Ladies and gentlemen, good morning, and welcome to Telecom Italia Q4 and Full Year 2023 Preliminary Results Conference Call. Paolo Lesbo, Head of Investor Relations, will introduce the event.

Ladies and gentlemen, good morning, and welcome to TIM full year 2023 preliminary results presentation. As usual, I am here with the CEO, Pietro Labriola; the CFO, Adrian Calaza, and the rest of the management team. Pietro will provide an overview of last year achievement, while Adrian will illustrate the financial results. A Q&A session will follow. Pointing out our safe harbor disclaimer on Page 2, let me hand it over to Pietro. Pietro, the floor is yours.

Thank you, Paolo. Good morning, everyone. Today's call is very important for two reasons. First of all, we disclosed preliminary results for 2023, which is the second year since this management team took office. At the same time, it marks a turning point in the history of the Group as this is the last column TIM as we are used to know, a single integrated company. We fully understand that we are already focused on what will come after NetCo closing and that you would like to know about the future TIM, its growth trajectories and cash generation potential. But today, we will focus exclusively on the results of TIM as is. Also, to give credit to all the people who have worked very hard in the last 2 years to improve the Group performance. We will reconvene in 3 weeks at the Capital Markets Day to open a new chapter entirely focused on the new perimeter. You will get pro forma figures and we will disclose the 2024-2026 plan together with guidance. So we ask you to be patient for a while and focus on what we delivered so far. Let's start. The last 2 years have been eventful, not to say that we navigated in the perfect zone. And as we already mentioned, we have been carrying out two jobs at the same time, managing the operation and the refinancing of the company; and at the same time, delayering TIM to pursue our long-term strategic view of a ServiceCo, no longer vertically integrated. When we started in 2022, inflation did not exist, risk-free rates was in negative territory and the Italian economy was in a good shape. Since then, a sequence of events made the macro scenario much more complex towards energy price shoring inflationary spiral to which the market industry were no longer use. A sharp increase in interest rates fall and is still present today. Let's not forget that in 2021-2022, the Italian market was driven by very strong price competition and that we were the first to introduce elements of rationality. Today, the market remains probably the most competitive in Europe, but it has improved in the last 2 years. For example, back book repricing has been implemented by almost all operators and the washing machine effect in mobile is significantly lower. Despite these challenges, we have managed to improve the domestic operation and laid the foundation for long-term structural growth, while Brazil reaped the benefits of what we see in 6 years of restructuring. For the second year in a row, we present results in line with the full year guidance on all metrics, something never happened in the last 12 years. 2022 results are another important step in building investor confidence. The successful development of our bonds signals that the market believes in our delayering strategy. For us, this is very important. And of course, we are fully committed to a timely and successful closing of NetCo deal. Let's move to Slide 5. As I said, 2023 Group and domestic metrics are only in line with full year targets. At Group level, service revenue are up 2.3% year-on-year, reaching the low-single-digit growth target, while EBITDA is up 5.7% year-on-year in line with mid-single-digit target. At domestic level, service revenue are broadly stable, while EBITDA is up 1.7% year-on-year in line with flat-to-low single-digit growth target. At the beginning of 2023, we were confident to achieve the guidance because we knew that the operation will continue to improve, thanks to positive drivers unfolding throughout the year. You may remember the slide we've presented last May, outlining the quarter-by-quarter trajectory. Nonetheless, delivering the targets was not given and I'm happy that our execution has been flawless. Let's go to the next slide to deep dive on Italy. Domestic performance continues to improve both year-on-year and sequentially. For the first time in 22 quarters, service revenue are back to growth in Q4. EBITDA turned positive in Q2 after more than 5 years and is up for the third consecutive quarter with a robust plus 5.5% year-on-year. The direction of travel is clear. Italian operations are steadily moving towards structural growth. We are confident, and I stress, we are confident that domestic ServiceCo is well positioned to confirm this trend, not only on the economics, but mainly on the financials. Slide 7. Today, I give you the usual high-level update on entities with the same disclosure we have provided so far. At the Capital Markets Day, we will disclose pro forma figures based on the final perimeter and on the master service agreement with NetCo. TIM consumer service revenue trend is steadily improving. If we look at the positive evolution of fixed and mobile ARPU, it's clear that pricing up the customer base has been a successful move, even more so, considering that churn has remained stable. The migration from copper to fiber is also ongoing with TIM having the highest market share in FTTH at over 25%. Lastly, year end target of NRRP 5G coverage tender has been overachieved. TIM Enterprise developed faster than the market also in 2023 with service revenue increasing over 5% year-on-year. Considering how the mix has changed over the last 2 years, it's clear that our strategy to defend the core telco and grow in SCT has worked out. Over 60% of the top-line now come from value-added services, 9 percentage points more than it was in 2021. I also highlight our leadership in cloud with over €1 billion revenues in the full year. Having said that, connectivity revenues declined only 2% year-on-year, better than our internal expectation. The pipeline is very strong with about €1.5 billion from ongoing negotiations. Slide 8. 1 week ago, TIM Brazil reported strong results across the Board, over-delivering versus full year guidance. Thanks to the operational performance, the company delivered the highest ever operating free cash flow, reaching over 17% of net revenues, a strong base of cash generation, supporting a solid shareholder remuneration. Again, we anticipated this performance at the time of the acquisition and we delivered. NetCo confirmed the positive trends, thanks to the new regulated prices that we strongly ask in order to ensure an adequate return on investment and improved technology mix. I point out that after several years of competition in the wholesale market, today, NetCo sell-out 77% market share. Year-end target of 5G backhauling tender was overachieved. For the Italia 1 Giga, we are on track in 6 out of 7 regions. We are below target only in Sardinia, mainly due to the issue related in prior quarter, which is the scarcity of specialized manpower, a structural problem which Infratel is well aware of. We have set-up a task force to cope with it. Anyhow, and we still have some months to recover the gap and we not expect any deduction or contribution. Slide 9. The transformation plan is on track. In 2023, we did slightly better than the €800 million incremental target, of which around €500 million OpEx and €300 million CapEx savings. Main contributors were the full decommissioning of the 3G network and the public payphones, the optimization of our real estate portfolio, and of course, labor costs where we leverage early retirement, voluntary exit and hourly reduction. We are really going deep in transformation of the cost base, revisiting the governance of each major spending area, pushing on digitalization and cutting as much as possible any avoidable cost. Another where we are truly transforming the cost base is customer care with a significant reduction in human-driven activities, the review of make versus buy mix and the adoption of digital solution across the board. This allowed us to reduce customer care costs by 6% year-on-year. On CapEx, we have been very strict in rationalizing the investments, revisiting the contracts with key suppliers and prioritizing the spending, in particular on IT. All in all, we are delivering what we promised 2 years ago, also in terms of cost discipline, i.e., to keep OpEx stable over time. Adrian will expand on this. So I hand it over to him for the full year financial results. Adrian?

