
- on July 1, 2024, TIM S.p.A. transferred the Business Unit – consisting of the activities relating to the primary network, the wholesale business and the entire shareholding in the subsidiary Telenergia S.r.l. – to FiberCop S.p.A., a company that already managed the activities relating to the secondary fiber and copper network; concurrent with the transfer, TIM S.p.A. sold its entire stake in the share capital of FiberCop S.p.A. to Optics Bidco S.p.A. (a subsidiary of Kohlberg Kravis Roberts & Co. L.P. (“KKR”)) and, together with FiberCop S.p.A., entered into a Master Services Agreement regulating the terms and conditions of the services provided between FiberCop S.p.A. and TIM S.p.A.. On that date, therefore, the deconsolidation of the transferred entity occurred and the effects of the Transaction on the income statement and financial position were recognized. The income statement figures for the transferred Business Unit transferred, for Telenergia S.r.l. and for FiberCop S.p.A., falling under the TIM Group until the sale date, were classified as Discontinued Operations, in accordance with IFRS 5;
- through the subsidiary Telsy S.p.A. (Domestic Business Unit), the TIM Group acquired control of QTI S.r.l., bringing the Group’s stake in the company’s share capital from 49% to 80%. QTI S.r.l. is engaged in the development, production and marketing of innovative hi-tech products and services.
During the first nine months of 2023, the main changes in the scope of consolidation were as follows:
- the acquisition on April 20, 2023, by Telsy S.p.A. of the entire share capital of TS-Way S.r.l., a company engaged in the field of IT security (Domestic Business Unit);
- the sale on August 4, 2023 by TIM S.p.A. of the entire share capital of TIM Servizi Digitali S.p.A. (Domestic Business Unit).
TIM GROUP RESULTS FOR THE FIRST NINE MONTHS OF 2024
The total revenues of the TIM Group (NetCo Discontinued Operations) for the first nine months of 2024 amounted to 10,630 million euros, +1.8% compared to the first nine months of 2023 (10,441 million euros).
The breakdown of total revenues for the first nine months of 2024 by operating segment in comparison with the first nine months of 2023 is as follows:
(million euros) | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Changes |
|---|
| | % weight | | % weight | absolute | % | % like-for-like |
|---|
Domestic | 7,353 | 69.2 | 7,233 | 69.3 | 120 | 1.7 | 1.8 |
Brazil | 3,304 | 31.1 | 3,236 | 31.0 | 68 | 2.1 | 7.2 |
Other Operations | — | — | — | — | — | | |
Adjustments and eliminations | (27) | (0.3) | (28) | (0.3) | 1 | | |
Consolidated Total | 10,630 | 100.0 | 10,441 | 100.0 | 189 | 1.8 | 3.4 |
The TIM Group’s like-for-like consolidated revenues were calculated as follows:
(million euros) | 3rd Quarter 2024 | 3rd Quarter 2023 | % Change | 9 months to 9/30 2024 | 9 months to 9/30 2023 | % Change |
|---|
REVENUES | 3,569 | 3,588 | (0.5) | 10,630 | 10,441 | 1.8 |
|---|
Foreign currency financial statements translation effect | | (150) | | | (154) | |
ORGANIC REVENUES excluding non-recurring items | 3,569 | 3,438 | 3.8 | 10,630 | 10,287 | 3.3 |
Impacts deriving from: | | | | | | |
Master Service Agreement (MSA) | — | 34 | | 67 | 101 | |
Other | — | (14) | | (16) | (59) | |
like-for-like ORGANIC REVENUES | 3,569 | 3,458 | 3.2 | 10,681 | 10,329 | 3.4 |
The EBITDA of the TIM Group (NetCo Discontinued Operations) for the first nine months of 2024 amounted to 3,739 million euros (3,406 million euros in the first nine months of 2023, +9.8%).
