Ladies and gentlemen, good afternoon, and welcome to Telecom Italia Q1 2021 Results Conference Call.

Ladies and gentlemen, good afternoon, this is Carola Bardelli, Head of Investor Relations. A very warm welcome to our Q1 2021 results call. 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 in our 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 very much. Good afternoon, everyone. Good morning for those of you connecting from the U.S. This is the first call of my new mandate, so let me say that I'm very excited to work with the new very qualified Board of Directors that, I'm sure, will help creating value for team. I'm also glad to report that revenues were finally flat year-over-year in Q1. Importantly, they're now becoming much more sustainable than they were in the past, and we continue to do what is needed to make them sustainable and cash-generating. On top of that, progress was made on our strategic initiative of Italy and Brazil, and we also delivered some game-changing surprises, such as becoming the sole distributor for Serie A, football and swimming. Page 4 summarizes what happened in the quarter, starting, as usual, from culture, clients and employees, with another significant improvement of our clients' perception of team quality. Last year, we reached a top position among the players in CSI Mobile. This year, the biggest improvement was in fixed, with mobile improving further. The relationship with employees and trade unions remain trustful after the big improvement last year. And we signed a new expansion contract that will produce annualized savings in the region of €100 million starting from May, while allowing us to recruit European talents. We issued our first sustainability bond with the lowest coupon ever, further reducing our cost of debt. Importantly, domestic fixed line and service revenues remained stable year-on-year. Ultrabroadband adapts the fixed seasonality, doubling year-on-year. And we expect growth to accelerate further in H2 when we start to distribute DAZN Serie A matches. In mobile, in a market that remains competitive in the low end, we had the lowest churn in the last 14 years, and our growth engines, our factories are well on track to deliver on the target to more than double sales by 2023. In Brazil, the value strategy is paying off, with revenues and EBITDA accelerating growth rates. Equity free cash flow increases almost 60% year-over-year. So that fell a lot, even before considering proceeds from KKR for the acquisition of 37.5% of FiberCop. Debt is down €2 billion in the quarter and €5.1 billion year-on-year, which implies leverage is now 2.7x EBITDA. Slide 5 shows that we continue to be happy our Fix the fixed strategy. Coverage grew with fiber reaching 92% of the families with an active fixed line. This effort contributed to a significant increase of our ultrabroadband penetration. In 2020, we had the highest market share in ultrabroadband and FTTH. We actually start to regain -- I mean, net adds. And we actually started to regain share in the ultrabroadband market. And in 2021, we more than doubled ultrabroadband net adds. This is the result of a combination of finance quality perception with CSI improving 1.7% in fixed and rich convergence offering and push on direct payments, i.e., on current accounts or credit cards, which make customers more loyal. All of those led to a big reduction into churn on fixed and mobile. Our convergent offer to Monica had one of its best quarters, growing almost 50% Q-on-Q. The ICT business grew 30% year-over-year, in line with the previous quarter. As a result of these actions and achievements, we confirm our view that both fixed and mobile service revenues will stabilize in the coming quarters, and the domestic service revenues will turn in positive territory in 2021. We enriched television content by integrating Discovery+ in its state interface. We also decided to increase the price -- to increase this price by 40% to €699, an action that reflects the increasing value of our TV platform. Speaking of which, we went a big step forward. We decided to include the most premium content of all, our Serie A. And with now moving to Slide 6, I'm very happy to announce that from next summer, football will go on fiber. This is a real revolution versus satellites, as it was in the past and is very synergic with the objective to accelerate the country's digital transformation. Indeed, The Zone 10 out of 10 matches. Until now, soccer viewers needed to have SKY subscription, plus The Zone subscription if they wanted to watch all 10 matches. And they typically watch them via satellite. Now they will have open matches to one single subscription and won't need two subscriptions as long as they go on fiber. SKY, in fact, will only release important matches. So now that's all you can see via satellite. Importantly, The Zone chooses TIM a strategic partner and granted us for the next three seasons the right to offer their content, both to our customer base,and also to new customers, making TimVision a master choice in Italian TV market. Let's go to the next slide to provide some numbers on this business. In Italy, football views are approximately 5 million, of whom around to 3 million-plus are pay TV users and the rest are pirating. We estimate that half of them do not have ultrabroadband yet. Approximately one-third has ASL only, and the remaining part do not have fixed broadband all. They're voice-only or mobile-only customers. This means that the TIM-The Zone partnership opens up two important revenue opportunities. Firstly, client buying The Zone through TIM will boost ARPU as the price is expected to be in the €30, €35 range. Secondly, all voice and mobile-only clients who will need fixed broadband will generate incremental demand for TIM and for the overall telecoms market. As I said before, it's another important step for the country digitalization. Our content strategy has not changed. We remain distributors. And in the last two years, we have enriched TIMVision to the extent that it has become a massive in our market, and the cybersecurity built around it will help reducing the piracy on live soccer. The ancient Romans used to say, Fortuna Adiuvat, which is to say, luck helps the daring ones. We were pretty lucky, as last weekend the police stopped illegal streaming for 1.5 million football viewers, another major change for the better. So we spoke about an important driver of growth. We can call it FTTF, fiber to the football. But this is not the only one. We see another three significant growth drivers. The first is COVID-led inversion of the fixed to mobile substitution trend. The second is beyond connectivity business. And the third is a stimulus from at from huge amount of public funds. Let's see them in the next slides. Slide number 8 shows the second growth driver, which was Covid-led, smart working and remote learning, which reversed the fixed to mobile substitution trend. The fixed market stopped falling in 2020, and the weight of mobile-only customers in Italy is still over 10% point above the rest of Europe. So if we put together, the expected benefit from narrowing the gap in mobile-only from football and from the public funding stimulus to ultrabroadband adoption, we can see that the delivered market should grow in the region of 3 million lines in the coming years. TIM is ready to capture this growth through its existing 92% FTTH coverage, and it will simulate it further in a virtual circle to FiberCop FTTH rollout, and our deal with The Zone is a great killer app to fuel it. We spoke a lot about the expected growth rates of beyond connectivity services during our full year results road show. The demand of digital services is strong both in B2B and B2C markets. And in fact, next-generation EU allocates significant market -- significant funding, I mean, to digitalization of public administration and enterprises. This is surely a major factor, which will lead a third driver of growth. As you know, we choose to focus on key specific verticals to our factories. In Q1, we launched the project Smart Districts that aims at accelerating the digital transformation in 140 industrial districts. Those districts represent 25% of our national production system. The goal is for TIM to provide ultrabroadband, together with cloud and edge computing through Noovle; cybersecurity through Telsy, IoT to Olivetti; and international services through Sparkle. Overall, we expect the €700 million revenues generated in 2020 ex-Sparkle to more than double by 2023. The fourth growth driver is public funding. The size of the so-called recovery fund to be spent in Italy is unprecedented, €235 billion. And the second good news is that 27% will be allocated to digital, over €50 billion, which is 10% higher than we commented at our full year results. The telecom sector well get €3.9 billion for fiber rollout in gray areas, €2 billion for 5G, €1.1 billion demand stimulus in the form of vouchers, €400 million for school connectivity. Vouchers are ongoing. They started with the first small program and will soon have the second larger programs to start as well. School connectivity will start to benefit revenues from Q3. Fiber tenders should kick off by year-end, and 5G, by Q1 2022. On top of all that, we expect two big benefits. TIM is extremely well positioned to benefit from the additional funds devoted to the country digitalization, EG to bring public administration and corporate and cloud as well as to help them digitalize them. And the size is huge, and two factories will benefit. Italian GDP forecast is expected to be over 4% in the coming three years, which is totally unprecedented for Italy and will surely make a difference for TIM. I believe Slide 10 speaks for itself and is indeed quite impressive. Our net debt after lease is down €6.7 billion since the end of 2018, and our leverage ratio is 2.7x on last 12 months EBITDA. At the end of March, we're already close to reaching our 2021 full year target. Now you should expect that this deleveraging and focus on equity free cash flow to continue as it is a center of our strategy. With that, let me hand it over to Giovanni to take you through our financials. Giovanni?

