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Operator: Ladies and gentlemen, good morning, and welcome to TIM 9 months 2025 Results Presentation. Paolo Lesbo, Head of Investor Relations, will introduce the event.
Paolo Lesbo: Ladies and gentlemen, good morning, and welcome to TIM 9 month 2025 Results Presentation. I am pleased to be here with the CEO, Pietro Labriola; the CFO, Adrian Calaza, and the rest of the management team. Today, we will guide you through the highlights and review the main operating and financial results. As usual, we will close with the Q&A session. Before we begin, a brief reminder. As in previous quarters, Sparkle continues to be reported as discontinued operation, in line with the guidance provided last February. It is therefore excluded from the scope of these results, unless otherwise stated. Please also refer to the safe harbor statement in the appendix for additional details regarding the reporting perimeter. With that, I now hand over to Pietro to start the presentation. Pietro, the floor is yours.
Pietro Labriola: Thank you, Paolo, and good morning, everyone. Let me begin with the highlights of today's presentation. TIM delivered a solid operational and financial performance in Q3, both in Italy and Brazil. Year-to-date results are in line with our budget, and we remain on track to meet full year guidance. It's important to note that the shape of our performance reflects the seasonality built in the plan. For this reason, we confirm our full year guidance. In Italy, the pricing environment in the consumer segment showed a slight improvement, with mobile front book price increases already visible in the market and some back book adjustment announced for Q4 by our competitors. Meanwhile, we have also strengthened our partnership with Poste Italiane, signing the MVNO contract and launching TIM Energia powered by Poste, an initiative that extends our presence into a new adjacent market. In the enterprise segment, we posted another quarter of robust growth driven by cloud. We also signed a letter of intent with Poste to establish a joint venture focused on developing proprietary solution, leveraging open source cloud and artificial intelligence. This partnership position TIM and Poste as leading players in the country's digital transformation. We will share more details later in the presentation. In Brazil, market dynamics remain highly rational and TIM Brazil delivered strong results with consistent growth and improved cash generation. In September, TIM successfully returned to the debt capital market for the first time since the 2023 bond issuance and the 2024 net cost separation. We issued a EUR 500 million bond that priced the lowest spread in the past 15 years for TIM and was the euro note with the lowest coupon of a sub-investment grade in the last 3 years. It received an exceptional response from investors with demand 6 times the offer, a clear sign of bringing confidence in the group's solidity. Let me now walk you through the key figures for the group in the 9 months. Total revenues were up 2% to 3% year-on-year with service revenue growing 3%. EBITDA after lease increased 5% to 3%. CapEx stood at EUR 1.2 billion, around 12% of total revenues. As a result, EBITDA after lease minus CapEx rose 10%, reaching EUR 1.5 billion. Equity free cash flow confirmed a structural improvement versus last year when NetCo was still consolidated and progress in line with our budget. Adrian will elaborate on cash flow in a moment. Net debt after lease remained stable at around EUR 7.5 billion with a leverage ratio below 2.1x. At domestic level, performance was equally solid. Total revenues grew 1.2% and service revenue 1.9%. EBITDA after lease increased 4.1%, showing that our operational model continues to scale effectively with cost discipline and repricing initiatives translating directly into profitability. CapEx reached EUR 0.7 billion, around 10% of total revenues. Consequently, EBITDA after lease minus CapEx was up 8%, reaching EUR 0.8 billion. In summary, these numbers confirm that our focus on execution and value creation is paying off. Quarter-after-quarter, we are building a more efficient and profitable team, in line with our industrial plan. The detailed Q3 metrics are available in [indiscernible]. Let's take stock of where we stand against our full year targets. Our metrics are in line with guidance. In Q3, the positive drivers we had anticipated started to kick in, supporting the expected domestic EBITDA after lease growth. In fact, domestic EBITDA after lease in Q3 was EUR 30 million higher than in Q2, up 6% quarter-on-quarter. Year-on-year growth was slightly softer at 4%, reflecting a tough comparison base. The Q3 domestic EBITDA after lease margin improved by 0.8 percentage points year-on-year and by 0.9 percentage points sequentially. Looking ahead, year-on-year growth in Q4 will be markedly stronger, benefiting from easy comps. Let me recall the main positive drivers progressively coming into play. First, the full effect of the back book price increases implemented also in Q3. Second, the usual seasonality of the enterprise business, which typically accelerates in Q4. This year, this effect would be amplified by a strong contribution from the National Strategic app. Third, additional OpEx efficiencies generated by the cost transformation program. Fourth, labor cost savings following the renewal in July of the solidarity agreement, which provides for a reduction in working hours for TIM employees until the end of 2026. In terms of cash generation, equity free cash flow after lease was positive at EUR 50 million in Q3. This result was fully in line with our expectations. It was lower than last year, mainly due to one-off effects. Adrian will provide more details on this dynamic in a moment. We expect cash generation to significantly accelerate in Q4, supported by higher EBITDA after lease and a strong contribution from net working capital, which typically benefits from favorable seasonality in the last quarter. We remain confident of lending smoothly in line with our full year target of EUR 500 million of equity free cash flow with some potential upside. Net debt after lease at the end of September was broadly stable at around EUR 7.5 billion, just EUR 50 million higher than in Q2, reflecting the impact of the buyback and minority dividends of TIM Brazil. Overall, our full year guidance is confirmed. Let's now move on to review the performance of the 3 entities. In consumer, the trend remains positive and fully aligned with the objectives of our value strategy. Year-to-date, total revenues for TIM consumers were broadly stable at EUR 4.5 billion down 0.4% year-on-year with service revenue split. In Q3, service revenues were slightly negative at minus 0.5% year-on-year, mainly reflecting a lower contribution from MVNOs, while retail services remained stable. At the end of September, we launched Team Energia powered by Poste, a significant add-on to our customer platform and the first tangible initiative of former cooperation with Poste. We are pleased with the market's positive response, especially considering that we have not yet carried out any dedicated communication campaign. Back book price adjustments continue in Q3, mainly in mobile. Year-to-date, we repriced around 4 million wireline and treated 4 million mobile consumer lines. The benefits are clearly visible. Wireline ARPU increased, mobile ARPU remains stable and churn stayed under control, a remarkable outcome given the multiple price adjustment implemented over time. This validates the effectiveness of our volume-to-value strategy launched in 2022 and we know that similar action have recently been announced in the market, starting from Q4. Wireline net adds were stable in Q3 and on a 9-month basis, the trend improved significantly versus last year. In parallel, we continued our push of FTTH and 