Telecom Italia SpA

MIL:TIT

Ladies and gentlemen, good morning and welcome to TIM 2024 Preliminary Results and Strategic Plan Update Presentation. Paolo Lesbo, Head of Investor Relations, will introduce the event.

Ladies and gentlemen, good morning. My name is Paolo Lesbo, Head of Investor Relations, and I welcome you to TIM Full Year 2024 Results and Strategic Plan Update Presentation.

Before starting, I want to point out the safe harbor disclaimer and set out the agenda for today. In Chapter 1, the CEO, Pietro Labriola will outline the key messages on the results and on the plan. In Chapter 2, Pietro and the CFO, Adrian Calaza will present 2024 results. In Chapter 3, Pietro and Adrian will be joined by the Head of TIM Consumer, Andrea Rossini; the Head of TIM Enterprise, Elio Schiavo; and the CEO of TIM Brasil, Alberto Griselli, to update the strategic plan for 2025, '26, and '27. A live Q&A session will follow.

Let's start. Pietro, the floor is yours.

Thank you, Paolo, and good morning everyone. 2024 has been a transformational year, marked by the completion of key initiatives. For the third consecutive year, we achieved our full year guidance, something that had never happened in TIM's recent history.

We completed the NetCo disposal in record time, a challenge that many thought was impossible. We executed the Europe's largest ever liability management, significantly improving our financial structure. We sold our remaining stake in INWIT and accepted the binding offer for disposal of Sparkle, further strengthening our financial flexibility.

We made significant progress on the EUR 1 billion concession fee that will reinforce our cash position. TIM is now a different company. We have restored our strategic and financial flexibility, and we are once again in control of our future. What seemed impossible just 3 years ago is now a reality.

Slide 4. Having successfully executed the transformation announced in 2022, TIM is now at the turning point, a strong, stable and efficient company. What does this mean in practical terms? in Italy, TIM Consumer and TIM Enterprise are positioning as the leaders in the Telco and ICT revolution, leveraging on their expertise in digital services and cloud solution.

In Brazil, TIM has become the most efficient Telco operator in Latin America, with industry leading margins and sustainable growth. But as you several time mentioned, being a normal company also means generating structural free cash flow to support future investments, maintaining a healthy balance sheet with the leverage ratio now aligned with industry best practice, returning value to our shareholders, something that seemed impossible just year ago, but is now within reach.

A year ago, this ambition will consider wishful thinking. Today, they are becoming reality, thanks to a stronger business model, a linear cost structure and a clear strategy for the future.

Now let's look at the numbers that confirm this transformation. Slide 6. Let's start to review how the performance of the business has changed following the transformation announced in 2022. Here, we compare the key metrics of the new TIM in 2024 with the same metrics of the old TIM in 2023.

It's clear that a stronger business is emerging. At domestic level, we almost double revenue per employee, significantly increase EBITDA after lease per employee, and have CapEx intensity.

EBITDA minus CapEx has also increased materially, highlighting stronger cash generation capability. The comparison is based on organic figures. The EBITDA minus CapEx improvement was much more substantial based on reported figures.

At group level, net debt after lease decreased from over EUR 20 billion to EUR 7.3 billion and leverage come down from 3.8x to below 2x. Such improvements were possible because the transformation has produced the benefit we expected.

Vertical integration has been overcome. Regulatory burden has been reduced. The balance sheet has been deleveraged. Financial flexibility has been restored. Capital intensity has been reduced. As a consequence, operational results have improved.

In a nutshell, today, TIM is an efficient business, leveraging the most distinctive digital and Telco infrastructure in Italy and Brazil, with the solid balance sheet, with strategic flexibility to capture market opportunities, and with a strong focus on cash generation, which enables to reinstate shareholder remuneration.

Slide 7. The full year 2024, results confirm that TIM is now a stronger and more efficient company. Mid-single digit revenue growth at EUR 14.5 billion; double-digit EBITDA after lease growth at EUR 3.7 billion; EUR 2.1 billion CapEx; 14% of revenue, also including growth CapEx. EUR 1.6 billion EBITDA after lease minus CapEx, up 24% year-on-year. EUR 7.3 billion net debt after lease including INWIT disposal.

TIM Brasil performance is not a surprise. They reach a cruising speed that keeps strong quarter-after-quarter. What is eye catching is the performance of domestic business, where TIM Consumer has been stabilized and TIM Enterprise continues to grow above market.

So for Italy, we have 1.5% revenue increase at EUR 10.2 billion. EUR 2 billion EBITDA after lease, up 8.5%. CapEx on revenue below 13%. EUR 0.7 billion EBITDA after lease minus CapEx, up 24% year-on-year. Please note that excluding Sparkle domestic EBITDA will grow 11%.

Despite the Italian market remains one of the most challenging, I'm not aware of similar growth rates across Europe. I've seen 2 key drivers of our performance. First, our strategy works. Don't forget that TIM domestic improved also in 2022 and 2023.

Second, the delayering works. We always say that being vertical, integrated didn't give TIM any advantage, but only constraints. Today, the benefits we expected are coming true.

Slide 8. If we look at the operational KPIs, the positive trends of the previous quarter are confirmed. For TIM Consumer, wireline ARPU grew and Mobile ARPU stabilized thanks to the price up that we implemented in the first half of the year. At the same time, churn was stable. We have also recorded a significant increase in service revenue from ICT services provided to small and medium businesses.

For TIM Enterprise, total value of contrast signed in the 12-month increased to over EUR 4 billion. This backlog will turn into new revenues in coming years. If we zoom on cloud, the National Strategic Hub confirmed to be a key growth driver, with total value of contract signed increasing by over 50% to EUR 520 million, while the average duration of new cloud contracts is almost doubling.

In terms of mix, ICT accounted for 64% of total service revenue in the 12 months. TIM Brasil reported 2 days ago, no need to add anything. All KPIs improved and supported an overall performance that was once again very strong.

Slide 9. For the third year in a row, group result were in line with guidance, an unprecedented achievement in the recent, and even not so recent history of TIM. At domestic level, revenues and EBITDA after lease were a touch below guidance. This was entirely due to Sparkle, which was weak in the second half because the situation in Israel delayed the completion of a new subsea cable. The related IRU revenues and EBITDA, which we had included in 2024 budget will come in 2025.

Domestic CapEx and EBITDA after lease minus CapEx were significantly better than guidance. On the right-hand side, we compare actual result, excluding Sparkle, with the guidance. The picture further improves with all metrics in line and domestic EBITDA above target.

Looking ahead, our financial discipline and improved cash generation give us the flexibility to invest in growth while enforcing our commitment to shareholder value.

With that, I now hand over to Adrian, who will take you through the cash flow evolution.

Thank you, Pietro, and good morning, everyone. One of the key financial targets we set for 2024 was net debt reduction, and I'm pleased to say that even after a significant amount of billions of euro flowing, we delivered exactly as promised. We fully understand why there was skepticism in the market, TIM was not considered a normal company, but today our results speak for themselves.

At the beginning of 2024 estimating cash flow dynamics was particularly challenging with multiple moving parts, NetCo disposal still pending, significant working capital variations and financial charges to manage. Yet, despite this complexity, we closed the year exactly where we said we would.

Net debt after lease at EUR 7.5 billion, equivalent to 2.0x leverage, fully in line with expectations. All in and even absorbing some impact from the Brazilian exchange rate, we have generated EUR 0.6 billion net cash in the second half, of which EUR 0.5 billion is in the fourth quarter, which confirms the operational and financial health of the group after the disposal of our domestic wireline access network.

Originally, the target leverage did not include the proceeds of the INWIT stake disposal. And since we cashed in EUR 0.25 billion in November the year end, net debt after lease was slightly below EUR 7.3 billion with a leverage below 2x. This confirms that our financial strategy is working, and TIM is now operating with solid balance sheet, and especially with full strategic flexibility.

Now back to Pietro for the presentation of this strategic plan in Chapter 3.

Thank you, Adrian. First, let me clarify that today, we are not presenting a new plan, but an update and an extension of the existing one. Of course, the external environment and TIM's perimeter continue to evolve, which means some initiatives have been adjusted. For example, Sparkle is no longer included in the plan or in the guidance as we are in the final steps of its disposal process.

That said, the overall strategic framework remains unchanged. The 5 pillars of our plan are the same we presented last year, because they are working. Let's go through them.

Core business consolidation, we will continue to focus on customer value management, accelerating the adoption of new access technology and shifting towards a fully digital service model.

Focus on growth areas, the ICT market remains a strong opportunity, and we will capture upsides beyond connectivity, by leveraging our customer base and go-to market strategy. Becoming a data driven company, we are accelerating process automation and digitalization, integrating AI and advanced analytics to improve service quality and value creation.

Effective capital location, we will continue to prioritize investment in distinctive assets that reinforce our competitive position and execution capabilities. In organic opportunity, will also be explored where they create value.