The breakdown of EBITDA by operating segment for the first nine months of 2024 compared to the first nine months of 2023 was as follows:
(million euros) | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Changes |
|---|
| | % weight | | % weight | absolute | % | % like-for-like |
|---|
Domestic | 2,121 | 56.7 | 1,857 | 54.5 | 264 | 14.2 | 8.3 |
Brazil | 1,622 | 43.4 | 1,554 | 45.6 | 68 | 4.4 | 9.0 |
Other Operations | (6) | (0.1) | (6) | (0.1) | — | | |
Adjustments and eliminations | 2 | — | 1 | — | 1 | | |
Consolidated Total | 3,739 | 100.0 | 3,406 | 100.0 | 333 | 9.8 | 8.7 |
TheTIM Group’s like-for-like consolidated EBITDA was calculated as follows:
(million euros) | 3rd Quarter 2024 | 3rd Quarter 2023 | % Change | 9 months to 9/30/2024 | 9 months to 9/30/2023 | % Change |
|---|
EBITDA | 1,099 | 1,269 | (13.4) | 3,739 | 3,406 | 9.8 |
|---|
Foreign currency financial statements translation effect | | (71) | | | (73) | |
Non-recurring expenses (income) | 12 | 125 | | 95 | 552 | |
Effect of translating non-recurring expenses (income) in currency | | 1 | | | 1 | |
ORGANIC EBITDA - excluding non-recurring items | 1,111 | 1,324 | (16.1) | 3,834 | 3,886 | (1.3) |
Impacts deriving from: | | | | | | |
New Master Service Agreement (MSA) | — | (449) | | (902) | (1,368) | |
Reversal of previous MSA between TIM and FiberCop | — | 166 | | 341 | 521 | |
Other | — | (8) | | (23) | (50) | |
Like-for-like ORGANIC EBITDA | 1,111 | 1,033 | 7.6 | 3,250 | 2,989 | 8.7 |
The EBIT of the TIM Group (NetCo Discontinued Operations) for the first nine months of 2024 amounted to 1,322 million euros (926 million euros in the first nine months of 2023).
The Net loss for the first nine months of 2024 attributable to owners of the Parent was 509 million euros (loss of 1,124 million euros for the first nine months of 2023), which includes the proceeds from the sale of NetCo, which are in turn recognized as profits from discontinued operations. In terms of net capital gains, the impact on the TIM Group’s income statement was approximately 0.2 billion euros, even after taking into account the goodwill attached to the sale value; nevertheless, further adjustments may yet be made in accordance with the usual mechanisms for post-closing price adjustments.
The TIM Group headcount at September 30, 2024 was 26,900, including 17,630 in Italy (47,180 at December 31, 2023, including 37,670 in Italy).
In the first nine months of 2024, the TIM Group’s industrial investments and mobile/spectrum licenses (NetCo Discontinued Operations) amounted to 1,372 million euros (1,481 million euros in the first nine months of 2023).
Capex is broken down as follows by operating segment:
(million euros) | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Change |
|---|
| | % weight | | % weight | |
|---|
Domestic | 814 | 59.3 | 889 | 60.0 | (75) |
Brazil | 558 | 40.7 | 592 | 40.0 | (34) |
Other Operations | — | — | — | — | — |
Adjustments and eliminations | — | — | — | — | — |
Consolidated Total | 1,372 | 100.0 | 1,481 | 100.0 | (109) |
% of Revenues | 12.9 | | 14.2 | | (1.3) pp |
Specifically:
- the Domestic Business Unit (NetCo Discontinued Operations - Domestic ServCo) reported capital expenditures of 814 million euros, with a significant portion aimed at developing the Mobile and IT infrastructure. The investment trend reflects the slowdown in the IT and Mobile Platform segment;
- The Brazil Business Unit reported capital expenditures of 558 million euros in the first nine months of 2024 (592 million euros in the first nine months of 2023). Excluding the impact of changes in exchange rates (-28 million euros), capex decreased by 6 million euros compared to the first nine months on 2023. The slight decrease is due to the completion of investments relating to the integration of the Oi Group’s activities and the reduction in the development of the 4G network, partially offset by the acceleration of investments in 5G technology.
