- The Italian operator has reported its first quarterly earnings since selling off its fixed network
- Brazil and enterprise remain growth drivers, while the consumer group remains a challenge
- Net debt expected to drop further by the end of the year
In typical understated fashion. Telecom Italia (TIM) CEO Pietro Labriola remarked that the last six months have been "quite eventful.”
As he elaborated, in July TIM finally completed its long-gestated plan to sell its fixed-line grid or NetCo to the Optics BidCo consortium controlled by investment firm KKR and moved into its new era as a service company.
“This was our ambition since we took office in 2022, to put the company on a new industrial path. Now it is a reality,” said Labriola, who was speaking during the operator’s first earnings call following the NetCo sale.
The relationship between TIM and NetCo will be regulated by a master services agreement (MSA), although Labriola emphasized that there are no value or volume commitments here.
Although much of the heavy lifting has now been completed, TIM still has to pin down buyers for its submarine cable unit Sparkle and its remaining stake in telecom tower company INWIT.
“We are quite optimistic over the finalization of the two deals,” said Labriola. Reuters reported that TIM is seeking to raise around €1 billion ($1.1 billion) from the sales.
Labriola also reiterated that the main focus for TIM is to grow organically on its domestic market, although he did not rule out that the operator could play an active role in M&A both in the consumer and enterprise segment.
Downsizing debt
In the second quarter of 2024 (Q2 FY24), TIM reaffirmed its guidance to cut debt following the NetCo sale. It said its net debt after leases amounted to €8.1 billion, which it said was in line with forecasts. The outlook is to reduce debt further to about €7.5 billion by the end of the year.
Without the NetCo sale, net debt would have risen to about €21.5 billion, a slight increase from the first quarter.
On a like-for-like basis, TIM ServCo revenue increased by 4.2% to €3.6 billion in Q2 FY24, primarily boosted by strong growth from TIM Brasil and TIM’s domestic enterprise business. Group EBITDA increased by 7.4% to €1.12 billion.
“TIM group has now a sustainable financial structure,” Labriola said. “Approximately 70% of group EBITDA after lease, comes from two healthy businesses: Brazil and enterprise.”
He noted that the domestic consumer business remains the biggest challenge in what is an extremely competitive environment, although he said TIM Consumer is “performing in line with our target and better than the largest competitors.”