Last, cost transformation, since 2022 we have been radically reshaping our cost base. Now, with the simplified domestic perimeter and the transition from all seller to all buyer, completed, we can target new efficiency levers that were previously inaccessible.

Our strategy is deeply rooted in our unique infrastructure and ICT capabilities, which represent the most advanced digital and telecom backbone in Italy. The most pervasive mobile network, the largest and most expensive -- extensive IP backbone, 16 data centers with a deployed capacity of 100 megawatt, a leading position in cloud security and ICT services through TIM Enterprise.

Many may have thought that after selling our network TIM will be weaker. The reality is exactly the opposite. We are now more flexible, more efficient, and more focused on high values areas where real differentiation happens. We are the only operator in Italy that combines top tier digital infrastructure with leading ICT and cloud capability. TIM is now positioned to capture the future of telecommunication and digital services better than anyone else.

Slide 13. To ensure that everyone is on the same page, this slide outlines the key assumption, including our plan, as well as what is not factored in. Key assumption for domestic market. For the customer platform, we plan to launch energy services at the end of 2025 with expected revenue of EUR 0.2 billion by 2027.

For mobile sale, we assume that Fastweb MVNO will terminate in 2026 as per contract, and that we'll have one or more new MVNO agreements starting from the same year.

For data centers, we include EUR 0.2 billion in CapEx for a new site and the refurnishment of existing facilities. For the transition service agreement, the service provide to FiberCop expected to end in H1, 2027.

For cost transformation, the program will be extended to 2027, ensuring additional EUR 0.7 billion of cumulated efficiency gains by 2027.

For FTE evolution, there will be no pre-retirements. Account reduction will occur through natural attrition and incentivized exit. For the 1998 concession fee, we will assume that when we cash in EUR 1 billion in 2025 with an equivalent reduction in net debt in 2025 or 2026. However, no profit and loss gain is included, given the timing uncertainty of the Court of Cassation ruling expected no earlier than 2026.

What is not included for Italy? Sparkle is out of the plan. Since yesterday, the Board approved the binding offer receipt. The closing is expected by the first quarter of 2026. Therefore, the related cash-in of EUR 0.7 billion is included.

Further in market consolidation, any material changes in the regulatory framework, earnouts, clearly if any of these occurs, it will be an upside.

Moving to TIM Brasil, I stress that we treat the exchange currency rate exactly as always have, as outlined in the safe harbor statement. Let me reiterate some key principles. Brazil profit and loss figures and CapEx are translated at an average 2024 rate of BRL 5.83. We keep this rate constant in each year of the plan to make a meaningful comparison and show the business performance in terms of year-over-year growth.

Group equity, free cash flow, includes Brazilian flows, translated at annual average exchange rate, published in Bloomberg survey on January 9, we used BRL 6.18 for 2025, BRL 6.37 for 2026, and BRL 6.20 for 2027. Year-end group debt includes Brazilian debt translated at year end exchange rate published in the same Bloomberg survey. We used BRL 6.21 for 2025, BRL 6.47 for 2026, and BRL 6.16 for 2027. These assumptions ensure that we present a clear and consistent view of our business performance, while allowing for meaningful comparison over time.

Slide 14. Let's move to the 3 entities. For each one, we have a clear set of priorities. For TIM Consumer, we want to increase profitability while keeping revenue stable. CapEx will be concentrated on 5G and customer platform. For TIM Enterprise, we want to grow above market. The real challenge will be to further improve margins through cost reduction and the better make versus by mix. We will invest in data center and AI capabilities. For TIM Brasil, the priority is to grow EBITDA above inflation. CapEx will be concentrated in 5G and IoT verticals.

Slide 15. Let's now focus on 2 of TIMs most distinctive assets, 5G and data centers. In 2024 we achieved a tremendous improvement in network quality despite a threefold increase in traffic. This confirms our ability to manage exponential data growth, while maintaining top performance. In the next 3 years, the group will invest a total of EUR 6 billion with a focus on key infrastructure and technologies to ensure the leadership also in future.

Our 5G expansion plan for the next 3 years includes reaching 90% outdoor coverage across the country, accelerating 5G adoption, almost doubling the number of connected devices. This will further enhance customer experience and strengthen our leadership in mobile connectivity. We are executing an ambitious investment plan to support the increasing demand for cloud and digital services.

New tier 4 data center to be built near Rome, refurbishment and expansion of 2 sites near Milan, capacity upgrades in 6 additional sites. These projects represent a EUR 0.2 billion investment, adding 25 megawatt of extra installed capacity.

And why is this matter? It's because our data center infrastructure is a key enabler for both TIM Enterprise and the broader digital transformation in Italy, and therefore meaning this expansion is critical to sustaining future growth. By strengthening these 2 assets, we are reinforcing TIM's competitive advantage in both mobile and cloud services, ensuring long term scalability and differentiation.

I will now leave the floor to Andrea, Elio, and Alberto for the strategy and targets of each entity.

Thank you, Pietro. The third consecutive year of TIM guidance and plan was achieved, as Pietro and Adrian previously highlighted, also thanks to a solid performance and the material improvement of the commercial and economic results of TIM Consumer.

2024 was for TIM Consumer a year of turnaround and transformation. We demonstrated a material improvement of revenue trend year-over-year and an even stronger performance on margin improvement due to a transformational effort on efficiency and productivity of the commercial and service operations, bringing EBITDA growth into positive territory.

These results were demonstrated, thanks to a combination of core revenue stabilization, continuing work on efficiency and new revenue streams expansion, thanks to beyond core customer platform scale-up.

The next 3 years of TIM Consumer and SMB plan are based on an enhanced and scaled up version of the same core factors plus some transformative opportunities that can drive new revenues and margin growth. In particular, the revenue stabilization will be driven by a strong technology upgrade with focus on FTTH and FWA 5G, the 2 growing technologies in the broadband market, where TIM is the only main player in Italy that has consistently grown market share during the last 3 years.

We have improved the fixed mobile convergence ratio on customer base by nearly 20 percentage points during the past 3 years and plan to bring it to 50% of the customer base. Delivering significant benefits in terms of reduction of mobile and fixed line churn.

Thanks to the changed market environment, we can turn around customer base trend in large urban areas with improvement of FTTH coverage and increased productivity in areas where with consolidation of Vodafone and Fastweb, we now have a smaller relative market share.

We will continue to work on ARPU improvement as, we demonstrated during the last 2 years, thanks to further reinforcement of CVM practices and repricing micro targeting, also using automated responsive AI-based campaigns.

On cost transformation, we will drive new space for efficiency, thanks to improvement of sales channel productivity, both due to the integration of AI-based agent support and to the personalization of integrated cross-selling offers.

Moreover, we plan to further improve the ratio of digital versus human interaction in caring, which will be transformed, thanks to AI-based support provided both to customers, such as we do today in voicebot and chatbot integrated with Gen AI and to agents. For example, with customer personalized caring and selling scripts.

We have a solid plan to optimize MSA cost, thanks to migration to more efficient technology mix and phase out of legacy technologies. And we will continue in the smart CapEx approach, which allowed a strong improvement of EBITDA minus CapEx year-over-year.

Finally, we will focus on expanding the multiservice customer platform strategy. We will continue to grow the already existing elements of multimedia TIM Vision proposition, device financing and ICT services for SMB. While we launched the energy proposition in 2025, we did already launch in early February for SMB segment indeed, with first contract already signed, and we plan to further expand portfolio in 2026.

Next page. The combination of this action has already partially delivered a substantial turnaround of commercial drivers, such as fixed line ARPU that was demonstrated by Adrian previously. And mobile number portability and net adds performance, as well as TIM Vision ARPU and volume of new contracts.

In years 2025 to 2027, we plan to further improve ARPU on both mobile and fixed and to significantly rebalance the customer base net adds due to better technology mix, enhanced retention and upgrade activities and selected areas market share gains due to closure of FTTH gaps.

We also plan a further improvement of SMB fixed ARPU, thanks to enhanced business grade premium connectivity. The expansion of customer platform multiservice approach will improve the top line trend, but it is relevant to highlight we considered in the plan an increase around 8% to over 15% of beyond connectivity revenues.

All these actions will bring the top line trend to a more solid stabilization and a slight growth, while the efficiency actions will deliver a more material growth of EBITDA year-over-year.

Now over to Elio Schiavo for the Enterprise section.

Thank you, Andrea, and good morning, everyone. Let's now zoom into TIM Enterprise. As we told you several times, we are the largest and most important ICT platform in Italy, combining top-tier infrastructure, digital platforms and ICT capabilities in a way that no other operator does.

Our goal is to consolidate and expand this strategic advantage, focusing on 3 key areas: the first one being fueling future growth through ICT. And here, we will take 3 different actions to achieve this result.

