2020
Annual Report
Dear Shareholders,
The 2020 pandemic emergency led to a sudden change in social behavior and had highly
significant effects on the whole community.
The value and importance of an easy and efficient access to the Internet has become clear
to everyone, as well as how these digital tools now represent a key factor for households,
businesses and the public administration: a crucial element for managing daily life and for
the economic and social progress of the Country.
The TIM group has handled data traffic volumes that doubled in just a few days: growth of
this magnitude and speed has never been seen before in the history of modern
telecommunications. In critical times, such as those we have experienced in recent months,
the Country’s communication infrastructures ability to withstand the impact have been
tested, For the TIM Group, this “stress test” has produced an entirely positive result.
In Italy we have been able to continue to work and study during the most acute phase of
the crisis: this was also possible thanks to TIM’s people and their daily commitment to
maintaining high standards of network access and responding to the requests of customers
as well as local and national institutions.
Together with managing unprecedented traffic volumes, TIM was required to address
another important issue: households and businesses that do not yet have a fixed
ultrabroadband connection, a situation which, at a time of such intense collective and
concurrent use, could have caused great difficulties. To take care of all this, in just over nine
months, ultrabroadband was brought to over 3,250 municipalities, making access available
to 5 million people.
The work to provide all Italian households with an ultra-broadband connection is
continuing in order to finally close the digital divide. We would like to highlight that what
we have achieved in 2020, in wholly exceptional circumstances, has greatly sped up the
Country’s route to digitization, demonstrating on the field that a combination of
determination, professionalism and technical expertise can lead to the achievement of
ambitious milestones in a relatively short time.
Moreover,
in 2020 the Group accomplished
important strategic projects, each
demonstrating a careful balance between the creation of enabling infrastructures and new
services essential for the progress and development of Italy: FiberCop, created to roll out
optic fiber to the black and gray areas of the country; Noovle, to offer cutting-edge cloud
services to businesses of all sizes and to the public administration; Inwit, to offer the largest
and most efficient network of transmission equipment in Italy; Olivetti, to relaunch the
historical brand and develop the Internet of Things to be offered to businesses of all sizes
and to the public administration; TIM Ventures, to contribute through venture capital
investments to the development of new technological start-ups in their growth phase. All
of this is the result of an innovative approach open to collaborations with other leading
players in the market who share TIM’s vision on the opportunities that can be seized on the
digital sector. The agreement reached with the infrastructure fund KKR and Fastweb to
create FiberCop, and its possible evolutions (confirmed and also consistent with the co-
investment proposal presented at the start of this year), represent
its clearest
representation.
TIM Brasil also played a leading role in operations based on important alliances geared
towards strengthening our role and seizing opportunities for growth in the largest country
in South America. During the year TIM Brasil, together with Vivo and Claro, was awarded
the purchase of the mobile assets of Oi and this transaction, once completed, will
significantly strengthen TIM’s industrial and commercial capabilities in the Country.
The Group has also made ESG objectives the focus of its strategic plan and included them
in the remuneration policies for its personnel, setting important social and environmental
sustainability targets for the next decade.
In terms of the environment, energy efficiency initiatives have been launched and
renewable sources of energy are increasingly sought. All Group companies have geared
their processes and innovative offers towards sustainability criteria, offering more efficient
solutions that have a better impact on the community in terms of the environment and
less waste of resources. Examples of this are: the TIM Green branded line of products;
Noovle’s cloud services, developed at data centers with low environmental impact;
solutions for remote working and smart agriculture; integrated services in the Internet of
Things sector, mentioning the smart control room Olivetti created for the city of Venice, to
name just one.
Finally, as digital technologies will increasingly require knowledge and new skills to
generate effective economic and social progress, TIM showed determination in carrying
through the “Operazione Risorgimento Digitale” project, the first free large Internet school,
established together with over 40 partners from the world of business, institutions and the
voluntary sector.
The economic results achieved by the TIM Group in 2020 show that the commitment to generate
cash and reduce the debt has been confirmed. Significant results were also recorded from an
operational perspective, for instance the positive increase in fixed lines achieved in the last
quarter of 2020, inverting a trend that had lasted for approximately twenty years.
As regards mobile network services, the customer base has stabilized and positive
developments of prices were recorded, which involved both the low bands and those of
higher value.
The television content offer continued to grow and TIM Vision, thanks to the important
partnerships signed (Netflix, Disney+, DAZN, NowTV), is now the best aggregator of content
on the Italian market in terms of the breadth, diversification and quality of the offer.
To conclude, 2020 highlighted the strategic role of connections and the digital services
enabled by them to ensure the social and economic activities of citizens, businesses and
the public administration.
At the same time the priorities that should be taken into account to plan the post-
pandemic restart were clearly defined: complete the work to provide the country with a
solid and inclusive network infrastructure; introduce technologies that ensure an effective
and sustainable digital transition; continue the efforts to increasingly spread throughout all
levels of the population the skills and knowledge necessary to seize all the opportunities
that will arise from the technological revolution we are experiencing.
In 2020, the TIM Group based its execution capabilities on these priorities. This same vision
will guide us in the delivery of the 2021-2023 “Beyond Connectivity” plan.
Salvatore Rossi
Luigi Gubitosi
CONTENTS
REPORT ON OPERATIONS ..............................................
TIM Group ................................................................................................
Key Operating and Financial Data - TIM Group .......................................................................
Financial and Operating Highlights of the Business Units of the TIM Group .......................
Main Commercial Developments ..............................................................................................
Main changes in the regulatory framework .............................................................................
Competition ..................................................................................................................................
Consolidated Financial Position and Cash Flows Performance .............................................
Consolidated Data – Tables of detail ........................................................................................
After Lease indicators .................................................................................................................
Sustainability aspects .................................................................................................................
Research and Development .......................................................................................................
Consolidated Non-Financial Statement ...................................................................................
Events subsequent to December 31, 2020 ...............................................................................
Business Outlook for the Year 2021 ...........................................................................................
Main risks and uncertainties .......................................................................................................
Information for Investors ............................................................................................................
Transactions with related parties ..............................................................................................
Alternative Performance Measures ...........................................................................................
TIM S.p.A. .................................................................................................
Review of Key Operating and Financial Data - TIM S.p.A. ......................................................
Tables of detail – TIM S.p.A. ........................................................................................................
After Lease indicators - TIM S.p.A. .............................................................................................
Reconciliation of Consolidated Equity .......................................................................................
Corporate Boards at December 31, 2020 ..................................................................................
Macro-Organization Chart ..........................................................................................................
8
8
11
30
39
45
57
61
70
77
78
83
88
89
90
91
98
102
103
106
106
119
125
129
130
132
TIM GROUP CONSOLIDATED FINANCIAL
STATEMENTS ................................................................. 133
Contents ........................................................................................................................................
Consolidated Statements of Financial Position .......................................................................
Separate Consolidated Income Statement ..............................................................................
Consolidated Statements of Comprehensive Income ............................................................
Consolidated Statements of Changes in Equity ......................................................................
Consolidated Statements of Cash Flows ..................................................................................
Notes to the consolidated financial statements .....................................................................
134
135
137
138
139
140
142
TIM S.P.A. SEPARATE FINANCIAL STATEMENTS ........ 298
299
300
302
303
304
305
307
Contents ........................................................................................................................................
Statements of Financial Position ...............................................................................................
Separate Income Statements ....................................................................................................
Statements of Comprehensive Income ....................................................................................
Statements of Changes in Equity ..............................................................................................
Statements of Cash Flows ..........................................................................................................
Notes to the Separate Financial Statements of TIM S.p.A. ....................................................
OTHER INFORMATION………………………………………… 450
451
460
465
486
Report of the Board of Statutory Auditors ……………………………………………………………………...
Motions for resolutions…………………………………………………………………………………………………….
Glossary…………………………………………………………………………………………………………………………...
Useful Information…………………………………………………………………………………………………………..
BOARD OF DIRECTORS
Chairman
Chief Executive Officer and General Manager Luigi Gubitosi
Directors
Salvatore Rossi (independent)
Alfredo Altavilla (independent)
Paola Bonomo (independent)
Franck Cadoret
Giuseppina Capaldo (independent)
Maria Elena Cappello (independent)
Massimo Ferrari (independent)(1)
Paola Giannotti de Ponti (independent)
Marella Moretti (independent)
Lucia Morselli (independent)(2)
Dante Roscini (Lead Independent Director)
Arnaud Roy de Puyfontaine
Agostino Nuzzolo
Rocco Sabelli (independent)
Michele Valensise (independent)
Secretary to the Board
BOARD OF STATUTORY AUDITORS
Chairman
Standing Auditors
Alternate Auditors
Roberto Capone
Giulia De Martino
Anna Doro
Marco Fazzini
Francesco Schiavone Panni
Andrea Balelli
Antonia Coppola
Franco Dalla Sega
Laura Fiordelisi
Independent Auditor
EY S.p.A.
(1) Resignation tendered on February 22, 2021
(2) Resignation tendered on February 22, 2021
Annual Financial Report
at December 31, 2020
The Board of Directors and the Board of Statutory Auditors
of TIM S.p.A.
