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3Q 2018 Results

- TIM Group reported its 3Q 2018 results, with stable group revenues and clean EBITDA. Group net debt was down more than €1 billion year-over-year. - In Italy, revenues were stable as improvements in Domestic EBITDA-CAPEX and a positive performance in Brazil offset pressures in the Domestic business. Fiber migration continued with over 2 million FTTx lines. - TIM Brasil reported steady revenue growth and double-digit EBITDA growth, with ongoing efficiency and strong operational metrics including UBB coverage expansion. - TIM is well positioned for 5G with spectrum leadership that will enable new services and strengthen its ultra broadband access leadership in Italy.

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TIM Group 3Q 2018 Results November 9th, 2018 Amos Genish Piergiorgio Peluso
1 3Q’18 Results Safe Harbour 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 and operating data have been extracted or derived, with the exception of some data, from the TIM Group Interim Management Report at 30 September 2018 which have been prepared in accordance with the International Financial Reporting Standards issued by IASB and endorsed by the EU (IFRS) and are unaudited. The first nine months of 2018 results include the effects arising from the adoption, starting from 1 January 2018, of the new standards IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers). To enable the year-on-year comparison of the economic and financial performance for the first nine months of 2018 and 3Q2018 , this presentation shows “comparable” statement of financial position figures and “comparable” income statement figures, prepared in accordance with the previous accounting standards applied (IAS 39, IAS 18, IAS 11, and relative Interpretation).
2 3Q’18 Results 3Q’18 Results 1 2 3 Financial Update Closing Remarks Highlights and Main Trends
3 3Q’18 Results 1,006 1,221 Organic data (1), €mln 3Q’18 Main Results Resilient top line, cash flow growth (1) Excluding exchange rate fluctuations & non recurring items (2) 3Q’17 Domestic Organic Ebitda excludes 28 mln € of liability reversals. This one off item impacted 2Q’17 by 39 mln € and 4Q’17 by 46 mln €. No further YoY impact from this item after 4Q’18 (3) Excluding 630 mln € GSM Licences in 3Q’17 3,553 3,518 1,821 1,764 845 872 -1.0% Group Domestic Brazil Stable group revenues: Italy meeting well all challenges, Brazil confirming steady growth Stable group clean EBITDA: improvement on Domestic, positive high single-digit performance in Brazil Strong growth in EBITDA less CAPEX Group net debt down by more than €1bn YoY SERVICE REVENUES EBITDA (2) -0.3% +3.3% +8.7% EBITDA-CAPEX (3) 4,391 4,380 3Q’18 3Q’17 3Q’18 3Q’17 3Q’18 NET DEBT 3Q’17 330 357 -1.4% -3.1%2,149 2,119 1,793 -1.6%Net one offs -0.1% 26,228 25,190 3Q'17 3Q'18 -1,038 25,308 25,190 FY'17 3Q'18 -118 +21.4% +18.0% 108 161 +47.1% Net one offs2,121 900 1,062
4 3Q’18 Results 3Q’18 Domestic Domestic transformation is building value Best in Class Customer Engagement Leadership Positioning Agile Organization Cash-Flow Generation DigiTIM pillars Consumer: Building Sustainable Premium Main 3Q Domestic Achievements  Unlimited mobile data for value customers strengthening convergence  New consumer app (with self care messaging)  Smart-life suite IoTIM  Improved mobile customer journey  Accelerated fiber migration  Optimized B2B sales model  More-for-more business portfolio  Massive adoption of cyber-security services Business: Implementing IT Company Model  Network simplification: decommissioning started  Keeping the pace on network automation  Intelligence: progress in big data & API exposure  Increased technician productivity  Pervasive FTTx approach  Increased digital experience in assistance ▪ +1.2m retail FTTx lines ▪ +3pp ICT / total business revenues (from ~18% to ~21%) ▪ +394k ICT clients (from 135k to 529k), 43% penetration ▪ Pilot project on 7 central offices ▪ 34 IT systems shut down ▪ >40 network functions virtualized ▪ >100 APIs already implemented ▪ +8 big data use cases ▪ Productivity: +1.8 jobs/day per technician (1) ▪ +1.1 mln wholesale FTTx lines ▪ + 23% wholesale non-regulated revenues Operational Improvements 9M '17 9M '18 +14% Strong growth in Domestic EBITDA-CAPEX Financial Results (KPIs, D YoY) Shaping Convergent Digital Platform Reinforcing Best Italian Infrastructure 2,725 3,110 (1) Completed gross jobs per day (from 3.4 to 5.2) Commercial Technology Access
5 3Q’18 Results 3Q’18 Domestic Wireline Improving service revenues and ARPU 2,498 2,492 2,632 2,607 3Q'17 3Q'18 Wireline Revenues Service Organic data, € mln 33.4 35.5+6.3% YoY +11.8% YoY Consumer Broadband ARPU Positive ARPU effect from repricing(1), while more-for- more approach limits churn Premium Position Consumer Business Launched new IoT app and services (e.g. TIM Security, Smart Home, iHealth) IoTIM ~1.6mln customers. New partners: Amazon and Dazn, adding to Netflix TIM vision € / line / month ICT Modular approach on ICT value- added services. Penetration on total business customer base materially increased Cloud & IT services revenues growing 12% YoY 9% 42% 29% 43% 3Q'17 3Q'18 Enterprise SME Wholesale National Double-digit growth YoY of non-regulated service revenues Drag on revenues worth 41 mln €, with limited impact on EBITDA (-4 mln €). Sparkle is evolving from voice to data, and is a sound low-margin business, where scale is key International 24.5 27.4 Equipment Retail Core Service (2) (1) July repricing of 1.95 euro/month (net of VAT) on about 8 million lines (2) Includes Domestic Wholesale and excludes Sparkle 2,183 2,211 1,663 1,682 Wireline Domestic -0,9% -0,3% +1.1% +1.3%