5G fixed and wireless access with net debt growing 9% and more than doubling year-to-date, respectively. Mobile net debt saw a slight sequential deterioration. However, the number portability balance remained neutral also in Q3, confirming the trend observed in the first half. As mentioned in previous earnings calls, SIM cards involved in number portability and an ARPU of around EUR 12, EUR 13 compared with about EUR 1 for the other SIMs. This means that most of the mobile lines lost year-to-date had the limited impact on service revenue. Finally, a note on our customer platform. TIM Vision service revenue continued to grow steadily, up around 5% year-to-date. In enterprise, we are pleased to report the 13th consecutive quarter of growth. The performance remains solid and fully consistent with our strategy to focus on high-value ICT services. Over the first 9 months, total revenues grew mid-single digit to EUR 2.4 billion, with service revenue up more than 5%. Following the unboxing event held in October, it is now even clearer why TIM Enterprise continue to stand out in the European context. Our distinctive edge come from the combination of a unique portfolio of assets and advanced capabilities in cloud, IoT and cybersecurity. This positions TIM as a leading provider of secure and sovereign digital services for the country. Year-to-date, cloud remains the key growth driver with service revenue up 23% year-on-year, reinforcing TIM's position as well as Italy's leading ICT players. Revenues from other IT declined by 5% as growth in Security and IoT was offset by a contraction in the licensed businesses, reflecting our deliberate portfolio reshaping to phase out low margin activities and focus on higher value solution. Connectivity performed as expected, showing a slight decline. Within the mix, fixed connectivity remains stable year-on-year, while mobile declined due to the phase out of a major public administration contract that we deliberately choose not renew. This decision is consistent with our strategy to avoid low or negative margin tenders. The value backlog contracts signed but not yet activated is expected to reach around EUR 4 billion by year end, up 5% versus last year. Moving to Brazil, results once again confirm strong execution and market leadership. The market remained healthy and rational and TIM Brazil continued to deliver profitable growth, reaffirming its position as the most efficient operator in the country. Year-to-date, top line grew mid-single digit, driven by mobile service revenue. Customer base monetization remains a key focus with successful upselling from prepaid to postpaid, leading to the highest ARPU in the market. Meanwhile, 5G network expansion continued at pace with TIM maintaining its leadership in 5G coverage. Now reaching more than 1,000 cities. Efficient operational execution supported robust EBITDA growth and margin expansion. In the 9 months, OpEx remained below inflation and EBITDA after lease exceeded 38% of revenues, up 7% year-on-year. TIM Brazil also delivered strong cash generation with EBITDA after lease minus CapEx growing double digit. These results demonstrate that the operational discipline that has driven success in Brazil are the same principle regarding the transformation of our domestic business. In both markets, the formula is the same. Focus, efficiency and value creation and the results speak for themselves. I'll now hand over to Adrian for the detailed financial results.
Adrian Calaza: Thank you, Pietro, and good morning, everyone. Before moving to cash flow and debt, let me start a few comments on CapEx and OpEx. At group level, CapEx was stable at EUR 1.2 billion in the first 9 months and EUR 0.4 billion in Q3. Accordingly, CapEx intensity remained soft at around 11% of revenues, mainly due to phasing, but we expect CapEx to pick up in Q4, both in Italy and Brazil as it did last year. About 25% of CapEx was customer-driven, while the majority was allocated to infrastructure investments, in particular, mobile networks, IP backbone, and data centers, where we continue to increase our capacity to cope the significant growth on cloud services. Group OpEx increased modestly in the 9 months, up 0.9% year-on-year, mainly due to TIM Brazil, while domestic OpEx remained broadly flat. Notably, in Q3, domestic OpEx were down 0.7% year-on-year, thanks to lower industrial costs, including the MSA and labor costs, partially compensated by volume-driven costs. I remind you that Q3 last year was the first one with official figures following network disposal. Therefore, we are pleased to confirm similar trends compared to the pro forma basis. In Italy, both OpEx and CapEx discipline continued to be insured by the transformation plan. As a reminder, progress is measured against initial OpEx and CapEx trajectory that is the cost base line we would have incurred without the plan. We currently have more than 80 transformation initiatives underway which have delivered over EUR 130 million of incremental benefits year-to-date. Our efforts are focused on 4 main areas: the commissioning legacy technology consolidating ICT vendors, aligning service levels with actual customer needs and optimizing labor costs through the renewed solidarity agreement. Net debt after lease at the end of Q3 was broadly stable at EUR 7.5 billion. Let me highlight the main differences versus last year to clarify the cash flow dynamics and address the questions you might have in mind. First, working capital. In Q3, absorption was higher than last year, mainly due to a reduction in days payable outstanding. As part of our vendor consolidation efforts, we reduced the number of suppliers in certain purchasing categories, securing better pricing conditions in exchange for a slightly shorter payment terms. This effect was concentrated in Q3 when the change was implemented and will not repeat in coming quarters. Second, financial charges. In Q3 2024, cash interest expenses were EUR 27 million lower, reflecting a remarkable increase of the mark-to-market valuation of securities in our portfolio, keeping aside such 2024 one-off performance driven by the reduction in the interest rates. The financial charges are slightly down year-on-year. Third, cash taxes and other. Last year benefited from dividends received from INWIT through Daphne also a one-off factor. And fourth, payback. In Q3, we had EUR 49 million equivalent outflow related to share buyback at TIM Brazil. As Pietro mentioned, we have good visibility on cash generation for Q4. We expect a ramp up supported by both higher EBITDA after lease and a robust contribution from the networking capital, which typically benefits from favorable seasonality in the last quarter of the year. We remain on track to achieve or even exceed our full year target of EUR 500 million in equity free cash flow after lease with leverage below 1.9x. To conclude, as you know, yesterday was my final day as group CFO. This almost 4 years have been an incredible journey reached with challenges, but mainly of rewarding moments of growth and transformation. Looking back, I am deeply proud to see the group firmly on a positive path, not just financially but above all, operationally. I'm grateful to Pietro for his vision and courage and for giving me the opportunity to contribute to this journey. My thanks to all our colleagues, both in Italy and Brazil for the unwavering commitment. To my peers in Pietro's leadership team for their patient and friendship and especially to my team for their unconditional support and extraordinary capacity. Special thanks to the financial community and our shareholders who believed in this transformation story. It was an honor to serve alongside you all, and I am confident that the group's momentum will continue with Piergiorgio to whom I wish every success as he takes on this role. With that, I hand over to Pietro for the very last time.