8
2020
TIM Group
Revenues 15,805
Millions
of Euros
Key operating and financial data
EBITDA
EBITDA MARGIN
EBITDA ADJUSTED AFTER LEASE
6,739
Millions
of Euros
44.6%
organic
excluding
non recurrent
6,249
Millions
of Euros
ADJUSTED NET FINANCIAL DEBT
23,326
Millions
of Euros
ADJUSTED NET FINANCIAL DEBT - AFTER LEASE
18,594
Millions
of Euros
CAPITAL EXPENDITURES
3,409
Millions
of Euros
HEADCOUNT ITALY
HEADCOUNT OUTSIDE ITALY
42,680
numbers
9,667
numbers
HEADCOUNT AT YEAR END
52,347
numbers
KEY OPERATING AND FINANCIAL DATA - TIM
GROUP
Consolidated operating and financial data (*)
(million euros)
2020
2019
2018
2017
2016
(1)
(1)
Revenues
EBITDA
EBIT before goodwill impairment loss
Goodwill impairment loss
EBIT
Profit (loss) before tax from continuing operations
Profit (loss) from continuing operations
Profit (loss) from Discontinued operations/Non-current
assets held for sale
Profit (loss) for the year
Profit (loss) for the year attributable to Owners of the Parent
Capital Expenditures & spectrum
15,805
6,739
2,104
—
2,104
1,397
7,352
—
7,352
7,224
3,409
17,974
8,151
3,175
—
3,175
1,739
1,226
16
1,242
916
3,784
18,940
7,403
3,151
(2,590)
561
(777)
(1,152)
—
(1,152)
(1,411)
6,408
19,828
7,790
3,291
—
3,291
1,777
1,287
—
1,287
1,121
5,701
19,025
8,002
3,722
—
3,722
2,799
1,919
47
1,966
1,808
4,876
Consolidated financial position data (*)
(million euros)
Total Assets
Total Equity
- attributable to Owners of the Parent
- attributable to non-controlling interests
Total Liabilities
Total Equity and Liabilities
Share capital
Net financial debt carrying amount
Adjusted net financial debt
Adjusted net invested capital
Debt Ratio (Adjusted net financial debt/Adjusted net
invested capital)
Consolidated profit ratios (*)
EBITDA / Revenues
EBIT / Revenues (ROS)
Adjusted net financial debt/EBITDA
(1)
(1)
(2)
(1)
(1)
(1)
12.31.2020
73,234
28,840
26,215
2,625
44,394
73,234
11,588
23,714
23,326
52,166
44.7 %
12.31.2019
70,104
22,626
20,280
2,346
47,478
70,104
11,587
28,246
27,668
50,294
55.0 %
12.31.2018
65,619
21,747
19,528
2,219
43,872
65,619
11,587
25,995
25,270
47,017
53.7 %
12.31.2017
68,783
23,783
21,557
2,226
45,000
68,783
11,587
26,091
25,308
49,091
51.6 %
12.31.2016
70,446
23,553
21,207
2,346
46,893
70,446
11,587
25,955
25,119
48,672
51.6 %
2020
42.6 %
13.3 %
3.5
2019
45.3 %
17.7 %
3.4
2018
39.1 %
3.0 %
3.4
2017
39.3 %
16.6 %
3.2
2016
42.1 %
19.6 %
3.1
(*) As of January 1, 2019, the TIM Group has adopted the new IFRS 16 (Leases) with the modified retrospective method (without the restatement of
comparative financial information of previous years). In addition, effective from January 1, 2018, the TIM Group has adopted: The new IFRS 9 (Financial
Instruments) retrospectively - making use of the specific exemptions provided for by the same standard and without restating the previous periods
under comparison - and the new IFRS 15 (Revenue from contracts with customers) using the modified retrospective method. Consequently, operating
and financial data of previous years have not been restated. Further details are provided in the Note “Accounting Policies” to the Consolidated
Financial Statements at December 31, 2020 of the TIM Group.
(1) Details are provided under "Alternative Performance Measures".
(2) Adjusted net invested capital = Total equity + Adjusted net financial debt.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
11
Headcount, number in the Group at year end (1)
(units)
Headcount (excluding headcount relating to Discontinued
operations/Non-current assets held for sale
Headcount relating to Discontinued operations/Non-current
assets held for sale
12.31.2020
12.31.2019
12.31.2018
12.31.2017
12.31.2016
52,347
55,198
57,901
59,429
61,229
—
—
—
—
—
Headcount, average number in the Group(1)
(equivalent units)
Headcount (excluding headcount relating to Discontinued
operations/Non-current assets held for sale
Headcount relating to Discontinued operations/Non-current
assets held for sale
2020
2019
2018
2017
2016
49,099
51,917
54,423
54,946
—
—
—
—
57,855
2,581
Financial performance measures
TIM S.p.A.
(euros)
Share prices (December average)
- Ordinary
- Savings
Dividends per share
- Ordinary
- Savings
Pay Out Ratio
Market capitalization (in million euros)
Market to Book Value
Dividend Yield (based on December average)
- Ordinary
- Savings
TIM Group
(euros)
Basic earnings per share - ordinary shares
Basic earnings per share – savings shares
Diluted earnings per share - ordinary shares
Diluted earnings per share – savings shares
(1) Includes employees with temp work contracts.
(2)
(2) (*)
(**)
(2) (***)
2020
2019
2018
0.39
0.42
0.0100
0.0275
24 %
8,458
0.34
2.60 %
6.49 %
2020
0.34
0.35
0.33
0.34
0.56
0.55
0.0100
0.0275
35 %
11,762
0.65
1.80 %
5.04%
2019
0.04
0.05
0.04
0.05
0.55
0.47
—
0.0275
13 %
11,153
0.61
—
5.86%
2018
(0.07)
(0.07)
(0.06)
(0.06)
(2) For the year 2020, the ratio was calculated on the basis of the proposed resolutions submitted to the Shareholders' Meeting of March 31, 2021. For
all periods, the reference index was assumed to be the Parent’s Earnings, calculated by excluding non-recurring items (as detailed in the Note
“Significant non-recurring events and transactions” in the Separate Financial Statements of TIM S.p.A. at December 31, 2020).
(*) Dividends paid in the following year/Profit for the year.
(**) Capitalization/Equity of TIM S.p.A..
(***) Dividends per share/Share prices.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
12
Highlights of 2020
The fourth quarter of 2020 began to show the results of two years of transformation, by streamlining the
organizational structure, optimizing processes and undergoing a major repositioning of the business with the
creation of new development opportunities, thanks also to key strategic agreements.
During 2020, TIM further boosted cash generation, both for ordinary and extraordinary operations. Today TIM is
a solid company geared towards meeting the various needs of its customers in a sustainable manner and with
credible growth prospects, thanks also to the expected improvement in the macroeconomic environment and
sector, which is one of the main beneficiaries of the Next Generation EU.
Net financial debt as at December 31, 2020 fell by 4,342 million euros YoY (i.e. 3,299 million euros on an After
lease basis), at 23,326 million euros, (i.e. 18,594 million euros on an After Lease basis). Equity free cash flow
contributed 2,414 million euros (1,615 million euros on an After Lease basis).
Additional significant progress was recorded in the implementation of strategic initiatives:
■ Development of convergent offer and TIMVISION: the key partnerships entered into during the year with
major global players (Disney+, Netflix, DAZN, NowTV, Discovery+) have transformed TIMVISION into Italy’s
leading aggregator of entertainment and sports content. This development has further strengthened the
positioning and popularity of TIM’s convergent offering.
■ Fiber network: work is continuing to launch the FiberCop operations, which will bring FTTH technology to a
large part of Italy by 2025 (76% of property units in grey and black areas – equivalent to 56% of technical
property units nationwide). This is an important plan to boost the capacity of the TIM network, which already
offers technologies capable of supporting the distribution of multiple streams of high-definition video to over
91% of Italians with an active fixed telephone line, with the remaining population serviced by UBB Fixed
Wireless Access and satellite connections. As part of the FiberCop project, the secondary network fiber co-
investment offer open to all interested operators was published.
■ Disposal of mobile towers: Ardian Infrastructure and Canson Partners (Guernsey) Limited invest in INWIT
for an equivalent value of 1.6 billion euros, collected by TIM in Q4.
■ Data Centers and partnerships for Cloud services: announced in January 2021, the birth of Noovle S.p.A., a
new company wholly owned by the TIM Group to serve the market as a center of excellence for Cloud and
edge computing, with the aim of enhancing TIM’s offering with innovative public, private and hybrid cloud
services for businesses (from small and medium-sized enterprises to large industries and government
bodies), thus boosting Italy’s digital transformation. 2020 pro-forma turnover of the Group business Cloud
came to 0.5 billion euros.
■
In Brazil, TIM S.A. won the tender – together with Vivo and Claro – for the purchase of Oi Group’s mobile
assets. The transaction is expected to be completed in 2021, following the necessary authorizations from the
competent authorities. TIM S.A.’s investment will be approximately 7.3 billion reais and 476 million reais
relating to TIM S.A.’s share of the data transmission contracts. In terms of asset allocation, TIM S.A. will
receive approx. 14.5 million customers, approx. 7.2 thousand mobile access sites and approx. 49 MHz of
mobile radio frequencies.
The placement of the first 1 billion euros Sustainability Bond with an 8-year maturity was successfully concluded
in January 2021. The bond issue has a yield at maturity of 1.75% and a fixed coupon of 1.625%, below the Group’s
average cost of debt which, at the end of September 2020, amounted to around 3.4%. The proceeds will be used
for initiatives of energy efficiency, transition to renewable energy and circular economy development. Moreover,
for the first time in Italy a corporation will invest part of the funds collected into projects with social value, as
envisaged in the Sustainability Financing Framework published in December 2020.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
13
Performance in the fourth quarter 2020
The commercial strategy implemented over the last two years led to a stabilization of service revenues in the
fixed line segment in Q4, amid a backdrop of significantly improving commercial indicators. The growth in total
fixed retail lines for the first time since 2001 and the first signs of rationality in the mobile market were
particularly noteworthy.
The total number of mobile lines was 30.2 million at the end of the year, up by around 5 thousand lines over the
previous quarter, despite the partial lockdown in November and December. Machine-to-machine SIMs are on the
rise once again, with 103 thousand new lines. The performance of “human” lines improved, significantly reducing
the loss of lines and confirming the ongoing trend of stabilization. “Number portability” (i.e. the flow to other
operators, amounting to 35 thousand lines) posted the best result since Q2 2018.
In the fixed line segment, the migration of the customer base towards ultrabroadband is accelerating thanks
also to the greater availability of lines in white areas, where TIM has opened 18 thousand new cabinets since
March 2020, making fiber (FTTx) available to 91% of Italian households with fixed lines.
In Q4 2020, 437 thousand new retail and wholesale ultrabroadband lines were activated (retail +171% YoY),
reaching 8.6 million units – up 24% YoY.
Group revenues in the quarter amounted to 4.1 billion euros (-2.1% organic YoY), with an upward trend (+2.9
percentage points) compared to the previous quarter. Group revenue from services was 3.7 billion euros, with a
trend – compared to the previous year (-1.2%) – that is also up from the third quarter (+5.2%).
In the Business segment, revenue growth associated with innovative services (ICT, Cloud, IT solutions)
accelerated (+27.6% YoY), also thanks to the positive contribution of the partnership with Google Cloud.
In Domestic Wholesale, service revenues in Q4 2020 are up 12.1% YoY, benefiting from the ongoing migration of
customers to ultrabroadband and the acquisition of new contracts over the quarter.
In Brazil, service revenues continued to rise (+1.9% YoY), driven by strong commercial performance with a positive
effect on the customer base trend and average user prices. The efficiencies achieved (particularly the
containment of credit losses) contributed to an organic EBITDA growth of 2.8% YoY.
