Ladies and gentlemen, good afternoon and welcome to Telecom Italia Q2 2021 Results Conference Call. Mrs. Carola Bardelli, Head of Investor Relations will introduce the event.

Ladies and gentlemen, good afternoon and a very warm welcome to our Q2 2021 Results. I'm here with our CEO, Luigi Gubitosi; and our CFO, Giovanni Ronca. Luigi will provide an overview of last quarter's main achievements and Giovanni will illustrate our financial results. Pietro Labriola, connected from Brazil, will participate to the Q&A session. Pointing out to you our Safe Harbor disclaimer on Page 1. Let me hand it over to Luigi. Luigi, the floor is yours.

Thank you, Carola. Good afternoon, everyone, and good morning for those of you connected from the U.S. Let's start from the presentation title. We're building our future. We're building roads. Yes, we have had quite a few investments and extra costs in Q2, but we did it because they will accelerate our path to growth. Delivery remains our priority, but at the same time we want to grow. And in fact, our revenues are back to growth for the first time since Q3 2018. As you see in the bottom of Page 4, where we summarize what we need [ph] to do. Domestic fixed lines remain stable year-over-year and that's the third quarter in a row. And we had [indiscernible] in the first semester, quite evenly split between Q1 and Q2. And this is before the boost we expect from distribution of the complete football Serie A TIM and Champions League. In mobile, we were recognized by Ookla, as the operator with the fastest 5G network and the widest overall coverage. As you know, 5G will become a differentiation factor between operators at the high end of the market. In the market that remains competitive in the low end, CSI improve further as well as churn. Churn in fact, reached again the lowest level in the last 14 years. ICT revenues keep growing and they're close to 30% growth year-over-year and we obviously continued our cost cutting exercise. We had about 1,000 people leaving the company in H1 and we expect to add more in H2. We upgraded our ESG guidance and increased the renewable energy target to 100% of total energy by 2025. Last but not least, we accelerated revenues and EBITDA growth rates in Brazil, thanks to our value strategy there. Net debt is on track to reach a 2023 leverage target of 2.6x EBITDA. On the next slide, you will notice as in last quarter, we focused on four key growth drivers. Today, we have evidence all four are materializing. Let's see them one-by-one starting from football in the next slide. Indeed, on July 1, we launched a new TIMVISION offering including the super valuable and beloved [ph] football content. This has transformed TIMVISION in the home of football and passions, the richest TV platform in Italy. Serie A TIM, Europa League, Champions League are included in the same package, thanks to the agreement signed with DAZN [ph] and Mediaset Infinity. And on top of that, we have packages that bundle Netflix, Disney Plus and other premium content providers. The slide speaks for itself, describe the breadth of content and the attractive pricing and all of this is available for everybody -- both for TIM clients and for our competitors' clients. And indeed, I'm happy to report that the anti-trust authority today has given the greenlight, the case is closed. To remind you of the size of the opportunity, in Italy, football viewers are almost five million. With over three million paid TV mainly on satellite and the rest, pirating [ph]. Also they doesn't have Ultra broadband yet. One-third in fact is already at sale and the rest are boys-only customers. So they will need to get a new BB line. So, the opportunity is not just for us, but for the entire country to boost digitalization and for the entire telco sector in team to support such process. It's time to modernize. Our revenues would benefit from football subscriptions and equipment sales and from a higher customer base, thanks to lower churn and new broadband customers. We expect EBITDA contribution to be positive and CapEx negligible from next year. Let's move to the next slide. And here we are on the second growth driver, mobile-only customer back to fixed. We're glad to see that Italy fixed market is finally back to growth. AGCOM two weeks ago published a market data on Q1 2021 and confirmed what we were anticipating, fixed line are growing year-over-year, plus 450,000 new fixed line as of March 2021 and grew by 700,000 lines year-over-year. Ultra broadband is accelerating with FTTH and FTTC, accounting for 90% of growth, and that's subjugated for the remaining 10%. AGCOM also reports that as of March 21, more than 54% of active lines in Italy have a speed higher than 100 megabits per second. And this is a great recognition of the excellent quality of our FTTC network that now reaches 93% of active fixed lines. Within this positive context, TIM is leading the fight against digital divide and recorded the highest growth rate in aesthetics, mostly thanks for the acceleration as FTTH where we gained four percentage point on market share in one year; that's very satisfactory to us. Slide 8, our traditional Fix the Fixed slide, indeed shows that we performed even better than our competitors in UBB, thanks to the mentioned increase in population coverage of 93% of fixed lines, content rate, convergent offering and direct promo payments, which made our customers figure, therefore reducing churn. Once again, both the fixed and mobile churn is at historical lows. We are therefore confirming our projection for H2 and full year, with fixed service revenue expected to start growing and mobile to continue its recovery path. The third growth driver, which is totally on-track, is our Beyond Connectivity business. As we said, our full year results, Noovle, Olivetti, Telsy, our cloud, our IoT and our cyber-security business, are expected to more than double their revenues by 2023. With Sparkle targeted to grow revenues by over 20% and football to be added on top represented the Beyond Connectivity like the consumer space. Growing this part of this business is important for two reasons. First of all, our clients want the services. We make them compare/configure by integrating our connectivity offering with these services. Secondly, expanding these businesses creates value as their respective sectors trade the market multiples ranging from 10x EBITDA, 20x EBITDA, and even above much higher than both TIM and Telco's in general. This means that there's good hidden value in some of the buyers and we intend to unlock and grow further, leveraging on the synergies that this business have among each other and with a more traditional connectivity business. It's a great opportunity which we'll not miss. And in fact if we move to Slide 10, you can see the Olivetti is a good example of what we're doing. It is targeting markets with an aggregate value of almost EUR10 billion with an ambition of reaching a market share of around 5%. Merchant services of the more traditional space where Olivetti has been operating historically, and in fact, has been gaining space for years. IoT and smart services are a great complement for Olivetti and projected to grow double digit. If you do your math, you can see we can extract lot of value from this factory as well as from Telsy, which is a market leader on security and encrypting government communication as more with my growing segment within the larger domain of cyber security where Telsy capabilities are pretty unique. We're leveraging on these capabilities to transform Telsy in the cyber-security competence center for the group, and in a key element to achieve a leadership profile in one of the most promising segment of the ICT space. Managers are good in these sectors and importantly, there is a lot of money allocated by the recovery fund to this business and we are candidates to benefit from that. As you can see on Slide 11, Noovle in Q2 grew revenues by 20% year-on-year, in-line with a plan and sign more than 1,000 contracts. It is in fact on his plan to deliver infrastructure for Google regions. And last week, we changed its bylaws to transform it in a benefit corporate, one that does not only profit as a goal, but also sustainability and a positive impact on society and on the environment. Sparkle drew 13% year-on-year in Q2 and it is targeting for 2023 double-digit growth for its EBITDA target, coming from our expansion in new geographies for the wholesale business and from a complete transformation to achieve value market share in the international enterprise market. The new operational model in fact is already helping us gaining new customers. On Slide 12, we have the fourth growth driver, i.e. public funding. As you know, the size of the recovery fund to be spent in Italy unprecedented. EUR235 billion and telecoms will get EUR 3.9 billion for fiber rollout in gray areas. EUR2 billion for 5G, EUR0.4 billion for school connectivity, EUR1.1 billion demand stimulus in the form of voucher with the second phase that unfortunately has been delayed a few months and now we expecting it to kick off after the summer. On top of that, TIM is very well positioned to benefit from additional funds devoted to the country digitization; easy to bring public administration and corporate on cloud. The size is huge and these factors would benefit. So, let me conclude this part of the presentation with the guidance that indeed reflects what I described to you. The number of our investment in 2021, OpEx or CapEx for football, start-up cost in our factories, tax realignment costs in order to benefit in the coming 18 years, prepayment of the spectrum to be used for 5G -- all of that to accelerate growth in 2022-2023 and even more in the following years. Importantly, we expect in Brazil EBITDA growth guidance to move to double-digit from middle single digit after the acquisition with given cloud [ph] of our mobile business. But this is not included yet in our guidance because we wait for card approval. And even the help we are likely to obtain from the EU recovery fund is not included yet. On the contrary, we've taken out of the guidance any material help from Phase II of the government voucher plan. We continue to target EUR4 billion accumulated equity free cash flow for the next few years. Now, let me hand it to Giovanni.