Pietro Labriola: Thank you, Adrian. Today, we are also sharing some high level updates on the strategic partnership we are developing with Poste. A more detailed disclosure of the expected synergy will come next year when we update our plan. Starting with initiatives within TIM Consumer. The MVNO contract has been signed and customer migration are set to begin in Q1 2026. As mentioned earlier, TIM Energia powered by Poste is showing strong early traction, confirming the cross-selling potential we can leverage together. Additional cross-selling initiatives, targeting retail and SMB customers are currently under evaluation. Moving to TIM Enterprise. We are exploring cost-saving opportunities through joint procurement initiatives and we have signed a letter of intent to establish a joint venture on cloud services, focused on generative AI and open source technologies. This JV will position TIM and Poste as front runners in the country's digital transformation, further strengthening enterprise positioning as a key player in sovereign initiatives. A more comprehensive update will follow next year. Let's now move to the final slide for the closing remarks. To wrap up, our 9-month results are fully on track to meet full year targets, both operationally and financially. We confirm our guidance for the full year. We're advancing the strategic partnership with Poste to generate synergies between the 2 groups. The MVNO contract and the TIM Energia powered by Poste are the first initiatives unlocking mutual benefits with more to come to further expand our respective product portfolios. In the enterprise place, both groups play a central role in Italy's digital ecosystem. TIM in the telecom infrastructure and cross services and Poste in public digital services. Our partnership remains key to enabling secure nationally controlled digital transition. We are delivering what we said we will deliver, and we'll continue to execute with consistency and discipline. Before closing, I would like to take a moment to thank Adrian. His contribution over this year has been fundamentally transforming the company, not all in terms of financial results, but above all, in restoring the discipline, transparency and credibility that's now define TIM. Adrian, thank you for your professionalism and the deep commitment to the group. At the same time, I'm very pleased to welcome back Piergiorgio, returning to TIM after several years. His deep knowledge of the sector and of our company we ensure continuity and competence. Two essential qualities in a market where understanding the business and the technology is an imperative. The best way to predict the future is to bid it. And that's exactly what we are doing because, as I always say, inaction is not an option. With that, we are ready to take your questions.
Operator: [Operator Instructions] The first question is from Mathieu Robilliard at Barclays.
Mathieu Robilliard: First, I wanted to thank Adrian for all the collaboration, transparency over the years and obviously, welcome Piergiorgio. With that, I had a few questions. The first 1 was in terms of the Consumer division. So obviously, very impressive ARPU progression on the fix continues, a bit less this year -- or this quarter rather on mobile, but the trajectory is good. Meanwhile, however, the volumes continue to be a bit depressed. So my question was a bit forward-looking, which is if we look into 2026, and we think about how this -- the top line, the service revenue can progress. Do you expect to have improving volumes to support the growth of the service revenues? Or is it still going to be based essentially on ARPU progression. And is there room for that? So that's the first question. The second question was about the migration of the use of the Open Fiber network versus the one of FiberCop for fiber. If you could maybe give us a sense of how is your base progressing there? And I wanted to check what kind of contract you had with Open Fiber. I understand that with FiberCop, you have no volume commitment, which gives you a lot of flexibility. I was wondering if that's the same thing with Open Fiber. And lastly, if I may, on M&A, obviously, we've seen some press reported news that some players could engage some discussions. And I was wondering if you would welcome that kind of scenario in Italy.
Pietro Labriola: Thank you, Mathieu. I will answer immediately to the third question related to the M&A. I think that I must be repetitive because I'm saying to all the markets since several quarters that. Whoever will be that we proceed with the market consolidation in Italy will be a good sign for us then can be TIM to manage the situation or can be another player. I think that it's really important because this is a trigger that we allow to continue and to improve the network efficiency and the efficiency on the cost base. So I'm very happy if someone will do a first move and will proceed on that. It's important to remember when in 2022, we started to talk about these things, no one was believing us. When we're saying that from volume to value was the driver of the growth, no one was believing us. Now also looking at the result of a lot of players, not only in Italy, but also in Europe, everybody are using this claim from volume to value. And the market consolidation in Italy is no more a dream because the free step succeed, that is Vodafone Fastweb. And I'm quite optimistic that quite soon, there would be a further step. Related to the consumer division, I will leave Adrian to elaborate more on that, having in mind that on the mobile and Adrian will explain better, we can expect also in the reduction of the volume because, as he will explain a part of the cancellation as related to seasonality phenomenon and to the past commercial approach, not only TIM, but of everybody. On the fix, you were mentioning that we are proceeding. And so we are also quite optimistic on the consumer. Let me give also a more strategic outlook on the consumer market. In the past, I was always more confident in the improvement coming from the industrial cost base, market consolidation and these kind of things. And I was more worried about the possibility of a real growth of the ARPU. I spent the last 10 days in an innovation trip, and I have now a more optimistic view. Why that? All the AI, all the new functionality that you are experiencing in the market and everybody described about the future, we request mainly 3 things: low latency, higher uplink and higher throughput. In the actual offer, we have nothing of that. So these 3 pillars will become one of the main driver. I'm talking about medium, long term about potential ARPU increase. And in such a case, different from the customer platform will be mainly connectivity with a very high margin. Now I'll leave Adrian to answer.
