Telecom Italia S.p.A. ($TIT)

Ladies and gentlemen, good afternoon, and welcome to TIM First Quarter 2026 Results Presentation. Paolo Lesbo, Head of Investor Relations, will introduce the event.

Good afternoon, ladies and gentlemen, and thank you for joining the TIM's First Quarter 2026 Results Presentation. I am pleased to be here with the CEO, Pietro Labriola, the CFO, Piergiorgio Peluso; and the rest of the management team. Today, we will present the highlights of the first quarter and review the main operating and financial results. As usual, we will conclude with a Q&A session. Please refer to the safe harbor statement, including in the annex for details on the reporting perimeter. Before we begin, I would like to briefly highlight one aspect of today's call that reflects a broader transformation journey underway within the TIM group. This session, including the Q&A is supported by AI leveraging the digital twins of our CEO and CFO. This solution is part of a wider set of initiatives through which TIM is leveraging artificial intelligence to enhance internal processes, operational efficiency and the quality of communication with our stakeholders. We will outline these initiatives in more details during the presentation. With that, let me hand over to our Q1 2026 results. Pietro, the floor is yours.

Thank you, Paolo, and good afternoon, everyone. Let me start with the most relevant messages for this quarter. First, our Q1 results were fully in line with what we expected. As already guided, domestic performance reflects the MVNO transition and expected the impact already embedded in our 2026 targets. The underlying trajectory is unchanged. We are on track versus the path we set out guidance confirmed with full focus on execution. Turning to infrastructure. As part of our ongoing efforts to optimize TIM's cost base, we have launched a set of initiatives aimed at updating our tower strategy. I will come back on this topic later in the presentation, also providing additional disclosure following a specific request by the Italian companies and Stock Exchange Commission. On capital structure, the share capital reduction process faced no opposition from creditors and the savings shares conversion will therefore be completed as planned by the end of May. Finally, regarding Poste Italiane's full voluntary public tender and exchange offer, the TIM Board of Directors has appointed financial and legal advisers. The Board has initiated a structured and fully governed process to assess the offer in the best interest of the company and all shareholders. The fairness opinion will be delivered in due course based on complete information and rigorous analysis in line with market practice. Let me start with an overview of our results. As usual, we disclosed performance at group, domestic and Brazil levels. For the domestic perimeter, we present revenues and EBITDA after lease on a year-on-year basis both including and excluding the MVNO business. This allows you to clearly distinguish between the overall performance and the underlying business trends. The difference is material, and it is entirely explained by the MVNO phasing. Compared with Q1 last year, MVNO transition accounted for EUR 54 million lower revenues and almost EUR 50 million lower EBITDA after lease, while the underlying business performance remains very solid. Starting with the group. Revenues increased by 1.4% year-on-year to EUR 3.3 billion. Excluding the MVNO impact, growth reached 3.1% supported by continued commercial momentum across our core businesses. EBITDA after lease decreased by 2.7% to EUR 0.8 billion. Once again, this reduction was entirely driven by the MVNO transition. Excluding MVNO, the underlying business delivered a 4.1% year-on-year growth reflecting operating leverage and tight cost control. CapEx remained disciplined at 12.5% of revenues amounting to EUR 0.4 billion, fully in line with our investment framework. As a result, EBITDA after lease minus CapEx increased by over 5% to EUR 0.4 billion. Cash generation reflected the usual seasonality of working capital absorption at the beginning of the year as well as the reversal of the advanced payments from public administrations received last December. Accordingly, equity free cash flow was negative by EUR 0.4 billion. Piergiorgio will provide more details on the cash flow dynamic later in the presentation. Net debt after lease stood at EUR 7.3 billion, with a leverage ratio of 1.99x. From a geographical perspective, performance was solid across both of our markets. At domestic level, despite continued competitive intensity, the underlying business remained resilient. Total revenues stood at EUR 2.2 billion, down 0.9% year-on-year while service revenues were flat. Excluding MVNO impact, the underlying business recorded growth of 1.5% in total revenues and 3% in service revenues. EBITDA after lease stood at EUR 0.4 billion, down 8.2% year-on-year. Excluding MVNO, performance was robust with growth of 4.5%. CapEx was soft at EUR 0.2 billion or approximately 9% of revenues. As a result, EBITDA after lease minus CapEx increased by 4.1%, reaching EUR 0.2 billion. In Brazil, market conditions remain rational and TIM Brazil continued delivering robust growth. Let me walk you through how the MVNO phasing and the expected EBITDA after lease acceleration are already fully embedded in our plan. Starting on the left-hand side of the slide, you can see the evolution of MVNO revenues. As anticipated, the impact is front loaded in the first half of the year with a pronounced decline in Q1 and a more moderate reduction in Q2 As we move through the year, the MVNO headwind progressively face with Q3 and Q4 showing a much more normalized trend. In the second half, MVNO revenues reached a stable run rate of approximately EUR 45 million per quarter, in line with last year, effectively closing the gap. Turning to the right-hand side, this dynamic is directly reflected in our domestic EBITDA after lease trajectory. We expect a clear acceleration in the second half of the year with EBITDA contribution increasing from around 19% in Q1 to approximately 29% to 31% in Q4. This acceleration is driven by 4 key factors: first, the contribution from our consumer price initiatives; second, favorable seasonality in the Enterprise segment, particularly in the fourth quarter. Third, the continued execution of our cost transformation program, with the majority of benefits materializing towards the end of the year. And finally, the stabilization of MVNO revenues in the second half. Overall, this profile underpins our confidence in confirming full year guidance with a clearly back-end loaded EBITDA after lease trajectory. Turning to TIM Consumer. Let me first remind you that MVNO revenues are included in the wholesale and other line of business. As a result, the full impact of the MVNO phasing is reflected in TIM's consumer trends. Total revenues and service revenues declined by 3% and 1.8%, respectively. On a normalized basis, excluding the MVNO impact, the same metrics showed year-on-year growth of 0.6% for total revenues and 2.2% for service revenues. As already seen in the fourth quarter of last year, retail performance remained resilient, delivering a 0.4% year-on-year growth. Back book repricing continues to be a key driver of TIM Consumer's top line stabilization. This marks the fifth consecutive year in which our strategy has been firmly focused on value rather than volume, a necessary approach in a highly competitive market such as Italy. Compared to previous years, we have brought forward the timing of price increases with more than 4 million wireline and mobile customers already repriced in the first quarter. This will allow us to anticipate the benefit in terms of incremental revenues over the course of the year. The impact of these actions was visible across all key KPIs. Wireline ARPU increased by 5.4% year-on-year. Mobile ARPU rose by 1%. Churn remains firmly under control despite multiple pricing actions implemented over time. Customer KPIs were stable on a sequential basis with wireline and mobile line losses of approximately $50,000 and $100,000, respectively. Notably, we continue to see an accelerating contribution from SWA, while mobile number profitability remains broadly neutral, a further indication of strengthened customer retention and competitive position. Finally, turning