Adjusted net financial debt amounted to 10,903 million euros at September 30, 2024, a decrease of 14,753 million euros compared to December 31, 2023 (25,656 million euros). This reduction was mainly due to the NetCo sale transaction finalized on July 1, 2024, which resulted in a deleverage of 15.3 billion euros (including 1,960 million euros from the deconsolidation of Net financial debt for lease contracts recognized in application of IFRS16), in addition to the positive trend in operational-financial management.
The Group’s Operating Free Cash Flow for the first nine months of 2024 is positive and amounted to 1,737 million euros (+1,624 million euros in the first nine months of 2023).
Equity Free Cash Flow for the first nine months of 2024 came to -368 million euros (-238 million euros in the first nine months of 2023). This financial measure represents the free cash flow available for the remuneration of own capital, to repay debt and to cover any financial investments and payments of licenses and frequencies.
For a better understanding of the information, the table below shows the various ways by which the Net Financial Debt can be shown:
(million euros) | 9/30/2024 | 12/31/2023 | Change |
|---|
| (a) | (b) | (a-b) |
|---|
Net financial debt carrying amount | 10,904 | 25,776 | (14,872) |
Reversal of fair value measurement of derivatives and related financial liabilities/assets | (1) | (120) | 119 |
Adjusted Net Financial Debt | 10,903 | 25,656 | (14,753) |
Leases | (2,915) | (5,307) | 2,392 |
Adjusted Net Financial Debt - After Lease | 7,988 | 20,349 | (12,361) |
Net financial debt carrying amount amounted to 10,904 million euros at September 30, 2024, a decrease of 14,872 million euros compared to December 31, 2023 (25,776 million euros). The reversal of the fair value measurement of derivatives and related financial liabilities/assets saw a positive change of 119 million euros due to the dynamics of the interest rate markets and the liquidation of a substantial portion of the derivatives portfolio following the transfer of the bonds of TIM S.p.A., Telecom Italia Finance S.A. and Telecom Italia Capital S.A. to Optics BidCo S.A.; this valuation adjusts the booked Net Financial Debt with no monetary effect.
Adjusted Net Financial Debt – After Lease (net of lease contracts) was equal to 7,988 million euros at September 30, 2024, down by 12,361 million euros compared to December 31, 2023 (20,349 million euros).
In the third quarter of 2024, adjusted net financial debt decreased by 15,585 million euros compared to June 30, 2024 (26,488 million euros).
(million euros) | 9/30/2024 | 6/30/2024 | Change |
|---|
| (a) | (b) | (a-b) |
|---|
Net financial debt carrying amount | 10,904 | 26,589 | (15,685) |
Reversal of fair value measurement of derivatives and related financial liabilities/assets | (1) | (101) | 100 |
Adjusted Net Financial Debt | 10,903 | 26,488 | (15,585) |
Breakdown as follows: | | | |
Total adjusted gross financial debt | 15,412 | 32,067 | (16,655) |
Total adjusted financial assets | (4,509) | (5,579) | 1,070 |
As of September 30, 2024, the TIM Group’s available liquidity margin was equal to 7,832 million euros and calculated considering:
- “Cash and cash equivalents” and “Current securities other than investments” for a total of 3,832 million euros (4,695 million euros at December 31, 2023);
- Sustainability-linked Revolving Credit Facility amounting to 4,000 million euros, totally available.
This margin covers the Group’s non-current financial liabilities (including the portion of the medium/long-term loans due within twelve months) maturing for at least the next 24 months.
For the purposes of determining the available liquidity margin, the “BTPs July 15, 2028” held by Telecom Italia Finance S.A. and subject to a securities lending agreement with TIM S.p.A. signed on October 18, 2023 were not considered; in particular, of the total nominal 131 million euros of securities subject to the loan, a part corresponding from time to time to a market value of 99 million euros was pledged by TIM S.p.A. on October 25, 2023 against a guarantee bank issued on the same date by MPS in favor of INPS, in support of the application of Art. 4 of Law no. 92 of June 28, 2012.
It should be noted that the sale of non-recourse trade receivables to factoring companies completed in the first nine months of 2024 had a positive effect of 932 million euros on net financial debt at September 30, 2024 (1,135 million euros at December 31, 2023, 986 million euros at September 30, 2023).
