Telecom Italia S.p.A. (TIT) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to Telecom Italia Full Year 2022 Preliminary Results and 2023-2025 Plan Conference Call. Manuela Carra, Head of Investor Relations, will introduce the event.

Ladies and gentlemen, good morning, and welcome to TIM's full year results and strategic plan presentation. I'm here with our CEO, Pietro Labriola; and our CFO, Adrian Calaza, and the rest of the management team. Pietro will provide an overview of last year's main achievements, while Adrian will illustrate the financial results. Pietro will then outline the 2023-2025 strategic plan update. 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. Good morning, everyone. After 12 months of hard work, I'm pleased to present our results and 3 year plan update. This will be our focus today. While I understand there is a lot of interest on the recent developments related to net cost disposal, you will forgive us if today, we will not make any comments on this topic and wait for February 24, when the Board will convene to evaluate and define next steps on the offer arrived. So let's start. Looking at the company now compared to the situation last year, I believe that we have more live than shadows in front of us, and that the future of TIM will be better than its recent past. But before talking about it, let's cover 2022 highlights first. Let's go to Slide 4. I want to start by rewinding the tape over the past 12 months. A year ago, inflation did not exist. Risk free rate was still in negative territory. And Italian economy at the Wind in its sales. However, from February 2022, a sequence of unpredictable events began, which made this scenario much more complex. The war in Ukraine caused energy prices to rise, triggering an inflationary spiral to which the market [indiscernible] were no longer used. A sharp increase in interest rates follow. In March, investors' confidence in team reached an all-time low. Since then, the spotlights have been on the possible sale of NetCo, details of which were provided only during the Capital Market Day in July. But another event, difficult to predict, the fall of the government in July, created additional uncertainty. Despite the extremely challenging context, we have continued to work hard to improve the operational performance and to lay the foundation for a long-term structural turnaround. Let's give some example. We renewed the management team, completed the integration of Oi in Brazil. Own the tenders for the National Strategic Hub and the NRRP, signed a commercial agreement with Open Fiber in white areas, launched a new communication campaign, updated our EBITDA 2022 guidance, sold indirect stake in INWIT, revised agreement with Zoom, signed a new labor agreement, launched the 10 gigabit commercial service, participated in the public consultation of 2023 wholesale rates, set up the process to make TIM Enterprise legal entity, met 2022 NRRP milestones and FiberCop rollout targets, and I can continue for hours. But thanks to these work, the performance both in Brazil and in Italy has sequentially improved quarter-by-quarter. And today, we can finally present results above the full year guidance on all metrics. Before moving to the next slide, I have one additional message. Today, we believe TIM is more credible than it was one year ago. And we want to continue regaining investor confidence. The successful placement of the bond in January with the demand 2.5x the offer, [indiscernible] that the market is starting to believe in our company. For all of us, this is a very important result, but we keep pushing. Let's move to Slide 5. Building the new team is a long journey. 2022 has been the first step. Now we need to carry on what we started. We are convinced that the action we have implemented so far are working. Therefore, 2023-2025 plan will be in full continuity with the strategic pillars we outlined at the Capital Market Day, something not usual for our company in the past. The first principle is to manage each of the 4 entities independently with its own set of priorities as they operate in distinct markets and face different competitive dynamics. For TIM consumer, the goal is to achieve top line stabilization and then restart growth through high-quality positioning, but always keeping an eye on the profitability. TIM Enterprise is a market leader in a large and growing ICT market. The priority is to adopt an integrated operating model to increase efficiency. NetCo is undergoing a shift to next-generation access technology on a basis of a clear return on investment and not at any cost. TIM Brazil will continue the growth story as the next-generation telco, but always increasing the cash generation. Driving efficiency and productivity is the second priority. We will deep dive on this in the one of the next slides. Revamping TIM's role in the industry is a third pillar. On this, we have a lot to say as I will tell you shortly. Capturing new growth opportunities is the fourth priority. Needless to say, the ambition for TIM Enterprise is to continue to grow faster than the market. However, we see opportunities also in the other segment. Last but not least, the delaying plan allow us to pursue strategic options to structurally deleverage the group to be ready for a market consolidation that may happen, while keeping a strict financial discipline. Delayering is indeed our fifth priority and probably the most important in the short-term. Slide 6. Let me now give a high-level update on each of the 4 entities. And in the following slides, we will dive on 2022 KPIs and financials. For TIM Consumer, the volume-to-value strategy is ongoing. New measures to increase the rationality of the market had been taken by us and by most of our competitors. At TIM, we have started to selectively reprice the customer base, and more recently, we have introduced a CPI-linked mechanism in the retail contract. The fees price revision will be on April 1, 2024, with reference to the inflation recorded in 2023. This is something that could be imaginable just one year ago. The migration from copper to fiber is also ongoing with TIM having now the highest market share in FTTH. One year ago, it was completely the opposite. In the meanwhile, we are restructuring our cost base. 2022 saw TIM Enterprise strengthening its leadership. Service revenue grew 10.6% year-over-year, 2x more than the market, and this was the real challenge. On cloud, which is the main growth driver, it is worth mentioning that the National Strategic Hub entered the implementation phase in Q4, as we signed the first contracts and started to accrue revenues. In the meantime, we are pushing on innovative ICT services and advanced connectivity. NetCo's FTTH rollout is on track at 32% coverage of technical units at the year end. TIM Brazil is over-delivering on growth targets, benefiting from the market consolidation. The focus is on strengthening the core and going beyond connectivity with B2B and IoT verticals, a new partnership for digital services. In 2022, TIM Consumer total revenues declined 9% year-over-year, and service revenues were down 7% year-over-year. We see a better trajectory in Q4. Q4 overall negative net adds were approximately 25% less compared to the same quarter of 2021. In mobile, mobile number portability trend is steadily improving and line losses are also down year-over-year. Churn improved on a full year basis, both in fixed and mobile, notwithstanding price-ups. TIM Enterprise total revenues increased 8% year-over-year and service revenue 11%, a growth twice the market. The performance is driven by Cloud, Security and Internet of Things, which more than compensate for the modest reduction in the other business line. In full year 2022, ICT services generated 58% of total revenues compared to 56% in 2021. Let's move to Slide 8. In 2022, NetCo total revenues declined 4% year-over-year, and also service revenue were down 4% year-over-year. The FTTH rollout is progressing and reached 32% coverage of technical units at the end of the year with a pace which is 4x faster than at the beginning of the year. On the rollout, all the targets have been reached, including the ones envisaged by FiberCop. TIM Brazil total revenues and service revenue increased 19% year-over-year. There are several drivers. To name just a few, I remind the ongoing migration of Oi's 16 million mobile customers and the rationality of the market with all players pricing up. 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. Let's now move to Slide 9 for a focus on cost transformation. The transformation plan is on track. In 2022, with a slightly better than the EUR 300 million OpEx saving of which around EUR 100 million of labor costs and more than EUR 200 million of external OpEx. In 2023, we will raise the bar with EUR 1.1 billion target saving versus the inertial plan. Here, you see the split between OpEx on the one hand and cash cost and CapEx on the other. The former will amount to EUR 0.7 billion, of which around 50% is secured, also thanks to the expansion contract we signed last summer. The end game is to rethink the entire operating model to achieve a more sustainable cost structure with around EUR 1.5 billion cash cost savings in 2024 vis-a-vis 2021 addressable baseline. I want to stress that the group CapEx envelope will remain flat at around EUR 4 billion per year in 2023-2025, of which around EUR 3.1 billion at domestic level. Hence, we confirm that we will absorb the extra CapEx related to the NRRP as we anticipate at the Capital Market Day. Let's move to Slide 10. In the last 12 months, we have been very vocal to increase the awareness of policymakers and the general public on specific issues the industry is facing in Italy. Just a few data points. Italy with a population of 60 million has 5 MNOs, the U.S. with a population of 330 million has 3 MNOs, and Brazil with 200 million has 3. In the last 3 years, telecommunication investment have been 2x, 3x higher than those of utilities. EUR 22 billion for TFCs, EUR 10 billion for electricity, and EUR 7 billion for gas. And TIM in terms of CapEx is the second spender in Italy, regardless of the industry. We must have the right capital remuneration recovering inflation. This is a must. In the last 10 years, data consumption has increased from 16 gigabit to 191 gigabit per month per broadband line. The top 5 OTTs generate more than 50% of the data traffic without remunerating the infrastructures. I could carry on reminding that the cost of 5G spectrum in Italy has been one of the highest in the world that the electromagnetic limits are 10x more stringent than in the other large European market or that, historically, telecommunication are the only utility to show a deflationary price trend. My message is that the understanding of this issue today is more higher than before, and the government is actively addressing most of them. Potential measures span from the inflation-based revision of 2023 wholesale copper and fiber tariffs to the reduction of VAT, which currently stands at 22% as per luxury goods to the extension to TLC operator of the fiscal benefit assigned to energy-intensive companies and to the release of limitation of mobile initials. The discussion is ongoing. Each of this measure has reached a different level of maturity. Nonetheless, it is reassuring to see such long needed attention. We hope something will happen. Slide 11. In parallel with the work we are doing on the operation, we are also making progress along the path of value generation. In the slide, we highlight the main achievement for 2022, both in terms of financial discipline, transformation and delayering of the 4 entities. Among these, I just want to point out the continuous improvement of our liquidity position with the placement of the EUR 850 million bond in January and a new financing from EIB, which we expect to finalize in the first part of the year. Let's move to Chart 12. In this slide, you'll find the 2022 ESG mean achievements with a focus on the 4 entities. ESG is a key priority for the group and will drive -- will ship the business in coming years. The ESG plan characterizes the activities of each business area. More in details. With NetCo, our main goal is to create infrastructure that offer energy saving, lower CO2 emissions, use renewable energy and promote the digitalization of the country to the closure of the digital divide. For consumer, we strive for a quality of service and physicalization of ESG making it more distinguishable through product and services with low environmental impact for sustainable lifestyle. We also aim a touch point that offer circular model in the use of resources and the renewed commercial identities that embodies the value of inclusion and sustainability. For Enterprise, the goal is to help changing business and public administration to obtain simpler and accessible services for citizens and with a lower environmental impact. HR is responsible for strengthening all aspects of a sustainable working environment. We launched a new smart working model. Our workplaces remain close on Friday, bringing significant results at the same time for the people health and the environment. We are also committed to bridging the gender gap and to skilling and upskilling employees through intensive training campaigns. Then there are important actions that affect the sustainability control. We've put in place a short and medium-term incentive policy on ESG to focalize the management on the sustainability transformation. We have implemented an ESG platform that will combine data with project to make digital the ability to monitor the progress of ESG project, enabling the task and ESG impact. We are also creating a sustainability performance report that is easier to read and focus on investment to make people understand we are doing in terms of project. In 2022, we put on track over 40 projects to support the achievement of our ESG targets. We've invested in a strategic partnership with ENI opens to transform our supply chain into sustainable one. On the infrastructure side, we have carried out efficiency intervention that have allowed us to absorb the increasing energy consumption of data center, and thanks to which we have issued energy efficiency certificate for over EUR 3.8 million. We increased the use of renewable energy in Italy till about 46%, and in Brazil 100%. We have given a great impulse to the recycling and resale of product and material with the valorization for behind EUR 2 million of revenues and important reduction of the West is, thanks to the monitoring through the target of a circular economy ratio. Let me now hand it over to Adrian for 2022 financial results. Thank you, Adrian.