6 3Q’18 Results 3Q’18 Domestic Wireline Healthy FTTx conversion continues (1) Retail VoIP included (2) VoIP excluded Multi-play customers increased > 40% of consumer broadband base Retail and wholesale customers are migrating to fiber and FTTx adoption is growing: ▪ +12% customers upgraded to FTTx (QoQ) ▪ +2.3m total FTTx lines YoY, o/w +1.2m retail Internet up to 1000 Mbps Modem included TIM VISION Unlimited calls Unlimited ITZ Voice F2F (EU and North America) Mobile: 1000 minutes and 5 Giga TIM Connect Black 24% 40% 3Q'17 3Q'18 +16 p.p. YoY retail FTTx penetration on total broadband customer base Accesses (1) Total Accesses on TIM Infrastructure Broadband FTTx WHOLESALE RETAIL Line losses continued to be impacted by repricing, increase in competitive intensity and voice-only erosion Line Losses 11,203 11,102 8,078 8,114 19,281 19,216 2Q'18 3Q'18 -65 +36 -101 7,547 7,561 7,505 7,553 15,052 15,114 2Q'18 3Q'18 +62 +48 +14 2,776 2,990 1,617 1,924 4,393 4,914 2Q'18 3Q'18 +521 (+12%) +307 +214 -200 -195 3Q’182Q’18 (2)
7 3Q’18 Results 3Q’18 Domestic Mobile Limited revenue impact from a complex quarter TIM 100% F-M package: 600k activations to-date TIM Party loyalty program: 1.5 mln signed-up (~350k convergent) since launch in June. Unlimited data for F-M customers Loyalty & Convergence Consumer Upgraded customer app providing new services (e.g. TIM Pay) and access to customer care via messaging TIM PERSONAL Business Portfolio Offers simplification and more-for-more approach and relevant win-back deals on enterprise customers 1,202 1,169 132 159 1,334 1,328 3Q'17 3Q'18 Service Organic data, € mln Handsets -2.8% +20.7% flat € / line / month 16.4 16.0 3Q'17 3Q'18 Mobile ARPU (on human SIMs) -2.0% Mobile Revenues Solid Performance Stable service revenues YoY with slight improvement QoQ. Positive 3Q MNP results
8 3Q’18 Results 3Q’18 Domestic Mobile New entrant effects minimized through proactive commercial approach € Mln, organic data Customer Base k, Rounded numbers k, Rounded numbers Total o/w Active o/w LTE Human 31,629 31,994 23,132 22,738 19,621 19,299 10,424 10,417 2Q'18 3Q'18 +1,2% 78% penetration on mobile broadband CB -1.6% -1,7% Mobile Number Portability Trend (1) (1) TIM+Kena 2-Tier strategy paying-off -350 -250 -150 -50 Jul Aug Sep Oct 3Q’18 0 YTD Loyalty & Convergence Core long term positioning on high value, diving convergence 2nd Brand segmented approach Resilient MNP with reducing contribution to new entrant TIM share of ports-out to Iliad: ~20% in September, reduced from ~24% in June, both well below TIM’s market share Further improvement in October
9 3Q’18 Results 1,009 904 3Q’18 TIM Brasil Steady growth in top line and EBITDA Organic Performance, R$mln, Rounded numbers 503 740 Double-digit mobile and fixed ultra broadband ARPU growth EBITDA double-digit trend confirmed on a 9M basis Ongoing efficiency supported EBITDA margin expansion Optimized CAPEX in 3Q’18 and strong EBITDA – CAPEX performance Strong operational metrics and UBB coverage expansion confirmed: FTTH launched in 5 cities in 3Q’18 Improved consumer sentiment expected after elections Merger between TIM Celular and TIM S.A. will generate relevant operational and financial synergies, and unlock ~R$1bn in tax loss carry-forward from 2018 REVENUES EBITDA EBITDA-CAPEX 3Q’183Q’17 +8.7% 1,512 1,644 +47.1% 3,905 4,033 +4.4% +3.3% 4,083 4,261Total Service Mobile Service Revenues TIM Live Revenues CAPEX -10.4% KPIs Mobile ARPU R$ 22.6 +10.3% YoY 12 Months Postpaid Net Adds +2.9 Mln (CB: 19.6 Mln) TIM Live ARPU R$ 77.5 +10.4% YoY 12 Months Fixed UBB Net Adds +73k (CB: 449k) 700 Mhz Cities 1,172 +256 vs YE’17 FTTH1 HH +761k vs YE’17 R$ 3.8 Bln +2.9 % YoY R$ 0.10 Bln +35.7% YoY (1) Addressable households ready to sell
10 3Q’18 Results Focus on 5G 5G will redefine competitive landscape, strengthening TIM position 5G spectrum leadership further enables seamless experience of TIM ultra broadband access- agnostic service all-over Italy Spectrum Leadership 700MHz 10MHz 3.7GHz 80MHz 26GHz 200MHz • 4x the bandwidth of Wind and Iliad in 3.7GHz • Capability to stimulate/cope with future traffic growth • Best suited for smart industry 4.0 and FWA services • “Deep indoor” and strong mobile broadband QoS in rural areas • Strong positioning on automotive and public safety verticals Lower Costs, Higher Quality, New Services • Lower industrial cost of data traffic • Superior throughput, low latency and improved capacity (n. of served devices x square km) • Enhanced mobile broadband to differentiate retail offer • Competitive advantage in new verticals for industrial automation • 5G pilots in 4 cities, 55 partners, 70 use cases Enhanced Ultra Broadband Access • FTTH complemented with 5G FWA on 3.7GHz and 26GHz where convenient • FTTC complemented or improved - hybridized with 3.7GHz 5G FWA • 700MHz to provide high- speed performances everywhere FWA @ 3.7Ghz also from already existing mobile macro sites (~20k) Multi-technology ultra broadband coverage of Italy