Thank you, Luigi. Good afternoon, everyone. Once again, in Q1, the improvement path in cash generation and debt reduction continues. As Luigi said, total group revenues were flat year-on-year. EBITDA actually grew on a like-for-like basis, i.e., cleaned off a couple of discontinuities on the labor cost. Being more specific, there was no solidarity in 2021 versus three days in Q1 2020, which implies a 1.6 percentage points year-on-year drag. And telecom sector contract renewal grants one-off payments rather than salary increases. And this drag is worth 1.8 percentage points year-on-year. The first drag, we reverted to a tailwind in H2 as there was no solidarity in H2 2020. The second will start disappearing from Q2. Equity free cash flow after lease grew 57% year-on-year. Net debt after lease improved €2 billion in the quarter and over €5 billion year-on-year, including the €1.8 billion proceeds paid by KKR. Let's assume on the domestic fixed in the next slide. Retail line losses are again broadly stable quarter-on-quarter. On ultrabroadband, net adds were very similar to Q4 despite much lower seasonality with retail net adds more than doubling versus last year and total lines now exceeding €9 million, including wholesale. Public vouchers actually helped as TIM got 76% of total so far, and importantly, there is a loss still available, 60% of the first €200 million tranche plus the other upcoming buckets. What helped even more is our fix the fixed strategy and the structural change in customers' behavior that Luigi described. Churn improved both quarter-on-quarter and year-on-year. On top of convergence, this is due to the increased penetration of direct payments, yielding lower churn and better credit collection. By the way, on Football Direct, debit will be required. Importantly, in wholesale, ultrabroadband activation remained above copper disconnections. Next slide. This slide shows that total fixed revenues were up 3% year-on-year with equipment benefiting from higher ICT revenues, ultrabroadband net adds and vouchers. Service fees were flattish with the 0.3 percentage point delta versus Q4, entirely explained by lower weight of ICT in Q1 versus Q4. National wholesale benefited from the better copper versus fiber mix that we saw in the previous slide. International wholesale good performance is mainly related to increased volumes. Retail was supported by better trends in the customer base with year-on-year impact reduced to 0.5 percentage points, and it is the most important evidence that our fix the fixed strategy is working. Then ICT is still growing at 30% year-on-year. ARPU was down year-on-year in Q1, but we anticipate improving trend in H2, even before considering the support from football. Let's move to the next slide, mobile. Mobile KPIs were broadly in line with Q4. The mobile number portability market kept cooling down with volumes down 18% year-on-year. TIM is continuing to lose half of what Vodafone lost, and Wind continues to lose more than double versus TIM, remaining the only donor to Iliad. Overall, net adds were positive, thanks to the very good performance of our machine-to-machine and IoT business. Importantly, calling human net adds were reduced to approximately 1/3 of the level reported last year. And churn improvement year-on-year and quarter-on-quarter, thanks to the improvement in quality, shown both on the positive trends in CSI and Net Promoter Score. Next slide. Mobile service revenues were deeply affected by discontinuities, explaining a total of approximately eight percentage points of organic year-on-year performance. Five points are the one-offs, as described during our full year results call, i.e., roaming, CSP cleaning and COSI contract negotiated at lower prices. On top, we have to add the comparison with Q1 2020 when pandemic drove very high retail -- sorry, when pandemic brought very high retail and wholesale out of the bundle revenues before people started offloading mobile on Wi-Fi from April 2020. As we anticipated last quarter, all these one-offs are set to fade below 1% on the full year view. Two points are the accounting impact affecting organic revenues not reported related to COVID promotions, which were monetized in organic revenues last year and are expected to fade to zero from Q3. One point is the lapping of past price moves that should represent 0.5 point in full year 2021. On top of these one-offs, as I mentioned earlier, impact from the customer base improved to 2% points, up from three percentage points in Q4. And mobile termination rates explain the remaining part. So let's see what happened on cost on the next slide. Further acceleration in cost-cutting, this quarter, the addressable cost base was down almost 9% year-on-year despite a discontinuity on labor costs that I described previously. Indeed, the solidarity, which kicked off again in May and will last for 16 months contributing to reduced labor cost by around €25 million per quarter on average. Improvements were recorded across the board. Just an example, I can name energy costs down 15% year-on-year; and bad debt, which was down €60 million year-on-year in the quarter. Let's move on, on the next slide that is on CapEx. Two messages here. It is more evenly split along the year because COVID affected Q1 '20 CapEx timing. Importantly, we were able to push on growth CapEx for FTTH rollout, the kickoff of The Zone partnership, new data centers and to save maintenance CapEx through efficiencies. Net working capital improved €155 million year-on-year, excluding swings in nonrecurring items mainly related to labor cost one-offs. On this slide, for your reference, you'll find the reconciliation of IFRS 16 net debt with the after lease view. Liquidity, on liquidity, we are covered until 2023, and we have reduced our cost of debt by 10 basis points quarter-on-quarter, down to 3.3%. In addition, we recently extended our committed makeup revolving credit facility to 2026 and for an amount of €4 billion, rightsized according to the current lower gross debt exposure of the group. Brazil already reported, so I will just summarize the key messages in the next slide. In Brazil, growth rate accelerated across the board. Service revenue were up 3.3% year-on-year, and EBITDA up, almost 5%, showing that the strategy to focus on increasing customers' value is paying off and leading to increasing ARPU in mobile pre- and postpaid and fixed. TIM Brazil keeps improving and expanding its infrastructure and has announced the creation of a FiberCo to accelerate fiber rollout with the aim of reaching 8.9 million households in four years. With that, I leave you to Luigi for an update on strategic initiatives and his final remarks.

