Infrastrutture Wireless Italiane S.p.A.

Ladies and gentlemen, good afternoon.

Welcome to the first Q20 results presentation and thank you for attending our conference call. We do hope that all of you and your families are fine and in good health. As usual, our CEO, Mr. Giovanni Ferigo, and our new CFO, Mr. Diego Galli, will provide you with an update on our first Q20 operating and financial performance, and then will be available to answer your question. Now you can take note of our disclaimer policy that you should now see on slide number two. Let me highlight that the reported data refer to the financial statement at March 31st, 2020. The data refer to standalone figures until 30 March, 2020. Now I leave the floor to Mr. Giovanni Ferigo, who will guide you through the presentation. As usual, a Q&A session will follow the result presentation. You can book it by pressing star one. Let me remind that in order to let everyone take part in the Q&A session, only one question for each person is allowed. Giovanni, over to you.

Thank you, Manuela. Good afternoon, everybody. Let me guide you through the presentation by starting with slide number three. As you know, the merger has been completed at the end of the March, and the new Inuit was born. We have come a long way to reach this stage, and I'm very happy that the new journey has finally started. As part of the journey, as announced, the extraordinary dividend has been paid in April, and the ordinary one will be paid in May. Today, we will share with you the results of the last quarter of Inuit Standalone. and we will give some insights on how the new Inuit is progressing.

Let's now move on to the highlights of slide 5, which concern standalone Inuit, since Vodafone Towers was consolidated only on the last day of March. Revenues increased by 8.5% compared to the first quarter of 2019. Recurrent revenues increased by 1.3% excluding the 6.8 million euros a year. EBITDA and an annual increase of 6.3% the recurring EBITDA increased by 4.1% eliminating 1.8 euros in euros always as a voice a tantrum finally the free cash flow reached 50 million euros in an annual increase of 16.1% confirming therefore a great generation of cash the tenancy ratio has increased and reached 1.96 today we have here with us the new cfo diego that to be part of Inuit in April, bringing with him his excellent skills and experience in the field of telecommunications. I now leave the floor to Diego, who will provide us with further details about the results of the first quarter. Thank you Giovanni, good evening everyone. I am very happy to be part of this new Inuit trip. Moving on to slide number 6, we will give you more details about the trend of revenues. In the first quarter we had 103 million euros as revenues. There are three components. The first component concerns team revenues, which have reached 66.3 million. There was an increase of 0.5% year-on-year. This reflects The Master Service Agreement of TIM is also an effect of the inflation of 2019, which was roughly half of that of the previous year. The second component is the revenue from other operators and other subjects at 24.4 million euros, an increase of 2% per year. This is the result of an increase in volumes, especially supported by Fixed Wireless Access. Finally, the third point, we have new sites, new services, here the total revenues are 12.3 million euros, including 6.8 which are a tantum. I will explain well what this voice is, a tantum, it concerns the full consideration of the upfront payments of previous years, which also concern the hospitality contracts. These revenues have been regulated according to the contract. The contract has been completed and has been incorporated into the new MSI. As a result, it can also be seen in the economic account. Taking into account the impact of this voice, the increase is 10% based on the year. supported by Backholing and DAS, both in an increase. So, as Giovanni has already said, the total income earned is an increase of 8.5%, while at the base there is a growth of 1.3% and this is basically the result of a lower inflation and a slightly slower growth and an increase in fixed wireless access, backhauling and DAS. Moving on to slide number 7, there are several operating KPIs and I would like to start from the bottom left, we see the new tenant holo and we see that in the There is an increase of 150 units, mainly due to fixed wireless access, while there has been a small increase due to traditional MNOs, which we predict will accelerate further in the coming quarters. The Tenancy Ratio is 1.96, slightly increasing compared to the previous quarter, 1.95. Moving on to the next slide, number 8, we see the activity column. In the new sites we have reached 600. We have installed 50 new sites after several quarters without further additions due to the quarantine period. In this quarter we have also installed 100 units in remote and 3,500 small cells and dust. And finally, as for bike hauling, there are 150 new links that allowed us to exceed quota 1000. Let's move on to slide 9, the main financial cycles. As for EBITDA, in the quarter we reached 88 million euros, which is an increase of 6.3% on annual basis. If we exclude the extraordinary voices not recurring, then we get 5 million. As a consequence, the EBITDA at the base is an increase of 4.1% based on the