11 3Q’18 Results 3Q’18 Results 1 2 3 Financial Update Closing Remarks Highlights and Main Trends
12 3Q’18 Results Organic data, €mln, Δ YoY (1) Associated to sales of receivables (2) Capitalized costs are essentially those associated with delivery and activation of fixed lines, with directly related IT and Network costs, which are smoothed on an average 5-yr basis (3) 3Q’17 Organic Domestic Opex is changed to €2,028 mln (€1,999 mln plus €28 mln of liability reversals) Sales-related costs up YoY, supporting commercial performance in a very competitive environment. Caring cost sub-cluster showing some improvement Industrial flat YoY, supported by lower energy costs Rigorous cost discipline and zero-base approach on G&A and IT, also supported by YtD real estate space reduction of 380k sqm Labor cost savings driven by FTE reduction of 3.2% YoY (down 1,464 YoY; domestic workforce 3Q18 44,260 vs 45,724 3Q17) Other costs flat YoY excluding one-offs 3Q’18 Domestic OPEX: stable YoY trend despite increased commercial activity 3Q17 3Q18 Addressable Cost Base 1,677 flat 1,680 Commercial and Caring 705 4.4% 736 Industrial 266 flat 268 G&A, IT 127 -9.4% 115 Labor 580 -3.3% 561 Other 350 -1 349 Interconnection 410 -30 380 Credit Cost (1) 23 26 49 Bad Debt & Other 30 -11 19 Capitalized Cost & Other (2) -113 13 -100 Total Opex 2,028 flat 2,029 (3)
13 3Q’18 Results 9/'17 9/'18 9/'17 9/'18 Traffic Growth Mobile Fixed +46% +45% 97% >98% 70% ~80% 9/'17 9/'18 Coverage LTE FTTx ▪ Ultra broadband coverage extended in line with Plan ▪ Fixed access YoY reduction derived from having reached ~80% FTTx coverage, which will now continue in synergy with 5G (FWA) ▪ 4G access reduction will be rebalanced by up-and-coming VRAN technology and 5G roll-out ▪ Heavy traffic growth fully supported ▪ Procurement transformation in progress: number of suppliers and unitary costs reduced 9M’18 Domestic Capital intensity reduced, ultra broadband coverage improved 222 211 298 193 895 420 726 701 379 413 9M'17 9M'18 -572 -22.5% 34 -25 -475 -105 -12 2,547(1) 1,975 Mobile access Fixed access Capacity, run and maintain CPE & success based Other IT (1) Net of € 630 million License capex in 3Q’17 Organic data, €mln, Δ YoY CAPEX/sales 22.5% 17.5%-5.0p.p.
14 3Q’18 Results 9M’18 TIM Group Operating free cash flow generation (1) - € 407 mln excluding GSM Licence (2) + € 41 mln excl. Brazilian Spectrum Reported, €mln Group 998 1,457 (1,334) (2,000) 2,332 3,457 EBITDA- CAPEX DOWC OpFCF +1,125 -666 +459 9M’17 9M’18 Brazil (86) 176 (552) (310) 466 486 9M’17 9M’18 +20 +242 +262(2) EBITDA- CAPEX DOWC OpFCF 1,083 1,306 (795) (1,677) 1,878 2,983 9M’17 9M’18 +1,105 -882 +223(1) Domestic DOWC OpFCF EBITDA- CAPEX Δ operating working capital differences driven by: ▪ Roll-down effect of cash costs: 0.4bn € ▪ VAT change-in-law impact (split payment): 0.3bn € ▪ Early retirement cash-out and other: 0.2bn € Most of these impacts are specific of 2018 only
15 3Q’18 Results Other Impacts NFP FY17 NFP 9M18 NFP 1H18 Op.FCF Dividends & Change in Equity Op.FCFFinancial Expenses & Cash Taxes Financial Expenses & Cash Taxes Other Impacts NFP 9M’17 9M’18 TIM Group Net financial position* has been reduced from 3Q’17 and YE’17 +49 €mln; (-) = Cash generated, (+) = Cash absorbed, excluding call-outs -1,038 -118 *Adjusted for mark-to-market of hedging derivatives
16 3Q’18 Results* TIM also has band in 3400-3600 MHz, as well as Linkem, Aria/Tiscali and other operators (Go Internet, Mandarin, Brennercom, Eolo). For Fastweb, Aria/Tiscali spectrum acquisition is not considered Best in class allocation in 3.6-3.8 GHz available from 2018, without material cash-out impact in plan horizon Focus on 5G 5G auction payments are back-end loaded in 2022, and will not increase group net financial position until cash-out occurs 5G licences will expire in 2037, 2100MHz will expire in 2021, all other licences will expire in 2029 Vodafone Wind/3 Iliad Fastweb 800 LTE 1800 GSM/LTE 2100 UMTS 900 GSM/UMTS 1450 Band “L” (SDL) 3600-3800* 5G 700 26000 2x10 80 200 2x10 20 2x202x10 2x15 5 2x10 200 2x10 20 2x202x10 2x15 5 200 2x10 2x202x10 2x20 10 2x10 200 2x102x5 2x10 200 2600 LTE 2x15 2x15 2x20 2x10 30 80 20 20 MHz TOTAL MHz EXCLUDING 26GHz 265 265 220 110 20212018 2019 2020 TIM Schedule of payments 477€ 18€ 110€ TOTAL investment in 5G 2,399€55€ 680,2 million in 700 MHz 1,686 million in 3.6-3.8 GHz 33 million in 26 GHz mln Only 606 mln € spend in the next three years 2022 1,738€
17 3Q’18 Results Bonds Loans (of which long-term rent, financial and operating lease payable € 2,104) Undrawn portions of committed bank lines Cash & cash equivalent (1) € 28,421 mln is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 766 mln) and current financial liabilities (€ 814 mln), the gross debt figure of € 30,001 mln is reached (2) In June, July and October TIM signed € 1.4 bln of bilateral loans at an average term of 3.5 years (1) TIM Group Actively managing refinincing needs to keep a strong liquidity margin €mln 649 1,449 541 1,494 733 343 1,657 6,8665,000 582 2,447 1,267 564 3,087 2,422 11,186 21,555 3,603 8,603 1,231 3,896 1,808 2,058 3,820 2,765 12,843 28,421 Liquidity margin Within 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Beyond 2023 Total M/L Term Debt Liquidity margin improved by € 500 Mln QoQ, supported by new bilateral loans(2) at a cost below TIM secondary market bond yields, covering any cash requirement from debt renewals until 2021 Debt Maturities Liquidity Margin