Thank you, Pietro, and good morning, everyone. Let's start with a short summary of our main Group financials. Results are in line with guidance also because the positive drivers were indicated at the beginning of 2023 unfolded as expected. In particular, full year Group service revenues grew 2.3% year-on-year with a further acceleration in Q4, up 3% versus 1.7% in Q3. Group EBITDA increased mid-single-digit in full year and was very robust in Q3 at 6.5% and Q4 at 6.8%. Additionally, EBITDA after lease grew by 9.4% in Q4, boosted by sites decommissioning in Brazil. At domestic level, service revenues were broadly stable in the year and EBITDA increased 1.7%, reaching the upper part of the guidance. Next slide. As Pietro anticipated, domestic OpEx were broadly flat in the last 2 years. This was not a given, and it's clear that the transformation plan has been key to build a strong cost discipline throughout the company. We still see room for further efficiencies. So this is an area which we will continue to push. Looking at the dynamics in detail. Variable costs are up 1.9% year-on-year. The increase in COGS due both to ICT revenues dynamic and costs related to other goods sold is not fully offset by the reduction of interconnection and equipment. Commercial costs are also up year-on-year, mainly driven by higher content and VAS due to higher multimedia revenues and higher commissioning costs only for accounting effects, but reducing year-on-year in cash terms. Industrial costs are up 4% year-on-year, with higher energy, industrial spaces and provisioning despite lower network maintenance costs. Energy is up 5% year-on-year, mainly for higher prices in Q4 with no fiscal benefits versus Q4 of 2022 despite volume efficiencies. G&A and IT are down for the reduction in professional services, utilities and fleet management. Lastly, labor costs continued the sequential decrease, down 6% in full year, thanks to solidarity and lower FTEs. Next slide. In Slide 13, you can see details on CapEx. We closed the year at around €4.0 billion for the Group with domestic of €3.1 billion in line with the guidance. We continued to invest heavily in Italy in FTTH and 5G with specific focus on NRRP projects. In our Brazilian unit, the extension of 5G coverage with the standalone technology is on track and represents a significant part of the total CapEx envelope. As we guided back in November, equity free cash flow was broadly flat in the year. I remind you that equity free cash flow was positively impacted by the anticipation of the NRRP funds amounting to over €750 million in Q4. Therefore, net debt after lease is decreasing versus Q3, lending just a touch higher versus last year. Despite tough market conditions, we raised more than €4 billion, including the debenture in Brazil and secured a strong liquidity margin, which fully covers the maturities until the end of 2025. With this, I hand over to Pietro for the closing remarks.

Thank you, Adrian. So let's remember, for the first time since 2010, we delivered results in line or above guidance for 2 consecutive years. Not many people will dare battle it. The domestic growth trajectory is confirmed with service revenue back to positive and 3 consecutive quarters of EBITDA growth. The transformation plan is well executed, ensuring full cost discipline and we can push further. We have cashed in over €700 million of NRRP funds. We refinanced more than €4 billion in the year with maturities covered until the end of 2025. The delayering plan is on track. The Golden Power authorization was obtained, while the separation activities are in line with the execution plan. Let me say that we are proud of what we achieved against all odds. But the fun never stops. And in 2 weeks, we will reconvene to open the chapter on the future TIM. With this, let's start the Q&A session.

[Operator Instructions] The first question comes from Mr. Tavolini Giorgio of Intermonte.

I had three questions on -- from my side. The first one is on mobile. We saw weak net adds in Q4. I imagine this is mainly concentrated in the low-end segment. So I was wondering how are you responding to recent pressures by some operators such as Iliad? And in particular, if you intend to strengthen your second brand, Kena, we've been opening it to the 5G network, I don't know or if you intend to continue the win-back approach with below the line offers? The second one is on mobile. I was wondering what was behind the double-digit decline in TIM wholesale in Q4, minus 21%, if I remember correctly. So should we expect a similar decline also in Q1? And the very last question is on NetCo. Considering the observation recently made by the European antitrust by the OLOs and separately by DNB, are you still confident of getting the green light of the deal by July? And have you set-up a long stop date with KKR for the deal?

