Telecom Italia 1Q 2013 ResultsMARCO PATUANO 5 TELECOM ITALIA GROUP 1Q 2013 Results D Capex 1Q12 1Q13...
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TELECOM ITALIA GROUP 1Q 2013 Results Milan, May 9th, 2013 Telecom Italia 1Q 2013 Results MARCO PATUANO
Transcript of Telecom Italia 1Q 2013 ResultsMARCO PATUANO 5 TELECOM ITALIA GROUP 1Q 2013 Results D Capex 1Q12 1Q13...
TELECOM ITALIA GROUP
1Q 2013 Results Milan, May 9th, 2013
Telecom Italia
1Q 2013 Results
MARCO PATUANO
1 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
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 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 Company and the 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 S.p.A. makes no representation, whether expressed or
implied, as to the conformity of the actual results with those projected in the forward looking statement.
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 are cautioned not to place undue reliance on those forward looking statements, which speak only as of
the date of this presentation. Telecom Italia S.p.A. 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 S.p.A. business or acquisition
strategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and
investors are encouraged to 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.
Some data for the first quarter 2012, used in comparisons, included into this presentation have been restated as
a result of the early adoption, starting from the first half 2012, of the revised version of IAS 19 (Employee
Benefits) and the reclassification of Matrix (company that was disposed of on October 31, 2012) from the
Business Unit Domestic–Core Domestic to the Business Unit Other Activities.
2 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Agenda
Domestic 1Q13 Progress Report
Mobile Business
Fixed Business
Appendix
3 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Structurally Evolving in a Changing Environment
Cu
rre
nt
Sit
ua
tio
n
Economy Regulation Highlights 1 2 3
Acti
on
s
Operating Performance Regulated Prices
Focus on «Willingness to
Pay» Areas
New Labour Contract
Agreement
BoD to assess for final kick-off
decision on our Structural
Separation Plan by May 23rd
Proceed thereafter to enact our
Structural Separation Plan,
targeting a new Regulatory
framework for our Fixed Access
Network Company and TI‟s Retail
Operations
Defend Market Share
Confirm Value and Quality
approaches
Distinctive deployment of Next
Generation Networks
Confidence Indexes
100,8 96,3
85,3 97,2
82,1
73,7
Mar-2011 Mar-2012 Mar-2013
Consumer Confidence Corporate Confidence*
* Services Sector
Tra
dit
ion
al
Inn
ova
tive
Fixed
Mobile
Fixed Internet
Business Data & ICT
Mobile Internet U
LL
B
itstr
ea
m
MTR
AG
CO
M
pro
po
sa
l
AG
CO
M
de
cis
ion
A
GC
OM
de
cis
ion
4 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Domestic 1Q13 Top Line Euro mln, Organic data, %
Domestic Revenues
Core Domestic Revenues 1Q13 vs 1Q12 Bridge Highlights
Core Domestic Revenues Trend – D% YoY
4.244 3.832
347 283
1Q12 1Q13
-18.4%
-9.7%
Sparkle
Core
-453 M€
-10.1% 4,477 4,024
-3,2%
-4,6%
-7,9%
-8,9% -9,7%
-4,2%
-3,9%
-6,4% -7,5%
-6,7%
1Q12 2Q12 3Q12 4Q12 1Q13
Core Core Normalized
Operating
+8,8% +9,0%
-9,5% -10,9% -18,4%
Sp
ark
le
Co
re
-3.0pp -6.7pp
Dual Speed in Domestic Revenues Trends:
Improving Core Domestic Revenues on a
Normalized basis
Double-digit drop in Sparkle Trend as per the new
rationalization process on low-margin contracts,
supporting however EBITDA contribution
Significant Regulatory & Other exceptional elements
