Ladies and gentlemen, good morning and welcome to TIM First Half 2024 Preliminary Results Conference Call. Paolo Lesbo, Head of Investor Relations, will introduce the event.

Ladies and gentlemen, good morning and welcome to TIM Preliminary First Half 2024 Results Presentation. I am here with the CEO, PietroLabriola; the CFO, Adrian Calaza, and the rest of the management team. Today, we open the presentation with the highlights of the first half and we explore each of them in the following three sections. The first one explains the implication of NetCo closing. The second reviews TIM ServiceCo financial and operating results based on preliminary like-for-like estimates, i.e., considering the new perimeter and the relationship between TIM and NetCo regulated by the Master Service Agreement. The third section outlines TIM's new capital structure. A Q&A session will follow. Pointing out our Safe Harbor disclaimer on Page 2 and 3, let me hand over to Pietro. Pietro, the floor is yours.

Thank you, Paolo. Good morning, everyone. The last six months were quite eventful. We successfully completed NetCo this quarter. As a result, we achieved massive de-leverage, credit rating improvement, and capital structure optimization. The relation between TIM and NetCo will be regulated by the MSA with no value or volume commitments. I repeat, this is not a TowerCo deal. H1 performance was robust and financials were in line or ahead full year guidance. Domestic business grew as expected, both on revenues and EBITDA, and H2 will be supported by positive drivers and favorable seasonality. Transformation plan execution is ongoing, with more than EUR 100 million EBITDA after lease managed CapEx savings in H1. The stabilization of TIM consumer top line continued to be supported also by Beyond Connectivity's initiatives. Growth at TIM Enterprise accelerated, fueled by ramp-up of National Strategic Hub and an increasing interest by private sector on cloud and security services. TIM Brazil delivers strong growth, thanks to the value proposition both in mobile and wireline. Group Performa was fully on track and leveraged, target below or equal to 2 times by year-end 2024 is confirmed. Let's review each topic starting from NetCo disposal. On the 1st of July, we completed the sale of NetCo to KKR. This was our ambition since we took office in 2022, to put the company on a new industrial path, now it is a reality. We achieved this milestone by meeting all targets within the announced, deadlines and terms. It was not given and very few people were confident. We have structurally solved the leverage issue the company had been dragging for more than 20 years, giving an industrial future to the group. This turning point comes after 2.5 years of hard work, which intensified since last October when we received the binding offer. In just eight months, we had closed a complex negotiation with KKR, obtained the unconditional approval by the Golden Power Authority and by the EU Antitrust, and carried out a huge amount of work to physically split the company. This has entailed transferring almost 20,000 employees and 50,000 real estate assets to NetCo, successfully completing the largest ever liability management in Europe, ensuring business continuity through the cutover of hundreds of IT Systems and allocating thousands of contracts between TIM and NetCo, just to name some of the tasks we have performed in such a short period of time. Therefore, my first message today is for all the people working both, in NetCo and ServiceCo. You must be proud for the outstanding effort and commitment you have put through in this period. For my part, I am proud because we have achieved a result that many thought almost impossible. We have delivered flawless execution, managing unprecedented complexity-wise, at the same time delivering on our plan. As we will comment later in the presentation, like no one has done for this company in recent years. At the end of June, we reported group net debt after a lease of EUR 21.5 billion. This was based on the old perimeter, which still included NetCo. On July 1, we completed NetCo disposal, which led to a material group net debt reduction. The expected deleverage of EUR 14.2 billion, pending customary post-closing adjustments, was achieved as originally announced. Consistent with the disclosure included in the addendum to the Capital Market Day published on March 11, closing adjustments and separation costs amounted to EUR 0.4 billion. So, net deleverage was EUR 13.8 billion. Noteworthy, the cash component of EUR 0.4 billion corresponded to the NRRP advances relating to FiberCop was deconsolidated as part of the transaction. Taking all this into account, TIM ServCo per-forma net debt after lease was EUR 8.1 billion. This slide answers a question most of you ask, namely how we get to the leverage target below or equal 2 times at year-end with net debt after lease around EUR 7.5 billion. Let's see the cash dynamic we expect in the second half. For the sake of clarity, we present the same metrics used in the Capital Market Day addendum. It's clear how the dynamic is different pre and post-NetCo. First, we have the reduction of financial charges driven by deleverage. Second, the ordinary working capital is expected to revert from absorption in the first half to generation in the second, thanks to favorable seasonality, which typically delivers a positive cash contribution, especially in Q4. It's worth mentioning that there will not be further effects on working capital related to NetCo, since all of them were settled at the closing through the adjustments. Third, cash-outs related to extraordinary working capital, tats all in pre-retirement and decommissioning in Brazil were entirely concentrated in the first half. Last, organic EBITDA after lease minus CapEx is expected to accelerate, also considering the growth driver we will explain later. All in all, we expect positive net cash flow of approximately EUR 0.6 billion in the second half, which will allow us to land at year-end in line with the leverage and net debt target. I remind you that you should not take 2 times EUR 0.6 billion to estimate next year cash generation. TIM remains an infrastructure-based operator, therefore the typically working capital dynamic with absorption in half one and reversal in half two will continue. Also, as disclosed in the Capital Market Day, some extraordinary working capital payments will impact the coming years, typically in the first half, even with lower amounts compared to 2024. The business relationship between NetCo and TIM is regulated through a 15-year term Master Service Agreement, renewable for a further 15 years. Let me briefly recall the key principles and give you an indication of the value at stake. First, the MSA regulates the provision of services in both directions, from NetCo to TIM and vice versa. On the right-hand side, you find a map indicating the nature and values of the respective services. Figures are a cash-view like-for-like based on a full-year 2023 actual volume and MSA prices. Obviously, TIM costs towards NetCo are the predominant component. Approximately EUR 2 billion, 70% of which are access services, while the remaining costs are mostly pass-through, for example energy and