RESULTS OF THE BUSINESS UNITS
Domestic
Revenues
The revenues of the Domestic Business Unit (NetCo Discontinued Operations - Domestic ServCo) totaled 7,353 million euros, up 120 million euros compared to the first nine months of 2023 (+1.7%).
The like-for-like Domestic revenues were calculated as follows:
(million euros) | 3rd Quarter 2024 | 3rd Quarter 2023 | Changes | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Changes |
|---|
| | | % | | | % |
|---|
REVENUES | 2,531 | 2,459 | 2.9 | 7,353 | 7,233 | 1.7 |
Foreign currency financial statements translation effect | — | (1) | | — | (1) | |
ORGANIC REVENUES - excluding non-recurring items | 2,531 | 2,458 | 3.0 | 7,353 | 7,232 | 1.7 |
Impacts deriving from: | | | | | | |
Master Service Agreement (MSA) | — | 34 | | 67 | 101 | |
Other | — | (14) | | (16) | (59) | |
like-for-like ORGANIC REVENUES | 2,531 | 2,478 | 2.1 | 7,404 | 7,274 | 1.8 |
“Like-for-like” service revenues amounted to 6,849 million euros (+180 million euros compared to the first nine months of 2023, +2.7%), thanks to the growth in ICT and Multimedia revenues despite the impact of a competitive market on the customer base.
“Like-for-like” Handset and Bundle & Handset revenues, including the change in work in progress, totaled 555 million euros in the first nine months of 2024, down 50 million euros from the same period of the previous year, due to a decline in both the TIM Consumer and TIM Enterprise segments.
Following the completion of the delayering operation, resulting in the sale of NetCo, the presentation of revenues has been changed, so that the revenues shown below are divided between TIM Consumer, TIM Enterprise, and the Wholesale International Market (TI Sparkle group), complete with the breakdown of the reference perimeter.
- TIM Consumer. The segment consists of all Fixed and Mobile voice and Internet services and products managed and developed for individuals and families (of public telephony, caring and the administrative management of customers) and for and for customers of SMEs (small and medium-sized enterprises) and SOHO (small office home office) and for other mobile operators (MVNOs); it includes the company TIM Retail, which coordinates the activities of its stores).
The main “Key Performance Indicators” of TIM Consumer were as follows:
| 9/30/2024 | 12/31/2023 | 9/30/2023 |
|---|
Total Fixed accesses (thousands) | 7,245 | 7,499 | 7,586 |
Of which active ultra-broadband accesses (thousands) | 5,455 | 5,404 | 5,384 |
Fixed Consumer ARPU (€/month) (1) | 30.1 | 28.2 | 27.9 |
Mobile lines at period end (thousands) | 16,101 | 16,397 | 16,539 |
of which Human calling (thousands) | 13,399 | 13,578 | 13,731 |
Mobile churn rate (%) (2) | 14.5 | 19.2 | 14.1 |
ARPU Mobile Consumer Human calling (€/month) (3) | 10.6 | 10.8 | 10.8 |
(1) Organic Consumer service revenues in proportion to the average number of Consumer accesses.
(2) Percentage of human lines discontinued in the period compared to the average human lines.
(3) Organic Consumer service revenues (excluding visitors and MVNOs) in proportion to average human lines calling.
(million euros) - organic data | 3rd Quarter 2024 | 3rd Quarter 2023 | 9 months to 9/30/2024 | 9 months to 9/30/2023 | % Change |
|---|
| (a) | (b) | (c) | (d) | (a-b)/b | (c-d)/d |
|---|
TIM Consumer revenues – like-for-like | 1,540 | 1,542 | 4,510 | 4,512 | (0.1) | - |
Service revenues | 1,420 | 1,424 | 4,151 | 4,141 | (0.3) | 0.2 |
Handset and Bundle & Handset revenues | 120 | 118 | 359 | 371 | 1.7 | (3.2) |
TIM Consumer revenues for the first nine months of 2024 amounted to 4,510 million euros and were in line with those recorded in the first nine months of 2023, despite the impact of the challenging competitive environment. Service revenues, which totaled 4,151 million euros, increased by 10 million euros compared to the first nine months of 2023 (+0.2%).