18 3Q’18 Results 3Q’18 Results 1 2 3 Financial Update Closing Remarks Highlights and Main Trends
19 3Q’18 Results Closing remarks The Company remains committed to the strategic priorities of its plan, which will be reviewed and enhanced 3Q’18 operational achievements: ▪ Domestic transformation leads to strong operational KPIs in a challenging context ▪ Resilient performance in Italy, growth confirmed in Brazil 5G auction financial undertakings will be met with the firmest determination to deleverage: ▪ Debt reduction remains an utmost priority, driven by organic performance, and further supported by the disposals of Persidera and Sparkle
20 3Q’18 Results Annex
21 3Q’18 Results Organic data(1), €mln, % YoY ~48% ~28% ~12% ~8% ~3% 68% 32% By Technology By Business Segment 5% 95% Fixed +11.5% Mobile +2.9% Domestic Brazil Consumer -1.3% Business +0.5% Nat. WHS +5.6% Inwit/others +4.3% By Technology ▪ Mobile: despite slower prepaid and postpaid due to macro, growth confirmed ▪ Fixed: TIM Live double-digit performance continues. FTTH launched in 5 cities. (1) Excluding exchange rate impact and non-recurring items (2) Net of eliminations Group Total Service Revenues (2) 4,380 -0.3% Domestic 3,518 -1.0% Brazil 872 +3.3% Sparkle -11.7% ▪ Mobile: Service revenues impact from Iliad entry remained limited. Competitive pressure trended better at the end of the quarter. ▪ Fixed: Retail service revenues up +1.1%. ▪ Business: continued revenue growth, steady customer base ▪ Consumer: impacted by competitive dynamics and still affected by 28-day billing reversal. ▪ National Wholesale: more fiber and growth of non-regulated revenues ▪ Sparkle: reduction on low-margin business; impact on Ebitda limited to - 4 mln € YoY ▪ Inwit: continued organic growth Fixed -0.3% Mobile -2.8% -4% Other & Eliminations 3Q’18 TIM Group Service revenues breakdown
22 3Q’18 Results TIM Domestic Ultra broadband network ▪ ~113 k cabinets passed ▪ ~366 k FTTH OTB installed ▪ ~19.4 mln HH passed FTTC ▪ 2,511 cities with commercial active service, o/w: ▪ 2,395 cities FTTC ▪ 116 cities FTTH/FTTC ▪ >19.7k LTE nodes ▪ 7,367 cities LTE with commercial active service, o/w: ▪ 1,524 with 4Gplus ▪ 12 cities with 4.5G Fixed UBB 42% ~60% 77% 78.3% 79.8% ~80% 2015 2016 2017 1Q'18 2Q'18 3Q'18 88% >96% >98% >98% 2015 2016 2017 1Q'18 2Q'18 3Q'18 % FTTC passed % LTE passed Mobile UBB
23 3Q’18 Results Average m/l term maturity: 7.67 years (bond only 7.78 years) Fixed rate portion on gross debt approximately 70.3% Around 31% of outstanding bonds (nominal amount) denominated in USD and GBP and is fully hedged Cost of debt: ~4.4 % Gross debt 30,001 Financial Assets (4,811) of which C&CE and marketable securities (3,603) - C & CE (2,543) - Marketable securities (1,060) - Government Securities (551) - Other (509) Net financial position 25,190 Maturities and Risk Management N.B. The figures are net of the adjustment due to the fair value measurement of derivatives and related financial liabilities/assets, as follows: - the impact on Gross Financial Debt is equal to 1,489 €/mln (of which 169 €/mln on bonds); - the impact on Financial Assets is equal to 552 €/mln. Therefore, the Net Financial Indebtedness is adjusted by 937 €/mln N.B. The difference between total financial assets (€ 4,811 mln) and C&CE and marketable securities (€ 3,603 mln) is equal to € 1,208 mln and refers to positive MTM derivatives (accrued interests and exchange rate) for € 909 mln, financial receivables for lease for € 90 mln, deposits beyond 3 months for € 1 mln and other credits for € 208 mln. TIM Group Well diversified and hedged debt €mln Banks & EIB 5,365Other 704 Op. leases and long rent 2,141 Bonds 21,791 17.9% 72.6% 2.4% 7.1%
24 3Q’18 Results As from January 1, 2018, IFRS 9 (Financial Instruments) and IFRS 15 (Revenues from Contracts with Customers) have to be applied. In order to allow comparison of the results for 3Q’18 with those for the same period of the previous year, financial statements data are also prepared under previous accounting principles. IFRS 9 impacts the determination of expected losses on trade receivables and other financial assets (change from the incurred loss model provided by IAS 39 to the expected credit loss model). IFRS 15 impacts the revenue recognition of fixed and mobile offerings as well as the recognition of relevant contractual costs, without any impacts on cash flows. TIM Group IFRS 9-15 impacts Reported data, € mln, Rounded numbers (1) The ongoing refinements, also on supporting IT systems, related to the process of implementation of the new accounting standards, together with the high number of new commercial offers in recent months, have led - in the financial statements of the first nine months of 2018 - for some specific contractual cases within the fixed and mobile sectors, to the recalculation of the temporal distribution of revenues during the year. Revenues Services Revenues EBITDA 9M '18 old IFRS D IFRS 15 9M '18 new IFRS 9M '18 old IFRS D IFRS 15 9M '18 new IFRS 9M '18 old IFRS D IFRS 9 - 15 9M '18 new IFRS TIM Group 14,217 (140) 14,077 13,165 (140) 13,025 6,030 (252) 5,778 Domestic 11,311 (129) 11,182 10,397 (141) 10,256 4,958 (219) 4,739 Brazil 2,929 (11) 2,918 2,791 1 2,792 1,084 (34) 1,050 (1)

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3Q 2018 Results

  • 1.