Thank you, Pietro, and good morning, everyone. In Slide 14, you have a summary of our own main group financials. As you can see, all the metrics were better than the guidance with service revenues and EBITDA trends improving sequentially in Q4 versus Q3 as expected. In particular, group service revenues were positive at plus 3.6% year-on-year in Q4 from 3.0% in Q3. In the full year 2022, group service revenues stood at 1.3% year-on-year, beating the low single-digit decrease 2022 guidance set at the beginning of the year. Group EBITDA turned out positive at plus 2.7% year-on-year in Q4 from minus 6.5% in Q3. In the full year 2022, group EBITDA stood at minus 6.7% year-on-year, reaching the upper part of our high single-digit decrease 2022 guidance that we revised upwards in August. Domestic full year EBITDA would have posted a minus 4.6% net of the non-repeatable items of 2021. CapEx was also better than guidance at around EUR 4.0 billion with domestic a touch better around EUR 3.1 billion. As Pietro mentioned, we worked hard during this year to improve our results compared to our own projections. And we did it despite the very different macro environment we encountered versus the expectations at the beginning of the year. Equity free cash flow is around 0 in the year, also better than our own expectations. I remind you that equity free cash flow was negatively affected by the DAZN one-off payment of EUR 300 million. Net debt after lease increased during the year, as anticipated, mainly for 2022 specific one-off payments, in particular, the EUR 1.2 billion payment related to the Oi acquisition, and the EUR 2.2 billion cash out for the 5G licenses, EUR 1.7 billion in Italy, and EUR 0.5 in Brazil. On the positive side, we cashed in EUR 1.2 billion for INWIT stake disposal. Let's now have a better look at the quarterly risk trends in the coming slides. As you can see, group service revenues grew 3.6% year-on-year in the fourth quarter, a touch better than in the third quarter, thanks to a positive contribution of Brazil after our integration, and better trends at the domestic level that improved further after the third quarter at minus 1.6% year-on-year versus 3.5% year-on-year on the previous quarter. As I said, full year was above our expectations, and we are now aiming at stabilizing domestic business in 2023 with group revenues growing low single-digit. Group EBITDA was back to growth in the fourth quarter with a positive 2.7% year-on-year, improving strongly versus the minus 6.5% in the third quarter. The main contributor was the domestic business that improved to minus 4.2% from the minus 16.2% in the third quarter. Full year was in the upper part of our already revised guidance, and we now want to keep the fourth quarter base also for 2023 with potential for domestic EBITDA to slightly grow. Let's now zoom in the domestic trends starting from fixed. Slide 16, fixed service revenue were slightly down minus 0.8% year-on-year in the fourth quarter, improving sequentially from minus 3.9% in Q3 with better trends, especially in retail, thanks to the very positive performance of our ICT business. At the same time, international and national wholesale have continued to improve their performance in the second half after a tough year-on-year performance in the first half, impacted by non-repeatable transaction in 2021. In terms of market, 2022 stabilized after the growth in 2020 and 2021, fueled by vouchers and COVID that supported broadband net additions and equipment. For these reasons, retail KPIs are weaker, but with a significant churn containment during the year, now steadily around 1% per month, combined with the historic low level of delinquency. Price ups have been done in previous quarters on our existing customer base with churn impact below our expectations. Equipment was slightly positive year-on-year after a strong deceleration experienced in previous quarters due to the comparability with 2021 that was including the support on equipment from voucher scheme. Moving to Mobile on Slide 17. Mobile service revenues were down 1.5%, better than the minus 2.2% in the previous quarter. Retail reported a negative revenue contribution coming from the lower customer base. This has been partially compensated by the positive result coming from the wholesale revenues with higher roamers and MVNO revenues. In terms of the market dynamics, MNP was similar to Q3, notwithstanding some selective price increases done in the recent months. This resulted in a sequentially ARPU growth quarter-on-quarter this year, and we are reiterating this approach as a good practice also to counterbalance the recent inflationary pressure and additional actions are likely to come in the next months. On Slide 18, we have details on OpEx that were broadly flat year-on-year in 2022, but declining minus 2% on a cash view. More specifically, variable costs were down year-on-year, mainly for lower interconnection and equipment sold, partially compensated by higher COGS related to ICT growth. Commercial costs were up 1%, but they would have been down, excluding the extension of client useful life last year. Higher commissioning content and VAS costs were -- have been compensated by lower bad debt, customer management and advertising. Industrial costs were up year-on-year due to higher energy and provisioning costs. It is worth mentioning that energy costs was, in any case, under control, thanks to our hedging policy and volume containment, slightly higher versus 2021, but broadly in line with initial expectations despite the adverse macro scenario. [ G&A ] was also slightly higher year-on-year due to the ICT revenues growth. Finally, labor cost was down 1% year-on-year driven by solidarity and lower FTEs offsetting some variable labor costs. On Slide 19, you have details on TIM Brazil. The company reported another strong quarter, largely beating the guidance on every line, and you can find many details in the company's disclosure done last week. Nonetheless, it is important to highlight the main achievements of this quarter. The top line expanded 21% year-on-year with EBITDA growing at 17% after the consolidation of Oi numbers at the beginning of May. Definitely, it has been a transformational year for our Brazilian unit with an important milestones accomplished making it ready to become the next-generation telco. But probably the most important metric is the EBITDA minus CapEx margin that stood above 25% on revenues, the highest level among its peers in LATAM. As you can see from the numbers, TIM Brazil is now fully benefiting from Oi mobile integration and posted a strong organic performance focused on customers' value strategy that continues to base off. In Slide 20, you have details on CapEx. We continue to invest heavily in infra-broadband network deployment, FTTH and 5G. With specific focus on network decommissioning, data centers, development and NRRP CapEx. These investments permitted us to be on track with our FTTH rollout that, as mentioned, reached 32% of coverage of technical units, while exceeding the mobile plan target goals in terms of activated layers, both on 4G and 5G. Equity free cash flow was positive in the fourth quarter and allowed us to close the year level. As mentioned, this was achieved, thanks to an improvement on the operations, helped also by the reversal of the DTA payment and despite the EUR 300 million payment for the DAZN agreement. The change in net debt, as commented before, was not affected by operational results. In Slide 21, you can find a summary of our debt maturities and the breakdown between fixed and variable rates. As anticipated in the third quarter, we have worked hard in recent weeks to enforce our liquidity position that was already strong. As you can see, we ended the year with approximately EUR 9 billion of liquidity margin that allowed us to cover maturities until 2024. Importantly, at the end of March, you should see a similar liquidity position to the one shown here for the year end 2022, even after the repayment of EUR 1 billion bond maturity in January, thanks to the EUR 850 million bond issuance, a new loan from the European Investment Bank and other financing we are working on. It is worth to mention that even in this context of high interest rates with Italian BTP above 4% from 1% at the beginning of 2022. Our total cost of debt sits below 4%. With this, I hand over to Pietro for the guidance of the 2023-2025 plan.

