Ladies and gentlemen, good morning and welcome to Telecom Italia Q3 2022 Results Conference. Manuela Carra, Head of Investor Relations, will introduce the event.

Ladies and gentlemen, good morning, and welcome to our Q3 2022 results presentation. I'm here with our CEO, Pietro Labriola; our CFO, Adrian Calaza, and the rest of our management team. Pietro will provide an overview of last quarter main achievements and Adrian will illustrate our financial results, a Q&A session will follow. Pointing out to you our safe harbor disclaimer on Page 2, let me hand it over to Pietro. Pietro, the floor is yours.

Thank you, Manuela, and good morning everyone. I'm glad because today we have the chance to talk about business after weeks during which everybody's attention has been caught by information and misinformation appearing daily in the press. It's now time to let numbers and facts talk. Back in August during the call on second quarter results, I explained the main challenges that we need to address as a management team. I said that the first one is to ensure business continuity. It means that we must put the operation under control and improve the business trends. I also said that we will need to do this operating in a macro environment that is much tougher than expected where high inflation poses new challenges. I think Q3 results showed that we are on the right path and for some metrics even ahead of our target. Here I just give you some highlights and we will deep dive into each topic later in the presentation. Trends are clearly improving year-over-year in Q3. Group revenues are back to growth. Service revenue are further accelerating with more than half of the improvement versus Q2 coming from domestic business. Group EBITDA after lease is also going better despite domestic OpEx increase due to tough comparison on personnel in Q3 last year. Adrian will elaborate on this later showing you that this is a specific quarter discontinuity while the fourth quarter will begin on track. If we zoom on domestic in the fixed market, we have a better service revenue year-over-year trend, higher ARPU and we are able to slowdown the washing machine achieving consequently, the lowest churn in the last five years. In mobile, we have seen a huge improvement in human net adds with the negative balance reduced to one sixth versus Q2, better mobile number portability balance where we are again the best performing MNO and with churn at a new record low. We are highly focused on the execution of the transformation plan where we target profit and loss cost cuts of 20% of our addressable base, plus extra efforts at cash level OpEx and CapEx for a total of €1.5 billion savings in 2024. Out of the 6% targeted OpEx reduction versus 2021, in the first nine months we have already achieved around €270 million OpEx savings. This represents 90% of 2022 target, a reassuring result indicating that we are managing the company more and more with the cash driven logic working on inefficiencies and attributing the right priorities. Moreover, we have also – we have already secured around 50% of the 2023 profit and loss OpEx reduction target. Also, thanks to the expansion contact we signed with unions for 2022, 2024. On energy costs, a trend topic of this reporting season, which is creating a lot of concern from most European tackles. I want to give you reassuring messages. Our costs for 2022 are almost all hedged with fixed prices set before the energy crisis started. Therefore, we are in line with our budget. Please know that the increase is driven not so much by this huge in prices rather by higher consumption considering that we are expanding our network and data center infrastructure and that this summer was very hot and we had to use more power to cool down the data centers. Energy costs for next year are hedged for approximately 75% including the pass through on colocation considering that the consumption driven by all of the equipments colocated in our central offices is eventually born by them. On top, we have launched several initiatives to keep 2023 overall consumption flat year-over-year, thanks to around 6%, 7% gigawatt savings that will compensate for growing data center and network consumption. My final remark is on the liquidity position. In Q3, we paid the last tranche of the Italian 5G spectrum, but we have also secured 2 billion SACE financing and cash in 1.3 billion through the unit disposal. Overall, our liquidity position is sound and upcoming maturities are fully covered until the end of 2024. Also, we see no major impact for interest rates increase as the majority of long-term debt is at fixed rates. Our business today is more stable, predictable and healthy than it was at the beginning of the year. Our ambition now is to take it back to growth in 2023. This is also due to better condition in four markets we operate in and this is what you can see in the following slide. Despite tough macroeconomic environment, we are confirming that finally the market is becoming more rationale as we predicted at the beginning of the year and we are now seeing several positive signs in all segments. We are not magicians and our behavior was an accelerator for this result. In the consumer market, operators are increasing prices both from fixed and mobile also in order to pass inflation to final customers. The migration to FTTH is happening. However, FTTC is still a reliable technology growing year-over-year and remaining at the market share on new adds around 55%. Let's remember that more than 57% of our FTTx lines go beyond 100 megabit per second. Mobile number portability market is cooling down, so the washing machine is now less relevant again as we predicted at the beginning of the year. In the corporate market, cloud migration is accelerating both on private and public administration segment. At the same time, connectivity is still broadly stable year-over-year. In this segment, we are growing more than the market. In the wholesale market, fiber adoption is still growing healthy both in FTTC and in FTTH, despite at the slower pace versus previous quarters. In Brazil, market consolidation is in progress and we are seeing a more rationale competitive environment. The ICMS tax reduction is fueling customer spending power and creating additional demand. Next slide. On the following slides for the first time we provided an update on the four entities outlined at the Capital Market Day. We'll give you full disclosure of KPIs and financial metrics in February when we will present full year results and 2023, 2025 plan. Let's start from TIM consumer. The turnaround is ongoing. We see improving trends both in fixed and mobile. As commented before, the market is cooling down. This is something we have stimulated in the last quarters as it enabled us to retain high ARPU customers. We will further support this trend with the introduction of price indexation for new contracts from the year end. We have selectively priced up our customer base with very low incremental churn while the revenue uplift will be sizeable so expect more to come of such action in the coming months. Other positive notes are the increase of our market share in FTTH, which has gone from fourth to first position in two quarters and the stickiness of TimVision customer base despite the exclusivity on football has gone. TIM Enterprise is developing according to expectation, which means it is growing steadily and faster than the market. We continue to see strong demand for ICT services with a growing pipeline across the board. Needless to say, the recovery plan tenders, we secure this year and National Strategic Hub are growth engines and may even deliver unexpected upside in coming years. Also new contract of TIM Enterprise will be CPI Link. NetCo is moving forward with FiberCop plan execution. FTT rollout is on track. On the wholesale front we have new wholesale tariffs under public consultation that take into proper account the inflationary environment, finally reducing the gap versus other European markets and incentivizing faster migration towards fiber. TIM Brazil growth has further accelerated. Q3 was the first full quarter of integration of Oi, while in Q2 we had only two months. Both service revenue and EBITDA increased more than 24% year-over-year in local currency. This business is definitely performing up to expectation. Before we move on, some additional consideration. It feels that my tenure at TIM started a long time ago. However, I was appointed CEO in January and it has been just four months since we presented our new plan delivery in TIM. During this period, we have been working hard to execute our long term strategy. In recent weeks it has become clear that the timeline of this project has been impacted by the unexpected evolution of the macro and political environment, but the strategic option that we outline at the Capital Market Day back in July are underway and remain our North Pole. The long term strategy is confirmed. We continue to work hard to fully implement it. More specifically on TIM NetCo, as you know, we extended the deadline of the MoU to the end of November. However, exclusivity has not been renewed as we want to have the flexibility to conduct parallel negotiation from now on, should the opportunity arise. On TIM Enterprise, the process to set up the legal entity has been approved. We are fully committed to go ahead with this two projects. Let's now zoom in each of the four entities. At the Capital Markets Day, we were very transparent in saying TIM consumer is a turnaround case that 3% the biggest managerial industrial challenge