TIM Consumer’s Handset and Bundle & Handset revenues totaled 359 million euros, -12 million euros compared to the first nine months of 2023: the change is mainly related to the contraction in the market for mobile handsets.
- TIM Enterprise. This segment comprises the connectivity services and products and the ICT solutions managed and developed for Top, Public Sector and Large Account customers. The following companies are included: Olivetti, TI Trust Technologies, Telsy and Noovle.
(million euros) - organic data | 3rd Quarter 2024 | 3rd Quarter 2023 | 9 months to 9/30/2024 | 9 months to 9/30/2023 | % Change |
|---|
| (a) | (b) | (c) | (d) | (a-b)/b | (c-d)/d |
|---|
TIM Enterprise revenues - like-for-like | 787 | 731 | 2,294 | 2,168 | 7.7 | 5.8 |
Service revenues | 739 | 665 | 2,123 | 1,966 | 11.1 | 8.0 |
Handset and Bundle & Handset revenues | 48 | 66 | 171 | 202 | (27.3) | (15.3) |
The segment’s revenues amounted to 2,294 million euros, up 126 million euros (+5.8%) from the first nine months of 2023, mainly due to the service revenues component (+8.0%), driven by cloud and security services.
- Wholesale International Market. Includes the activities of the TI Sparkle group, which operates in the market for international voice, data and Internet services for fixed and mobile telecommunications operators, ISPs/ASPs (Wholesale market) and multinational companies through its own networks in the European, Mediterranean and South American markets.
Revenues for the first nine months of 2024 in the Wholesale International Market segment amounted to 740 million euros, down compared to the first nine months of 2023 (-8 million euros, -1.1%), due to the postponement of several deals related to fibre/spectrum sales and a decline in traditional voice revenues, partly offset by growth in revenues related to mobile operator solutions and colocation offers.
EBITDA
The EBITDA of the Domestic Business Unit (NetCo Discontinued Operations - Domestic ServCo) for the first nine months of 2024 amounted to 2,121 million euros (+264 million euros compared the first nine months of 2023, +14.2%).
The like-for-like Domestic EBITDA was calculated as follows:
(million euros) | 3rd Quarter 2024 | 3rd Quarter 2023 | Changes | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Changes |
|---|
| | | % | | | % |
|---|
EBITDA | 574 | 708 | (18.9) | 2,121 | 1,857 | 14.2 |
Non-recurring expenses (income) | 12 | 124 | | 95 | 546 | |
ORGANIC EBITDA - excluding non-recurring items | 586 | 832 | (29.6) | 2,216 | 2,403 | (7.8) |
Impacts deriving from: | | | | | | |
New Master Service Agreement (MSA) | — | (449) | | (902) | (1,368) | |
Reversal of previous MSA between TIM and FiberCop | — | 166 | | 341 | 521 | |
Other | — | (6) | | (23) | (49) | |
Like-for-like ORGANIC EBITDA | 586 | 543 | 7.9 | 1,632 | 1,507 | 8.3 |
EBIT
The EBIT of the Domestic Business Unit (NetCo Discontinued Operations - Domestic ServCo) for the first nine months of 2024 amounted to 627 million euros (+268 million euros compared the first nine months of 2023).
Headcount at September 30, 2024 stood at 17,855 (37,901 as of December 31, 2023).
Brazil (average real/euro exchange rate 5.69470)
Revenues of the Brazil Business Unit (TIM Brasil group) in the first nine months of 2024 were 18,817 million reais (17,559 million reais in the first nine months of 2023, +7.2%).
The growth was determined by service revenues (18,244 million reais vs 17,037 million reais for the first nine months of 2023, +7.1%) with mobile telephony service revenues growing 7.3% on the first nine months of 2023 due to the continuous improvement of the post-paid segment. Revenues from fixed services grew by 4.4% compared to the first nine months of 2023, driven above all by the growth rate of Ultrafibre.