Thanks, Adrian. In terms of plan, today, we are giving you just an update with the 2023 guidance and some 2023-2025 plan horizon indication. The strategy remains the same in turn continuity with the topics already discussed during our Capital Market Day. Let me say that today's positive news for the guidance is that, we are now seeing domestic business to broadly stabilize the top line for 2023, with domestic EBITDA slightly growing. I know this was already embedded in the last year's guidance, but we are pleased to see it coming now despite a completely different and worse macro environment. Let me make another comment here. 2022 was ahead of our expectations. So -- even if this 2023-2025 trends were already embedded in the last year's guidance, numbers in absolute terms will go up. This could not be important when you look at the year-over-year trends, but it is extremely important when you talk about free cash flow and net debt. So coming to the targets, we are now seeing, group service revenue to grow low single-digit in 2023. Brazil growing high single-digit and domestic broadly stable after 6 years of decline. We are also seeing a similar low single-digit growth trend for the group CAGR 2022-2025. Moving to group EBITDA that is expected to grow mid single-digit in 2023, with Brazil continue to grow low double-digit and domestic growing a touch again after 6 years of decline. Group EBITDA CAGR for 2022-2025 is expected to grow similarly at the mid single-digit pace. In terms of CapEx, we are seeing group CapEx at around EUR 4 billion in 2023 and to remain at this level for 2024 and 2025. Within this, domestic is expected to be around EUR 3.1 billion for each year. This is probably the other news for today. We were able to accommodate CapEx related to the [ NRPP ] project within our 2022 CapEx envelop level. The amount of EUR 3.1 billion at domestic level is gross CapEx, before the refund from NRRP, which will come in approximately one year after the investment. If we consider the refund by competence, 2023 CapEx will be approximately EUR 0.5 billion lower at around EUR 2.6 billion. Lastly, we are projecting cumulative equity free cash flow as slightly positive in the planned horizon. Moving to the domestic entities on Slide 24. We are providing an indication of the drivers behind the plan. We cannot be more specific here in terms of financial that in any case were already presented to you in July last year because, as you all know, we are in a delicate phase and confidentiality is of the assets in such circumstances. Starting from TIM Consumer, the plan envisaged the following assumption, fixed market growing slightly in terms of number of lines driven by fixed assets and ultra-broadband technology, [indiscernible] strong reduction. Mobile lines declining with non-human SIM growing, but still limited insights and value. Our commercial strategy will leverage on some strong pillars among which best-in-class technology, customer service leadership and offer simplification. On top, repricing will touch the majority of consumer and SME customer base, both in fixed and mobile, as well as CPI-linked adjustments for new activation and for around 90% of fixed and mobile customers. For enterprise, the plan is built on the following trajectories, growth above market in line with 2022 performance at an expected CAGR of 6%. Here, we'll have the additional benefit of NSH and NRRP tenders. Improved overall margin driven by professional services, reducing customization, vendor consolidation, inflation recovery and repricing. For NetCo, the plan envisaged the following trajectories. In wholesale, we target to increase the FTTH customer base by almost 6x in 2025 versus 2022, leveraging the new FTTH VULA price, co-investment offers and simplifying the migration from legacy copper to FTTH lines. We'll continue to upgrade the fixed infrastructure, leveraging on NRRP and FiberCop to maximize the FTTH coverage, reaching 48% of technical units in 2025. In mobile, we will move towards the full 5G network transformation, targeting 90% population coverage by 2025. Let's move now to Slide 25. Let's talk about TIM Brazil. In terms of targets, we expect TIM Brazil to grow high single-digit in service revenue for 2023 and low double-digit for EBITDA. CapEx are expected below 20% on revenues with EBITDA minus CapEx growing double-digit and shareholder remuneration to increase as well. In this slide, you can also see 2025 mid-term indication. Last year has been transformational for Brazil with important achievement, and we believe the company will continue to deliver high levels of profitability, creating value for its shareholders. Let's now close with ESG target. On ESG, the targets are in line with our strategy. We made some adjustment to consider the 2022 performance, and we aligned main target value to 2025 to ensure a more homogeneous reading, net of long-term goals. On women leadership position, we confirm the group target and we leverage on short, long-term incentive on ESG to push transformation. On IoT & Security, we reported a 20% growth in revenues from service and resale. We have retimed the goal by entering the cloud and choosing to focus only on revenue from services. At the end, finally, I want to thank the management team and all my colleagues, both in Italy and in Brazil for the results achieved that are the fruit of a great teamwork. It is also not to be undervalued that these results have been reached in a totally different scenario. We want to keep gaining market trust with a transparent approach and by constantly delivering on what we promised. Now, let's start the Q&A session. Thank you.