impacts on 1Q13 Results
-3,6pp
-9,7pp
-3,1pp
-2,2pp
-0,8pp
Mobile Fixed Regulatory
Calendar &
Other
Total Core
Domestic
5 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
D Capex 1Q12 1Q13
Euro mln, Organic Data
Outstanding Ebitda Margin Confirmed
(489)
D EBITDA DWC
-218M€
-9.8%
% on Total Revenues
49.7% +0.2 p.p. 49.5%
2,218 2,000
Ebitda
Capex Highlights
Domestic OpFCF
1Q12 1Q13
1,167
678
(242)
+8 (255)
1 2
3
1
2
3
Euro mln, Reported Data
1Q12 1Q13
586 578
-8M€
-1.4%
Confirm investments rirght-sizing increasing YoY Innovative
Capex share
Reversal effect of suppliers payment deferral related to
134/2012 Law
EBITDA performance held back by key actions enacted
only from April onwards (such as Solidarity Contract,
Fixed Price Simplification)
6 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Consumer Segment Trend – YoY% change
Revenues Trend by Segment: Consumer & Business
Business Segment Trend – YoY% change
* Source: ISTAT for 2012 – Prometeia for forecasts
** Data Normalized for bad weather and calendar discontinuities; Excluding Regulatory Impact (D MTR and EU Roaming price cap)
Lower Italian 2013 GDP Forecasts*
-1,6%
-2,6% -2,6% -2,8%
-2,1% -1,8% -1,7%
-0,5% -1,7%
-0,9%
-0,4%
+0,4%
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13
New GDP Outlook 2013 Trend - as of April
Old GDP Outlook 2013 Trend - as of February
FY12
-2.4%
Impacts on Business 1Q13 Revenues Trend
Regulatory Economic Context Competition
More than 2/3
of Revenues Drop
-1,1%
-1,8%
-6,9%
-4,5%
-8,9%
-2,5%
-1,2%
-5,3%
-2,7%
-4,8%
1Q12 2Q12 3Q12 4Q12 1Q13
-6,5%
-9,6%
-11,7%
-15,3%
-13,1%
-7,5%
-8,7% -9,7%
-13,7%
-10,5%
1Q12 2Q12 3Q12 4Q12 1Q13
Reported Trend Normalized Trend
-4.0% -2.8% -6.3% -4.4% -5.3%
-5.5% -6.5% --7.5% -9.9% -10.3%
Service Revenues Trend Normalized
Service Revenues Trend Normalized
~1/3
~1/3
7 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Agenda
Domestic 1Q13 Progress Report
Mobile Business
Fixed Business
Appendix
8 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
1.335 1,175
176
56
62
62
77
87
1Q12 1Q13
Euro mln, Organic Data
Mobile Revenues: 1Q13 Results at a Glance
Total Mobile Revenues
Business Generated
Business Received
Handsets
Retail Services
Total Service Revenues
Wholesale & others
Total Mobile Revenues
-12.0%
-68.2%
1,511
1,231
1,573
1,292
1,650
1,379
-18.6%
+0.2%
-17.9%
+12.2%
-16.4%
% YoY
-11.0%
Excluding UE Roaming impacts
Service Revenues Trend – D YoY
Total Revenues Trend – D YoY
-3,7%
-7,5%
-13,0%
-11,7%
-17,9%
-5.7%
-6.2% -8.5%
-6.8%
-9.4%
1Q12 2Q12 3Q12 4Q12 1Q13
Reported Normalized
-1,7%
-5,0%
-11,5%
-9,4%
-16,4%
-3,6%
-3,8%
-7,1% -5,0%
-8.4%
1Q12 2Q12 3Q12 4Q12 1Q13
Data Normalized for bad weather and calendar discontinuities; Excluding Regulatory Impact (D MTR and EU Roaming price cap)
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TELECOM ITALIA GROUP
1Q 2013 Results
Mobile Domestic Market Developments and TIM’s Response
While the Market is overheating in MNP…
…TIM‟s answer is twofold:
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13
+30%
+50%
Strong increase in MNP Market Volumes
Short term tactical
response
Shift and Structural change towards a more convergent positioning
1
2
Defend Market Share 1
Reinforce best-in-class CB Value & Churn 2
• Super Local offers
• Increased push on low-end cluster, leveraging on prices where
they matter most (geography/demography) to customers
• Strengthen Lock-in Action
• Reward value customer base with handset substitution (24
months lock-in) and data penetration.
