Ladies and gentlemen. Good afternoon and welcome to Telecom Italia Full Year 2021 results and 2022/2024. Pietro L [Operator Instructions]

Ladies and gentlemen, good afternoon. A very warm welcome to our full-year 2021 results, and strategic brand presentation. I'm here with our CEO Pietro Labriola, our CFO, Adrian Calaza, and the management team. Pietro will take you through the whole presentation, while Adrian and the management team will be available to take your questions in the Q&A session. Pointing out to you, our safe harbor disclaimer on page one. Let me hand it over to Pietro. Pietro, the floor is yours.

Thank you, Carola. Good afternoon everyone. It's a great pleasure and an honor me to be here to present our results and plans. I have a lot to say, shed some light on the company I worked for over the last 20 years. And I'm now convinced requires both decisions to be taken to have a brighter future. We have identified a root for strong value creation but before talking about it, let's cover '21 results first. Let's go to Slide 5. 2021 was a very good year for Brazil on all fronts and we had several achievements in Italy as well. In a nutshell, we had a strong boost in client's perception of our superior quality. The launch of our tiered offer has set the premium price referenced in the market and confirmed TIM's positioning as the quality leader with a segmented approach. We'll go further down this route. Premium price and segmentation are key for us. This service for business are a great opportunity for TIM and this is already shown in the numbers: plus 23% year-over-year for ICT services, 20% year-over-year for Cloud. We significantly increased our coverage reaching now 94% of active lines with ultra broadband And we grew FTTH coverage 36%, with a roll-out at 3.8 times greater than 2021. And we did it in a co-investment model, Fibercon; created last year by [Indiscernible] is first company in European Union to adopt the European telecommunication code co-investment scheme, fully approved by Italian authorities. We had good results on our quality KPIs, fixed and mobile churn, CSI, bad debt, and clients are trusting us, more which translate in higher digital payment. I'm particularly proud to report that TIM Brazil has achieved its guidance, and successfully driven the company into a new phase thanks to the positive outcomes of the 5G tender, its accretive strategy on fiber, and the approved deal to acquire part of Oi's mobile business. In full year 2021, net debt after lease was down €1 billion year-over-year for the total reduction of €5.7 billion in the last three years. Next slide, please. We have done well also in E SG. We met every single target and are setting the company towards already signed and ambitious plan that is now being scrutinized to verify its compliance with the science-based targets initiatives. On many fronts as eco -efficiency and employee engagement, we already topped the target we have set ourselves for 2033. Approximately 1/4 of our variable regulation is based on ESG performance criteria. Next slide. As you know very well, a few things played out differently versus initial expectation. First of all, football. Ambitions were upbeat. However, a number of headwinds has lowered down the whole initiative and transformed the opportunity in a drag for EBITDA. The key issue are from currency, multiple viewers per subscription, and the rated [Indiscernible], which drastically reduced the size of the market. [Indiscernible] was meant to stop it, but they did not, hence we're renegotiating phase with them. Secondly, the delays in the voucher plan caused a domino effect in the market, increasing competitive pressure, and driving down expected lines, growth and prices. We had higher costs to fewer digital companies and [Indiscernible], not fully compensated by higher revenues. And then, last but not least, a new low provided for a change in the treatment of activation and handset costs, the required the provision in 2021 and that will affect travelers of the coming years. Next slide. So if we look at our financials, group service revenue are on an improving path in terms of year-over-year trend. Also, thanks to the increasing positive contribution from TIM Brazil. Fourth quarter year-over-year performance is affected by comparison with a very strong fourth-quarter 2020 on non-regulated wholesale revenues. Retail was [Indiscernible] offset, but for the reason explaining, it performed similarly to Q3. For the same reason, Q4 EBITDA was down year-over-year, namely, the provision for each [Indiscernible] installment collection due to the [Indiscernible] low. Football and digital company startup costs, lower equipment sales with the related positive markets, labor and G&A for COVID rebound, energy, and interconnection. Let's see into the revenue's dynamics in the next slides. Looking at fixed KPIs. Fixed line almost stabilized despite fading out from [Indiscernible] are starting from Q3. Ultra broadband growth was good in retail and very good in wholesale. We passed in December the 10 million ultra broadband last month. Churn was down 0.5 percentage point year-over-year, and this quarter again, we improve CSI and NPS year-over-year. Moving to next slide. Fixed service revenue was down minus 3.7% year-over-year with the quarter-on-quarter swing, and currently due to the national sale that compared with a fourth-quarter that in 2020 benefited from peak sales opportunity. That is why you will see KPIs were very strong with [Indiscernible] on assets doubled quarter-over-quarter and well above corporate losses. But revenue did not reflect it. International sale with Sparkle did very well growing double-digital service revenues, that this quarter of double-digit growth. Retail, despite all what they said, improved year-over-year performance [Indiscernible] versus Q3 thanks to ICT, including Cloud, growing 21% year-over-year, and to the stabilization of the customer base while consumer ARPU remain a drag. Equipment was significantly down year-over-year in Q4, as 2020 benefited from equipment sold with vouchers, a strong sell in modems. Next slide, the mobile market is showing signs of easing tough it's rational competition. The mobile number portability market has shrunk again, this was the coolest Q4 of the last 11 years, thanks to TIM’s rational behavior. And TIM was confirmed again as the best performer in the top three, with the fourth operator decelerating its growth. TIM human effects are now on an improving trajectory, and trend record low. Next slide. Mobile service revenue have not reflected improving KPIs yet, and the worsened four percentage point quarter-over-quarter, entirely due to lower roaming benefit in Q4. Tough comparison in North sale and partially repaid due to much higher proportion of out-of-bundle last year. ARPU Human improved progressively and spanning flat year-over-year net of the drag from content service provider cleaning and effect that we might have the possibility to revert in future years. Next, slide. Capex in the quarter are down year-over-year for different fishing during the year that was already explained in previous quarter. They are up on the full year for higher growth, capex for cloud FTTH and football in Italy, and for preparation costs for all integration in Brazil. Networking capital is flat in Q4, equity free cash flow was down mainly for lower EBITDA and for lower contribution from cash taxes that in 2020 at the benefit from the patent box. Next slide. As I mentioned, in full-year 2021 net debt after lease was down, €1 billion year-over-year helped by [Indiscernible] for the stake in Fibercon for €1.8 billion. The net income in 2021 is materially down for three main reasons: good will impairment on domestic business unit as a consequence of rebasing of the performance on 2021 actuals and increased interest rate. Second, the write-off of the favorable tax asset exceeding 25 years. The receivable amount should be recognized in future years based on foreseeable net income. Three, the provision for multimedia contacts on