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

Just a couple of questions from my side. The first one is on the guidance on net free cash flow for a slightly positive cumulative equity free cash flow that seems particularly conservative. I was wondering if it's related to a faster rate of the balloon study redundancies than expected by us. And then the second one is on KPIs. What was behind the volatile KPI trends in Q4? Was it due to a tougher lender competition? Or was it a side effect of the repricing increase, which would affect the lower ARPU customers without worsening every mix?

Giorgio, before turning to Adrian about the guidance, let's start with the KPI. If you distinguish our market by 2, TIM Enterprise, TIM Consumer, and that start more and more to comment every time distinguishing the 2 business, because our 2 trends that are completely different. And so sorry if it takes some minutes to give desert, but it is really important. We are going to manage our company and our revenues based on a portfolio of business. Some one that test a higher level of possible growth. I used to say, well, that it is like a surfer with a lot of wave that he can serve. On the other side, we have Andrea that is managing a market there, that is a tough condition where -- what we have to do is to become more efficient and to reduce the washing machine of the change between -- among the operator. So in the case of value, we have in the last quarter an increase of sales compared to the other quarter that is traditionally a seasonality effect that we have at the end of the year, we have been working also in a company that when you are at the end of the year and if you have seen available budget, you used to spend, that has happened every year in the company. So this is true also in the large corporate, they anticipate sometimes some projects. And another important element, we overperformed compared to the other player in this market and to the other benchmark around Europe, because as we stated since last year is that, Italy is a complete different market and our footprint in terms of penetration in public administration, penetration in the large segment. And our main point we have 1,500 people in our sales department that are not a liability, are an asset. And all the main OTTs -- sorry, hyperscalers are looking for partnership with us, because in this way, they can increase the speed. So on the TIM Enterprise, we're much more on the ARPU. The over -- we had an overperformance with TIM Enterprise. We do not expect that will then go slow down, but you have to imagine that every year in the fourth quarter, TIM Enterprise will overperform. This is really important, and again, this is our trend in terms of growth. When we move to the consumer, what's happened that you have also some seasonality, usually the third quarter is also -- always one of the best of the year. Then there are some trends that can change also based on the competitor applicated -- that is not constant. What I mean is not only TIM, but also other competitors, publicly stated in their call with the financial market that the acquisition model, as is today is not profitable. So sometimes when they have to reach their goal, they can speed up. But at the end of the day, the new acquisition are not so profitable. And so then they slow down. But what we cannot expect is that, we will multiply by 3, our positive net debt. Today, our goal also for 2023 is to continue to freeze the market, reducing for sure, the impact on our net adds, because of our strategies from volume to value, but doesn't mean that we want to play the game of the volume. But we don't want to play the game of the volume at any cost. Let's remember that not only for TIM, and this is really important, but also for the other player, the loss of a new -- a customer and the customer base, substituted by a customer from the acquisition is going to destroy value. I really apologize to you and to the other colleagues, if I took more time on this question, but because very useful not only to broke the glass here, I'm joking, but also to state in a clear way, the element of our strategy. Before to leave the stage to Adrian to discuss about the equity free cash flow, let me help you also to read some of the things, because we gave out together that is Andrea's, also because there are some events that will have an economic impact on the year one and a positive financial impact on the year 2. The main example is all the CapEx related to the PNRR. Usually, the proceeds that will come from the PNRR, 70% for the 1 giga plan and 90% for the others will come with 12 months of delay. So to be clear, if I should put by competence, the level of CapEx of 2023 should be lower of something close to EUR 0.5 billion and better, much closer to EUR 600 million and not EUR 500 million. And the same for the other years. Last but not least, again, but I leave the stage to Adrian is that, we are improving our operations, we are improving our economics, but it's clear that on the financial part, we have to continue to work because the level of debt that we have today is something that we have to manage in a clever way, because also the increase of interest rate is not helping to transform whatever we create at the economic level on the financial part.