First, expanding the penetration of our ICT portfolio, reinforcing our strength in cloud, cybersecurity and digital transformation. Second, strengthening our positioning in the public administration market, accelerating growth through the National Strategic Hub. And last but not least, driving AI adoption, integrating proprietary application and third-party AI solutions to enhance business productivity.

The second area of focus is enhancing profitability and operational excellence, which we will do by transforming our operating model, aligning processes and systems with best practices and upgrading workforce skills, integrating AI and generative AI with the aim of improving our go-to-market execution, increasing commercial effectiveness and making better our customer operations and contract management by reducing costs and improving service quality.

And then our third priority is to strengthen core assets for long-term scalability, which translates into expanding data center capacity, ensuring leadership in cloud and AI infrastructure, in-sourcing high-value professional and managed services through targeted M&A to integrate strategic capabilities. And finally, enhancing our digital platforms, reinforcing our presence in high-growth verticals.

With these strategic levers, TIM Enterprise will keep shaping the future of ICT in Italy and setting a benchmark for the European market.

We move now to the next slide. Looking ahead, we expect our transformation and growth trajectory to accelerate through 2027. Let me give you just a snapshot of a few KPIs. Value of contracts signed to exceed EUR 5 billion in 2027, representing a 25% increase versus 2024.

ICT revenues to account for more than 70% of our total revenues by 2027, supported by data center expansion and high-value digital services. And last but not least, both revenues and EBITDA after lease expected to grow at a mid-single digit rate each year, ensuring sustainable and profitable expansion.

As I said before, TIM Enterprise represents a unique model in Europe, integrating infrastructure, digital platforms and ICT services at scale. This makes TIM the reference point for digital transformation in Italy and beyond.

Now, I will hand over to Alberto for TIM Brasil.

Hello, everyone. I'm Alberto Griselli, CEO of TIM Brasil. I'm pleased to present to you a robust set of results in a dynamic year when we overcame challenges and took advantage of our strengths to meet all of our targets.

2024 was marked by powerful cash generation, thanks to solid financial and operational results. We closed the year with service revenue growing at a robust pace, reaching the upper bounds of our expectations. Our performance outpaced inflation even amidst challenging macroeconomic conditions. Notably, our fourth quarter service revenues continue to demonstrate consistent growth.

Mobile services were a significant driver of our revenues with particularly excellent performance in the postpaid segment, where we outpaced our peers in client base growth and sustained low churn rates.

Our EBITDA for the year showed a solid increase compared to the previous year, reflecting our ability to operate efficiently and expand our margins. Our operating cash flow grew solid double digit and expanded as a percentage of revenues, highlighting our capacity to generate substantial cash, further underscoring our financial results.

The strong financial results were supported by our 3B strategy, best network, best offer and best service. Under this framework, we developed our infrastructure, launched innovative offers and improved our current services. As a consequence, we delivered sound operational performance.

TIM Brasil was the most awarded network by Open Signal with 7 of 14 prices. We posted the highest mobile ARPU of the market. And presented outstanding resolvability rating in multiple rankings, solving clients' problem faster and according to their expectations.

Looking ahead, setting the stage for TIM's strategic direction in the coming year, we reinforced our focus on sustainable growth by adding new revenue opportunities and putting renewed effort into efficiency, reflecting a commitment to long-term value creation.

Our updated plan reflects changes in macro and telecom market conditions. We evolve our priorities to extract the most from our 4 strategic pillars: mobile, B2B, efficiency and broadband. Each area is supported by specific strategy aimed at enhancing our value proposition in mobile, doubling down in B2B, extracting the most from our assets and resources and last monitoring for opportunities to complement or transform parts of our business.

The emphasis on people, society and the environment underscores TIM commitment to responsible business practices. By prioritizing these areas, TIM aims to strengthen its market position and drive sustainable growth in a competitive landscape.

With that, we introduced the new guidance for '25, '27, remembering that our projections are always subject to revisions in the face of material changes in the macroenvironment and business development assumptions.

Our strategic guidelines for sustainable growth focused on revenue and EBITDA progress with margin expansion. This is a combination of mobile core evolution, increased relevance of new revenue streams and renewed efforts in efficiency.

Our investment plan points to a flattish CapEx despite ForEx oscillation and maintenance of the leadership status of our network. Once again, this reflects a commitment to efficiency and operational excellence. These dynamics translate into strong cash flow evolution with margin expansion. And this cash flow being generated is returned to shareholders in form of interest on equity and dividends.

And now we are adding a robust buyback program that benefits TIM Brasil minority shareholders and its controller. The program reinforces our confidence in delivering what we are promising and at this valuation, buying back our shares is the right capital allocation.

With this, I end my comments and hand back the floor.

Thank you, Alberto. Here is 2025-'27 group guidance, a general consideration. Some 2024 results outperformed previous targets. This considered even if the EBITDA after lease year-over-year growth rates in 2025 and 2026 are slightly lower compared to past guidance, our absolute value projection remained fully consistent, especially at EBITDA after lease minus CapEx level, even now without Sparkle contribution.

And thanks to an improvement on financial expenses and cash taxes, cash generation and net debt reduction improved compared to our previous projection, reinforcing our deleveraging road map.

So coming to the targets. Revenue are expected to grow 2%/3% in 2025 and 3% CAGR until 2027 for the group, 1%/2% in 2025 and 2%/3% CAGR for domestic. EBITDA after lease is expected to grow 7% in 2025, a 6%/7% CAGR until 2027 for the group, 5%/6% in 2025 and 5%/6% CAGR for domestic.

CapEx on revenue is expected at 14% in 2025, down to 13% in 2027 for the group. For domestic, the target is 12%/13% in 2025, down to 11% in 2027. In terms of cash generation, we expect equity free cash flow of EUR 0.5 billion in 2025, EUR 0.9 billion in 2026. This represents a cumulative EUR 0.5 billion improvement over our previous targets. In 2027, we expect equity free cash flow of EUR 1.1 billion.

For 2025, we expect organic leverage lower than 1.9x. It will be around 1.7x if the cash-in of EUR 1 billion related to the '98 concession fee is considered as a positive impact on net financial position. I remind you that the profit and loss recognition of the '98 concession fee is not included in the guidance due to timing uncertainty related to the Court of Cassation ruling.

In Slide 23, we will explain how we intend to use the cash we will generate organically in the plan horizon. While in Slide 25, we will outline the expected evolution of leverage. Any potential earnouts are excluded from this guidance, and they represent potential upside that could further improve our financial profile.

Now let's move to the financial number, leaving to Adrian the stage.

Thank you again, Pietro. As we saw in our guidance, in the planned horizon, we expect to generate approximately EUR 2.5 billion equity free cash flow. But before describing how we will use these funds, let me give you some additional elements.

Around EUR 0.5 billion of equity free cash flow in 2025 turns into around EUR 0.2 billion of net cash flow even after a full impact of the buyback to be performed in Brazil, compared to the 0 level that we communicated in the addendum to the Capital Market Day of last year.

But probably the most important thing here is that the domestic business would be equity free cash flow positive in 2025 without considering the extraordinary working capital effects, which are outlined in the annex and definitely positive in 2026.

And from a credit profile perspective, this is an interesting change since the company has had negative organic free cash flow for many years when it was fully infrastructured. And now in the first year after the disposal of our wireless access network is already organically generating cash.

So the use of these funds will be based on a disciplined and value-driven capital allocation strategy, together with the reinstatement of shareholders' remuneration. The slide shows the economic breakdown of the destination of equity free cash flow. This notion is important as it is not a cash view. Shareholders' remuneration will be cashed out at a date in time, which is beyond the financial year-end.

More in detail, the EUR 2.5 billion equity free cash flow will be allocated to TIM S.p.A. shareholders' remuneration, to dividends for TIM Brasil minorities, and to financial flexibility that can be used to deleverage for capital structure optimization and/or accelerate our growth, both organically or inorganically.

On top of that, out of the Sparkle EUR 0.7 billion cash-in expected upon closing in Q1 2026, we will be allocating 50% as extraordinary TIM S.p.A. shareholders' remuneration to be paid in April 2026. I remind you that TIM S.p.A. shareholders' remuneration is subject to all formal steps described in the slide.

Slide 24. We propose an ordinary and extraordinary shareholders' remuneration. For the ordinary, we intend to allocate approximately 70% of equity free cash flow generated in 2026 and 2027, net of dividends to TIM Brasil minorities. You can assume the later to be approximately EUR 0.2 billion each year.

Based on our targets, ordinary remuneration related to fiscal year 2026 will be around EUR 0.5 billion, and this will be paid in 2027. In the same way, ordinary remuneration related to fiscal year 2027 will be around EUR 0.6 billion, and this will be paid in 2028. For the extraordinary remuneration, we intend to allocate approximately 50% of Sparkle proceeds with around EUR 0.35 billion cash out in spring 2026.