real-estate. However, there is also a flow of revenues that TIM generates from NetCo, approximately EUR 100 million. Second, the MSA is a commercial agreement, not financially committing TIM. Services will be provided without any minimum purchase commitments, except for engineering services. It means that if a customer churns, TIM will stop paying the related costs to NetCo. It also means that where NetCo doesn't provide FTTH coverage, TIM will be free to hole buy from other suppliers. As far as MSA prices, NetCo is a wholesale-only operator, hence it will not be subject to ex-ante regulation and cost orientation. This new status, however, must be rectified by AGCom, the national watchdog, in the market analysis that will kick off soon and will likely be effective from the second half 2025 onwards. Until then, NetCo will apply regulated prices where relevant. For all services other than access, which by nature are non-regulated, prices will be at arm's length. Last, while benefiting from the most favorable client close on an non-discriminatory basis, TIM has granted exclusivity to NetCo. Let's now move to the second section. With the sale of NetCo behind us, we can finally open the new chapter. Today, TIM is a group with a sustainable business model that can allocate resources on growing businesses in Italy and Brazil. At domestic level, TIM can enjoy a lateral regulatory profile and is financially strong to compete as a customer-focused service company while retaining the largest portfolio of their co-assets. TIM Brazil and TIM Enterprise operate in two healthy and growing markets and generate 70% of group EBITDA after lease, making the group a well-balanced and diversified portfolio that can mitigate the risks arising from the intense competitive dynamic of the consumer market in Italy. Let's now benchmark TIM ServiceCo first-half results against full-year guidance, starting from revenues and EBITDA. All in all, the performance was robust at group level, thanks to the performance of Brazil and in Italy. Group revenues grew 3.5 % year-over-year, falling in line with the target. Domestic revenues were up 1.6% year-over-year, with an acceleration from 0.5% in Q1 to 2.7% in Q2. Group EBITDA after lease increased double-digit and above guidance, with the Brazilian operation growing above expectations so far, and domestic EBITDA after lease almost in line with guidance. While 11% growth in Q1 was driven by EC comp, Q2 increased at almost 7%, more than we internally expected. Domestic EBITDA is expected to accelerate in second half, thanks to positive drivers that will progressively kick in. FTTH offering in white areas, thanks to an agreement we signed with Open Fiber, the full effect of price up that we concentrated in Q2, geo-marketing offering, the New DAZN deal that will support ARPU, the steady ramp-up of cloud revenues linked to the National Strategic Hub, and the benefit of vendor consolidation. There will be also easier comps in Q4. First half was a bit light in terms of CapEx intensity, in particular at domestic level, where CapEx on revenues stood at 11%. This was due to the facing related to Next Web project and efficiencies due to transformation, while volumetric CapEx and massive project were on track. We expect Next Web projects related to CapEx to pick up in H2. Consider that we don't just run shops and we don't just sell devices, TIM remains the operator with the largest asset portfolio in Italy, ranging from the mobile network to data center to AP backbone. All in all, combining Italy and Brazil, we have good visibility on revenue and EBITDA trajectory in H2. Domestic revenue and EBITDA target that were considered challenging are in sight. Full year guidance is confirmed on all metrics. Let's now review the performance of the three entities. As indicated at our Capital Market Day, our strategy on TIM Consumer is to stabilize the top line by increasing ARPU while keeping churn under control. The results of the first half indicate that our actions are working. All metrics are performing in the right direction. Let's see what we did so far. First, the price up. We've been very active in increasing prices to over 5 million wireline and 4 million mobile customers. As you can see, the increases were concentrated in Q2, so the effects will be fully visible in the second part of the year. This action led to a further increase in fixed ARPU. TIM Vision, which is currently the main driver of our Beyond Connectivity strategy, is also playing a role. You can see in the last three years, ARPU grew 2.5 times with a stable customer base. Mobile ARPU decreased year-on-year but was stable compared to Q1, reverting the downward trend we saw in the past. In all this, you see that the churn has been remarkably stable, regardless of the number of customers we have targeted in any given quarter, including Q2 when we made the bigger push. All in all, in the free half total revenues were flat and service revenue grew 0.5% year-on-year. Overall, the performance is in line with the guidance. Our ambition of TIM Enterprise is to continue to outgrow the market by further expanding into the ICT sector, where we want to consolidate our leadership. A strong position on cloud also enables us to protect our connectivity business, which is still sizable, but unlike other European incumbents, has already been impacted by competition and today contributes to just around 30% of TIM Enterprise total revenues, compared to 50% of some of our peers. In the free half, total revenues increased 5% year-on-year and service revenue over 6%, with an acceleration in Q2, respectively, plus 7% and plus 8%. In the mix, the decline of connectivity was limited to minus 0.9% year-on-year, better than our budget, while ICT combined increased 12%. The growth comes from all lines of business, with cloud up almost 20%. While Italian public administrations are progressively migrating to cloud, TIM Enterprise is taking the lion's share of this business under the National Strategic Hub. We also see an increasing interest by private sector on cloud and security services. The value of contract signed in the first half increased by over 40%, with the growth mostly driven by cloud. For the rest of the year, we expect growth to remain very robust. However, we do expect some quarter-on-quarter fluctuations, which are typical of this market. TIM Brazil reported better than expected H1 results. It's clearly on a solid path with half of the journey towards full year target completed. Mobile postpaid was the main lever to boost service revenues. More initiatives and migration strategies are supporting ARPU performance and a well-executed customer-based management improved net addition growth through migration and churn reduction. Also, TIM Ultrafibre and B2B grew significantly. In the first half, service revenues were up over 7% year-on-year driven by mobile. EBITDA grew 10%, with record-level margin for the second quarter. The commissioning of towers paved the way for EBITDA after lease performance, up by almost 18%, as recurring lease expenses keep reducing. Q2 was the 9th consecutive quarter of EBITDA after lease double-digit growth. EBITDA after lease minus CapEx grew 37% in the first half. I now hand over to Adrian for the rest of the presentation.