year. On the same slide we see the CAPEX at 8.1 million and the Recurring Free Cash Flow which is an increase of 16%, thus reaching 50 million euros. Let's move on to slide 10, we see the detailed analysis of the economic account. I would like to emphasize DNA, The DNA figure is 31.3 million euros, which includes the 27 million that concern the amortization of the IFRS 16 Lebit, with an increase of 9.6% on a yearly basis, with a margin of 55%. after the calculation of interest that also concerns the commitments the last slide we see the dynamics of the cash flow we see a recurring free cash flow of 50.3 million euros in an increase of 16% on an annual basis this is the result of a The operating capital was negative for 4.7 million euros, but the result is better than the previous year. Cash flow to equity, 31.7 million euros supported by Capex for development with the expenses of the fourth quarter of the creditors. Net cash flow also includes the payment to Vodafone Tower of the minority rate of 2.14 billion and other financial honours that concern New Bank Financing. Now I will leave the floor again to Giovanni, but in line with the COVID-19 safety provisions, let's take a break for a few seconds to allow the interpreter to change.

Ok, we can continue. We can continue, thank you Diego. Now I would like to illustrate some data regarding the new Inuit. The number of sites is 22,100 and the number of tenants is approximately 40,000. The Tenancy Ratio is about 1.8 times lower than previously illustrated, as it marked the lowest Tenancy Ratio of Vodafone Towers. On the slide you can see some financial data. These are pro-form data. that include the numbers in white as represented, as well as the financials of the Vodafone Towers. These data do not reflect the new MSAAs that started in April. These data simply intend to give a little indication of the new entity. As you can see, the Proforma combination of Inuit and Vodafone Towers shows revenues of 190.3 million and EBITDA of 167.1 million. The P&A margin is 87.8% and the income of anchor tenants is 85%. As expected, the company has doubled its size. Let's move on to slide 14. We see that the net financial position at the end of March is equal to 3.3 billion euros. This implies a net debt on EBITDA of 4.9 times and this data does not include the extraordinary dividend paid to the second quarter of 570 million. As you probably remember, we have totaled 3 billion bank loans that we have partly used for the Vodafone Towers acquisitions in the first quarter and the extraordinary dividend in the second quarter with an impact of 2.15 billion in March and 2.7 billion, following the extraordinary dividend of the second quarter. I would also like to mention that Inuit was assigned the rating by Standard & Poor's and Fitch Ratings. Fitch Ratings assigned Inuit an investment grade BBB- with a stable outlook, while Standard & Poor's has given Inuit a long-term rating of WB+, with a stable outlook. The ratings reflect the business's solidity and its growth potential and will then allow us to optimize the capital structure. I would now like to move from the data to the business update. As you can see on slide 17, a new governance has been defined in line with the best practices and the new board has already met three times. I would now like to highlight that a sustainability committee has been established in order to have a role of support on matters of strategic importance and to achieve sustainable development objectives. You will remember that in the last quarter we presented the company's triennial plan for sustainable development in all areas of the ESG. or Environmental Social Governance and we are fully committed not to lose this commitment. Slide 16. I am extremely pleased to say that we have reached a new organization. The management team has been established. The new organization is focused on the key objectives of the company. For example, Massimo is responsible for the management of MSA. to ensure that the contractual commitments are carried out according to the scheduled times on both sides, also playing a role of support on the innovation roadmap. Francesco is responsible for real estate and brings his rich experience in optimizing the rental costs. Elisa knows Inuit very well and is focused on fast and efficient installation and maintenance. while Gabriele is focused on the development of revenues by Holos and new businesses. They are all then supported by the function managers, who are all senior staff with rich experience in TLCs. We are putting on a strong and committed team that represents an invaluable value for all of us. Last week it was really exciting to meet our entire company with all 200 units of Inuit who participated in a digital meeting. We are now at the 17th slide. As I said, we are fully operational, open running, and we have not had any impact regarding COVID. Inuit, in fact, is considered an essential service, 100% of our team has worked from home. All suppliers have also maintained their functions, of course, following the safety instructions. Now we are seeing a series of new opportunities that take new pops for Vodafone Team, the growth of Holos, a growing interest from the operators FWA and backhauling to support the increasingly pressing demand for data. We have also implemented some interesting solutions for