Thank you, Giovanni. Let me provide you some update on the strategic initiatives, starting from FiberCop. The closing on KKR deal last March translated into €1.8 billion cash in TIM. As you know, FiberCop is an open project to a co-investment proposal that is out for public consultation and that aims to take full benefit of the new European telecommunication code. We are confirming Fibercop targets published last year, so I won't go to them again. It's suffice to say that FiberCop is perfectly in line with what we disclosed previously. On AccessCo, i.e. the potential creation of a joint network, a single network, as has been called, the news is that Enel finally announced the disposal of 50% to Open Fiber, 40% to Macquarie and 10% to CDP. And CDP will end up owning 60% of the Company and the right to appoint the CEO. Single controlled shareholding definitely simplify ongoing dialogue, and we look forward for this simplification. As Giovanni mentioned, TIM Brazil announced the creation of Fiberco newco to accelerate fiber rollout. The newco will be 51% owned by IHS, an industrial player with significant expertise to help accelerate FTTH rollout; and 49% by TIM with prerogative on rollout decisions. IHS valued FiberCo of 21x EBITDA. Last but not least, the carve-out of Noovle is completed. The Company is up and running at full speed towards target, which are confirmed as well. There is strong interest from investors to enter Noovle capital. But as you know, we want to have a better clarity on the next-generation EU funds and its impact on Noovle before entering into discussion to any -- with any new partner. Not much to say on guidance, which is unchanged as first quarter was consistent with our expectation. Of course, there are many moving parts that, as we explained on our full year, we are not factored in, such as the acquisition that will, of course, have a positive impact on revenues and EBITDA, the The Zone setup distribution that implies some set-up costs and CapEx and, of course, a big help to revenues and the contribution from the recovery fund on both revenues and CapEx. Everybody sees the size of the $1.0 trillion stimulus package as huge. The reality is that in comparison to Italian GDP. The weight of the Italian recovery fund is much bigger. No change in our SG guidance, but we anticipate that we are considering increasing our target for weight of renewable energy on total energy following a very important power purchase agreement signed with ERG for the supply of 3.4 terawatt of wind energy for the next 10 years. This agreement alone accounts for around 20% of our domestic consumption and allow us to achieve a 2025 target for renewable energy. So -- and I'm now on Slide 27. What we would like you to take away from this presentation. Well, group revenues were stable year-on-year and more sustainable. Domestic fixed service revenue and fixed line were stable. UBB growth was impressive. Convergence brought mobile churn at the lowest level in 14 years. And we are setting the scene for domestic growth through a football agreement with The Zone FiberCop FTTH rollout and our factories beyond connectivity plan. Funding and macro forecast further improved post news release of the recovery plan. Cost-cutting continues equity free cash flow generation growth, so in Q1, net debt, already near year-end 2021 target. With that, let me open the Q&A session.

