dbAccess TMT Conference
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Telecom Italia Group held a dbAccess TMT Conference on September 3rd, 2014. Marco Patuano, CEO of Telecom Italia Group, presented highlights from the second quarter of 2014. The presentation contained forward-looking statements and noted changes in reporting classifications. Key highlights from the second quarter included stable performance in line with the company's plan, with improving revenue trends in Italy and continued strong growth in mobile data demand and network investments in Brazil.
dbAccess TMT Conference
- 1. Telecom Italia Group TELECOM ITALIA GROUP dbAccess TMT Conference London, September 3rd, 2014 Marco Patuano
- 2. dbAccess TMT Conference 2 Marco Patuano Safe Harbour These presentations contain statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of developments and changes in the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Telecom Italia 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. Consequently, Telecom Italia makes no representation, whether expressed or implied, as to the conformity of the actual results with those projected in the forward looking statements. Forward-looking information is based on certain key assumptions which we believe to be reasonable as of the date hereof, but forward looking information by its nature involves risks and uncertainties, which are outside our control, and could significantly affect expected results. Analysts and investors are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telecom Italia undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telecom Italia business or acquisition strategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and investors should consult the Company's Annual Report on Form 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securities and Exchange Commission which may identify factors that affect the forward looking statements included herein. The accounting policies adopted in the preparation of the Half-Year Condensed Consolidated Financial Statements as of and for the six months ended 30 June 2014 have been applied on a basis consistent with those adopted in the Annual Consolidated Financial Statements at 31 December 2013, to which reference should be made, except for the new standards and interpretations adopted by the Telecom Italia Group starting from 1 January 2014 which had no effects on the Half-Year Condensed Consolidated Financial Statements as of and for the six months ended 30 June 2014. Please note that the limited review on the Telecom Italia Group Half-Year Condensed Consolidated Financial Statements at 30 June 2014 has not yet been completed. Following the classification, starting from the fourth quarter 2013, of the Sofora - Telecom Argentina group as a disposal group (Discontinued operations/Non- current assets held for sale) the consolidated financial statements data of prior periods (including the first half 2013) have been restated accordingly and therefore the Sofora - Telecom Argentina group is no longer separately presented as a business unit. Furthermore: •starting from the First Quarter 2014, Organic change in Revenues, EBITDA and EBIT are determined excluding, where applicable, only the effects of the change in the scope of consolidation and exchange differences and therefore don’t take into account, as in the past, non-organic income and expenses, including those non-recurring; •starting from the Interim Report at 31 March 2014, the Domestic business unit includes the Olivetti group, in addition to Core Domestic and International Wholesale. This different presentation reflects the commercial and business placement of the Olivetti group and the process of integrating its products and services with those offered by Telecom Italia in the domestic market. In the past, the results of the Olivetti group were included in the “Olivetti” business unit; as a result, the data for prior periods under comparison have been restated, accordingly.