Adrian Calaza: Thank you, Pietro. Thank you, Mathieu, for the question. So we see a positive outlook going towards '26, meaning that we continue to believe we can go on with the price increases. The price increases of this year proved to be successful, and we also expanded a little bit the segment in Q4. So we will continue in Q4. That will be positive, of course, on the ARPU contribution. Equally, I have to point out that yes, on fixed, we still see some negative networks, but a large proportion of that, very large is due to the voice-only customers that are phasing out the voice fixed technology and that is actually considered in the plan. So if we look at the net broadband, we are improving and we continue to believe we will improve, thanks to several factors. One is exactly what you mentioned, the improved coverage of FTTH network, thanks also to the agreement with Open Fiber. So we are growing in terms of acquisition and transformation of technology on the Open Fiber network that we are continually working on. And also, especially from last summer due to the very wide progression of FWA which, for us, FWA 5G for TIM is a new technology that is also coming with very high margin. As Pietro was pointing out, we see an improvement that you also noticed in our portability trend in the mobile market. The mobile market is somehow stabilizing, and we measure a sizable improvement of the net active customer year-over-year. That is improving. And so we think that this phenomenon will continue to increase because, as Pietro was pointing out, the market is deflating in terms of rotation and volumes, which is, of course, coming with benefits on the ARPU dilution and on the net balance effect.
Pietro Labriola: Is it fine, Mathieu?
Mathieu Robilliard: Just on -- thank you so much. But just in terms of the type of contract you have with Open Fiber, is it a volume commitment? Or is it on a per-line basis. Just to understand if it's similar to what you have with FiberCop, I don't know if you want to disclose that.
Adrian Calaza: It is an agreement that is complementary to FiberCop, of course -- complementary in terms of coverage, we use that mostly on a per line basis but is a wholesale agreement that is complementary to FiberCop.
Pietro Labriola: But in any case, immaterial. Open Fiber as offer on the market that are per line or with a minimum commitment based keeping the price flat for the next years. So we use a mix on that based on our convenience in the different areas.
Operator: The next question is from Fabio Pavan at Mediobanca.
Fabio Pavan: Yes. Before asking questions, I would love also to thank Adrian for supporting this. Yes, very precious and we will also welcome Piergiorgio on board. Coming to the questions. First one is a follow-up on what Pietro, you just said. So there is anything that you can do in order to support sector consolidation even if you are not at the driving seat? Second question is on Poste and the letter of intent signed on the cloud side. Could you give us some more color about how would you, let's say, approach the market? Is it going to be something targeting Poste customer base, is it going to be a bundled offer.
Pietro Labriola: Okay. Thank you, Fabio. Let's start from the second question about the JV with Poste. I will leave Elio to elaborate more on that also because this was a very clever idea that Elio elaborate and that was accepted also by the counterpart. But in any case, if you think in this way, we'll talk about unboxing TIM Enterprise 1 month ago, we told to everybody that for us it was very important to fill up the value chain that today we are managing through some external partner. Now the idea is that, that was very well explained by Elio that we want to do that internally. We don't want to do everything internally, but we'll do that, that has a much future-proof reliability. Now I leave to Elio to talk about the JV.
Elio Schiavo: Thanks, Pietro, and thanks, Fabio, for the question. So we made pretty clear that in our strategy, there are 3 things that we need to hear about. One is the insourcing of capabilities because this will allow TIM Enterprise to improve margins. The second 1 is we have been very vocal, as you know very well, during the last few months about this opportunity of sovereign cloud and because we believe that from this country and the continent Europe more in general, they need to face -- they need to embrace the opportunity of creating a kind of digital independency. And for doing this, it's clear, you need to develop open source capabilities, which is something that Poste will provide within this -- in the creation of this joint venture. And the third point is that we need to embrace as much as possible model and model by model of artificial intelligence. So the idea is to create a structure which is fast, agile, flexible, able to attract talents and able to integrate vertical capabilities resulting potentially from M&A activities. So -- and so the aim of this company will be to serve both Poste and TIM for embracing the new technologies and at the same time, to provide the market with a solution that today -- an end-to-end solution on new technologies that today, we don't see in the market. And as I said, the 3 areas of focus will be cloud migration and sourcing capabilities, open-source platform and artificial intelligence. Hope I answered the question.
Pietro Labriola: And what is really important that for the first time after several years, we are a newcomer. So we don't start from legacy. And this is what will have passed because just to give you an idea, if you are already a system integrator with a lot of developers, you will have to face the challenge of the AI that will have the software development. We start now from scratch. So we'll be able to explore since the beginning, the possibility to increase the productivity with the number of developers that are lower. In the meantime, focus on open source is key in the development also of our sovereign cloud strategy because this is the area in which you have less dependence by other countries' technology. It doesn't mean that this is a complete alternative to the partnership with the hyperscaler. We'll continue to partner with them because they are key also in terms of innovation. About the consumer segment, what they want to highlight Fabio is that, as we told during the call, the performance that we are having today on TIM Energia powered by Poste is a multiple of what we are thinking to have without having launched yet an advertising campaign. So this is a first test to try to understand us, our customer platform strategy can work. Let's remember, sometimes we forget that we are now the second content platform in Italy. And now we started with the Energia that will pass for the increase. We are working also for further activity on the consumer side, as we mentioned, we are starting the portfolio of both companies, Poste and TIM and we are trying to understand how to exploit the channel for this activity. These are all things that will develop more in detail during our next 3-year plan presentation. About the first question that is related to the sector consolidation, it's clear that we are very supportive. It doesn't mean that we can accept anything that will transform in a weaker company TIM, but I think that the rationality in this market is becoming more normality, so we are very welcome in any kind of market consolidation that will make this market more equilibrate and rationale.