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

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

Yes, hi, good morning. Thank you for the presentation. I would like to start with some question on the football content. So first of all, there is a timing in which you are considering to present the new offer. I suppose it would be likely ahead of the summer? The second question is about what are your expectations for what could come in terms of new customers for TIM, or I mean, let's say, existing customers which may have an interest in adding this new project? And finally, on this on the deal, I was wondering if after football rights and this agreement with The Zone, you may consider other deal to improve further your relevance on the content distribution?

Okay. Let me answer your three questions. I just want to make sure I understood. Carolina?

New offer.

So when will there be a launch on new offer? Am I understanding right? You want to know about timing? Fabio, was that your question, when are we going to launch the offer? Hello?

Yes, sorry. Mr. Pavan is not on the line at the moment.

Well, that was his question otherwise we lost to come back. Basically until June 30, the football rights are owned by SKY and not by The Zone, so we are prevented from making any comments -- any public comments on football rights because until then, it's SKY that can only do that. After June 30, SKY gets shut off, and The Zone and us as distributor will be able to comment and publish our offerings and so on. So I would say that a safe bet is on or around July 1. Second question was?

Clients.

How many clients could we get? Well, the number, as you know, I think I discussed in this presentation as well, is that who are following the football is -- around 3.3 million plus the, let's call the piracy clients, which are paying but to somebody else that is not SKY. We expect that -- and about 600,000 of these are already online. So we do expect a vast number coming to us. But I wouldn't want to give you a number at this stage. It's going to be a material number. And as we say in the presentation, it's going to be a big help to revenue side, obviously. I also wanted to clarify, as we mentioned, that there's going to be some CapEx. The amount is around €63 million or so for basically building up multicast capabilities to our network and some enlargement which, by the way, does not only benefit The Zone, but will benefit also all other OTTS which distribute content. And that's the way we'll go. Then there are a few millions. So I think the number is around €70 million or so. The rest of the activity, it's going to be basically -- and this is a part of this already occurred, and the activity will be completed by July so that we'd be ready for launch. And then there was a third question.

[Indiscernible]

Well, we already are going to be -- we already are the richest platform in town, so to speak -- in fact, in the country because even if you were to consider without the football, basically, we had -- this May, we got Discovery, we got Amazon Prime. So all those that you would like to have -- with this, we have a bundled exclusivity. So effectively, we are the only one-stop shop and we'll be also for the football. So we'll always look at other opportunities if they come up. But I would say that, at the moment, we're happy with the fact that we have the biggest offer, and this offer, since it includes also this may was much better than the SKY customer used to have. And also because in order to have -- before to have an ability to view all the matches you had to put together SKY and The Zone, now it's one single subscription you get and all the matches. So in terms of content, I think this is an unprecedented offer. It's quite rich. And obviously, we'll try to make it better in a continuous improvement mode. But I think we're already on a very high standard. I hope that I answer your question, Fabio, if not, please come back to us.

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

Yes, thank you very much indeed for the question. Two, please, from me. I mean, we've seen in the press recently quite a few kind of conflicting headlines about whether the politicians are in support of the single network venture. So it'd just be great for you to give your comments, please, Luigi, on what you're seeing on the ground on political interest in the project at the moment? And secondly, would just love to get your comments about the longer-term potential for shutting down the copper network and the cost savings from that and what you're hearing from AGCOM progress on being able to do that.