Yes. Thank you, Pietro, and good morning, everyone. Well, I won't say that this guidance is conservative, at the end, the equity free cash flow is a result of all the main lines of the operations. And I won't -- I don't think that the guidance that we gave for service revenues or for EBITDA is conservative. If you ask my colleagues, they will tell you that are challenging numbers. But what I can tell you is that probably we've been prudent in terms of not considering effects that can arrive. Pietro discussed the initiatives that we are having with the government for the industry, not for us, in particular. There are some specific positives that could arrive. What I can tell you is that, there are very little downside risk. There could be more upside risk going forward. So -- and remember always that the equity for cash flow is effective by some effects that are not on total control, you have the impact of the exchange rate of our assets in Brazil that can go up or down. There are different variables that we need to understand when we see the evolution of the equity for cash flow. Then particularly effects as the one that you were commenting in terms of the exits that we can have in terms of labor cost. Yes, these could be an effect. We have some other specific effects. Remember that we still have the payment for the DAZN agreement. We have the CapEx, as Pietro augmented, this year for the NRRP projects and the proceeds will come only next year. So again, but we think that the slightly positive is somehow challenging, again, prudent in terms of the effects that are considered. Hopefully, we can do better than that.

Next question comes from Mr. David Wright of Bank of America.

I'm a little confused on these CapEx rebates, and to what extent your guidance does assume them, doesn't assume them? I'm just -- maybe I'm a little behind the curve of my colleagues here. But just to understand what is in the guidance and what is not? And then just separately, if I very quickly map the consensus numbers based on your guidance -- sorry, your guidance, I'm still seeing a very levered balance sheet even by 2025. Is a deal -- a NetCo deal or even an enterprise deal, do you feel like that is really quite essential to really free TI Group from this leverage challenge? And I know you can't comment on NetCo, I understand. But any updates on enterprise, I think you have had stated interest in the past, what you're thinking there? So the CapEx question, the debt and enterprise question.

I'll answer the first one in terms of CapEx. The guidance that we gave are -- these are the gross CapEx. And so it's so what we need to do in terms of deployment, in terms of IT on every side of the business. Then the proceeds, you will have it the following year and inside the equity free cash flow, but not considering the CapEx. CapEx, as you know, is the assets that you acquire for the company. So in those EUR 4 billion, the proceeds are not considered. If you want to see a net, you should do EUR 4 billion less the proceeds that will arrive in 2024. So something around EUR 50 million -- EUR 550 million that -- what you see here are the gross CapEx.

But just to be clear, and I really appreciate the fact that you asked us, so it's better to clarify to everybody. Both CapEx and proceeds are in our numbers. Then as Adrian explained, the CapEx are the gross CapEx, so the CapEx of 2023 includes the CapEx that we spend on the PNRR on the equity free cash flow of 2024, you have the refund, -- the proceed that will refund the 70% of this CapEx. And the same will be 2024 CapEx, our gross and in 2025, in the equity free cash flow, you will see the proceed. This is not due to us, but this is the mechanism of the refund of the PNRR. I hope that now is more clear before to move to the second question.

So the actual net rebate do you think across the plan period could be about EUR 0.5 billion.

No.

Is that correct?

No.

$0.5 billion per year, right?

Per year. Yes.

Yes. Per year.

Okay. So then the equity free cash flow...

Sorry, David. Sorry, it's EUR 550 million per year starting in 2024. So you won't have the proceeds starting in 2023.

Okay. So the equity free cash flow guidance includes EUR 1 billion rebate. Is that correct?

Correct.

Okay. Can I ask, because if you're guiding to mid single-digit EBITDA growth, then that's going to deliver EUR 500 million, EUR 600 million. And you've got additional -- you're then delivering an additional sort of EUR 1.5 billion of CapEx rebate. I'm just trying to understand where -- what's disappearing before we get to equity free cash flow guidances slightly positive.

Clearly, you have the effects that I commented in the first question, you have, again, all the effect of our somehow labor expenses related to the layoffs. You have the -- obviously, instead the equity free cash flow, you have the financial expenses, as you can assume, there will be a different situation considering these interest rate levels. And some specific points, we think that we have a very transplant disclosure on equity free cash flow in 2022 that you can assume the evolution of these effects. So again, it's a matter of improving that. If you compare this level of equity free cash flow with the one somehow embedded in our previous plan, we are significantly better. We are thinking that this can further improve, probably, we'll need to see the evolution. What we think is that, it's important to the improvement that we are having in the business, then obviously, the equity free cash flow will evolve in the same level.

Okay. That is clear. And maybe just a quick question on leverage and enterprise.

Sorry, David, can you repeat?

Yes. That's clear. And then my second question, and I apologize to my colleagues for taking the time. Just on the absolute of leverage remains very high over the period. What -- with very little cash flow deleverage and some EBITDA growth, but essentially a leverage ratio way over 3x. What is -- you can't comment to comment on NetCo, but what is the latest commentary on a potential divestment of enterprise?

David, but I think that we state this is the beginning that to have an effective deleverage of the company, it's clear that some extraordinary operation, which will help for sure. And it's not only a matter of the leverage, it's also a matter of strategic option, as I clearly stated. This is a market that will have a consolidation and to be ready for this consolidation, we must have a better leverage condition. So this is part of what we are discussing. Then it's clear that all the auction that we mentioned during the Capital Market Day are on the table. We are trying to approach them in the most serious way. We are trying to avoid discussion and negotiation on the press, at least in our possibility, but this is something that we are confirming since the beginning of 2022. If we have the time machine and we come back in 2022 in March, we told exactly that. Now what we told in 2022 that you have to work to improve the operation, that we have to work to try to reduce in a significant way the debt if we want to have an industrial and strategic option. One year later, we are here, we are not changing what we told one year ago, and this is an exception in the story of our company. We are improving our operational KPI. Not everything can be transformed on the financial due to also the change of the environment, if you remember, in March of 2022, we were facing a complete different scenario. But despite that, we were able to achieve our guidance, overperform, we are continuing to improve the number, we have a clear understanding about the situation. We can continue to work to improve the operations, but it's clear that if we want to change the profile of our company at a certain point, an important deleverage has to be done. About the state to solve the net enterprise or whatever, we continue to confirm our approach that we defined the 7 of July on the Capital Market Day. But I'm not going to disclose details because we are in the middle of some negotiation, because it's not me that declare the fact that KKR put an offer on the table. So I think that it's serious for all the market to not comment that.