Operator: The next question is from Keval Khiroya at Deutsche Bank.
Keval Khiroya: I have 2 and good luck as well, Adrian, from my side. So firstly, your financial expense remain high whilst your cost of debt on new issuance has been falling and you highlighted the EUR 500 million bond you issued. What financial expenses assumptions have you baked into your guidance for the next 2 years? And is there any opportunity to optimize these further? And secondly, can you give us your latest expectations on the concession fee case? I think you previously expected a year-end outcome on that.
Adrian Calaza: Yes. Kevin, thank you for the question. As a matter of fact, financial expenses, we've been mentioning -- I think it was a couple of quarters ago and also in the plan that the run rate for 2025 was something between EUR 150 million and EUR 160 million per quarter, and we are on the lower end of that number. Last year, we had some positives that were one-off mainly coming from some mark-to-markets that we counted, but we are on track. And as a matter of fact, slightly below with what were our projections at the beginning of the year. Going forward, clearly, this is a number that will probably go down, especially because of the net financial position and the gross debt will be reducing going forward. In terms of average interest rate of our gross debt, the domestic, it's clearly that the bonds of lowest coupons, so the ones that were issued in 2015, 2016 are maturing and the weight of the issuance that we did in '22, '23, with much higher coupons is more important. So it's not a matter of average interest rate, but more a matter of the evolution of the gross debt, but obviously, the numbers should be reducing in the coming quarters. But again, just to mention the EUR 150 million of financial expenses of this quarter is it's slightly better than what we projected.
Pietro Labriola: About the concession fee, as you can imagine, formally, we don't have any further detail informally too, but the only thing that I can share with you and that is public is that in the process of approval of the state balance, it was put in a provision for 2026 for the payment of some litigation and was expressively mentioned that there could be also the TIM one. It doesn't mean anything. But again, you can understand.
Operator: The next question is from Javier Borrachero at Kepler.
Javier Borrachero: So my question, Pietro for you, a bit of follow-up on this cash windfalls. So I mentioned the concession. Maybe on the earnouts, maybe you can also give us some color on where you still think that the Open Fiber, FiberCop merger earnout is still possible or maybe now it's too late. And on the energy one, if that is -- if you are more confident that here, you can maybe get some cash. And regarding all the proceeds from all these cash windfall, say, concession fee, earn-out, et cetera, what is now your view given that the share price has had a phenomenal performance year-to-date doubling. What is now your view in terms of the use of that cash in terms of the balance between dividends and share buybacks based both on your own what is already guided in terms of shareholder remuneration for the next few years, but also in terms of any extra proceeds that you may get going forward?
Pietro Labriola: Javier, so first of all, about the -- the first point is that the exceptional performance of the stock. If I may, it was strange the previous value because in terms of multiple, you see that we are still slightly below the average of the European Telco. So it's not strange the actual value, it's strange the value in the past. And if I may just for me and Adrian, the plan in place for which we are today at EUR 0.50 is the same that was presented in April 2024 in March 2024, when the stock was down 25%. So it's just a matter of the trust and execution, nothing changed. About all the proceeds, the earnouts on and so forth. About the earnout, I'm still optimistic on the fact that we can get something. We never declare that we get all the amount. We always told that we can get something. And the deadline for the expiration is the end of 2026. But the earnout is due, not only in a case of a merge, but also strategic commercial partnership that will generate synergies. So while I can understand in some way, some worries related to a potential to merge at last time for the approval. Also, if we have to remember that in the case of the [indiscernible] deal at European level, it took 6 months for the approval. So I'm optimistic that something will happen also because looking at what is happening also in the press, I'm optimistic that all the discussions and all the fight we bring everybody to see rational because rationality drive the return on investment also for the private equity and something will happen. It's important to remember that we have 0 in terms of earnout in our plan. Then in the case in which the concession fee and all these things will happen. At that time, we will evaluate what is the best. It doesn't mean that we don't have a clear understanding, but the number of pieces that are moving at the same time, oblige us to have several options. So I don't have -- we don't have in mind, just 1 option. We have several options. But everybody, all the different options will be driven by market-friendly approach. And about the plan, we stay stick to the plan. We continue to maintain the guidance about the shareholder remuneration. And so we move forward in that way.
Operator: Next question is from Giorgio Tavolini at Intermonte.
Giorgio Tavolini: The first question is on Deutsche Telekom that has recently announced a EUR 1 billion collaboration with NVIDIA to build an AI factory in Germany. Do you believe TIM Enterprise could play a role in developing similar giga factories in Italy possible through joint venture with other national players beyond Poste Italiane. I mentioned this because I saw your role in the national strategic hub and the need to ensure data sovereignty. The second question is on sector consolidation and the recent rumors about a potential Wind Tre Iliad merger. So beyond the team potentially being a passive beneficiary of the market repair. I was wondering if such a merger could pave the way for a consolidation between TIM and Poste Mobile since it would ease the antitrust concern and now that TIM, Iliad deal would be completely off the table. And the third question is on the recent proposal on inflation index fee increase for Telco tariffs that was proposed by a political party. I was wondering if you think this measure could be reconsidered by policymakers to help restore sector profitability and return on investments. And in particular, you raised the prices for the fourth consecutive year. So is it correct that if this measure is introduced, this would extend all the players in the market, including Iliad to push their prices above the current ones?