DAS. You know that I am passionate about innovation and therefore I would also like to tell you about the solution that we implemented in Sorrento, where we put a small cell under a vine. I would also like to talk about the coverage of the Apple Academy in the university campus of Naples, which has just been completed. These days we have done a micro-coverage in 18 hospitals to be able to offer a better connectivity that has been used by all mobile operators. Finally, slide 18. I would like to summarize here a little about what has been achieved and what will be the path to follow for the future. In the last few weeks we have brought to an end the merger, we have paid the extraordinary dividend and we will pay the ordinary dividend in a few days. We have established a new organization and a new management team that is fully operational. We see the question that comes from the greater growth of data and the need for efficiency. We really have an important and operational portfolio and we are ready to offer operators a faster 5G rollout, a wider 5G coverage and an enhanced network capacity. In addition, we are also ready to satisfy all the questions of internal coverage from us and we also see a strong interest from the Bank Office Branches and from the Touch Payment transactions. Manuela, Giovanni, Diego, thank you. And now we can open the Q&A session. Our CEO, Federico, and our CFO, Diego Galli, will be able to answer the questions. Only one person, one question per person is authorized, so that everyone can ask their questions. Thank you. First question. from Barclays Courts to you. Simon Barclays, thank you for asking the question. A comment about the FWA operators that are carrying out their activities. If we think about the performance data for the cash flow number that they have mentioned in the long term, part of this is guided by the increase in the Tennessee ratio, this growth should come in the future from FWE operators rather than from MNAs, or you will see an increase in business from Iliad because we have seen a certain slowdown according to Wintrade in recent years. So I wonder if you could give us a little more information on this. Thank you. Yes, we have noticed a greater demand from the FWA, which is really guided by the greater demand for data traffic. What we see today is an acceleration compared to the past, which does not have immediate implications, so we expect the same dynamics of the original plan for MNOs. Thank you. Next question. Thank you. My question on the recurring revenue growth that has been eliminated in the last two quarters due to your inability to negotiate with your key clients such as TI and Vodafone. Now that the deal has been completed, these discussions, these negotiations have returned to the regime and we will have to see an organic revenue growth returned, let's say, from the times of 2019 So we will have an organic revenue growth that will return as before, or maybe it will take a little more time to be able to accelerate again compared to the past. Thank you. Vodafone and the team are carrying on and completing what is predisposed, planned, and so we will be able to respect all the questions that will come. I believe that in the third or fourth trimester we will see a greater movement also in organic growth. Organic growth. Thank you. There are no debates about it. Now we just need to install it. That's it. Deutsche Bank. Ranji. Deutsche Bank. Looking at the data you have provided for the first quarter, the Vodafone, the underlying business, the affordability, Perhaps you have to be more efficient than other telcos, such as Power Company. Is there a possibility of further synergies that can be developed in the Vodafone business, in addition to the target that you have set for future years? Thank you. No, I would say that for the moment we can confirm the ambition of synergy towards which we have focused. We do not have any evidence that can lead us to review what has already been previously communicated. Thank you. A question from Exane. Make up. Here's the question. I want to go back to the comment on... What's next? I'm asking... Wind tray, fixed wireless access. I would like... you have less spectrum compared to the MNOs. So I'm asking if this is electromagnetic spectrum, how are you going to manage it compared to the fixed wireless access and compared to the MNOs? Thank you. Well, let's say that WIN3 It has no less spectrum than Vodafone, it has less spectrum in the 5G environment. And then when CCWin3 has completed, is completing the network with many different layers, we are in business with them to try to offer hospitality wherever possible. The second consideration is that the operators need less power band. I think we can offer hospitality in the space that Vodafone and Tim will not use to develop 5G. These days Tim and Vodafone They are trying to push for fixed wireless access services. I don't see this as a problem. I think we can manage the possibilities of free space in terms of infrastructure, in terms of electromagnetic spectrum. So we will continue to serve our customers wherever possible. The Delfix Wireless Access antennas are smaller, so they are easier to install wherever they want. Have you seen anything from FastWeb, for example? Or others that you are using? Well, usually we don't comment on specific customers.

