Telecom Italia 3Q 2012 Results – Operations – Marco Patuano
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Transcript of Telecom Italia 3Q 2012 Results – Operations – Marco Patuano
TELECOM ITALIA GROUP
9M 2012 ResultsMilan, November 9th, 2012
Telecom Italia 9M 2012 Results
MARCO PATUANO
1MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Safe HarbourThese 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 2011 financial year used in comparisons included into this presentation are restated as a result of the early adoption of the revised IAS 19 (Employee Benefits) version and the reclassification of Matrix from the Business Unit Domestic–Core Domestic to the Business Unit Other Activities
2MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Agenda
Domestic 3Q12 Progress Report
Fixed BusinessMobile Business
Appendix
3MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Domestic Results: 3Q12 vs 1H12 EvolutionEuro mln, Organic data, %
Domestic Service Revenues
EBITDA 3Q12 vs 1H12: EBITDA Bridge
3Q12 vs 1H12: Revenues Bridge
-7.7%
-2.9%
-7.0%
-3.3%
1H
3Q
1H
3Q
Δ-616 M€-4.5%
-321 M€-4.6%
% on Total Revenues
50.0%0.0 p.p.50.0%
13,552 12,936
7,034 6,713
Mobile: -0.7ppFixed: -0.2pp Mobile: -1.9pp
WH&Transit: -1.2pp
Operating Performance
Δ Revenues Efficiency
Total Revenues FY Target Confirmed
EBITDAFY Target Confirmed
-0.8 pp
4MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Euro mln, Reported Data
1 32
Domestic Operating Free Cash Flow Evolution
+61 mln
% on Revenues 28.3% 30.1%+1.8 pp
Δ EBITDA Δ Capex ΔWC
1 2 3
Cost Control Accelerating Right Spending ΔWC Improvement
(335)
1H12 (82)3Q12 (79)
(22)
DaysReceivables
Turnover
Cash Cost
+0.2
+0.2
-0.1
€ bln
ΔWC impact
Euro mln, Organic Data
5MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Source: ISTAT and Prometeia
Consumer Segment Trend – YoY% change
Service Revenues Trend by Segment: Consumer & Corporate
Corporate Segment Trend – YoY% change
Consumer Confidence
* 1Q12 & 2Q12: Data Normalized for bad weather and calendar discontinuities – 3Q12: Excluding Regulatory impact (Δ MTR and price cap Roaming UE)
Corporate Confidence
Index: 2005=100
Index: 2005=100
Δ% YoY
Italian GDP
6MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Delivering Domestic Targets during an Economic SlowdownDelivering our Targets for 2012… …while working for the Future
Traditional Services
Innovative Services
Traditional Services
Innovative Services
• Traditional Services under pressure• Fixed Market weak, but TI holds a stable
Market Share
• Mobile BB: Small Screen Penetration up• LTE Launched (Nov. 7th)• Fixed UBB ready to go
• Cloud & ICT Portfolio enriched
ManteningTightExpensesControl
Commercials•No subsidy increase•Advertising expenses reduced but «Top of Mind» confirmed•Cost of caring under control while CSI improvedIndustrial
Human Resources
Well on Track
• Bundling is the way to defend ARPU• Leveraging on Fixed and Mobile Customer Base• Explore Regulatory opportunities
• Best UBB experience• Enrich connectivity• Multi-devices approach• Extract value from the Cloud (Consumer & Corporate) • ICT offering upgrade
Working on non-core activities in order to further benchmark with «best-in-class» players
Maintaining high level of Efficiency
Focus on:•New technologies•Architectural simplificationRight-Spending on:•Day-by-day operations•Commercial CapexPursue Group Synergies
Introduce Discontinuities
Efficiencies and Right-Spending on Investments confirmed, notwithstanding LTE & NGN deployment
7MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Agenda
Domestic 3Q12 Progress Report
Fixed BusinessMobile Business
Appendix
8MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Euro mln, Organic Data, %
Domestic Fixed: Focus on core Service Revenue Performance
3,343 -6.2%
Total Fixed Revenues Domestic Service Revenues Trend – YoY % change
3,136Sparkle
Core Service
-9.5%
-4.9%
Spa
rkle
*C
ore
Serv
ice
*net of elim. & adj
Highlights
Elim.