    TIM Group 3Q 2018Results November 9th, 2018 Amos Genish Piergiorgio Peluso
  • 2.
    1 3Q’18 Results Safe Harbour Thispresentation 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 and operating data have been extracted or derived, with the exception of some data, from the TIM Group Interim Management Report at 30 September 2018 which have been prepared in accordance with the International Financial Reporting Standards issued by IASB and endorsed by the EU (IFRS) and are unaudited. The first nine months of 2018 results include the effects arising from the adoption, starting from 1 January 2018, of the new standards IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers). To enable the year-on-year comparison of the economic and financial performance for the first nine months of 2018 and 3Q2018 , this presentation shows “comparable” statement of financial position figures and “comparable” income statement figures, prepared in accordance with the previous accounting standards applied (IAS 39, IAS 18, IAS 11, and relative Interpretation).
  • 3.
    2 3Q’18 Results 3Q’18 Results 1 2 3 FinancialUpdate Closing Remarks Highlights and Main Trends
  • 4.
    3 3Q’18 Results 1,006 1,221 Organicdata (1), €mln 3Q’18 Main Results Resilient top line, cash flow growth (1) Excluding exchange rate fluctuations & non recurring items (2) 3Q’17 Domestic Organic Ebitda excludes 28 mln € of liability reversals. This one off item impacted 2Q’17 by 39 mln € and 4Q’17 by 46 mln €. No further YoY impact from this item after 4Q’18 (3) Excluding 630 mln € GSM Licences in 3Q’17 3,553 3,518 1,821 1,764 845 872 -1.0% Group Domestic Brazil Stable group revenues: Italy meeting well all challenges, Brazil confirming steady growth Stable group clean EBITDA: improvement on Domestic, positive high single-digit performance in Brazil Strong growth in EBITDA less CAPEX Group net debt down by more than €1bn YoY SERVICE REVENUES EBITDA (2) -0.3% +3.3% +8.7% EBITDA-CAPEX (3) 4,391 4,380 3Q’18 3Q’17 3Q’18 3Q’17 3Q’18 NET DEBT 3Q’17 330 357 -1.4% -3.1%2,149 2,119 1,793 -1.6%Net one offs -0.1% 26,228 25,190 3Q'17 3Q'18 -1,038 25,308 25,190 FY'17 3Q'18 -118 +21.4% +18.0% 108 161 +47.1% Net one offs2,121 900 1,062
  • 5.
    4 3Q’18 Results 3Q’18 Domestic Domestictransformation is building value Best in Class Customer Engagement Leadership Positioning Agile Organization Cash-Flow Generation DigiTIM pillars Consumer: Building Sustainable Premium Main 3Q Domestic Achievements  Unlimited mobile data for value customers strengthening convergence  New consumer app (with self care messaging)  Smart-life suite IoTIM  Improved mobile customer journey  Accelerated fiber migration  Optimized B2B sales model  More-for-more business portfolio  Massive adoption of cyber-security services Business: Implementing IT Company Model  Network simplification: decommissioning started  Keeping the pace on network automation  Intelligence: progress in big data & API exposure  Increased technician productivity  Pervasive FTTx approach  Increased digital experience in assistance ▪ +1.2m retail FTTx lines ▪ +3pp ICT / total business revenues (from ~18% to ~21%) ▪ +394k ICT clients (from 135k to 529k), 43% penetration ▪ Pilot project on 7 central offices ▪ 34 IT systems shut down ▪ >40 network functions virtualized ▪ >100 APIs already implemented ▪ +8 big data use cases ▪ Productivity: +1.8 jobs/day per technician (1) ▪ +1.1 mln wholesale FTTx lines ▪ + 23% wholesale non-regulated revenues Operational Improvements 9M '17 9M '18 +14% Strong growth in Domestic EBITDA-CAPEX Financial Results (KPIs, D YoY) Shaping Convergent Digital Platform Reinforcing Best Italian Infrastructure 2,725 3,110 (1) Completed gross jobs per day (from 3.4 to 5.2) Commercial Technology Access
  • 6.
    5 3Q’18 Results 3Q’18 DomesticWireline Improving service revenues and ARPU 2,498 2,492 2,632 2,607 3Q'17 3Q'18 Wireline Revenues Service Organic data, € mln 33.4 35.5+6.3% YoY +11.8% YoY Consumer Broadband ARPU Positive ARPU effect from repricing(1), while more-for- more approach limits churn Premium Position Consumer Business Launched new IoT app and services (e.g. TIM Security, Smart Home, iHealth) IoTIM ~1.6mln customers. New partners: Amazon and Dazn, adding to Netflix TIM vision € / line / month ICT Modular approach on ICT value- added services. Penetration on total business customer base materially increased Cloud & IT services revenues growing 12% YoY 9% 42% 29% 43% 3Q'17 3Q'18 Enterprise SME Wholesale National Double-digit growth YoY of non-regulated service revenues Drag on revenues worth 41 mln €, with limited impact on EBITDA (-4 mln €). Sparkle is evolving from voice to data, and is a sound low-margin business, where scale is key International 24.5 27.4 Equipment Retail Core Service (2) (1) July repricing of 1.95 euro/month (net of VAT) on about 8 million lines (2) Includes Domestic Wholesale and excludes Sparkle 2,183 2,211 1,663 1,682 Wireline Domestic -0,9% -0,3% +1.1% +1.3%
  • 7.