Thank you, Luigi. Good afternoon, everyone. As Luigi said, Group revenues are back to growth. Service revenues trend improved 0.8 percentage point quarter-on-quarter. EBITDA was affected by a few discontinuities related to labor cost and by the start-up costs for football and for the factories. Both of them will support revenues and EBITDA acceleration from 2022 onwards. On labor, the discontinuity, the explaining the 5 percentage point drag are related to the measures taken in 2020 to limit the pandemic impact. For example, we anticipated H2 solidarity to Q2 in 2020, with a total of 12 days versus only five in 2021 and all holidays in Q2. This 5 percentage point drag is not expected to repeat in H2. We quantified in a couple of percentage points at the start-up cost for football and factories. Let's move on cash generation and net debt in the next slide. Equity free cash flow was affected by our investment for future benefits as well. Indeed we paid in Q2 the EUR231 million substitute tax that will allow us not to pay taxes for 18 years through goodwill realignment. It was also affected by payment of almost EUR150 million fine accrued and provided for in previous years and therefore already embodied in our three-year equity free cash flow guidance. For a better year-on-year comparison, the slide also shows that this continuity related to fiscal payment shifted to H2, allowed it by COVID measures in 2020 and the benefits on working capital brought about by fintech [ph] last year. Lastly, and other COVID-related discontinuity is on CapEx with investment activity, much lower than average in Q2 2020, explaining our EUR220 million swing year-on-year. Net debt after lease improved the EUR3.7 billion year-on-year much more than in Q2 2020. Quarter-on-quarter performance instead was affected by the prepayment of the 2,100 megahertz spectrum usable for 5G, allowing to say the financial charges and dividends payment on top of the already mentioned tracks on the equity free cash flow. Let's now zoom on domestic fixed in the next slide. Fixed KPIs remain strong, which we already anticipated many of these KPIs retail lines stable quarter-on-quarter, Ultra broadband net at EUR231,000 in Q2 and EUR0.5 million in H1, churn down again quarter-on-quarter. All these, held by five factors: convergent offering, direct payment, fiber rollout are now reaching over 93% of fixed lines, happier customers, and hopefully more public [ph] vouchers. TIM got 80% of total resources so far, but as you know, these first EUR200 million tranche is limited to low-income families, while the EUR900 million delayed out for summer our for all families and corporates. Including a wholesale line, Ultra broadband and worth 366,000 lines in Q2 with 20% increase year-on-year and reaching a customer base of over 9.4 million lines. Next slide? Total fixed revenues were increasing year-on-year with equipment, which incidentally have positive margins, benefiting from ICT revenues, Ultra broadband to that and vouchers. Service revenues were down 2.3% year-on-year with the trend explained by international wholesale good performance, thanks to Sparkle repositioning. National sale impacted by tough comparison against Q2 2020, a quarter that benefited from very strong non-regulated revenues. Retail innovative trend was a touch better versus Q1. Customer base impact improved them 0.8 percentage points quarter-on-quarter and we see it progressively stabilizing. ICT grew at 29% year-on-year; consumer ARPU pressure affected by activations dynamic is offset on the business side by the push on digital services. Indeed, our retail ARPU including both broadband and ICT revenues grew 8.6% year-on-year. In consumer, it is expected to improve in H2, also held by football. Moving to the next slide; we see that mobile KPIs improved further versus previous quarter. The mobile number portability market volumes reduced again by an overall 2% year-on-year and TIM recorded the best results among infrastructure operators for the fourth consecutive quarter. Overall, as we improved one-third further versus Q1, thanks to the very good performance of our machine-to-machine and IoT business. Importantly, stabilization of calling human line is progressing and negative net assets were further reduced quarter-on-quarter, and churn set a new low record level of the last 14 years. Next slide? Total mobile revenues trend improved 5.3 percentage points quarter-on-quarter to minus 3.3% year-on-year. Mobile service revenues improve the 4.2 percentage point quarter-on-quarter to minus 7.1 year-over-year supported by customer base liberalization and progressive reduction of one of drags. Be more specific minus 3.3 percentage points drag it comes from roaming, CSP cleaning and COVID-related retail and wholesale as a bundle. All these one-offs are expected below one percentage points in H2. Minus 2.1 percentage points of the accounting impact affecting organic revenue is not reported related to COVID promotions, which were monetized in organic revenues last year. The second bucket will disappear from Q3. Minus 0.8 percentage points is the lapping of past price moves that should fall to less than half a point in H2. On top of these one offs, as I mentioned earlier, impact from the customer base was below one percentage point. Price dynamics contributed positively and mobile termination rates explained minus 0.9 percentage points drag. Net of all these discontinuities mobile service revenues underlying would be minus 1.8% year-over-year improving 3.2 percentage points versus previous quarter. Let's see next slide on OpEx. While variable costs were up for the increased volumes of traffic and equipment sales, further reduction was achieved on Q2 addressable cost base, down 3.1% year-over-year despite the discontinuities on labor costs that I described previously. Labor costs was up 2.1% year-over-year and that was impacted by the lower holidays and lower solidarity days in Q2 ‘21 versus 2020 excluding these effects, labor costs would come down more than 10% year-over-year. We had lower energy call for higher efficiency and lower purchasing prices and commercial costs were down for lower commissioning and bad debt. These increase in G&A is instead related to other direct labor costs. Let's move to CapEx. A couple of things to say. First Q2 2020 CapEx was affected by COVID and about 200 million lower than average. Second in 2021, we pushed on growth CapEx for application rollouts, the kickoff of the zone partnership and new world data centers. On the contrary, we say the maintenance CapEx to efficiencies. Networking capital year-over-year swing is mainly explained by litigations paid in Q2 2021 for domestic and by the delayed payments of the sale in Brazil. In Brazil, growth rates accelerated across the board, service revenues were up 8.7% year-over-year and EBIDTA up 6.4%. These results show that the strategy to focus on customers value continues to pay off and is supporting up ARPU increase both in mobile, prepaid and postpaid and indexed. Team Brazil keeps expanding its infrastructure and creating new sources of revenues through valuable partnerships. Let's move to SG. Sustainability remains the heart of things long term strategy; we are putting a lot of effort to continuously improve our impact and that of our suppliers and clients. That's why following the power purchase agreement signed with ERG and announced in previous quarter, we increase our targets for the weight of renewable energy on total energy 200% by 2025, doubling the previous target. Consequently, we increased our indirect emission target to nil by 2025. With that, I leave you to Luigi for an update of strategic initiatives and his final remarks.