So...

We can't go into further details. We can say that this is a trend that was already included in the plan, but we saw an acceleration and this thing happened faster than expected. Fasweb is a new MNO in the regulatory context, Italian, so it has the right to ask us what it wants. Thank you for the answer. Again, we have to pause for a few seconds to make the change with the interpreter. Thank you.

Here we are. Next question. Thank you. I have a question about the growth of the OLO reported in the quarter. It seems to have It has slowed down by 2-3% on a yearly basis. Previously it was 8-9% in the second quarter. So the growth of the tenancy has remained quite solid. So I was wondering what caused this slowing down of the oleons in the first quarter. And if we can... and give some ideas on a financial level for 2020. Obviously there are some ideas that are longer term, but we don't have any short-term predictions. Let's remember that Inuit was in quarantine until the end of March, when it was impossible to sell hospitality. In the meantime, there was also the antitrust of the European Commission, has somehow affected this hospitality, so this slow growth that we can notice is due to these two phenomena. Clearly now we will focus on remedies, on solutions and other possibilities. Coming to financial data, Diego? I would also like to clarify that the slowdown was already visible in the previous two quarters, so this is a continuation of all this. Moreover, there was a variation in inflation with the M6 from 1% to 0.5%. This also had an impact on revenues. As for the possible forecasts, We have a new management team, there is a new bottom-up approach, there is a new way of planning, so there is a slightly new management and we will be able to share with you the forecasts for 2020, more or less in the course of the summer. Can we go back for a moment to the oil-oil discussion? Because Tenancy's growth is 7%, while the other growth is 2%, so there is a It's a 5% difference. This is all due to the tenants that are replaced with fixed wireless. So when will this end? Yes, there is a combination that is diluting the ARPU effect. This impact, however, It allows us to see a growth in fixed wireless and we expect a further growth from the other holos that together should increase the amount of revenue. So we expect ARPU to stabilize as far as the holos are concerned by the end of the year or would it be too optimistic? We expect that the operating KPIs will accelerate in the next few months, but this will then translate into an increase in revenues. So yes, we can probably expect it for the fourth quarter. Thank you. Next question. Stefano Giamberini, Equita. Thank you. Returning to the data for 2020, it seems to me that that the target for the Business Plan 2027, as far as the Proforma is concerned, was a life margin of 800 million, 90%. Is this something that can be achieved? Can it be achieved through fusion? Or do you think that this goal can vary substantially? If we look at the figures on this new entity, you can also give us the figures regarding the investments in the first quarter. Thank you. The first question was about the business plan. Siamo abbastanza sicuri che il piano andrà come previsto anche per quanto riguarda l'opportunità di crescita. Magari il punto di partenza sarà un po' più basso rispetto a quanto previsto nel primo trimestre. Adesso il punto qual è? Quanto potremo accelerare a livello di crescita di ricavi nei prossimi mesi? Questo... We need to see the time to market, the orders, the revenues. This will take a few months. We cannot give further information on the guidance for the rest of the year. As I said, this summer we will have a clearer idea and we will be able to provide you with further information. As far as investments are concerned, we have seen the investments of Inuit, the investments of Vodafone, which were lower than those of Inuit. Thank you. Next question. Giorgio Tavolini, Intermonte. Good afternoon, thank you. I would like To better understand the exposure to inflation. Inflation should be the only escalator in the M6 regarding revenues. What influences costs? What margins are there at the level of inflation? I would like to check with you. I would like to better understand the clear exposure. Thank you. As for the M6, it is 100% inflation with the floor at zero. As for the costs, the main voice is the rents, also according to the IFRS 16. And this is linked to the trend, to the dynamics of rental. We are one of the main actors on the market. There are several subjects who have worked on this. We are working well, however, we can be optimistic about our ability to manage the costs of housing without suffering particularly negative impacts. Thank you. Next question, Luigi Minerva, HSBC. Good afternoon, thank you. As far as small sales and backhauling are concerned, can you give us an update about the opportunities? What kind of opportunities will there be in this sense in the new areas of business