we are facing. However, we also expressed our convention that this business has significant potential and our confident that we will succeed in making it industrially sound. Of course, the journey to fix the core transforming our consumer and SMB business into an agile, efficient, and commercial flexible premium operation has just started. Let me say that we are pleased with the achievements so far. On the top right corner of the slide we show that TIM consumer overall is a business with total revenues still declining high single digit year-over-year and service revenue down 7.4% year-over-year in nine months. However, if we see a better trajectory in Q3 and improving operational trends both in fixed and mobile. Q3 overall our negative net adds have almost halved compared to previous three quarter with a further deceleration in September, churn is down to the last year level. In mobile churn is at a new record, low. Mobile number portability trend is steadily improving and line losses are down 80% quarter-over-quarter and 75% year-over-year. We have kicked it off a lot of initiative from new communication to radically different incentive schemes from major focus on digital channels to a more daring approach to how we extract value from the customer base. In a nutshell, what we have done in these months is to steer the business from volume to value. All the action you see on this slide are current with this approach I will recommend only few. We are announcing TIM’s premium brand and market position. The communication campaign within recent months has been very successful to revamp the brand. We have also launched the first ever 10 gigabit per second offer available in the current market while switching up the less popular offers. Selectively pricing up our customer base is proving to be a healthy practice, limited churn on one end, sizable upside on the other with the run rate of €50 million incremental revenues combining mobile and fixed. Considering the untapped potential still lying in our customer base do expect to see us more active on this front in coming quarters. So far we've addressed less than 20% of our customers. Competitor have also been quite active in back-book repricing and recently also in front book prices. In a nutshell, the market is moving slowly but steadily towards high rationality. The volume-to-value approach is paying off also in our content business where TimVision customers have increased year-over-year and the number of paying customer for football is 44% higher now than it was one year ago, despite we have given away exclusivity. Concurrency has been removed from November 1 and hopefully this will translate also into a higher market in terms of viewers that will be beneficial also for us. The introduction by year end of inflation linked contracts for the new retail customer is another building block of our strategy. Passing inflation through the customers is common practice for virtually all industry. Honestly, we see no reason why we should be behave differently. Let me make a final remark here. Our telco industry has the same VAT of the luxury sector, while this is not the case for utility services that are treated as primary goods. In Brazil, this is something that has changed recently, for example. And we hope to see the same changes here in Italy. In the nine months TIM Enterprise total revenues are up almost 6% year-over-year and service revenue almost 9% year-over-year with a mix where the moderate decline in connectivity is more than compensated by Cloud, IoT and Security. The combined weight of ICT business has increased five percentage points from 51% to 56%. Overall we [indiscernible] the messages of the Capital Market Day. The business is growing faster than the market with cloud being the main driver. Connectivity is down year-over-year but we have contracts already designed that are incorporating a double digit growth in this line. Over 60% of revenue still 2025 are already secured and will further improve. The visibility on growth trajectory is very high considering €1.1 billion cumulative value from the National Strategic Hub and €0.2 billion from the Connected Schools, Healthcare tenders we have been awarded. Furthermore, we have over €1 billion of public administration contracts in activation and the pipeline of ongoing negotiations may deliver up to €0.6 billion additional revenues. A significant part of the growth is coming from top 35 customers, indication that TIM Enterprise is indeed a natural reference player in the Italian market, uniquely positioned as an infrastructure based ICT player capable to exploit the telecom and IT convergence. That is why would not solve the drawbacks that other European telcos have reported recently. We see multiple potential upsides through upselling, ecoselling for example on the public administration that we start the migration to cloud in Q1 2023. My final remark is that also TIM Enterprise new contract will be CPI linked. At the Capital Markets Day, we presented a timeframe articulated in three major steps from foundation until the end of this year, followed by 18, 24 months for the evolution in a standalone company with own infrastructure and ICT capabilities and then an acceleration phase leading to 5 billion revenues by 2013. The initial phase is on track to create a separate legal entity with an integrated operating model and clear interfaces versus the broader TIM Group. Slide 9, in the nine month net total revenues are down 4.8% year-over-year and service revenue 3.8% year-over-year. Let's put this performance into context. In the year-over-year comparison, there is 3.2 percentage point drag on total revenue and 1.7 percentage point drag on service revenue due to non-repeatable transaction in freestyle for last year. Q3 trends are significantly better, more in general at the Capital Market Day, we said that net cost total revenues were expected to slightly reduce in the mid-term and recover as a mix of the loss of volumes and evolution of regulated prices that would incorporate a link to inflation. This year debt, the overall market has slightly decreased year-to-date in terms of total assets lines. There is no surprise in the number we report today the trajectory is in line with our expectations. Of course, the news here is the new approach in wholesale regulated prices for the next year. Copper prices to increase those for full fiber connection to decrease. Let me repeat what I said at the beginning of the presentation. In the proposed start, we basically see two things, a strong incentive to accelerate the migration to FTTH. A reduction of the gap between Italian tariffs for copper services versus other major European market. Should the proposed prices be confirmed by AGCom on local loop unbundling Italy will finally realign with France and UK considering the automatic CPI linked mechanism but we still be beyond Germany. On sub-loop unbundling, the gap reduced but we still be beyond these markets. In any case, in the existing plan, it wasn't included. More importantly, and this is my main message on this topic, we do hope that the market will react rationally, taking this as an opportunity for a pricing also in the retail market. Slide 10, in the nine month TIM Brazil total and service revenues increase well above 18% year-over-year, being the first quarter benefiting of three month of integration in Q3 growth further accelerated in mobile. Also fixed so an improving revenue trend, actually all profit and loss line were up year-over-year. KPIs show strong trends across the board. Mobile app is flat and churn is down more than two percentage point versus Q2, while in fixed in Brazil reported 6% year-over-year ARPU and 5% year-over-year customer base growth. These are several drivers of this performance. To name just a few, I remind the ongoing migration of 16 million mobile customer which is proceeding according to expectation, the rationality of the market without players pricing up and the ICMS tax deduction, most of which would be passed through to customer. All of that creating additional demand. On top TIM Brazil, 5G coverage arrived in all state capitals with a number of antennas that is higher than its peers combined. This create new commercial opportunities and enable to speed up 4G uploading, thus increasing the overall quality of service. Slide 11, just a quick recap on our ambition in terms of the transformation plan. The end game is to rethink the entire operating model to achieve a more sustainable cost structure with around €1.5 billion cash cost saving in 2024. The mix will be around €1 billion of profit and loss addressable cost reduction that represent a 20% target we have already provided to you in May. Around €250 million of extra cash cost savings, mainly related to leases. Lastly, around €300 million of CapEx savings already starting from 2023. That will help us to mainly absorb the increasing gross CapEx. we are having from NRRP initiatives. The target for 2022 is to save €100 million of labor costs and €200 million of external OpEx for a total of €300 million or 6% of 2021 addressable by baseline. In the nine months, we have 100% of the labor cost savings and 85% of other OpEx so we are at 90% of the full year target. For 2023, around 50% of profit and loss OpEx reduction target is secure, also thanks to the expansion contract. As you can appreciate, we are working on many streams in order to regain efficiency from real estate to customer care to channel mix, just to name a few. Let me now hand over to Adrian who will guide you through our financial result. Adrian, please.