which we are projecting a negative margin going forward. The first two more material items are non-cash, which means that they will not have any impact on our future cash flows. Next chart. Let's soon page looking at TIM Brazil and I'm happy to report of the pass over to Alberto Griselli and the Brazilian team, a company in really good shape. TIM Brazil has been delivering consistently results and option. The value strategy of core focusing on ARPU more than on volume has paid off. The [Indiscernible] was perfectly aligned with our expectation. We are pushing innovation and rolling out further infrastructure with effective partnerships. Last, but not least, we have obtained the green light from local authorities for the Oi deal that is dramatically stepping up the company's industrial inertia profile. We met all financial and ESG target set. Team Brazil has already reported, so I won't go through Slide 18. On OS integration, we are now shifting to the execution phase, with a target to complete the migration within one year from now. This deal, I'm really proud of. It's a deal that will improve the fundamentals of the company and health of the overall market. Brazil come late in the development of mobile versus Europe, and it was steam that introduced GSM in the country. But I would like to align that now the country is ahead of Europe, but in taking action after understanding that the mobile market, with its massive need of investments does not work if it is overcrowded. Next chart. Thanks to the good performances of TIM Brazil and to the [Indiscernible], we are in the position to raise our targeting in Brazil to the double-digit growth that we had anticipated for EBITDA. And we are raising our guidance for revenue to double-digit [Indiscernible] as well. Again, the company's reported so I will not go line by line. Let's talk about our plan. Let me set the [Indiscernible] first. Let me give you my view on the context and where we are. I believe -- I strongly believe that TIM has incredibly valuable asset, but also material challenges deriving from tough competition, geographic constraints. The FTTH is growing but facing regulatory hurdles and competitive pressure. Mobile is progressively improving towards stabilization. This our business are growing. However, there are, different profile versus core business, lower margin, and they are less capital intensive. We suggest that this should be value on different metrics than core cycle and have different capital allocation criteria. The same market is benefiting from the shift from copper to fiber, but TIM now faces infrastructure, competition and operates in a truly tough regulatory environment. Plus, capex is needed if you want to capture all the opportunities in the growing businesses and build future cash flows. In a nutshell, I strongly believe that extraordinary actions are needed and we have identified that. Let me elaborate more on that. Again, TIM is a great company with untapped value. It does the FinTech co-branding the country. The best impact structure with the ISO ultra broadband coverage and 5G speed. And while they serve leadership position in the enterprise segment, it's the only convergent player that has it all from connectivity service to digital platform for consumers and B2B. Thanks to infrastructure and B2B positioning, TIM is the best suited player for ratio recovery and resiliency plan. And it operates in a market that in many respects, has reached the bottom. One example is fixed mobile substitution that has been increasing for years, we finally saw a stop year. Technology improvement in pandemic made this trend reverse. On the other side, TIM is facing very material challenges, and we saw it in 2021 numbers. Our market is the most competitive and the most regulated in Europe. [Indiscernible] has fallen 32% in the last 10 years and 18% in the last 30 years, like in no other European country. We are the only operator in EU, and maybe in the earth, to have all the toughest regulation obligations, separation, replicability test, or retail offering and wholesale regulation, also on new duration network. As I said, aside of the challenges, there are opportunities that need to be financed. In profound, private equity know it very well. You need to accelerate FTTH, 5G, Cloud, digital company investment, if you want to shorten the path to sustainable cash flow duration. It is now the time to pursue and finance new opportunities for the long run, As such opportunities require Capex at 11 that is slightly up from previous years. The good news is that the peak requirement would be in 2022, and that the medium and long-term Capex profile is very lax for a few reasons. FTTH and [Indiscernible] roll-out will be finished, these ideas are less capital intensive. Decommission [Indiscernible] will act. So what is the way forward? Let's see in the next slide. From our point of view, the way forward is to break the chase of value to delayer, transforming the company from a vertical integrated player in to separate entities, with different industrial focus and financial metrics. [Indiscernible] company, we call it NetCo, including national and international wholesale business and assets, and a service company, ServiceCo, with the enterprise and consumer businesses. They are relevant asset jointly with team Brazil. Why that? First, it makes sense from a business and strategic perspective. The four entities operate in different market and have very different capital requirements. They need specific focus. Secondly, being separated paves way for valuable partnership and aggregation. Moreover, breaking vertical integration put incumbents in the position to obtain anything of the regulatory constraints that have been locking them so far, as I said, particularly in Italy. According to the European telecommunication code, wholesale-only operators are free from the cost orientation. Retail would enjoy regulatory relief as well. By splitting NetCo and ServiceCo, we will then able ServiceCo to compete on equal basis with other players. Lastly, it makes sense from a financial perspective, enabling better capital and depth allocation, clearer visibility on the specific [Indiscernible] and attractiveness for private money, increasing [Indiscernible] for this type of asset. We expect that the process could take at least 12 to 18 months. Next chart, the four entities have truly different [Indiscernible] and business perspective. Three of them are in very good shape. The network is a source of cash flow, enjoying a shift from copper to fiber that is helping the ARPU mix and will add operational costs and Capex in the long run. Enterprise as very good growth opportunity driven by Cloud [Indiscernible] cyber security and recovery plan. TIM Brazil, we saw it as delivered results and is about to accelerate. Consumer, which includes the small and medium business, is instead fighting in a crowded and regulated market. We hope to see in Italy what's happened in Brazil soon. Let's see our ship, the perimeter of these entities in next slide. Perimeter, brands and companies will follow their natural location and so customer. The mobile net of data center service platform would be in service corp that will also have it's [Indiscernible]. All fixed and network assets will be in Newco including the entire access network primary, secondary as well as central offices and backlog -- and backwards. During the phase of analysis, sounds more changes could happen. Sparkle with its asset will also be part of Newco. Next slide. As I said before, team is subject to the most stringent regulation in Europe firm, despite [Indiscernible] painful and costly financial and legal separation, we didn't have regulatory relief, which instead expect in case of structure of separation. On the contrary, we are bound to cost orientation for all our Olson services. This is not happening in any other country. The structure of separation will enable us not only to lift cost orientation but also to eliminate replicability test in retail, and could lead to an easy, of course, also in