from here to three years? How much will they be worth compared to the figures of the business as a whole? As you know, we strongly believe in these three lines of business because bug-hauling is absolutely necessary for the roll-out, for the development of 5G technology, so we have increased the links to over 1,000 fiber optic, I'm talking about fiber optic links, and our client will install the 5G antennas, We are ready to move forward with these fiber optic links and we strongly believe that we will continue to develop this business in the coming years. We will continue to install and introduce new fiber optic links. As for small cells, they are really my passion and I strongly believe that in the future This technological solution will be absolutely crucial for the closed coverage because the 5G frequencies will probably not be able to penetrate and reach all the locations, all the places within the cities. They will also be useful in terms of outdoors, because data traffic continues to grow year after year. So, for example, in Sorrento there is a small cell in the center of Sorrento that is managing all the data very well. So in the next three years, currently, The operators are currently focused on 5G development. If we accelerate in this sense, next year we will see something extremely tangible and in the next three years it will represent an excellent source of revenue. So we are ready to be compliant I have to temper everything that is requested by the customers and small cell backhauling will allow us to move in this direction. A small follow-up. Are there tangible proofs for a bigger demand for small cells or are customers still focusing on macro cells? Currently, operators are mainly focused on macro-sales, but as far as indoor coverage is concerned, for example hospitals, which is an extremely important issue at the moment, we have guaranteed coverage in 18 hospitals. Keep in mind that this type of solution, which I have illustrated, are multi-tenant solutions, multi-operator solutions. Currently there are requests for specific coverage, I'm talking about campus, universities, hospitals, even in shopping centers. in the shops, in the exercises. So it's something that moves... It's more in the past than in the past. And we strongly believe in the development and investment in technology. We have to be ready when the demand increases. We can't afford not to be ready. Thank you. Last question. James Thorne, Jefferies. Thank you. A follow-up to the previous question. If we look at the data of 2018, there is a great value on the part of mobile operators, on the blocks of 2.7 GHz, and then there is another The installation will be strongly connected to spectra such as the 26 GHz. This does not tell us that the installation of small cells with small spectra is perhaps not a priority for the MNOs. Can you really invest in this type of installation, also in relation to competitors on the Italian market? I would like to know more details regarding the development of small cells. All the small cells are 4G and are prepared for 5G. We are waiting for the final decision of the operators, of the clients, who will opt for 3.6 GHz or 26 mm. In Europe the market is very different. In the United States this type of technology is being developed, but in Europe the operators are still talking about it, but our vendors that we choose are ready to start with the additional services guaranteed by 5G at the frequencies they want, either 26 GHz or 3.7 GHz. So we are ready to install any solution that the operator will want to install. I would like to add one thing regarding the millimeters, the small cells must be installed at a maximum distance between one and the other of 150 meters, so the operator will have to make a clear decision and follow it if they want to move forward in this direction. However, let us reiterate that we have multi-tenant solutions, so we are able to optimize investments. We are ready for the mmWay or 3.7 GHz or according to the client's request. We will have the solution and it will be ready to go. Yes, I understand that you are ready. I don't know if Tim and Vodafone are able to develop an adequate business. He spoke to the United States. I don't have to tell anyone that there is a huge difference between us and Italy and the United States. But you are absolutely certain that Tim and Vodafone, once they have done everything at 3.7 and 700, then they will go to 26 GHz. I can't answer this question because I don't know exactly what the operators will want. They paid for the license, they paid for these frequencies, so why not use something that has been purchased? So in my opinion, will proceed with this type of installation because there are 5G vertical services that will absolutely need millimeters. Thank you. This was the last question of this presentation of the quarterly results. Thank you all for participating. As usual, you can contact us for any further questions. Thank you and good evening. The conference call is over.