Telecom Italia (TIM) confirmed its full-year core profit guidance in spite of an 8.4 percent year-on-year decline in first-quarter revenues to EUR 3.96 billion, attributed to a sharp fall in domestic sales resulting from lower customer numbers in stores and reduced roaming traffic during the coronavirus lockdown. The company’s EBITDA was down 7.5 percent year on year on organic terms to EUR 1.77 billion in the first 3 months of 2020 thanks to cost savings and a 1.6 percent rise in revenues at TIM Brasil that partially offset the lower domestic revenues.
Medium-long term outlook ‘positive’
However, in contrast to what it described as a “short-term downturn”, TIM said the company’s “medium-long term outlook is positive” following a strong acceleration in the country's adoption of digital services and connectivity. It reported net profit attributable to shareholders of the parent company of EUR 0.6 billion (+239% YoY), thanks in part to cost cuts and net capital gain of EUR 441 million following the merger of towers unit Inwit with Vodafone Towers, and confirmed guidance of a low-single digit fall in EBITDA this year, followed by a low-to-mid single digit growth in 2021-2022. TIM also reduced its debt to EUR 26.7 billion at the end of March, EUR 923 million lower than Q4 2019.
In its domestic market, Telecom Italia’s first-quarter revenues declined 11.3 percent year on year to EUR 3.11 billion, hurt by a combination of stronger competition in the mobile market and the effects of the Covid-19 pandemic that hit Italy at the end of February. The result was a reduction of both the customer base and ARPU levels, with handset sales likewise declining by EUR 95 million to EUR 252 million in Q1 due to lower footfall in physical stores.
Mobile segment hit by competition and Covid-19
TIM’s mobile customer base fell 1.2 percent year on year to 30.5 million (20.4 million of them human SIMs) at the end of March, hit by competition and the impact of the lockdown on gross activations, which conversely benefited the disconnection rate (churn rate down to 5.3% in Q1), with a further improvement recorded in the month of April. Mobile ARPU on human SIMs dipped to EUR 12.3 from EUR 12.6 a year earlier.
Fibre lines up 22 percent to over 7 mln
In the fixed line segment, TIM continued benefiting from the migration of customers to fibre-optic plans, which rose by 119,000 in Q1 alone compared to 105,000 in Q4. In fact, the total number of fibre lines (retail and wholesale) surged by 22 percent year on to 7.3 million units at the end of March. However, overall retail fixed line accesses were down to just below 9.0 million from 9.9 million a year earlier, with consumer ARPU declining to EUR 33.8 form EUR 35.6.
Returning to the Covid-19 pandemic, TIM added that the resulting lockdown led to increases in traffic consumption of up to 80 percent in landline and 30-40 percent in mobile, while use of video applications for remote working was 11 times higher than before the crisis.