Thank you, Pietro and good morning everyone. Slide 13, if we look at our key financials in Q3, we reported improving trends versus Q2, continuing the positive evolution registered in the previous quarter. Group service revenues year-on-year trend was positive at 3% from 1% year-on-year in Q2. In the nine months, group service revenues stood at plus 0.5% year-on-year. Group EBITDA was down at minus 6.5% year-on-year from 8.5% in Q2, we work hard during the first nine months of the year in order to improve our results compared to our projections and we succeeded despite the present tough macro environment. Equity free cash flow was likely negative in the quarter partially driven by the operational trend. I want to highlight that the year-on-year comparison is negatively affected by a positive one-off effect in 2021 in the financial charges. Equity free flow in the nine months was positive at €261 million, with operating free cash flow net of license fully covering financial expenses. Net debt after lease increase in the quarter mainly due to the €1.7 billion cash out for the last installment of the 5G license in Italy. That was not entirely compensated by reduction from the disposal of the stake in. Let's now have a look at quarterly trends in the next slide. As you can see, group service revenues grew 3% year-on-year with an improving trend versus Q2, thanks to a higher contribution of Brazil after our integration but also better trend at domestic level that improved further after Q2 at minus 3.5 year-on-year versus minus 4.8 year-on-year in the previous quarter. Group EBITDA after lease was down 11.2% year-on-year, with domestic minus 18% in line with Q2, net of last year non-repeatable items, the declined for the quarter in domestic EBITDA would have been high-single digit. CapEx were slowly down this quarter year-on-year. Notwithstanding the push and growth investment mainly in FTTH with 400,000 household passed in the quarter in line with the previous quarters. In the nine months group CapEx are up 5%. Moving to fixed in the next slide. Fixed service revenues were down minus 3.9% year-on-year, improving sequentially versus minus 5.0% in Q2 with around half of the contribution to the client explained by retail and around 1% touch point each by international and national wholesale with later improving its strengths after a tough first half impacted by non-repeatable transactions. Retail was just a touch lighter year-on-year versus Q2, but with resilient ARPU level and improving KPIs on net adds. Indeed, ARPU was up 6.2% driven by broadband and content revenues and by ICT that keeps increasing double-digit. In terms of market, we are continuing to see 2022 stabilizing after 2020 and 2021 growth fueled by vouchers and COVID, supporting lines, broadband net additions and equipments. For these reasons, retail KPIs are weaker but with an improving trend quarter-on-quarter with a highlight being the continuous improvement of the churn level trend now below 3% combined with a historic low level of delinquency. At the same time, equipment was significantly down year-on-year this quarter, but in line with Q1 and Q2 trends. I remind you that this is neutral in terms of cash. Moving to mobile in Slide 16. Mobile service revenues were down 2.2% improving significantly compared to the minus 4.1% in the previous quarter. Retail reported and negative revenues contribution coming from lower customer base that in any case improved quarter-on-quarter. This has been partially compensated by the positive contribution coming from wholesale revenues for higher roamers and MVNO revenues. In terms of market dynamics, MNP decreased again with a churn at a new record low notwithstanding with some selective price increases done in the recent months. We are reiterating this approach as a good practice also to counterbalance the recent inflationary pressure and as Pietro commented additional actions are likely to come in the coming months. Next slide, on Slide 17, you have details on OpEx that that were slightly up year-on-year for Q3 affected by some discontinuities on labor costs. More specifically, variable costs were down year-on-year mainly for lower equipment, partially compensated by higher COGS related to ICT growth. Commercial costs decreased 3% in the quarter, higher commissioning content and bus costs have been more than offset by lower bad debt customer management and advertising. Industrial costs were up year-on-year due to higher energy cost in line with our budget as we will show you in the next slide and provisioning costs not fully counterbalanced by lower network maintaining costs. G&A was also slightly higher year-on-year due to ICT revenues growth. Finally, labor costs was up 17% year-on-year this quarter mainly for tough comps due to the release of provision last year related to one of bonuses not distributed and lower solidarity days in Q3 this year versus last year. This trend in labor costs was already expected in a forecast and indeed if you look at the nine months, the trend shows a healthy minus 1% in labor costs. I also remind you that on labor, we are well covered also for the coming two years because we have signed last year, three years agreement with unions including a pre-agreed 1.5 increase per year. Next slide. I already anticipated that energy is currently under control. Obviously, we are exposed to the same challenges the whole industry is facing, but so far we have been able to manage the risk quite effectively. I just want to remind you that this year energy cost will be in line with our budget defined before the war and subsequent energy crisis started. I also want to add some color on what we are doing for 2023, on top of the 75% hedging if we include the pass through on collocation. For next year, our goal is to keep overall consumption flat year-on-year thanks to the 6% or 7% gigawatt hour savings that will compensate for growing data center infrastructure and network expansion, both fixed and mobile. Areas of saving will span from fixed infrastructure that will be benefit from the commissioning to mobile network with selective real time switch off of a new frequencies and 3G from data centers where we will introduce new start technologies that will enable us to buy energy during the night and utilize it during the day. In two offices where we continue to rationalize spaces and we continue to heavily adopt working from home. Now on Slide 19, you have details on TIM Brasil. The company reported another strong quarter and you can find many details in the company’s disclosure down on Tuesday, but it is important to highlight the main achievements of this quarter. The top line expanded 24% year-on-year in the quarter with EBITDA growing at 24% as well, after the consolidation of Oi numbers at the beginning of May. Furthermore, the company continues to post significant levels of cash flows with EBITDA CapEx on revenues at around 30% for the quarter. As you can see from the numbers, TIM Brasil is now fully benefiting from Oi mobile integration and posted a strong organic performance focused on customers value strategy that continues to pay off. The last nine months have been transformational for Brazil with important achievements and we believe the company will continue to deliver high levels of profitability, creating value for its shareholders. Next slide. Net debt after lease increased by €2.5 billion from year-end 2021, $3.3 billion on IFRS view, mainly due to the payment of the 5G licenses in Italy this quarter and for the acquisition of Oi Mobile and 5G license in Brazil in the previous ones. FX already anticipated on our plan as presented in March As anticipated equity free cash flow was slightly negative in the quarter, but still positive in the first nine months of the year. You may have noticed that the company decided the revocation of the goodwill tax realignment. As you know, legislation changes have maturity worsened the investment profitability of the tax realignment and on top of it, we have performed a new round of analysis given the significant increase in interest rates and the results prove the scheme not to be viable any longer. Therefore, we have decided to revoke as many other companies. On the timing of this decision, please note that the rules for the revocation were disclosed only at the end of September when a specific degree was finally published. The provisions there included ruled that the substitute tax already paid can be offset against any other tax payable with no cap limit. This implies that between the credit for the payments carried out and the cancellation of the payments still due, the overall effect is an improvement in the cash flow of the company over around €700 million in 2022 and 2023, an important amount given the present levels of interest rates. On the other hand, of course, we have completely written off the deferred tax asset and this has had a negatively impact on our net income of approximately €2 billion. That has also allowed us to cancel the tax suspension constraint on all of our reserves. In Slide 21, you can find a summary of our debt maturities and the breakdown between fixed and variable rates. Three main messages here. One, our liquidity position is strong and we cover upcoming maturities until the end of 2024. I also want to assure you that we’re working on further actions to enhance it. You’ll have more information on this point in the third quarter. Two, average maturity over debt is long at almost six years. And three, around 65% of our medium long-term debt is at fixed rate following the cash in of €2 billion from SACE. That is at a variable rate giving us the opportunity to keep our average cost of debt at a healthy 3.7%, despite the significant increase in interest rates and spreads. With this, I will hand over to Pietro for his final remarks.