It is clear that these proposals will be subject to Board and shareholders' approval and availability of distributable reserves, and we are working in this direction. As mentioned earlier, the P&L recognition of the '98 concession fee proceeds is not included due to uncertainty around the Court of Cassation ruling time line.

Slide 25. And last but not least, and even if it's not the monster issue as it used to be, let's talk about net debt and leverage evolution. Organically, we expect leverage to sit around 1.3x at the end of 2027 as a result of equity free cash flow generation, the inclusion of Sparkle proceeds, the dividends and buybacks to TIM Brasil minorities and TIM S.p.A. shareholders' remuneration, both ordinary and extraordinary.

And additionally, the '98 concession fee will be -- will further reduce the [ NFP ], leading to a 1.1x leverage. Clearly, neither 1.3 nor 1.1x is a target for us. But we do take the commitment of maintaining a leverage below 1.7x since we believe it is the most efficient level for the capital structure and will put us in a best-in-class position. And this said, we will have a significant amount of financial flexibility, which will be available for strategic and tactical options.

And now I hand over to Pietro to comment on ESG targets and his final remarks.

Slide 26. Thank you, Adrian. The ESG plan '25-'27 is built on 4 fundamental action lines. First and foremost, human capital development achieved by strengthening organizational processes through AI adoption, enhancing employees' skills to keep pace with market evolution and reinforcing the meritocratic system.

Regarding infrastructure, our goal is to maintain leadership in efficiency while increasingly relying on renewable energy sources and self-sufficient, particularly in Brazil.

Cybersecurity is a strategic priority and a dedicated plan is in place to increase security code robustness, automate penetration testing and strengthen anomaly detection at critical access points. Technological transformation is another key element of the plan with targeted investment in the ICT sector, transitioning to network to cloud architecture and accelerating AI adoption through both licensing for everyday operation and customization of solutions for complex processes.

I want to emphasize that regarding the environmental, social and governance issues, we aim to adopt a pragmatic approach, actively seeking solutions to align ESG objectives with the need for profitability and cash flow improvement. To explain this pragmatic approach, social impact is often interpreted as a corporate responsibility narrative. However, for TIM, it means implementing organizational adjustments that respond to major social trends such as the evolution of work models, internal organization with a mediocratic perspective and closing the gender gap.

Similarly, environmental impact is not merely an ideal goal, but an opportunity to improve operational efficiency by adopting advanced processes and technologies. This means optimizing energy and resource consumption, reducing operating costs and minimizing risk associated with regulation and environmental sustainability. In this context, technological innovation enhances resilience and adaptability, strengthening the group's market position.

Finally, the targets for innovative services steer the company towards providing a social and environmental impact solution such as application for smart cities and public administration digitalization, services that drive Italy's digital transition and are expected to see increasing demand.

Now let's move to Slide 28 for the closing remarks. Things are unfolding exactly as we anticipated to the market. We are guiding for the same EBITDA after lease minus CapEx announced last year. CapEx level would be lower, as mentioned during 2024. Equity free cash flow will be higher due to lower financial expenses and taxes, as we mentioned many times. Domestic will be almost neutral at equity free cash flow in 2025, not considering extra working capital effects and definitely positive from 2026.

Brazilian operations have the highest EBITDA margin in LatAm and always delivering cash flow above expectation. '98 concession fee will be cashed in, in 2025 as indicated many times. Sparkle binding offer has been accepted and the disposal is now in progress as presented in the Capital Market Day in 2022.

We returned to shareholder remuneration, as previously mentioned in last year Capital Market Day. We retain strong financial flexibility to capture inorganic opportunities. We have a full commitment to a strong capital structure with leverage below 1.7x, significantly better than investment-grade peers. It's a good picture, but there is nothing new. Simply, things are unfolding as expected. We deliver what we promised.

[Operator Instructions.] The first question comes from Mr. Fabio Pavan at Mediobanca.

First one is if you can provide some more details on free cash flow bridge, what we may expect in 2025 for Italy and Brazil? And if there is any different assumption with respect to the previous plan?

The second question is if there is any upside left on business plan targets, what assumptions have you made on domestic market dynamics? And any color about your expectation for the cost of debt?

And the final question is to shareholders' remuneration, long awaited. Could you elaborate a bit more on your preference for dividend distribution versus share buybacks?

First of all, let's start from what you asked about upside left on domestic market. Yes. What we show is a minimum. We think that we still have in the market some opportunity that can come from the real market consolidation that we couldn't put inside this number.

This is one of the area. As you have seen also at group level, what is happening is that we put an evaluation of the exchange currency rate with Brazil that in some way, we think could be conservative. And if it will be improved, let's consider it, we'll put in the plan 6.37 at certain point, while today, we are at 5.97, it could be good. And it allows me also to show that 2024, 2026 in absolute value, the EBITDA minus CapEx of the group is confirmed and it was possible also recovering the worsening of the exchange currency rate.

Then I will leave now just for a second to Andrea to give some colors about the market dynamics and the market consolidation. And then we'll go through the further question.

Thank you, Fabio for your question. In terms of market dynamics, we -- 2024 has been a change year. We have seen an improvement of the market dynamics towards the second half, especially on mobile. We previously commented in a previous call on this. We see especially a different trend in the no frills gain versus the main operator on portability. And we do see some very initial results of the Vodafone, Fastweb consolidation already in the last weeks in terms of market behavior.

We also see an improvement of the market trend on fixed line due to migration to new technologies and to the improvement of market share of TIM on FTTH and FWA that are the growing technologies in the market. We launched FWA 5G in December, and this is going to improve our position as well.

And now just also to Elio to give some more highlight on the dynamics on the Enterprise market.

So for the Enterprise market, the market is growing at 5% PAT, as you have seen probably from our figures. We are growing the PAT which is slightly better than the market because we are growing at 6%. What makes us feel very positive about the outlook is that this 5% market growth is a combination of 2%, 3% on the Enterprise, on the private sector and 10% to 11% on the public, where, as you know, we have a very, very strong positioning.

So having our business with 50% of revenues generated by the public sector, the fact that we are -- we see this trend of the public administration business growing more and more, this is, let's say, the most important KPI that let us feel that we are in a good position.

Okay. About the question related to the shareholder remuneration, I think that it's very useful to receive this question at the beginning of the Q&A because allow us to give a clear explanation. What is important for us was to become a normal and solid company. And the restore of the shareholder remuneration is an important milestone to be back on the right track.

In the meantime, we have always declared that our goal is to be market friendly. We demonstrated that also during the liability management. So the definition of how will be the shareholder remuneration used in terms of dividend, buyback, saving, ordinary is something that will be defined in 2026, having in mind that whatever we will do will be market-friendly and based on the price and the situation of the market at the time, having in mind the right capital allocation.

About then, the first question about the free cash flow bridge, if you remember also the famous addendum of the last year and you look at normalized and not normalized number, we already showed the possibility to have a normalization. What happened was that we accelerated compared to the previous year, the normalization. But Adrian can give you more details.

Fabio, clearly, if you compare to the addendum that we issued last year, it's at net cash flow level, the comparable number is additional EUR 200 million. But at the equity free cash flow level the improvement is something around EUR 300 million, mainly coming from cash taxes and some financial expenses, even if the improvement in financial expenses, you will see it at a higher pace in 2026.

But also in terms of working capital, both in Brazil and in Italy, the thing is that this improvement of EUR 300 million, it's even absorbing what TIM Brasil announced yesterday, the local payback that the company will be performing. Then this is probably another flexibility that we have. Initially, we think that we won't be participating to the buyback, so we're directly increasing our code in TIM Brasil, but this is something that we will be just handling during the year.

So again, yes, as Pietro has mentioned, we anticipated probably 1 year in terms of improvement. Also '26 has a similar improvement with the old 2026. The thing is, now we have more certainty about many, many things that flow inside the equity free cash flow as we did in the past. So -- and then let me tell you what happened in the second half of 2024 in terms of cash generation gives us some comfort in terms of reaching at least the level that we guided today.

I think that we answered all your questions, Fabio.

Yes.

The next question comes from Mr. David Wright at Bank of America.

So just to explore the shareholder remuneration. So you will commit half of the Sparkle proceeds this year to be paid next year. Now I'm assuming that will -- so that's effectively that there was no capital gain of note with Sparkle. So that would imply, unless there's a significant change, it could be paid more from distributable reserves, if I'm right. And if that's the case, did the saving shares still carry the same premium to odds? And if there is a buyback, do savings shares have any rights versus odds? Or can you buy back one, not the other?

And then just to become sort of clear, if you do generate positive net income in 2025 and you're looking to pay dividend in '26, I'm assuming that the Savers shares on paid dividend must get first rights on that cash. I appreciate this is a little complex, but it is a little complex.