to our customer platform, TIM vision service revenues continued to grow steadily, increasing by almost 4% year-on-year. TIM vision represents the most comprehensive content aggregation platform in the Italian market, now including also HBO. The sustained top line momentum confirms the strategic soundness of this positioning. Let me now introduce a new chapter in our consumer strategy, namely the launch of in premium. We are launching in premium now because we can finally combine network platforms and AI to deliver a materially better experience. This is not a rebranding exercise. It's about higher quality more services and more simplicity with pricing discipline aligned to the value we deliver. We are witnessing an unprecedented increase in bandwidth demand, driven by 3 structural trends the rapid adoption of generative AI applications, the acceleration of high-quality video consumption with 4K and 8K streaming becoming increasing mainstream and a growing need for seamless multi-device connectivity. Together, these trends are reshaping customer expectations and require a step change in network performance, reliability and quality of service. In this context, TIM is uniquely positioned to lead the transition. Our unmatched fiber footprint, combined with our nationwide 5G infrastructure enables us to deliver superior connectivity and positions TIM as the best place operator in Italy to capture this evolving demand. Building on these strengths, we are launching in premium, a new high-performance connectivity proposition designed to serve the most demanding customer segments and digital use cases. We have identified 5 key target groups. First, sports and live event [indiscernible] who require congestion resilience connectivity to share and engage in real time even in highly crowded environments. Second, influencers and content creators who depend on reliable multi-platform streaming, cloud-based content production and real-time interaction with their audiences. Third, streaming and gaming families with growing expectations for uninterrupted 4K content and high-quality cloud gaming experiences. Fourth, students and AI power users increasingly relying on advanced digital tools, collaboration platforms and immersive technologies such as virtual reality. And finally, smart workers who depend on cloud applications, real-time collaboration and increasingly virtual reality enabled workflows. TIM premium is designed to address these needs through a combination of best-in-class network performance value-added services and enhanced security features. In summary, TIM premium represents a key step in our strategy to move further up the value chain in the consumer segment, monetize network superiority and respond to the evolving digital lifestyle of our customers. Just as we have been committed to a volume-to-value strategy, we firmly believe that telecom operators must also take the lead in educating the market that higher levels of service quality and performance need to be adequately priced even more so in a highly competitive market, such as Italy. TIM Premium is a concrete step in this direction. Turning to TIM Enterprise. Q1 marked the 15th consecutive quarter of growth with both total and service revenues increasing at mid-single-digit pace, further confirming the structural momentum of the business. The integration of our infrastructure assets with advanced cloud, IoT and cybersecurity capabilities continues to underpin TIM Enterprise's competitive edge and to translate into tangible results. Cloud was once again the clear growth engine, expanding by 15% year-on-year and representing 44% of TIM Enterprise service revenues. Connectivity delivered modest growth, supported by the positive one-off impact related to the Winter Olympic Games. Other IT services declined by 7% reflecting a deliberate reshaping of our portfolio to phase out low-margin activities and focus on higher-value solutions. Finally, the National Strategic hub, Europe's first concrete implementation of a sovereign cloud initiative delivered revenue growth of 50% year-on-year. This provides TIM with a clear structural head start in a strategically critical segment with long-term relevance. Turning to digital sovereignty. Last December, we launched a CEO-led strategic initiative aimed at positioning TIM as the player of reference in this space in Italy, building on the capabilities developed within the national strategic hub, our objective is to expand sovereign technology solutions beyond the public sector to strategic private enterprises managing critical data. This initiative is grounded in 3 key pillars. First, we continue to invest in integrated proprietary network and cloud infrastructures. Our focus is on secured scalable and fully controlled platforms capable of supporting niche and critical services while ensuring the highest standards of reliability, resilience and data protection. Second, we are strengthening our positioning in sovereign cloud and AI. In this context, we are developing a sovereign AI platform designed to support independent software vendors, start-ups and developers, enabling them to run high-performance workloads in a secure and compliant environment. We see this as a key enabler of the next wave of enterprise digital transformation. Third, we act as a trusted partner for hyperscalers. By combining our proprietary infrastructure with leading global technologies, TIM positions itself as the guarantee of sovereign allowing Italian enterprises to benefit from innovation while retaining full control over their data. Our unique positioning is supported by tangible assets and capabilities. We operate 60 data centers fully integrated with our proprietary network backbone. We have built deep expertise in sovereign cloud platforms already serving over 650 public sector customers. Our organization is further supported by more than 2,000 certifications in key competencies and a dedicated sales in pre and post sales force of around 1,600 professionals. Looking ahead, we plan to invest approximately $500 million between 2026 and 2028 to further strengthen our sovereign infrastructure, platforms and capabilities. In summary, TIM Enterprise is uniquely positioned to capture the growing demand for secure and sovereign digital solutions and to play a leading role in shaping Italy's digital future. To conclude on the domestic perimeter, let me explain how we are leveraging agentic AI to improve service quality, while driving leaner and more efficient operations. We are moving at full speed with a clear focus on 3 priority areas. First, in customer care, we are leveraging generating AI to significantly improve response times and the quality of interactions. Second, in back office, we are using AI to materially increase productivity while reducing manual errors. And third, we are enhancing agility by building an agentic layer that allows us to bypass legacy IT constraints. To enable this scale, we are building what we refer to as an industrial-grade AI environment. This includes establishing centralized data governance, strengthening data quality and upgrading our cloud and machine learning operation capabilities. In parallel, we are developing a common data platform with reusable APIs, allowing us to scale use cases quickly across the organization. We are also taking a pragmatic approach, starting with pilots and then rapidly scaling what proves effective. Equally important is people's empowerment. We have established robust AI governance and security policies to ensure safe and controlled access to internal knowledge. At the same time, we are equipping employees across functions with AI licenses and have launched a company-wide AI literacy program supported by targeted training initiatives. Adoption is closely monitored through usage and productivity KPIs. All these initiatives are expected to translate into tangible performance improvements with go-live targeted in the second half of 2027. Specifically, we expect around 50% of inbound calls to be managed by AI agents, 70% automation of back-office activities and a 50% reduction in customer issue resolution time. Overall, these initiatives will be a key contributor to the efficiency gain embedded in our cost transformation plan. Before moving to TIM Brazil, let us now show a short video to further illustrate the AI-driven opportunities we are pursuing. [Presentation]