our decommissioning activity. In terms of preliminary financial, what you should expect is EBITDA margin, a larger Capex in NetCo and vice versa ServiceCo for the short term. Minimum term Capex are projected to fall for bulk units as fiber in [Indiscernible] will be finished. Let me point out that TIM is spread unique in European context. For TIM, the direct costs of the split of [Indiscernible] in terms of the synergies is going to be very limited. This is because we have already incurred in the past all the cost of introducing equivalents of input and equivalents of output plus, we've already separated Fibercon. Let's now look at the evolution of plans for each single market in the next slide. In the [Indiscernible] market, we see growth for featured accesses supported by FTTH, competition from Fiber overbuild and opportunities coming from the recovery plan. In this market context, we are aiming at protecting our customer base and further pushing towards fiber to [Indiscernible] the co-investment model. And we'll open new [Indiscernible] market as a channel for our factories as source of incremental business for both. Sparkle will operate in a context of huge data growth that increases the demand for international connectivity. It will also seek selective expansion in growing geographical areas and other value-generating initiatives. Moving to enterprise. The enterprise market is growing, driven by increasing customer demand for ICT services. In this context, our strategy is to further strengthen our connectivity and SGT solution, evolving towards an integrated unit that will accelerate commercial traction. We also have to improve our marginality, so we'll develop more announced solution and in source part of the value chain. We are at full speed on our commitment to participate towards relevant Recovery Plan initiatives. And we have dedicated teams to capture these opportunities. This is a healthy unit and in product EBITDA to double by 2030 and revenue to grow 80% versus the starting point that is very close to 3 billion. We expect it to remain almost stable on capex year. Importantly, TIM Enterprise is expected to grow faster than the rest of the market because of its unique selling proposition. It is the only player in our market that can offer a wide end-to-end portfolio of services that include ICT and Advanced Connectivity. Simply security and convenience in one single shot. In the future, we might also replicate this model abroad. Next slide. As you know, a very important project that leverage on these capabilities is natural strategic gap. the Cloud for the public administration financed by the recovery fund. Our offer was selected as the reference in the tender. And we also have the right to meet shoppers that other might put forward, a good situation indeed, I will not say anything more than this because [Indiscernible]. Next slide. Now, the tough one, the consumer market. What are we going to do given the market context, I already described before. We need to revamp our premium positioning from a branding perspective, leveraging on high tech made in Italy concept and handset financing through TIMFin. We will still commercial operation effort from acquisition to upselling and customer base retention carrying. On this point, we have developed in-house and effective data market automation system that enable us to target micro-segment with [Indiscernible] direct marketing actual. We have been experiencing redemption rate three to ten times higher than before, and will scale up the system. We will push [Indiscernible] convergence, and we'll make sure to leverage the voucher program that is planned despite the constraints that have been introduced. On content, you saw we had issues. My goal, our goal, is to improve the marginality by [Indiscernible], investment, commercial, legal. We are considering all options. We also need to rethink our business model in a way that makes it sustainable and productive to a more over-the-top approach, less dependent on set-top boxes. In the small and medium business market, it's the only player that is offering traditional and advanced connectivity solution, as well ICT and digital products and services. This is the reason why business customers should choose us and we'll push further on this concept to maintain premium positioning. We have to protect our customer base using the same tools that are described for the consumer. We will improve carrying and customer experience. And we aim to benefit from the voucher scheme also for a technology upgrade of the customer base. Next slide. Looking at opex, we have to manage the change of mix of revenues. The new mix brings higher growth, both for revenues and for revenue-related costs. Namely those for ICT, digital, business, and content. These businesses have the benefit of lower Capex, but carry lower margins. For content, as I said, we'll be reviewing our agreement and strategy with a view of avoiding negative marginality and possibly creating value. For the rest, to offset this trend, we have defined a proper transformation plan with a large set of initiatives aimed at addressing and improving operating efficiency, including also action or revenue driven cost, as well as on indirect and labor costs. Since it arrived, I have identified cuts for 15% of diverse cost base, but deem is to cut them by 20%, which is not in the plan yet. It is also important to note that beyond 2025, with the end of some content contact, costs are projected to fall significantly. Our long-term plan, and [Indiscernible] margin expansion of four percentage points from 2025 to the end of the [Indiscernible] on growing revenues. Last but not least on ESG. Our plan, ambitions, actions and target on a wider set of KPIs. Let me mention at least a couple of them. We are targeting net zero for 2040 and we are now including scope-tree in our initials reduction targets. I'm fully committed to drive the company in the journey, and we'll report the progress along the way. Before my final remarks, let me provide some additional color on what we factored in our plan for 2022. As I already hinted, we have a few headwinds. The impact of the Europe on consumer contract duration, the regulated all sale price update stricter than expected rules on voucher and we have factored some impact from the entrance of a new player in the market. On the other side, we assume will benefit from some items that we had in 2021. The over-performance you'll see, where we had the peak in one [Indiscernible], the positive effect on commissioning of the revised customer lifetime, consequence of strong churn improvement versus the passive, subsidies for public trading. On the net debt front as you know, 2022 we left a number of extraordinary payments for a total of 3.7 billion, including Spectrum in Italy and Brazil, all the acquisition and the substitute tax to enfranchise goodwill. I understand. It's a lot to take in one page. However, there is also some good news as we see a binding offer from Ardian for INWIT, to buy 41% of Daphne 3 for €1.3 billion. So in case will accept it, we will remain with 10%, including some governance privilege. To us, we're reading in the news that the concurrency should come to an end from the next football season. Both elements, being last minute news, are not yet factored in the plan.So to conclude, we are leaving an unprecedented period for TIM and it's time to take bold actions. I'm empowered by the board to develop the execution plan of the group organization. We'll host a capital market day where all the details of the new plan will be disclosed. Before then, we're, of course, working on a contingency plan which means based on current organizational structure that envisages group revenue to grow low-single-digits in the plan period, a flat EBITDA and Capex level that you read in the chart. On 2022, we're taking the hints that I described, revenues, EBITDA, and net debt. We intend to reinstate dividend as soon as the organization envisaged will have brought the expected results. With that, let me open the Q&A session.