It's important to remember and also, other now with Agostino can give you more details that the obligation and the privilege of the saving shares start when we'll be back to have net profit at the S.p.A. level. In 2025, we think that will be roughly 0 in terms of net profit on the S.p.A. So it means that in 2026, in theory, the privilege towards the saving share will be small, while in 2026, our net profit would be higher and it will allow in 2027 to pay the dividend for the saving shares.

So this is what is related to the privilege. Then it's clear that we want also to improve our capital structure, and we will propose to the Extraordinary Shareholding Assembly to approve the reduction on the so-called [ capital social ] that will allow to reconstitute the legal reserve. But I leave to Adrian and Agostino to elaborate more on that.

No, I think that you answered everything, David. The thing is today, we do not have available reserves for any distribution. So we need to take this first step that Pietro was mentioning before. And then in terms of privilege, it works as he mentioned, only if we have net profit. So if it's a distribution coming from available reserves, it doesn't trigger the privilege. But yeah.

In the event of, Adrian, of a buyback that you mentioned, how does the buyback work with ordinary and saving shares? Is it the same split if you allocated EUR 350 million buyback? Is it split proportionately towards saving shares? How does it work?

Agostino, to give the answer from a legal point of view. But it's important the statement that we did at the beginning. We will do something that will be market-friendly, and we will decide at the moment when all these proceeds will be available. But from a legal point of view.

Okay. Just one clarification. In terms of privilege, it doesn't matter whether you are distributing net profit or reserves. So it is the same. So it works the same way.

Now moving to the buyback. Clearly, it's a discussion -- decision of the assembly. You can buy back the ordinary or you can buy back the saving or both of them. But clearly, on the buyback, there is no action in terms of privilege. It's a decision -- a discretionary decision what you want to buy back. We already did some buyback in the past in order to have an availability of the shares for our LTI plans and so forth.

That's clear. Just maybe one clarification. I'm sorry to take the mic here, my colleagues. But if you get a nice present from the government, EUR 1 billion check, that would instantly drop into TIM S.p.A. reserves, that would instantly crystallize the first, I don't know, EUR 500-odd million of that would instantly be paid to savings shareholders before any of it was allocated beyond that. Is that correct?

So P&L recognition only with the final decision of cassation. So it's different if we will cash-in probably in 2025, and we'll see when is there a recognition in net financial position. But what triggers is the final decision of the Cassation Court.

Yes. The answer is, once we transact or we have the sentence of the cassation, it goes directly to the net profit of the S.p.A. and trigger the payment of dividend of the saving shares.

Well, you could realistically get the cash before that. So you could have the cash in bank useful, but you haven't collected the reserves. That seems crazy.

Yes. What's happened with the sentence that we had of the appeal court, we have -- not the possibility, we must cash-in the amount of EUR 1 billion. It doesn't go to the profit and loss. And once it is paid, it goes on the PFM. Then it's really dependent and we enter in a lot of accounting dynamics. If the Italian government pay an installment in 2 years, but agree, we can have a discount on that by the banks.

So it enter inside our cash-in, but cannot be put in PFM. But we are giving some details that makes everything more complex. Let's stay simple. We will have the cash-in. The cash-in is not usable for the payment of the dividend. When we will have the sentence by the Cassation Court or a transaction agreed between the parties, it goes directly on the net profit of the S.p.A. and so it triggers the payment of the saving shares.

The next question is from Mr. Domenico Ghilotti at Equita.

I have a question on the Enterprise business, in particular. So I saw some slowdown in the last part of the year. And Elio, you mentioned, say, a commitment, a target to grow the business mid-single digit, both sales and EBITDA. So basically with no margin expansion. So I tried to get some clarification on the trends that you are seeing on the business and on the opportunity for having also some margin expansion.

And then a follow-up on the concession fee. Are you still -- or do you see chances for a settlement with the government? Or is something that is over and so you are just waiting for the cassation ruling?

Domenico, about the concession fee, we have to also respect the willingness of our shareholders and we have to fight for the right of our shareholders. So let's see what will happen in the following days and we will return to the market with the right answer at that moment. Today, the only possibility that we see is to cash-in based on the sentence. And now I leave to Elio to answer.

Yes, Domenico, thanks for the question. Actually, we don't see any weakness in the business trending in quarter 4. Actually, as you probably know, we have a very high peak revenues and EBITDA concentrated in quarter 4 because there is a seasonality in our business that makes -- that the last quarter of this year was at EUR 1 billion revenue level. So it was a quarter record in terms of revenues and EBITDA generation.

What we are trying to do in terms of marginality is in the EUR 3.3 billion of revenues that we generated in 2024, there are more than EUR 1 billion revenues that are concentrated still in other ATL licensing, which is a part of revenues that heavily dilutes our marginality. We are -- with a kind of synergical approach, we are trying to get rid of revenues that are not, let's say, functional to our business and marginally very dilutive. And this is what we will try to do also going forward.

In terms of margin opportunity, as I told you before, the reason why we believe that we are in a good situation is that is the market that -- the component of the market that is booming, which is the public administration is an area where we have concentrated 50% of our revenues.

We have recently launched also a vendor consolidation process, which we expect will generate a margin improvement. And we see the value and the duration of our cloud contracts getting better and better. And this is an area of our cloud, which is very good in terms of marginality. So the more we expand that area, the better the business will look like.

The next question is from Mathieu Robilliard at Barclays.

I had a few questions. The first one is on your MSA with NetCo. You showed that there was a decline in the costs related to the MSA. I realized that this is volume-based. So probably part of the decline is due to lower volumes, but I was wondering if there was also any change in the price compared to the assumptions you had used in 2023 or there was just a change in the price for contractual reasons, and that could also benefit 2025?

The second question is, I was intrigued by one of the slides where you talk about things that are included in the current plan, notably on MVNO, a new operator in 2026. I don't know if you can elaborate on that.

And then lastly, in terms of the free cash flow kind of bridge, you made it very clear that one of the reasons for the improvement was the fact that some of the one-off items are probably going to be less important than you feared a year ago. But if we look at the core free cash flow generation, notably on domestic, is it fair to say also that it's probably going to be a bit better than what you thought at the time? I think you made comments that Q4 was quite good. So if you can give some color on that, that would be great.

Thank you, Mathieu. I think that you did a statement that was, we told to the market several times, on the first question, the MSA declining. We told to everybody that there was no volume commitment, no value commitment. And when we were telling that, there were a lot of doubts about the fact that it could be a reality. This numbers are showing to everybody that is exactly as we told.

Then what is happening is that there's a matter of volume. So if we have less line, we pay the less. If -- and we hope that sooner or later, we will be back to growth in terms of line, the cost could grow up. But in any case, there's a flexibility on that. And then I will leave to Claudio to elaborate more on that. Finally, the loss of the vertical integration allow us to act as any other of our competitor. We can choose the right mix between technology to make our profit and loss more efficient.

Finally, we were able in the first quarter to activate for the first time FTTH customer also in the white area with Open Fiber. But Claudio, if you can give some more colors.

Thank you, Pietro. I think that you said it all. I mean, the key element and key characteristic is volume-driven with no commitment. Therefore, it allows us to correlate our cost to our evolution of volumes and service and to execute our strategy. That means that we can concentrate in using the infrastructure that is more efficient in terms of cost and improve the average mix while we are executing our strategy to position in the market. It's as simple as that.

Thanks Claudio. About the second question, MVNO, this is not just a wishful thinking. We are in a negotiation, as you can imagine, it's a confidential phase. So we are confident to offset the Fastweb loss. Last but not least, on the free cash flow, Adrian, the bridge for 2025 at domestic level.

Mathieu, the thing is, in terms of the extraordinary effects, no -- are the same that we projected last year, and you have it in the appendix. The thing is, now the other side of the working capital, the ordinary working capital is improving compared with what we guided last year. So aside of the effects on financial expenses and cash taxes or others, yes, clearly, the domestic is performing better than we projected last year at the end.

And again, as I was mentioning before, the fourth quarter was very encouraging. For us, it's the statement that what we mentioned in the speech, the fact that the domestic in terms of equity free cash flow would have been positive without the extraordinary effects in '25, and it's definitely positive in 2026. It's something -- it's confirming what we were thinking by the time of the NetCo disposal. So again, that's probably one of the most positive parts of these new projections.

If I can sneak a last one. The extraordinary dividend that you plan to pay linked to the sale of Sparkle, I realize the way you pay it depends on a lot of things. But that would be, in theory, goes for the odds and the Savers, putting aside the reconstitution of reserves and et cetera. And you haven't made any decision on that or you haven't clarified that. Is that true?

Yes, it's true. And as we mentioned, we will elaborate the right strategy to use these proceeds at the right time, first quarter next year once it will be approved also by the Board and the Shareholder Meeting, having in mind a market-friendly approach.

The next question is from Giorgio Tavolini at Intermonte.

