Telecom Italia (TIM) has released its latest financial results, revealing painful battle scars as European nations continue to fight the coronavirus pandemic.

While it should come as little surprise when you look at which countries were most severely impacted by COVID-19, the figures have confirmed it. Telecom Italia is still profitable, which is often forgotten when companies miss expectations, but the impact of the coronavirus pandemic has been very notable.

Total revenues for the three-month period to March 31 stood at €3.9 billion, down 11.3% year-on-year, while profits declined 10.8% year-on-year to €1.7 billion.

Although it does look like business as usual at Deutsche Telekom, let’s not forget that as well as the country effectively combatting the coronavirus, the Group also contains T-Mobile US, which has been flying over the last few years. Total revenues in the US grew 0.3% to $11.1 billion over the quarter, while profits shot up 11.6% year-on-year to $3.6 billion.

What is worth noting is that it is not all bad news at Telecom Italia. This is a company which is under extraordinary pressure because of a truly unforeseeable event, but previous initiatives to create a healthier and more sustainable business are seemingly working. Improvement in cash generation (14% year-on-year increase) and debt reduction (down €923 million) have continued through the three-month period thanks to strategic initiatives launched in 2019. The underlying business model and strategy is still theoretically sound.

One of these projects, the network sharing agreement with INWIT and Vodafone, and subsequent sale of a stake in the towers joint venture, contributed €650 million to the debt reduction mission. Negotiations with KKR, for the sale of a minority share of the secondary fibre network, are continuing which will also reduce debt. It is not necessarily perfect scenario to be offloading assets, but needs must occasionally when pressure mounts on the spreadsheets.

It might be tempting to look at the surface figures, but it is always important to remember that COVID-19 is creating trading conditions no-one could foresee. TIM is still a business which is under threat from a highly competitive landscape in Italy, but the reaction from the team still looks competent.

Looking at the non-financial performance data, TIM Vision, the content platform saw a 20% increase in active users across the period, though mobile subscriptions dropped 579,000 year-on-year. IOT connections slightly compensated, but not enough. In fixed broadband, net customer losses across both consumer and wholesale totalled 233,000. It is clear the business is still adjusting to the new market dynamic with Iliad on the scene.

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