Let me be clear. This is not AI as a buzzword. This is AI at scale, embedded in our network, our operations and our customer journeys. And it's a real level for better service, faster execution and structural efficiency. Moving to Brazil. Results once again confirms strong execution and disciplined management. Market conditions remain healthy and rational and in Brazil continued to deliver profitable growth, reaffirming its position as the most efficient operator in the country. Top line growth was in the mid-single-digit range, driven by mobile service revenues and supported by a growing contribution from the wireline segment. Monetization of the customer base remained a clear priority, underpinned by successful upselling from prepaid to postpaid, resulting in the highest ARPU in the market. Strong operational execution translated into mid-single-digit EBITDA after lease growth above inflation. The combination of EBITDA after lease growth and disciplined CapEx delivered high single-digit growth in cash generation. These results clearly demonstrate that the operational discipline and value-oriented approach that have driven success in Brazil are the same principles guiding the ongoing transformation of our domestic business. With that, I will now hand over to Piergiorgio for a detailed review of the financial results.

Thank you, Pietro, and good afternoon, everyone. Let me start with a few comments on group OpEx and CapEx. In the first quarter, group OpEx increased by 2.7% or EUR 62 million. Approximately 80% of the growth was attributable to Brazil where half of the growth was linked to revenue-driven costs, while the remainder was driven by the V8 acquisition and higher operating expenses. In Italy, the increase in OpEx was modest and entirely driven by revenue-related components, namely higher cost of goods sold associated with ICT revenue growth. These were partly offset by lower industrial costs including savings in network operations and energy. OpEx related to FiberCop MSA were flat year-on-year and accounted for 24% of domestic OpEx. Given the current geopolitical environment, I would also like to reassure the market that our energy costs remain well under control. In Italy, we have hedged approximately 80% of 2026 energy consumption and approximately 50% for 2027. This applies to consumption that we manage directly, representing approximately 60% of total consumption. FiberCop, which accounts for around 40% of total energy consumption, manages its own independent hedging strategy. In Brazil, more than 80% of the electricity is generated by hydropower, meaning that energy costs are primarily influenced by weather conditions rather than by gas and oil price dynamics. Group CapEx amounted to EUR 0.4 billion, corresponding to 12.5% of revenues. CapEx in Brazil increased slightly year-on-year, while domestic CapEx was particularly soft decreasing by 18% year-on-year as a reflection of lower IT spending due to the timing realignment of major software license renewals, continued IT spending optimization and lower customer-driven investments. Approximately 20% of CapEx was customer-driven, while over 50% was allocated to infrastructure investments, including mobile networks. The IP backbone and data centers, where we continue to expand capacity to support the growing demand for cloud services. Moving to financials. The first quarter reflected the expected seasonal working capital absorption, mainly driven by the payment of the significant CapEx recorded in the fourth quarter of each year. The cash dynamic was also impacted by the reversal of advanced payments from public administrations that were originally due in the first quarter as were collected in December. Financial charges were EUR 30 million lower than last year, thanks to the optimization initiatives implemented in 2025, while cash taxes arose mainly in Brazil. As a result, equity free cash flow was negative by approximately EUR 0.4 billion. In Q1, we launched a new pre-retirement scheme. Compared with the schemes implemented by TIM after 2021, this new program delivers higher cost savings with a better cash out profile, benefiting from recent changes in the regulatory framework. Under this program, approximately 1,000 employees will enter preretirement by the end of this year, up to 5 years ahead of the statutory pension. TIM, will pay approximately 70% of salary over the 2027 to 2031 period, with severance indemnity paid in 2 installments. We expect annual cost savings of approximately EUR 60 million once the program is fully implemented. From a cash perspective, the scheme was cash neutral in the first quarter as we booked a one-off provision of approximately EUR 0.2 billion in the income statement, with a corresponding increase in working capital liabilities below equity free cash flow. We recorded EUR 30 million in dividends paid to TIM Brasil minorities and EUR 30 million related to the acquisition of a small B2B business in Brazil. Net debt after lease closed at EUR 7.3 billion with leverage at 1.99x. Finally, regarding the concession fee, we expect to cash in approximately 50% of the amount in the coming weeks with the remaining 50% spread between the third and fourth quarters. A breakdown of net working capital is included in the appendix. With that, I will now hand back to Pietro.