The Group’s organic EBITDA amounted to 1.8 billion euros (-1.5% YoY, +6.4pp QoQ) and that of the Domestic
Business Unit came to 1.4 billion euros (-2.5% YoY, +7.2pp QoQ), up from the previous quarter despite the partial
lockdown in November and December and the new distribution of expansion contract days (brought forward
and used in Q2 2020), while also benefiting from cost containment measures (-7.4% YoY for the addressable
base). Net of these discontinuities, EBITDA in the quarter would have performed even better than the previous
quarter, with a positive YoY change.
After Lease EBITDA was 1.6 billion euros (-0.8% YoY, +7,4pp QoQ): 1.3 billion euros for the Domestic Business Unit
(-1.7% YoY, +8.0pp QoQ) and 0.3 billion euros for TIM Brasil (+3.0% YoY, +2.5pp QoQ).
At Group level, investments amounted to 1.4 billion euros, in line with the year’s targets, despite the acceleration
in Brazil and Italy of the coverage plan for white areas in Q4.
The net result came to 6.0 billion euros in the fourth quarter and 7.2 billion euros during the year, showing strong
growth on 2019 (when they were reported, respectively, as 0.1 and 0.9 billion euros) also in view of the benefits
obtained from the tax recognition of the greater values booked in accordance with Decree Law 104/2020 (5.9
billion euros). The net result would, excluding that effect, have been 1.3 billion euros, 431 million higher than
2019.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
14
Financial highlights for the year
(million euros)
2020
2019
% Change
(a)
15,805
6,739
42.6 %
7,063
44.6 %
6,249
2,104
13.3 %
15.3 %
7,224
3,409
12.31.2020
(a)
23,326
18,594
(b)
17,974
8,151
45.3 %
7,505
44.3 %
6,652
3,175
17.7 %
17.2 %
916
3784
12.31.2019
(b)
27,668
21,893
organic
excluding
non-recurring
(a-b)
(12.1)
(17.3)
(2.7) pp
(33.7)
(4.4) pp
-
(9.9)
(6.4)
(5.9)
(5.9)
0.3pp
(6.1)
(16.6)
(1.9) pp
(2.8)
Change Amount
(a-b)
(4,342)
(3,299)
Q4
2020
Q4
2019
(a)
4,148
1,621
39.1 %
1,764
42.5 %
1,571
477
11.5 %
14.9 %
6,046
1,403
(b)
4,551
1,652
36.3 %
1,790
42.2 %
1,584
463
10.2 %
16.8 %
64
1,508
% Change
organic
excluding
non-recurring
(a-b)
(8.9)
(1.9)
2,8pp
3.0
1,3pp
—
(7.0)
(2.1)
(1.5)
(1.5)
0.3pp
(0.8)
(12.9)
(1.9) pp
0.4
Revenues
EBITDA
EBITDA Margin
Organic EBITDA excluding non-recurring
Organic EBITDA Margin excluding non-recurring
EBITDA adjusted After Lease
EBIT
EBIT Margin
Organic EBIT Margin excluding non-recurring
Profit (loss) for the year attributable to Owners of the
Parent
Capital expenditures
Adjusted net financial debt
Adjusted Net Financial Debt
After Lease
Q4 Financial highlights
(million euros)
Revenues
EBITDA
EBITDA Margin
Organic EBITDA excluding non-recurring
Organic EBITDA Margin excluding non-recurring
EBITDA adjusted After Lease
EBIT
EBIT Margin
Organic EBIT Margin excluding non-recurring items
Profit (loss) for the period attributable to owners of
the Parent
Capital expenditures
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
Details are provided under “Alternative Performance Measures”
.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
15
TIM’s initiatives to deal with the COVID-19 emergency
Initiatives for the
Digitalization of the
Country
18,000
new cabinets
Initiatives for the
Community
Initiatives to support
Institutions
Initiatives for Schools
and Digital Skills
(March - June 2020)
1,635
kits (device+sim)
to prisons
(March - December 2020)
6,500
digital training
accounts created for
the Carabinieri
(March - December 2020)
2.5 mln
and more platform users
WeSchool - start-up expedited by TIM -
in the week 4-10 May 2020
(+300% compared to average pre-covid
access)
5 mln
new citizens
gained access
to ultrabroadband connectivity
1,400
Operations Room
700,000
kits for 75 hospitals
(configured with technology aids
for the hearing impaired)
for the Italian Civil Protection
Department
with 72 work stations
(freephone number activated just 15 hours
after lockdown started)
citizens in streaming for the
Operazione Risorgimento Digitale
training and teaching cycles
3,250
municipalities involved
€ 1 mln
Constant monitoring
20
allocated by Fondazione TIM in
favor of 4 hospitals
to ensure the continuity of
emergency services
(112, 113, 115 and 118)
agreements signed with the main
universities to ensure distance
teaching
37%
increased bandwidth achieved on
some routes
Freephone number
to support citizens and healthcare
workers
(with Ministry of Health and Civil
Protection)
Freephone number
for charitable
donations
for Red Cross fund-raising
200,000
SIMS card supplied to the universities
at concessionary rates with an equal
number of free LTE/WiFi modems for
students
National
Confindustria
support for smart-working for 230
employees
Initiatives for customers
(March - December 2020)
435,000
Initiatives for employees
(March 2020 - to date)
36,000
consumer offers activated during the emergency
165,000
business offers activated during the emergency
employees in Agile Working since the start of the
emergency
162,774 ton.
less CO2 equivalent due to stop to mobility through
smart-working
FREE
the “classic” TIMVISION package
(for all fixed network customers)
Training tools
Informative videos produced on how to prevent
infection and use PPE correctly
FREE
for two months, TIM WORK SMART: the
collaboration service
Expansion pf PC stock
for Red Cross fund-raising
FREE
for three months, G Suite TIM Edition
(the smart-working solution by TIM, Google Cloud and Intesa
Sanpaolo)
Insurance cover
healthcare in the event of COVID-19 infection
Support for Companies
thanks to an agreement with UniCredit
(for immediate access to liquidity and investment support
measures)
Safety at work
New procedures for the safety of activities carried
out by technicians and shop staff
Initiatives of Tim Brasil
(March 2020 - to date)
10,000
employees working from home across the country
1st
operator to convert the entire in-house call center
to remote working
500
employees who monitored the network from
home thanks to virtual access, while maintaining
the quality of service
24/07
assistance to employees and dependent family
members through the personal support program
and Einstein Conecta health platform
3,000
families with disabled people living in vulnerable
areas of Rio de Janeiro helped with food parcels
during the emergency
Instituto TIM
responded quickly to the pandemic by changing
the methods used in its projects in order to ensure
full operation online in 2020: AWC, Instituto TIM
Percussion Band and TIM Tec
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
16
The health emergency caused by the COVID-19 outbreak has underpinned the essential value of connectivity
and digital solutions in emergency situations to cope with generalized social distancing, the interruption of the
provision of in-person services, a stop to mobility and the interruption of school and education services. Because
of social distancing, Italians have discovered that digital connectivity is the key to transforming the way they
work, limiting travel to a minimum and ensuring compliance with the most rigorous safety standards.
Aware of its leading role in the digitalization of the country, TIM has put in place a series of initiatives to support
citizens, businesses and institutions during the lock-down and in the progressive reopening phases, with a wide-
ranging plan.
The main initiatives include:
■
to accelerate the Italy's digitalization, more than 18,000 new cabinets were switched on in 3,250 different
municipalities, allowing more than 5 million residents to access UltraBroadBand connectivity. Moreover,
thanks to a series of technical measures, which on some routes have led to increasing bandwidth by up to
37%, it has been possible to meet the strong increase, which during the first lockdown recorded a maximum
increase of 90% on the fixed line network and 45% on the mobile network, while keeping service quality
unchanged;
■ Fondazione TIM donated 1 million euros to hospitals and medical research institutions, also promoting fund-
raising among TIM employees;
■ over 3,000 devices and SIM cards were distributed to hospitals involved in the emergency and prisons to
facilitate contact with family members; in collaboration with the National Deaf Association over 1,000
devices were supplied for deaf people and equipped with apps to facilitate the use of LIS (Sign Language)
and for the real-time translation of messages from voice to text and vice versa;
■
■
in participating in the “Torino City Love” campaign, TIM provided free of charge innovative digital solutions
to the public to support health care, families and the elderly;
to counter the negative effects of the lockdown on people, toll-free psychological support helplines were set
up for citizens, a help desk for doctors and a special number for donations to the Italian Red Cross;
■ with the "Operation Risorgimento Digitale" project, the first large free on-line school for the spread of
digital skills in Italy was established. Operazione Risorgimento Digitale is a great system alliance headed
by TIM, which has brought together over 30 different partners and obtained the support of trade associations,
the fourth (welfare-driven) economic sector and important players in social innovation, such as Confindustria
Digitale, Telefono Azzurro, Fondazione Mondo Digitale, Junior Achievement Italia, Generation and Italiacamp.
The project, which endorses the Manifesto for the Digital Republic promoted by the Ministry for Innovation,
is being implemented in conjunction with the European Commission, Polizia di Stato, Italian Law
Enforcement and it has obtained ANCI support. As part of the project important memorandums of
understanding have been signed with the Ministries for Public Administration, Education and Justice. To
immediately adapt to the needs created by the emergency, the activity was consolidated into awareness-
raising and distance teaching cycles used by over 700,000 citizens;
■
■
■
to ensure continued education in schools, TIM signed up to the Italian Ministry of Education’s
#LaScuolaContinua program and, together with Cisco, Google, IBM and WeSchool, it made platforms and
information support available for ensuring distance teaching; more than 20 agreements have also been
signed with Italy’s main universities for the supply of modems and SIM cards to help students take courses
remotely;
the initiatives for people, families and companies have all been aimed at offering free connectivity and
providing services, such as remote-working, throughout the emergency period. In this context, over 435,000
offers were activated for consumer customers and approximately 165,000 for business customers;
reflecting the exceptional circumstances, initiatives were taken to support institutions involved in the crisis,
including the Protezione Civile (Civil Protection), the Carabinieri, Confindustria, S. Raffaele Hospital, ASST
Mantua, to whom physical spaces were made available with the equipment needed to manage operations
in the area, special training programs, platforms, toll-free numbers and other services to manage
emergencies;
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
17
■ competitions for health care innovation have been promoted through partnerships with public institutions
and other private foundations, such as Innova for Italy, #EUvsVirus Hackathon and the COVID-19 Challenge;
■
finally, about 36,000 of our employees were involved in the Remote Working program, in line with
government provisions on the management of working spaces. The benefit in terms of emissions reduction,
resulting from the stop to mobility, is equal to over 162K tons of CO2e.