Thank you, Giovanni. Let me provide you with some updates on our strategic initiatives. I like the representation of the group, you can find on Slide 26. Because this shows our breadth of value, the sum of the paths exceeds significantly team's packet value. It is mandatory to unlock it, and management would make sure this happens. We're building growth synergies between our business units and factories. Sparkle is factories benefiting from Olivetti, Noovle and Delsi [ph], much more than the past, and it's being evolved to other parts of our group, more than ever before. The same is true for our pieces of our puzzle, and this combined to further efficiencies allow us to stabilize and then grow revenues and EBIDTA. Secondly, we're working on portfolio optimization. We start in 2020, enhancing our towers value to the merger with Vodafone, and then monetizing them, as well over 20 times EBIDTA while maintaining joint control. Similarly, we expect integration with our mobile assets to enhance EBIDTA and market multiples within Brazil. We then unlock the value our secondary part of our access network to fiber KKR entering at over eight times EBIDTA. It is important to further enhance the value of our network. With the announcement for all our factories starting from the cloud whereas you know, market multiples range from 16 times to 20 times EBIDTA or plus in certain cases, and Noovle EBIDTA is projected to reach $400 million by 2024. In fact, it's potential value is expect to be further enhanced by the recovery fund and dislike the positive impact on the company value. So, we'll take action as soon as we have clarity on the magnitude of the recovery fund potential boost. As you see, we have a vast portfolio whose value we intend to unlock even to partnerships. And speaking of partnership, over the next few months, we will work with Cidipi [ph] on a number of initiatives to enhance the country's digitalization, including the network. Our objective is to make the best out of our assets and the recovery fund. I'm sure we will both work with pragmatism and open mind. So, if you find our remarks, group revenues are growing for the first time in almost three years. Domestic declines were stable for the last three quarters with ultra broadband growing fast. Convergence brought churn at the lowest level in 14 years. We're investing in the business beyond connectivity, be it football or ICT services to achieve growth and create optionalities. Team value is some of the parts of all these initiatives. Public funding and macro forecast further improved since last quarter. We're not yet incorporating our guidance nor, we are incorporating the immobile assets acquisition. With that, let me [Technical Difficulty].