Thank you, Piergiorgio. Let me now turn to our ongoing corporate actions aimed at delivering a leaner, more efficient and remuneration supportive capital structure. Starting with the savings shares conversion, the reduction of share capital from EUR 11 billion to EUR 6 billion has been completed without any opposition from creditors. This allows us to proceed with the final steps of the savings share conversion. The voluntary conversion period will run from May 6 to May 19, with the outcome announced on May 20. This will be followed by the execution of the mandatory conversion of the subsequent day, which will also represent the last trading day for savings shares. Moving to the 10:1 reverse stock split of ordinary shares, execution is planned for June. I remind that this is a purely technical adjustment with no impact on total share capital or on shareholders' proportional ownership. At the same time, it will allow TIM shares to exit any stock territory, enhancing liquidity and potentially broadening the investor base by improving overall investability. Finally, on the share buyback, the program approved at the last Annual General Meeting authorizes purchases of up to EUR 0.4 billion, corresponding to a maximum of $700 million ordinary shares or 70 million ordinary shares post reverse split, representing approximately 3.3% of share capital. The execution of the program remains subject to the completion of the [indiscernible] disposal, which we expect by the end of the second quarter. Overall, these actions are fully aligned with our strategy to optimize capital structure and enhance shareholder returns. Let me walk you through our tower strategy, which is a key lever in optimizing our infrastructure cost base. To recap, we are progressing on 3 main fronts. Firstly, on [indiscernible] hand, sharing Fastweb, we have reached a preliminary agreement to enable mobile access across approximately 50,500 existing sites. This will support a faster and more capital-efficient 5G rollout, particularly in lower density areas, while preserving full commercial and technological independence. Importantly, this approach allows us to avoid unnecessary duplication of infrastructure and deliver midterm cost and CapEx efficiencies. Secondly, we have signed a nonbinding agreement to establish a tower joint venture with Fastweb. The joint venture is expected to develop and manage around 6,000 new mobile sites and will be equally owned by the partners. We also see potential to bring in third-party investors over time to further optimize the financial structure. The model will be open access, creating additional optionality and value. Finally, regarding our MSA with INWIT, we have served notice of termination effective August 2030. However, following the notice of termination served by Fastweb, TIM termination notice would be effective upon the original expiry date of 31st of March 2028. In case it is established, whether by controlling or by agreement between the parties that the change of control occurred in December 2020. Overall, these initiatives strengthen our industrial flexibility, accelerate 5G deployment and support a structurally lower cost base over the medium to long term. upon request of the Italian stock market authority. Let me now go deeper into how we will execute this strategy and the path toward a potential exit from INWIT. We are structuring our approach around 3 complementary pillars. Firstly, leveraging existing third-party towers. The market currently offers around 30,000 towers excluding INWIT and we plan to utilize approximately 8,500 of these sites, less than 30% of the total available. This provides significant flexibility and avoids the need for incremental capital deployment. Secondly, new towers built by third parties. We are already seeing strong market interest in developing around 6,000 towers with a feasible rollout of roughly 500 sites per year shared across operators. Importantly, about 80% of existing INWIT sites already hosts both TIM and Fastweb, making these new sites highly attractive for tower companies given the built-in double tenancy. Thirdly, Towers developed through the new joint venture. This adds a further 6,000 sites over the next 12 years with full flexibility to adjust the rollout pace depending on market conditions. Supporting these pillars, we benefit from a number of structural enablers. From a geographic standpoint, a large portion of our sites are located in smaller towns, which simplifies site acquisition and deployment. The [indiscernible] sharing agreement further streamlines migration by reducing complexity. On the regulatory side, the increase in electromagnetic limits from 6 to 15 volts per meter create additional capacity while remaining well below European thresholds. Operationally, we expect to internalize key activities such as design and permitting by 2029, and we can leverage AI to accelerate network planning and deployment. Putting all of this together, we see a clear and achievable path to a full exit from INWIT in approximately 10 years while maintaining operational continuity and enhancing long-term efficiency. Let's now move to the closing remarks. To wrap up, Q1 2026 came in fully in line with our expectations, which allows us to confirm our full year guidance. We are continuing to strengthen our leadership in AI and digital sovereignty in Italy with TIM Enterprise clearly positioned as the reference player. The results delivered so far provide tangible evidence of the progress we are making along the strategic path. With TIM Premium, we are redefining our consumer proposition around performance and translating network excellence into differentiation. In parallel, we have defined a new clear and realistic tower strategy. It gives us flexibility and control while preserving value and it embeds significant OpEx and CapEx savings to the satisfactory agreement with [indiscernible] not be reached. Finally, we are about to complete the savings share conversion process. This was a long-standing overhang that this management team has been able to resolve after decades in a way that is satisfactory for all shareholders. Let me close on a positive and pragmatic note. For years, M&A was seen as the main lever for Telcos. It mattered, but it was not enough. Today, the opportunity set is changing. Cloud and digital sovereignty are moving from nice-to-have to must-have. New services increasingly require a sure performance, not just best effort. And AI is reshaping business models across industries, driving demand for low latency, secure data processing and predictable connectivity. This is where telcos can be central again, not by talking about it, but by building networks engineer for performance, platforms designed for trust and capabilities that make AI usable at scale. One final point for European policy makers. This opportunity is real, but it is also fragile. It would take very little to destroy value again. uncertainty, outdated rules and a framework that discourages long-term investment. Europe needs a pro-investment agenda. Clear rules, predictable enforcement and genuine reciprocity across the entire digital ecosystem. Same responsibilities, same contributions, same accountability for those who build the networks and for those who use them. If we want a stronger Europe and stronger nations, we must act with vision and courage now. And as I said, we must do our part with discipline, speed and execution. For the first time in years, the future is genuinely in our hands. Let's not miss it. With that, we are now ready to take your questions also with the support of our digital twins.