Thanks, Adrian. Now the closing remarks. Team continuity plan is proceeding. We promise to do better than forecasted and we are keeping this promise despite a tougher macroeconomic environment. You can see improvement on all metrics and with positive outlook both on financials and on KPIs. Guidance is now comfortably inside, and I leave the math to you to implicitly compute our Q4 trends. In terms of market dynamics, signs of rationality are consolidating and we think there will be more to come in the future. We continue with our strategy from volume to value that remains strongly in place. I’m happy to see that, at the same time, we are seeing the operational rebound accelerating. On the delayering plan, the implementation is ongoing and we will release our pro forma balance sheet at our full year 2022 results. The memorandum of understanding on NetCo have been extended to November 30 with now no exclusivity obligation. On TIM Enterprise, the legal entity setup process already approved. With this, we have completed our presentation. Let me now hand it over to the operator for the Q&A session. Thanks.

Q&A session is now open. [Operator Instructions] First question comes from Mr. Giorgio Tavolini of Intermonte. Mr. Tavolini, please.

Thank you and good morning, everyone. Just questions on my side if I may. Regarding the revocation of the tax scheme and the €700 million extra income from the reversal of the substitute taxes. I was wondering if you see any scope to state the same share dividend for the current year and for last year with on the new level of distributable reserves that you see at the team at parent company. The second one is regarding leverage, based on your current outlook, if you can elaborate on your expectation for year-end net debt. And the third one is on Brazil, I was wondering what level of synergies would do you expect to not to rely on your equity free cash flow from Brazil in the current plan? So just to the same share dividend group leverage at year-end and Brazilian synergies. Thank you very much.

Hi, Giorgio. Good morning. I leave the stage to Adrian, but in any case, just as a joke, also the operation are going very well and the number are showing that we are on right path. Now I leave Adrian the stage to answer.