We are ready for the Q&A session. First question please?

[Operator Instructions] First question comes from Mr. Pavan from Mediobanca. Mr. Pavan, please.

Good morning. And thank you for taking my question. The first one is on the football. You were pointing out the new offer for Team vision was launched at the beginning of June of July. So after this few weeks, I was wondering if there is there any feedback you can share with us in order to understand how the market is reacting to these breaking news? And the second question is on the cloud migration. You were mentioning, above 1000 contracts were signed in the first six months of the year by Noovle. Can you elaborate a little bit more on these on the type of this contract, the duration of this contract? Thank you very much.

Okay, first of all football. Well, I will give you a qualitative comment which is, we are quite happy with the way it's developing both technically because everything has been working out as expected, there is mostly and in fact we have that multicast 4K for the Olympics and this working out well with extremely good quality of the image. So we're happy on this side. On the commercial side, we are quite happy with what we're seeing there is a strong interest and we are bookings a significant number of contracts. We're not going to disclose the number here and obviously we expect to accelerate, but let's put this way, the second half of August and September are the very important months, we are ahead to what we expected originally to do in July. So far so good and as I said, we will start with a very catchy at least that's what I think advertising campaign, it will be surprise, which will start in a couple of 3 days or so. So, we expect that to continue well, it has started well and as I was saying before I'm quite happy that we got today the response of antitrust with eliminated also some potential disturbances because some people were saying you know there is still uncertainty about who has this rights and so on so forth and that was never in doubt as a matter of fact. And so, as I said, touching good and whatever else you want so far so good and we will continue steady as it goes. Your second question was on cloud and indeed as I was saying cloud is continue to grow nicely; actually I would say that this is a worldwide trend, so we were not a phenomenon, but we've always said that we wanted to double our revenues to reach 1 billion by 2024 that would imply that the time 16% growth. Since then, we've been growing at double digit with the 2 as a first number and that was true also in the second quarter. Obviously, the 1,000 count that we were mentioning about encompass a very bright type of contract, which ranges from Banca Intesa, which -- obviously, it's a very large client, well we do not have and thousand bank and this in the counters how they're as a smaller. We actually starting offering also to small and medium enterprises and as a matter of fact they expect this has being part of the recovery fund that will should enhance and transformation 4.0, which is another important program of the recovery fund should enhance moving to the cloud or with new enterprises. As you know, we are very bullish of cloud and so far this seems to be a bet that is paying off.

Thank you very much.

Thank you, Fabio. Next question please. Next question comes from Mr. Andrew Lee from Goldman Sachs. Mr. Lee, please.

Yes, good afternoon, everyone. I had a couple of questions, firstly on the EU recovery fund, there has been some hope the EU recovery funds may start to help and come through before the end of this year; so I should say the SME digitalization parts. Vodafone, for example, in last week was mentioning that could come through in Spain before the end of the year. So just wondered on your view on when and by how much that can help you and why you've taken EU recovery out of your guidance. And then second question just on competition the Vodafone was starting how aggressive competition was in the market at the moment particularly in fixed as competition is kind of melded from a mobile into fixed line any expect fixed line competition to remain tough ahead of Iliad entry, how are you expecting competitive intensity to trend through the rest of this year, have you seen any change in intensity as a run rate today versus what you saw on average through Q2. Thank you.

Okay. So your first question was in the recovery fund and could this help us, indeed it could help us a lot. However, we have decided not to incorporate because we already incorporated the beginning of the voucher. And in fact, not only as even we understand other operators, we were expecting voucher as originally stated would have started by at the beginning of June. I think what happened was that this was an Italian program, by the way it was not European funded program, but I think what happened is that they are coordinating the entire effort, so everything Italian, which is much smaller component and they will be in one together, so yes we do understand that something might start before year-end, but we not sure, we don't want to come back and tell you again that we thought you would have started in September or October and then it did not start. I believe that the voucher should start before year end, at least that's what they're aiming, the last time we checked, which was recently they were finalizing those papers, but obviously nothing will start in August. So, we'll see immediately after the summer, so if you ask me my personal opinion, I think we will see some components and we'll see actually all of the plan should be out before January 1 because then it's -- when actually the managed will start being spend in the next five years. So my understanding that there is an acceleration and they are working very hard in the offices that are preparing all these projects. But I cannot tell you with certainty when it starts. I think when it start is going to be beneficial, but at the moment, we decided that we don't want to bet on which exact date they will start. Bottom line is that we are sure that when it starts is going to be very positive. Then you have the second question, which was on competition on mobile, sorry on fixed. The market since Vodafone spoke, I think there was one change, which will be major which was its Fastweb there was a company that really started that as a removed is 1999 and I think that happen in the last couple of days or so. The market is now somewhere in between €25 and €28 price point. As I said, Vodafone as ignited the promotional, so it's back at around €28 about the minus €26 and €25. So the market is slightly lower than the beginning of the year where everybody was around €30, but this I think was due to the fact that the market after Easter was a bit cool in terms of new activation, and so people did some volume targets started to be more active in discounting. Q1 was actually much better and we saw the price. So why rupture was important because obviously there was somebody else providing a discount that would have created demand and typically where demand is relatively strong the price discounting is much lower. So logically speaking, I would expect that in the back-to-school season, we will see a better environment, but in the meantime, let me tell you that our KPIs remained strong in Q2 despite all these and we see a market as I said we're accelerating with contents kicking in and voucher on the horizon. I think there could be room for a more positive environment for us and obviously from Q3 for us the football kicks in and that's definitely going to be a positive.

Thank you.

Most welcome. Next question, please.

Next question comes from Mr. James Ratzer from New Street Research. Mr. Ratzer, please.