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

Thanks for taking my two questions. The first one is on the MVNO segment. In 2025, segment generated EUR 210 million in revenues. In 2026, you expected the trend to stabilize at around EUR 45 million per quarter in the second half of the year. So I was wondering if this state revenues could be approximately EUR 180 million per year.

Giorgio, you are touching on a crucial aspect of our wholesale dynamics. That is a very important point about the phasing of our wholesale revenues. We are currently managing a planned transition in our virtual network operator partnerships. The first half of 2026 reflects the exit of certain older contracts, while Post officially began migrating its customer base to our network in the first quarter. This is a temporary dynamic that we already anticipated in our guidance. Everything is moving according to the trajectory we set out earlier this year. We expect these revenues to stabilize and build significant momentum throughout the second half. This will lead to a normalized run rate as the new contract reaches full scale. Our focus remains on high margin service revenue rather than just chasing volume. This stabilization is a key part of our domestic performance for the full year. I hope that it was clear.

My second question is on the repricing campaign. You announced that in Q1 we involved more than 4 million in consumer lines. So what impact could we expect on financial KPIs in the coming quarter? And if you confirm around EUR 100 million revenues incrementally?

Thank you, Giorgio. This is an important theme for our consumer strategy. Excellent question on our strategy for value extraction in the consumer segment. We have deliberately brought forward the timing of our price increases this year. This maneuver allows us to capture the benefits of incremental revenues much earlier in the cycle. Our strategy remains firmly focused on prioritizing value over volume. This is a necessary approach in a highly competitive market like Italy. The results we are seeing confirm the soundness of this direction. Despite these actions, our customer loyalty metrics remains very stable in churn is firmly under control. we are translating our network excellence into a clear and differentiated consumer proposition. We expect this proactive approach to support our top line stabilization throughout the coming quarters. Everything is under control as we continue to execute our value-driven strategy. I hope that answers your question.

The next question comes from Mr. Paul Sidney with Berenberg.

I had two, please. Firstly, on domestic consumer, ARPU up 4% year-on-year from mobile at 5% for fixed. Are we generally seeing recent Italian price increases really sticking. I know on [indiscernible] call earlier, had a different market, but they're really struggling to make these price increases stick. They're getting promoted away. Are we looking at a different dynamic in Italy because of the differences in ARPUs, the different starting positions. And does that allow for even more price increases going forward. I know it's so close to your heart, Pietro, from the last call. And second question, very big picture and maybe it's too big a question, but events in the Italian market over the past 24 months have really kept investors very busy and analysts as well, but a huge amount potential mobile consolidation, fixed consolidation, tower disputes, the postpaid base. Do you think, Pietro, there's a scenario that exists where all the players can win and we can unlock the investment, the infrastructure investment we need and apologies if that's a very sort of high-level question.

Thank you, Paul. About the first question, I will leave Andrea to elaborate on top of that. But first of all, what's happened is that in the last 4 years, we were the first mover in the approach of price increase with our strategy of -- from volume to value. And it means that Andrea and the consumer team was really good in the approach of the [indiscernible] to try to avoid that. The price increase could become just a new bleeding or more than bleeding the strategy. On top of that, for the future, the good is that what we define as priority or premium connectivity strategy will give us a further boost because today, it's more complex to think that we can continue like we are doing today forever. You must start to increase the price to the customer because they are going to add better quality. And so there will be willingness to pay much higher. It will mean that we'll be able to increase price with a further lower level of churn. Then I will answer to your second question, but I will leave Andrea to talk about that.

Thank you, Pietro. Thank you, Paul. So what is the difference that we see versus other markets. Certainly, we worked hard to exploit several levers to reduce churn. Hence, during the last 4 years, and this is the fifth consecutive year, as Pietro highlighted, we were to enhance 3 practices to reduce broadband churn, convergence migration to FTTH, so better technology mix and quite prominently also the use of content and in vision as a churn reduction tool. And by the way, an ARPU increase tool. So this is maybe a difference versus other markets where other competitors are playing also because the TV market in Italy is quite unlike some other European markets. On mobile, also, we have refined and we commented this in previous calls, we have refined the repricing practices to act in a more segmented and careful way to prevent churn effect. After all, what we learned during the last years is that the market of mobile is evolving with a number of rotation and possibilities that are reducing, and this is also unlike other markets. We are, I have to say, positive that other players in Italy will follow our example. We have been quite vocal in favor of back book price after, and we are actually positive that other competitors are now following the lead.