Pietro Labriola: Giorgio, let's start from the third one, then I will leave to Elio to answer to the first one. About the index, we will continue to discuss with the different, let me say, stakeholder about that because I think that this is a rational approach and sooner or later, my expectation is that also on the fiber business wholesale, it will be needed a kind of inflation index. If it will happen, it's quite clear that must be reflected also in the retail price. So this is not this year, but this is something mainly in Italy. I have to remember that it happened already in U.K., if I'm not wrong in Netherlands. So this is a trend in the market. Then let's remember that we have the lowest price in Europe. So I'm quite optimistic to that if it will not be this year, but sooner or later, it will happen. Related to the prices increase, I have to remember and then I will ask Andrea to give also more color that a part of the price increase that we did was with the kind of more formal approach, not in terms of giga because Italy has packaged with a huge amount of Giga, but about 5G. I have to say thank you also to Leo our CTO because we were able to move from the last place in the ranking for the 5G quality to the first place. And it allowed to Andrea also to do price up also based on the 5G., but we are still talking about what they tell the 5G of marketing, not real 5G with low latency, that will be the next step for a further price increase and we'll continue also next year with this kind of approach. About the sector consolidation, we are positive about that. It's clear that any kind of further simplification of the market structure is more than welcome. So let's take the window, we don't have to anticipate, but again, we have a clear idea about the possible scenario. Thanks to God, we are no more playing poker, but we are starting to play a chess game. And so every time we have to think what could be the further moves. And we have a clear understanding about what could be the different further moves that we have to act on in relation to the events about Deutsche Telekom, I leave it to Elio and then if Andrea wants to add something about the repricing, we will do and before to Elio and then to Andrea.
Elio Schiavo: Thanks, Pietro. So thanks for the questions. First of all, let me underline that this news about the partnership between Deutsche Telekom and NVIDIA confirms that the Telco industry is back again to the center of the innovation process. And this depends on -- basically on the fact that infrastructure, both the network and the colocation became and will be very, very relevant going forward because as you can imagine, majority of those new technologies will need a house where to stay and a network that can help them to move data at a very fast speed. So -- and we are at the center of that business environment. So in the country, as you mentioned, that there are many giga-motions we look at this in a very pragmatic way. First of all, there is nothing giga that can happen in this country without TIM being involved because at the very end, you need to connect to the market. We are the only one having bandwidth for doing it. And we are in talks with NVIDIA. And as I said, we are looking at this, trying to size how big is the effort, but more importantly, how big is the opportunity that can be taken together. Clearly, and the Deutsche Telekom is the clear example. It's very difficult for them to do this without having a big Telco on board and I guess we are the ones they want to deal with. But -- so we will -- we will try to understand, as I said, very pragmatically this what will mean. And the way we will measure this is what is the length, the duration, and the size of the ROI that we can extract both together from this business. But let's say, we are talking to them, and we do believe that there is a good opportunity to be taken.
Pietro Labriola: Before turning to Andrea also to elaborate something on top of what Elio told sometimes we focus too much in something that is real estate or computing capacity. But computing capacity is nothing without connectivity. Also, mask that is much more well-known than me in elastic talk is explained that he's foreseeing a future in 3, 5 years where the computing capacity will be distributed, but what will be needed is low latency and uplink. And we have the 5G frequencies, and so we are the one that can provide low latency. We don't have the ownership of the passive fiber, but latency, throughput at uplink come through the electronic that you put in the last mile and the last you must have a very wide spreaded backbone. And also on that, we are the best player. So if you add this capability, the ones that were mentioned by Elio it's clear that we continue in this kind of technological future to be the best player to get the main part of the cake.
Andrea Rossini: Thank you, Pietro. Thank you, Giorgio. So this gives us the opportunity also to talk a bit more about our replacing action and strategy and as also Pietro pointed out, we did price ups, but we also gave more benefits to the customer. And in particular, during the last years, also thanks to great work done by Leo Capdeville with the technology team. We upgraded millions -- literally millions of customers to 5G, to the basic level of 5G. We did also something that other operators have not done yet, which is forward-looking. We created a 2 level of 5G, a basic level, which is optimizing use of network because as you know, 5G is much more efficient in terms of use of bandwidth and energy. And we created a top level of 5G, let me say, quality, which we sell for premium. So this gives us an opportunity also to upgrade ARPU going forward and optimize network efficiency. Now as also Pietro pointed out, we are in favor since many years of a general increase of prices to the customer base. We have worked a lot because we believe that sustainability in a sector in which the usage of network is increasing, is coming with price increase. So we are in favor of price inflation. And we believe that this, especially together with consolidation in the market can be a structural solution to the sustainability of the network. So looking forward, by the way, as Pietro pointed out, also with more segmentation of service on latency, uplink use of network with AI, we can see an ARPU increase in the mobile market because demand of connectivity is always increasing.
Operator: The next question is from Domenico Ghilotti at Equita.
Domenico Ghilotti: Well, first of all, I joined the other analysts and say goodbye to Adrian, and thanks for your support. And well, just a couple of questions remaining. One is on the Sparkle deal. If there is any update on the transaction? And then on the cash flow, can you help us understanding how was the impact of the vendor consolidation that you were mentioning? And also from the let's call it, extraordinary working capital item that you were flagging in the past for 2025.
Pietro Labriola: Thank you, Domenico, about Sparkle. We are proceeding that. We are waiting for the approval from some local authorities. I think there are 2 or 3 for which we are still waiting. So sometimes the closing could be at the beginning of 2026 and not in the last quarter 2025, but all the things are proceeding very well, while about the cash flow, I leave to Adrian.