Yes. Good morning, everyone. Hi, Giorgio. Regarding the first question, clearly, yes. This is a side effect in the decision of the location of the deferred tax asset at the end. Legislation has changed. The context has changed today. If we compare this, let’s consider it investment in terms of payback period is well below some other CapEx that we need to do for example in a business in a network and different things. So that’s – that was mainly the decision for the revocation. Clearly, it has a positive effect in 2022 and 2023, in terms of cash flow. It’s clear, we disclose it is probably a bit more – a little bit more of €700 billion. But then yes, it has also this side effect of locking the reserves that were blocked for tax purposes. Then how these can be considering the future regarding the saving shares, this is probably a decision that will – the Board will take in March with the year-end financial statements. Anyway, it’s important always to remember that in the absence of positive or net income, there are no privileges from the saving shares over the ordinary shares. But then, yes, and your assumption is correct. We are unlocking also the reserves and we will decide in March, when we will discuss the 2022 financial statements. On the leverage side, well, we’ve been doing much better than the expectations even now our initial expectations in March in terms of equity free cash flow. Clearly, 2022 was very particular year, because there were many extraordinary effects, such the licenses in Brazil and the license the big payment for the license here in Italy, the closing of the deal with Oi. So that’s the main effect of the increase of the debt since the January 1. Going forward, the fourth quarter, particularly, we have good expectations. If I need to mention something, I think that the €20 billion area, it’s says for year-end, it’s something that we can [indiscernible] we’ll see because this being a reported number, it’s always open to the exchange rate oscillations. But anyway, somehow optimistic about evolution, the fourth quarter of the cash flow. And the last one, yeah, Brazil I think that, well, Pietro then can comment a lot in terms of the operational side of Brazil. But at the end, we always mentioned that the Oi deal was an infrastructure deal basically. And synergies will come especially from that side, but at the same time, we are already seeing what a more – much more efficient market can bring to the operators. Today, Brazil is a three players market on the mobile. It’s a market that is – has been very positive in terms of revenues evolution. But at the same time, it’s a market where operators want to invest because the return, the evolution, the return investment is clear. So that was our case at the time we decided to go for this – to lead these deal for assets. And we think that the synergies already clear and we’ll be much clear when the company start with the decommissioning of the additional sites. But anyway, today, if you can see the equity free cash flow after lease, so the most asset measure in terms of cash flow on revenues team Brazil is delivering a 16% this kind of a metric. If they manage to perform what it is in the plan, this will be even higher. So again, we think that the synergies are already clear, let’s say. I don’t know, Giorgio, if that answers the questions.

It’s very clear, Adrian. Thank you.

Bye, Giorgio.

Next question comes from Mr. David Wright on Bank of America. Mr. Wright, please.

Yes. Thank you very much for taking my call guys. Just on the presentation and your comments on inflation linking consumer and enterprise contracts, I think on Slide 7 it says contracts inflation linked by 2022 with effects in 2024. Could you just explain that to us? When does the actual inflation kick a drop into the actual revenue – the actual price itself? I’m just a bit confused by the end of 2022 and effects in 2024. Could you just explain the implementation of the contracts? Thank you.

Hi, David. To be clear, what will happen by the end of this year, we will apply in the contract of the new customer, the inclusion of a specific close to recover the inflation. It’ll happen both on Consumer and on Enterprise segment. What we’ll do on the existing customer base is that we will press up on the consumer during the year based also on the duration of the contract because a change is in the close, mainly on the fixed, for example, could mean a possibility by the customer to cancel the contract. I don’t have to remember to you that mobile is based on prepaid where you have no commitment in terms of timeframe of the contract. And so Adrian is already working on progressively price up of the customer based on a [indiscernible] approach and you have seen that we’re able to press up, reducing the level of drawback in terms of churn. When we discuss about fixed on the consumer, the customer have usually one year contract obligation. If you change some specific close, they have the right for cancellation. So the idea is that we put the close starting from the end of 2022. Why the end of 2022? Because if you do that at the beginning of 2023, what will happen is that you have to change based on the inflation of 2023 and we know that – we hope that the inflation in Europe, it’ll be not something like South America. On the remaining customer base Adrian is already planning to price up the customer base based on a targeting – in a targeted way to avoid an issue. But what is important is also to remember that we are not moving only on the inflation, we are moving toward a more rational market. I don’t have to remember that the price of team in August 2021 for the fixed was €19.90 for the FTT with also the content. Now we’ve increased the price to €29.90 and we are no more advertising this offer. We are advertising the 10-gigabit offer because we want to stress that as a market leader, we are driving a process to increase the level of price and also with this increase, Italy continue to be one of the country with the lowest price for fixed mobile. Our move is a move that is important because set the market trend. And if you remember David, we were discussing few months ago, not two years ago, about the fact that could be true that the market in Italy could follow a more rational approach and it is happening, okay. On the Enterprise segment, what will happen is that, again, in the new contract, let’s remember that on the Enterprise segment, usually we send contract for three, five or seven years. So it’s quite normal that now we’ll include in this kind of contract inflation. On the customer base, we’ll follow two different approach, public administration and private, because the public administration, there are some public bid on which we have less leverage and we are discussing to include in the new biding the inclusion of the inflation rate. On the private, it’ll be a leverage to try to increase our portfolio of services. What I mean, sometimes for us, it’s much better to convince our customer and team enterprise to avoid the increase on the connectivity in terms of inflation and buy further new services that are real important for our strategy on team enterprise. That I was clear, David, if not, please?

Yes, I might follow up with that. Okay, thank you for the moment.

Next question comes from Mr. Fabio Pavan of Mediobanca. Mr. Pavan, please.

Yes. Hi, good morning all. Let me [indiscernible] questions. First one is a follow up on the market or I should say, on the business. How the other [indiscernible] do you think they will follow you on this intention to link contract inflation destination? One second point…

Fabio, sorry to interrupt you. Can you go more slowly because we are unable to catch you?