Thank you, Pietro. Good morning, everyone. The sale of NetCo not only resulted in a massive deleverage, but also structurally changed the cost structure of TIM Domestic. With the disposal of wireless assets, we also transformed operational structures, including approximately 20,000 employees and their related costs. Furthermore, following the separation, CapEx is significantly low. Therefore, if we compare the old with the domestic perimeter, some interesting points emerge. In the first half, the new perimeter had approximately EUR 0.8 billion less cash costs, approximately EUR 0.1 billion more OpEx, as TIM ServCo hold buys access services from NetCo, partially compensated by lower labor costs, and approximately EUR 0.9 less CapEx, thanks to the deconsolidation of the investments related to the assets sold. The change in mix means that the cost structure of the domestic business is now more success-driven, hence more sustainable. Clearly, we agree that there is also a reduction in revenues. But if we compare the EBITDA after lease minus CapEx between the two perimeters, there was no difference in 2023. But in the first half of 2024, the new team perimeter is higher than the old one by approximately EUR 0.2 billion, and this would have been the trend going forward due to the erosion of wholesale revenues. This trend, combined with the significant deleverage, makes the case very clear. Group EBITDA after lease of TIM ServCo grew 13% year-on-year in the first half of 2024, and margin increased by 2 percentage points, a clear sign of the focus on marginality that the group is putting on both markets. The growth on revenues in the domestic business was coupled with the results of the transformation plan that is fully on track, with some significant contributions, as in customer care, with a 16% reduction in human contacts, on credit management, or on interconnection costs due to anti-fraud initiatives, as a few examples, which allowed us to maintain flat our OpEx year-on-year on the first half. At the same time, our Brazilian operations posted a sound growth on EBITDA thanks to the value proposition, together with important initiatives on the cost side, being the most important, the decommissioning of mobile towers. Now we focus on TIM ServCo new capital structure. In this slide, we go back to the NetCo disposal in order to explain how we used the proceeds. On the left-hand side, you have the building blocks of the total delivered, and on the right, how it was applied. Starting from the left, the EUR 14.2 billion included EUR 1.5 billion FiberCop bank debt that traveled with NetCo, and 5.5 billion team bonds that were deconsolidated through the liability management exercise. Additionally, the cash component of EUR 7.2 billion included EUR 2.3 billion of FiberCop intercompany loan that was repaid by KKR. Of the cash, EUR 0.4 billion was used for the closing adjustments, another EUR 0.4 billion related to the NRRP anticipation was deconsolidated, and then EUR 1.7 billion repaid the bridge financing including the winding of derivatives, and EUR 2.2 billion repaid the most expensive bank loans of our portfolio. Out of the EUR 7.2 billion cash received from KKR, today we're left with EUR 2.4 billion. In this slide, you can appreciate how the capital structure changed pre and post-deal. At the end of June, we had gross debt after lease of EUR 24.5 billion, financial assets of EUR 3.0 billion, and net debt of EUR 21.5 billion. Thanks to the NetCo disposal, the pro forma gross debt decreased to EUR 13.3 billion with financial assets of EUR 5.1 billion and net debt of EUR 8.1 billion. It is a structural improvement. The massive leverage triggered an immediate rating improvement. Moody's rating improved by one notch with positive outlook from negative. Standard & Poor's by two notch with stable outlook from negative, and Fitch by one notch with stable outlook from negative. The average cost of debt is expected to reduce by 0.4 percentage points, and we have a significant buffer with pro forma liquidity margin covering debt maturities until 2028. Pre-lease disposal, it was until 2025. Furthermore, there has been a significant reduction on the yield of our bonds, taking the spread to levels that we haven't seen since the beginning of 2020. Clearly, a totally different situation. And now, I hand over to Pietro for the closing remarks.

TIM Group is now a sustainable financial structure as indicated by the upgrade of rating agencies. Approximately 70% of Group EBITDA after lease comes from two healthy businesses, Brazil and Enterprise. Consumer that represents the question mark in market evaluation is performing in line with our target and better than the largest competitors in Italy. We expect to generate approximately EUR 0.6 billion net cash in H2. Full year guidance are confirmed. Now, we can open the Q&A session.