Adrian Calaza: Domenico, thank you for your words. On the cash flow, yes, and this is something that we've been working for a period, and it was also commented during the Enterprise Day, a month ago, it was -- one of the targets was in the consolidation and obviously consolidating those vendors in some of the main OTT is the payment terms clearly are shorter. It has had an impact of something around between 6 and 7 days in terms of DPOs, so it was fully absorbed in the quarter. This is an onetime effect. And going forward, we expect an improvement on Enterprise margin as we projected in the plan. In terms of extraordinary items were those that we disclosed when we presented the plan in February. Remember that there were mainly 2 effects along the year. It was the -- all the unfolding of the -- of the [indiscernible] and there is some effect on this quarter was mainly on the [indiscernible]. So no additional extraordinary effect rather than those. So on the first quarter, we expect only the effects of the [indiscernible]. And as you know, the fourth quarter is always the most intense positively in terms of working capital. So we are on track as we mentioned and probably slightly by better. We'll see the fourth quarter is, again, the biggest in terms of cash flow generation.
Operator: The next question is from Paul Sidney at Berenberg.
Paul Sidney: Just a couple of questions for me, please, building on a couple of the questions that we've had already. Firstly, in terms of the Poste and cloud and AI JV LOI signing. We know very well what TIM Enterprise capabilities are in this area, but could you just expand a little bit about what capabilities Poste will bring to this JV in this area? And then secondly, just staying on the theme of price changes. We've seen you successfully put through price changes over the year. We've seen some very welcome recent price increases from Fastweb on mobile, Vodafone Fixed Wind on their back book as well. You mentioned the prices have landed well for TIM for yourselves. But I just wondered, has there been any adverse reaction in the wider market from the press, sort of consumer groups, the government even -- because obviously, when you look at these price increases on a percentage basis, they can be pretty material. But great to get your thoughts.
Pietro Labriola: About the second question, then I can leave to Andrea, but in practice, what we are doing is that we are increasing the price. There is a right of our customer to cancel the contract if he doesn't agree about that because we are in a more severe market environment from this point of view. So there is nothing specific and then also to be also more clear, we are not doing price increase in a blended way. Andrea has developed a very strong CVM, customer value management. And so the evaluation of the target of the customer or for the price increase is based also on the willingness to pay for an improvement of the service. With the propension to cancellation, so on and so forth. So it's a traditional marketing activity that we're performing better, sometimes than the other. I can tell you that in the past, we've seen us changing the wording of the message, respecting the law can change also the level of churn that you will expire, but again, this is not a Telco activity. This is a marketing activity. So we are -- sometimes we are better than other to work on the marketing side. About the Poste JV, I [indiscernible] but in a nutshell, sometimes some of you are considering Poste as the traditional main services. A lot of you do not know that Poste has hired during the last years, several hundred people expert in open source activity and developing. So they have also specific know-how in this area, and it will help. So this is part of the contribution that they can put inside this kind of activity. Adrian, I don't know if you want to add something?
Adrian Calaza: Just to add a few information to what Pietro said. So -- this is clearly unknown as Pietro mentioned as well, actually, Poste has a huge open source operations, they have almost 500 in open source engineers. And the idea is that they will contribute a few hundreds of them. So you believe 250, 300 will join the joint venture. And the idea is that, that will be the Army that will help us to create this open source platform to tackle the cloud sovereign business. So we will contribute the hybrid cloud migration capability that will contribute the open source capability. Both together, we will try to attract talents for developing an AI business that, as I said, will serve both TIM and Poste and the market.
Pietro Labriola: As we mentioned during unboxing TIM Enterprise, we are talking about sovereignty, digital sovereignty, and have [indiscernible] also on our side on this project is a further reinforcement of, let me say, a neutrality towards other technology and is reinforcement about the sovereignty.
Operator: The next question is from Andrea Todeschini at Akros.
Andrea Todeschini: So first one would be on the contract that you have with the tower companies for your mobile network. I believe there -- the contract should be up for a new one in the first half of next year. So I was wondering if you do see some room for potential savings coming from renegotiating that contract and if there's anything you can share with us? And second question regards the equity free cash flow guidance for full year '25. So we clearly know that it's really back-end loaded in the fourth quarter. I was wondering if you could see if you have any visibility for some possible upside, so not just reaching the guidance but maybe doing a little bit better in the full year.
Pietro Labriola: Andrea great. You are the less shy person because I think that this is a question that everybody was asking, we confirm the guidance. We're optimistic that we can do also something better. But as we told also in the last call, the market to our company will never forgive any kind of underperformance. So, we want to stay focusing deliver the guidance with the optimism that we can do better. About the TowerCo, I have to remember to everybody the list of the main point of our cost. First one, MSA with FiberCop. Second, cost of labor, third energy, fourth TowerCo. So in a professional and serious way, we are talking with our main partner about possibility of efficiency in the interest of both companies.
Operator: The next question is from Andrea Devita at Bank Intesa.
Andrea Devita: So on the consumer company, looking at the ARPU, just wondering whether after further EUR 1.7 million reprice in Q3 alone. So we haven't seen yet a rebound, so flattish minus in Q3. So if we could expect a rebound in Q4, at least or otherwise, if it is the balance of customers in, customers out [indiscernible] ARPU pressures again. And again, on consumer, I saw that there was 1 percentage point service revenues took out from the -- from the MVNO. So wondering whether this will accelerate in Q4? And finally, again, on consumer, whether it is already material, the contribution and if you could roughly quantify of adjacency and energy and so on in terms of service revenue growth contribution in Q3.
Pietro Labriola: I will Andrea to elaborate on that. The only point about the MVNO that is very important that it was already included in our budget. So just to be clear that we are not surprised is something that we are forecasting and planning and that we are managing.