Okay, let we start from scratch. On the operation from the business, how other players are behaving in this market? Do you think they will follow your move on CPI links? Do you think they’re becoming more rational as well also in the lower part of the market, mainly on mobile? As in fixed it seems something is already moving. Second question, if I may is on the enterprise piece that on the cloud there has been very good acceleration and is becoming irrelevant for enterprise. So my question is, are we talking about new clients or recreating for – or new business offer to existing client base? And then the third one again, for you Pietro, 5G is becoming clear part of the strategy in Brazil, also shown by your presentation. It seems so far we are not mentioning 5G and when talking about Italy in my understanding, this could fit very well with a volume to value strategy with your strategy. So why is that too early is something that you may elaborate on the future? Thank you.

Okay, Fabio, for sure, I cannot put myself in the shoes of the other player. But they think that more or less everybody will follow because the inflation, the pressure on the cost base that we have is common to everybody. So it’s quite difficult to emerge to continue to compete in the market without that. And mainly on the fixed our proposal to put inflation on the wholesale price will be another, let me say pressure towards everybody also with team, because in replicability we use our wholesale price to increase price. So if everybody stay rational, everybody will do that. Why I trust that would be rational. Because if you see what’s happened in the last three months in terms of new offer, everybody increased price. Just to give you an idea, and I don’t want to scare anyone, we did a stupid calculation based on the official number that were released by AGCOM by the other – all the players. If you look at the trend of the revenues of all the industry, the sum of the part, the trend of CapEx in terms of level of CapEx and the trend of EBITDA, the risk is that in 2024, the Italian telco industry would be EBITDA minus CapEx negative if they continue with this trend. So due to the fact that none of the, our companies is a charity institution, everybody must be back to rationality. But again, this is exactly what I was stating some months ago, and this is what’s happening. I cannot assure that it’ll continue like that, but at least there are real sign of rationality. Moving to the enterprise, your second question, what’s happening is that, as always stated, we have already 20% of our customer base that buy from us all the services, connectivity, cloud and cyber security. What is happening is that the cloud is something that we are adding in our portfolio, and we think that our main leverage is the fact that we will offer to all our customer a turnkey solution. If you buy separately, connectivity, cloud and cybersecurity, and you buy from three different player, you will keep the headache to understand where the problem is. While if you choose us, you can do that. In any case, one of the trigger for this acceleration is the public administration. I think that the move toward the national strategic app is becoming a clear indication toward the public administration to move towards this more future proof technology. And for us, it’ll be an important element in terms of growth. We are not showing already all this element, but I think that we’ll have good surprise in the next two, three years. And if I may, sorry about enterprise. When we presented at the Capital Market Day, our number, one of the main question was how can you perform better than the market? Today we are performing better than the market. We are growing at a pace rate that is higher than the market. Are you able to sustain the decrease of connectivity that is happening through Europe in some way, whatever is to be lost was already lost. It doesn’t mean that connectivity will be flat, but it will happen that we will be able compared to other player in Europe to keep the level of connectivity at a more sustainable trend. And what we are doing? We are moving all the licenses to the cloud. Let’s remember El [ph] and the team don’t have to be, and to work as an evangelist explaining why the cloud is important. All the main hyperscaler, Microsoft, Oracle, so and so forth, are moving all their solution from on-premise to cloud. So, we have to go there and be ready when they will explain to all these big customer that have to move in the cloud, that will – we will be there with our connectivity, our security system, but with our cloud. This question 5G. If five years ago, Italy was telling that we’re the first country to move toward the 5G. The choice was increase at maximum level, the level of frequencies cost, and let’s see if the player will have enough money to invest, because it’s very difficult today to define how we can materialize advantages from 5G. Today on the consumer side, 5G is a technology more efficient than 4G, but is not a lever to increase the level of revenues on the consumer. Brazil did a complete different choice in terms of industrial policy. The price for frequencies was very cheap, was among the lowest in the world. But with the commitment I was there to negotiate with the Brazilian government this issue, this element, a commitment to build a 5G network. So compared to Italy, what what’s happen, low cost of the frequencies, but a strong commitment to build a 5G network on the Release 16, that is the standalone one that is much more performance than the traditional one. So now what’s up is that? We will start to work on the 5G, but it’s important to remember we have to work mainly on the segment of Elio on the enterprise one, because 5G is technology that is very important for the B2B2C [ph] business model. For the B2C, we have to find a way to monetize better 5G. So, now we are notary to invest a build as fast as possible, a 5G network, and we have to evaluate also to build the new network could be driven also by some network sharing agreement. Italy is not a country that can sustain five different mobile networks. This is a further statement that allow me to say that I think that in Italy in the following years, there will be any case a market repair that could be, at network level in terms of network sharing or at company level. I hope that Fabio was clear enough.

Super clear. Thank you very much.

Next question comes from Mr. Luigi Minerva of HSBC. Mr. Minerva, please.

Yes, good morning and thanks for taking my two questions. The first one is, on the single network. I’m sorry if I diverted the attention from the good results to talk about the, but I wanted to ask essentially, the government, the new government seems to have different views about how to achieve the single network. So how do we reconcile? What the government seems to be willing to achieve with your plan A? And perhaps related to this, I get to notice the update on the MOU and the lack of exclusivity to CDP. But I’m wondering whether this lack of exclusivity just know theoretical aspect because eventually any deal on the network would’ve to be approved by the government as part of the golden power. And clearly the government and CDP are aligned. And the second question is on towers. And it’s not a strategic one on ownership, because obviously, the management team not find itself in a situation where there is no longer control on towers in Italy. And I’m wondering, yes, Pietro, what do you think about this? Whether you are comfortable not owning the towers, and particularly if you think about the MSA that regulate the relationship with between [indiscernible] whether you’re satisfied with the parent MSA or you see a room for improvement given that the environment has changed with higher inflation? Thank you.