Okay. Thank you for those two very interesting questions in a sense that many asked the first one, not many of focus on the second one. They're both very relevant. First of all, I wouldn't get into commenting you what you correctly described conflicting statements because I would have to comment facts and the opposite of facts. The reality is that I think I would like to stick with facts. Basically, I think since we last spoke, we have one point that we discussed for a long time and finally materialized. It took Enel eight months to complete the examination of the Macquarie letter, but then it finally did occur. And so that confirms that sometimes things take some time to happen, but they do happen as expected. And basically, I think the fact that we know now that CDP is going to be the majority shareholder of Open Fiber and that Enel will fade away from the picture and will get Macquarie in. Now what's my takeaway from this? As you know, and this is not a value judgment, it's a fact. Enel has been a major slowdown factor in our discussion. And so it's going to be much easier. I wouldn't say less difficult in terms of fine agreements and agreeing on what's a good exchange ratio and so on and so forth. But definitely, the interaction is going to be easier in terms of -- or quicker, I think that's the right word, quicker with CASA. We'll understand more quickly if we have an understanding or if we don't have an understanding. The second thing, I think, which is important as Macquarie is coming into the picture and Macquarie, it's a market operator, which has a profit objective. I mean, they want to make money out of this transaction. And whenever there's people that are -- a profit motivation, they will pursue what is best for their objectives. And on this, I think we're on the same side. We all want to make money and we all want to create value. And I think from what they said publicly and from what I hear is that Macquarie wants to have a better fiber market in Italy and will pursue opportunities. So I think the framework, it's potentially better than it was before this news. So this is the fact. Then what the single person is interpreted to have thought, frankly, I would not want to go into that. I think, however -- and that I'm certain is that the objective of this country is to complete fiber network. And frankly, to go beyond connectivity account to itself and start working on even other very important issues such as cloud, such as edge computing, such as quantum computing, such as artificial intelligence and so on and so forth. So the more we keep on discussing about something that should be already been decided and completed, the least we can focus on that. So my thinking is that there's going to be a positive development in this respect because -- and this is shown, by the way, and the fact that the government attributes significant importance by the sheer size of the amount that the recovery fund allocates to these activities. So in short, I think we will basically, as soon as they've completed their discussion with Macquarie, which I think should be not long from now, we will want to discuss with the new setup of shareholders of Open Fiber. And hopefully, we'll find an agreement for the better. So I'm trying to interpret your question, am I more optimistic after this news that CDP/Macquarie are substituting Enel? The answer is yes. Your second question is about substituting copper with fiber. And this actually is quite relevant. And sometimes, when people say TIM might not do all the investment in fiber, basically don't know our company works. For us, as for every incumbent, one of the very important things to do is to reduce as much as possible the copper, the complexity, the legacy that we get from. Copper is basically a legacy work from the past, which is more expensive to maintain. And yes, indeed, we have already built that network. But now the worst that you can do is to remain in the middle. You will not copper anymore, but you will not fiber either. So for us, it's going to be a huge saving when we can move to fiber. So our interests are aligned with all that wants a new network in the country. In this respect, our interaction with ADICON seems to be positive because, obviously, I think AGCOM welcomes -- and it would be major so with the government that we do as much fiber as we can, which doesn't mean we'll not try to exploit the full potential of what we have in terms of cabinets. But for example, we have done the first experiments in Trento in Northern Italy, one neighborhood has been switched all in FTTH. In Talento, we are now going to switch off, and this is where we will need also AGCOM and local authorities help, we will switch off copper from basically voice-only and an ADSL will be substituted by FTTC and FTTH. So it is an ongoing process, and FiberCop allows also as more means and forces us to more discipline because we have committed also with our partner, KKR and Fastweb, to a certain calendar. And we're very optimistic on that as well. I think as time goes by, you will see that we continue to do more and more fiber and copper -- copper weight gets reduced. Incidentally, in the first part of the year, we are doing a significant amount of houses, and we are using the same methodology to calculate, which, as you know is always the case. We are, by far, distancing Open Fiber in terms of coverage -- actual coverage, not line passed. I hope I answer your two questions.

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

First question is a follow-up on the discussion about the single network. So if I understand properly, so you are clearly saying it's quicker to negotiate with CDP and Macquarie. So my question is do you need to wait for the closing of the transaction to have really the new ownership? Or you can do it now, so before the closing? Second question is on the content and The Zone, in particular, you're referring to some additional CapEx. Should we expect also some start-up costs? So should we expect that this is affecting some way the EBITDA for the domestic business? Or is this marginal or even accretive? And last question is on the contribution, in particular, the boost on demand coming from the voucher. I'm a bit concerned looking at the low penetration of the first tranches that is not really taking up. So I wonder if it's something that can be accelerated or done better with the second tranche that is even larger and potentially more interesting for you, and if you have any update on this?

Okay. So your first question was whether we should wait for the closing. I don't see why we should, in the sense that one thing have cleared and been completed among them. Since I don't think anybody would argue that it's going to be a regulatory issue in transferring 10% to CDP and having a fund which has no other telecom activity in Italy, I think it would be fair to say that we could -- there's nothing that we could do after the closing that we could not do before the closing. Of course, whatever agreement, if any will be reached, it will be subject to closing of the previous transaction. So to cut the long story short, I don't see that we should wait. In fact, I would imagine that we would start much earlier than that. My understanding, but bear in mind that I'm not that, I'm not sitting at the table between, obviously, between Enel, CDP and Macquarie when appropriate, they are completed the principle. They are working on the details to finalize the agreement. Once that is finalized, I don't see why we couldn't start our discussion. So the short answer is yes. Your second question was about the vouchers. And basically, I think from the vouchers, we learn a few things about how sometimes bureaucracy can complicate things. Bear in mind that there was a need for a certificate, so-called EC certificate, which basically certifies that a family makes less than x. And at year-end, apparently, those certificates expire. And so people have to redo all over again. So there should be more communication and so on and so forth. So yes, we have learned -- or rather who writes this tender -- this regulations should think about practicalities. But it will come back, and I'm sure that they will be utilize. The second aspect is on the large voucher program. That part, as a matter of fact, has no requirements. So, it's -- I would imagine that it will definitely should be launched before back-to-school, so either just before the summer or immediately thereafter. And that has no requirements, but the fact that you certified at the UR a new line or taking a new technology, so that should be much simpler in application. So all in all, I think will -- and by the way, will coincide with the fact that -- mind you, it's €900 million, the larger one, versus €200 million, the smaller one. And this, by the way, will coincide more or less with the launching of the football. So that might help some people in that -- and we have mapped the present users. So SKY, who was the -- what do they use basically? And this is the numbers that do not have fiber, which may want to take the opportunity of the public funding to help its own migration. And I think you had the third question.

Setup cost.