Paul, about the second question, I think that we have to find a new equilibrium among all the players of the telco ecosystem because the truth is that until today, inside this, let me say, value chain beyond the, let me say, players that were paying the check was the telco because if [indiscernible] who was investing in infrastructure, had very, very, very good return on investment. The software company that was delivering software were aiming very good, good, good return on investment. The other vendor, good return on investment, but also sometimes the employee because we are obliged to adapt our salary to the inflation. So until your pocket is big enough to continue to sustain all the value chain there's no problem. But at least in Europe, the telecom market, mainly in some countries, is no more able to pay the bill for everybody. So now what is happening? I think that everybody understanding that the game is over for everybody if we are unable to rebalance through all the value chain, the different elements. And it means also that also the regulator had to do something. My opinion -- my personal opinion is that this is now well understood. If you look at what is happening in the rest of Europe, for example, in France, in terms of market consolidation, what's happened in U.K. in terms of market consolidation. What is happening at the EU level when we talk in the D&A about a kind of review of the net totality to allow the tech player to use the 5G frequencies, differentiating the quality of the service. We pay the 5G frequencies because of that, while today, the regulation do not allow always to do that. So I'm very confident that this time, the things will change, and there will be not a winner and a loser. Everybody will win, but some time, someone that was over-winning will have to do a step back. I hope that it was clear.

The next question comes from Mr. David Wright with Bank of America.

Hopefully, you guys can hear me and thank you for the AI twin presentation. I will give you some feedback on that separately. So I actually have a super quick question for Piergiorgio. You said annual cost savings of EUR 60 million from the refinement theme. So I'm assuming that means EUR 60 million less OpEx, EUR 60 million more EBITDA. And then 70% of that, so let's call it whatever, EUR 42 million or so of working capital outflow. Is that the way it works? So EUR 60 million less OpEx [indiscernible] EBITDA of EUR 42 million?

Yes, David, it's correct. As you said, the amount -- the total amount has been provisioned in our accounts. So you will have also in our EBITDA reported and in our net working capital, we have the full amount. And in the next years, you will have the use of this provision, as you know, consistent with the payment of the [ preparation ] plan. As you had in the past. So the mechanism is exactly the same. It is slightly different from the optical [indiscernible], but the mechanism is exactly the same. In terms of impact on EBITDA is exactly what you said, correct.

Okay. Very good. And then a couple of other questions. Pietro. So first of all, can you just remind us just [indiscernible] press reports of your earn-out protection around Italian consolidation. I understand the protection rooms until the end of this year, like 31st of December. And it could be triggered upon just an MOU, if I'm right, it doesn't need to be any kind of deal completion. And then if you could just remind me the mechanism. I remember it was a high percentage of potential synergies. That's question one. And then if you don't mind a little hypothetical and maybe you just can't answer this, but [indiscernible] have set a 2/3s acceptance level for a TI bid, which could theoretically leave a 1/3 minority listing. Now under that circumstance, what I don't understand is how synergies could be allocated. And I wonder if you know how that would be done. So for instance, if there are EUR 500 million cost synergies, of course, they're in the consolidated Topco. But how much of that in theory, could be allocated to the TI standalone accounts, if that makes sense? That was my second question. And just very finally, reports of [indiscernible] suing you guys on the Dison deal, if there is anything you can say.

Thank you, David. I know I already imaged your comment about my digital twin. It was so polite with [indiscernible] level of anger. So we will try to improve that. Now -- I'm joking, but in any case, for us, was very important in this moment that is so important for the company to show to all the shareholders that were not crossing finger, we are continuing to work in the interest of all the shareholders to continue to improve the number of the company. AI is an important lever for us to continue to achieve the number that we put in this year plan, but also for the next years. So it was very important to show that we continue to deliver what we promise. Now let me go through the 3 questions. The first one is related to the earn-out. It's quite easy. We can have the earn-out if there will be a close yield. So not subject to approval, but it's something that is at the last stage by the 31st of December. [indiscernible] clear, as we tried to explain also in the past that if they are doing, they will try to do a full merger. It's quite difficult to imagine that the full merger will have a closing. A full merge between [indiscernible] and FiberCop. FiberCop by the end of this year, looking also at all the process at the EU level. While if they sign a commercial agreement that will allow them to exploit industrial synergies, we will have an amount up to 75% of the industrial synergy that FiberCop will reach. This is in a nutshell what is happening. We were reading on the press that we are talking about a commercial agreement. So let's say the wind or have someone say, stay tuned, and we see the next step about the post synergy. It's quite difficult for me to answer. I was also hearing the post call that ended less than 1 year ago. And also in that -- sorry, an hour ago. But if you take a look at the list of the synergy that they put a good part of that, but again, is the first reading based on what was told less than 1 year ago, It's difficult that can be considered in -- without a full [indiscernible] because when they talk about the reuse of the redundancy of the employee in activity of post, it's quite difficult to me that it could be possible as 2 separate company with rated party committees, so on and so forth. But again, I think that Poste will give more details also when they will release the final prospective for Mativo. And as I mentioned, the Board will do its own work and then will be also the market that will evaluate the offer. Related to Sky, a joke, I saw, and this is an advertising spot, that Sky has renewed the copyright for the Formula One. I love [indiscernible] until 2022. So sometimes, they will need some more money to finance that because this is the only way to think about that. But to give you some details, someone is thinking that at this time, we had an issue of anti-competition approach. Just to highlight to you, the agreement with [indiscernible] was giving us the exclusivity of the bundle. And now 2 details. The first one if you were a win, Vodafone, faster, Sky customer, you could buy, in any case, the [indiscernible] offer on the data. So we were not closing the market. The second, also having the exclusivity for the bundle, I have to remember to everybody that in 2021, this company was vertically integrated. And at a regulatory level, we were obliged to the exempt analysis of the price that will not allow us to do anything in dumping. So we are unable to subsidize the connectivity with the content and vice versa. So it's really complex to understand -- the reason for that, then here, we have also Agostino Nuzzolo, our Chief Legal Department that we like to talk about these things in the right place because we don't like to live in a constant big brother where -- because I've seen that in the last period, a lot of people talked about litigation as they were in a big brother. We are also say what we think and do what we say. This is what we did in the last 4 years, and we'll continue to do that.