Thank you, Luigi. Don’t worry, feel correction. I love Brazil, so I shouldn’t call soap opera, I should call telenovela. But again, I’m joking also because we have to distress all this focus on something that is proceeding in a rational way. So what is happening? I really apologize, but I cannot answer in the name of the Italian government. I’m ambitious, so I would like to be Prime Minister, but today I’m the CEO of a company. Listen to the stock exchange, so I can tell whatever happened inside my environment. So on this area, what is happening is that we propagate the MOU with CDP. If you were in our shoes, 30 days of propagation and exclusivity, yes or exclusivity, no. I’m creating issue to our company if I don’t propagate the exclusivity. I don’t think so. I don’t think that no one of my shareholder will claim for the fact that they didn’t leave 30 days of exclusivity to Casa Depositi e Prestiti. And the deal with Casa Depositi e Prestiti in our view from a matter of mathematics, continue to be the best choice in terms of industrial synergies. In the meantime, having no exclusivity in these 30 days. I agree with you. It’s impossible that they send any kind of agreement in 30 days. But if leave us also the opportunity to understand if there are other interests, what could be the interest, the possible values on and so forth. So we are not changing our mind and our plan. The north pole is to find an agreement at a value that could make sense for all my shareholders with Casa Depositi e Prestiti. We have the prorogation until the 30 of November. And the non exclusivity is not an issue of or a change of our approach in this kind of negotiation. When we talk about towers, two things. The first one, are you happy with the MSA? I’m not happy with any contract that we have in our company, but not because of that. But we have a lot of challenges and as I told every day to my team, we have to wake up in the morning thinking if we did the right things the night before, this is the only way to improve our number. And I think that with this culture, we are showing that we are on the right path to improve our number. If you want to discuss about strategic view team, but also a lot of other player perhaps didn’t do the right choice several years ago, if we had the tower seal today, what you, I should have be done. What we are doing now, the layering. The tower business is something that is different from the retail. I cannot at the same time put one person to manage an infrastructure business, a retail business and wholesale business and all these kind of things. And this is one of the reason for which we move toward our plan of the layering, our complete different business model. But again, we were the only one to do that more or less all the telco did that about MSA. We have to sit every year to discuss with in it that today is also a partner. We don’t have any kind of litigation. They are always open to discuss with us what they can do to improve our numbers and this is the way with which we proceed. I hope that there was enough clear Luigi.

Thank you very much. Appreciate it.

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

Good morning, everyone. Just two questions, please. The first of all on the enterprise business. I think you talked about 9% service revenue growth here today? And if you could just unpick that growth between how much is coming from acquisitions, how much is coming from kind of energy cost you mentioned, and then how much of it is internal revenue? So just charges to other parts of the group?

Sam, sorry, again, we are getting some issue. Can you repeat please, because we were unable to understand the question sorry.

Yes, actually, I’ll ask slowly. I was probably [indiscernible]. On the slide you talk about 9% revenue growth in enterprise. I just wanted to ask you how, if we could think about how that growth was built up? What is the contribution from M&A? What is the contribution from the energy cost being passed through in data centers? And then how much of that growth is being driven by internal passed through revenues to other parts of the PI group? So if you are consumer own network, basically utilizing some of the enterprise services. And then on energy costs, you talk about being 75% hedged for next year. I wonder if you just give us a bit more color around kind of the pricing of those hedges kind of as we think about what the euro, million step up in energy costs for next year is likely to be any kind of color that would be really helpful. Thank you very much.

Sam, we will try to repeat what we understood because sorry, the line was very bad. So you asked more details about on energy, try to understand which is the value at which we are buying energy and we are forecasting to buy energy for 2023, some more detail about the so-called pass through towards the other player that is not M&A. And then some more details about our trend on the revenues of team enterprise where there is no M&A. Is this the question, sorry.

Yes, it’s pretty much, so kind of the growth in enterprise, how much energy passed through, how much [indiscernible]?

Okay. So I leave Adrian to talk about the energy, but what is important, I think that you asked the right question whether code from other player that say that they have hedged much more than us, but it's not a matter of how much did you hedge and the main issue is at which price. For example, when we talk about 75%, 50% of the 75% is at the value that is close to €120, €110, so a real low price. Then there is a person that is 15% that is pass through towards the other player because it's important to remember that you have the co-location toward the other [indiscernible], other license operator. The consumption of energy of this part is something that has no impact on our EBITDA because it's completely past through, but again, I don't know if...

No, I think that's pretty much it. To understand 2023 and what happened in 2022, the main thing is that these hedge positions were closed before the war started. So it was at, at the previous prices for energy of December, January and February. Because as Pietro was mentioning it's not being fully hedge the intention, the intention is to cover in terms of prices. So this is the situation for the 50% of hedge for next year in terms of energy cost. We have – we've done an additional 10%, 12% of hedging these past weeks where prices were going down and then we have 15% of the energy consumption that is the best through for the other operators in terms of co-location that it's kind of network hedge for this position. So what we are working on is in terms of be conscious of the cost of 2023. We will give much more information. We will present the plan, but definitely is something that is under management, okay.

Sam, and then I'll leave the stage to Adrian to give some more color about the trend of the revenues, but it's important to start to think that the business model of TIM Enterprise is completely different from the business model of the consumer. Now we'll ask [indiscernible] to give you an idea about what we have already signed in terms of contract that we guarantee us a trend of revenues because this is something that we controlling many account way because it's the most important element of TIM Enterprise and the mix of the revenue and the control of the cost of each line of revenues is one of the main target that I gave to Adrian. Adrian, please.

Thank you, Pietro. Good morning. Thanks for the question. So just to make a quick recap on revenues; so we are steadily growing revenues quarter-over-quarter when comparing to last year, I'll give you just a quick snapshot on the main numbers. So in quarter one we did the 667 versus 625 in quarter two, 702 versus 670 and in quarter three 681 versus 654. Now, when you put together nine months, revenues are growing mainly by services where the difference between 2022 and 2021 is €137 million only by services, mainly driven by cloud and cybersecurity, where we are accelerating most of the business. There is no M&A; this is an organic growth because we are concentrating all the efforts and all the energies on switching customers to cloud as Pietro mentioned before. And on the energy for what it may concern enterprise, we registered only incremental cost of €50 million year-to-date and this is mainly driven by gas in connection to the users of data centers. Hope that picture look earlier.