Operator, we are ready for the Q&A session. Thank you.

Ladies and gentlemen, the Q&A session is now open. [Operator Instruction]. The first question comes from Mr. David Wright of Bank of America. Mr. Wright, please.

Thank you, Pietro, for giving us the presentation and the opportunity to ask. I guess just a couple for me. One is a little more technical, but just first of all on the NetCo that you've described, could you give us any indications of how you could look to bring that, if all of that asset, whether it would be like a BT open-reach or whether you could look to actually carve-out of the TI group. And there has been some reports of an MOU with Open Fiber that feels like the next progressive step. Can you give us any indication on discussions you may be having? And then my second question a little more technical on the [Indiscernible] share dividend, which I understand carries forward in the event of not being paid. If it's not paid the following year and there is reserves available to pay, does it carry preference? The roll forward, [Indiscernible] dividend over the current dividend, just trying to understand some of those dynamics. Thank you once again.

Hi, David. Thanks. Related to the first question that these NetCo, we have in mind a [Indiscernible] and not more than a lot of BT work. And I'll try to elaborate more on that. What we're thinking is that to separate completely the network could allow us to have the advantages on both sides. The first one [Indiscernible] on the NetCo network's side, and so also prices and on the retail one. I continue to remember that sometimes we forget that we've lost during the year, all the theoretical advantages coming from a vertical integration. We are the most regulated country. We still have a lot of [Indiscernible] to compete on the retail side face-to-face with the other player. So a complete separation, that carve-out could allow to have better competition play-field, both on the retail side and on the wholesale side. In the meantime, what we are expecting is that in any case, building a carve-out could allow us to have optionality toward a possible industrial partnership. We cannot tie that the potential partnership from industrial point-of-view, could be CDP with open fiber.Or to look for a full their financial partner that could allow us to distress the level of capex that are requested to proceed the move on all the development of FTTH. The result that we are facing in our number are related to [Indiscernible] in the next year will face a wave of capex that is particularly high. But if we look in the medium long-term, they will be reduced because once we have covered all the error that are planned, we'll not have the level of expenditure make to the FTTH. Let's remember also to clarify, what expecting is that in the medium long run, we can start where we also benefit coming from the decommissioning of the old technology and fixed [Indiscernible]. And in the case of a structural separation, all of the decommissioning process could be also facilitated by all the different steps. Related to the savings share, I need Adrian to answer.

Hi, David, how are you. Regarding the dividends for the savings shares, it's not a discretionary decision, it's a technical matter. Today, even if we have reserves, these reserves are blocked. And if we pay these dividends to the savings shares, we will need to pay taxes on those dividends. So that's the matter -- the reason why for us technically today, it's not possible. Going directly to your question, if these dividends are cumulative, yes they are for two years. So if in the future we'll go -- come back with or we have additional reserves in order to distribute it, we will pay definitely.

