Telecom Italia (TIM) (TLIT.MI) announced on Wednesday a notable 6.1% increase in its core profit for the previous year, propelled by the strong performance of its Brazilian unit and encouraging signs of recovery within its struggling domestic business. This positive development was underscored by the return to growth in service revenue during the final quarter, marking a significant milestone for the company.
The earnings before interest, tax, depreciation, and amortization including lease payments (EBITDA-AL) surged to 5.3 billion euros ($5.69 billion) for the fiscal year 2023, as indicated in the preliminary full-year results released by the former phone monopoly. This figure slightly surpassed the company-provided analyst consensus, which had projected a 5.7% rise to 5.28 billion euros, aligning with TIM’s targeted low to mid-single-digit growth.
In response to the robust performance, TIM expressed confidence in achieving or exceeding its financial targets set for the year 2023. The company’s total revenue, inclusive of contributions from its rapidly expanding Brazilian arm, witnessed a commendable 3.1% increase to 16.3 billion euros, consistent with analysts’ expectations.
A pivotal highlight of the financial report was the resurgence of domestic service sales, which constitute the majority of TIM’s total revenue. These sales recorded a modest 1.2% growth on an annual basis during the final quarter, marking the first instance of growth in over five years. This positive momentum signals a potential turnaround for TIM’s domestic operations, reflecting efforts to address longstanding challenges in the fiercely competitive telecommunications market.
Despite the overall positive performance, TIM noted a slight uptick in net financial debt, which stood at 25.7 billion euros as of December 31, representing a modest increase of 300 million euros compared to the previous year. This underscores the ongoing financial management challenges faced by the company amidst its strategic initiatives and market dynamics.
In response to the formidable price competition in the domestic market, TIM is actively pursuing an ambitious turnaround strategy centered around the proposed sale of its fixed domestic access network to U.S. investment firm KKR for up to 22 billion euros. This strategic divestiture aims to streamline operations, unlock value, and bolster financial flexibility, positioning TIM for sustainable growth and competitiveness in the evolving telecommunications landscape.
TIM’s performance highlights the resilience and adaptability of the company amidst evolving market conditions and strategic imperatives. The focus on optimizing operational efficiency, capitalizing on growth opportunities, and enhancing financial discipline underscores TIM’s commitment to delivering long-term value to its stakeholders.
Looking ahead, TIM remains poised to navigate challenges and capitalize on opportunities in the telecommunications sector. The company’s strategic initiatives, coupled with ongoing investments in network infrastructure and digital innovation, position it favorably to drive growth, enhance customer experience, and deliver shareholder value in the dynamic and competitive telecommunications landscape.