And just to clarify another point; in this number of TIM Enterprise we consolidated all the different company, so Noovle, Olivetti, Telsy so and so forth. So this is a trend that is towards all the market. So compared to some number in the past when we were looking at Noovle on a standalone basis where the revenues of Noovle were composed from a component toward the external market is something toward the captive market. Here all the captive market doesn't exist anymore because there is a consolidation. So it's so growth outside the company. I hope that we answer to Sam. I want to come back just...

Yes. [indiscernible]

Thank you, Sam. I want to come back just for a second to the question of David, because I understood better from my colleagues. The question related to the contract. What's up is that once we sign a contract in December, CP linked we have to wait one-year and after the one-year we can adjust based on the inflation. We cannot change the day after. Why we want to do everything by the end of 2022 because the reference point is also the inflation that we had during 2022 and we reduce the impact because the inflation will go down, while on the customer base we will recover the inflation through the price app [ph]. The further question could be, so you will leave only a marginal part of the customer base in this way. It's important to remember that we have also a lot of customer in our customer base that's usually buy also new services. So what we'll do every time we'll sell a new service on the customer base we'll exploit the opportunity to change the closest without give them the possibility to cancel the existing contact. I hope that now it's more clear, but if not David, we can meet in Barcelona and I'll be able to give more colors.

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

Yes, thanks very much. Indeed, good morning. I've a few questions please. The first one, Pietro, could you just please give us an update if there is one to be given on the enterprise sale in quite a few stories in the press around that. So I'd just love to hear the latest on that situation? Secondly, I think EBITDA consensus for this year for domestic EBITDA is about €3.54 billion. That would imply fourth quarter EBITDA of only €700 million. I mean, is that too low? I mean that would imply almost 17% decline in the fourth quarter yet I think you were mentioning the clean underlying decline in the third quarter is only about 9% when you adjust for some of the employee accounting. So does that not look a little bit conservative at the moment? And then finally, just love to go back to the fixed trends around ARPU is although you talk about value over volume, it does look if I strip out the ICT business, your wireline fixed ARPU is still coming down around 10% year-on-year. So there does seem to still be ongoing pricing pressure on the wireline side. So it'd be great to hear, what's driving that and, how that trend could evolve over the next few quarters. Thank you.

Thank you, James. About enterprise, If you remember when we, the 7th of July, we talk about our delivering plan. We spoke about the important milestone to start to transform the internal business unit in a firm, in a company. And this is what was approved by the board. Yes, they, that is for sure the free step of a further process because we always mention that we want to keep the optionality to sell a minority stake and remember a minority stake because we strongly believe that team enterprise, it's a real good business if we need it. Based also on the experience, we think that the eventual negotiation of this, of a sale of a minority stake cannot be treated as I use the word of Luigi Minerva, soap opera or the word of Pietro Labriola, Telenovela. And we have to disclose on the press or work on leaks. So what we want to state is that we are working on our capital market plan that had clear milestone at a process to transform the different business unit in separate company and to be ready and work to have the optionality to sell a minority stake of team enterprise. Again a minority one and this is what we are doing, related to the second question. You asked me a lot, so I don't have to declare anything due to fact that we don't foresee any kind of issue in terms of business trend for the fourth quarter. Your math is better than mine, so you did the right calculation. Okay, so and this is what we told also in the last call to the market. We are optimistic and always if I follow your math, it's quite possible that also 2023, 2024, if you do the calculation about our guidance and result of the 2022 could have some improve. But this is not a guidance. We will release our guidance in February to the market. You ask us a question about the cost of labor. So about the ARPU, it's clear that our strategy from volume to value have to work also on a timeline because for example, now we release a new offer of 10 giga at close to €40. So no problem, but about the calculation, we have to remember that. And I think that is something that they try to explain also in the call of March, 2022. In the past our offer on ultra broadband was made by two component, a kind of installation fee contribution and the monthly fee. This is something that doesn't appeal on the bill of our customer, on the bill of our customer and on our cash trend we have each customer €29.90 per month. But the win which was built, the offer was a contribution upfront that was close to €8,100, sorry €200 and price per month of 24. Due to the fact that we didn't, we discontinued in some way this procedure because and we are reducing everything to an installation fee that is much lower. What is happening that this is impacting the trend of the ARPU. What will happen is that by math starting from the third quarter, 2023 when we start web, the end of the free software that was built in this way, you will start to see an increase of the ARPU by math. I'm always transparent because I don't want to give any kind of surprise to the market. So I'm telling you already, what you will experience in the third quarter 2023. I understand that is not easy to explain this detail and in any case, we are more than open with our IR to give you the details and to show in some chart all this element.

Okay, the great tips. Thank you I follow up with more. I mean more you can disclose on that in future quarters. I think would be helpful. Thank you.

Thank you.

Next question comes from Mr. Carl Murdock Smith of Berenberg. Mr. Murdock Smith, please.

Hi. Thank you. I just wanted to ask on restructuring costs, over the first nine months I think you've spent over €0.5 billion on restructuring costs. Can you just provide a bit more detail on those and also some guidance in terms of what level of restructuring costs should we expect going forward? Thank you.

I leave Adrian to give some more details, but the main element is related to the cost of labor because if you remember when we send a contract no, sorry the contract, the agreement with the unions. We push an acceleration about early retirement of five or seven year. The number that you see are not cash out and, but again it allow was, and this is the amount of money that you are putting in the plan to facilitate the process of early retirement of our colleagues for the next years. Adrian?

Again, that's pretty much it's the cost of the restructuring for the exits of this year and next year. It's basically a non-cash item and these will allow us to reduce in the future by 40% the cost of these exits. So this is the agreement that we signed in August. It was very positive even and in this context and it's similar to what we did in last year, but in this case with probably a higher return.

That's great. Thank you.

That was our last question. The conference is now over. Thank you for calling.

Thank you.