• Stimulate loyalty with top-up discounts
• “2-Play” convergent offers
• Progress on “n-Play” offers
Pure
price
Pure mobile Full Convergence
Op4
Op2
Op3
SUBITO IL 20% IN PIÙ
AD OGNI RICARICA
E UNO SMARTPHONE
GRATIS
1
2
10 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
mln
Total SIM cards Annualized Market Churn
Domestic Mobile: Customer Base Trend
-0.3
32,3 32,2 31,9
1Q12 4Q12 1Q13
26%
29%
32%
30%
36% 36%
TIM VOD WIND
2013
2012
A tough 1Q for TIM‟s MNP – Better Outlook for 2Q
OU
T/IN
Avg 2012
MNP Balance Trend
January February March April
Increased
Competition
1,2 x 1,2 x
1,6 x
1,2 x
1,5 x
1Q12 2Q12 3Q12 4Q12 1Q13
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TELECOM ITALIA GROUP
1Q 2013 Results
Domestic Mobile Consumer: Focus on VAS
1Q YoY VAS Performance Browsing
1Q12
1Q13
Messaging
Browsing
Small Screen Market Share Large Screen
6,3
1Q12 1Q13
Total Users: Large + Small Screen
Mln users
Double Digit
Growth
Double digit growth both in
Revenues and Users
*% on gross adds
1Q12 1Q13
1Q12=100 Content 55,9%
62,4%
38,1% 40,3%
1Q12 1Q13
value volume
M/S on dongle
Users
Revenues
12 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Agenda
Domestic 1Q13 Progress Report
Mobile Business
Fixed Business
Appendix
13 MARCO PATUANO
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1Q 2013 Results
2.875 2.693
347 283
62 52
1Q12 1Q13
Euro mln, Organic Data, %
Domestic Fixed: Focus on core Service Revenue Performance
3,223 -7.7%
Total Fixed Revenues Domestic Service Revenues Trend – YoY % change
2,976
Sparkle
Core
Service
-18.4%
-6.3%
Sp
ark
le*
C
ore
Se
rvic
e
*net of elim. & adj
Consumer & Business Trend - YoY % change
Elim.
Equipment -17.3%
Core Service Revenues Trend – YoY % change
Re
tail
Do
me
sti
c
Wh
ole
sa
le
+8,8% +9,0%
-9,5% -10,9% -18,4%
1Q12 2Q12 3Q12 4Q12 1Q13
-3,9% -3,6% -5,9% -7,1% -6,2%
1Q12 2Q12 3Q12 4Q12 1Q13
-0,9% -1,2% -2,3%
-3,8%
-6,6%
-1,5% -1,0%
-4,0% -3,5% -4,4%
-2,4%
-0,8%
-4,0% -3,5% -3,6%
1Q12 2Q12 3Q12 4Q12 1Q13
-5,9% -6,6% -8,1% -9,2% -8,7%
-6,2% -6,2% -8,1% -9,6% -8,4%
Reported Normalized
Co
nsu
me
r B
usin
ess
-3,1% -2,9% -4,9% -6,2% -6,3%
-3,5% -2,7% -4,9%
-6,3% -5,9%
Reported Normalized
14 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Internet
Business Data & ICT
Consumer Segment Total Fixed Internet
o/w Internet Services
o/w BroadBand Services
Total Internet 405 mln €
+1.8%
o/w Internet Services
o/w BroadBand Services
Total Internet
401 mln € +1.7%
395 mln € +1.5%
268 mln € +3.7%
265 mln € +3.6%
260 mln € +3.2%
D YoY D YoY
D YoY
ICT Business Data
Domestic Fixed: Focus on Internet & Business Data Euro mln, Organic Data, %
-9,6%
-9,9%
-13,2%
-17,3%
-4,6% -5,9%
-4,3% -7,0%
-5,6%
-1,9%
1Q12 2Q12 3Q12 4Q12 1Q13
Business Data o/w Service
-9,9%
-8,8%
-16,8%
-21,2%
+0,4% -5,0%
+3,1%
-3,6% +1,1%
+9,4%
1Q12 2Q12 3Q12 4Q12 1Q13
ICT o/w Service
15 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
14.457 14.277 14.133 13.978 13.777
7.105 7.106 7.063 7.175 7.238
1Q12 2Q12 3Q12 4Q12 1Q13
Domestic Fixed: TI Access Performance
Fixed Access Line Losses Trend
-137k
21,562 21,195 21,016
TI
Re
tail
W
ho
lesa
le
TI
Re
tail
W
ho
lesa
le
Outgoing Voice KPIs OLO Access Growth
64.0% 65.5% 65.8% M/S
on total Mrk
21,153
64.6% -195
-180
-144 -155
-201
+45
+1
-43
+112 +63
1Q12 2Q12 3Q12 4Q12 1Q13
21,382
65.3%
-3,7%
-7,0%
-9,1% -8,2%