Revenues from product sales totaled 573 million reais (522 million reais in the first nine months of 2023).
Revenues in the third quarter of 2024 totaled 6,419 million reais, increased by 6.0% on the third quarter of 2023 (6,056 million reais).
Mobile ARPU in the first nine months of 2024 totaled 31.1 reais (29.0 reais in the first nine months of 2023).
Total mobile lines at September 30, 2024 amounted to 62.1 million, +0.9 million lines compared to December 31, 2023 (61.2 million lines). Within this change, +2.1 million is attributable to the post-paid segment and -1.2 million to the pre-paid segment. Post-paid customers represented 47.8% of the customer base as of September 30, 2024 (45.1% at December 31, 2023).
Broadband ARPU for the first nine months of 2024 was 97.8 reais (97.3 reais in the first nine months of 2023).
EBITDA in the first nine months of 2024 was 9,237 million reais (8,434 million reais in the first nine months of 2023, 9.5%) and the margin on revenues was 49.1% (48.0% in the first nine months of 2023).
Organic EBITDA, net of the non-recurring items, increased by 9.0% and was calculated as follows:
(million Brazilian reais) | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Changes |
|---|
| | | absolute | % |
|---|
EBITDA | 9,237 | 8,434 | 803 | 9.5 |
Non-recurring expenses (income) | — | 41 | (41) | |
ORGANIC EBITDA - excluding non-recurring items | 9,237 | 8,475 | 762 | 9.0 |
The growth in EBITDA can mainly be attributed to the positive performance of revenues from services, partially offset by the increase in operating costs.
The EBITDA margin stood at 49.1% in organic terms (48.3% in the first nine months of 2023).
EBITDA in the third quarter of 2024 totaled 3,221 million reais, +7.7% on the third quarter of 2023 (2,992 million reais).
EBIT for the first nine months of 2024 amounted to 3,977 million reais (3,102 million reais for the first nine months of 2023, +28.2%).
Organic EBIT - net of the non-recurring items in the first nine months of 2024 amounted to 3,977 million reais (3,143 million reais in the first nine months of 2023), with an EBITDA margin of 21.1% (17.9% in the first nine months of 2023).
Organic EBIT, net of the non-recurring items, was calculated as follows:
(million Brazilian reais) | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Changes |
|---|
| | | absolute | % |
|---|
EBIT | 3,977 | 3,102 | 875 | 28.2 |
Non-recurring expenses (income) | — | 41 | (41) | |
ORGANIC EBIT - excluding non-recurring items | 3,977 | 3,143 | 834 | 26.5 |
EBIT in the third quarter of 2024 totaled 1,445 million reais (1,245 million reais in the third quarter of 2023).
Headcount at September 30, 2024 stood at 9,032 (9,267 as of December 31, 2023).
AFTER LEASE INDICATORS
TIM Group, in addition to the conventional financial performance measures established by the IFRS Accounting Standards, uses certain alternative performance measures in order to present a better understanding of the trend of operations and financial condition. Specifically, following the adoption of IFRS 16, the TIM Group presents the following additional alternative performance measures:
LIKE-FOR-LIKE EBITDA AFTER LEASE - TIM GROUP
(million euros) | 3rd Quarter 2024 | 3rd Quarter 2023 | Changes | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Changes |
|---|
| | | absolute | % | | | absolute | % |
Like-for-like ORGANIC EBITDA | 1,111 | 1,033 | 78 | 7.6 | 3,250 | 2,989 | 261 | 8.7 |
Lease payments | (168) | (156) | (12) | (7.7) | (505) | (517) | 12 | 2.4 |
Like-for-like EBITDA After Lease (EBITDA-AL) | 943 | 877 | 66 | 7.6 | 2,745 | 2,472 | 273 | 11.1 |
LIKE-FOR-LIKE EBITDA AFTER LEASE - DOMESTIC
(million euros) | 3rd Quarter 2024 | 3rd Quarter 2023 | Changes | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Changes |
|---|
| | | absolute | % | | | absolute | % |
Like-for-like ORGANIC EBITDA | 586 | 543 | 43 | 7.9 | 1,632 | 1,507 | 125 | 8.3 |
Lease payments | (48) | (41) | (7) | (17.1) | (133) | (122) | (11) | (9.0) |
Like-for-like EBITDA After Lease (EBITDA-AL) | 538 | 502 | 36 | 7.2 | 1,499 | 1,385 | 114 | 8.3 |
EBITDA AFTER LEASE - BRAZIL
