TIM Q3 hit by worsening market conditions

Telecom Italia downgrades full-year outlook; pushes back timeframe for 'stabilization' of domestic revenue.

Ken Wieland, contributing editor

October 28, 2021

3 Min Read
TIM Q3 hit by worsening market conditions

A slide on Telecom Italia's Q3 presentation, ominously entitled "2021 guidance update reflects transformational start-up costs and market conditions," contained pretty much all the reasons for shareholder pain as TIM's stock price tumbled to a near one-year low.

In what is usually called the "core profits" metric - earnings before interest, tax, depreciation and amortisation after leases, a.k.a. EBITDAal – TIM, at group level, is now guiding a full-year mid-single digit drop compared with 2020. The previous forecast was low- to mid-single digit decline.

Domestically, TIM is expecting a high single-digit year-on-year decrease in EBITDAal for 2021, as aggressive broadband pricing – driven by Iliad – looks set to take its toll.

Figure 1: TIM flagship store in Cordusio square, Milan. (Source: Arcansel / Alamy Stock Photo) TIM flagship store in Cordusio square, Milan.
(Source: Arcansel / Alamy Stock Photo)

In hard numbers, Q3 group EBITDAal was down 7.6% year-on-year, to €1.5 billion ($1.8 billion). At domestic level, EBITDAal slumped 9.2% over the same period, to €1.2 billion ($1.4 billion).

Stabilization? What stabilization?

TIM also backtracked on ambitions to stabilize full-year domestic revenues in 2021. The new outlook is a low single-digit decrease compared with last year.

The Italian incumbent pluckily maintained, however, that fixed service revenue was "heading towards stabilization" on its home turf. At €2.27 billion ($2.7 billion), fixed service revenue in Italy was a year-on-year 2.6% drop compared with Q3 2020, but TIM pointed out that this was a 1.2% increase compared to Q2 2021.

Total Q3 domestic revenue was €3.1 billion ($3.6 billion), a 3.2% year-on-year fall, which TIM said was in line with expectations.

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Any suggestion that TIM is on the cusp stabilization, however, might well be premature -- at least according to a research note by Jefferies. While the broker house acknowledged an easing in domestic service revenue declines, it said it was "not enough to deliver promised FY21 stability."

There was brief mention in in the Q3 press release that TIM's top brass had discussed "possible reorganization initiatives with the aim to enhance assets and company businesses' value," but Jefferies was not entirely impressed,

"More pressing, in our view, is a clearer plan for stabilising core activities, including a constructive response to Iliad's inevitable BB entry," said Jefferies.

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— Ken Wieland, contributing editor, special to Light Reading

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About the Author(s)

Ken Wieland

contributing editor

Ken Wieland has been a telecoms journalist and editor for more than 15 years. That includes an eight-year stint as editor of Telecommunications magazine (international edition), three years as editor of Asian Communications, and nearly two years at Informa Telecoms & Media, specialising in mobile broadband. As a freelance telecoms writer Ken has written various industry reports for The Economist Group.

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