In the last conference call, you mentioned the plan to launch a bundled offer with gas electricity in partnership with utility provider in Q1 2025. So I was wondering if you could share any update on this initiative.

The second question is very simply question on targets. When I see the Free to Run plan, the domestic EBITDA growth envisaged a 9% to 10% growth and now its 5% to 6%. So I was wondering if you can elaborate on this different growth?

And the third question is on the recent consolidation scenarios, the rumors on the consolidation scenarios with Iliad or PosteMobile, if you have any preference among the 2 scenarios that you can elaborate a little bit on this.

Start from the first one about the energy. I leave to Andrea to give some more details, but we've already signed the first contract.

Thank you, Giorgio, for the question. Yes, indeed, we launched the offer in the SMB segment in partnership with Axpo. And we did sign already in February the first contract. So in reality, we achieved the first milestone. We are working to enlarge the action on the consumer market. We are confident we can get there.

About the consolidation scenario, we always thought that from an industrial point of view, the only 2 possible targets for an M&A activity in the consumer side were Poste or Iliad. When we started to say that, it was 2022. It took 3 years. Now everybody are discussing about that. I don't have a specific preference.

What is happening is that for us, always is important the result for the company. So we want to continue to deliver the number and don't be distracted by something that happened outside our perimeter and our possibility.

About the targets of EBITDA after lease, I will have Adrian to give you some more details. But let me explain better that if you look at our number on the domestic side with the exception of Sparkle, where we at in the last quarter, a small issue related to the war on the Israel Sea. The domestic without Sparkle performed much better than the guidance. So when you have to look at our number, you have to look, as I told at the beginning, to the 3 years, '24, '25 and '26. And in absolute value, EBITDA after lease minus CapEx is aligned to the previous plan. The new plan is aligned with the new plan. But I don't want, Adrian if you --

I don't think that we need to complement. But anyway, no, clearly, the most important fact is the starting point is higher. And then the growth clearly is a little bit lower. Then considered to the previous plan, there are some accounting factors that swing between EBITDA and CapEx. That's why Pietro was mentioning, if you take the '24, '26 cumulated EBITDA minus CapEx, you will arrive to the same absolute number.

And then as Adrian told, if you look in terms of percentage, the math is different if you achieve in the first year a higher level of efficiency due to also the great activity that we did on the transformation. And so it's clear that the percentage in the following 2 years will be slightly lower. But to confirm that when you look at the absolute value, EBITDA after lease minus CapEx in the 3 years are exactly as the previous plan.

The next question is from Mr. Luigi Minerva at HSBC.

First question is on your relationship with FiberCop. Obviously, there was some management change at their levels. I'm wondering if there is any delay in the execution of FiberCop plans, whether that will affect your ability to keep your commercial momentum on the ServiceCo side?

Second question is on Enterprise, and you are very clear that the public sector is very important. Could you perhaps clarify the precise contribution from the EU recovery fund to Enterprise and what we should expect once we get to June 2026 and the recovery fund vanishes arguably?

And then if I may, just a couple of questions for Adrian. So the first one is, can you clarify how much goodwill is there at the [ TI S.p.A. ] level?

And finally, I'm always surprised by the big delta between net debt and gross debt. So why do you keep EUR 5 billion of liquidity, of which EUR 4.5 billion are in cash? It doesn't look too efficient, but I'm just wondering.

Luigi, I can resign as moderator because you already give the question to the right people. But in any case, let me answer to the first one. The relationship with FiberCop, we are 2 companies and the relationship and the contract works independently from the people that are managing the company. So I really appreciated the activity that was made by Luigi Ferraris that was a real good professional with which our relationship was very good.

Now Massimo Sarmi is leading the company. Massimo Sarmi was also a previous Board Member of team. And so the relationship are good, too. But in any case, everything is working in the right way and with the right pattern. Then anyways as you defined and decided to Elio and to Adrian to answer to the further question. To Elio.

Luigi, thanks for the question because you give us the opportunity to shine. So the reason why we feel very confident about our outlook is that we have already sold and signed the contracts for more than EUR 4.5 billion as a total contract value, out of which more than EUR 2.5 billion are cloud contracts. As I said at the beginning, what makes our business getting better is the fact that the value and duration of those contracts is higher than it was before.

And answering to your question on the public sector, I would say that 1/3 of the number that I gave you in percentage before -- so, sorry, 1/3 of the number of the EUR 2.5 billion cloud contracts is coming from the National Strategic Hub. This, as you know, if you look back to our business 2 years ago is fully incremental. And that's the reason why we had the hope we delivered consistently the generation of a growth, which is slightly better than the market. So that's the reason why the public sector is heavily impacting positively our business. And let's say, the size of the contract that we have already signed that tells us that we are in track.

Just to clarify, there is no -- you expect no impact once the PNRR is over?

No, actually, this is something that -- thank you for the clarification because this is something that I also read on the media, on the press, and this is very misleading. Actually, let's say, what the market is considering a risk, I see as an opportunity. In the sense that by the end of 2026, administration can make the addition to the program. But once they are in, then they will sign contracts for the next 10 years.

So let's say, the time horizon of the PNRR is not a time horizon for our revenues. It's a time horizon for the administration to get into the program. From that moment in time, so we will keep generating revenues and margins with those administration. I don't know if the concept is clear.

Luigi, and what is important is that, once you are in, the name of the game will be upselling because this is not just a matter to migrate everything in the cloud. Once you are migrating in the cloud, you can further increase the share of wallet selling further services. And this is also another important element in our strategy.

About the cash position, yes, as you were mentioning, it's -- by the end of '24, it's EUR 4.5 billion. But just consider that those EUR 4.5 billion or EUR 3.5 billion of the domestic business and almost EUR 1 billion equivalent in Brazil. So in terms of how we manage the cash, you need to consider this effect.

Going forward, clearly, and if you can imagine our target at the domestic level by the end of 2025, this cash position will go down clearly and obviously, considering the maturities that we have this year. But it's a matter of how we try to be the most efficient as possible also considering that part of our cash position is down in Brazil.

And if you see what was announced yesterday, part of that also goes in that direction. We need to hedge our position in Brazil, both with financial instruments or naturally. So it has many, many variables. Then clearly, that was the year-end cash position. Normally, we absorb working capital in the first quarter, then we have the maturities in April and May. So it's a matter of coverage, just we are handling as efficient as possible.

And Luigi, thank you for love, comes again your report.

Last question was about the goodwill at TI S.p.A. level.

Yes, about the goodwill. We have a goodwill -- I don't have the exact number now, but it's around EUR 10 billion, because it was -- somehow the previous goodwill by June '24 was almost splitted by half between the NetCo component and what was called [ self ] in the past and TIM. So now we are around EUR 10 billion.

The next question is from Mr. James Ratzer at New Street.

I have 2, please. So Pietro, I was wondering if we could come back to the topic of potential in-market consolidation. I think most of us would agree, Xavier Niel is a pretty smart guy at creating value. He's, obviously, tried to consolidate the market through buying Vodafone. He couldn't succeed there. He's, obviously, trying at the moment, if we read the press, to potentially look at some influence over Telecom Italia.

So real question is, if there's value to be created there, why don't you take the lead here and actually make a bid directly for Iliad, so you become the driving force in actually creating this value opportunity in the market?

And then the second question I had was just be interested in digging around in more detail on the consumer mobile ARPU. That in the last couple of quarters, the year-on-year trend there seems to have deteriorated a bit. But yet in the guidance, you're now outlining that's going to grow. So what's kind of driven that recent weakness on consumer mobile ARPU? And then what gives you more confidence in that ability to turn it around?

So James, thank you for the 2 questions. I will leave then to Andrea to answer about the mobile ARPU. And sometimes it seems that really times fly. Until 1 month ago, the issue of our company was these people were liar or not. The plan that they declared was real or fake. And now we are showing a number on which we are reaching a level of leverage that is 1.1.

So it's clear that with this kind of leverage position, we are more open to different optionality strategically wise that can be on Enterprise, on Consumer, but we have also to have a clear view about if our shares are 2x EBITDA, it's more convenient to invest in further putting a bet on a market consolidation, buying someone with the right price or it's better to buy our company, because today, it's a real cheap company. So I don't want to give you the answer.

We have always in mind that we have to create the maximum value for all our shareholders. We started 3 years ago trying to restore a normal company. Now we can say that we are on track. We will evaluate any strategic optionality that will create value for all the shareholders, comparing that with other options. But it's clear that the market consolidation in Italy is a must to repair the market. Andrea, if you want to talk about.

Yes. Thank you, Pietro. Thank you, James, for the question. It allows me to clarify some of the trends. Indeed, you noticed right, there is a slight change in the trend of ARPU in the last couple of quarters. This is due to basically a couple of effects that I will now explain. This year, we have been more prudent in repricing mobile customers. So we repriced a smaller portion of the mobile base, and we repriced it basically all in the first half. So the second half comparable was slightly different.