So Giorgio, let's start from the end about NetCo. The answer is very easy. Yes, we continued to be confident about the timeline. For who of you is used to follow us and the Italian market, it's quite normal that all the OLOs usually ask for something also when there is no ground. To be clear, the request that not TIM, but KKR, and it's better to stress, KKR alone, due to the European antitrust is related to a concentration. To have a concentration, it's a matter of math. You must have two companies that's concentrating one. In our case, we are discussing about something that is not the case. This is -- it's the opposite. And what we are doing is to follow the indication of the European Union that ask for an wholesale -- pure wholesale player. This is the reason for which we don't foresee any specific issue. And let me give you also some light about the co-investment because someone has tried to, how to say, talk about the -- segmentalized, this is the right word, the co-investment. I have to remember to everybody that I asked to the National Authority -- the national watchdog to have the co-investment with the recovery of the inflation. We didn't receive it. So for the matter of economics, it's impossible to work with that kind of model without recovery of the inflation. So no issue. We don't foresee any kind of issue on the antitrust level. About mobile, the double-digit decline, it is mainly for a matter of seasonality, because as you have seen in the number that we disclosed, the retail proceeds in the right way. So there's no issue and we are growing quarter-on-quarter of the same year, not year-on-year. So the retail is continuing to proceed. And the churn control and the ARPU increase is giving us the result that we are expecting. About wholesale and visitors, you have to keep in mind that there's a seasonality. This year in the fourth quarter, we have a worse seasonality of the visitor. And then compared to the previous year, we have less, let me say, one short recovery related to the mobile virtual operator contract. So we don't see that there could be any kind of impact for the 2024 as you asked. About mobile, then I will leave to Andrea to elaborate on that. But it's important to understand that we are defining a strategy about 5G that we'll disclose in the following weeks and also during the Capital Market Day. So we don't want to accelerate the pricing competition. If you see our number proceeding in the right way, so it makes no sense to put gasoline on the fire. But we have to continue to work to improve the quality of the network, to try to monetize better 5G and to serration in our approach. And then I leave to Andrea to give some more details, but we are planning also in 2024 to do something on Kena that is different from what was done by all the other players that is not related to be pricing aggressive.

Thank you, Giorgio, for the question. Indeed, in Q4, we had a bit of a softer net adds performance, but you are right, it was concentrated on the low end. It's explained by 2 factors. First, we had the factor of repricing campaign that we're very successful in raising ARPU, but also triggered clearly a bit of rotation. I have to underline that anyhow, our portability performance -- net portability performance has been better year-over-year despite this. And this was the 7th consecutive quarter in which we have been the best performer in portability versus the big players in the market. The net adds has been more concentrated, not on the portability, that is the higher value in the acquisition, but on the so-called gross adds and specific segment low end. So we concentrated more on controlling churn and portability balance.

The next question comes from Mr. Pavan Fabio of Mediobanca.

Yes. First one is when looking at the Capital Market Day, I was wondering, in that occasion, you would also provide us detailed breakdown for ConsumerCo and Enterprise and which kind of KPI you eventually will share with us on that occasion? And my second question is a follow-up on the -- what you have already discussed. Thanks for the update on mobile. I was wondering if you can share with us some update on business trends for fixed?

Fabio, sorry, could you repeat the second question because we didn't understand very well?

Yes. Just an update on fixed business, how returns are growing? That same picture you have to share with us with mobile, but on fixed side.

Okay, Fabio. About the first question, about the Capital Market Day, we don't disclose anything because it's a surprise. No, I'm joking. I'll leave that Adrian to give you some more details.

Fabio, clearly, on the Capital Market Day, we will disclose many detail, obviously, with the focus on ServiceCo and on the domestic business. And we will include definitely specific KPIs on the Consumer side and on Enterprise, probably in the same way we did it last year in July of 2022. Anyway, in terms of disclosures, this should be the way that we will disclose the results going forward.

To be clear, Fabio, also because sometimes it's important to remember the huge work that the structure is working on because it seems that we started 10 years ago to discuss about all these things. But in 2 years, we put under control the operation. We signed I think the third deal ever in Italy, the 5th deal in the last 5 years in Europe, the 31st deal worldwide, putting a check of more or less €20 billion on the table. In the meantime, we are managing the carve-out of the NetCo. In the meantime, we are building the pro forma of ConsumerCo and EnterpriseCo. In the meantime, we are continuing to control Brazil to allow that Brazil will continue to grow as expected. So you must be patient on something because sometimes it's impossible to do everything at the same time. But I think that we'll enter in the Guinness in terms of number of activity that we did at the same time. The second question related to the fixed, yes, the fixed is proceeding. When you look at our number, we are having very good performance on Enterprise. On Enterprise, it's clear that every year, the fourth quarter is the highest of the year because there is a matter also of seasonality. And you don't see in the Enterprise number yet the good result that could come fully with the PSM, but then I leave to Elio couple of minutes to elaborate on that. While on the fixed, the repricing activity that we did and the strong portion of FTTH is allowing us to continue to improve our number. Today, fixed is growing better than mobile, but we think that we'll be able to arrive also on the mobile with the same good number on the fixed. In any case, we are more than satisfied about the number, because again, if you remember, 2 years ago, March 2022, when we disclosed our strategy, churn control, pricing rationality, premium offer, everybody we're looking at us as ET. It's impossible, it doesn't work. 2 years later, we are driving the market rationality. And if you remember, there were also a lot of questions related to the European M&A. I was always vocal at European level about the need to work on that. And also on that, there were a lot of doubts, but the rumors that you have heard in the last day about that say that we did -- we told and we did always direct things. But now I leave to Andrea a minute to talk about the fixed and Elio to elaborate on the Enterprise.