(million euros) | 3rd Quarter 2024 | 3rd Quarter 2023 | Changes | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Changes |
|---|
| | | absolute | % | | | absolute | % |
ORGANIC EBITDA excluding non-recurring items | 527 | 492 | 35 | 7.3 | 1,622 | 1,488 | 134 | 9.0 |
Lease payments (*) | (120) | (115) | (5) | (4.5) | (372) | (395) | 23 | 5.8 |
EBITDA After Lease (EBITDA-AL) | 407 | 377 | 30 | 8.5 | 1,250 | 1,093 | 157 | 14.4 |
ADJUSTED NET FINANCIAL DEBT AFTER LEASE - TIM GROUP
(million euros) | 9/30/2024 | 12/31/2023 | Change |
|---|
Adjusted Net Financial Debt | 10,903 | 25,656 | (14,753) |
Leases | (2,915) | (5,307) | 2,392 |
Adjusted Net Financial Debt - After Lease | 7,988 | 20,349 | (12,361) |
EQUITY FREE CASH FLOW AFTER LEASE - TIM GROUP
(million euros) | 9 months to 9/30/2024 | 9 months to 9/30/2023 | Change |
|---|
Equity Free Cash Flow | (368) | (238) | (130) |
Change in lease contracts (principal share) | (467) | (669) | 202 |
Equity Free Cash Flow After Lease | (835) | (907) | 72 |
BUSINESS OUTLOOK FOR THE YEAR 2024
In light of the performance of the main business segments of the ServCo perimeter in the first nine months of 2024. The guidance previously communicated with the approval of the TIM 2024-2026 “Free to Run” Business Plan is confirmed.
EVENTS AFTER SEPTEMBER 30, 2024
TIM: Purchase offer for Sparkle
See the press releases issued on October 2 and 4, 2024.
MAIN RISKS AND UNCERTAINTIES
Risk governance is a strategic tool for value creation.
The TIM Group has adopted an Enterprise Risk Management model, which is continuously being improved and aligned with international regulations and standards and enables risks to be identified, assessed and managed in a homogenous way within the Group, highlighting potential synergies between the players involved in the assessment of the Internal Control and Risk Management System. The Enterprise Risk Management process is integrated with strategic and operational planning processes and is designed to identify potential events that may affect the company’s business so that these risks can be managed within acceptable limits or by keeping risks at a level that does not compromise the financial, operational and reputational stability of the company, and reasonable assurance provided about the achievement of its business objectives.
The Enterprise Risk Management model adopted by the TIM Group:
- identifies and updates, in collaboration with the risk owners, the overall portfolio of risks to which the Group is exposed by analyzing the Business Plan and the most significant investment projects, monitoring the reference context (e.g. macroeconomic and regulatory), specifically analyzing the risks to which assets may be exposed, and continuously monitoring and analyzing the risk profile, in order to detect any changes and/or new risk scenarios;
- quantitatively assesses risks both individually and from a portfolio perspective, taking correlations into account;
- supports management in establishing and monitoring risk mitigation plans and periodically updates the Control and Risk Committee (CRC) with respect to related tolerances;
- manages the information flow to top management and the bodies responsible for assessing the Internal Control and Risk Management System (ICRMS) by producing the relevant supporting reports.
It is worth highlighting the continuing Russia-Ukraine conflict and the possible extension of the conflict in the Middle East. Other risk factors include: market developments; entry of potential new competitors; potential proceedings brought by the Authorities and consequent delays in implementing new strategies; single supplier for fixed infrastructure related services (i.e. MSA FiberCop) with possible impacts both on the ability to provide services to end customers and the expected quality levels; cyber attacks related to the current global geopolitical climate; issues related to the regulation of artificial intelligence; issues related to new networks and infrastructures; obligations related to the Italian Government’s exercise of special powers (Golden Power), the effects of which will be assessed in terms of the strategic choices and the development of the Plan’s objectives over time.