Over that, by the way, there was anyhow some market dynamics with volumes that were higher. And we know that the dilution of ARPU is due to the rotation of customer among operators because we have no dilution on the customer base as such. We indeed grow the ARPU with repricing on customer base. There is a dilution just because the acquisition offers are lower than our customer base ARPU.

So why do we see the trend improving going forward? We see it improving for 3 reasons. First reason is that we see the market dynamic improving. Due to the consolidation of Vodafone and Fastweb, we see a scenario in which probably we will rotate less customer having Fastweb become a bigger operator, whereas Fastweb was in the past, one of the main contributor to the rotation of customers with very aggressive offers.

The second reason is that there is a technical item, the incoming price, price of termination that declined quite a lot between '23 and '24, and this is a regulatory item. The trend will be softer between '25 and '24. Therefore, we have an improvement in the dilution trend.

And the third item is that we are improving our CVM practices. We see upselling ratio, especially also bundling with content. You may have seen that we just launched a partnership with Apple, for instance, with mobile and music. And this is going to contribute to a bigger upselling and therefore, compensate better the dilution terms.

If I may, if you remember the chart that is in the presentation where we talk about financial flexibility. In that financial flexibility, there are also, as we told, the opportunity to look also to some smaller inorganic acquisition that could be very useful mainly in the Enterprise segment. But in any case, now we have the strategic flexibility to look at the market for the best of our shareholders.

The next question is from Mr. Joshua Mills at Exane.

I have 3 questions, please. Firstly, I wanted to come back to the Italian guidance outlook. And I know that you keep referring to the fact that the EBITDA after lease minus CapEx number is ending up in the same place as the previous guidance. But just to be clear, it sounds like the EBITDA growth is going to be a bit lower, but that's being offset by CapEx. So that was the first point of clarification.

And then the second point of clarification on this, Adrian, you mentioned earlier that there was an accounting change here where some of the costs were moving from CapEx to OpEx. Can you just elaborate on that and be a bit more specific, because otherwise, it looks to us like your organic growth is weaker, but you're spending a bit less money on CapEx, which is maybe a lower quality guide.

The second question, on the MVNO contract, earlier, you said it should be able to offset the Fastweb MVNO loss, which I think is around EUR 100 million. Are you saying that the new contract, whoever it's with will offset all of the EUR 100 million of revenue that you expect to lose with Fastweb, and that would be helpful.

And then thirdly, just taking on the question around mobile pricing and the mobile ARPU deterioration. I guess, from where we look at the market today, there's still a lot of activity at the low end of the market, including from the Kena brands.

I wasn't quite sure that I understood your answer to the last question about business mix, but surely, there will be some cannibalization here within your own base. So one of the ways for you to be more inflationary on ARPU and better for the pricing environment more generally going forward to be to remove some of those aggressive low-end offers as well. Is that something you're thinking about?

Thank you, Joshua. About the MVNO, we don't want to enter in too many details about who are the MVNOs. But let me say that what we have in mind is to cover not one-off, but close to the total amount of the loss that we have with Fastweb. We are working on that. And in any case, if it will be slightly lower, we have margin to further fill the gap, which was the EBITDA coming from Fastweb.

About the mobile price, I will leave to Andrea to elaborate on that. But what is important is that, we never did on our customer base promise forever, and it allows us to exercise the lever of the price up that other players cannot use. And this is a real advantage that we have because sooner or later, you have to cash-in whatever you did. Andrea, if you want to elaborate?

Yes. Thank you, Joshua, for the opportunity to further clarify. So indeed, we see a combination of different factors that will allow us to improve the ARPU trend. The first, as I said, is that we have dilution in the base because we inflow customers with aggressive offers to stay balanced on customer base level. That is what we call the dilution effect.

Now that dilution is proportional to the amount of acquisition we have to do to balance the base. So in reality, as the no frills trend are actually softening, not only the Fastweb contribution, but noticeably, even the Iliad net adds have diluted quite a bit during 2024. If you compare the trend of MNP by Iliad in the last quarter versus the first quarter, the amount of net adds they did is 1/3. So that is demonstrating that somehow the no frills operators are struggling more and more to intake customers from the main players. And that is also due to the fact that we have a lot more customer in convergence.

Compared to 2021, we increased the rate of convergence by almost 20 points. And that is coming with an advantage of around 4 points on the churn between convergent customer and nonconvergent customers. So the net adds impact of the no frills is lower. Therefore, we need to do less acquisition at aggressive pricing. Therefore, the input into the customer base ARPU is softer.

The second item is actually repricing. Let me clarify. We did 3 action of repricing for 3 consecutive years. We actually have the intention to continue on mobile and fixed, because we have new segments of customers that can be repriced depending on their behavior of churn and their value. On this point, actually, we have improved our repricing strategies over the last years, and we segmented in order to reduce the churn impact. So we continue the inflationary element on the customer base, and we plan it for the next 3 years.

The last item is actually, as I said, also the contribution of new services that we are -- we bundle into the mobile ARPU. That is coming with, for instance, content like television and music lately, and that will give an additional upside.

Now, Italian guidance of EBITDA after lease, it gives me the opportunity to restate exactly which was our strategy that we are delivering. If you get the number of the plan, at domestic level more or less 2027 towards the end of 2024, we have to grow at revenue level something close to EUR 750 million. It means that when you look at our EBITDA target, we have to grow about EUR 350 million.

If you look at the marginality of Enterprise and Consumer and if you look at how much comes from the top line and how much come from efficiency, we have 2 different story. Annual, EBITDA in a good part from the growth of revenue and partially by the efficiency.

On Andrea side, mainly '25 and '26 are slightly close to 0, slightly negative in the first year, then it starts to grow in 2027. So the history, Andrea, is much more in efficiency in history. Why I'm mentioning that? Because if in 2024, we did 11.4% of EBITDA after growth year-on-year, it means that it was mainly driven by the cost efficiency. And it means that we anticipated in some way part of this efficiency that could come ahead.

Then when you manage a company, you manage the offer and you manage the profit and loss, including CapEx, you do also sometimes some calculation. For example, independently from the accounting on which Adrian will elaborate, we accelerated the migration to the 5G of our customer base because it allows us to reduce the need of CapEx on the mobile network because the 5G network is more efficient.

So if we want, you can spend a lot of time on a specific item, but usually manage a company means to look at the overall picture that is made by revenues, OpEx and CapEx because they are all related among them. And it allow us to deliver every year our result and that allow us to confirm '24, '26 EBITDA after lease minus CapEx exactly as the previous plan.

Yes. I will try to avoid to enter into many specifics, but we have now much more elements than we had last year. And there are some swings between CapEx and OpEx or between some amortized cost and OpEx. Just to give you a couple of examples.

In terms of the B2Bs that we're going to buy from FiberCop, some of them are for enterprise services customers. And those are mainly short term, short term, speaking about 5 or 6 years. Initially, we projected those as some amortized costs. Now after many analysis, we understand that, that will be considered as OpEx. And that accounts for something around EUR 20 million, EUR 25 million.

Yes, you said EUR 20 million, EUR 25 million is not that much. But at the end, if you consider as a growth, it's 1, 1.5 percentage points and it affects mainly [ Helios ] number. Then the acceleration that we are doing now in terms of journey to cloud also swings from CapEx to OpEx, because on-premises, it's mainly a CapEx effect. Now when we are going to cloud services, it is a full OpEx. So there is also these swings in between OpEx and CapEx. It is 1.5 percentage points, 2 percentage points. Yes, it affects the growth. But that's why if you consider the EBITDA minus CapEx accumulated in the 3 years, we are totally aligned.

Sorry. Then there is, on the MVNO.

So Joshua, on the MVNO, unfortunately, we cannot disclose at this stage the amount of the contracts we are negotiating. But let me say we are confident with the negotiation we have ongoing to fill the gaps.

Maybe just to be clear, how much are you expecting to lose on the Fastweb MVNO? Am I right in it's about EUR 100 million?

Let me see, we get a loss of -- EUR 20 million difference between the previous contract and the new one. But perhaps we are able to get more than one MVNO and we can recover. So as usual, when you do a plan, you put some assumption and we are working to deliver. Perhaps we can come also with some surprise. We get more than just one MVNO, we can more than offset. But what is important is that we are confident to fill the gap.

Just to complement on Pietro, on your precise question, we cannot disclose the amount of the Fastweb contract because that is confidential. We can tell that we planned for filling the gap within reasonable terms in 2026 versus 2025, and that is included.

Next question is from Mr. Ajay Soni at JPMorgan.

Just to come back to the extraordinary shareholder returns that you might do. I just wanted to clarify the Saver shares are -- if they get paid -- if you pay a dividend on ordinary shares, then Saver shares get paid a dividend, which is EUR 0.011 higher. Is that the same for ordinary dividends as well as extraordinary dividends, and that's obviously related to your Sparkle shareholder return?