- 3. dbAccess TMT Conference 3 Marco Patuano Service Revenues 4,871 mln € • Organic Performance at -7.1% YoY vs -6.5% in 1Q’14 reflects: • Domestic trend stabilization with a consistent improvement in mobile service revenues. Good acquisition trend in Fixed & Mobile UBB; • Slight erosion in TIM Brasil figures impacted by full MTR drag in 2Q Solid growth in Mobile Generated Revenues • Organic improvement to -4.8%YoY vs -5.7% in 1Q’14 driven by: • +0.8pp in 2Q in Domestic operations (+2.5pp net of subsidy); • Continued Sound performance of TIM Brasil Ebitda 2,145 mln € Innovative Capex ~250 mln € • Constant progression in this key area: • Italy: 83 municipalities covered with fiber, 60.5% population reached by LTE, TIM recognized by AGCOM as best network in Italy for speed and security in data transmission; • Brazil: 66 cities covered by mobile BB project (+13 cities vs 1Q’14) OpFCF generation 1,058 mln € • Strong Performance in 2Q’14: +11% YoY • Reduction of 0.2 bln € vs 1Q’14 & -1.5 bln € vs 2Q’13Net debt 27,36 bln € 2Q’14 Group Highlights: In Line with Plan
- 4. dbAccess TMT Conference 4 Marco Patuano Innovative revenues on total (1)MobileBBCBFiberCBnetadds 6.853 7.166 8.023 8.444 8.677 9.151 0% 1% 2% 4% 5% 7% 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 MBB Users % LTE on MBB Users +4,3 +10,9 +29,8 +58,1 0,1 0,2 0,5 >1.0 3Q'13 4Q'13 1Q'14 2Q'14 Fiber CB Avg daily acquisition ('000) >100k clients at the end of June ~+30% YoY Investing to support the growth in data and new services (1) net of wholesale ‘000 25% 32% 28% 32% 2Q’13 2Q’14 2Q’13 2Q’14 MobileserviceFixedservice innovative traditional innovative traditional Italy: Innovative Investments are meeting a Growing Demand
- 5. dbAccess TMT Conference 5 Marco Patuano Italy: the Lego of our Convergent Strategy Telecom “Tutto” TIM “Smart” Delta ARPU post vs pre launch phase new linesexisting CB Growth Broadly stable Stable Double digit growth mobilefixed A Value-Accretive Proposition A Successful Proposition: locked-up more than 1 mln clients ~5k per day: >50% new client & upselling only-voice The Leaders in Connectivity and Content are together with a unique offer Telecom Italia & Sky • Commercial partnership for Sky Online (OTT SKY offer) • Complete Sky Offer onTelecom Italia IPTV (Feb. 2015) • Accessibility over mobile of SkyGO and premium sport content with «connectivity embedded” • ~300k clients at July ’14 of which ~40% with decoder (vs ~ 15% July ’13) • Strong reduction in churn rate: ~5% (vs >15% in July ’13) • Relevant growth in viewing time thanks to technical improvements : 2.5x vs July ’13 Cubovision rebranded:“TIM” as one single commercial brand
- 6. dbAccess TMT Conference 6 Marco Patuano Traditional • Outgoing ARPU stabilization • Zero MTR drag • Constant recovery in calling CB Innovative • Increasing smartphone penetration • 4G uptake support • New digital entertainment services Service Revenues Trend Italy: Clear signs of improvement for a better 2H’14 %YoY ‐14.9% ‐13.3% 1Q'14 2Q'14 3Q'14 4Q14 + + Traditional • F/M traffic erosion reduction due to bundled offers • Access valorisation Innovative • Constant support from BB CB growth • Increased fiber penetration and adoption • Continued uptrend in ICT services -7.3% -8.6% 1Q'14 2Q'14 2H'14 + ARPU CB -7,3% -8.6% 1Q'14vs1Q'13 2Q'14vs2Q'13 -10,4% -13,1% +0,1% +1,8% -14,9% -13.3% 1Q'14vs1Q'13 2Q'14vs2Q'13 -24,1% -21,9% +9,9% +8,4% Service Revenues Trend 2H’142Q’14 1Q’14vs1Q’13 2Q’14vs2Q’13 1Q’14vs1Q’13 2Q’14vs2Q’13 1Q’14vs1Q’13 2Q’14vs2Q’13 1Q’14vs1Q’13 2Q’14vs2Q’13 Traditional services Innovative services Traditional services Innovative services Mobile Service Revenues Fixed Service Revenues
- 7. dbAccess TMT Conference 7 Marco Patuano Brazil: Our Summer Assessment Reinforced the Importance of its Value TIM’s Infrastructure Strategy: Data Centric Approach CapacityCoverageAvailability • Higher speed • 4G roll out • Mobile broadband project acceleration • Backhauling infrastructure • Homogeneous • Access upgrade • Coverage in all relevant areas • Site densification • Small cell / Wi-Fi • Always available • Fine tunning • Fiber rings / redundance • Resilience Number of 3G & 4G Sites Number of Wi-Fi & Small Cell Number of sites with fiber (FTTS) 4Q13 2Q14 4Q13 2Q14 2Q13 2Q14 +19% +47% 3.5x 2H’14 Network Approach 700Mhz Auction (30th September 2014) Supports our continued development of mobile data, increasing our 4G frequencies and roll-out Best-in-Class Network Investments to address New Customer Needs 2G 3G 3G “dense” Densification Project Retaining customers with data devices Improve quality of experience Boost data usage MBB Project