Next question comes from Mr. Fabio Pavan of Mediobanca.

Two question. First point I would like to discuss is a follow-up on what Pietro, you just have said. You're referring to sector consolidation as other CEOs of the companies involved in this space. Do you think something may happen already in the mid-term wouldn't save short term? And second point, it seems to me your ambition is to play active role in this potential project. And second question for you is on digitalization. It seems to me you are speeding up on this with an angle may be much more oriented to savings, thanks to digitalization for consumer and digitalization like a way to open to new revenue opportunities on enterprise. Could you elaborate a little bit on this?

Fabio, about consolidation, exactly, as you mentioned, is not me, also the other CEO in Italy are declaring that. And what makes me also, the things more funny, let's say, in this way that it's also the last comer that is declaring that we need for a market consolidation. So I think that this is something that will happen. If you ask me if it is in the short-term, it's all a matter of definition of short-term. And if you see in the 3 year of the plan, 2023-2025, I think that something will happen for sure. But this is my point of view. And also -- and I have always to say if not because I don't believe, but because we have always discussed in terms of what if, it's clear that in case of a network sale, it will be a trigger and then we'll have a kind of a domino effect, because it's clear to you that if I'm vertically integrated, it should be more difficult to be part of a market consolidation. I have that -- I was clear on this stage. And what is important is that, we have to start to think that market consolidation could be, intra-market or inter-market between market, what they mean. For example that going ahead in the TIM Enterprise segment, I could think that could be useful to do something merged acquisition with some other company that can complement our value chain. But sometimes also, and the consumer could be something like that. But before to fly, we have to stay on the ground and deliver our numbers. So I'm answering to you that this is the view, but 2023, we have to deliver, again, our number. And we have to do that quarter-by-quarter, because we have to continue to gain the trust of the market on the fact that what we say we deliver. About digitalization, the second point, you are completely right. We are not working on that only as a tool to reduce our cost and transform our cost base. And we have a transformation plan that is working on that. But it is very important also on the revenue side. Here, to be clear, we have 2 different story. The Enterprise segment is the Consumer segment of the beginning of the 20 century. If you remember in 2000, the consumer was the area with a lot of new business model that was coming in the market. 20 years later, they progressively took different direction. While on dementor price, when we talk about cloud, cybersecurity, IoT, smart cities, we are not discussing of a wishful thinking. We are discussing about market that today give some value. So what will happen? In the Enterprise segment, we have a clear path for innovation and -- this team is working on that. And in March, we will disclose also a new approach more efficient to work on that. On the consumer, we have to understand which is the path for innovation. And we have to do that carefully, because we don't want to repeat the mistakes of a lot of telco player towards the world that was thinking that the content was the new paradise and become dual. I hope that the answer to your question, Fabio.

Next question comes from Mr. Luigi Minerva of HSBC.

The first one is on your capital allocations and how you see the assets. I mean leaving the NetCo on the side for confidentiality reason. I just wanted to hear how you think about enterprise versus consumer? Because if I hear the way you present about them, it looks to me like enterprise is the better business that grows more, that generates better returns, whereas consumer is the challenged business. So in principle, if you think about asset allocation, you would want to retain full ownership of enterprise and perhaps dispose the part of the business that generates lower returns or no returns. So in this context, I don't understand why all the talks are about disposing the stake in B2B, while on the consumer side, there has been no discussion or no hint about a potential disposal? The second question is on the Savers dividend. And I appreciate we don't have the full accounts today, but all indicates a loss -- a net loss in 2022. So just to clarify, does that mean essentially no dividend for the Savers also this year?

Luigi, I think that we did a good job because you did a right synthesis about what we have to do on the consumer and TIM Enterprise, not in terms of M&A, but in terms of goal that we have to reach. My point is that the consumer is not bad, it's a company that was -- didn't have a right indication to improve the cost base. So the first result that we reached in this year, dividing the company in business unit, let me say in this way, is that now it's clear to everybody that we have a clear understanding about where we have to put capital -- our strategy of capital allocation. It doesn't mean that they don't have to put CapEx on the consumer. I have to put that because, sometimes it will allow to me to have a faster return on the investment in terms of saving on the cost. On the other side, TIM Enterprise has less issue in terms of efficiency, also if we have also on TIM Enterprise some challenges in terms of efficiency, but in a prospective way as much opportunity in terms of growth. So -- and we have also our strategy of TIM Cloud that we define the name TIM Cloud, because we have to also try to explore the opportunity that are coming from a worldwide view about a more local cloud, because the cloud started at something that could be everywhere at 4 security element. Now it's becoming something that is becoming more and more local. About the M&A, I don't want to comment too much, because if not, we put the focus on something that is not operation. We cannot do everything at the same time. I think that we don't have to distract our management team from deliver the operation. And it's clear that we have always an eye to the opportunity that come on the market that doesn't mean necessary sale. That are the opportunity to create and generate value for all the shareholders. And it's clear that the 2 strategic view of these 2, let me say, retail entities are different, but both have clear path that we will follow in the following months. About the saving dividend selling, to Adrian.

Yes, you're right. The result of 2022 will be negative in terms of net income, considering also the reversal of the DTA, the effect that is created. Then the decision about the payment of the dividends or not to the savings shares will be taken in March during the Board approves the -- our financial statements of 2022 anyway. I think that the effects in terms of this net income, but we'll see, the decision will be taken by the Board on March 15.

Next question comes from Mr. Domenico Ghilotti of Equita.

A few questions. The first, just sort of clarification on what is embedded in the plan. So you mentioned the recovery fund. I presume that you have also included new wholesale tariffs, just to be sure on that, while you do not have a factory in the other potential initiatives from energy intensity to VAT to the electromagnetic limits. Second question is on the price, the strategy on the consumer. Well, if I understand well, you are really committed to reprice to raise prices also for the back book for most of the customer base, mobile and fixed during 2023. And third question, well, I don't know if you can give us some granularity or some indication, what have been for the 3 entities, I understand the issue on NetCo in terms of profitability and CapEx. But that would be useful for us to understand the trends compared to what you have presented in the Capital Market Day.