And then my second question is just around the broadband and mobile customer losses. In Q4, they look to have accelerated a little bit. Could you highlight any one-offs in there or anything else you want to highlight within the market itself, that would be helpful?

I'll start from the second question with Andrea and then Agostino will elaborate on the first point.

Ajay, can you repeat the question?

[Foreign Language]

Thank you, Petro. So the broadband net adds have been impacted by an extraordinary action. So in reality, let me say, organic net adds have been better than the previous quarters. We had an improvement. We had an extraordinary action because following the new contract with FiberCop, we had some optimization action on some items of profile of customer that had broadband configuration. But in reality, we're not using the broadband service.

And so we pushed actually them to migrate to broadband active usage. Those ones that didn't comply with this action, we didn't respond. Basically, we optimize. And that is optimizing the cost, but it's actually changing the figure with no change on the revenues.

So first of all, let me clarify that the term extraordinary was not that it's different from the ordinary. It's extra because it's be coming from -- the net income is be coming from an extraordinary transaction, which is Sparkle. So it will be an ordinary distribution and the principle applies.

Guys, I see that probably there is a bit of complexity. So let me restate again. If we have net income either coming from operations or from any extraordinary transaction, if we have net income, we have the obligation to comply with the preferred dividend.

If we don't have net income, we don't have any obligation. Our bylaw says that we can distribute the reserves and the decision whether to use the reserves to cover -- to pay the ordinary or the preferred is a decision of the assembly. Hopefully, I was clear. Sorry for that, but it's a bit complex.

Next question is from Mr. Keval Khiroya at Deutsche Bank.

I've got 2 questions, please. So the 2024 MSA revenues would have included some benefit from the TSA with NetCo. Can you remind us what the TSA contribution was in '24? How you expect this to trend and how long it will last for?

And then secondly, you've talked about a potential savings share conversion in the past. Perhaps it's too hypothetical at this stage, but could part of the shareholder remuneration you planned to be used towards any premiums for conversion or buybacks to offset? Or would that come from a different bucket?

As we stated, inside shareholder remuneration, we consider all the levers that we can use to further improve the remuneration of our shareholders. We already expressed that we will be market-friendly, and we will evaluate that at the right time, looking also at the market value of all the different shares. Then about the TSA, the duration of the TSA, Claudio.

Yes, TSA contributed in 2024. It has an extension that goes up probably to 2026. Given that it is a transitionary service agreement, it depends on the 2 parties' the ability to prepare themselves in order to be fully autonomous in delivering certain service. At the moment, our horizon is broadly end of 2026.

Could you just remind us what the contribution was from the TSA?

In 2024,it has been EUR 30 million, roughly.

The last question is from Mr. Ottavio Adorisio at Bernstein.

The last question should be a number of follow-ups. So I'll first start from the MSA. From a previous comment, it's all about volumes. And of course, that introduced the issue of the volume discounts. If you can tell us the sort of discounts you received in the first year? And because now you have an investigation coming from an inquiry from the antitrust, what could be the risk that this discount cannot be repeated?

The second one is on the reply you gave many times over about the ARPU. The implication is that there is quite a gap between the front book prices and the back book prices. So the more the customer churn, the lower the ARPU because front book prices are lower. So want to just look at the dynamics, could you tell us the gap you have today on average between your front book and back book prices?

The third is on the dividends. Again, I'm looking forward, I'm just looking backwards. The saving shares you haven't paid dividends for the last 4 years. They have a drag along close. I just want to ask you, have you received a legal opinion that because you haven't generated net income, a drag along close effectively means that there's not been accrued any dividends to the savings shares.

And the fourth one, it's about your gearing. Again, you said that the plan is an evolution, not a revolution from the previous plan. So therefore, I would like to ask, Adrian, if you can reconcile the gearing it was given last year for 2026 that was mid-range of 1.65 to the 1.3 you have for '27, bearing in mind that it didn't include INWIT disposal, so adjusted should be 1.4. And considering that you increased the cash flow guidance, it looks to be relatively low the gearing you project from '26 to '27 from 1.4 to 1.3. If you can give us a bit of a bridge between the 2 would be great.

Thank you, Ottavio, because this allows me to further clarify the phenomenon of the ARPU dilution. Indeed, in the market and not just -- this is not just about TIM, but I would say all the main players have some gap between the front book and the back book, and this is due to the 2 factors basically. One is the fact that the main players do repricing, whereas the so-called no frills typically don't do repricing.

Now while this creates a bit of a gap, it's also a source of growth. And indeed, you will find in our KPIs that this year's growth has been more from value than from volume. Although we also improved some volume of customer base on FTTH, for instance.

So the gap in ARPU -- and this is very important. This is one of the factors that make us confidence on the trend of ARPU for the year forward. The gap between front book and back book has reduced. It has reduced for 2 reasons. One, let me say, is a sad reason. The ARPU went down for several years for the main players. And therefore, the gap versus the market level of acquisition has been reduced.

And the second one is actually a good reason. The good reason is that as we feel less pressure, especially on mobile from the no frills operator, we can soften the aggressiveness of the acquisition game.

Therefore, today, we see a gap that is around a couple of euros on mobile, for instance. It used to be much bigger. In the past years, when, for instance, Iliad entered the market, they entered with an offer that was EUR 5.99 when the average ARPU of the main players was over EUR 13. So you see that to react to that pressure, we had to dilute the ARPU quite a bit.

On fixed line as well, we have a positive element due to 2 factors. The gap there is a bit bigger, around EUR 4 to EUR 5, depending on the promotional period. But the trend of ARPU, as you see, is improving for 2 reasons.

The first reason is that we are improving our trend of net adds, especially on FTTH. And the second reason is that in the second half of the year, we completely transformed our policy on bundling content into fiber and attaching, therefore, higher ARPU packages on the new offers, therefore, closing the gap between front book and back book. I have to underline this is a distinctive trait of Telecom Italia because we are the only player in the market apart from Sky having content bundled in the offer.

About the discount on the MSA, it's important to remember that today, for the component related to the access, we buy more than 80% on FTTH and traditional services that are mainly -- not mainly, that are regulated. And so the price is the same for everybody.

Waiting for the approval that is not an inquiry because it's a normal process of evaluation because sometimes the use of some adjective can give the idea of something that is not on the right track. We will see if it will be approved the possibility to have the most favorable customer clause.

In the meantime, on FTTH, what we are losing are the offer that FiberCop put the disposal of all the operators. So today, we have no specific treatment by them.

About the dividend, I restate that our approach will be market friendly. Then there are some elements of the regulation that are very complex. We are analyzing, but it's important to state that the approach of our company will be always market-friendly as we were when we manage the liability management. I think that one is MSA, ARPU, dividends.

There's a question about the leverage. I think that you were trying to reconciliate the 2026 guidance that we gave last year with the new one. Clearly, the leverage that we are projecting is lower in this plan than it was in the past, mainly because of the organic contribution, but also because of the Sparkle disposal, the portion that we won't be remunerated. But then you have also on the negative side, the possible absorption of the buyback we receive.

So there are some moving parts inside. But at the end, the evolution of leverage is better in this plan. But in terms of leverage, let me mention something. This is what we are projecting now. It doesn't mean that we will arrive there with that leverage. It will depend a lot in terms of financial flexibility, it could be an upside on remuneration, could be many, many things going forward.

What we are committing ourselves is to be below 1.7x. Then what we showed in the slide is what we are projecting. That doesn't mean that we will arrive in that level, depending on many variables. But we have the commitment to be below 1.7x EBITDA of leverage.

I think this was the last question. Thank you to everybody. We will follow up in the following days with our roadshow.

But I would like to conclude remembering what's happened in this journey. Let's remember that at the end of 2021, beginning 2022, everybody were really worried about the financial sustainability of this company. We have in front of us a wall to negotiate EUR 9 billion of debt. We have to pay EUR 1.7 billion for the 5G frequencies. If I'm not wrong, we presented minus 15% in the EBITDA in 2022.

Our operational KPI were bad. We present a plan that should restore a strategic opportunity and choices for our company and to restore the financial flexibility. We did something that was considered impossible, the sale of the network.

We are demonstrating with our operational number that before the sale of the network, we were able to manage the operation of the company improving, and we are showing that after the sale of the network, we are able to continue to deliver this number.

We did the sale of the network transforming from a PowerPoint to a reality in a short period of time that should seem impossible. Now what we are doing is delivering exactly what we promised. We are restoring the financial flexibility of the company because we are restoring the shareholder remuneration. So I think that whatever we told, we deliver and promise, also the things that was not completely under our control.

So I think that today is starting a new age for our company that must be the big and best player that always was in Italy. Thank you to everybody.

Ladies and gentlemen, the webcast is over. Thank you.