    6 3Q’18 Results 3Q’18 DomesticWireline Healthy FTTx conversion continues (1) Retail VoIP included (2) VoIP excluded Multi-play customers increased > 40% of consumer broadband base Retail and wholesale customers are migrating to fiber and FTTx adoption is growing: ▪ +12% customers upgraded to FTTx (QoQ) ▪ +2.3m total FTTx lines YoY, o/w +1.2m retail Internet up to 1000 Mbps Modem included TIM VISION Unlimited calls Unlimited ITZ Voice F2F (EU and North America) Mobile: 1000 minutes and 5 Giga TIM Connect Black 24% 40% 3Q'17 3Q'18 +16 p.p. YoY retail FTTx penetration on total broadband customer base Accesses (1) Total Accesses on TIM Infrastructure Broadband FTTx WHOLESALE RETAIL Line losses continued to be impacted by repricing, increase in competitive intensity and voice-only erosion Line Losses 11,203 11,102 8,078 8,114 19,281 19,216 2Q'18 3Q'18 -65 +36 -101 7,547 7,561 7,505 7,553 15,052 15,114 2Q'18 3Q'18 +62 +48 +14 2,776 2,990 1,617 1,924 4,393 4,914 2Q'18 3Q'18 +521 (+12%) +307 +214 -200 -195 3Q’182Q’18 (2)
  • 8.
    7 3Q’18 Results 3Q’18 DomesticMobile Limited revenue impact from a complex quarter TIM 100% F-M package: 600k activations to-date TIM Party loyalty program: 1.5 mln signed-up (~350k convergent) since launch in June. Unlimited data for F-M customers Loyalty & Convergence Consumer Upgraded customer app providing new services (e.g. TIM Pay) and access to customer care via messaging TIM PERSONAL Business Portfolio Offers simplification and more-for-more approach and relevant win-back deals on enterprise customers 1,202 1,169 132 159 1,334 1,328 3Q'17 3Q'18 Service Organic data, € mln Handsets -2.8% +20.7% flat € / line / month 16.4 16.0 3Q'17 3Q'18 Mobile ARPU (on human SIMs) -2.0% Mobile Revenues Solid Performance Stable service revenues YoY with slight improvement QoQ. Positive 3Q MNP results
  • 9.
    8 3Q’18 Results 3Q’18 DomesticMobile New entrant effects minimized through proactive commercial approach € Mln, organic data Customer Base k, Rounded numbers k, Rounded numbers Total o/w Active o/w LTE Human 31,629 31,994 23,132 22,738 19,621 19,299 10,424 10,417 2Q'18 3Q'18 +1,2% 78% penetration on mobile broadband CB -1.6% -1,7% Mobile Number Portability Trend (1) (1) TIM+Kena 2-Tier strategy paying-off -350 -250 -150 -50 Jul Aug Sep Oct 3Q’18 0 YTD Loyalty & Convergence Core long term positioning on high value, diving convergence 2nd Brand segmented approach Resilient MNP with reducing contribution to new entrant TIM share of ports-out to Iliad: ~20% in September, reduced from ~24% in June, both well below TIM’s market share Further improvement in October
  • 10.
    9 3Q’18 Results 1,009 904 3Q’18 TIMBrasil Steady growth in top line and EBITDA Organic Performance, R$mln, Rounded numbers 503 740 Double-digit mobile and fixed ultra broadband ARPU growth EBITDA double-digit trend confirmed on a 9M basis Ongoing efficiency supported EBITDA margin expansion Optimized CAPEX in 3Q’18 and strong EBITDA – CAPEX performance Strong operational metrics and UBB coverage expansion confirmed: FTTH launched in 5 cities in 3Q’18 Improved consumer sentiment expected after elections Merger between TIM Celular and TIM S.A. will generate relevant operational and financial synergies, and unlock ~R$1bn in tax loss carry-forward from 2018 REVENUES EBITDA EBITDA-CAPEX 3Q’183Q’17 +8.7% 1,512 1,644 +47.1% 3,905 4,033 +4.4% +3.3% 4,083 4,261Total Service Mobile Service Revenues TIM Live Revenues CAPEX -10.4% KPIs Mobile ARPU R$ 22.6 +10.3% YoY 12 Months Postpaid Net Adds +2.9 Mln (CB: 19.6 Mln) TIM Live ARPU R$ 77.5 +10.4% YoY 12 Months Fixed UBB Net Adds +73k (CB: 449k) 700 Mhz Cities 1,172 +256 vs YE’17 FTTH1 HH +761k vs YE’17 R$ 3.8 Bln +2.9 % YoY R$ 0.10 Bln +35.7% YoY (1) Addressable households ready to sell
  • 11.
    10 3Q’18 Results Focus on5G 5G will redefine competitive landscape, strengthening TIM position 5G spectrum leadership further enables seamless experience of TIM ultra broadband access- agnostic service all-over Italy Spectrum Leadership 700MHz 10MHz 3.7GHz 80MHz 26GHz 200MHz • 4x the bandwidth of Wind and Iliad in 3.7GHz • Capability to stimulate/cope with future traffic growth • Best suited for smart industry 4.0 and FWA services • “Deep indoor” and strong mobile broadband QoS in rural areas • Strong positioning on automotive and public safety verticals Lower Costs, Higher Quality, New Services • Lower industrial cost of data traffic • Superior throughput, low latency and improved capacity (n. of served devices x square km) • Enhanced mobile broadband to differentiate retail offer • Competitive advantage in new verticals for industrial automation • 5G pilots in 4 cities, 55 partners, 70 use cases Enhanced Ultra Broadband Access • FTTH complemented with 5G FWA on 3.7GHz and 26GHz where convenient • FTTC complemented or improved - hybridized with 3.7GHz 5G FWA • 700MHz to provide high- speed performances everywhere FWA @ 3.7Ghz also from already existing mobile macro sites (~20k) Multi-technology ultra broadband coverage of Italy
  • 12.
    11 3Q’18 Results 3Q’18 Results 1 2 3 FinancialUpdate Closing Remarks Highlights and Main Trends
  • 13.