Okay. And just to double check, Pietro. Can you comment are there any discussions with Open Fiber on the way right now. And I guess just on the savings shares, if it's not paid this year and it can be paid next year, does this year get priority against the reserves versus next year. I hope I'm being clear with that. Thank you.

David, related to the first question, it's clear that we are looking around and we started to have some discussion -- initial discussion with possible partner, both on the industrial side that on the, let me say financial side. Then it's clear that is something that we must go more in depth in the following weeks. But what is important is that -- and perhaps it can anticipate it also other question that could arise during the call. Compared to the past that we stated that we are ready now to lose the vertical integration. This is something that during the last eight years because they're starting 2015 to start to discuss about the network separation was a taboo for our company. Now is the [Indiscernible] and putting it on the table that you are ready to lose the vertical integration. Adrian.

Yes, David. Regarding which has priority? I think it's indifferent. If we come back to have net -- positive net income, and we [Indiscernible] reserves, will be available to pay up to the reserves that we have, and this considering the level of each year.

Thank you for your answers, gents.

Thank you, David. And next question, please.

Good afternoon, all and thanks for taking the questions. If I can follow up on some of the previous questions on NetCo specifically. So when you talk about carving out NetCo against the structure within the holding company, which is the list of company with two separate entities, and my question would be, would you be ready in that scenario? I think you alluded to partners to join you in the wholesale NetCo business but are you willing or are you -- or would you accept to lose the majority in that NetCo? And that will be my first question. And then I saw that you're raising Capex, obviously investing in fiber, which is a great opportunity. But when we think about a potential combination with another partner which according to what you said today in any case, wouldn't take place between maybe -- before 12 or 18 months, isn't that step up in Capex something that reduces potential synergies if you were to merge with someone and maybe defeats a lot of the benefits of doing that merger? So that's -- sorry, that's the first question. The second one was on some of the write-downs you did. If I read correctly in the slides, you talked about something related to media. I suspect this has to do with the deal with [Indiscernible] and it seems that you're assuming that business is going to be negative or have a negative impact for the future or is that a reflection of the change of view about the past? And I guess the question is, are you assuming, when you write down the media, that you're not renegotiating for now the deal with [Indiscernible] and you've been prudent and could that change? Hopefully that's a clear question.

Thank you, Mathieu Robilliard. So as I stated in beginning, we're ready to lose the majority of NetCo, then the possible scenario that could allow us to reach that goal could be different. And we spent the last three months to go through the different situation that are mainly related who will be the partner with which we will proceed. We can have a demand, we can have a contribution. So based on the different situation, can change the way to proceed. Keep in mind that in any case, as we stated, we can also keep a minority stake, but in any case to be sure to have the -- to lose the vertical integration should be a stake that do not allow us to have veto power to contribute in discussion or to have the possibility to interfere with that. Keep in mind that in these NetCo, we should put all deals and business. So the ServiceCo would be mainly retailer. Related then to the -- you were asking something related to Fibercon combination, if I'm not wrong, yes?

That's right.

Let me check. The step-up in Capex about -- yes, the possible synergies that are coming ready to [Indiscernible]. If we proceed with an industrial partner, we have to keep in mind that we have three different kinds of synergy. The first one is Capex avoidance. And for sure, if we should proceed with CDP and Open Fiber, the time that will be spent through the eventual authorization by the antitrust, could it be at European level or at national level, could not allow to exploit all the Capex avoidance. But if you look at the number above company, looking at the public number, are thinking to continue to invest on [Indiscernible], so this is not the main issue. But again, we could lose a part of synergies arising from Capex avoidance. But then we have two full other level of synergies. The first one, I don't take to explain to you how this business is a business where it's really important the level, let me call that saturation, although it is not saturation. If we put the customer all on one network, the return on investment is for sure higher. If you put all the customers in one network, also the speed to reach the level of saturation is faster. Both of them are two elements that could allow to add further synergy, let's call it this way, coming from a better return on investment. Last but not least, there is a matter of speed and also concentration of the effort. Today, this is something that is well-known in Italia market. We are facing difficulties because while we believe that at the same times, in the same area, we are having some issue with the operational activity to look for companies that are able to build this network. So all-in-all, for sure based on the time that will be needed, if we will proceed with an industrial partner, the synergy that we will lose will be the part of peer that is necessary for the antitrust authorization. While, the other synergies will continue to exist. Related to the second question that is, on DAZN. Yes, what's happened is that we put in 2021 direct off of the negative impact of the DAZN. We didn't include any kind of further improvement that can arise from a renegotiation, or if we will do something different. And what will happen is that in the next year, we will walk on the media business that we have managed until today, because we are not completely satisfied by the way in which we are implementing this strategy. It's clear that they are not contributing in terms of EBITDA and value, as we were imagining, so we'll do all we can do to try to be back to have marginality also from this line of business.

Thank you very much, Pietro.

Thank you, Mathieu. So next question, please.

Next question comes from Sam McHugh of Exane BNP Paribas. Mr. McHugh, please.

I only have two questions, if I can. First on the fiber build, I think that your ton of the moment gets you to 60% coverage and obviously beyond that is Open Fiber. Can you give us first an indication of how your customer base retail and wholesale splits between the 60% where you will have coverage and then the 40% where you don't have a plan to rollout. Number one. And then the second question is, [Indiscernible] your balance sheet, is starting to look very stretched. There have been some reports in the press about KKR having a put option on the FiberCop stake. Can you confirm or deny whether that is true or not? Thanks very much.

