How Tim will go according to Tim
The quarterly numbers. Scenarios with network selling. And not only. What did the president and management of the Italian group say about Tim and Kkr's accounts
Accounts, network and scenarios at the center of the debate on Tim. Here are facts, numbers and words.
TIM IS REACHING HIS GOAL, SAYS LABRIOLA
“We are achieving the main objective that was defined only a year ago when we presented our separation plan approved unanimously by the Board of Directors in office at the time, reaching the declared financial leverage target on a like-for-like basis, with macro conditions that had worsened since then,” underlined Tim CEO Pietro Labriola when presenting the third quarter accounts to analysts.
“Considering the positive factors that have so far manifested themselves as expected and which will accelerate in the fourth quarter nationwide, the full-year forecast is confirmed. It will be the second consecutive year that we deliver what we promised, which has never happened in several years."
THE OPERATION WITH KKR? A “MILESTONE”
“Last weekend our board of directors made a decision that is a 'milestone',” Labriola said, referring to the operation with KKR on the network . “We believe that it will not only structurally resolve the financial leverage problem that the company has been experiencing for more than 20 years, but will also allow us to transform it into a sustainable group with a lighter regulatory profile in the Domestic Unit and with the ability to allocate resources on growing business in Italy and Brazil".
ROSSI'S WORDS TO THE FINANCIAL TIMES
There is "nothing nebulous" in the sale of Netco to KKR, only Italian law is different from English law. Tim's president Salvatore Rossi explains this to the Financial Times , which in the Lex Column of last Tuesday's newspaper had the headline 'Telecom Italia: good deal, wrong process', praising the goodness of the fixed network sale operation but stating that "approving the deal without a shareholder vote” is a bad idea and “would not be permissible in the UK”.
Tim's president, Salvatore Rossi, then intervened with a response letter published today in the Anglo-Saxon financial newspaper to defend the correct actions of the Board which approved the operation last Sunday (with 11 votes in favor out of 14). “We thank you for the appreciation expressed in the substance of the operation – writes Rissi in his reply – but we also want to underline how Italian law assigns to the Board of Directors exclusive responsibility for any decision that does not involve a modification of the corporate purpose, regardless on the relevance of the decision".
“The Italian Civil Code was reformed in this sense in 2003 precisely to avoid any attempt by the Board to offload its responsibilities onto the shoulders of the shareholders. Regarding this transaction specifically, there is no doubt that Tim will continue, after the sale, to install and manage telecommunications networks and provide these services,” he adds.
“So – concludes the president of Tim, with a long experience at the Bank of Italy – there is nothing 'nebulous'. It is the law of our country. As Lex rightly observes, this is 'a good business', which has been managed through a clear process at all stages. Thanks to the Board, which correctly fulfilled its responsibilities, for the first time in more than two decades TIM now has attractive strategic options before it."
TIM'S RESULTS IN THE FIRST NINE MONTHS OF 2023
But how did the accounts go for the first nine months of the year? The summary can be this: Tim increases revenues, but the debt slows down its profitability. In fact, between January and September the group's turnover rose by 3.7% to 11.9 billion and the gross operating margin by 6.9% to 4.2 billion. This is thanks above all to the constant push of Tim Brasil which is worth around a quarter of the company's turnover (3.2 billion), but contributes over a third to its profitability (1.5 billion).
It is the extra core business part that outlines a controversial picture on a financial level. In fact, in nine months, Tim has paid almost two billion in interest on the debt, which rose to 26.3 billion as of September 30th. A significant expense that led the group to record a loss of 1.1 billion, down compared to 2.7 billion in 2022 but still significant.
It is from this situation that the decision taken a few days ago by the board of directors to sell the network to the KKR fund for 22 billion was born, despite the opposition of the main shareholder, Vivendi, who announced a legal war whose contours are not yet well defined. . The operation approved by the former Telecom Italia board (but with 3 votes against) will allow Tim to reduce its debt by 14 billion, to halve its workforce in Italy and to return to investing in the development of services to individuals and businesses, according to the group chaired by Rossi and led by Labriola. However, Repubblica noted, “Tim, even without the sale of its Netco (+5.8% nine-month revenues) to KKR expected in the summer of 2024, has a liquidity margin of 8.9 billion which covers all financial deadlines until the end of 2025".
THE QUARTERLY
Tim's quarterly report was summarized as follows by Repubblica : "Tim closes the first nine months with a growing turnover of 11.93 billion (+3.7%), thanks to Brazil (+12.4%) and the Enterprise division (+4.8%), which offset the decline in revenues from domestic services (-1.3%), both fixed-line (-0.3%) and mobile telephony (-3.5%) and a red which is reduced to 1.12 billion (from 2.72 billion in 2022)”.
ANALYSTS' ACCOUNTS
Analysts are calculating the capital gain that KKR (37.5%) and Fastweb (4.5%) will make together with Tim on Fibercop, the fiber and copper access network that connects the lockers in the street to the homes of all Italians , wrote Repubblica : “In August 2021 the US fund invested 1.8 billion for 37.5%, valuing 100% of Fibercop at 4.8 billion (and 7.9 including debts). In the offer just presented for the entire 18.8 billion network, Fibercop is valued at 11.41 billion: that is, 135% more than 2 years ago (and 84% more assuming that the debt remained constant with that of 2021). A good deal also for the Abu Dhabi fund, which had invested in Fibercop in 2021 alongside KKR, and will now take over 10% of Netco: half of the share optioned by the Mef (which aims for 20%, but which unlike the Arab fund, it will also have important governance rights together with F2i (which has optioned another 10-15% of the network company)".
THE SITUATION ON THE STOCK STOCK
Tim is cautiously rising on the stock market (+0.12% to 0.25 euros) where it is however performing worse than the main index of Piazza Affari (Ftse Mib + 0.55%) in the aftermath of the accounts while the presentation is underway to the financial community from which analysts are awaiting indications on the terms of the sale of the network (Netco) to KKR with which the Italian group plans to cut its debt by 14.2 billion euros.
THE OPINIONS OF EQUITA, JPMORGAN AND MORE
For Equita, the third quarter was better than expected, especially in terms of Ebitda and fixed and mobile Arpu. According to JP Morgan, both services revenues and EBITDA for the three months beat estimates, the same consideration that Jefferies makes, recalling that the group confirmed the guidance. Along the same lines is the opinion of Barclays which, like other investment houses, awaits details on the sale of Netco from the conference call. Oddo reports that he “continues to see great opportunities from the sale of Netco, which should create value”. For NewsStreet, Tim reported a "decent" set of results in the quarter but interest expenses on debt are growing.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tim-risultati-terzo-trimestre-2023/ on Thu, 09 Nov 2023 11:29:39 +0000.