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

Hi, good morning. Good morning, everyone. Thanks for taking my three questions. The first one is on the progression of debt in the second half. I was wondering if you see any risks from the depreciation of the Brazilian currency. Now, the euro is above 6 and you have 5.4 average exchange rates implied in your guidance. The second one is on the internal reorganization between the team enterprise and the consumer. I was wondering if you expect the appointment of a dedicated management for each company or will they remain business units for some time without necessarily being legally incorporated, meaning adding two separate boards, preparation of separate financial statements and double internal structures. The third one is on the outsourcing of call centers. I was wondering if you are considering this option and if you see a tradeoff between outsourcing around 5,000 employees resulting in personnel cost savings and the purchasing of the same services externally. Many thanks.

Ciao, Giorgio. Thank you for the question. The second question creates some issue here because there are some colleagues that are trying to suicide themselves, because if they have to start to work on financial statements for consumer and business after all this marathon that we had to finalize the deal, it could be an issue. No, I'm joking. First of all, there will be no change in the management team, also because the result for which I'm really satisfied on the commercial and operational side that were carried on by Elio and Andrea, demonstrate that Elio and Andrea are the two people that are best in the condition to continue this challenge that we started together. Then we don't foresee, at least for the moment in the actual plan, any kind of creation of separate companies to work on these things. But in any case, Adrian will give you some more details, because the most we proceed, the most we release further information related to all the KPI, economic and financial, about the two business units. This is really important also for us, for the capital location, the trade-off between the activity. About the outsourcing of call center, what we are doing today is that we are proceeding to an internalization of the activity that today we have outside our perimeter. I remember that in the consumer perimeter we have something close to 3,500 employees that work on the call center side, and that in the last two years, they did a great job to increase the productivity and to try to compensate with the lower cost of the external call center. So for the moment, our approach is to internalize all the activity. This is one of the areas of the transformation that we are carrying on, and it will be not only for the call center, but also for other activity. So the 400 million target cash cost improvement on the transformation are made also by internalization of the activity, not only in the call center but throughout the company. About the progression, I leave it to Adrian to give some comments. A - Adrian Calaza: Yes, hi Giorgio, good morning. Just complementing on the reorganization, in terms of the information that we give, you remember that in our capital market day we mentioned that we will be giving this year yearly the evolution of the EBITDA of the entities. We are working hard, honestly, in order to prepare everything for next year, and we'll probably be giving at least each half the information about the entities up to the EBITDA level. Hopefully, we'll also be ready to give it quarterly, but this is something that we're working on these days. As Pietro mentioned, we are not seeing today that we'll be preparing financial statements separately in the domestic business. But anyway, hopefully next year we will give more disclosure on the entities. On your first question, clearly this is a matter that we've been working not this year. If you remember, last year when we issued the debenture in Brazil at the holding company level, we mentioned that one of the goals of this financing was to partially cover the exchange rate through a natural hedge. That was the first step. In April of this year, we entered into agreement of a hedging position here in Europe of the Brazilian real at 5.57 real per euro for the 50% of the equity free cash flow of the year of Brazil. Since the exchange rate evolved, mainly starting in June, we think that this coverage will be, if you consider the full year, will be almost covering totally the equity free cash flow of the Brazilian operation. We shouldn't expect any impact in terms of equity free cash flow coming from the Brazilian operations.

Many thanks.

Next question comes from Mr. Joshua Mills of BNP Paribas. Mr. Mills, please.

Hi, guys. Hopefully you can hear me. I'd love to just get a bit more color on the competitive environment in Italy at the moment. It looks like the six-line price rises have landed quite well. Mobile is still under a bit of pressure, but if you could perhaps comment on what you're seeing from your competitors and then what price moves you have planned for the second half of the year, that would be great. And then the second question was just more on the B2B side, and you've given some helpful detail here. I know that in the recent Biosphere [ph] presentation, they are talking more about deploying AI and about the opportunities they see as they merge with Vodafone. So perhaps, again, you could give a bit of color about the competitive environment you are seeing in the B2B space and whether there's been any big contract wins, losses or repricings in the past few months since that merger was announced. Thank you.

Okay. Thank you, Josh. I leave the stage to Elio and to Andrea so we can demonstrate that we are a team that indicates that they are the right people to continue the challenge that we started together.

Thank you, Joshua. So the competitive environment in the first half has shown different trends. First of all, we see some signs of rationalization by the main player on fixed and on mobile. We see actually aggressiveness from the new players, especially from the challenges coming from the energy sector, so NL and other energy providers. But in general, we see some signs of rationalization, also with some repricing coming up from the main players. And we have also positive expectations on the rationalization of policy by the merged entity, Fast plus Vodafone, that hopefully will have a different approach to the mobile versus the previous Fast stand-alone unit. So in general, I would say that the competitive environment remains relatively tough, but we managed to have a strong repricing campaign that as portrayed also by Pietro, is the actually wider repricing campaign we did in the last three years. So with the escalation of numbers and delta ARPU and positive outcomes. Elio?