- 8. dbAccess TMT Conference 8 Marco Patuano +7% +9% -30% -23% -1% +1% -18% -22% mobile • Outgoing Voice Revenues flat • SMS declining trend Excellent take-up in data KPIs in 2Q • Smartphone & webphone penetration at 62% • Smartphones ~71% of new handset sales YoY, % +3% ex-MTR -2,0% +0,3% Total Service Revenues Mobile & Fixed Service Revenues Mobile Service Revenues(1) -7% flat -1% Outgoing SMS Outgoing Voice Traditional +73% +35% +44% Vas Content & other VAS Data Innovative 1Q’14 2Q’14 fixed(2) received generated 1Q’14 partially impacted by MTR cut 2Q’14 fully affected by this year MTR cut (1) visitors&other revenues non included (2) revenues based on net contribution Brazil: Mobile Data Demand is Rapidly Expanding
- 9. dbAccess TMT Conference 9 Marco Patuano The Market is Asking for TIM % of smartphone sales among players in 2Q14 % of smart + webphone on TIM’s base in 2Q14 % of smartphone over new sales in 2Q14 Postpaid o Reduce churn on postpaid o Attract dual SIM card users traffic o Renewed focus on corporate customers o Leveraging on “pure mobile” distinctiveness o Expanding daily tariff scheme to new regions o Simplicity / Transparency R$ 7 weekly service package R$ 0.75 daily offer Prepaid 35% 50% 62% 2Q12 2Q13 2Q14 39% 57% 71% 2Q12 2Q13 2Q14 41% 23% 28% 9% P3 P2 P1 TIM Managing customer base… To Infinity and beyond… Penetration of smart + webphones drives data usage growth Source: GFK Group Source: Company Source: Company Brazil: Building on our Commercial Strenght
- 10. dbAccess TMT Conference 10 Marco Patuano Domestic • Domestic business on track with 2014-2016 Plan • Improving trend in mobile space paving the way to a solid 2H2014 • Line losses and voice ARPU weak as expected; increasing BB ARPU and sound fiber take-up rate leading to a better fixed revenues mix • Continued over-performance on efficiencies with a positive impact on OpFCF Efficiency Plan Innovative Capex • The take-up of innovative services shows we must keep our focus on CAPEX for innovation M&A • Driven by Financial Discipline Marco Patuano • Free Cash Flow Generation well on track and debt duly managed FCF generation 2Q’14 Group Take-Aways Brazil • Brazilian mobile transformation to a data driven market is underway: data revenues almost offset MTR drag and by 2016 it will account for 40% of total revenues • Focus on development and investment ‘14-’16 Plan leveraging on TIM Brasil’s strong position in the market.
- 11. dbAccess TMT Conference 11 Marco Patuano Appendix
- 12. dbAccess TMT Conference 12 Marco Patuano Brazilian TLC Market – Mobile Accesses Trend (‘000) 75,988 76,200 76,614 77,245 78,465 79,357 79,406 71,232 72,195 72,892 73,431 73,917 74,203 74,372 66,308 66,472 67,432 68,704 68,749 68,776 68,932 49,494 49,708 50,013 50,216 50,579 51,081 51,095 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Jul‐14 Telefônica Brasil TIM Claro Oi Pre-Paid Post-Paid 56,470 55,515 54,476 53,552 53,553 53,188 52,984 60,306 60,803 60,953 61,146 61,687 61,963 62,123 52,89552,768 53,563 54,388 54,144 53,964 54,012 41,107 41,326 41,640 41,753 42,035 42,329 42,278 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Jul‐14 19.518 20.685 22.138 23.693 24.912 26.169 26.422 10.926 11.393 11.940 12.285 12.230 12.239 12.249 13.413 13.705 13.869 14.316 14.605 14.812 14.920 8.386 8.382 8.374 8.463 8.545 8.752 8.818 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Jul‐14
- 13. dbAccess TMT Conference 13 Marco Patuano Brazilian TLC Market – Market Shares on Mobile Accesses (%) 28,78 28,67 28,56 28,49 28,68 28,78 28,75 26,98 27,17 27,17 27,09 27,02 26,91 26,93 25,11 25,01 25,14 25,34 25,13 24,95 24,96 18,74 18,71 18,64 18,52 18,49 18,53 18,50 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Jul‐14 Telefônica Brasil TIM Claro Oi 26,71 26,30 25,78 25,31 25,24 25,06 24,97 28,53 28,81 28,84 28,90 29,07 29,19 29,27 25,02 25,00 25,34 25,71 25,51 25,42 25,45 19,45 19,58 19,70 19,73 19,81 19,94 19,92 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Jul-14 37,06 37,83 38,89 39,81 40,59 41,25 41,33 20,75 20,84 20,97 20,64 19,93 19,29 19,16 25,47 25,07 24,36 24,05 23,80 23,35 23,34 15,92 15,33 14,71 14,22 13,92 13,80 13,79 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Jul-14 Pre-Paid Post-Paid