However, service revenues trended downwards, posting a decline of 6.6% year on year to reach €3.7 billion due to Covid-19 lockdowns, ongoing product portfolio rationalisation, and “more disciplined commercial conduct”.
Meanwhile organic group EBITDA declined 7.5%, “thanks to the cost savings that partially offset the reduction in revenues”. The margin on revenues increased by 0.5 percentage points year on year to reach 44.6% in the quarter. Meanwhile, domestic business EBITDA came to €1.4 billion euros (a decline of 11.1% year on year), while the EBITDA of TIM Brasil increased by 8.1% YoY.
Group EBITDA after leases totalled €1.5 billion, a decline of 8.5% year on year, on an organic basis.
The results, released by Telecom Italia’s (TIM) board of directors, have been attributed to the operator’s implementation of strategic initiatives in 2019. This marks the second release of annual financial results since the appointment of CEO Luigi Gubitosi (pictured) in late 2018.
The board added: “This improvement is also the result of a rationalisation of the product portfolio and more disciplined commercial conduct, which lead to a fall in revenues in the short term, but a significant increase in cash generation and, above all, in customer satisfaction, strongly improved in 2020.”
TIM’s net profit stood at €591 million, with cash generation reaching €923 million in the quarter. Consequently, the net financial debt at March 31 declined by more than €923 million since the end of 2019, standing at €26.7 billion, or €21.7 billion after lease.
Other highlights included:
Operating free cash flow: €788 million, with an increase of €98 million YoY (+14%)
Equity free cash flow: €466 million, with an increase of €110 million YoY (+31%)
Net financial debt down by €923 million for the quarter and 1.8 billion euros YoY
Net financial debt after lease: €21.7 billion
Organic EBITDA: €1.8 billion (-7.5% YoY)
The news followed reports in March that TIM aimed to generate €1 billion annual revenues from cloud, edge and other services by 2024 after signing an agreement with Google Cloud.
In terms of the company’s global interests, the financial update detailed an exclusive concession granted to a consortium led by Ardian Infrastructure and participated by Canson Capital Partners for the acquisition of a minority stake in the holding which will hold TIM's stake in INWIT.
Further, the exclusive negotiation with KKR for the valorisation of the passive fixed network is ongoing and, in Brazil, negotiations continue for TIM and Telefonica to acquire OI’s mobile business.
On the topic of Covid-19, TIM said it had increased the capacity and coverage of its networks, and added: “The financial results have been impacted by the effects of shop closures and therefore product sales, and by reduced roaming traffic to and from abroad.
“However, in contrast to a short-term downturn, the medium-long term outlook is positive, following the strong acceleration in the adoption of digital services and connectivity that appears to be moving Italy towards closing its fixed ultrabroadband penetration gap versus the rest of Europe, as well as to reverse the trend of fixed-mobile replacement.”
In terms of business performance by division and geography, TIM recorded:
€30.5 million – the total number of TIM mobile lines, March end, down 1.2% QoQ
3% churn – in part due to Covid-19 lockdowns
119,000 net increases (+105,000 in the previous quarter) – customers migrating to ultrabroadband in the fixed line segment
3 million units – a 22% increase year on year in the total number of fibre lines, retail and wholesale
6% increase in YoY revenues – benefitting from continuous migration of customers from copper to fibre
6% increase in service revenues in Brazil – despite Covid-19 and macroeconomic trends