Yeah, so thanks for the question. So I would start from the competitive scenario. So we have basically three layers of competitions in the country. You have on the top large system integrators; Accenture, Engineering, Ludic, you name it. Then you have a set, a large set was small system integrators, and in both cases they are on the competitive side, but they are also partnering with us, because in many cases we do leverage on their services to provide services to our customers. And then there is a third layer, which is I guess the one you are referring to, which is the carriers one, where we do see mostly Fastweb and Vodafone competing with us. And specifically on the artificial intelligence topic you were mentioning, we do believe that on the revenue side we are probably the only player that achieved in the last 18 months to actually generate a significant amount of revenues on AI, because as you probably know, we do leverage on a platform which is inside Olivetti, which is a platform where we provide tools to municipalities to make cities smarter. And actually this is a business going very, very well. We have that platform installed in 17 different cities across the country, and we don't see any other player honestly in the country generating the same kind of effect. On the other side, we are also very active on the cost side, because we do believe that artificial intelligence can help us on the operation side. So we are trying to understand how to leverage on the platforms provided by large hyperscalers to optimize costs on the customer operation and on the customer care. And then more in general about growth. We do see cloud doing very, very well, significantly ahead of our best expectation. Maybe we can comment on this later on.

Josh, if I may I would like to add two things, one on the consumer and the other on the enterprise. On the consumer it's important to highlight to everybody that the number of the free stuff and the beginning of the third quarter are related to the way in which we were used to compete, so no flexibility. So we can imagine this is part of our plan that after the sale of the NetCo, on the consumer side we will have more leverage to bundle and compete at the local level, and so it will allow us to give a further speed up. In the meantime, as Andrea mentioned, there is an increase of aggressiveness from players coming from energy, and this is something that must be put under the spotlight, because sometimes there could be the risk of cross-subsidy between the two industries. So this is something that will be highlighted. On the other side, let's remember that independently from the AI, a real, let me say, competitive advantage is the number of data centers that we have at our disposal. The 16 data centers and the speediness with which we have migrated our customer base in the cloud will be very important, because once you migrate the customer base in the cloud, it will increase the level of stickiness of this customer, having in mind that the duration of the contract on the corporate segment is in any case between three and five years. Thank you.

Thanks very much.

Next question comes from Mr. Mark Watts of Citi. Mr. Watts, please.

Hi, good morning, guys. A couple of questions here. So first is just on your plans for the front-end ServCo bonds for the Telecom Italia. I know obviously they weren't part of the exchange, but what is the imminent plan there? I think from memory, you guys said you'd use cash to potentially redeem, or are you looking to refinance those? Second question is just on the second half and what you are guiding for. So do you mind just outlining from what I see here EUR 200 million more of EBITDA AL or CapEx? Do you mind just elaborating on some of the other cash bridge items for the second half? And then just to clarify, so from what you had on slide 19, so the NRRP, that's now been fully repaid. The only thing that moved across to the ServCo was the FibreCop and the bonds. But I'm just wondering whether there are any other debt that's traveled or is this now the clean amount? And what's the kind of pro forma cash balance now at the ServCo? Should I just take this as the gross, the delta between the net debt and the gross debt, so the 5.1? Like if it was possible to split it, how much actual physical cash there is at the ServCo, that would be useful. Thank you.

Hi, Mark. Good morning. Honestly, there's a little bit of noise in the line, so I don't know if I got correctly your questions. But the first one was related of our strategy going forward in terms of our outstanding debt. Is that correct?

Yeah, on those early maturity bonds at the ServCo level.

Yeah, clearly. Well, we did a lot this year in terms of debt strategy, as you can imagine. Clearly, we will be monitoring the market and we will see if there is any opportunity there, we'll probably take it then. Consider that if we are covering more than four years of maturities now, it's a totally different situation for us, not needing to do any issuance in the near future. It's clearly a much comfortable situation. Then, you know how these things evolve. Our bonds are trading very well. So it's a matter of windows in the market. Today, we are comfortable in this situation. I think on the third question, it's about liquidity. Then I will leave the floor to Pietro for the second one in terms of CapEx. The third one was about liquidity, but I don't know if I got it correctly. Was the question about the liquidity?

Yes, I just wanted to clarify what’s the actual cash position at the ServCo level, because you obviously give a liquidity position. How much of it is physical, unrestricted cash or non-trust cash?

Today, again, the deal with NetCo helped us also in this sense, because there were many guarantees up to the closing. Now, with a different rating, as you saw, having two rating agencies as BB helps us also in terms of guarantees. So there was a significant reduction in terms of liquidity trapped. There are still some guarantees, but are marginal in this pro forma situation. I would say that almost all of the liquidity today is free to be used for covering maturities.

Okay, so roughly EUR 5 billion of cash was free to be used to address the NetCo maturities? Sorry, to mark up the other question, I just was going to maybe clarify on kind of the earn-outs and discussions in the past around Sparkle. What are your plans? How are you looking at those potential asset disposals, if at all, near term? How do you look at that asset portfolio now after NetCo?

