TIM to take 2021 earnings hit on football deal

Italian operator group TIM is upbeat about the impact its controversial football streaming deal with DAZN will have on its core financial metrics in the next couple of years.

TIM confirmed its group revenue target for the full year – stable to low-single-digit growth, that is – but said it expects EBITDA to fall by low to mid-single digits, partly because of its distribution deal for top-flight football and partly because of delays to the voucher scheme designed to provide access to high-speed connectivity for low-income homes and businesses.

The operator did not provide further details on the projected earnings drop, but it’s probably safe to assume there are initial costs associated with rolling out the football service.

The beautiful game was already causing TIM some pain prior to Monday’s announcement.

The exclusive streaming deal for the 2021-2024 period the telco brokered with rights holder DAZN earlier this year has enraged a number of its rivals, including pay TV big gun Sky, which has complained to Italy’s antitrust watchdog. The Autorità Garante della Concorrenza e del Mercato (AGCM) has dutifully opened an investigation, looking at both the commercial restrictions of the deal and the technical aspects that could give TIM an advantage over rival ISPs.

TIM initially gave Sky short shrift when it first raised competition concerns a month ago, essentially pointing out that its rival is in no position to take such a stance given that it holds a dominant position in the pay TV space. It seems to be playing nicely with AGCM, but nonetheless maintains its argument that the deal will enhance competition in the pay-TV and streaming markets, rather than restrict it.

That’s for the regulator to decide though.

In the meantime, the telco is looking at the numbers, and aside from this year’s predicted earnings slide, the DAZN deal is set to have a healthy impact on its numbers.

“The agreement with DAZN for the distribution of the Serie A championship implies an acceleration of the forecasted revenues and EBITDA growth in 2022-2023 (to mid-single-digit growth),” TIM announced. It had previously guided for low-single-digit growth for the same period.

However, there are other factors at play that it seems could still change things.

The operator has not yet factored into its calculations the anticipated upside from the Resilience and Recovery fund – a €191.5 billion scheme recently endorsed by the EU, 25% of which will go towards digital transformation, a key component of which will be 5G and fixed networks – and from the acquisition of a portion of Oi’s mobile assets in Brazil.

These are expected to have a beneficial effect on TIM’s finances. But there’s also the chance that the AGCM’s ruling, whenever that comes, will change the picture once again from the football side. TIM’s winning right now, but it’s a game of two halves.

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