TIM targets more of the same...only better

TIM’s domestic business will return to growth this year after six years of negativity, the Italian incumbent predicted this week, after the presentation of a reasonable set of financial figures for 2022.

The telco’s board of directors has approved its 2023-2025 strategic plan, the headline for which is growth in Italy, albeit at a fairly moderate rate. It is looking at flat service revenue at the domestic business – “broadly stable” were its exact words – and flat to low single digit growth in organic EBITDA. Its group level figures should show stronger growth, buoyed by the Brazilian business.

“Despite a radically different macroeconomic context compared to last year, the new plan is consistent with the previous one and with the project presented at the Capital Market Day (July 2022),” TIM said. “In particular, thanks to the better-than-expected results recorded in 2022, the plan envisages further acceleration at Group level.”

To put it another way, TIM’s looking for better results this year, without changing anything strategically.

The project it references is, of course, the plan to split the company into two, separating networks from services. The resulting NetCo business – the name is pretty explanatory – comprises TIM’s core fixed-line business, its FiberCop fibre-to-the-home (FTTH) unit, and international wholesale operator Sparkle, and is earmarked for M&A.

While the well-publicised plan to sell NetCo to existing shareholder and state-backed lender Cassa Depositi e Prestiti (CDP) as part of Italy’s single network project collapsed last year, the business has drawn suitors once more. KKR – which already holds 37.5% of FiberCop – has made a non-binding offer for an unspecified stake in NetCo, an offer that will be examined by the TIM board later this month. Meanwhile, there is talk that CDP is back at the table, bringing a joint bid with Macquarie.

TIM could look very different by the time its latest three-year plan plays out. But despite the fact that things seem to be moving in the right direction for NetCo, it seems unlikely that a deal, plus all the bureaucracy that will go with it, will be fully completed by the end of this year. So the telco will be held accountable for its 2023 predictions at least.

TIM did not split out any financial targets for NetCo, but said the business will push for FTTH migration. It aims to reach 48% of Italian properties with full fibre by 2025, and cover 90% of the population with 5G by the same date.

Group capex will come in at approximately €4 billion next year and remain stable over the duration of the plan, TIM said. That figure includes spending of €3.1 billion per annum in the domestic market, which presumably will be mostly if not entirely attributable to NetCo.

Group capital spending last year came in at €4.1 billion, over half a billion euros down on 2021, with Italy accounting for €3.2 billion. Group capex represented 25.8 percent of revenues in 2022, down from over 30 percent the previous, and the figure should fall further this year, presuming the telco makes good on its low single digit revenue growth prediction.

Group revenue last year was €15.79 billion, up slightly on the previous 12 months. Three quarters of the total – €11.86 billion – was generated in Italy, down 5.2% on the previous year, but up by 5.5% on an organic basis, excluding non-recurring items. Earnings fell by 6.7 percent organically percent year-on-year to €5.35 billion, including a 14.3 percent EBITDA slide in Italy to €3.52 billion.

Those figures might not appear to be anything to get excited about, but TIM points to improvements in its fourth-quarter results, as well as positive operating trends at its Consumer business that enable it to look to a stronger 2023. Presuming it doesn’t get distracted by the proposed split and potential takeover battle, that is.

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