The next question comes from Mr. Keval Khiroya with Deutsche Bank.

I have two, please. You had planned to CMD for late this year. Do you still intend to give me term guidance? And when could that be in -- presumably benefits from working with [indiscernible]. Would have also been part of your plans? How are these now affected given the offer to TI shareholders? And then secondly, we've seen a 10% improvement in the Brazilian real this year and the currency is also just over 10% better than the FX you assumed in your guidance, if the FX stays where it is, how does this affect your group free cash flow versus what you guided for?

On the second question, I will leave to Piergiorgio to answer.

Okay. Thank you. As you know, yes, we -- compared to our guidance, we are seeing a material improvement of the effects. So we are in the process of updating our forecast, and this is probably something that Pietro will comment in relation to the questions, of course, in the forecast process, we will evaluate all the market conditions. In terms of impact of the cash flows, I can only say that -- so let me say in different way. In terms of hedging, we are using a dynamic hedging process. So we are covering the tail of the distribution. So we -- and this is something that we have done in the beginning of the year in order to protect us from additional devaluation and this is something that we are slightly changing in order to, let's say, have the all benefit of depreciation. In terms of impact on our cash flows in the first quarter just to complete the point on FX in our net working capital, we have, of course, the impact of depreciation in relation to the debt in Brazilian Real should that is going to be partially compensated by the improvement on the cash flows. And of course, going forward in the next months, this component will be, of course, bigger and we would expect to have an impact on -- a positive impact on cash flows on the full year.

Kevin, about the first question by the second quarter results, we will present the market an update of our plan because it will allow everybody to have all the elements to do all the evaluation about the public tender offer.

The next question comes from Mr. James Ratzer with New Street.

Yes. I have two, please. So the first one was just coming back to the offer from Poste and I just like to kind of always wind the clock forward by a couple of months from now or 3 months and the prospectus is published. The deal goes live. I'm trying to work through what happens at that point because presumably then the Board will like review where the implied also prices from Poste based on positive share price. And presumably, it's the prices above the Board's view of intrinsic value, they will recommend the offer to shareholders, but I'm interested in what happens if the offer is below what they think the intrinsic value is. What happens then? Will the Board formerly tell shareholders they're rejecting the offer. I'm just trying to kind of work through what happens there because I'd imagine the Board is going to be putting forward quite a compelling case to what the intrinsic value is given this is effectively an unsolicited hostile takeover offer. So just interested to work through the scenario here on what happens with the intrinsic value and if the Board were to reject the offer. And then the second question is just -- I'd love to hear more about an update on your SWA strategy. That's seen good momentum and growth despite the fact that fiber in the market is continuing to be deployed to more locations. So I mean, are you seeing any evidence that SWA customers disconnect and go back to fiber? Or are you now starting to pick up more FWA customers in fiber areas be interested to get an update on your strategy there.

Thank you, James. About the Poste offer, it's important to remember to everybody that a public tender offer is well defined in terms of [indiscernible] rules and procedure by Italian regulation. So in a nutshell, we will follow the timeline that will release by post jointly with all different regulatory institution. Then at the end, the Board has the obligation to give an advice that is not an obligation towards the shareholder. It is, let me say, kind of digital advice yes or no, fair or not fair. We have the chance also to prepare ourselves studying all the different answers, the different board in Italy gave to this kind of public tender offer. And then this stage will be for the shareholders that will evaluate to accept or not independently by the Board advice about the [indiscernible] strategy [indiscernible] to Andrea?

Thank you, Pietro. Thank you, James. So update on FWA, how do we see -- first of all, the market in Italy is remixing technology or if you want some technologies are growing in infusion and some others are actually reducing. And quite obviously, the most prominent growing technology that is constantly growing ever since the last like basically 5 years. An SWA is growing as well, thanks to the implementation of 5G technologies by several players. TIM has been the latest operator joining the club of those offerings SWA 5G. We just started at the beginning of 2025. And the outcomes have been very encouraging. The share of SWA 5G acquisition has increased quite a bit. It is now over 20% of the acquisition are going to SWA 5G. So that is coming from basically single-digit share of SWA 4G that goes up to the end of 2024. So you can understand that now this is representing an important element of our offer. Let me be precise on a couple of things. We do not offer SWA as a subscription in areas where there is good FTTH coverage and service and where there is FTTH service and where this is available. We do offer FTTH because we see that the quality of service, level of churn, in general customer satisfaction is better. But SWA represents a very valid optionality in all those areas where there is no FTTH coverage and where also the quality of FTTH, for instance, is not very good. So we see that people -- our customers adopt SWA and the level of satisfaction is actually quite high. And despite the fact that we are just offering this since the 5 quarters, practically, we are improving level of service and level of satisfaction. So we do see an opportunity as a complementary technology to FTTH, and we do intend to use it as such. I hope that answers your question.