Yes, on the set up cost. Okay. So I mentioned to you, there's going to be about €70 million for the network and €80 million. The rest of the cost obviously is the modem we give to our customers. Set up costs, I don't think they're going to be material even our size. I would be -- I don't think that, that would be accretive in the very first year because we get three or four months of revenues versus you get the cost. We'll be more specific once we realize what is the price that will be given as a banner price by The Zone, but I don't see at this stage as very material. So we will try to be more specific next time. In fact, we'll be very specific because then we'll know the price. But I think every time we think about this transaction is that its major effect is going to be an enormous boost to broadband takeup. And so strategically, we are very pleased with this transaction because it's one of those moments in which you have a discontinuity in the market and you see the new technology kicking in. So it -- if you add this to the mobile-only substitution, we see that giving us a big boost going forward to the fixed line market. And by the way, we think we're going to be a significant beneficiary, but that will help also our competitor, I mean, with one exception, obviously, the one that's providing satellite services.

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

I have two questions, please. First question is on the fixed line business. Fixed retail revenues are quite weak, down about 5% year-over-year. Obviously you had quite a big boost from wholesale up to growing almost 9%. I know you've explained it as a mix shift, but are there any sort of one-offs or IRUs in the wholesale? Or is the type growth rate that you're reporting structural and sustainable? So that would be kind of the first question. The second question was, I was just looking at the total number of wholesale lines has declined relatively materially the previous quarter and again this quarter. And obviously, the last quarter was a lockdown quarter. So maybe Open Fiber's ability to do physical installations or take customers away from you was limited. So I'd like to just get a little bit of color on what sort of traction you think Open Fiber is having and taking away wholesale lines from you? And would it have been even worse without lockdowns?

Giovanni speaking. On the -- on your first question, so the trend in fixed service revenues on the retail side, I think that you should consider in the numbers we provided you with the two components. The first one is the fact that -- what our current so-called factories do produce are not yet included in those revenues but are traded apart, so cybersecurity, IoT,and so and so forth are part of that business but are not clustered in the number that you see. So if you put the two things together, you have a clear picture. Going forward, we will be -- we will combine the two things. The second element that is impacting the trend and the results of the quarter, is related to lower activation fees. That is not, by definition, a negative dynamic because it means that you have the same number of net adds, actually a bit more, but you obtain the result with a lower number of gross adds and a much lower churn. The combination of the two is benefiting the equity free cash flow of my definition, but it's not yielding an immediate result in the very short-term. It makes the business more sustainable, and we do confirm that we expect ARPU improving year-on-year in the second half of the year. These are the two elements I think you should consider. The second question was related to the wholesale. Let me say that the recent number of wholesale lines you asked about. So reasons for the good trends have been explained clearly, I think, in the presentation. What you have to -- so the very relevant positive things is that in terms of growth in UBB line, the ultrabroadband lines, the result is crystal clear, a clear improvement. On the other side, you have two types of accounting phenomenal in a number of lines that you do not have in wholesale, the lines that the move to flash fiber, even if flash fiber is 80% part of the part of TIM. If you look at the year-on-year decline in wholesale lines, over 2/3 is explained by this movement from faster to flash fiber that I just said, and then you have a 20% in wholesale line rental, that is a business that is not any more leading ahead. So all in all, you do not have any strange effect in that. The clear point is the growth of UBB lines. That is the driver. So we do expect the wholesale business to continue grow and with a very positive path. Did I answer your two questions?

Yes. I mean, I just wanted to follow-up as to whether you are seeing any loss of lines to Open Fiber and whether that's been affected by lockdown because, obviously, it requires a physical intervention. And therefore, should we expect -- obviously, they're building lines. Are they going to be taking incrementally higher share the more they build? And kind of just some color on that, please.

Yes. I mean, it is not any kind of material trend. It happens that Open Fiber loses lines for us, and it happens the other way around. But I don't -- I mean, it's a very normal type of market trend, nothing specific on that.

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

First one, related to the single network. So we understand that the government has given operators until 15th of June to define the private investment plans on fiber. And we read that the government's intention is to allocate the EU recovery funds by competitive regional tenders. I'd be interested in your thoughts on these proposals, please. And where a competitive tender situation would leave the single network scenario, it might appear to rule out a single network scenario, at least for some time. My second question is just -- and apologies if I've missed this. Do we have a figure for the overlap between SKY Sports customers and Telecom Italia customers on the fixed line side, either voice-only or broadband? And then very finally, please, within the broadband ARPU decline of 5%, was there any element of retention discounting ahead of the Iliad broadband launch, please?

Okay. About the intention of the Italian government, how the tenders are going to be structured, you probably have more information that we do because at the moment, there is nothing that has been published about the structure. So I would refrain from commenting on that until we get an official statement how they're going to be done. I think what they're doing now is to collect the operators' intention about their investments, and then they will come up with their intention in regional, I mean, in other things. So is it two regions, one region, three regions, five, 15. So it will be very difficult. Is there going to be a co-investment allowed, for example, which I expect so because it's under the European Telecommunication Code. And then bear in mind that, that does not solve the issue of network because from a telecommunication point of view, the country is divided not in regions, but in black, gray and white areas, and sometimes, at some points, one call, super whites. So what we're really talking here is the gray areas because the white areas are already covered by the famous tender for government subsidies, which happened a few years ago as the one that Open Fiber won and that, so far, has not yet been executed. So it's not possible, we believe, to do another tender in an area where there's already one in place. So the question is what shall be done with the existing one? Which, in our opinion, has already gone -- has already expired in the sense that has been outstanding for much longer than was allowed under the rules. But so to cut the long story short, basically, I think the government is basically getting the information from the operators about their objectives. We are quite confident about the fact that in the gray areas, we already -- we have the shorter loop to cover because we have 99% plus of our cabinet there covered -- connected in fiber. And therefore, we should have a cost advantage towards everybody else. And then we should see what is intended to do. And as you know, under our plans -- under the FiberCo plants, a part of the gray area should be covered anyway. So we'll see how it moves on. But as I said, I'm not aware of a format which has been defined by the government yet. And in fact, it would be unusual to see it before they do all the collection information because it should be a consequence of what they find out about the market, not apprehensive activity. Your other question was about the overlap between our customers. Yes, we do have the information. I'm not sure that we have made it public. And I think, basically, I see my commercial guys basically -- they're trying to tell me that this information is confidential. But yes, we do have basically mapped all the people that are legally using -- I mean, watching football. And we believe that we have a fairly good understanding of what technology they're using divided also by geographical areas. So -- and we believe there is good opportunity. And there is. As you might expect, SKY has a significant number of customers. We do a significant number of fixed customers. So yes, there is an overlap, and it's quite sizable. And then your third question was?