Thank you, Pietro. So on the fixed performance, in general, I think we had a positive progression in terms especially of the repricing effects and related churn impact. We see a good balance and overall relatively good stickiness. The market has been a bit more aggressive in Q4 with the back-to-school promotion, but the net balance in value has been very positive and we see overall good progression. The price market is still quite aggressive. During the first weeks of the year, we see a bit of a better and more rational position by the new players. Elio?

Yes. Thanks for the question. I will elaborate a little bit on what Pietro said. So as you have seen, Enterprise figures are trending, generally speaking, quite well. As Pietro said, there is also in Enterprise, a very high seasonality concentrated in quarter 4. Just for you to know, on a big average normally in quarter 1, quarter 3 and quarter 3 – quarter 2 and quarter 3, we registered €700 million revenues, while in quarter 4, 1 year ago, we did €918 million, and this year, we did €981 million. Let’s say, the growth is mainly driven by 2 effects; connectivity doing better than we were expecting and actually trending much better in H2. We started the year at total minus 2.6, we ended up minus 1.9 and the trend is looking good. And on cloud, as Pietro said, the national strategy gap is really taking off because the combination of what we were used to do 1 year ago on the previous SPC Cloud. And what we were supposed to do this year on PSL, we had an expectation in quarter 4 of making €94 million on cloud – on public cloud, and we generated €183 million. So basically, the reason why there is a high spike in quarter 4 is because cloud business on the public side is really taking off, and this looks really, really promising going forward.

Next question comes from Mr. Ghilotti Domenico of Equita.

Two questions. The first is if you can elaborate a little bit more on the comment on the EU white paper leak by the Financial Times? You are mentioning the opportunity on market consolidation. There is also a comment related to the fair share. And so if you have any comment on these 2 topics is very welcome. And the second is the clarification on your bylaws, in particular, when looking at the dividend. So I understand that if you distribute reserves, you can pay the same amount to ordinary and saving shareholders. In this scenario, my understanding is that the distribution to saving shareholders reduces also the accumulated preferred dividend that you have to pay to saving shareholders. Is it correct? And on the dividend distribution, can you help us also in understanding the different dynamics between the income at the holding level and the income at the consolidated level is quite complex?

The second question is difficult and Calaza is on strike, so I'm unable to answer. No, no, I'm joking. I will leave it to Adrian answer about the bylaw. About the first question, the comment about the EU. If you remember, I always touch 3 topics. The first one is the number of players in Europe compared to all the other countries. Maths it's maths. So if you have a 3 player in U.S., 3 player in Brazil, 3 players in China, so on and so forth, it's very difficult to image that the industry in Europe with more than 100 player can be sustainable. Then if you look at the Italian case, we are perhaps in the worst situation today. If you consider the price that we paid for the 5G licenses, the level of electromagnetic frequencies, all these kind of things, the market repair is the only path to improve our number also because the increased price, it's more complex, it takes more time, while a merger of the infrastructure allow to reach much faster cost efficiencies. The second point is the fair share. I think that was [Indiscernible] in the third quarter call, let's say, stated something like we want our money back. That's the truth. When you have some OTT that increased the price of their package of €5 to give high definition 4K and 8K services, you have to remember that if you to gather all the traffic in that way I should have an increase in the backbone cost that is unsustainable if you don't pass that to the customer. So the only model to that could be to be back to the traditional interconnection model that was in the past for the voice or in some way to give some target of control of the volume for the high spender of data. And these are the 2 things that we are proposing. The third one are the law, the routes. Just to be clear, how do you consider WhatsApp? Do you consider WhatsApp a telecommunication services, telecommunication service or social? My point of view is that it's a telecommunication service. So why it's not possible to apply to WhatsApp all the rules that in Italy, but also in the other European country the different players follow. Just to give you an idea, I'm obliged to give to my customer a call center services 24 hours per day with human assistant. So each call that I answer is a cost of €3. Why other players that play this kind of game are not obliged on that? Then there is a strange situation where there are companies that are starting to choose their headquarter based on the privacy law, fiscal law, regulation. I think that the best solution is not to regulate them, but to allow to have the hands free to compete exactly in the way that they compete. Then about the dividend, I leave to Adrian to give you some more color.

You’re right on the first part of your question, in terms of the bylaws, the savings shares have the privilege on the dividends only when the company has a net profit. And when I said the company, in this case, it is Telecom Italia S.p.A. So the kind of holding company. You know how we determine the effects of the results of our subsidiaries in the Telecom Italia S.p.A. only when we receive dividends from those companies. And you will see a clear effect of this when we release the full set of results in March the 6th and you will see the evolution of the net income of the S.p.A. There will be a clear effect coming from the dividends that we received in Italy from Brazil. But this said, as you were mentioning, if there is not a profit, we do not have privileges on the savings shares dividend. So it could be the case that we distribute the same for the ordinary or for the saving shares. But again, this won’t be the case on 2023 results probably. This is something that we will start to discuss once we close the deal. Probably we can make some assumptions in the next months, but your assumption is right, yes.