Yes, thank you very much, indeed. Good afternoon. Luigi I had two questions please. The first one was just regarding the new; I think it's a new target you have given out on Sparkle where you're assuming double digit EBITDA CAGR out to 2023 in that business on the back of the kind of strong results you've seen in the second quarter, could you let us know what your current starting point is for EBITDA in that business and what gives you the kind of confidence around the double digit target there. And then the second question I had, please, we just coming back to the news today around the settlement with the competition watchdog over the DASAN deal. Maybe you could just talk us through a few more of the specifics of that, for example, are you able to or are you forced to resell it to SKY and could they then bundle that in somehow with their satellite packages? Who books the revenue for this, do you own the rights from DASAN and then you would sell it on to the other telecoms operators or the other telecoms operators deal now directly with DASAN and finally does this in any way affect your revenue and EBITDA guidance to mid-single digits over the next 2 years. Thank you.

First, let me say no way and now I answer in a more orderly fashion at no way was could do we have resell it to Sky. And now, let me answer in the more orderly fashion your question. First of all on Sparkle, where we haven't spoken much about Sparkle over this last couple of years, but the company has been turnaround is started actually developing some very interesting infrastructure projects including the Blue-Raman which is a cable that connects Europe with India and basically and others. And basically, the company has been changing scheme. And to give you that you were asking for figures, the EBITDA in 2020 was 130 and we have a 2023 target of 240, you know those are infrastructural companies, the one like Sparkle and so on. They tend to have long contracts typically 5 years or so, and they are somewhat more predictable than as a company and we see the work that has been done that's why we say that we continue to expect double-digit EBITDA growth. Actually I'm quite happy with the work that has been done, we are very satisfied with the results and it's more within the team, vast empire of companies and so on so forth, but you know still a company that saved at London and 30 million last year, which, which are going to become 240 and already in 2021 they're growing significantly and that's by the way another announcement of value when I was saying that we have a vast portfolio which should be fully valued somehow by the market you know if we can see there 240 or even if we start from 130 of last year, if you take an infrastructure multiple that's very different multiple, the one typically at telecoms traditional, telecoms operators pay now. If I've answered your question of Sparkle, I would move to the football. But I think there is the press release that was issued by the Antitrust this morning was pretty much self-evident and maybe if you don't have it to, we will happy to provide you with a copy, but basically we don't op entering any relationship with Sky whatsoever. I mean this has been a misunderstanding from the very beginning somehow somebody fueled there has been as usual every three years this happens, there has been a tender SKY does on the standard, the higher number wins, it's as simple as that. And you know it's like in elections, you get the higher number of votes and in this case you vote with millions and the number of millions and that's only where higher than the number of millions SKY full stop, it should have been stop it there and I think it's very un-sporty to start you know lawsuits and other things and basically DASAN has no obligation to provide anything to SKY in over a week. I think basically there is a number of engagements that we have undertook, for example, we have to provide the zone with 50,000 of set box and DASAN has an OTT does not use it typically, goal there is, but in white areas. How they do there sell that is interesting peculiarity; a specific peculiarity, which is -- it does incorporated sort of an emergency element, meaning if -- first, whatever reason, there is not enough bandwidth, you can still watch the match on digital terrestrial. So, I think they just wanted to make sure that doesn't add that in the white areas. Then, I think there is another provision we say that if one of our customers want to leave that one who maintain the service of division, we have to keep it, so for example it could become a wind customers, but still retaining it envision they go there and subscription, this is the type of things but as I said, we'll be pleased to provide it and in-depth and I think it's very well written and self-explanatory. So our satisfaction is that I think it's for us it's always been clear, but now it's clear and hopefully to everybody that basically it does own the rights and as an obligation and we basically a reseller of these rights. And as I say that we think that the matter for as long as we are concerned is settled and we continue to focus now on the numbers and in fact out, I think the future discussion will be on commenting the number of subscribers and so on so forth. I hope I've answered your two questions. If there is any more color you want me to add, please feel free to ask.

No Luigi, that's great. Thank you so much, indeed.

Thank you. Next, please.

Next question comes from Mr. Domenico Ghilotti from Equita. Mr. Ghilotti, please.

Good afternoon. A few questions, the first, just a follow up on the football content and particularly on the remedies because we saw that there is, do you have to give the opportunity for a full unbundled offer, so I wonder if the profitability of these pure football clients is still positive and so we do expect to see EBITDA accretion also from this kind of clients. The second is on the ICT trend. So given the stronger growth that we have seen in the past few quarters, I'm try to understand better understand what is really driving. So you are mentioning cloud, if you can provide some more granularity and also, we saw the jump in the attached cost particularly in cost of goods sold interconnection sometimes understand in the profitability of these new businesses is, so what do is the profitability of these new businesses. And then maybe just a third question on your discussion with CDP if you can share with it without the area of what you're seeing opportunities.

Okay. First of all on the football, I wasn't exactly clear to me, what we're aiming at I mean would you mind repeating the last bit, the question on football, because it seems to be similar to the previous one.

Because you are now force or in some way, there is this potential unbundled clients, so you were mentioning when clients taking TimVision.