-12,4%
-2,0%
-1,1%
-0,7% -0,8%
+2,6%
1Q12 2Q12 3Q12 4Q12 1Q13
Volumes Price
+77
+62
+27
+79 +86
-7 +0
-24
+58 +7
-24
-61
-46
-25 -30
1Q12 2Q12 3Q12 4Q12 1Q13
ULL Naked WLR
16 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
7.092 7.037 7.030 7.020 6.984
6.458 6.579 6.630 6.738 6.804
1Q12 2Q12 3Q12 4Q12 1Q13
‘000
TI retail accesses
M/S 52.3% 51.5% 50.7%
Broadband Accesses* BB Lines Evolution
Domestic Fixed: Broadband Figures
Retail Broadband ARPU Growth Highlights
Total Market
13,550 13,757 13,788
Monetizing from our Value Strategy:
Positive trend in Broadband ARPU quarter by
quarter
Further increase of flat vs free BB clients
Broadly Stable Broadband Market Share above 50%
Euro/month/line
BB OLO
13,617
51.7%
TI
Re
tail
B
B O
LO
‘000 13,660 +240
+121
+51
+108
+66
-33 -55
-7 -10 -36
1Q12 2Q12 3Q12 4Q12 1Q13
51.0%
18,3
18,5 18,6
18,9 18,9
1Q12 2Q12 3Q12 4Q12 1Q13
+3.5%
* AGCOM figures
17 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
First Quarter 2013 Take-Aways Balance to FY2013
Domestic Take-Aways
The Italian economic environment is not improving yet
Regulatory effects from MTR and EU Price Cap affecting
Year-on-Year comparison
Challenging Competitive Mobile Market behavior
Adjusted Total Revenues 1Q13 better than 4Q12
Domestic Top Line Trend did show:
High-single digit decline in adjusted Mobile
Revenues
Resilient performance in the Fixed Business
supported by signs of recovery in the Business
Segment
Leading position in EBITDA Margin among EU peers
confirmed
Italian Economic Indicators point to recovery signs
towards the end of the year
Better YoY comparison in Mobile performance, due to
milder MTR drag and data roaming price cap in 2H
Positive effects on Mobile KPIs starting from 2Q, with
a progressive positive contribution to financials in 2H13
Monthly fee increase, new price simplification, BB
performance and ICT further support Fixed Results
Strict, Continuous focus on Cash Costs
18 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Cash Cost Efficiency Plan
-1.3
-0.4
-0.3
-0.6 -0.5
-0.2
2013 2014 2015 Cum'12-'15
Opex Capex
€ Bln
Target
-0.6
Focus on Cash Cost Domestic Efficiency Plan
FY
„1
3-‟1
5 P
lan
H
igh
tlig
hts
Labour Cost Industrial , Energy & Other Capex
Acceleration of Labour Cost
Efficiency starting from April, due
to «New Solidarity Contract»
signed at the end of March
Headcount reductions
Strong reduction of variable labor
costs (Performance-related pay,
etc…)
Increased Productivity Ratio
Efficiency in Energy costs
through rational management
program
Efficiency in maintenance and
caring
Positive effect in G&A due to
optimization of Real Estate
Sale of prime location
buildings
Less outsourcing costs
Important Capex efficiency in
IT due to reduction of costs
driven by Architectural &
Market Driven Developments
19 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Agenda
Domestic 1Q13 Progress Report
Mobile Business
Fixed Business
Appendix
20 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Domestic Fixed Revenues Euro mln, Organic Data, %
62
2,875
1,386
394
278
759
58
1Q12
3,223
347
(61)
Products
Domestic Core Services
Voice & Access
Internet
Business Data
National Wholesale
Other & Subs
Total
Sparkle Group
Elimination
52
2,693
1,259
401
273
709
51
1Q13
2,976
283
(52)
YoY %
(17.3)
(6.3)
(9.1)
1.7
(1.9)
(6.6)
n.m.