Domenico, about the consumer, yes, we put in our plan repricing on the customer base also for the new acquisition. We do that also based on a different approach. If you remember, you follow us during the different quarter. We started already in 2022, applying with a more, let me say, clever approach based also on the propensity of different customer base on the churn, based also on the reaction of the customer to the different way in which we contact them, based also on the way in which we can manage also the claim of the customer. So after the experiment that we did during 2022, we applied that also in 2023, while the [ indexation] for the inflation, we start in 2024. So this is on the consumer and the repricing strategy. But my understanding is this something that is already happening everywhere in Europe and from the public indication of some other player, they are applying these element, too. About what is included in the plan about the opportunities, you did a great job, because you gave the answer to your question. Yes, there are only the wholesale price revision, while for all the other element, what we are doing is that, we didn't put that because it shouldn't be serious to put something that is not defined. I don't -- I want to avoid what's happening in the past, at the start of the year, I say everything fine in February, then someone declared that they will not proceed and in March have to do a profit warning. Because this is not under our control. But we were also transparent to give you what is included and what is not included. So on your own, you will be able, if something of this happen to understand that there is an improvement. About the last question that was related to the NetCo, what's happened is that, you have seen -- what we are doing is that we are continuing to invest on the FTTH network building. And this is one of the components that put the level of CapEx or revenue close to 25%. Then it's clear that if the NetCo should be a private company, it will be much easier to sustain that level of CapEx without a lot of discussion on that. And this is one of the element for which we started to see that, we would like to start to give a separate number about the 3 entity. In a general perspective, our number presented in July to the Capital Market Day about the different unit are more or less aligned. And in the case of NetCo, this is slightly better. Hope Domenico that -- I answered to your questions. This is not the case I'm yet.

Next question comes from Mr. Mathieu Robilliard from Barclays.

I had a follow-up on the equity free cash flow. First, so you did mention that the cost of debt has increased, the fact of life and your cost of debt historically is 4% and the assurance you did recently is 6.9%. So I just want to confirm that your equity free cash flow guidance reflects higher financial costs. So it assumes that you're basically going to refinance the debt instead of paying it down? And still on the free cash flow, the CapEx refunds you mentioned these are guaranteed, right? I mean, in the line of what you just said, this is not something that is up for debate and that could be changed. I just want to confirm that was the case. And then lastly, on NetCo, I may have missed it. But in terms of the revenues, so they're down 4% and they've been done throughout the year, I understand there were some run-off elements maybe that helped the revenues in 2021. But I want to understand if there is something structural there and we should also expect a decline in 2023?

Mathieu, on the first one regarding the equity free cash flow and the impacts of the financial expenses. Clearly, of course, you saw that we placed -- we issued the bond in January and at what interest rate level, the thing is, you shouldn't consider that that will be the cost of all the debt. Obviously, we still are by 2022 below 4% of total cost on the group, even slightly lower at the domestic level. Going forward, obviously all debt exits at lower cost and we renew today with this situation and with these -- this level of interest rates at a higher cost. Remember that until 1 year ago, the interest rates, the risk free rate was negative today, it's something what about 150 basis points, 200 basis points. So this is the situation consider this context, should this context improve significantly in terms of interest rates? Obviously. We'll benefit from that. What we are guiding today is the context that we are foreseeing for this year, for the next year. So just to synthesize, you shouldn't consider that our debt costs should increase at the level that we issued the bond, but then, yes progressively considering the new financing will go up. And that's considered in that guidance. Regarding the proceeds in the PNRR, yes, these obviously -- these proceeds are included because we included the CapEx that required to meet the goals that we have for the NRRP. So both sides are included, the CapEx obviously at the gross level and the proceeds below the CapEx level, but inside the equity free cash flow. Always consider the effect that the CapEx that we do this year 2023 will receive the proceeds on 2024.

Sorry, maybe I wasn't clear. I just wanted to make sure that these refunds on the CapEx not 100% guaranteed. There is no risk that there is a change in the way the state and the subsidies work.

No, if we do what is required in each of the CapEx side, we'll have the proceeds. It's not that we will see. It's written in the terms of the bids. So we are not doubting. The thing is, we will do the CapEx and then we'll have the proceeds. It's not something that we probably be receiving. No, it's linked to what we do in terms of deployment both on the 1 giga or calling on the other elements.

About your second question on the trend of the net core revenue 2022 towards 2021, if you remember in March of the last year when we presented the plan, we showed that in 2021, we had some more repeatable items. Part of that was related to the net core area that are the transaction with the other [indiscernible] for 2021 are not repeatable and this is what explain also the trend.

And so when we look into 2023, we should expect a change in the trend, might be suggestion.

Yes, so also because better than me when you work on your model that everything is done by [Foreign Language] and in English, queue. So it's clear that progressively, we can lose some lines because we're in a competitive market now. We've deployed also -- not deploy, we're able to suffer the competition over in fiber. In the meantime, we have also reference of new prices that will allow to grow up. So it's a balance of that, and so you will have a new trend.

Next question comes from Mr. Sam Mchugh of Exane BNP Paribas.

Two questions, on the guidance again. Can you just give us some detail on what you're baking in in terms of retail and mobile and fixed price increases, as a kind of percentage over '23, '24 and 2025? And then secondly on ICT. You saw a huge growth in Q4. You mentioned you started to accrue revenues from the national strategic hub. How material is that in Q4 and is that costs being accrued alongside the revenue as well?

And if I may, we are trying to squeeze in the grid through it and not the lemon, because the lemon is too small to generate what we are generating, but I'm joking. About the enterprise, I didn't mention that we are getting money or revenues from the PSN. Until today, the number of these PSN are homeopathic, very small. What I mentioned is that we have a strong position on the public administration where we are continuing to sell in at a good level on the different bid that you won during the year and we want to continue to be a reference for the public administration. About the consumer, what is -- I leave to Andrea without go in too many details because we're in a competitive market. If we say that I will increase the prices by 7%, there will be someone that will do at 6%. And so we can give the idea about the strategy, but we don't want to disclose the numbers.

Yes, so thank you Sam for the question. It's -- in the current environment, what we've already published is that we are increasing the pricing fixed line consumer by around EUR 2, and also in mobile we are having a pricing campaign that is around the same value. In mobile, therefore the percentage is higher in this wave over pricing and in fixed it's actually lower, but as Pietro pointed out, it's a segmented approach. So we do not disclose the detail for every customer. Next year we -- included the assumption that we will have an indexation related to inflation and of course, we had to make an estimate of what is the inflation rate for 2023.

Okay. Super clear. I now have a few lemons. They are the best lemons in the world, Pietro. So these are good lemons.