In fact, I realized that they did not answer fully my previous questions, so let me comment on that, which is also commented as you know you asking, is the better, worse, if we keep say win client along the TimVision clients. You can see it either way, in a sense that clearly the TimVision people inside are quite happy about it because they see a much wider potential markets because we could end up having a bunch of Vodafone or Wind or Fastweb could become customer of divisions. So they are happy, so obviously we wouldn't get the broadband mapped on this. So the question is are we're going to get more customers or then where we will get otherwise and we will never know, but we think that TimVision is now and I think that's not debatable, it's a fact that the platform that the most content in Italy and actually we are quite least without the last addition Infinity not only because of the football and Champions League obviously it's a big catch. But for example, people can now watch the Game of Thrones in 4K on our platform you know those it like its peak and the quality of the picture in for case absolutely amazing. So as I said, now it's time of making the TimVision also the widest, the most widely spread platform and indeed it is obviously a big task because for the last 20 years so there was only SKY and this is new for us. So we're quite excited by this opportunity and we like to see the glass sell full and so we will try to interpret this so called remedies of the Antitrust as a positive because we will be able to enhance number of participants to our network and in football, as I said it’s going to be positive in terms of equity free cash flow and so the more people we add that the more it becomes positive, so for the next 3 year, yes, it will be positive. And let me move to your second question that was about ICT, well ICT that quite positive margin. Let me also remind you of one other of our, could I say mantras, we don't do loss leaders show, all businesses, all activities have to do profitability on their own. Now in ICT you can have the cloud, which obviously is very profitable you know it can reach 40% or so and you have activity that are less, but they are all profitable. Clearly, the marginality is less than EBITDA. But let me remind you of another aspect ICT requires much less CapEx, so if you judge the business, EBITDA minus CapEx, in the comparison it's more flattering. Having said that, as we are becoming a more sophisticated supplier of services and as I say when you move to cyber security IoT, those activities basically the marginality improves, at the same times, we were working on cost and by the way let me make a point on cost, sorry just to complete your question one other thought I wanted to make sure and transmit said obviously when you get new clients, you have more expense at the beginning, you provide them with devices so you see cost as this client stay, you don't have these expenses and costs that you get at the beginning over time and so even your profitability over longer term improves. The second aspect that I wanted to mention is that, as I said, these are less CapEx intensive and they tend to become also they're going to become a very useful tool now that the recovery fund goals for digitalization of our companies and our economy. So being in the field of the services in our connectivity as a good chunk of allocation from the recovery refund, but if you take the digital as a whole is a much larger pool and we basically going to be able to also in those other pools and I think you had a third question as well.

It was related to talks with CDP.

Yes, whether we're talking with CDP. Well, we will be you know CDP at least the CDP likes to be discrete and if you could see by the way, grew at least 6 in general of this government, not to be a lot, not to talk a lot and so on so forth they will try to respect this. After that I'll tell you something that is public, I mean there'll be a number of articles that we working with them on this [indiscernible] for cloud. I cannot give you any detail nor I could represent you what will be the final outcome, but it is very interest in discussion and we're quite happy to participate in this discussion and hope that they will deliver the fruits that you know CDP and the government expects, at the same time well, of course, we'll be discussing the network. I will not, again I will want to be my sales also very much bound to confidentiality, but as I said in my speech, we start in this discussion with them with an open mind in a very pragmatic approach. Clearly, there are benefits incorporating and we hope that this will be the same opinion of CDP at the end of our conversations and at the same time we could I say eagerly wait for the conclusion of the annual Macquarie saga, which is now almost 1-year-old, it's going to become 1-year-old on September 4th so that at least we have a single interface and we can hopefully find solution, which are beneficial for us and for the country. And thank you for your question. And I ask for the next one, please.

Next question comes from Mr. Mandeep Singh from Redburn. Mr. Singh, please.

Thank you. I have 2 questions or 3 hopefully one of them is very quick. So first of all, you talk about how the Italian fixed line market is growing. The broadband market is growing. So I think 450 thousand lines growth year-over-year, but if I look in your sort of KPIs spreadsheet you're losing around 80,000 wholesale lines per quarter. So, can you go and marry the two; if the market is growing but you're losing wholesale lines, obviously we can't explain the delta with the retail line. So, what's kind of going on? Is it like substitution to fixed wireless access is that the main delta or is Open Fiber taking a few hundred lines a year, maybe just give us a little bit of color on bringing those numbers together. Second question I have, please, is on Noovle. Can you talk about the monetization of that? You know, lots of your peers in the market, whether it be Telia selling their carrier business, obviously you've got Sparkle, you have Telefonica monetizing assets, left, right and center reducing debt. How far we away from monetizing or crystallizing real value from assets like Noovle or any other of your infrastructure assets that you think the market is missing in your sum of the parts? And then, the third question is coming back to the single network. I mean most of your previous presentation slides have included some reference to the single network. If you look at your Q1 slides, you talked about how the single shareholder makes things easier, there is no reference to the single network anywhere in your presentation slide, is it fair to conclude that the momentum behind the single network is significantly less now than it was maybe a few quarters ago. Thank you.

Okay. Let me start from the last one and then so is no, it's just we would like to. Hello, can you hear me?

Yes, I can hear you.