About the first question that is related about liquidity different the well, your question we want to know about the coverage of the country are with distribution between our customer and the customer of the competition. Is it right? On the FTTH. Or we are talking about distribution between black area and wet area.

Yes. It's a more and more I'm thinking if you can't do an Open Fiber deal, how much of your customer base fits in areas where you won't have the network and they would have the network. Just trying to size the downside risk if you start building at 60% of the country.

It is not really easy to do this comparison but let's work in this way. Let's remember that the country development [Indiscernible], black, gray and white. On the white area, Open Fiber is the concession, so they will be the FTTH network. They will be the only one that will be the FTTH network. But in this area, we've already developed our ATPC network, where we have more than 60%, 70% of our customer with ultra broadband. And in these area, 50% of our network is able to achieve something above 50% -- 50 megabits per second. Then we have the gray area on which none of the company for what they know, public information, have started to build in this area. And in this area, we have our FTTC coverage, where we are continuing to perform. Let's remember that we complete and increase the coverage with FTTC from 85% up to 90% during 2021. And then there are the black area in which, again, I don't -- I can talk only based on the public information I am able to gather, their Open Fiber is [Indiscernible] of team in terms of FTTH coverage. Then the second question was related to the Fibercon [Indiscernible]. You were asking if we have any specific [Indiscernible] option or other element? Yes?

Correct. Let's just try to think about the balance sheet, and the risks that we see in other big cash outflows of KKR work advertiser per option on that bank account. Thanks.

It's clear that the contact that has happened in any kind of this contract, some rise in favor of the KKR. But at this stage, also for the confidentiality issue, we cannot disclose. So again, this is something that is normal, but to be clear, it doesn't put us in difficulties if we want to proceed with the carve-out.

[Indiscernible]. Thank you very much.

Thank you, Sam. Next question, please.

The next question comes from Jerry Dellis of Jefferies. Mr. Dellis, please.

Yes. Good afternoon. Thank you for taking my questions. First question might be a follow-up from the last one. I was just interested in whether you would imagine that FiberCop would continue to exist as an entity within NetCo; And what right KKR has about the way in which Fibercon might be folded into NetCo? And then secondly, a follow-up on the question regarding the [Indiscernible] dividend, if I may. If you are in a positive net profit position next year and even if you don't have positive distributable reserves, would you pay the 2021 [Indiscernible] dividend in preference over the 2022 dividend? Thank you.

So about the fifth question that -- where he's asking more details about our contact with Fibercon. Again, is up really any kind of these deal they have summarized [Indiscernible] low couple of five-year set, but it's clear that if we will proceed with any kind of activity we will be involved and discuss with them. Also, if I think that as I was telling you before, the rag that [Indiscernible] neutral, traditional, right. Let's remember in any case, when we discussed about the two possible different scenario, the so-called industrial one and the financial one. One we talked about the industrial one. Let's remember that independently from averaging, there are also some gold and power routes that put and give more right about the possibility to merge compared with the financial one. For the second question, Adrian.

Yes. On the preferred -- on the savings, clearly, if we have positive net income in the future. Of course, these preferred shares in order to a new dividends. Obviously, starting with the ones that were due to pay in 2022, but yes, definitely either net positive, net income we will restart to pay dividends on the preferred shares.

Thank you very much. Could I just ask what was the distributable reserves position at the end of 2021, please.

At the end of 2021, so before the shareholders meeting, the total reserves are €11 billion before the shareholders meeting. After the shareholders meeting, it will be €5 billion.

Thank you very much.

[Indiscernible]

Sorry, [Indiscernible]. Also just to be clear. For some questions, it's clear that we are not hiding anything. But you can imagine that we are in a situation for which the next three months will be very important for our company types of negotiation. On the table, we have several opportunities that we have to try to get. So some information can put someone in a better condition to negotiate. These reasons for which on some information, I will try to not give too many details.

Understood. Thank you very much.

Thank you Jerry, next question please.

The next question comes from Mr. Luigi Minerva of HSBC. Mr. Minerva, please.

Yes. Good afternoon. Thanks for taking my two questions. The first one is on Slide 29. Pietro, I know -- it's about the rationale for the structural separation. Because if I look at that slide, it's very clear that you have countries like Spain, France, Germany, where regulatory benefits are there even in the absence of structural separation. So it is possible within the European regulatory framework to have a support on your regulation even when the incumbent remains vertically integrated. So what is special in the case of TI that you require structural separation in order to win regulatory relief? And the second question is just a clarification on the INWIT stake. I just found the press release not completely clear. So I just wanted to clarify if the Ardian offer is to buy TIM completely out of INWIT? Thank you.