Retention discount.

If we do retention -- we cannot do retention.

Retention discount.

We can't -- we don't do retention because we are prevented from regulation to do so.

Next question comes from Mr. Keval Khiroya from Deutsche Bank. Mr. Khiroya, please.

Two questions, please. So firstly, you've talked about mobile stabilizing in the coming quarters. Can you elaborate a bit more on what's going to drive this? And the subscriber base is declining less, but it's still declining. So do you expect ARPU to inflect and grow at some point? And then secondly, you had an impressive quarter on cost reduction, on addressable costs, as you highlighted. Can you talk about how we should think about commercial costs in particular going forward, given I think, we faced much tough comps on commercial costs from Q2 and Q3 last year.

Okay. Okay. Well, first of all, let me start from the easy part, the cost. Yes, costs will continue to go down and we'll continue to work on cost. As you know, we have done basically a provision also for a continued reduction of HR because of voluntary preretirement. So you should expect that our total workforce with some entrants -- new entrants, but overall, many more exits will continue to go down. And this has been the case for the last three years. So that part will continue to shrink. We will also continue to work on all our addressable costs, and where possible, even on unaddressable. And I'll tell you what I mean. But basically, the market is the market. So revenues sometimes are more difficult to control. But cost is definitely something that the Company can control. And on the commercial costs, which you specifically mentioned, we're moving more and more from a push strategy to a pull strategy. There's -- the web is adding more importance, and we're working on rationalize our relationship with agents. And the fact that there is much -- we discussed a couple of times churn today. It's very important to underline the importance of the churn reduction. Because -- and by the way, that's -- in terms of EBITDA, that might not be necessarily a good thing because when you have a lot of churn, you get a division fees and the costs get spread over the years. So you kick the can, so to speak. But the reality is that it's problematic. Having the customers actually stay, it's much, much better. So we are quite happy with that trend, including in the mobile customers. And yes, you are saying that -- and I think I mentioned last time, I reiterate, we obviously are a number of reasons to be more optimistic on fixed than we are on mobile in the sense that in fixed, there are a number of trends that at some point will kick in. I think the major positive in mobile is that we've seen the results of our competitors. And then some competitors not report results, but they are more or less known. We continue to generate cash flow and -- as you can see from our results, but also from our history, and we are very focused on cash flow. And I think this is becoming an issue for others because, frankly, if you improve your EBITDA but your cash flow, it's negative or doesn't improve, I mean, it's a nice story to tell, but it doesn't last that long. I think that this market, it's on the mobile side, the prices are too low. As a matter of fact, at the moment, we are the one that are more disciplined. We have no prices below €9.99, which is not the case for the rest of the market. And -- well, Vodafone is somewhat more disciplined. But at the low end of the market, Wind and Iliad are trading punches and it's not good for either one of them. And I think eventually, they will have to be more disciplined or they will continue to burn cash. With regards to our sales, I think our convergence strategy is working. Basically, we need to continue to improve. We're already a leader, but we want to continue to improve CSI. And the fact that churn stays as low as it got so far, it's quite positive. Again, in -- basically, you can look at Slide 5 and see that there is a number of benefit from the filing of one-offs with better on the mobile, we should have some return. And I don't -- I cannot quantify to you yet, but of roaming, because basically, this summer, some movements between countries is restarting. So I think some of the things that were -- became abnormal because of COVID will start normalizing. And so as I said in last conference call, at a slower pace than fixed, we see also mobile improving. Then, as I said, I see that eventually, this situation for some of our competitors is going to be unsustainable in the longer end, but that -- I leave it to the next quarters, and be happy to comment with you on that specifically.

Next question comes from Mr. Mathieu Robilliard from Barclays. Mr. Robilliard, please.

First, I had a question about the tax asset. You disclosed at the Q4 results that there had been a change in the way you could amortize and tax back some of your intangibles, which is a very positive news. After that, there were some -- I don't know if it's speculation, but it was comments in the press that, that law may change. But I now see that you've basically reiterated the same message in your Q1 slide. So maybe you could give us a little bit of color as to why you think it is still very valid. That would be helpful. The second question had to do with the DASAN deal. You say the deal is strategic. You are a strategic partner of DASAN. Does it mean you're an exclusive distributor of DASAN? Maybe I missed that. And also, do you have minimum volume commitments with DASAN in order to get that contract? And lastly, you flagged on your slide about the costs, that the bad debt provision had come down by €60 million in Italy, which I was surprised of because of the churn context where there's a lot of uncertainty. But maybe you're coming from a very high base of bad debt provisions to revenues, and that's why you had that flexibility. So maybe if you could give us a sense of what is the bad debt provision as a percentage of revenues at this stage. That would be helpful.