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

I have a couple of questions. The first one is on the NetCo. And I was wondering if you can summarize the next steps ahead, not from now into the closing of the deal? What are the key steps and how are those? And secondly, still on NetCo, I wanted to ask a question about how binding is the contract you signed with KKR? I know you've been quite clear on this, but it's a fact that in the market there is a lot of noise about this topic. So if you can clarify it would be helpful for everybody. So how binding is the contract? And essentially, what can go wrong from here? Is there any condition that allows KKR or Telecom Italia to step away from the agreement signed in November? And lastly, a question about the market. So if I look at the MSA between ServiceCo and NetCo, there are volume discounts. So you disclosed that in the Q3 presentation. So volumes discount means that smaller players are likely to struggle more. So Pietro, I wanted to hear your views whether you think that the NetCo spin-off will essentially trigger consolidation in the retail market in Italy because players will need more scale?

Thank you, Luigi, also because it helps us to clarify, because again, there is a lot of talks sometimes on a voluntary basis about what is happening, but everything is very clear. I cannot go too much in details, but you have to consider that the market today is a market where there are services that are and will continue to be regulated because there's no competition on that. Market on which there will be the liberalization, just to give you an idea, wholesaler rental, it was already liberalized, but not because of us, because of regulation, while FTTC and the unbundling continue to be regulated. And then there is a market that is by facto, the regulated, the FTTH, because now if someone say that the FTTH in the black area is not a competitive environment, I want to know him in person because I think that there's a real issue. Then -- so if you look at these things, we are not beginners. So the MSA that we signed is based on this principle. It's difficult to image that we can sign something with volume discount or something that is regulated. While what is not regulated, there could be volume discount. But also on that, if you have the chance to read the market analysis of AGCOM, that consider TIM as a vertically integrated player, they consider the possibility to have in the area of competition volume discount. So let me say, I'm not disclosing anything about the MSA because it's confidential. But if as a vertically integrated player, the national watchdog said that you can have volume discount. When you become a pure wholesale player, you can continue on that. I don't know if it was clear, again, for a matter of confidentiality, I cannot go in details. But stated in this way, it is very clear the situation. So we don't foresee any specific issue on this part. Then about the steps we have to go through. I think that the most important one is the authorization at TAC level, on which, as I stated in the previous answer, I don't foresee specific issue because concentration, it's a matter of nature. I have 2 that become 1, as a song, if I'm not wrong, about the Space Girls. But this is not the case. So we don't foresee specific issue on that. The next -- so once we do that, then the next 2 important step is the liability management, but it is important more to have the right evaluation of the caching that we will have than for the closing of the deal, because the LME, if you remember, in the chart that we showed you, we define a certain amount, but if it works in a better way, could be also higher than what we forecasted. [Indiscernible]

Yes. The LME is not a condition, it's something that probably will add value and will have NetCo in terms of the kind of financing that they will have, but it's not a condition.

Yes. But I was giving the step we have to go through. So the LME, it's quite possible that will be managed between April and May after the general assembly. And then there's the activity that we are putting in place that are related to the carve-out because we are defining all the TSA to proceed. So we'll continue to foresee as a deadline before the summer, the closing. So then to give some more colors about the level of binding, that they confirm that is binding. So there are someone that is trying to argue that it's not binding. This is not the truth, but I'll leave to Agostino, the Legal Counsel to give more color.

So the contract is binding. There is no way to skip the closing. In terms of condition precedent, as Pietro said, we are just waiting for the last condition precedent, which is the antitrust. We have everything. We are ready to close. So as soon as the antitrust authorization comes, we will go to closing. In terms of risk on the antitrust authorization, again, the antitrust authorization refers to the concentration. So we have to check that there is no concentration effects on the market as of the transaction. Now it's clear to everyone that KKR has no activities in the European market. So it is neutral per se. There could be no concentration at all. All the rumors about the relationship between TIM and NetCo, frankly speaking, our usual noises, but please consider that Italy and NetCo will be the first we send only operators probably in the world. So again, if someone is saying that is anti-competitive having an independent wholesale operator vis-a-vis TIM integrated, I mean, it's something really surprising. And whatever happens to the Board of TIM, to the team management, to the world, the contract has to be closed as per the provisions. And so again, we are very close to the end and we are still confident that in June, July, we will close.

The next question comes from Mr. Beyazian Stephane of ODDO. Stéphane Beyazian: You've done quite a lot in terms of savings on track with your €1.5 billion, which should complete at the end of 2024. I was just wondering whether you believe that there is still potential after the sale of NetCo because one thing I don't know how those savings split between NetCo and ServiceCo? And do you think that after the sales of beyond 2024, there is potential to further adjust your cost base at ServiceCo?

There are some -- for example, I have heard a lot about artificial intelligence. Everybody is saying that artificial intelligence will allow us to have a huge amount of saving. I can tell you that until today, we work with more traditional tools. Just to give you an idea about the potential savings that we did in until today that only a small part was related to the NetCo, just to be clear, because today on ServiceCo, we have still room to further improve our cost base. Just to give you idea about call center, we have something close to €220 million of call center costs. So you can choose a number of calls reduction and you can calculate that. When you will look at this amount inside the number of the EBITDA of ServiceCo, it's not a small number. Then I have to remember that we continue to keep the mobile network on us. So Leo Capdeville that joined us from Brazil is working to try to do -- to have better efficiency in the way in which we manage the mobile network. Also in terms of perspective increase of cost, 5G perhaps in this stage of our life is more useful to reduce the unitary cost for transportation of the data that's not to habilitate for their services. Then we have the sales commissioning. On this area, we still have room to work on that. When we talk about commissioning, you have to consider the impact on cash and not immediately the impact on the EBITDA because the sales commission today is depreciated in 4 years for mobile and ETFs for fixed. Then we continue to have good margin to improve also the collection cost that is another area in which we are working. Let's remember that then we have also the heritage of something that we did going in the past. Perhaps everybody forgot that we put a provision of more than €0.5 billion for the zone. Starting from 2025, the impact that is in terms of cash, something close to €100 million, €150 million per year will disappear. So we start to have also some improvement that will come from the fact that some mistake that we did in the past will disappear. Then I don't want to bore you to go in details of all the costs, and we work on that for the presentation of the 7th of March. But it was just to give you an idea that we have a clear understanding of the issue that we can manage, a clear understanding of the cost base of our company. And as we did in the last 2 years, we foresee that we can continue to further improve our cost base.