Equipment-39.7%
Core Service Revenues Trend – YoY % change
Ret
ail
Dom
estic
W
hole
sale
Core Services down to -4.9% YoY due to:expected worse comparison effect on Consumerworse Macro scenario on Corporate segmentunexpected retroactive reduction of WLR
Sparkle:New round of low-margin transit contracts discontinuation, with no impact on Ebitda
Positive support from monthly rental fee increase
9MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Domestic Fixed: TI Access Performance
Fixed Access Line Losses Trend
-187k
21,789 21,562 21,195
TI R
etai
lW
hole
sale
TI R
etai
lW
hole
sale
Voice ARPU Highlights
65.8%66.2%67.2%M/Son total Mrk
Line Losses neither caused nor caught by OLO’s
Our competitors are continuing to increase churn among each other
Consumer ARPU stable as the CB reduction affected low-end clients and slow-down mainly impacted the Corporate segment
21,382
65.9%
9M11+190 9M12
+3
9M11-524
9M11-519
Consumer Retail
Flat-1.6%
% YoY
10MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
‘000
TI retail accesses
M/S 53.9% 52.0% 51.9%
Broadband Accesses BB Lines Evolution
Domestic Fixed: Broadband Figures
Broadband Retail Highlights
TotalMarkets 13,313 13,527 13,544
Italian Fixed Broadband:Stability in TI’s Market Share.
Constant decline in OLO’s net acquisitions.
TI’s ARPU upbeat trend confirmed.
Increase in Superinternet and Flat Offers on CB without leveraging on promos.
Euro/month/line
BB OLO
13,263
53.8%
TI R
etai
lB
B O
LO
‘000
ARPU Service RevenuesEuro mln
+0.9%
11MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Agenda
Domestic 3Q12 Progress Report
Fixed BusinessMobile Business
Appendix
12MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Euro mln, Organic Data
Mobile Revenues: 3Q12 Results at a Glance
Total Mobile Revenues
Business Generated
Business Received
Handsets
Retail Services
Total Service Revenues
Wholesale &others
Total Mobile Revenues
-7.9%
-51.6%
1,624
1,419
1,7271,502
1,7901,584
-12.6%
-19.3%
-13.0%
+29.5%
-11.5%
% YoY
-5.9%
Excluding Roaming UE impacts
Retail Business Generated Trend – Δ YoY
Excluding Roaming EU impacts
Handset Revenues Trend – Δ YoY
Positive effects from bad weather and calendar discontinuities
13MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
‘000
TIM’s MNP 9M12
Total SIM cards Annualized Market Churn
+0.4 mln
Domestic Mobile: Customer Base TrendO
UT/
IN Aggressive Summer Campaignby some competitors
Launch of new TIM Portfolio offers:More Value for Money
3Q2Q1Q
1.0 x as of May
-102
Tota
lM
NP
Avg Market
14MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Domestic Mobile Retail: Focus on VAS
Retail VAS
TIMxSmartphone: Focus on ARPU VAS
-4.0%
+0.1% -8.4%
1 2
Messaging2
Bundles on MBB+VAS (e.g. “TIMxSmartphone”) are the right Value Proposition for the Market: no cannibalization effect on VAS Consumer ARPU
Negative balance between decreasing average SMS price and steady number of SMS user
Increasing number of active smartphone users**
(+49% YoY) enables alternative messaging services July 2011 July 2012
Without TIMxSmartphone
With TIMxSmartphone
Messaging
Data
0.9x
3.0x
vs ARPU 2011
-4.7%
*Excluding Roming UE Cap