Hi, Mark. So we focus the presentation, today's presentation, on the business as usual, because there were a lot of doubt about the fact that the business as usual was able to deliver the guidance and we are on target to deleverage. So we didn't put any details about the earn-out, but it doesn't mean that they are not under control. So about the more than EUR 4 billion earn out, the situation is the following. We are quite optimistic in the finalization of the two deals about Sparkle and Inwit. Second, about the so-called canone di concessione, the litigation with the Italian government, we started the execution to cash in it, it's a formal process. We started at the end of June. It takes four months as a deadline. So we expect that some discussion will happen by the end of September. About the earn-outs, the deal with NetCo was closed on the 1st of July. And so now starts the 13th month to have the opportunity to get the earn-out from a commercial partnership for the merge between Open Fiber and NetCo. On this part again, we are the – we set the window back. Also in this part, I think, that there is only one real possibility that Open Fiber will proceed with NetCo. But this is my personal opinion looking at the number. And if I'm not wrong, you asked also something, your second question related to the EBITDA AL minus CapEx. If, again, the second half, I think that the question was, how is it possible that the EBITDA AL minus CapEx of the second half is higher of the first half? This is a matter of seasonality. Just to give you an idea with the public number that are comparable. If you go and look at the number of TIM Brazil, first half 2023, second half 2023, EBITDA AL minus CapEx, you can see a seasonality, this in Brazil. If you look at our number, usually the third quarter is a seasonality related to the roaming and the visitor, and the fourth quarter a seasonality mainly on the enterprise segment. So this is the reason for the increase of the EBITDA after lease minus CapEx between the second half and the first half.

Thank you.

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

Yes, hi. Good morning and thank you for taking my question. First one is a follow-up on consumer. Many times you have stressed that you will get higher commercial flexibility. So my question is, are you expecting already to put this flexibility at work in the second part of this year, or we should expect something more concrete in 2025? Second question is on enterprise. Just wanted to be sure to have properly understood the presentation. So for the next half, we should expect cloud revenue growth to remain at this very high level and what's about 2025. And the last question is open one for Pietro. What's next after NedCo sale? It's much more focused on business, or you may consider some actions on saving shares. Rather, you are willing to play a role in the sector consolidation happening in our country. Thank you very much.

Thank you, Fabio. So I leave to Andrea to elaborate on the consumer segment. Then Elio, and then I will be back with the M&A. We will buy Apple. Back to Andrea.

Thank you, Fabio. So we actually immediately put in place some changes in the commercial policy. And although we have respected the guidelines of regulation that are still applied on Telecom Italia, we see some very positive sign, especially in bundling content with connectivity. So already from the summer, we have a campaign in place that is bundling streaming services with connectivity that is giving very, very positive results. More than that, we have plans to put in place already in 2024 back to school, some more flexibility, commercial flexibility in place. And that also explains why we have concentrated the repricing action in the first half. Whereas we will have a second half that is more focused on the commercial execution with the new parameters.

So thanks for the question on cloud. So let me – so first of all, we are very, very happy about our cloud. This is trending in our business. Let me give you a little bit of flavor of what happens on the market and what is our relative performance. So, this is a market that, as you probably know in 2023 was a little bit short of EUR 5 billion out of which we did the EUR 1 billion. So we did represent at that moment in time almost 20% of the total revenues, cloud revenues generated in the country. Today, we are -- if you look at actual figures for the first half, cloud accounts for 35% of our total revenues. When you look at the Slide 14 where you see the value of a contract signed, you can see that the trend is speeding up, and our value of contract signed is at the 150% on a year-to-year basis, meaning that the cloud will represent very, very soon almost 50% of the total revenues, which is a unique case in Europe. You will not find in Europe any other B2B Telco business with that amount of cloud revenues among the total amount of revenues. When you look at the at the first half, cloud is a little bit short versus connectivity in terms of total revenues, meaning that the difference between revenues that we generate in cloud and revenues that we generate in connectivity is a little bit smaller than EUR 50 million. By the end of this year, 2024, we foresee cloud to be 15% ahead of the connectivity. So, by the end of the fiscal year ‘24, we will generate more cloud revenues than connectivity revenues, which is a very, very big achievement because we thought 1 year ago that this would have happened only at the end of 2025. Now, in the slide that we presented you that were Pietro commented before, we said that this boost was also generated by the National Strategic Hub program. Just to give you the size of that acceleration out of the 1 billion cloud that you see in the total amount of a contract signed, more than EUR 0.5 billion comes from that program that, as is a program that will last for the next 13 years. So, not only we have a solid, steady growth on cloud, but we are securing those revenues on a program that will last for many, many years. So this will give also a lot of resiliency in defending that amount of revenues. So, this is basically our situation today on the cloud business, and I think that, as I said, there is no other Telco in Europe that has such a small amount of revenues based on connectivity as we do. So, we look -- when we look at the business going forward, this looks very, very promising. Thank you.

Fabio, I apologize if I have some fun talking before about Apple Net. Let's try to be serious. First of all, we were looking on the web it seems that TIDAL increased the price. Now it seems that TIDAL has a price on fiber at 21.99. That is also higher than Enel. This is confirmed what Adrian was mentioning before that the Telco market is trying to be more rational and newcomers that are coming from other industry are becoming less rational. But this is something that we'll address during the summer. About the M&A, as we always stated, now we must be focused in delivery the number that you promised at the guidance of the operational level. So I don't want to create any kind of destruction on the management team. It's clear that at the same time, we have to always take a look outside of what can happen. So as I mentioned several times, and this not me, was declared also at European level that at European level, the consumer is a market in need for a consolidation. So, in the actual situation, we have the possibility to set the window to be an active part of a possible consolidation in Italy on the consumer. On the enterprise side, the possibility to grow is for sure gaining back, we can look at inorganic growth with different model. But again, this is something that we'll detail more in the following quarters. But, is everything under evaluation? There could be something that is the opportunity, something that could be an acquisition or something with different commercial model that in any case can create value for the company. About the commercial, the savings share, this is something that any management team had to keep always under control, and we cannot do something different from that. I hope that I gave all the details that you needed.