The next question comes from Mr. Mills Joshua of BNP Paribas Exane.

I have a couple of definition questions just ahead of the Capital Markets Day, and then I'll ask a couple more operational ones. But the first thing is, I think the last time you gave headline revenue, you gave your CapEx figures for the Consumer and Enterprise business segments within July 2022. And since then, you've given us growth rates for service revenue over the quarters of the year. So the question is, can we still use the disclosure from July 2022 as a perimeter for the new segments which we're going to be giving detail on the Capital Markets Day or have all of them [Indiscernible] different moving parts changed and for the perimeter will be drawn? And the reason I'm asking is, it's obviously important to get a sense of what we should be modeling before the event. And second question is somewhat related, but the growth figures which you show on Slide 7 and 8, for example, where you can see service revenue growth through the year for Consumer and you also requisite for Enterprise, will those figures be the same under the new perimeter that is disclosed at the Capital Markets Day? And then finally, I just wanted to check, in 2023, the NRRP payment was received at the end of the year in the fourth quarter. I would assume that's the case for 2024 as well. And hence, your guidance for ServeCo won't be any contribution from NRRP because those payments are going to the NetCo business. Is that the right assumption?

Josh, I'm Adrian. I'll try to answer you the first question. There is a little bit of noise in the line. So probably, I don't know if we got it right then, so please set us now. But in terms of the disclosure that we did in July 2022 or Capital Market Day and what we will disclose in a couple of weeks, it will be pretty similar. Consider that the final perimeter of the deal with NetCo was almost the same than the one that we discussed in July of last year of 2022. There will probably be some difference on the MSA agreements in terms of what we mentioned in 2022, but you will find a similar approach in terms of disclosure. By that time, we also gave a lot of information on the business units on the Enterprise, on Consumer and Brazil, we'll see what we are discussing, what kind of guidance we will give. We'll try to be clear in terms of what we will expect for the next 3 years. So yes, you can assume that there will be some relations between what we will disclose in March the 7th and what we did in July of 2022. On the second question, Pietro will take it, but probably, we'll need some clarification on the last part of the question.

Joshua, I think that you are using a line of the competitor because there was a lot of noise. I'm sorry, I'm joking, but it was very difficult to understand the second question. Could you repeat, please?

Can you hear me better now through this line?

Yes, slightly better.

You are right. I'm on the Vodafone network. So you are correct.

You can move to TIM as soon as you will come to Italy.

Okay. The answer to the first question was clear. The second question was somewhat answered already, which is if I look at Slide #7 and see the trajectory for revenue and service revenues, will they be the same under the new disclosure. But I think the answer is yes based on what you said. And then the third question was that in Q4 2023, you received significant payments from the NRRP subsidies. I just wanted to check that in 2024, should we assume that all of those subsidies, most of them going to the NetCo, and therefore, the guidance you gave on the ServeCo, if you do talk about free cash flow, not to include any subsidies because they usually come at the end of the year and you will have solved the matter by then.

Yes. I'm Adrian again. On the NRRP, anticipation is that we'll put it this way because we are not talking right now in terms of subsidies. This is part of the compensation of the CapEx that the company is doing for the development of the NRRP projects. What we had in this quarter was the anticipation of part of these contributions coming from the company. We discussed a lot. This was something that Pietro took himself in terms of discussions with the authorities, because at the end, we were the only industry that -- for which the -- these funds were recognized only 18 months after the declaration of the project. So this is an impact considered, obviously, the actual interest rates that we have. So these were -- these discussions were interesting with the government. They agree of this impact. So we had the anticipation of these funds. Consider that probably until the closing, TIM would have done more or less €1 billion of the almost €3 billion of NRRP projects. So this is somehow covering in terms of contributions of what we did. I hope I answered the whole question. But if there is any doubt, please let me know.

But generally speaking, what we did, we didn’t put in the presentation today details about what we will show the 7th of March, because our desire was to focus the attention on everybody in the way in which we are managing the operations today, because during these 2 years, sometimes all the rumors around the company didn’t allow to show in this way, the good job that all the TIM did. But for sure, the 7th of March, you will receive all the answers related to the ServiceCo number, the relationship with NetCo and all the details that will allow you to do the right evaluation of our company. And as we always stated, since the beginning, because this was the first question, ServiceCo will not be a bad company. ServiceCo will be a company that will be able to compete in the market in a healthy way from the strategic and financial point of view. Joshua, remember to buy the TIM SIM next time.

The next question comes from Mr. Ratzer James of New Street Research.

So two questions, please. The first one is if I just look at your core consumer wireline business, the trends actually in the past 3 or 4 quarters are remarkably stable. You've been seeing 60,000 line losses roughly seating per quarter. And you've also seen ARPU growth of around 5% year-on-year net of the activation fees. So I'd just be interested in your thoughts on the continuity of those trends. What do you see potentially changing either of those trends for the better or worse as you look ahead over the next year or so? And secondly, with regards to the NetCo-ServeCo split. On the balance sheet as of Q3, you had about €1.7 billion of provisions and employee liabilities. Could you give us just an indication of how that €1.7 billion was split between NetCo and ServeCo?