Non-financial performance
The coronavirus pandemic has exposed problems and weaknesses in our economic, social and institutional
systems in dealing with global shocks. At the same time, however, awareness has grown that achieving
sustainable development also requires the use of ICT products and services, which are enabling factors for
inclusive development. These cannot be separated from digital infrastructure, which are increasingly necessary
across the country to guarantee all the advantages and opportunities they offer. In addition to this, it is however
necessary to increase training and the necessary digital skills in both the public (schools and Public
Administration) and private (families and businesses) sectors to boost the country’s recovery. TIM is strongly
committed on all these fronts, with a leading role.
The challenge now is to use the Group’s infrastructure and skills to contribute to a new phase of our company’s
digital evolution that requires us to use technology, working with all institutional and private players, to meet the
major environmental, social and economic challenges, made even more urgent by the coronavirus pandemic.
The Sustainability Plan, integrated into the three-year Strategic Plan, is the Group’s concrete contribution to
achieving the objectives of the United Nations 2030 Agenda for Sustainable Development, a commitment
confirmed by the inclusion of the stock in the Dow Jones Sustainability Index Europe for the seventeenth
consecutive year, and TIM’s return to the Dow Jones Sustainability Index World, which joins other specialist
indexes in which the stock has been included for several years.
Thanks to the continuous search for energy efficiency and limiting its emissions, also thanks to the increasing
contribution of renewable energy, TIM strives to be carbon neutral by 2030, by improving efficiency indicators
and developing infrastructure and Data Centers to provide more and more services with lower resource use.
The commitment to carbon neutrality does not only concern internal processes but also the tools that TIM makes
available to its customers thanks to the offer of energy monitoring and control solutions and the cloud offer that
can optimize the use of servers.
The Sustainability Plan places great emphasis on TIM’s people, with a renewed engagement survey, a
recruitment and training program to better meet the challenges of the Information and Communications
Technology sector, as well as a long-term incentive plan with ESG objectives.
Finally, TIM can contribute to the success of new companies, focusing on the impact on Italy’s system and, where
possible, on less advantaged areas: through TIM Ventures, the Group aims to participate in the growth of 10-15
companies over 5 years and to strengthen the Group’s technological innovation.
The Plan’s objectives, where possible with reference to 2020, were all achieved, with the excellent performance
of the “Engagement” cluster, which improved by 16 points compared to 2019, exceeding the 14-point growth
target expected for the end of 2022.
At the beginning of January 2021, the Group aligned its funding sources with the Strategic Plan which places ESG
objectives at the center of its development strategy, very successfully placing TIM's first Sustainability Bond for
a billion euros.
The Sustainability Report allows for an in-depth analysis of the achievement of the annual targets and the
progress of the multi-year targets into which the Sustainability Plan is grouped, highlighting the contribution to
the Sustainable Development objectives.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
18
Introduction
The TIM Group and TIM S.p.A. Consolidated Financial Statements for 2020 and the comparative figures for the
previous year have been prepared in compliance with the IFRS issued by the International Accounting Standards
Board and endorsed by the European Union ("IFRS").
The accounting policies and consolidation principles adopted are consistent with those applied for the TIM Group
Consolidated Financial Statements and the TIM S.p.A. Separate Financial Statements at December 31, 2019, except
for the amendments to the accounting standards issued by the IASB and in force as of January 1, 2020.
TIM Group, in addition to the conventional financial performance measures established by the IFRS, uses
certain alternative performance measures in order to present a better understanding of the trend of operations
and financial condition. Specifically, these alternative performance measures refer to: EBITDA; EBIT; organic
change and impact of non-recurring items on revenues, EBITDA and EBIT; EBITDA margin and EBIT margin; and
net financial debt carrying amount and adjusted net financial debt; Equity Free Cash Flow. Following the
adoption of IFRS 16, the TIM Group also presents the following additional alternative performance indicators:
■ EBITDA adjusted After Lease (“EBITDA-AL”), calculated by adjusting the Organic EBITDA net of the non-
recurring items, amounts connected with the accounting treatment of the leasing contracts according to
IFRS 16.
■ Adjusted net financial debt After Lease, calculated by excluding the liabilities connected with the
accounting treatment of the leasing contracts from the adjusted net financial debt according to IFRS 16;
■ Equity Free Cash Flow After Lease, calculated by excluding, from the Equity Free Cash Flow, the amounts
related to lease payments.
The meaning and content of the alternative performance indicators are provided in the "Alternative
performance indicators" chapter; analytical detail of the amounts of the reclassifications introduced and of the
methods for determining indicators is also provided.
Lastly, the section called "Business Outlook for the year 2021" contains forward-looking statements in relation to
the Group's intentions, beliefs or current expectations regarding financial performance and other aspects of the
Group's operations and strategies. Readers of this Annual Financial Report are reminded not to place undue
reliance on forward-looking statements; in fact, actual results may differ significantly from forecasts owing to risks
and uncertainties depending on numerous factors, the majority of which are beyond the scope of the Group’s
control. Please refer to the "Main risks and uncertainties" section for more information. It provides a detailed
description of the major risks pertaining to the TIM Group business activity which can, even considerably, affect its
ability to meet the set goals.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
19
Non-recurring events
In the years 2020 and 2019, the TIM Group recognized non-recurring net operating expenses connected to
events and transactions that by their nature do not occur on an ongoing basis in the normal course of operations
and which have been shown because their amount is significant. Non-recurring charges include, among others,
any goodwill impairment changes, provisions for regulatory disputes and potential liabilities related to them,
liabilities with customers and/or suppliers, and charges associated with corporate reorganization/restructuring
and prior-year adjustments.
In detail:
(million euros)
Non-recurring expenses/(income)
Revenues
Revenue adjustments
Other operating income
Other operating provisions absorption
Brazil Business Unit Tax recovery and Domestic Business Unit operating expenses
recovery effect
Acquisition of goods and services and Change in inventories
Expenses related to agreements and the development of non-recurring projects
Employee benefits expenses
Charges connected to corporate reorganization/restructuring and other processes
Other operating expenses
Sundry expenses and provisions
Impact on EBITDA
Sale of Persidera S.p.A. (Domestic BU)
Impact on EBIT
2020
2019
39
(1)
64
74
148
324
324
15
(706)
21
282
459
71
18
89
Specifically, non-recurring events for the year 2020 included:
■ 39 million euros in adjustments to revenues, of which 38 million in discounts as a result of TIM S.p.A. customer
support measures in relation to the COVID-19 pandemic;
■ 64 million euros in expenses related to agreements and the development of non-recurring projects, as well
as costs for purchases relating to supplies that became necessary for the management of the health
emergency;
■ 74 million
euros
in Employee benefits
expenses primarily associated with
corporate
reorganization/restructuring processes and other costs;
■ 148 million euros mainly in relation to provisions and expenses connected with the management of credits
deriving from the worsening of the macroeconomic context following the COVID-19 emergency, costs for
regulatory sanctions, as well as expenses related to agreements and the development of non-recurring
projects.
In the year 2019, the TIM Group reported net non-recurring operating charges totaling 89 million euros,
representing the balance of:
■ non-recurring operating charges for 795 million euros primarily regarding charges associated with corporate
restructuring processes (282 million euros), provisions for regulatory disputes and potential related liabilities
and liabilities with customers and/or suppliers (459 million euros);
■ non-recurring operating income amounting to 706 million euros, including 685 million euros recognized as
tax receivables by the Brazilian Business Unit, as a result of the favorable outcome of tax disputes relating
to the inclusion of the ICMS indirect tax in the basis for calculating the PIS/COFINS contribution and 21 million
euros recognized by the Domestic Business Unit as a receivable for reimbursement of the fine regarding
Antitrust proceedings I761.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
20
Main changes in the scope of consolidation of the TIM Group
The main changes to the scope of consolidation in 2020 were as follows:
■
Infrastrutture Wireless Italiane S.p.A. Infrastrutture Wireless Italiane S.p.A. (INWIT) (Domestic Business Unit):
the merger by incorporation of Vodafone Towers S.r.l. in INWIT S.p.A. was completed on March 31, 2020. The
transaction, which enabled the creation of Italy's leading tower operator, diluted the TIM Group's stake in
the capital of INWIT from 60% to 37.5%; therefore, as of March 31, 2020, INWIT S.p.A. is accounted for using
the equity method. INWIT S.p.A. was presented as "Asset held for sale" from the Consolidated Financial
Statements as at December 31, 2019 and until the completion of the aforementioned merger; therefore, TIM
Group consolidated economic data and cash flows for FY 2020 include data of INWIT S.p.A. for the first
quarter of 2020, net of amortization and depreciation for the period, as required by IFRS 5. In addition,
attention is drawn to the following events: in 2020, additional INWIT stock packets were transferred,
corresponding to 7.3% of INWIT share capital (for further details, please refer to the Note: “Equity
investments” in the TIM Group Consolidated Financial Statements for the year ended December 31, 2020.)
Consequently, at December 31, 2020, TIM Group’s investment held in INWIT was 30.2%;
■ Noovle S.r.l. (Domestic Business Unit): on May 21, 2020, TIM S.p.A. finalized the acquisition of 100% of the
quotas in Noovle S.r.l., an Italian ICT consulting and system integration company, specialized in supplying
cloud solutions and projects and one of Google Cloud's leading partners on the Italian market. With effect
from this date, Noovle S.r.l. and its subsidiaries have been consolidated line-by-line;
■ Daphne 3 S.p.A. (Domestic Business Unit): company established on July 24, 2020; the corporate purpose is
the acquisition, holding, management and disposal of equity investments in INWIT - Infrastrutture Wireless
Italiane S.p.A.
■ TIM My Broker S.r.l. (Domestic Business Unit): company established on August 4, 2020; the corporate purpose
is primarily insurance intermediation, within the meaning of article 106 of Italian Legislative Decree no. 209
of September 7, 2005, as amended.
■ Noovle S.p.A. (Domestic Business Unit): company established on October 9, 2020; the corporate purpose is
primarily the planning, design, implementation, commissioning and management of Data Center
infrastructure implementation and colocation services;
■ FiberCop S.p.A. (Domestic Business Unit): company incorporated on November 2, 2020; the corporate purpose
is the design, building, purchase, management, maintenance and sale of infrastructures, networks, cabled
access services easement to end customer facilities offered to telecommunications industry operators
across Italy;
■ Fiberco Soluções de Infraestrutura Ltda (Brazil Business Unit): telecommunications services company
established on December 21, 2020.
