Telecom Italia’s Earnings Call: Mixed Outlook with Strategic Moves

Telecom Italia S.P.A. ((TIIAY)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Telecom Italia S.P.A. (TIM) presented a balanced sentiment, reflecting both optimism and challenges. The company received strong backing from Poste Italiane, which has become its largest shareholder, and reported solid growth in its enterprise and international operations. However, the company faces hurdles in achieving domestic EBITDA growth targets and managing energy costs without government support.

Poste Italiane Becomes Largest Shareholder

Poste Italiane has agreed to acquire a 15% stake from Vivendi, resulting in Poste holding 24.8% of ordinary shares in TIM. This strategic move is expected to enhance governance and bring about industrial stability, marking a significant shift in the company’s shareholder structure.

Revenue and EBITDA Growth

TIM reported a 2.7% increase in group revenues and a 5.4% growth in EBITDA after lease year-on-year. This growth is underpinned by a stable consumer market and robust performance in the Enterprise division, which saw high single-digit growth.

Strong Performance in TIM Enterprise

TIM Enterprise demonstrated strong performance with mid-single-digit revenue growth. Notably, cloud services played a pivotal role, contributing to a 24% increase in service revenue, highlighting the division’s strategic importance.

TIM Brasil’s Solid Performance

TIM Brasil continued to perform well, showing mid-single-digit top-line growth. This was primarily driven by mobile service revenue, with a focus on customer base monetization and operational efficiency.

Cost and Debt Management

The company successfully extended its revolving credit facility to 2030, albeit reducing its size from EUR 4 billion to EUR 3 billion. TIM maintained a low leverage ratio of 2.05x, reflecting prudent financial management.

Negative Equity Free Cash Flow

The company reported a negative equity free cash flow of EUR 0.2 billion, attributed to seasonal working capital absorption and extraordinary working capital effects. This marks an improvement from the previous year’s negative EUR 1 billion.

Domestic EBITDA Guidance

Domestic EBITDA growth for the first quarter fell short of the full-year guidance, indicating the need for stronger performance in the coming quarters to meet targets.

Potential Delays in Government Support

TIM does not anticipate significant government support for energy costs in 2025, which could affect potential earnouts related to energy cost assistance.

Challenges in Network Infrastructure Sharing

The company is exploring network sharing opportunities with other operators. However, this remains a complex and unresolved issue, presenting both challenges and opportunities for future growth.

Forward-Looking Guidance

Looking ahead, TIM provided guidance on key metrics for the first quarter of 2025. The company expects a 2.7% increase in group revenue and a 5.4% rise in EBITDA after lease. Despite seasonal challenges, equity free cash flow showed significant improvement. TIM also highlighted strategic developments, including Poste Italiane’s acquisition of a 15% stake from Vivendi and ongoing negotiations to grant Poste Mobile access to TIM’s network by Q1 2026.

In summary, Telecom Italia S.P.A.’s earnings call reflected a mixed sentiment, with strong shareholder support and growth in enterprise operations counterbalanced by domestic EBITDA challenges and energy cost management issues. The company’s strategic moves, particularly involving Poste Italiane, signal potential for improved governance and stability, while ongoing efforts in network sharing and cost management will be crucial in navigating future challenges.