Okay, sorry. It looked like we had a technical problem, but it was not so as I was saying no, I mean our intention remains unchanged and as I said that there were some activity at Open Fiber that somehow made it more complicated, as you know Enel has been a major bottleneck in these discussions and so the news that Enel is on its way out obviously make us more convinced that this is achievable. We didn't want to go to reference in the sense that I think you will see much less news flow on newspapers and you'll hear more from us when will be ready to tell you something. But in this respect as I say eagerness, willingness and approach it has not changed and as I was saying before we think we like also the pragmatic approach by CDP. So we'll be talking with them and we'll report to what the result is. But if we give you the perception that anything has changed in our result to value our assets including and the network and then I didn't express well what I meant. We do intend to value our assets including the network. Now, this allows me to transfer to your other question about and Noovle and you may recall that we said in the recent past that you know in the first semester of this year also we could monetized but of Noovle in having an investor entering Noovle on a capital increase to fuel further growth. Now it is very clear the cloud, it's one of the milestone of our recovery fund both because of the fact that the public administration needs at least this intention of the government to modernize very quickly, public administration and that will also happen by utilizing ICT in particular the cloud, and so there is a reference to various project, I mentioned one of them before which could be potentially a significant further boost regardless of the public administration that is going to be sizable incentives for private companies in the program, which is called transformation of Dolcera, which I think is allocation of EUR18 billion, which is quite relevant. So, the fact is that Noovle is going to be one of the way or one of the conduits through which TIM is going to benefit of the recovery fund in turn is going to benefit the country and so we will want to go ahead with monetization. But as I said in my comments earlier on, we would want to have some sort of quantification and timing of the impact that the Recovery Fund will have on Noovle in order to avoid that you know either we have too shy and therefore we don't capture it, all that we can be perceived by potential investor as too aggressive in our calculation and they give us a discount. We do have a strong belief that the number, it's going to be important and it is going to reflect in further acceleration of Noovle growth. So after that will happen, as well as we have enough information and I guess by year-end we should able this information and then we shall be eagerly looking for way to monetize as I say to have new investor entering to company as an investor our investors. The second, you were mentioning in the same thing about Sparkle, now we did mention Sparkle in the past because the basic idea was that the company to be put on the path of growth and completed sort of let me use the word turnaround, which probably too match here, but anyway another operations and now this, I feel that this is getting to be completed, so we close a good 2021 Sparkle and because of its nature of interest act for long-term trends, it's going to be in a good path. So, I would think that we will examine the opportunities for both Noovle and Sparkle of the potential alliances opportunities of having investor entering, at the end of 2021, I think both company would be in a position to assess what's the next step for growth. One of the things I said in my initial speech is that there is now a significant disconnect between multiple that we are actually valued at and the some of the paths. We need to bring this more in line and I would expect that that might imply some asset monetization. I think you had a third question as well and Giovanni I think will answer you now. Am I satisfied you with the first two answers?

Yes, thank you. Just the final question was on your line losses versus actual line growth in the market. Thank you.

Yes. Our CFO will answer that momentarily.

Yes, absolutely. So the answer in two pieces, the first one is that in the spreadsheet you have all straight lines in our partially created is mainly explained by Fastweb wholesale lines switching from FTTC to FTTH. And hence accounted on our side on FiberCop flash fiber and not included in the spreadsheet. On the other side, based on AGCOM data, the 2.5 million lines growth on UBB can be split this way, more than 30% is retail, another 30 in wholesale and WA is a slightly less than 10% and only the right so 20% is other FTTH. So, the performance is pretty insignificant.

Thank you, Mandeep. Next question, please.

Next question comes from Mr. Jerry Dellis from Jeffries. Mr. Dellis, please.

Good afternoon and thank you for taking my question. I have two questions please. The first question is to do with retail ARPUs in your fixed line business. You spoke of the first quarter results. And that's how you anticipated broadband ARPU recovery in the second half before taking into account football in light of the broadband pressure that we saw in the second quarter, do you still expect to drive an improvement in retail broadband ARPU trends in the second half excluding football and how would you anticipate that being achieved. Then, my second question comes back to football again briefly, please. As I understand it you are required to make The Zone football service available to customers who don't take a Telcomitalia broadband subscription, so in light of that, how are you going to commercialize the offer in a way such as football is incremental to your retail broadband effort. Thank you.

Okay. So let me start from the consumer ARPU in Q2 that were decreasing; the one you have highlighted in the slide is the ARPU retail, including the ICT1 that is increasing by 8%. The first consideration is that it is important to consider that kind of view because it's fully consistent with the bundle strategy with services, the strategy of reducing churn and so you should see the consumer and business together and have a look to that -- so the important thing is how the ARPU performance. If you look into the pure ARPU consumer that was decreasing in high-single digit in the quarter was mainly impacted by activation dynamics that is the counterbalance of the better churn and low churn rate, but it will turn to positive year-on-year in Q4, thanks mainly to football. Business service revenues are growing and our part of our strategy of up-selling in particular on the business side would proved us with a low investment in CapEx. So, the combination of broadening the revenue base also through ICT is a support in the stickiness of the client and is contributing to the reduction of the churn rate. On the consumer side, let me end up adding that obviously the postponement of vouchers introduction will come from June, July to say after summer will only move forward the effect of support on consumer ARPU that voucher are expected to have as they already did in end of 2020 and as Luigi already anticipated before.

Was there another question Jerry or is that all?

Yes. Maybe if I could just come back, first of all just to clarify that the first quarter it was stated that retail broadband ARPU would improve in the second half irrespective of football. So now football is part of the ARPU improvement in the second half. My second question had to do with football again you're selling football packages to customers who don't have a TIM broadband line and that will be the situation going forward. So, I've been of the interested to understand commercially what's going to be the incentive to take a TIM broadband line, if you're subscribing to football. Thank you.

Well, first of all it is going to be an easier I mean let me step back and explain that amount 40% to 45% of the people that are watching now on the satellite do not have an ultra-broadband, so they will need a new one. The easiest for them is going to be to come to us. We are the only one that can advertise, you can you talk about football, our competitors have not such rights, basically we see that an opportunity as I was saying to widen the market and to basically utilize people that would stay with other operator otherwise, then we'll see as we move on how market is reacting. But as I said, we see that as an opportunity to enlarge the public that could potentially watch our product and by the way we are more prepared than others, I think we are the only one that have moved I guess available, basically our technology has been prepared very much for that. We should see with other operators, but I think you know in terms of even on scale we have organized dedicated call centers at the servicing. I mean you can, of course, there are multiple operators, but I guess people tends to associate now football with us we have been the sponsor of Serie A, which is Serie A team now the vision for the last 25 years, we have the sponsor of the European championship winner national team, which by the way, I think is a positive. This and even Italian always love football, now in this summer there even more happy of talking about summer, we are on the air pushing for that so you will see that we will get good results as compared to other alternatives and basically the first month of July and to confirm that, I'll be happy to continue a dialog on this and give you a periodic update and see what you think, then if there are no additional call you would like, I would ask for another question. Could be more precise in on your first question, so let me say that three factors, two of them, are incorporating the projection that we originally gave you one of it is related to the growth in the business side, it continues on in terms of revenues and broadening through the sale of ICT and that supporting the growth of ARPU, the second one that it's very supporting the overall causes. The second factor is like, they are on the consumer side; when an important factor was related to vouchers and vouchers will come later on in the year so the growth in ARPU facilitated by voucher, so will either happen in June or July, will happen going forward. On top of these, you have football that is playing on the consumer side obviously that was not part of the growth part of ARPU projection originally, but now is by definition will be part of the revenue we will get that, the business accretion is greater than consumer retail, so we do expect that factor to be very positive.