Don't worry. We go through all the kind of fruit that we find.

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

So the question, if possible, just keeping on the TIM Enterprise. I mean so the trends in 2022 have been, I mean, extremely strong. And so we did see that sharp acceleration in ICT in the fourth quarter. I was wondering if we could just spend a bit more time understanding what's driven that. So I believe there are trends other than just a national strategic curve. And looking at your guidance, I mean, enterprise in 2022 grew at 11%, but your guidance is suggesting a 6% growth going forward. So I'm just wondering why you know the growth should remain high, you're expecting a slowdown from the 2022 levels. I mean thinking with the European recovery fund, we should be seeing growth potentially even accelerate from current levels? And then could you just go back over what you're saying around the potential sale process of enterprise? Did I understand from your kind of earlier comments that the focus right now is on NetCo. So is there any potential disposal of a stake in the enterprise business has that been somewhat postponed at this stage?

Thank you, James. I'll start from the last question. We are proceeding in the approach to create a separate business unit to create optionality. So we are creating play field that could allow us in case of opportunity to do what is the best for the shareholder. Now it's clear that the focus is on the NetCo because we receive an offer. And on the other part, the focus is deliver the numbers. And this will allow me also to answer to your question why you decline on the number when improved the number of 2022. It was less than 1 year ago when -- when we were talking about this number, telling that we will overperform the market. No one was believing on us. We had no trust. Now I'm very happy that the trust is that we can continue to overperform on ourselves. But again, we must be, in any case, we have to keep our feet on the ground, and we have to continue to work delivering. But also to give you some more colors and will say that it's not just mandate, but we have a team of serious professionals that are working on that, and we are working as a team. I leave the stage to [indiscernible] that he can give some more colors about the number of TIM Enterprise.

Thanks, Pietro, and thanks for the question, which is a very good one. So first of all, let me highlight a couple of topics. Quarter 4 is traditionally a quarter where we have high seasonality. If you go back by 1 year, in quarter 4 '21 versus '20, we grew the business by 14%. As you can see, during the 2022, we registered a steady growth in quarter 1, 2 and 3, high single digits. And in quarter 4, there is a growth of actually high double digits. And this is due to a couple of things. One, as I mentioned, the seasonality, the second one is an acceleration of consumption in cloud and cybersecurity due to the government and large enterprise spending more money in that period of time. And we also have accelerated a lot the licensing because as you have seen in our plan going forward, delivery of professional and managed services, it's a core asset in our growth. Now on your second question on the 6% growth going forward versus 11% growth in this year, there is a very strong rationale behind that number. So we are currently growing twice faster than the market, leveraging mainly in cloud and cybersecurity growth. But in reality, going forward, we would like also to focus on marginality. And if you focus on margin, the first thing you need to do is to clean your P&L from revenues with very low margin. So there is actually, because if you look at the EBITDA, it comes from 0% to 10%, which tells you that we are going to concentrate our efforts on margins with high marginalities, keeping margins that are today generating low margins for us, which is the only reason why the top line is trending differently. If you look at absolute growth of revenues, it's actually EUR 200 million per year. So in percentage, you have 2 effects: one, lower revenues or low margins or more importantly, same amount of growth on a bigger number. Hope I was clear in the answer.

Yes. That's clear. So one quick follow-up, maybe one for Pietro, but the CDC offer that you received a year ago, has that offer now lapsed? Or is that still -- is that proposal still in front of the board?

No, I understood the first part of the question related to the CDC. I missed the last part about the Board. Okay. Again, about CDC, what's happened is that we evaluate that today, if you remember, when we did the plan, it was in March and in that period come out also the possibility with CDC. TIM Enterprise was still a power point at the time. Because if you remember, we see for the first time, TIM Enterprise on that. If I start to discuss about these things, while we don't have a separate company or embedded structural perimeter with the balance sheet better than me that we have a management adjustment on the way of the company. So I don't own to destroy value just because for a matter of time. We are not in hurry. So we will proceed when the Board will approve at the right moment where -- when we are able to maximize the value for all the shareholders. We are not in a condition to sell at any cost. So these are the valuation that we did on this item. And we are proceeding on the -- on the work to have the perimeter of the TIM Enterprises now is in place. The balance sheet of TIM Enterprise that in the case of any kind of discussion is a starting point that reduced the level of uncertainty on the evaluation of the company.

Next question comes from Mr. Andrea Devita of Banca Akros.

First of all, just to understand whether your equity free cash flow target for 3 years includes also the tax rebate. So I understand that you'll get one or 2 tranche of EUR 250 million over the last one this year. Second, whether this will allow to report end of year net debt to group level at least in line, if not lower than the one at December 2022. And finally, whether the end of the right -- the Serie A right of DAZN at the end of your agreement could allow you to have some positive impact, either at EBITDA or free cash flow level at least from next year and whether it is included in your guidance?

About the last part on DAZN, it will be -- we'll have some improvement starting from 2024, but just for a part of the year, because the Championships League in June, while in 2025 will have a better impact. In our assumption, we think that we'll continue to sell the soccer, but with a different approach. So, we don't want to take any kind of commitment. We made a scenario in which more or less everybody will be allowed to sell the soccer with a traditional OTT approach with the margin for the sale. About the equity free cash flow and the level of tax, I'll leave to Adrian.

Yes, Andrea, I don't know if you were referring to the reversal of the DTA or something different. Anyway, about the reversal of the DTA, it created a positive effect last year when we become the -- what we paid on 2021, what will happen this year that we won't be paying the portion that initially was projected that it's not a positive impact at the end. I don't know if this answers that part of the question.

Yes. Because I understood that there was a positive cash impact this year. And the last part is whether -- so just have to understand the zero free cash flow on the horizon, will it be the 2023, the worst -- let's say, the highest debt in that trajectory?

Well, in terms of net financial position, we need to understand, because there are different definitions. You know that we have subsidiaries that may need to pay dividends to third-parties such as Brazil. So this could create some effect. But then there are some other effects between the equity free cash flow and net financial position. That's why we think that, we prefer not to disclose or guide the net financial position. Anyway, it's also, as you know, affected by the evolution of the exchange rate. So going forward, what we -- definitely from last year -- this year, we guided the equity free cash flow that we think that is more on under our control.

That was our last question.

Thank you to everybody. And with our investors, we are at your complete disposal to go more in details because from the call, we understood that there are a lot of things to go in details. I hope that we are regaining your trust. And I want to thank you all the management team, but also all the employees that in our company are sacrificed also their wages to help our company to be back at the level that we think we deserve. Thank you to everybody.

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