Browsing1
Negative impact of Roaming EU Cap on data, occurred by July 1st
+12.1%241
271
Browsing Revenues Normalized*
**Usage 1x per week at least
+1.6%*
15MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
LTE: a Growth Opportunity, starting from Large Screens
4G Pricing Strategy…
Avg PricePremium
…beyond Early Adoption
Avg Price Premium: LTE offers vs 3G 42MB offers
Pop
ulat
ion
Cov
erag
e
Large Screens
Italian Price Premium aligned to other operators, notwithstanding the «early adoption» phase
Fit Data to Device:Large Screen, Large PackEntry giga size to be adjusted to UBB Mobile attitude
Source: Internal Estimates
Bundles without Boundaries
Diversify offer portfolio to fit customers’demand
Cross-check coordination in pricing vs ADSL
Quality of Services
Traffic Segmentation for a «Priority Service»
Speed availability is key to ensure a real «Ultra Mobile Broadband Experience»
“Tailor-made” VAS Content
Exclusive VAS Content to make best use of the strong increase of network performance
Market Approach
Coverage: Selective and Focused, aimed at maximizing the Return on LTE Investments
16MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Agenda
Domestic 3Q12 Progress Report
Fixed BusinessMobile Business
Appendix
17MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Domestic Wireline RevenuesEuro mln, Organic Data, %
102
2,932
1,385
396
302
789
60
3Q11
3,343
377
(68)
Products
Domestic Core Services
Voice & Access
Internet
Business Data
National Wholesale
Other & Subs
Total
Sparkle Group
Elimination
62
2,789
1,287
396
281
763
62
3Q12
3,136
341
(56)
YoY %
(39.7)
(4.9)
(7.1)
-
(7.0)
(3.3)
n.m.
(6.2)
(9.5)
n.m.
9M12vs11YoY %
(38.3)
(3.6)
(5.8)
1.0
(5.8)
(2.0)
n.m.
(4.0)
2.1
n.m.
18MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Domestic Mobile RevenuesEuro mln, Organic Data, %
(*) Including Visitors(**) Total Retail Services Revenues net of Incoming
Total
o/w Services
Wholesale (*)
Retail
o/w VAS
o/w Incoming
o/w Business Generated (**)
o/w Outgoing Voice
3Q11
1,790
1,624
103
1,687
524
176
63
1,448
924
3Q12
1,584
1,419
83
1,501
503
85
82
1,334
831
Δ % YoY
(11.5)
(12.6)
(19.3)
(11.0)
(4.0)
(51.6)
29.5
(7.9)
(10.1)
o/w Handsets
9M12vs11YoY %
(6.2)
(7.6)
(17.7)
(5.6)
1.8
(27.0)
46.6
(4.8)
(8.4)
19MARCO PATUANO
TELECOM ITALIA GROUP9M 2012 Results
Personnel
-4G&A &Other 376
Progress on Domestic Efficiency PlanEuro mln, Organic Data, %
Δ Abs9M 12 YoY9M12
-174
1,982Total Capex
1,331
793
-99
+83
6,709Total Opex* -335
1,533
Delta Cash Cost9M12 vs 9M11
Industrial
2,103 -116
Mktg &Comm.
ITX
Cash Cost
EfficiencyVolume Driven
-1749,048 -395
Intercon-nection
Target FY : -0.5 Bn
9M11 9M12
8,691
+212
Efficiency
8,691
64.8%+ 0.5 p.p.
-357TotalCash Cost
573 -24Handset
FixedOpex -37
-22
- 357
64.3%% on Revenues
FY12 Trend
Euro Bln, Organic Data
ITX
2.3
FY11 FY12 E
-0.3
Handset
Other External Cost*
Personnel Cost
1.0
FY11
Stable
FY12 E
FY11
3.4 Stable
FY12 E
FY11
3.0 -0,2
FY12 E
* Mktg&Comm.+Industrial+G&A & others
Δ Abs3Q12 YoY
-2
-124
-28
+34
-203
-54
-29
-22
-206
-3
FY13-14
FY12
1.2x FY12Target
>80% FY Target
Confirmed
Confirmed
Confirmed
Improved
Total FY 12 ~9.2Bln€