Luigi, thank you. Related to the situation, keep in mind that this is something that we are discussing since 2013. What is happening and when it's understood that I'm becoming old because I started 2008 when we start with the equivalents of output. Then we move in 2013, 2014 with the equivalents of input. Then we started with the Fiber and we're obliged to be cost oriented on the Fiber. Then we created FiberCop, and we create FiberCop specific company. In the meantime we started to change all our system. What it means is that, today if I was in the shoes of other takeoff player around Europe, before to go towards the loss of the vertical integration, I should think several times because perhaps part of them continue to have equivalents of output, and they didn't spend money to put in play something as we did. They continue to have equivalent of input, and they didn't spend the money that we spend to do that. They continue sometimes also to not be, as in our case, obliged to do a comparison for the launch of the new offer based on the comparison with some other role. Let's imagine this way, we are, if we have the network and -- the separation of the network, theoretically, I should be the most efficient player because I have the highest amount of customer. I should buy from end-of - seller. I'm not discussing about -- to you about wholesale price or volume discount, but I should be the most efficient. I don't have to explain to you, Luigi, that this is a business of economy escape. Today, one, when I have to compare and build my retail offer, I'm compared not with the most efficient competitor -- with the less efficient. So we chart advantages to continue to be like that. Perhaps you don't know, but in Milan our market share is 23%. I'm not the first player. Why I have to compete without the possibility to compete exactly as other trends did? Let's remember, for example, that one of the main competitor in Milan was able to subsidize with content. The connectivity, we're not allowed to do that. So again, I understand if you think from another [Indiscernible] player point-of-view. But all the theoretical advantages were lost during the time. Deregulation is like that. So one of the last case you see the soccer bundle. We were entering in the business of DAZN and sport, because we think it is bundled and it was forbidden. So I will put in a different way the question, you no matter the mid-market, can you tell me not by claim, which are the advantages of the vertical integration? This is the question that you asked to some analysts in the one-to-one. And if we go out from claim, I didn't receive specific elements that justify something like that. And I spent the last three months explaining that also to our board of directors because they are doing their job. They are challenging us as a management team, not to buy something as a black box, but explain why that. So again, also when we talk about synergies and dis-synergies, we are also advisor of the committee adopt that are experts on this matter. And they told, there are dis - synergies from the IT side, then explained them that we already developed everything during this year. So why stay like that? Which are the advantages as a vertical integrated player? Sorry, if it was provocative, Luigi, but I did it just to make more clear my statement. But again, if there's something that they didn't explain well, please let me hear to come back to you.

Thank you, Pietro.

And about INWIT hardware?

Yes. Regarding your -- the question about the offer coming from Aldean at this offer is for big portion of the stake that we have still on Daphne 3, that is one of the controlling company have been with. Even though after the -- if we accept the software, we will remain with participation in Daphne and also with some governance INWIT the operational companies. So the offer is not for the stake on INWIT but the stake we have on Daphne 3.

Can I ask, what is the stake in Daphne 3, can we quantify?

Yes. It's for the 41% and we will remain with an additional 10% of Daphne 3.

Great. Thank you.

Thank you. Luigi. Our next questions, please.

The next question comes from Mr. Domenico Ghilotti of Equita. Mr. Ghilotti, please.

Good afternoon. I have a couple of questions focusing on the 2022 outlook in particular for the domestic business. So if I'm not wrong, you are projecting something like mid-single digit declining sales, and mid-to-high teens declining EBITDA with costs that are actually up. Could you give us some more color in understanding the bridge on why the domestic business despite the KPIs that you were commenting before that were not so bad is so under pressure in 2022. And in terms of second question still on 2022 guidance. I presume that we should expect some negative equity free cash flow, and I reached something like €20 billion of debt after leases even including the [Indiscernible]. I wanted to check if this calculation are reasonable.

Let's start from domestic for 2022, and let's try to bridge the relationship between 2021 and 2022. What is important is that -- and let's discuss about EBITDA first of all, and then we can move also to the revenue. About EBITDA, what was happening is that on the domestic level of the 4.358 billion euro, in terms of EBITDA after lease, were part of them that are related on non-repeatable activity that are related as we mentioned also on some [Indiscernible] activity that it's very difficult to foresee that can be -- or we can have further opportunities like that during 2022. Then if you get the exits paid of the fourth -- sorry. There's another impact that is related to the fact that the 24 or the 26 of December change also, the communication code that oblige just to change the way we should approach the business of the ultra broadband. I don't remember, if you have the mind, our talk with the frontload of the revenues to the activation. [Indiscernible] one shot price. And then if you get the last quarter, the fourth quarter exits paid in terms of customer base and then multiplied by four, you mainly arrive to the number that we put in our plan. It means that we have some challenges because we are taking the commitment that we will stay as we are for the organic business because again, if you reduce by the headwind, as we called that in the chart 40, that are not repeatable and then you get the fourth quarter and you multiply by four, it means that we have a talk with Andrea and the rest of the team to keep the level of EBITDA also working on the cost side while we are moving towards an important transformation project for cost-cutting to keep that. I don't know if I was clear about the number but if you need more details, there's no problem. There was also a second question.

Okay. Yes, on the free cash flow and level of debt.

Yes.

Considering what we've been seeing in the different answers and what you have in the presentation. We have confidence of factors -- of [Indiscernible] factors. I want the negative because we see that some of them are really positive. On 2022, we will have the payment of the licenses here in Italy, we will have the payment of the 5G frequencies. In Brazil, we will have probably the biggest effect that is the payment of the participation in Oi in Brazil; and we will have additional cash effects up to the deferred tax and the payment on this also. You can imagine that it's difficult to assume that the evolution of the net financial position won't be negative. Then in terms of equity free cash flow, as we mentioned before, we're not guiding it because there are a lot of [Indiscernible] parts. We are trying to understand better some of these effects. Of course, we have our numbers internally, but we're trying to understand if we can improve them with some actions, for example, the INWIT deal that we're discussing before. So again, at 2022 we will have accomplish of different and several factors all aligned on the negative side in terms of financials, but probably on the positive side in terms of operation.