Thank you, all.

The next question comes from Mr. James Ratzer of New Street Research. Mr. Ratzer, please. Mr. Ratzer, we can't hear you very well.

Can you hear me now?

Yes.

Yes.

Yes, thank you. Thanks for taking the question. Sorry I missed you there. Pietro, congratulations on closing the NetCo sales. I was wondering that now you are independent from NetCo, could you please give me kind of any thoughts you have or interest plans in actually starting to now buy FTTH services from Open Fiber in the white and gray areas where they've been deploying, but the NetCo hasn't been doing so? And secondly, just be interested in your thoughts on whether a potential stake sale in your enterprise business might be on the cards at all. It sounds like you're progressing with Sparkle and Iliad, but I was interested to hear about whether an enterprise deal could be considered now. Thank you.

James, thank you for your appreciation for what we did, and report to all the team, because sometimes people forget that we did a great job. Because if you consider that we signed, we have the signing at the end of November, and in less than seven months we were able to separate the company. Let all the system work. Finalize of the contracts was really a huge job that the team was able to support. About the second, your second question that was on the M&A and disposal of the asset, again, as you remember, when in July 2022 we told that we were evaluating the sale of a stake of TIM Enterprise, it was mainly for a financial aspect. I remember that everybody was telling us, why if TIM Enterprise is a good, is a so good activity, you will sell. Now, we can evaluate that as an opportunity for growth and not to create further liquidity for the company. About the Sparkle and all the other elements, I already told before. Then about your first question, if I catch right, is what we'll do in the white and gray areas. So, in that area, what's happening is that as we are already doing and we declared also during the call, we are starting to buy from Open Fiber, FTTH, where it is needed to compete or to serve the customer with the technology that is fitting the most. Let's consider that in that area, white area and the gray areas of PNRR, the price are defined and are public for everybody. So, there's no possibility, nor for team, neither for our player in the white area, in the gray area PNRR to have specific prices. So, no problem, and this is also better to remember to everybody. In Italy we have 20 million lines. White area and gray area PNRR of Open Fiber are more or less 7 million lines. Then we have 1.5 million that are the gray areas PNRR of NetCo. So you reach 8.5 million. In these areas, there's no possibility to have specific prices because they are published by the bid. Then you have 4 million lines that are not yet covered, gray areas, and then you have 8 million lines that were more or less the overlapping between Open Fiber and NetCo. It's important to remember this number because sometimes there's some confusion. I think that -- I hope that it was clear James.

Yes, thank you. Are you able to say how many lines you actually buy from Open Fiber at the moment? Thank you.

No, we don't disclose this number, but we started to buy since a few months. So there's no problem.

Thank you.

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

Good morning. A couple of questions. The first is related to follow-up on the competitive environment in fixed. In particular, so you mentioned that you have been raising prices mostly during the second quarter. So, if you can give us a sense on any reaction in terms of churn. And maybe also how do you see the line losses evolving considering also the comments that you were giving on the new promotion that you are launching, the conversion promotions. On this also, I'm trying to just clarify if you are now allowed to present these market offers freely or if you are still linked to the previous situation until there is a clarification by AGCom.

Domenico, before to answer to you, I want to compliment to James. Because sometimes James is very polite and doesn't ask the question. If the question was related, do you have hands-free to buy FTTH from Open Fiber in wet areas? Yes. We don't have hurdles or any other kind of ties or limitations. So, we are able to compete in as best as possible. Sorry if I complimented that, but I was thinking that perhaps the real reason for the question was this one. Coming back to Domenico, about the possibility to move, we already requested formally to the National Watchdog to act in a free way because we have no more limitation. There is a formal step that we have to go through, but the formal step will be applied starting from the 1st of July. So the answer is yes, we can move. And now, I leave to Adrian to explain better.

So, on the repricing campaign, thank you Domenico. We did a very extensive repricing campaign in half one. That is giving us some advantage also in the year-over-year reported performance. You can also see in the chart that is projected that we had a very solid growth of fixed TIM ARPU. Thanks to this, so thanks to the repricing campaign. On the competitive environment, we have seen a relatively prudent approach by our main competitors on repricing campaigns in half one. But perhaps also following the good results that we reported on the first quarter, we now see in the summer some moves by the other players, some repricing action by some of the main players. Notably today, as Pietro said, finally after almost two years of very aggressive policy, Iliad raised also the pricing of their offer for the fixed line which is very important, is a very signal because we know that Iliad is coming with a policy of price forever. So, they don't do repricing campaigns. So it's their way to raise the ARPU, is to change the offer for the new acquisition. As we said, we see in terms of churn a relatively stable churn trend because of the rationality of the main players, they still represent 80% of the fixed line addition in the Italian market. But we see very, very aggressive play by the newcomers, which we believe are far from being rational and far from being sustainable also in terms of cross-subsidy rule. So, going forward, we expect also from the consolidation, as I said, between Vodafone and Fastweb. Vodafone has been traditionally one of the most aggressive players on fixed, and Fastweb is still one of the most aggressive players on mobile. So, from the consolidation of the two players, two massive forces on the market should basically come off, and we believe that they will act in a different way going forward.