Adrian Calaza: Thank you, Pietro. So on the ARPU, starting from your first question, indeed, you're right, mobile ARPU is basically balancing repricing, price ups with ARPU dilution that is coming from the difference between front book and back book. This is a dynamic that is in the market. And therefore, we consider that, let me say, ARPU stability or slight improvement as we show in the 9 months of '25 is what we are aiming for in the current market condition. As I explained before, we see improvement in the market because we see a declining number of rotation in the market, the mobile number profitability balance has improved and therefore, the dilution effect on the customer base ARPU is somehow decreasing. We also, as Pietro pointed out at the beginning of this presentation, with slight sign of improvement on the front book pricing by some competitors. Therefore, this compensation is probably improving going forward, that's possible to bring a rebound in the ARPU in the future quarters. Now coming to your question on ARPU, still, of course, the effect of radiation services is more visible on fixed ARPU because in fixed ARPU, we incorporate more services and that is also a market that is giving us the opportunity to upsell customers, for instance, with content services. So that is more visible on the fixed side. MVNOs as Pietro pointed out, I think the essential answer is, yes, we see a decrease, but this was planned due to the fact that, of course, Fastweb is bringing more and more traffic on their own network now that they consolidated with Vodafone. And this was in the plan. And the value of aviation market is for the time being, so what we call the customer platform approach is visible mostly on devices, connected devices and TIM Vision, which is bringing actually a growth to the -- as you see also in the chart, in the 9 months of '25, thanks to the fact that we grow the customer base significantly, and we also grow the portfolio of services. Energy, we launched in October, so certainly it's not visible yet, but we started on a good foot.
Operator: The next question is from Ben Rickett at New Street.
Ben Rickett: I just had 2 questions, please, on Fixed Wireless Access. So firstly, I was really interested in where you're seeing demand for your Fixed Wireless Access product -- is that mainly in rural areas? Or do you also see demand in areas that have fiber coverage? And second question, I was estimating that about 8% of your broadband base is now on Fixed Wireless Access. I was interested, do you have an idea how high that could go before it starts to impact the mobile network quality that your mobile subscribers experienced.
Pietro Labriola: Generally speaking, it's so important to explain what we can foresee for the future about the Fixed Wireless Access Technology. With Andrea and with Leo, we have started to see also evolution where the installation of the fixed [indiscernible] assets will become more easy, self-installable and the rate of coverage will move from 3.5 to 5 kilometers. This will be an important element in our pocket to optimize the cost structure. And it's not only a matter of cost structure. Sometimes, and this happened for everything in our life, if you want something, you want to buy and use. If we have to wait as a customer, I mean, too much time and so the installation of the fiber can get more time, it becomes an issue. Why? Because people will change their mind, while mobile today in the easiest way is go in a shop, get a chip, you have a plan, you come back home and with the tethering, you are already working. This is the reason for which with Andrea and Leo, we are working also in the future to a possible solution that is an hybrid solution to [indiscernible] Andrea because if not we say that I speak to Mark.
Andrea Rossini: Thank you, Pietro. I mean, this gives us the opportunity to actually beat the expectation of Pietro because we launched that very proposition at the beginning of last week. So we launched, let me say, innovative proposition that is combining FWA connectivity that is immediately available to the customer out of the shop. And that when the fiber comes, then that connectivity can be either given back to TIM or it can be used for a second home. By the way, in a nomadic way, so it can be brought as a sort of super Wi-Fi add-on to the mobile customer. So that proposition we launched last week. It's an initial, let me say, experiment. But we believe that there is market, as Pietro pointed out for a further expansion Equally, on FWA, today, we use it complementary to fiber. So let me point out that today, we do not overlap FWA to FTTH areas. We use it also mostly complementary to FTTC because FTTC performance in many areas is actually quite good. And so customer have better service with FTTC. Today, we see most sales in areas where we do not have FTTH coverage that are not necessarily rural because Italy is a very complex market with many small towns that are not covered by FTTH. So the market is quite huge, and you can also see it from the authority data that the market of the FWA is quite big. Up to a few months ago, team did not have a wide 5G coverage available. And now thanks to the work by Leo, we have a very wide coverage of the territory with 5G, just to your question, what is the amount we can support before affecting mobile traffic. We believe we have a long run to go because at present, we still have a few customers on 5G, and we have capacity that is capacity that is increasing. And of course, we can find also technological solution, but maybe Leo want to comment more that can actually give more capacity to the FWA.
Operator: The last question is from David Wright at Bank of America.
David Wright: Yes, I think you indicated Pietro before that the [indiscernible] causation still in consideration. It looks like that could drag into next year. That being the case, I don't think that S.p.A. will be net income positive this year. But if you could just give us some guidance there. So is there any obligation to pay, say the share dividends in 2026 as a shift in the cash flow? And if the gas station doesn't trigger those payments this year. Do you consider the [indiscernible] save share take out differently, there's a little bit less pressure to do so. Just your thoughts around that would be useful.
Pietro Labriola: David, you can understand that all these hypotheses are price sensitive also on the value of the stock. So due to fact that we have to guess on something, I think that it's better to not go too much in detail. But what I want to reassure you and to everybody is that whatever we will do will be market friendly. And again, we are analyzing all the possible scenario that will help the corporate structure of our company, but also in the meantime, with the best market friendly approach.
David Wright: Where is S.p.A. 9 months earnings? Is that published? Have I missed that?
Pietro Labriola: No, I was telling that we tried to answer to you as best as possible based on the sensitive data that we are discussing. Before to close the call and to leave to Paolo Lesbo, I want again to thank you Adrian for all these years since 2015. But -- what is important to remember to everybody that Adrian is in the Board of TIM Brazil, and he will continue to stay in the Board of TIM Brazil also for the next year. It will help us also due to high knowledge that he has about the Brazilian country and the one which we work here from Italy. We will continue to help us to drive the group towards a further increase in our evaluation. Thank you, Adrian.
Paolo Lesbo: Okay. Thank you very much, everybody, for your participation today. We will be back beginning of next year with full year results, which we are very confident will be fully in line with yours and our expectation. Thank you, have a nice rest of the day. Bye-bye.
Operator: Ladies and gentlemen, the conference is over. Thank you.