The following should also be noted:
■ TIM Participações S.A. (Brazil Business Unit): merger by incorporation into TIM S.A. became effective as of
September 2020;
■ TN Fiber S.r.l. (Domestic Business Unit): Merged with TIM S.p.A. on September 30, 2020 with retroactive
accounting and tax effects backdated to January 1, 2020.
■ TIM Vision S.r.l. (Domestic Business Unit): Merged with TIM S.p.A. on October 1, 2020, with retroactive
accounting and tax effects backdated to January 1, 2020.
■ H.R. Services S.r.l. (Domestic Business Unit): Merged with TIM S.p.A. on December 31, 2020 with retroactive
accounting and tax effects backdated to January 1, 2020.
■ TIMFin S.p.A.: on November 3, 2020, the Bank of Italy authorized TIMFin, a joint venture between TIM and
Santander Consumer Bank to carry out the business of granting loans to the public pursuant to articles 106
et seq. of the CLB (registration in the Register of Financial intermediaries is subject to the fulfillment of certain
operational requirements). The company - 49% owned by TIM and 51% by Santander - will offer financing
services to TIM customers.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
21
The main changes in the scope of consolidation in the year 2019, were as follows:
■ Persidera S.p.A. (Domestic Business Unit): Sold, after the demerger into two distinct entities, on December 2,
2019.
Also:
■
Infrastrutture Wireless Italiane S.p.A. (INWIT) (Domestic Business Unit): at December 31, 2019, holding
completion of the merger by incorporation of Vodafone Towers S.r.l. into INWIT highly probable within the
2020 financial year, with resulting reduction of the TIM Group’s equity investment in INWIT from 60% to
37.5%, the company was stated as “Asset held for sale”. Accordingly, the financial assets and liabilities have
been reclassified in the “Discontinued operations/Non-current assets held for sale” and “Liabilities directly
associated with Discontinued operations/Non-current assets held for sale” items of the Consolidated
Statements of Financial Position at December 31, 2019. Consolidated income data and cash flows for the
2019 included INWIT S.p.A. figures for the full period.
■ Noverca S.r.l. (Domestic Business Unit): Merged with TIM S.p.A. on November 1, 2019 with retroactive
accounting and tax effects backdated to January 1, 2019.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
22
Consolidated operating performance
Revenues
Total TIM Group revenues for the year 2020 amounted to 15,805 million euros, down -12.1% compared to the
year 2019 (17,974 million euros); organic change in total revenues was -6.4%.
The breakdown of total revenues for the year 2020 by operating segment in comparison with 2019 is as follows:
(million euros)
2020
2019
Changes
% weight
% weight
absolute
%
Domestic
Brazil
Other Operations
Adjustments and eliminations
Consolidated Total
12,905
2,933
—
(33)
15,805
81.7
18.6
—
(0.3)
100.0
14,078
3,937
—
(41)
17,974
78.3
21.9
—
(0.2)
100.0
(1,173)
(1,004)
—
8
(2,169)
(8.3)
(25.5)
(12.1)
organic %
excluding non-
recurring
(7.7)
(0.6)
(6.4)
The organic change in the Group’s consolidated revenues for the year 2020 is calculated by excluding the
negative effect of exchange rate cha1 of -990 million euros, the changes in the scope of consolidation2 for -64
million euros as well as non-recurring items. The adjustments of non-recurring revenues recorded in 2020 (-39
million euros) are connected to the commercial initiatives of TIM S.p.A. to support customers to deal with the
COVID-19 emergency, while 2019 was affected by non-recurring charges of 15 million euros relating to
adjustments to revenues from previous years.
The company Noovle S.r.l. and its subsidiaries are consolidated on a line-by-line basis since the date on which
control was acquired by the TIM Group (May 21, 2020). If the acquisition of Noovle S.r.l had been completed on
January 1, 2020, the TIM Group would have posted higher revenues for approximately 14 million euros with
insignificant effects on the profit (loss) for the year.
Total revenues for the fourth quarter of 2020 amounted to 4,148 million euros, with an organic change compared
to the fourth quarter 2019 of -90 million euros (-2.1%).
EBITDA
TIM Group EBITDA for the year 2020 came to 6,739 million euros (8,151 million euros in the year 2019, -17.3%; -
5.9% in organic terms).
The breakdown of EBITDA and the EBITDA margin broken down by operating segment for 2020 compared with
2019, are as follows:
(million euros)
2020
2019
Changes
% weight
% weight absolute
%
Domestic
% of Revenues
Brazil
% of Revenues
Other Operations
Adjustments and eliminations
Consolidated Total
5,339
41.4
1,407
48.0
(9)
2
6,739
79.2
20.9
(0.1)
100.0
5,708
40.5
2,451
62.3
(9)
1
8,151
70.0
30.1
(0.1)
100.0
(369)
(1,044)
—
1
(1,412)
organic %
excluding
non-recurring
(7.9)
(0.1) pp
3.1
1.7 pp
(6.5)
0.9 pp
(42.6)
(14.3) pp
(17.3)
(5.9)
1The average exchange rates used for the translation into euro (expressed in terms of units of local currency per 1 euro) were 5.88806 in 2020 and
4.41422 in 2019 for the Brazilian real. For the US dollar, the average exchange rates used were 1.14179 in 2020 and 1.11954 in 2019. The effect of the
change in exchange rates is calculated by applying the foreign currency translation rates used for the current period to the period under comparison.
2 For comparison purposes, the changes in the scope of consolidation also include the effects, effective March 31, 2019, of the new Master Service
Agreement signed by TIM S.p.A. with INWIT S.p.A. during the first quarter of 2020.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
23
Organic EBITDA - net of the non-recurring items amounted to 7,063 million euros; the EBITDA margin was
44.6% (7,505 million euros in 2019, with an EBITDA margin of 44.3%).
EBITDA for 2020 reflected a total negative impact of 324 million euros referring to net non-recurring expenses,
of which 108 related to the COVID-19 emergency in Italy.
For further details, in addition to that reported in the “Non-recurring events” chapter of this report on operations,
see the Note "Non-recurring events and transactions" in the Consolidated Financial Statements as at December
31, 2020 of the TIM Group.
Organic EBITDA, net of the non-recurring component, is calculated as follows:
(million euros)
2020
2019
Changes
EBITDA
Foreign currency financial statements translation effect
Changes in the scope of consolidation
Non-recurring expenses (income)
Effect of the conversion of foreign currency non-recurring
Charges/(Income)
ORGANIC EBITDA, excluding Non-recurring items
% of Revenues
6,739
324
7,063
44.6
absolute
(1,412)
614
254
258
(156)
(442)
8,151
(614)
(254)
66
156
7,505
44.3
%
(17.3)
(5.9)
0.3 pp
The EBITDA of the fourth quarter of 2020 totaled 1,621 million euros (1,652 million euros in the fourth quarter of
2019).
Organic EBITDA net of the non-recurring component in the fourth quarter of 2020 totaled 1,764 million euros
(1,790 million euros in the fourth quarter of 2019).
EBITDA was particularly impacted by the change in the line items analyzed below:
■ Acquisition of goods and services (6,173 million euros; 6,463 million euros in 2019):
(million euros)
Acquisition of goods
Revenues due to other TLC operators and costs for
telecommunications network access services
Commercial and advertising costs
Professional and consulting services
Power, maintenance and outsourced services
Lease and rental costs
Other
Total acquisition of goods and services
% of Revenues
2020
1,203
1,314
1,192
216
1,060
436
752
6,173
39.1
2019
Changes
1,396
1,324
1,351
220
1,119
428
625
6,463
36.0
(193)
(10)
(159)
(4)
(59)
8
127
(290)
3.1 pp
The decrease is mainly attributable to the Brazil Business Unit for 380 million euros (of which approximately 363
million euros due to the impact of exchange rate dynamics).
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
24
■ Employee benefits expenses (2,639 million euros; 3,077 million euros in 2019):
(million euros)
Employee benefits expenses - Italy
Ordinary employee expenses and costs
Restructuring and other expenses
Employee benefits expenses – Outside Italy
Ordinary employee expenses and costs
Restructuring and other expenses
Total employee benefits expenses
% of Revenues
2020
2,377
2,303
74
262
262
—
2,639
16.7
2019
2,730
2,463
267
347
332
15
3,077
17.1
Changes
(353)
(160)
(193)
(85)
(70)
(15)
(438)
(0.4) pp
The net decrease of 438 million euros was mainly driven by:
•
•
a decrease of 160 million euros of ordinary Employee benefits expenses in the Italian component,
essentially due to the benefits deriving from a reduction in the average salaried workforce amounting to
a total of -2,490 average employees;
a decrease of 193 million euros of “restructuring and other expenses” in the Italian component. In 2020,
charges were set aside amounting to 74 million euros mainly related to the effective exits of the Parent
Company in the year 2020 (also through the application of art. 4 of Italian Law no. 92 of June 28, 2012,
as defined in the Trade Union Agreement of February 26, 2019 and the Trade Union Agreement signed
June 4, 2020) and to the provision made for exits based on the application of art. 4 of Italian Law no. 92
of June 28, 2012 following the agreements signed with trade unions on April 22, 2020 by Olivetti and
Telecom Italia Trust Technologies, and on April 17, 2020 by Telecontact. In 2019, provisions were recorded
for expenses totaling 267 million euros following the updated provisions related to the application of art.
4 of Italian Law no. 92 of June 28, 2012, for both the Parent Company and the other subsidiary companies.
•
for 85 million euros, the decrease in the foreign component mainly related to the impact of the exchange
rate change and lower non-recurring charges of the Brazil Business Unit.