Thank you very much.

Thank you, Jerry. I think we have time for another couple of questions.

Next question comes from Mr. Sam McHugh from Exane. Mr. McHugh, please.

Yes, hi, I just wanted to ask one question on the medium-term guidance. I know we recently saw EBITDA expectations were wiped down, CapEx slightly higher over this 3-year period. And if I run the math, it's about EUR300 million or EUR400 million headwind free cash flow. But then the cumulative free cash flow guidance hasn't changed. So I was just wondering if you give us a bit of detail on what's improved within the mix and then a very short question, I think you finalized the acquisition of BT Italia assets in June, which were about EUR100 million of actual revenue on your guidance, is that on a kind of the M&A adjusted basis or is that kind of included in the organic growth for this year and next year. Thanks very much.

Okay, yes. So on the equity free cash flow, I mean we confirm that the 4 billion equity free cash flow generation in the plan horizon. Obviously, we will have a shift of a portion of that the front 21 to the best of the plan, that is related to what we announced at the beginning of the last week, but we do confirm our ability to reach the target. On BT, I'm not sure I got your question. It is the guidance easing in organic terms. So I think that it was the answer, you were looking for, if we look for that acquisition in terms of EBITDA minus CapEx, it is negligible in the total amount of number.

Let me explain you about these various morbidity acquisition. In fact that's very much a declining business. The reason why we bought this business for us because for the reasons that we fail to understand the Telecom Italia lost or did not renew its tender for ConZip. ConZip is purchasing agent for the Italian government, so somehow we were notwithstanding the fact that we have the largest company in the field, we were not able to bid for a number of ConZip contract and now BT was one of those of this contract. So for us the strategic interest of any BT was not to have a small amount of SMEs, which is what we got and you know people was actually to get this contract. So the impact that you will see hopefully going forward is not so much from those. This is that we acquire, which is going to be a rounding error. It's going to be more hopefully from successful tenders they will now be able to participate in, as we have now this, let me call the license. Hopefully, that was helpful. And with that, I think we are moving to the next. The last question, please.

The last question comes from Mr. Luigi Minerva from HSBC. Mr. Minerva, please.

Yes, good afternoon and thanks for taking my two questions, the first one, if I may is just going back to the antitrust document published this morning; I'm just trying to read the bottom of the advantage, the competitive advantage of the team has versus the other players. So now, if I understand well the document from the antitrust what they are saying is that that one will now has to allow the alternative operators direct interconnection to it's servers. And then for those operators that have the CDN, obviously done, so they can directly interconnect to DASAN. And then DASAN has to provide a cached copy of the content. And also with regards to multi-casting, my understanding is that the antitrust is asking for the same multi-casting capabilities to be available for TI retail business and for the alternative operators. So, eventually the advantage for TIM if I understand well, is that in the case of TIM, DASAN is embedded in the set-top box while for the alternative for the operators, we can only offer it over the top, would that be a fair summary of what is your competitive advantage after that the antitrust decision and then secondly, a question on the recovery fund and just looking at the medium term, I just wanted to get your views whether eventually the recovery fund can translate in structurally lower CapEx for TI after 2023. Thank you.

Let me start from your second one, I don't know why you say it from 2023 and up from 2022, is there a specific reason why 2023.

Well, because you have guidance until 2023 and I was wondering beyond the carbon.

Yes. Okay, I see your point. Actually as I said the recovery fund, we will get benefit let's say 3 ways. One is through subsidies for CapEx that we do let say for example for the gray areas, if you were to receive a subsidy that would lower our CapEx, so I would imagine that would lower our CapEx from 2022 if that happens, going forward. Then we could get it through revenues, meaning direct incentives for exchange for services or it could benefit through our customer getting either voucher or tax deduction for buying services saved at cloud and so on so forth. So there is a number of ways, but the going to CapEx and logically speaking there would be a reduction actually there's going to be anyway after 2025 reduction in CapEx, CapEx will tend to actually declined because we will have vastly completed our program of coverage, but yes of course anything coming from the recovery fund will actually accelerate this trend. Then your other question was what is our position versus other operators? What we clearly commenting an antitrust decision so my comment cannot be abutted, obviously antitrust has achieved I think a fair and level playing field, I didn't say that yes the other operators I don't think can offer the service, the customer of other operator can by the service, so our division can be linked with the let's say about the phone connection, Vodafone cannot sell TimVision, I don't know if I explained myself. So we're selling the service, we have the contract with the client; but clearly, other operators will be able to connect. And with that Luigi is fine with the answer?

Yes, thank you very much. Thank you.

You're most welcome. And I would like to thank everybody for their attention today and we'll see you in exactly 3 months on October 28 for the third quarter results. Thank you very much and for those who are going to take them, we wish you a very nice holidays. Bye-bye.

Ladies and gentlemen, the conference is over. Thank you for calling.