    12 3Q’18 Results Organic data,€mln, Δ YoY (1) Associated to sales of receivables (2) Capitalized costs are essentially those associated with delivery and activation of fixed lines, with directly related IT and Network costs, which are smoothed on an average 5-yr basis (3) 3Q’17 Organic Domestic Opex is changed to €2,028 mln (€1,999 mln plus €28 mln of liability reversals) Sales-related costs up YoY, supporting commercial performance in a very competitive environment. Caring cost sub-cluster showing some improvement Industrial flat YoY, supported by lower energy costs Rigorous cost discipline and zero-base approach on G&A and IT, also supported by YtD real estate space reduction of 380k sqm Labor cost savings driven by FTE reduction of 3.2% YoY (down 1,464 YoY; domestic workforce 3Q18 44,260 vs 45,724 3Q17) Other costs flat YoY excluding one-offs 3Q’18 Domestic OPEX: stable YoY trend despite increased commercial activity 3Q17 3Q18 Addressable Cost Base 1,677 flat 1,680 Commercial and Caring 705 4.4% 736 Industrial 266 flat 268 G&A, IT 127 -9.4% 115 Labor 580 -3.3% 561 Other 350 -1 349 Interconnection 410 -30 380 Credit Cost (1) 23 26 49 Bad Debt & Other 30 -11 19 Capitalized Cost & Other (2) -113 13 -100 Total Opex 2,028 flat 2,029 (3)
  • 14.
    13 3Q’18 Results 9/'17 9/'189/'17 9/'18 Traffic Growth Mobile Fixed +46% +45% 97% >98% 70% ~80% 9/'17 9/'18 Coverage LTE FTTx ▪ Ultra broadband coverage extended in line with Plan ▪ Fixed access YoY reduction derived from having reached ~80% FTTx coverage, which will now continue in synergy with 5G (FWA) ▪ 4G access reduction will be rebalanced by up-and-coming VRAN technology and 5G roll-out ▪ Heavy traffic growth fully supported ▪ Procurement transformation in progress: number of suppliers and unitary costs reduced 9M’18 Domestic Capital intensity reduced, ultra broadband coverage improved 222 211 298 193 895 420 726 701 379 413 9M'17 9M'18 -572 -22.5% 34 -25 -475 -105 -12 2,547(1) 1,975 Mobile access Fixed access Capacity, run and maintain CPE & success based Other IT (1) Net of € 630 million License capex in 3Q’17 Organic data, €mln, Δ YoY CAPEX/sales 22.5% 17.5%-5.0p.p.
  • 15.
    14 3Q’18 Results 9M’18 TIMGroup Operating free cash flow generation (1) - € 407 mln excluding GSM Licence (2) + € 41 mln excl. Brazilian Spectrum Reported, €mln Group 998 1,457 (1,334) (2,000) 2,332 3,457 EBITDA- CAPEX DOWC OpFCF +1,125 -666 +459 9M’17 9M’18 Brazil (86) 176 (552) (310) 466 486 9M’17 9M’18 +20 +242 +262(2) EBITDA- CAPEX DOWC OpFCF 1,083 1,306 (795) (1,677) 1,878 2,983 9M’17 9M’18 +1,105 -882 +223(1) Domestic DOWC OpFCF EBITDA- CAPEX Δ operating working capital differences driven by: ▪ Roll-down effect of cash costs: 0.4bn € ▪ VAT change-in-law impact (split payment): 0.3bn € ▪ Early retirement cash-out and other: 0.2bn € Most of these impacts are specific of 2018 only
  • 16.
    15 3Q’18 Results Other Impacts NFP FY17 NFP 9M18 NFP 1H18 Op.FCF Dividends& Change in Equity Op.FCFFinancial Expenses & Cash Taxes Financial Expenses & Cash Taxes Other Impacts NFP 9M’17 9M’18 TIM Group Net financial position* has been reduced from 3Q’17 and YE’17 +49 €mln; (-) = Cash generated, (+) = Cash absorbed, excluding call-outs -1,038 -118 *Adjusted for mark-to-market of hedging derivatives
  • 17.
    16 3Q’18 Results* TIMalso has band in 3400-3600 MHz, as well as Linkem, Aria/Tiscali and other operators (Go Internet, Mandarin, Brennercom, Eolo). For Fastweb, Aria/Tiscali spectrum acquisition is not considered Best in class allocation in 3.6-3.8 GHz available from 2018, without material cash-out impact in plan horizon Focus on 5G 5G auction payments are back-end loaded in 2022, and will not increase group net financial position until cash-out occurs 5G licences will expire in 2037, 2100MHz will expire in 2021, all other licences will expire in 2029 Vodafone Wind/3 Iliad Fastweb 800 LTE 1800 GSM/LTE 2100 UMTS 900 GSM/UMTS 1450 Band “L” (SDL) 3600-3800* 5G 700 26000 2x10 80 200 2x10 20 2x202x10 2x15 5 2x10 200 2x10 20 2x202x10 2x15 5 200 2x10 2x202x10 2x20 10 2x10 200 2x102x5 2x10 200 2600 LTE 2x15 2x15 2x20 2x10 30 80 20 20 MHz TOTAL MHz EXCLUDING 26GHz 265 265 220 110 20212018 2019 2020 TIM Schedule of payments 477€ 18€ 110€ TOTAL investment in 5G 2,399€55€ 680,2 million in 700 MHz 1,686 million in 3.6-3.8 GHz 33 million in 26 GHz mln Only 606 mln € spend in the next three years 2022 1,738€
  • 18.
    17 3Q’18 Results Bonds Loans(of which long-term rent, financial and operating lease payable € 2,104) Undrawn portions of committed bank lines Cash & cash equivalent (1) € 28,421 mln is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 766 mln) and current financial liabilities (€ 814 mln), the gross debt figure of € 30,001 mln is reached (2) In June, July and October TIM signed € 1.4 bln of bilateral loans at an average term of 3.5 years (1) TIM Group Actively managing refinincing needs to keep a strong liquidity margin €mln 649 1,449 541 1,494 733 343 1,657 6,8665,000 582 2,447 1,267 564 3,087 2,422 11,186 21,555 3,603 8,603 1,231 3,896 1,808 2,058 3,820 2,765 12,843 28,421 Liquidity margin Within 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Beyond 2023 Total M/L Term Debt Liquidity margin improved by € 500 Mln QoQ, supported by new bilateral loans(2) at a cost below TIM secondary market bond yields, covering any cash requirement from debt renewals until 2021 Debt Maturities Liquidity Margin
  • 19.