Yes. Let me start from the last one, which is -- and then I will ask Giovanni Ronca to comment specifically. But the bad debt management and our joint venture with Santander Credit in general, it's one of the success story that we have here in TIM. I'm very proud of what's been achieved, and probably Giovanni -- or does not want to say himself, but the team there has been very good. I think what was abnormal was the level before rather than what it is now, and we have changed systems, management, algorithm. Everything, it's brand-new. Now it's a year. Last old, but it's still relatively new compared to the past, and it's working out very nicely. So -- and by the way, we're not yet best-in-class, which we would like to be. So -- and as I finish the other question, maybe mm will give you some more color on this. Then you had two more questions.

Tax asset.

The tax assets, I don't understand exactly the question. Tax assets has not changed as compared to last quarter in the sense that there has been a law, and we have applied the law. And so we are going to get back -- or rather, we're not going to be payt -- we're going to offset taxes against this asset in the foreseeable future. What is it that has changed between now within last call in this call, in your opinion?

Nothing precisely, but there was those speculation or at least reports that the law may change again. So I thought it was good news to see that.

Well, the law has not changed, not that we're aware of. I mean, if the law has changed, we would have changed -- we have taken that into account. But I wouldn't mean surprised that they would change a lot three months after having implemented it. So there has been no change. So that's why there's been no change. Has there has been no changes, no, there has been no change in what we reported. And then you have the last question, that was -- whether we have an exclusivity with The Zone. So our arrangement with The Zone is covered by NDA, so we cannot comment. But I think at this stage, I would tell you that we are basically we have an arrangement similar to the one we had with Disney, meaning that we are the sole telco that can distribute that, how do you call it, the subscription. So if you want to buy fiber from us and bundle with The Zone, you can do that. If you want to buy only the contract from us with a subscription from us, you can do it. Or you can buy a subscription from Dasan directly and use somebody else's connection. So in this respect, we are strategic in a sense that we have advised them about the technology part, and we will implement and actually partially sell to them some technological services. And so in this respect, we are basically a unique relationship with The Zone, which we see as something that will benefit ourselves. As I said before, we will not get into the specifics of the commercial part. But we believe that this agreement will be very beneficial for The Zone, for ourselves, and also, frankly, for Italy because it's going to be a step change in digitalization. Giovanni, do you want to comment on credit, please?

Maybe an additional comment. What you find in one of the slides saying that direct -- the push on direct payments is contributing to the -- to have a lower churn, this is exactly the point related then to credit. I mean fighting credit, fighting bad debt is a catalyst of addressing some issues of the clients more effectively. When you bring them on direct debit, you reduce your credit risk by definition. Paying cash is four times more dangerous for us in terms of collection and having a direct debit. And you lower churn because the stickiness of the client increases by definition. So it's a positive circle that goes to the entire organization. So it's very tangible.

Last question comes from Mr. Giorgio Tavolini from Intermonte. Mr. Tavolini, please.

Good afternoon and thank you for taking my question. Just two questions on my side. In the context of the new release of public fund document of the government, do you see any chance for the telecom operators to benefit from a postponement or a discount of the large installment related to the 5G spectrum payment, which are still due in 2022? For TIM it's €1.7 billion out of the €2.4 billion. The second one is on costs. Do you see any inflationary -- I mean, any risk from rising inflation on OpEx and CapEx?

Okay. On your first question, I would prefer to decline comment in a sense that there is nothing per se in the document because that does not relate with the 5G license. But the -- I would say that a discount is unlikely. I don't know if some sort of different payments schedule is feasible or not. But let's say that probably there's nothing to comment at this stage. It's not impossible, but it's not given either. Your second question was on inflation risk. Well, considering that we have most of our debt at fixed rate long-dated, I'm not sure that inflation would necessarily be a risk for us. We're not seeing inflation, if you mean the cost of our suppliers. I think the only things that we are marginally starting to see is some shortage on chips around the market, which is affecting a number of markets. And in fact, I'll tell you something -- I don't think it's an industrial secret. We bought in advance the modems for the football season just to make sure that we don't have a supply chain issue. But more in general, I would say that there is some chips reduction. The cost of chips, it's not a large component of our activity. I think if at some point, there is some issue in availability or more scarcity, rather, I think that may affect some supplier of equipment, which in turn could affect the operators. So it's still not material yet, but this is something worth watching. On the rest, we're not seeing inflation in tenders and so on and so forth. Longer term, I mean, we could have a macroeconomic conversation about the fact that there is a commodity super cycle at the moment, and that there is a lot of money which is being pumped in the country. So if inflation derives from a very strong recovery, I think that will be a plus. I think the dynamic, our sector being so technology-driven will be so that we should have a limited amount of inflation. On the overall consumer price index and so on, I think we got so much deflation that some inflation would not be necessarily a bad news.

Thank you very much.

Most welcome and I think that was the last question. So I take opportunity to thank you and pass back the mic to Carola.

Thank you, everybody, once again. And if there is any follow-up question, we are obviously available 24/7 as with us, so happy to have your additional questions. Thank you. Bye.

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