■ Other operating income (211 million euros; 933 million euros in 2019):
(million euros)
Late payment fees charged for telephone services
Recovery of employee benefits expenses, purchases and services
rendered
Capital and operating grants
Damages, penalties and recoveries connected with litigation
Estimate revisions and other adjustments
Brazil Business Unit's income tax
Other income
Total
2020
46
14
34
24
59
—
34
211
2019
59
50
33
20
36
685
50
933
Changes
(13)
(36)
1
4
23
(685)
(16)
(722)
The decrease is mainly attributable to the Brazil Business Unit; in fact, other operating income in the year 2019
benefited from 685 million euros from the Brazil Business Unit (classified as non-recurring), connected with the
recognition of tax credits consequent to the favorable result of the tax disputes connected to the inclusion of the
ICMS indirect tax in the basis of calculation of the taxes on PIS and COFINS revenues.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
25
■ Other operating expenses (961 million euros; 1,625 million euros in 2019):
(million euros)
Write-downs and expenses in connection with credit
management
Provision charges
TLC operating fees and charges
Indirect duties and taxes
Penalties, settlement compensation and administrative fines
Subscription dues and fees, donations, scholarships and
traineeships
Sundry expenses
Total
2020
423
43
199
96
120
12
68
961
2019
Changes
577
497
268
124
58
12
89
1,625
(154)
(454)
(69)
(28)
62
—
(21)
(664)
The decrease is mainly attributable to the Domestic Business Unit (-460 million euros) and to the Brazil Business
Unit (-205 million euros, of which approximately -130 million euros linked to exchange rate dynamics).
Other operating expenses for the year 2020 include a non-recurring item of 148 million euros, mainly referring to
provisions and expenses connected with credit management in connection with the COVID-19 emergency (46
million euros), charges for regulatory sanctions and expenses related to agreements and the development of
non-recurring projects. In particular, in relation to credit management, it is noted that the macroeconomic
scenario with a sharp reduction in GDP caused by the pandemic worsened the Expected Credit Loss of some of
the customers. Consequently, the provision for bad debt was adjusted according to the expected loss differential.
With reference to the impairment and expenses connected with credit management, we note that the reduction
is the consequence of a program to optimize processes aimed at increasing the efficiency of credit management,
all round, intervening on the whole process involving the customer. More specifically, reference is made to the
acceptance, management and collection of debt through to the assessment model of the new commercial
offers.
The non-recurring component of 2019, amounting to 459 million euros, mainly referred to regulatory disputes
and related liabilities and to liabilities with customers and/or suppliers.
Depreciation and amortization
Amounts to 4,616 million euros (4,927 million euros in 2019) and breaks down as follows:
(million euros)
Amortization of intangible assets with a finite useful life
Depreciation of tangible assets
Amortization of right-of-use assets
Total
2020
1,627
2,301
688
4,616
2019
1,675
2,469
783
4,927
Changes
(48)
(168)
(95)
(311)
Net impairment losses on non-current assets
In 2020, the item shows losses of 8 million euros (zero in 2019), mainly following the provisions made by the
Parent Company TIM S.p.A for inventory differences for plant warehouse materials held at external company
sites.
In preparing the Annual Report for 2020, the TIM Group carried out an impairment test on goodwill. The results
of that testing, carried out in accordance with the specific procedure adopted by the Group, confirmed the
amounts of Goodwill allocated to the Group’s individual Cash Generating Units.
Further details are provided in the Note “Goodwill” to the Consolidated Financial Statements at December 31,
2020 of the TIM Group.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
26
EBIT
TIM Group EBIT for FY 2020 came to 2,104 million euros (3,175 million euros in FY 2019).
Organic EBIT, net of the non-recurring component, amounted to 2,428 million euros (2,913 million euros in
2019), with an EBIT margin of 15.3% (17.2% in 2019).
Organic EBIT, net of the non-recurring component, is calculated as follows:
(million euros)
EBIT
Foreign currency financial statements translation effect
Changes in the scope of consolidation
Non-recurring expenses (income)
Effect of the conversion of foreign currency non-recurring
Charges/(Income)
ORGANIC EBIT, excluding Non-recurring items
2020
2019
Changes
2,104
324
2,428
absolute
(1,071)
324
178
240
(156)
(485)
3,175
(324)
(178)
84
156
2,913
%
(33.7)
(16.6)
The EBIT of the fourth quarter of 2020 totaled 477 million euros (463 million euros in the fourth quarter of 2019).
Organic EBIT net of the non-recurring component in the fourth quarter of 2020 totaled 620 million euros (712
million euros in the fourth quarter of 2019).
Exchange rate fluctuations mainly related to the Brazil Business Unit.
Other income (expenses) from investments
Other income (expenses) from investments amounted to 454 million euros and refer to:
■ 441 million euros of net capital gain recognized following the dilution of the TIM Group investment in INWIT
S.p.A. capital from 60% to 37.5%, following the merger of INWIT with Vodafone Towers;
■ 11 million euros of capital gains deriving from the sale, during the year, of shares for a total of 7.3% of the
share capital of INWIT, through an accelerated book-building procedure reserved to institutional investors
and sales to an SPV managed and assisted by Canson Capital Partners (Guernsey) Limited;
■ 2 million euros relating to income distributed by the Northgate CommsTech Innovations Partners L.P. fund.
Balance of finance income/(expenses)
Financial income (expenses), net was negative and amounted to 1,179 million euros (negative 1,436 million euros
in the year 2019): the improvement was mainly driven by lower finance expenses, connected to the reduction in
the Group’s average debt exposure and a drop in interest rates, as well as the positive effects of the change of
some non-monetary items, of a currency and accounting nature, relating to the measurement of derivative
instruments at fair value.
Income tax expense
Lower tax income of 5,955 million euros were recorded in 2020 (taxes of 513 million euros in the year 2019).
Tax proceeds mainly relate to the recording of deferred tax assets as a consequence of the tax recognition of
higher amounts booked in accordance with Decree Law 104/2020, Art. 110, paragraph 8 and 8 bis (5,877 million
euros) for more details see the note on “Income tax (current and deferred)” of the TIM Group Consolidated
financial statements as at December 31, 2020. The item also benefited from the positive tax effect due to the
lower taxes paid in previous years and generated following the ruling signed on August 3, 2020 with the Italian
Revenues Agency for application of the “patent box” facilitation in income tax and IRAP (regional production tax)
tax returns for TIM S.p.A. for the years 2015 - 2019 (299 million euros).
In 2019, “income tax expenses” included, amongst others, 233 million euros of tax expense related to the
recognition of deferred taxation relating to non-recurring operating income of the Brazil Business Unit.
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
27
Profit/(Loss) for the year
This item breaks down as follows:
(million euros)
Profit (loss) for the year
Attributable to:
Owners of the Parent:
Profit (loss) from continuing operations
Profit (loss) from Discontinued operations/Non-current assets held
for sale
Profit (loss) for the year attributable to Owners of the Parent
Non-controlling interest:
Profit (loss) from continuing operations
Profit (loss) from Discontinued operations/Non-current assets held
for sale
Profit (loss) for the year attributable to Non-controlling interest
2020
7,352
7,224
—
7,224
128
—
128
2019
1,242
900
16
916
326
—
326
Net profits for 2020 attributable to the Owners of the Parent totaled 7,224 million euros (916 million euros in
2019).
Report on Operations of the
TIM Group
Key Operating and Financial Data – TIM Group
28
2020
Business Unit
Key operating and financial data
Domestic
REVENUES
EBITDA MARGIN
12,905
Millions
of Euros
43.7%
organic
excluding
non recurrent
EBITDA
EBITDA ADJUSTED AFTER LEASE
5,339
Millions
of Euros
5,135
Millions
of Euros
Fixed
TIM RETAIL
PHISICAL ACCESSES
TIM WHOLESALE
PHISICAL ACCESSES
BROADBAND ACCESSES
TIM RETAIL
end of period
8,767
thousands
Mobile
end of period
7,974
thousands
LINES
end of period
30,170
thousands
end of period
7,635
thousands
AVERAGE
MONTHLY REVENUES
Reported ARPU
8.0
Euros
Brazil
REVENUES
EBITDA
EBITDA MARGIN
2,933
Millions
of Euros
1,407
Millions
of Euros
48.1%
organic
excluding
non recurrent
EBITDA ADJUSTED AFTER LEASE
LINES
1,121
Millions
of Euros
51,433
end of period
thousands
FINANCIAL AND OPERATING HIGHLIGHTS OF
THE BUSINESS UNITS OF THE TIM GROUP
Domestic
(million euros)
Revenues
EBITDA
% of Revenues
EBIT
% of Revenues
Headcount at year end (number) (°)
2020
2019
Changes
(a-b)
(a)
(b)
absolute
12,905
5,339
41.4
1,635
12.7
42,925
14,078
5,708
40.5
1,887
13.4
45,496
(1,173)
(369)
(252)
(2,571)
%
% organic
excluding
non-recurring
(8.3)
(6.5)
0.9 pp
(13.4)
(0.7) pp
(5.7)
(7.7)
(7.9)
(0.1) pp
(19.2)
(2.1) pp
(°) Includes agency contract workers: 9 units at December 31, 2020 (5 units at December 31, 2019)
(million euros)
Revenues
EBITDA
% of Revenues
EBIT
% of Revenues
Fixed
Q4
2020
(a)
3,433
1,258
36.6
323
9.4
Total TIM Retail accesses (thousands)
of which NGN (1)
Total TIM Wholesale accesses (thousands)
of which NGN
Active Broadband accesses of TIM Retail (thousands)
Consumer ARPU (€/month) (2)
Broadband ARPU (€/month) (3)
Q4
2019
(b)
3,555
1,154
32.5
193
5.4
12.31.2020
8,767
4,407
7,974
4,220
7,635
33.0
25.4
Changes
(a-b)
absolute
%
(122)
104
130
(3.4)
9.0
4.1 pp
67.4
4,0pp
organic %
excluding
non-recurring
(3.0)
(2.5)
0.3pp
(9.8)
(1.0) pp
12.31.2019
9,166
3,670
8,051
3,309
7,592
34.9
27.7
12.31.2018
10,197
3,214
8,063
2,262
7,483
34.0
26.3
(1) UltraBroadband access in FTTx and FWA mode, also including “data only” lines; continuing with the methodology adopted in 2019, the “data
only” lines were also included in the total retail access for 2018.
(2) Revenues from organic Consumer retail services in proportion to the average Consumer accesses.
(3) Revenues from organic broadband services in proportion to the average active TIM retail broadband accesses.
Mobile
Lines at year-end (thousands)
of which Human
Churn rate (%) (4)
Broadband users (thousands) (5)
Retail ARPU (€/month) (6)
Human ARPU (€/month) (7)
12.31.2020
30,170
19,795
18.6
12,818
8.0
12.1
12.31.2019
30,895
21,003
20.4
12,823
8.7
12.6
12.31.2018
31,818
22,448
26.3
13,015
9.8
13.4
(4) Percentage of total lines that ceased in the period compared to the average number of total lines.