    18 3Q’18 Results 3Q’18 Results 1 2 3 FinancialUpdate Closing Remarks Highlights and Main Trends
  • 20.
    19 3Q’18 Results Closing remarks TheCompany remains committed to the strategic priorities of its plan, which will be reviewed and enhanced 3Q’18 operational achievements: ▪ Domestic transformation leads to strong operational KPIs in a challenging context ▪ Resilient performance in Italy, growth confirmed in Brazil 5G auction financial undertakings will be met with the firmest determination to deleverage: ▪ Debt reduction remains an utmost priority, driven by organic performance, and further supported by the disposals of Persidera and Sparkle
  • 21.
  • 22.
    21 3Q’18 Results Organic data(1),€mln, % YoY ~48% ~28% ~12% ~8% ~3% 68% 32% By Technology By Business Segment 5% 95% Fixed +11.5% Mobile +2.9% Domestic Brazil Consumer -1.3% Business +0.5% Nat. WHS +5.6% Inwit/others +4.3% By Technology ▪ Mobile: despite slower prepaid and postpaid due to macro, growth confirmed ▪ Fixed: TIM Live double-digit performance continues. FTTH launched in 5 cities. (1) Excluding exchange rate impact and non-recurring items (2) Net of eliminations Group Total Service Revenues (2) 4,380 -0.3% Domestic 3,518 -1.0% Brazil 872 +3.3% Sparkle -11.7% ▪ Mobile: Service revenues impact from Iliad entry remained limited. Competitive pressure trended better at the end of the quarter. ▪ Fixed: Retail service revenues up +1.1%. ▪ Business: continued revenue growth, steady customer base ▪ Consumer: impacted by competitive dynamics and still affected by 28-day billing reversal. ▪ National Wholesale: more fiber and growth of non-regulated revenues ▪ Sparkle: reduction on low-margin business; impact on Ebitda limited to - 4 mln € YoY ▪ Inwit: continued organic growth Fixed -0.3% Mobile -2.8% -4% Other & Eliminations 3Q’18 TIM Group Service revenues breakdown
  • 23.
    22 3Q’18 Results TIM Domestic Ultrabroadband network ▪ ~113 k cabinets passed ▪ ~366 k FTTH OTB installed ▪ ~19.4 mln HH passed FTTC ▪ 2,511 cities with commercial active service, o/w: ▪ 2,395 cities FTTC ▪ 116 cities FTTH/FTTC ▪ >19.7k LTE nodes ▪ 7,367 cities LTE with commercial active service, o/w: ▪ 1,524 with 4Gplus ▪ 12 cities with 4.5G Fixed UBB 42% ~60% 77% 78.3% 79.8% ~80% 2015 2016 2017 1Q'18 2Q'18 3Q'18 88% >96% >98% >98% 2015 2016 2017 1Q'18 2Q'18 3Q'18 % FTTC passed % LTE passed Mobile UBB
  • 24.
    23 3Q’18 Results Average m/lterm maturity: 7.67 years (bond only 7.78 years) Fixed rate portion on gross debt approximately 70.3% Around 31% of outstanding bonds (nominal amount) denominated in USD and GBP and is fully hedged Cost of debt: ~4.4 % Gross debt 30,001 Financial Assets (4,811) of which C&CE and marketable securities (3,603) - C & CE (2,543) - Marketable securities (1,060) - Government Securities (551) - Other (509) Net financial position 25,190 Maturities and Risk Management N.B. The figures are net of the adjustment due to the fair value measurement of derivatives and related financial liabilities/assets, as follows: - the impact on Gross Financial Debt is equal to 1,489 €/mln (of which 169 €/mln on bonds); - the impact on Financial Assets is equal to 552 €/mln. Therefore, the Net Financial Indebtedness is adjusted by 937 €/mln N.B. The difference between total financial assets (€ 4,811 mln) and C&CE and marketable securities (€ 3,603 mln) is equal to € 1,208 mln and refers to positive MTM derivatives (accrued interests and exchange rate) for € 909 mln, financial receivables for lease for € 90 mln, deposits beyond 3 months for € 1 mln and other credits for € 208 mln. TIM Group Well diversified and hedged debt €mln Banks & EIB 5,365Other 704 Op. leases and long rent 2,141 Bonds 21,791 17.9% 72.6% 2.4% 7.1%
  • 25.
    24 3Q’18 Results As fromJanuary 1, 2018, IFRS 9 (Financial Instruments) and IFRS 15 (Revenues from Contracts with Customers) have to be applied. In order to allow comparison of the results for 3Q’18 with those for the same period of the previous year, financial statements data are also prepared under previous accounting principles. IFRS 9 impacts the determination of expected losses on trade receivables and other financial assets (change from the incurred loss model provided by IAS 39 to the expected credit loss model). IFRS 15 impacts the revenue recognition of fixed and mobile offerings as well as the recognition of relevant contractual costs, without any impacts on cash flows. TIM Group IFRS 9-15 impacts Reported data, € mln, Rounded numbers (1) The ongoing refinements, also on supporting IT systems, related to the process of implementation of the new accounting standards, together with the high number of new commercial offers in recent months, have led - in the financial statements of the first nine months of 2018 - for some specific contractual cases within the fixed and mobile sectors, to the recalculation of the temporal distribution of revenues during the year. Revenues Services Revenues EBITDA 9M '18 old IFRS D IFRS 15 9M '18 new IFRS 9M '18 old IFRS D IFRS 15 9M '18 new IFRS 9M '18 old IFRS D IFRS 9 - 15 9M '18 new IFRS TIM Group 14,217 (140) 14,077 13,165 (140) 13,025 6,030 (252) 5,778 Domestic 11,311 (129) 11,182 10,397 (141) 10,256 4,958 (219) 4,739 Brazil 2,929 (11) 2,918 2,791 1 2,792 1,084 (34) 1,050 (1)