Okay, thank you.

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

Good morning. Thank you for the presentation and also congratulations on closing the deal. We will focus on what's next. I just wanted to, in terms of the earn-outs, can you remind me what are the different components of the earn-outs, links to regulation, change in energy, subsidies? Also, I don't know if you can comment, but I was wondering if you are may be combining with Open Fiber at the moment? And then lastly, with regard to pre-cash flow, I just wanted to confirm that information you gave at the Capital Market Day about the low CapEx free flow item, which is working capital financial changes for 2026. If you're still happy with that guidance. Thank you.

Mathieu, could you repeat the second question related to Open Fiber, because we are unable to catch you.

Oh, sorry. I was not sure whether or not you were holding questions at the moment. I'm in terms of maybe combining, yeah. If you maybe don't want to comment.

Mathieu, about the earn-outs, as we mentioned, after the negotiation that we had, we include the amount of the earn-outs that were and/or for two separate conditions that can happen together, separately, that are the application of an RAB model in the definition of the regulatory prices, on which our expectation is a probability that is lower, or a merge or a combination between Open Fiber and NetCo in the next 30 months from the closing. So, from the 1st of July. The amount should be up to EUR 0.5 billion, based on a percentage of the synergy that will come up from the merge or the combination of the two. Then there was further EUR 400 million on possible changes in the regulation for saving on the energy. Now, if you have to give some probability on the different part, the combination or merge between Open Fiber and NetCo is the highest level of probability. The second is the energy, but it's a separate basket for the first one. The third one is the RAB model. I'm not worried about the RAB model, because it's a condition that is and/or. What I mean is that the basket of the EUR 2.5 billion of earn-out for the combination and merge can be filled in only by the combination of the merge, in terms of synergy that will arise from the combination of the merge.

Hi, Mathieu. I'm Adrian. I don't know if we got correctly your third question, but it's about the guidance by 2026 of the leverage and what may happen below the EBITDA minus CapEx level. I think that that was the question. If that's the question.

That's right.

Yeah. Now, clearly we are still targeting the leverage that we guided by 2026. There are no changes, clearly. What you may find going forward, after the outcome of the deal, in terms of what we did with the LME, in terms of what we are seeing in the evolution of the Brazilian operations, in terms of financial expenses, is that you may have some improvement or some efficiency on that line. But then we need to see where we will be working on a new plan already, starting in September, and we'll have the new projections. But now, we are confirming the guidance for 2024 and also for 2026.

Thank you.

The last question comes from Mr. Jay Sunny [ph] of JPMorgan. Mr. Sunny, please.

Hi there. I've just got two questions. So on Slide 8, you show your net cash flow of around $600 million for H2. Can you provide any color on the seasonality of the cash flow for H1and any key movements we should be aware of for maybe H1’25?And then the second question was around enterprise, which was a key driver of your domestic growth in H1. So, do you expect a similar level for H2? Because I noticed that Q4, last year you had some pretty strong numbers. So, I'm just wondering how you expect that to evolve whilst also still hitting your domestic guidance. Thank you.

About the working capital seasonality, clearly as Pietro mentioned in his speech, we are still a very well infrastructure company. And these swings in working capital between the two halves will continue. So, probably what you will find is that in the first half of 2025, we will have an absorption of working capital, and in the second half, we'll have a positive, as we will probably have in the second half of 2024. So, this situation will probably continue. Additionally, if you remember the disclosure that we gave about the external networking capital, also in 2025 most of them will be concentrated in the first half. So, again, that will be the situation going forward.

About TIM Enterprise, yes, we can consider a speed like what we experienced in the first half, because usually the fourth quarter is always a seasonal quarter in the TIM Enterprise segment. But your question gave me the opportunity to do a quick recap about all the elements. So, first of all, ServCo is a group where 70% of the EBITDA after lease, minus CapEx is coming from two healthy businesses, Enterprise and Brazil, and we are delivering the number that you promised. The third business, consumer is performing around zero. That was something that a lot of people considered challenging. But we are performing that. At the domestic level, because no one is arguing Brazil, but domestic, the main question was, are you able to grow in terms of revenues? Mainly because the consumer is stable and TIM Enterprise is performing as planned. The second question was, your EBITDA comes from revenue and flat cost you are experiencing in the first half that the domestic level? Our level of cost is flat year-over-year. So, we are following all the things that we promised. We want to achieve also in the second half, and we foresee that, the possibility. To repeat that and so to confirm, think Adrian said we stating today.

That's great. Can I just have one clarification? I think earlier in the Q&A you mentioned that cloud will be 15% higher than connectivity within Enterprise (inaudible) 1.5 % higher.

Yes, today -- so the actual number at the end of each one is that cloud is, the total amount of revenues is 10% lower than what we generated in connectivity. By the end of 2014 we will have a cloud ahead of connectivity by 15%.

Great, thanks very much.

So, there are no more questions. I want to thank everybody. We will follow up with the IR team in some meeting. I want to thank you all -- the team for the huge work that was developed by us in the last month. I think that this is the starting point of a new history where we are giving to our company a new strategic and industrial view. Thank you to everybody.

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