Yes. I'm just wondering if I could go back to the first question. I mean do you see is there any possible route by which you can then get Poste to increase the offer that they're making to TI shareholders? Or is that essentially could only happen, it becomes clear that shareholders in August are not going to meet the required threshold for them.

James, it's too early to give any kind of answer because just to give you an idea, just an hour ago, for the first time, we have a further detail about the synergy that is also a further important element in the evaluation process. We like to understand the value of the stock of poses answer today is too early and unfair.

The next question comes from Mr. Ajay Soni with JPMorgan.

I've got two. First is on in premium. I wanted to know what portion of your existing client base do you think you can target with this offer and what would be the price premium for the software to the tariffs? And the second question is around CapEx relating to TIM Enterprise. So you've announced an [indiscernible] envelope over the next 3 years. Do you see this being a risk to your midterm guidance of 11% capital intensity maybe continue to invest in the TIM Enterprise offering?

About the first question, I will [ let Andrea, but just like ] something. What will drive the request for a better is not a push activity, will be a full activity driven by the need of the customer to have a better quality. If you have a son that used to play with cloud gaming, you very well know that your son is playing with you if the latency and the link is not good enough. We have to remember to [indiscernible] that the service that we are delivering to you today is a kind of best step for service. And so we'll move to premium. And the last example, we were in the stadium of [indiscernible] during the inauguration of the winter Olympic Games. And we gave a better quality kind of premium taste of our solution to all our customers. Now in the future, we are going to ask them to pay to have a very good quality during a public event in crowded situation. And my question is, when you are there and you pay the coffee 3x the price that you pay usually, the sandwich 4x the price you pay usually or whatever from 3 to 4x of what you pay usually. Why for a premium connectivity you shouldn't have to pay more. But I'll leave Andrea to give more details.

Thank you, Pietro. Thank you, Ajay. So TIM [indiscernible] is something that we are very very eager to launch very soon. We are working actually with our technology team, our CTO, [indiscernible], may further comment on that. I want to highlight a couple of things. First of all, the need for this service comes from mainly 2 factors. The mobile traffic and as well as the broadband traffic, but the most impressive growth has been on mobile has grown tremendously in Italy during the last 15 years. Recently, a competitor highlighted that the growth was more than 100x in the last 15 years. But very importantly, since 2017, the traffic multiplied almost 10x. That is due to also competition, enlargement of allowance And this, of course, has enabled completely different patterns of usage in the mobile use. So what we've done, and we've done this -- so the usage increase is a factor. And then the technologies as Pietro highlighted very well are changing AI is driving new pattern of usage. Now I also want to highlight that we have already done a lot of things, mainly more [indiscernible] during the last 4 years, we completely changed the mix of customers on 5G. We enabled already priority service. This we commented maybe some quarters ago, and we already have millions of customers that are paying for a premium quality on 4G. What we intend to launch is a further step in technology with higher level of price and higher level of quality and priority. Now we may imagine a gap of, let me say, some euros in the order of magnitude of EUR 3 to EUR 5. But over time, we will have to see, of course, how the market evolves. We believe that this, as the previous premium service that we launched some years ago, we trigger very interesting revenues, but most importantly, we'll be distinctive for TIM quality. I hope that answers your question.

That's great. And just on the enterprise CapEx would be great.

Yes. I will leave to [indiscernible].

As you probably remember, in last October, we -- during our TIM Enterprise [ unboxing ], we said that we would have invested EUR 1 billion in in the planned horizon -- Horizon in the 3 years of plan. And we actually recently announced that EUR 500 million, which are part of this EUR 1 billion will be dedicated to the development of our infrastructure. As you know, our capabilities to intercept the cloud growth in this country, our unique positioning on infrastructure because we have 16 data centers and 1 in construction and our unique positioning in the public administration. I want to remember you that we are only [indiscernible] telco B2B in Europe, generating more than 50% of our total revenues on the public domain. This actually recommended us to concentrate our efforts on redirecting part of our CapEx investment on our infrastructure, which was originally already part of the plan, but we now feel that we need to make an additional effort on that side because these will not only help us to defend our positioning on a component that today represents more than 44% of our total revenues, but more importantly, to intercept the sovereignty cloud let's say, need that is rising in our country and fortunately, across the entire Europe. And we do consider that for the sum of the assets that I've just described, so our capability and acceptive demand and the infrastructure and our positioning on the public administration being also part of the nationals will put TIM Enterprise in a good spot in order to intercept most of the EUR 4.2 billion that Gartner says will be generated by sovereignty cloud during the next 4 to 5 years.

The last question comes from Mr. Domenico Ghilotti with Equita.

Very two quick questions. The first is on the MSA revenues that I saw were up in the quarter. So I'm trying to understand what is driving this increase and if it is sustainable. And second is a clarification on the energy cost that was mentioned before, in particular in the part related to the MSA. So with FiberCop, trying to understand if it is the pass-through. So who is at the end taking the risk of energy cost. Is this a FiberCop? Or if it is your own risk because it is a pass-through.

So about the energy costs, what is happening. It's true that it's passed through. But in the agreement, we have the possibility to ask to the counterpart to build hedging activity. So we -- it's a that we drive the hedging strategy. This is for the not-regulated party because for the regulated party, we follow the traditional regulated approach. About the MSA revenues, what is happening that there was a seasonality related to the consumption, some component of the contract. I hope that was clear.

Yes, sure.

This was the last question. I want to thank you, everybody, and we will see you on the -- in the next few months, as we told at the beginning by the second quarter result or during the second quarter results, we will update our plan '26 to '28 to put everybody in a more trustable position to do all the valuation related to the public tender offer. Thank you, and see you soon.

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