Okay. About the consumer core, before to leave to Andrea, just some market light. What we did in these 2 years was to be rational, become to play the role of the market leader because the one which we set the price of everybody, starting to work to transform our services in premium and try to understand how to manage the churn reduction. In the following quarters, the idea is that to continue to work in the churn reduction through the bundling with further services, because what we have seen is that, for example, TIM Vision is an important element of churn stabilization and contention. It's clear that you have to do that having a content offer that is not burning cash, and this is what Andrea is working on. But I'll leave to Andrea to give some more color.

Thank you for the question. Indeed, we had a pretty stable trend in terms of performance quarter-over-quarter. We had an improvement in the full year performance of net adds, a slight improvement year-over-year, mostly due to the first 2 quarters in which we had lesser repricing activities. But overall, we had an improvement also in the full year. If you take into account the specific performance of broadband lines, excluding FWA, the repricing activities have been pretty successful. We managed to have stability of churn despite an increase of ARPU that was quite significant. As Pietro explained, we see positive contribution from the so-called customer platform approach, so including convergence services with entertainment and also financing of devices based on the bill, which has given a positive contribution to churn stability. So what we see going forward is that with further convergence expansion, we should have a pretty stable trend in churn. We need to see, of course, how the market develops in terms of aggressiveness of offer from competitors.

Yes. On the second question, James, about the distribution of NetCo and ServeCo of this provision, I think we mentioned it last quarter. Clearly, these are provisions that we booked during 2019, '20, '21, '22 of the different agreements that we had with the unions and were related to lay-offs that we have during this year. So in terms of cash effect, this will remain on ServeCo. Then we'll see what happens in 2024. This could be something different. But up to now and what is related to those provisions, the effect in terms of cash, you will see it on ServeCo. As we see today, if you look at our equity free cash flow, the effect is always in the working capital. So this will be the same going forward on ServeCo.

That's clear. So all those lie with ServeCo. Just coming back to this point on, Andrea, is there anything you can say about 2024 on your plans on pricing strategies for this year?

Let me say, we do not disclose details. Certainly, we believe that repricing is a common practice in the market and we will continue depending on the opportunities from the competitors’ aggressiveness.

The next question comes from Mr. Adorisio Ottavio of Societe Generale.

A couple of questions on my side. The first is on the Enterprise. You've provided a lot of color. You emphasize the seasonality. So quarter-on-quarter really is minimal, but year-on-year, you have a stellar performance. And from one of the speakers said that it was to do with the cloud, public cloud. So I was wondering if -- do we have to expect that particular performance to continue in the next few quarters or is it going to subside? The second one is basically on all the talk about Sparkle. There's been many reiteration about that deal. The last one, it looks that it could be you asking for a minority in the business. So I just was wondering what's the rationale for Telecom Italia to keep a minority in Sparkle if you decide to sell? The third one is to Pietro, it's on volume discounts. Now I appreciate that there are volume discounts today, but as you stressed many times, what you're doing is very unique in Europe, it's not been done. So the share size of ServiceCo in the retail market will be very unfair to get volume discounts. So in case the antitrust will come to the same conclusion, is that will be a deal breaker for you if there will be starting a volume discount towards ServiceCo? And the fourth one is to CFO. We talked a lot about ServiceCo, and given the historical, I understand there's a number of things, number of moving pieces on the MSA. Now in March, when you're going to give us some numbers, are those numbers will be just pro forma or are you going to be audited? So therefore, there will be a third-party looking these numbers before sharing with the market or after you can share with the market?

Okay. I will answer to the second to the third, about the volume discount. I tried to give the details to explain why this is not the case. First of all, today exists a pure wholesale player in the market that de facto on the FTTH that is the only market in some way the regulated is offering volume discount. And none of the players that today is claiming in Brazil is saying that it's unfair that the main competitor on the wholesale business is offering volume discount. The second, the market analysis made by the national watchdog is putting a disposal of the -- of TIM vertically integrated volume discount. So I really don't understand when you say -- I'm sorry to stress that because I cannot accept that in a public call, we talk about unfair, because if we don't know the details, we generate rumors on something that is not the truth. Here, no one has never discussed about volume discount, about unbundling at FTTC so and so forth. So I don't see any kind of things that is unfair. I'll give you the details. My competitor on the retail side are buying with a kind of volume discount from the main competitor on FTTH. The national watchdog is discussing about volume discount. So I think that at European level, everybody are asking also about that. So perhaps, I should use a different world. Finally, we will compete in a fair way, because until today, we were obliged to compete in an unfair way. Can you tell me why in the replicability I must consider having all these customers as the smallest player to build my offer? I think that someone is starting to understand that in the market with the capability to compete in a fair way, we'll have much more opportunity than in the past. It's like to have Marcell Jacobs, that is the winner of the 100 meters at the Olympic game, that have to compete against the other with Havaianas, and he will lose. Now someone is understanding that we run no more with Havaianas, but with the normal shoes to run and perhaps they are scared. But the truth is that there's no unfairness. It's a rebalance toward the fairness about that.

Yes. I think it's -- one thing that has been lost in all the conversation is that your market share has been built over the years where you're an integrated operator. So you start from, what we call, dominant position, but because the birch have been integrated, so you will be rewarded for this volume discount for your history. I understand going forward will be a different one, but your market share is today coming from being an integrated operator for many years?