Risks related to macroeconomic factors
The TIM Group’s economic and financial situation, including its ability to sustain the expected level of cash flows and margins, is influenced by multiple macroeconomic factors such as economic growth, consumer confidence, interest rates, increased inflation rate and the exchange rates in the markets in which it operates.
Added to these factors is the uncertainty around developments of the war in Ukraine, the Israeli-Palestinian conflict and the structural transformation of energy markets.
In September 2024, the Italian National Institute of Statistics (ISTAT) announced it would revise the Italian national accounts by adopting methodological changes agreed at European level. The revision significantly changed the GDP estimates and the main aggregates for recent years. The change in the GDP recorded in 2023 was revised downwards from previous official estimates, from +0.9% to +0.7%. ISTAT has not yet revised its +1% growth forecast for 2024 made in its June forecast note. The Bank of Italy reaffirmed its previous estimates of +0.6% GDP growth in view of a greater-than-expected expansion of services and higher growth in consumption, both of which supported by the recovery in disposable income. Consequently, the growth forecast range for 2024 currently remains unchanged at between +0.6% and +1%; this latter figure could be revised once the values for the third quarter have been taken into account.
Energy prices continue still need to be monitored, given how their volatility can affect business. The energy supply shock in 2022 highlighted European countries’ dependence on fossil fuels. Geopolitical uncertainty, with conflicts ongoing in key areas for energy supply, could once again spark the conditions that caused a deterioration in the industry in recent months. In any case, it should be noted that the TIM Group has implemented a hedging program which, domestically, made it possible to cover in advance almost all of the 2024 needs and part of 2025.
In Brazil, GDP grew by 2.9% in 2023, which was just below that of 2022 (+3.0%). In its latest report in June, the Central Bank of Brazil upgraded its forecast for 2024 – from +2.3% to +3.2% – as a result of stronger-than-expected GDP growth in the second quarter of the year. Growth is mainly driven by Industry and Services. Household consumption expanded strongly (+4.5%, up compared to the previous forecast of +3.5%) while the unemployment rate remained on a downward trajectory. GDP growth for 2025 is expected to be around +2%. The inflation growth estimate of +4.3% is above the target set for the end of the year.
Geopolitical uncertainty
The Russia-Ukraine conflict is having an indirect impact on the TIM Group’s business, mainly in terms of the potential effects of energy, materials and transportation costs going forward. Presently, these costs remain low, but they could become more significant as the conflict escalates. In particular, for companies in the TI Sparkle group (part of the TIM Group) operating in the areas impacted by the conflict, there were no significant repercussions on commercial relations, on the demand for international services and on the substantially regular collection of trade receivables.
The situation in the Middle East will continue having to be closely monitored with regard to the spreading of the conflict. Elsewhere, the new European Commission is set to take office while in the United States the results of the recent presidential elections could have consequences for the country’s foreign policy decisions. The effects in terms of geopolitical balances will have to be assessed, not only in Europe and the Middle East, but also in the relationship between the United States and China – which in turn could exacerbate an already tense situation that has had consequences on the import of advanced technological and digital systems from Chinese companies to the West.
If the international context were to worsen and tensions were to continue, this could have serious global implications and pose a serious security threat. This could bring greater risks for the TIM Group. Such risks include the security and protection of the TIM Group workforce, the possibility that cyber attacks may strike the infrastructure and data of the TIM Group or its customers, an increased probability of a shock of the supply chain that would entail higher inflation in the short and medium term.
∂
The Executive responsible for preparing the corporate accounting documents, Adrian Calaza Noia, hereby declares, pursuant to subsection 2, Art. 154 bis of Italy’s Consolidated Law on Finance, that the accounting information contained herein corresponds to the company’s documentation, accounting books and records.
Milan, November 13, 2024