(5) Mobile lines using data services
(6) Revenues from organic retail services (visitors and MVNO not included) in proportion to the average total lines.
(7) Revenues from organic retail services (visitors and MVNO not included) in proportion to the average human lines.
Report on Operations of the
TIM Group
Financial and Operating Highlights of the Business Units of the TIM Group
Domestic Business Unit
30
Revenues
The revenues of the Domestic Business Unit amounted to 12,905 million euros, down by 1,173 million euros
compared to 2019 (-8.3%), having suffered from the challenging competition and, particularly as regards the
Mobile market, the restrictions related to the COVID-19 emergency. Organic revenues, net of the non-recurring
component, amounted to 12,944 million euros (-1,081 million euros compared to 2019, -7.7%); in particular,
revenues for 2020 were affected by an overall impact of -39 million euros mainly referring to adjustments of
revenues connected to TIM S.p.A.’s commercial initiatives to support customers in facing the COVID-19
emergency. In 2019, non-recurring charges for 15 million euros were recorded, attributable to revenue
adjustments of previous years.
Domestic Business Unit revenues in the fourth quarter of 2020 amounted to 3,433 million euros, down by 122
million euros compared to the same period of 2019 (-3.4%, -3.0% in organic terms).
Revenues from stand-alone services amounted to 11,605 million euros (-980 million euros compared to 2019, -
7.8%) and reflect the impacts of the regulatory and competitive context on the customer base and ARPU levels.
Revenues from organic stand-alone services, net of the aforesaid non-recurring components, amounted to
11,643 million euros (-883 million euros compared to 2019, -7.0%).
In detail:
■
■
revenues from stand-alone Fixed market services amounted to 8,785 million euros in organic terms, with
a change with respect to 2019 (-6.1%) mainly due to the decrease in accesses and ARPU levels, which is
also reflected in the trend of revenues from broadband services (-170 million euros compared to 2019, -
6.9%), partly offset by the growth in revenues from ICT solutions (+134 million euros compared to 2019,
amounting to +15.6%);
revenues from mobile market stand-alone services amounted to 3,378 million euros (-397 million euros
compared to 2019, -10.5%) and were affected by the negative impact, on the customer base, of the changed
competitive dynamics as well as the effects related to the regulatory environment and those resulting from
the limitations imposed on health emergencies. In organic terms, net of the aforesaid non-recurring
component, revenues from Mobile stand-alone services amounted to 3,411 million euros (-330 million euros
compared to 2019, equal to -8.8%).
Handset and Bundle & Handset revenues, including the changes to work in progress, amounted to 1,301 million
euros in 2020, -198 million euros in organic terms compared to 2019, also due to reduced footfall in sales outlets
following the restrictive measures related to the COVID-19 emergency.
Key results for 2020 for the Domestic Business Unit are presented in the following table, broken down by
market/business segment and compared to 2019.
(million euros)
Revenues
Consumer
Business
National Wholesale Market
International Wholesale Market
Other
Q4
2020
(a)
3,433
1,525
1,104
513
262
29
Q4
2019
2020
2019
% Change
(b)
(c)
(d)
(a/b)
(c/d)
3,555
1,625
1,195
456
250
29
12,905 14,078 (3.4) (8.3)
6,594 (6.2) (10.5)
5,899
(7.6) (11.7)
4,624
4,084
4.0
1,843 12.5
1,917
947
966
2.0
4.8
70 — (44.3)
39
organic
excluding
non-
recurring
(a/b)
(3.0)
(6.2)
(7.6)
12.5
6.5
50.0
organic
excluding
non-
recurring
(c/d)
(7.7)
(10.4)
(11.1)
4.0
2.4
90.5
The performance of the individual market segments of the Domestic Business Unit compared to 2019 was as
follows:
■ Consumer: the segment consists of all Fixed and Mobile voice and Internet services and products managed
and developed for individuals and families and of public telephony; customer care, operating credit support,
loyalty and retention activities, sales within its remit, and administrative management of customers;
includes the company TIM Retail, which coordinates the activities of flagship stores. In organic terms, net of
the aforesaid non-recurring component, the revenues of the Consumer segment totaled 5,908 million euros
Report on Operations of the
TIM Group
Financial and Operating Highlights of the Business Units of the TIM Group
Domestic Business Unit
31
and show a trend (-686 million euros, -10.4%), compared to 2019, affected by the challenging competition
and greater discipline in commercial processes. The trend seen in total revenues also applied to revenues
from stand-alone services, which amounted to 5,181 million euros, down by 619 million euros compared to
2019 (-10.7%). In particular:
•
revenues from Mobile stand-alone services totaled, in organic terms, 2,343 million euros (-226 million
euros, -8.8%) compared to 2019; against the backdrop of an unprecedented competitive dynamic at the
lower end of the market, there was a more contained reduction in the calling customer base in the fourth
quarter. These results also take into account the effects of the COVID-19 emergency on roaming
revenues and the gradual reduction of regulated interconnection tariffs on incoming traffic;
•
revenues from Fixed stand-alone services totaled, in organic terms, 2,871 million euros (-382 million
euros, -11.7% compared to 2019), primarily due to lower ARPU levels and the smaller Customer Base,
which declined gradually over the course of 2020. The number of broadband customers, particularly
UltraBroadBand, grew, and an improvement was achieved in the 2020 performance compared to 2019
of broadband ARPU starting from the third quarter.
Revenues for Handsets and Bundles & Handsets in the Consumer segment amounted to 727 million euros, -67
million euros compared to 2019 (-8.4%), concentrated on the mobile sector following the change in the product
sales strategy, focused on protecting margins. The restrictions on circulation due to the COVID-19 health
emergency also had an impact on performance: during the lockdown, the volume of smartphones sold fell
compared to 2019 and only recovered to normal levels in July.
■ Business: the segment consists of voice, data, and Internet services and products, and ICT solutions
managed and developed for small and medium-size enterprises (SMEs), Small Offices/Home Offices
(SOHOs), Top customers, the Public Sector, Large Accounts, and Enterprises in the Fixed and Mobile
telecommunications markets. The following companies are included: Olivetti, TI Trust Technologies and Telsy
and, starting June 2020, the Noovle Group. In organic terms, net of the aforesaid non-recurring component,
revenues for the Business segment amounted to 4,113 million euros (-512 million euros compared to 2019, -
11.1%, of which -8.1% for revenues from the stand-alone services component). In particular:
•
•
total Mobile market revenues showed an organic performance compared to 2019 (-11.8%), linked to the
revenues from stand-alone services component (-11.8%) and the ARPU trend;
total Fixed market revenues in organic terms changed by -386 million euros compared to 2019 (-10.7%),
with the revenues from services component (-6.8%) influenced by a price trend partly offset by higher
revenues from ICT services.
■ National Wholesale Market: the segment consists of the management and development of the portfolio of
regulated and unregulated wholesale services for Fixed-line and Mobile telecommunications operators in
the domestic market. The following companies are included: TI San Marino and Telefonia Mobile
Sammarinese. The National Wholesale Market segment revenues in 2020 came to 1,917 million euros, up by
74 million euros (+4.0%) compared to 2019, with a positive performance mainly driven by the growth in
accesses in the Ultra Broadband segment.
■
International Wholesale Market: includes the activities of the Telecom Italia Sparkle group, which operates
in the market for international voice, data and Internet services for fixed and mobile telecommunications
operators, ISPs/ASPs (Wholesale market) and multinational companies through its own networks in the
European, Mediterranean and South American markets. Revenues for the International Wholesale Market
segment for 2020 totaled 966 million euros, showing growth of 19 million euros (+2.0%) on the 2019 figure,
with negligible effects on EBITDA. This performance is mainly related to the data business capacity offer.
■ Other: includes:
•
INWIT S.p.A.: operates in the electronic communications infrastructure sector, specifically relating to
infrastructure for housing radio transmission equipment for mobile telephone networks, both for TIM and
other operators. In 2020, the TIM Group's equity investment in INWIT recorded various changes due to
the multiple transactions involving the corporate structure, starting with the merger by incorporation of
Vodafone Towers S.r.l. into INWIT S.p.A. Further details are provided in the Note on “Equity investments”
in the Consolidated Financial Statements of the TIM Group at December 31, 2020. INWIT S.p.A. was
presented as "Asset held for sale" from the Consolidated Financial Statements as at December 31, 2019
and until the completion of the aforementioned merger.
• Other Operations units: covering technological innovation and development, engineering, construction
and operating processes for network infrastructures, IT, real estate properties and plant engineering; the
Flash Fiber company and Open Access operations connected with delivery and assurance of customer
services are also included, until September 2019 included in the Wholesale segment and then
reclassified following the change in organizational structure;
Report on Operations of the
TIM Group
Financial and Operating Highlights of the Business Units of the TIM Group
Domestic Business Unit
32
• Staff & Other: services performed by the Staff departments and other support activities carried out by
minor companies, including the company Persidera, sold on December 2, 2019 and included in the
financial data and cash flows for the first months of 2019.
EBITDA
Domestic Business Unit EBITDA for 2020 totaled 5,339 million euros (-369 million euros compared to 2019, -
6.5%), with a margin of 41.4% (+0.9 percentage points compared to the previous year).
Organic EBITDA, net of the non-recurring component, amounted to 5,658 million euros (-486 million euros
compared to 2019, -7.9%). In particular, the EBITDA in 2020 fell by -319 million euros, including -108 million euros
attributable to the COVID-19 emergency in Italy and mainly relating to the impacts of TIM S.p.A.'s commercial
initiatives to support customers, as well as the effects of macroeconomic difficulties on provisions and charges
related to credit management. Moreover, non-recurring expenses include charges connected with corporate
reorganization/restructuring processes, provisions for disputes, regulatory sanctions and potential liabilities and
expenses connected with agreements and the development of non-recurring projects.
Organic EBITDA, net of the non-recurring component, is calculated as follows:
(million euros)
EBITDA
Foreign currency financial statements translation effect
Changes in the scope of consolidation
Non-recurring expenses (Income)
ORGANIC EBITDA, excluding Non-recurring items
2020
5,339
—
—
319
5,658
2019
5,708
(1)
(254)
691
6,144
Changes
absolute
(369)
1
254
(372)
(486)
%
(6.5)
(7.9)
EBITDA in Q4 2020 was 1,258 million euros, (+104 million euros compared with 2019, 9.0%).