But Adorisio, sorry, do you know which is our market share in Milan? Tell me the number?

Sorry?

Do you know which is our market share in Milan?

Milan is not Italy. We're totally Italian. Milan is an exception. The rest of Italy was well above 50%.

No. But Adorisio, sorry. If you want, we can discuss in details and I like to have people in front of me with the number in their mind. What I mean, it's not only Milan 18%, but if you look Turin, the main cities, that is the things on which the market analysis are giving us the opportunity to do market volume discount are like that. Now why I'm unable in the city where I'm below 20% to compete as the others? And again, we are -- if you look at the market share on FTTH, which is our market share on FTTH? We are discussing to compete on FTTH. You remember our market share on FTTH, not on FTTC. So if you look at our market share on FTTH, we are not the biggest by far. We are equal to the others. And then about Sparkle, but Sparkle is not processed by us about possibility to have the minority stake. It was asked by the potential buyer because it was a kind of support in reaching the number because the buyer is not an industrial buyer. And so they feel more comfortable to have on their side someone that have them in delivering the number of the plan. So it's nothing strange. Then about EnterpriseCo, I leave to Elio.

Yes. Thanks for the question. So we do believe we can deliver a solid steady growth on service revenues going forward, particularly when we focus on cloud, and more importantly, as you mentioned, the public cloud. As you probably know, we do represent 45% of this national strategic hub, which is a program made for improving capabilities of a public administration to move to digital, so to move to cloud. And this is a very long journey. We are at the very beginning of the journey because the program is set for stay there for 13 years. We just handed the first one. So the growth that we registered at the end of quarter 4 in 2023, will keep accelerate going forward. We do see early signals of this acceleration already in the beginning of 2024. Let me underline something which is very relevant to this exercise. So not only we do believe we will deliver steady growth on cloud services. But margin-wise, this will become more interesting going forward because we will switch from professional services where we are making a tremendous effort today for migrating customers to cloud. We will move into the more prominent part of revenues going forward will be infrastructure services. And as you know, we have 16 data center where marginality of that business once you have made investment will become much more relevant. So not only we -- let's say, we stay on the statement that we believe that service growth will be steady, but going forward, margins will become more interesting.

Ottavio, I'll take the last -- your last question about the -- what we'll be disclosing in the March the 7th. No, clearly, on the Capital Market Day, we will give you pro forma figures. But anyway, we are working on the audit process, both on NetCo and on ServeCo and we will probably have this for late March that we will need these also for the liability management exercise. Anyway, on the NetCo side, we'll probably be fully audited. On the ServeCo side in terms of pro forma, probably we'll have a limited review because it's not mandatory to have full audit. But anyway, you will have by late March additional comfort on the figures anyway. We think that with the pro forma, we will be pretty sure about our numbers. On the -- I would like to come back on the volume discounts because it's extremely important what Pietro mentioned. These discounts are not different of what we are seeing today in the market. And this is probably the main matter here. It's not different of what we -- our competitor on the wholesale side is doing. And honestly, I don't agree with the fact that these volumes were constructed during the period that we were modeling, because at the same time, during this period, we lost probably 50% of our market share on the broadband. So it wasn't the benefit. Anyway, it's not just -- be sure that it's not different of what we are seeing today in the market.

But what is important is to discuss based on the number because this is a market that proceed based on words and numbers are more than words. So more than happy to have a discussion based on numbers.

Yes. Just a very quick one. I actually fully agree. So would you going to provide visibility on market shares, not just nation-wide, but provincially or regional so we can see where are your strength and your weakness are, so we can discuss by numbers?

Yes, Adorisio. But I'm surprised that you don't know that AGCOM release every year these numbers.

But cities, as you said earlier?

If you look at the AGCOM number, you can see the market share.

The last question comes from Mr. Wright David of Bank of America.

Yes, congratulations on the second year of guidance and somewhat remarkable reference to the Spice Girls. Just a very quick question, Pietro. We've seen Iliad's second attempt to acquire Vodafone. We've seen Vodafone say no. We have reports of Fastweb circling some kind of a deal with Vodafone. We've seen Wind Tre pull out of their infrastructure deal. It feels like there are multiple moving parts in Italy right now. Do you have any perspectives you could share? And could ServeCo even be part of this game as we look into the next 12, 18 months?

David, I appreciate that you love too Spice Girls. If we talk about...

I didn't say that.

I'm joking. But again, about the market view, what is happening is that for sure until July when we'll have the closing of the deal, we can only say the winner because it's difficult to have or to participate this kind of move while we are finalizing the carve-out and to have the authorization. While proceeded, we can be part of that game. It's important to understand that if we set the window and it happen, we will have some advantages. If we participate in an active way, we'll have advantages, but we have to be ready to understand what can happen. Then if you ask me which is the best solution to have the real market repair, if there's someone merged with Iliad. All the other are suboptimal. What I mean is that if you ask me if I should prefer Iliad-Vodafone or Fastweb-Vodafone, I should prefer Iliad-Vodafone. It's a matter of way in which the market can be repaired. But again, we are ready to do our part in the next month once we will finalize our deal. And so after the summer, we can try to understand which could be the move. But flexibility is what we need because nothing is yet defined and we have to understand how to proceed.

Okay. This was the last question. Thank you very much for participating today. We will reconvene in three weeks for the Capital Market Day. Have a nice day. Bye, bye, everybody.

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