[Indiscernible]. I don't like to seem impolite. And what is important that none of the team that is here in the room with me is [Indiscernible] of this number to be clear. We work on a realistic plan, and we'll do whatever we can do to improve these numbers. But we told that be realistic and try to gain the trust of the financial market was much more important than sell a dream that can then become a nightmare. So we see room for possible upside. As others mentioned, we will work on that. We will update you on a quarterly basis on the traditional business, on its [Indiscernible], on the day-by-day activity, while we will walk to arrive by the date of the [Indiscernible] results with our plan that could try to better valorize the assets of this company that are really good. And I'm quite optimistic about the possibility to improve these numbers.

Okay, thanks. And do you confirm that the Recovery -- the opportunity of the Recovery Fund have not been factoring, including the strategic poles or strategic app.

Yes. Thank you for your question.

Sorry. Yes, clearly they're -- these are not factories, example, INWIT.

Okay. Thank you.

Thank you, Domenico, so we now have time for the last question, so Operator last question please.

The last question comes from Mr. Keval Khiroya of Deutsche Bank. Mr. Khiroya, please.

Thank you. Two questions, and thanks for taking the questions. As the first one was, I appreciate in Q4, there's a lot happening about the Retail Propane answer negative. How are you thinking about that? How that subscriber momentum evolves in 2022? And then secondly, I appreciate this is more a question for your board, but you highlighted the interest of private money on infrastructure that given the extensive turnaround on a short time horizon, public markets. Do you think it's right for TI to be listed company all in current times? Thank you.

So about the [Indiscernible] on ultra broadband, what we are thinking to do is that during 2022, to try to be a player that will try to please the market and reduce the competition on price. We are working with Andrea in the possibility to segment in a better way our offering; not only in ultra broadband but also in the mobile. Because sometimes in Italy, the price are so low that we have room to do and giving more value to increase the ARPU. So from a certain point of view, we think that makes no sense to fight, to increase the quantities, diluting the ARPU. It doesn't mean that we're not work to improve our [Indiscernible], but you have to start to think that we are the only country where FTTH has the same price of FTTC. And easier when which you have destroying value. This is one of the only country where sometimes the main player created a second brand to compete with the new entrants. Either in the case, reducing the price, we have to work in terms of create offer to increase the quality of the service and to improve the ARPU. If you look at our price, we think that we have margin not for a so-called price up, but to create further offer that could allow to increase the level of ARPU adding service on what will sell us today. Then we have to find those a different way to accelerate those the migration towards THE ultra broadband for PSTN and traditional ADSL. What we did until today is to get the low [Indiscernible], why that? Because the [Indiscernible] that were easy to do. Now, for example, so when we have the possibility to use the best technology available offered. The issue is to convince customer to open their door and to allow us to meet with them at the same price towards the ultra broadband. This is something that we work on because customer experience and digitalization, are also too important elements we have to look to. Can you repeat then the second question because I was unable to catch all just a second. The possibility to team to be the listed. I think that there are some different way to reach the similar again. And this is something that I think some mean it's to explain, which is our [Indiscernible] If you look at TIM, as is today. In, at the same time, we're managing four business model that are completely different. We have Brasil that is, let me say that we saw the Azure, a wonderful country is happening exactly the country of what's happened in Europe. We had an auction for the 5G that was clever. They put the value of the auction in network building. So don't pay a [Indiscernible] The market is going from five to three player. Exactly the commentary of what's happened in Europe. We both, the third, fourth player and we will create that for the next year but by the end of 2024, they will be back to leverage one. And then it's a market with the growth. So what we cannot do is block Brasil from growth because it will be a grow and gene for our group in the middle long term. Then we have the enterprise business. And I tell you story, when I was younger, at the beginning of 2000, consumer was the best war. We were discussing about the huge opportunity coming from content, financial services, technology evolution. And it was the story that happened in the last 20 years. Now, the consumer is a segment where the competition put the price at the lowest level and it's difficult to our services to improve. So the consumer is a story of restructuring the company and re-position the offset. In the enterprise segment, we have the opportunity for the next six or eight year to follow the wave of the modernization of the public administration and of the above large corporation. We're discussing about cloudification, cyber security, IoT, huge opportunities in a market, in the segment where the average length of a contract is above three years and if we apply the Pareto law to our revenues, 80% of our revenues are coming from customer with contract above five years. What's happened next was to invest in the Cloud or to invest on some contracts. And so we have to find a way to finance these kind of activities. Last but not least least, you have the network. Once you look at the network, it asks for a huge amount of Capex because you have to build a network today. And what [Indiscernible] is saying is that, if this company was in utilities, the market could ask us, why you're not putting much Capex to build these infrastructure? Because in the medium long term, it will be a cash cow. But being a Telco player is more difficult. But to come to your question, perhaps sometimes it's better to keep private the network, because the private allowed to have access to an interest rate much better, in the short term, less constraints in terms of rating and financial issue. So if we want to discuss in theory if it is better to take private your group or to pick private -- from private some piece of the company. Perhaps you have to look at the network as the piece on which take private could allow to explore better the efficiency and the opportunity that will come. Again, sorry, if I took the last minute to do a long story short, but I think that it will allow. And again, I can't speak in the name of the management team that is here on this table, we will walk in the next week and month because we would like to improve this number. We are not happy about that. We think that we have the opportunity to do something better of what we have presented. But I don't want to miss the opportunity to ask you to be ready for our Investor Day, that we led by the presentation of the second half -- of the first half, sorry. And also to try to buy further time. And I'm sure that we'll show you a condition and a situation that it's much better than the one that we have today. Thank you.

Thank you very much. From my side as well. And from the whole team. We're available as usual for your questions in the afternoon and in the following day. Thank you. Bye.

Ladies and gentlemen. The conference is over. Thank you for calling.