(7.7)
(18.4)
n.m.
4Q12vs11
YoY %
(36.6)
(6.2)
(8.6)
1.9
(5.6)
(3.8)
n.m.
(8.4)
(10.9)
n.m.
21 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Domestic Mobile Revenues Euro mln, Organic Data, %
(*) Including Visitors
(**) Total Retail Service Revenues net of Incoming
Total
o/w Services
Wholesale (*)
Retail
o/w VAS
o/w Incoming
o/w Business Generated (**)
o/w Outgoing Voice
1Q12
1,650
1,511
62
1,588
510
176
77
1,335
825
1Q13
1,379
1,231
62
1,317
470
56
87
1,175
705
D % YoY
(16.4)
(18.6)
0.2
(17.1)
(7.9)
(68.2)
12.2
(12.0)
(14.5)
Handsets
4Q12vs11
YoY %
(9.4)
(12.6)
11.1
(10.2)
(4.3)
(48.5)
12.5
(8.1)
(10.4)
22 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Progress on Domestic Efficiency Plan Euro mln, Organic Data, %
-130
-59
-
-36
-10
-16
-9
-71
D Efficiency
D Abs
‟13 vs „12
Total Cash Cost
Ytd „13
-207
578 Total Capex - 8
581
254
-27
709
+6
-32
+25
2,024 Total Opex* -235
336
-207
-
-207
-
-
-
-
-207
D ITX
+94
+51
-
+9
+16
-16
+34
+43
D Vol.
Driven
Delta Cash Cost Ytd 13 vs Ytd 12
Industrial
Personnel
Mktg & Sales
ITX
G&A & Other **
- 243
144
Cash Cost
Efficiency Volume Driven
-207 2,845
-243
-130
Intercon- nection
Target FY : - 601
Ytd 12 Ytd 13
2,602
Handsets:
-1
+ 94
Cash Cost on Revenues %
Ytd‟12 Ytd‟13
2,602
19% of FY13 Target
25% of FY13 Target
22 % of FY13 Target
63.5% 64.7%
+ 1.2 p.p.
**Includes Other Operating Cost/Income and Capitalized Costs * Costs related to credit management are reclassified from G&A & Other to Mktg & Sales
23 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
TIS Wholesale Voice Revenues– Improve Profitability
247 194
1Q12 1Q13
Wholesale Voice Business mainly driven by bilateral agreements
Bilateral agreements review to improve profitability
Elimination of Low margin relationships
Focus on Itz routes with higher marginality
% on Gross Revenues
13.8% 17.0%
Euro mln, Organic data, %
Euro mln, Organic data, %
Minutes mln
Net Revenues - Voice
gen feb mar
2012 Actual 2013 Actual
Change -6.7% -15.3 % -5.5% (YoY)
Total Traffic - Voice
24 26
1Q12 1Q13
+10%
48 48
1Q12 1Q13
Voice Gross Revenues
-22%
Euro mln
Ebitda TIS Group
+3.2 p.p.
24 MARCO PATUANO
TELECOM ITALIA GROUP
1Q 2013 Results
Insourcing and capacity development
Stamping on system
Shift Revision
Job conversion
IT Access time reduction
TI/TCC Synergies (Telecontact)
Site reduction (-88 in 2 years)
Quality levels in line with 4Q12
Commercial performance on track
Higher In-House productivity with less staff
(-390 FTE average)
Start of new Solidarity Contract (April)
Lower cost of external staff
Lower labour cost
Caring Services – Progress in 1Q13
Fro
nt
En
d
Ba
ck
Off
ice
Engagement
Front End
Back Office
Performance
Operators Calls Received
-5%
Costs
In-House Incidence In-House Growth In-House answers
In-House processing
mln
Internal
Actions
started to
increase
production
capacity
Market
Dynamics Downwards trend of operators‟ busy time
marzo 2012 marzo 2013
Staff
External
Costs
-5%
-14%
Organic CS
(# resources) 12,800 12,000 -800
March 2012 March 2013
~35% of FY
Target