Regarding the dynamics for the main items, the following are worthy of note:
(million euros)
Acquisition of goods and services
Employee benefits expenses
Other operating expenses
In particular:
2020
5,129
2,401
639
2019
Changes
5,042
2,753
1,099
87
(352)
(460)
■ Other operating income amounted to 200 million euros with a decrease of 25 million euros compared to
2019:
(million euros)
Late payment fees charged for telephone services
Recovery of employee benefits expenses, purchases and services
rendered
Capital and operating grants
Damages, penalties and recoveries connected with litigation
Estimate revisions and other adjustments
Other proceeds
Total
2020
40
14
32
24
59
31
200
2019
48
50
29
20
36
42
225
Changes
(8)
(36)
3
4
23
(11)
(25)
Report on Operations of the
TIM Group
Financial and Operating Highlights of the Business Units of the TIM Group
Domestic Business Unit
33
■ Acquisition of goods and services amounted to 5,129 million euros with an increase of 87 million euros
compared to 2019:
(million euros)
Acquisition of goods
Revenues due to other TLC operators and interconnection costs
Commercial and advertising costs
Professional and consulting services
Power, maintenance and outsourced services
Costs for leased assets
Other
Total Acquisition of goods and services
% of Revenues
2020
1,063
1,191
868
128
889
301
689
5,129
39.7
2019
1,175
1,193
878
114
884
263
535
5,042
35.8
Changes
(112)
(2)
(10)
14
5
38
154
87
3.9
The increase of 87 million euros reflects the effect of the deconsolidation of the company INWIT as of March 31,
2020 and the consequent start of the new Master Service Agreement (MSA) with that company. Excluding these
impacts, the item Acquisition of goods and services would show a reduction of 126 million euros, above all in
purchases for resale, due to the decrease in volumes sold of mobile terminals, in line with the ongoing
repositioning of commercial strategies. The reduction was also affected by restrictions related to the COVID-19
emergency, especially in the mobile area.
■ Employee benefits expenses amounted to 2,401 million euros with a decrease of 352 million euros
compared to 2019:
■ Other operating expenses amounted to 639 million euros with a decrease of 460 million euros compared to
2019:
(million euros)
Write-downs and expenses in connection with credit
management
Provision charges
TLC operating fees and charges
Indirect duties and taxes
Penalties, settlement compensation and administrative fines
Subscription dues and fees, donations, scholarships and
traineeships
Sundry expenses
Total
2020
329
6
44
79
120
11
50
639
2019
Changes
407
418
49
89
58
11
67
1,099
(78)
(412)
(5)
(10)
62
—
(17)
(460)
Other operating expenses for the year 2020 include a non-recurring item of 148 million euros, mainly referring
to provisions and expenses connected with credit management in connection with the COVID-19 emergency (46
million euros), charges for regulatory sanctions and expenses related to agreements and the development of
non-recurring projects. In particular, in relation to credit management, it is noted that the macroeconomic
scenario with a sharp reduction in GDP caused by the pandemic worsened the Expected Credit Loss of some of
the customers. Consequently, the provision for bad debt was adjusted according to the expected loss differential.
With reference to the impairment and expenses connected with credit management, we note that the reduction
is the consequence of a program to optimize processes aimed at increasing the efficiency of credit management,
all round, intervening on the whole process involving the customer. More specifically, reference is made to the
acceptance, management and collection of debt through to the assessment model of the new commercial
offers.
The non-recurring component of 2019, amounting to 416 million euros, mainly referred to regulatory disputes
and related liabilities and to liabilities with customers and/or suppliers.
EBIT
Domestic Business Unit EBIT for 2020 totaled 1,635 million euros (-252 million euros compared to 2019, -13.4%),
with a margin of 12.7% (-0.7 percentage points compared to the previous year).
Report on Operations of the
TIM Group
Financial and Operating Highlights of the Business Units of the TIM Group
Domestic Business Unit
34
Organic EBIT, net of the non-recurring component, amounted to 1,954 million euros (-464 million euros less
than 2019, -19.2%), with a margin of 15.1% (17.2% in 2019).
Organic EBIT, net of the non-recurring component, is calculated as follows:
(million euros)
EBIT
Changes in the scope of consolidation
Non-recurring expenses (Income)
ORGANIC EBIT, excluding Non-recurring items
2020
1,635
—
319
1,954
2019
1,887
(178)
709
2,418
Changes
absolute
(252)
178
(390)
(464)
%
(13.4)
—
(19.2)
EBIT in Q4 2020 was 323 million euros, (+130 million euros compared with 2019, +67.4%).
Report on Operations of the
TIM Group
Financial and Operating Highlights of the Business Units of the TIM Group
Domestic Business Unit
35
Brazil
(million euros)
2020
2019
(millions of reais)
2020
2019
Revenues
EBITDA
% of Revenues
EBIT
% of Revenues
Headcount at year end (number)
(a)
2,933
1,407
48.0
476
16.2
(b)
3,937
2,451
62.3
1,297
33.0
(c)
17,268
8,282
48.0
2,801
16.2
9,409
(d)
17,377
10,820
62.3
5,726
33.0
9,689
Changes
absolute
%
(c-d)
(109)
(2,538)
(2,925)
(280)
(c-d)/d
(0.6)
(23.5)
(14.3) pp
(51.1)
(16.8) pp
(2.9)
organic %
excluding
non-
recurring
(0.6)
3.1
1.7pp
(4.7)
(0.7) pp
The average exchange rates used for the translation into euro (expressed in terms of units of real per 1 euro) were 5.88806 for 2020 and 4.41422 for
2019
(million euros)
Q4
2020
Q4
2019
(millions of reais)
Q4
2020
Q4
2019
Revenues
EBITDA
% of Revenues
EBIT
% of Revenues
(a)
725
364
49.9
156
20.8
(b)
1,007
499
50.1
272
27.3
(c)
4,678
2,336
49.9
974
20.8
(d)
4,586
2,298
50.1
1,250
27.3
Lines at period end (thousands) (*)
MOU (minutes/month) (**)
ARPU (reais)
(*) Includes corporate lines.
(**) Net of visitors.
organic %
excluding
non-
recurring
2.0
2.8
0.4pp
(19.9)
(5.9) pp
Changes
absolute
%
(c-d)
92
38
(276)
2020
51,433
122.7
24.9
(c-d)/d
2.0
1.7
(0.2) pp
(22.1)
(6.5) pp
2019
54,447
123.6
23.7
The Brazil Business Unit (TIM Brasil group) provides mobile telephony services using UMTS, GSM and LTE
technologies. Moreover, the Tim Brasil Group offers fiber optic data transmission using full IP technology, such as
DWDM and MPLS and residential broadband services.
On December 15, 2020, TIM announced that the offer presented by TIM S.A. (the operating company of the TIM
Brasil Group) together with Telefônica Brasil S.A. (VIVO) and Claro S.A., had been awarded the contract in the
competitive sale process for the purchase of the Oi Group’s mobile business. The completion of the transaction,
expected in 2021, is in any case subject to the fulfilment of the same conditions precedent provided for in the
agreements and the authorizations of the competent Authorities.
The total value of the transaction amounts to 16.5 billion reais (approximately 2.7 billion euros) which is summed
with the consideration offered to the Oi Group, of approximately 819 million reais (about 134 million euros), as
net present value (NPV) for the Take-or-Pay Data Transmission Capacity Contracts. TIM Brasil will participate in
the transaction with an investment of approximately 7.3 billion reais (approximately 1.2 billion euros), to be paid
Report on Operations of the
TIM Group
Financial and Operating Highlights of the Business Units of the TIM Group
Brazil Business Unit
36
at closing, and 476 million reais relating to TIM Brasil’s share of the net present value (NPV) of the contracts.
Given the low debt and the favorable market conditions, TIM S.A. believes it can finance the acquisition through
cash and the local debt market. However, in the event of any changes in market conditions, TIM S.A. will evaluate
all available options.
The purchase plan provides for TIM Brasil, Telefônica Brasil and Claro to divide up Oi’s mobile assets and, in
particular, its customers, radio frequencies and mobile access infrastructure.
In particular, TIM Brasil will be allocated:
■ approximately 14.5 million customers (corresponding to 40% of UPI Ativos Móveis’ total customer base),
according to Anatel’s data of April 2020. The allocation took into consideration criteria that favor competition
among the operators present in the Brazilian market;
■ approximately 49 MHz as a national average weighted by population (54% of UPI Ativos Móveis radio
frequencies). The division of frequencies strictly respects the spectrum limits per group established by Anatel;
■ approximately 7.2 thousand mobile access sites (corresponding to 49% of total UPI Ativos Móveis sites).
The transaction, as of its completion, will add value not only to its Brazilian subsidiary but to the whole TIM Group
and its shareholders as it will accelerate its growth and increase operating efficiency through relevant synergies.
In addition, positive effects are also expected for customers, since improvements in user experience and in the
quality of the services offered are expected from the transaction. Finally, the transaction is expected to benefit
the entire telecommunications sector in South America, which will be strengthened in its investment capacity,
technological innovation, as well as its competitiveness.
In December 2020 the Board of Directors of TIM S.A. approved the formation of a company, in preparation for
future segregation of assets and provision of fiber infrastructure services. This process is one of the intermediate
steps in the transformation of TIM in the provision of broadband services and aims to create an open fiber
infrastructure company attracting a strategic partner that will become a shareholder. The infrastructure
company will operate in the wholesale market and providing fiber connectivity services for last-mile and
transport network, for all market operators, with TIM S.A. as an anchor customer. This transaction aims to
accelerate the growth of the residential broadband business and unlock the value of TIM's infrastructure.
Revenues
Revenues for the year 2020 of the Brazil Business Unit (TIM Brasil Group) totaled 17,268 million reais (17,377 million
reais in 2019, -0.6%).
Revenues from services totaled 16,665 million reais (+68 million reais compared to the 16,597 million reais in
2019, +0.4%).
Revenues from product sales totaled 603 million reais (780 million reais in 2019). The trend reflects the impact
of closure for two to three months in most of Brazil due to the COVID-19 emergency. The sales policy is still
focused more on value than on increasing sales volumes. In particular, the main goals of the new strategy are to
increase purchases of new connected devices giving TIM customers access to broadband services on 3G/4G
networks and to support new retention offerings for higher-value postpaid customers.
Revenues in Q4 2020 totaled 4,678 million reais, increased by 2.0% on the fourth quarter of 2019 (4,586 million
reais).
The mobile ARPU for 2020 was 24.9 reais, up from the figure recorded in 2019 (23.7 reais) thanks to general
repositioning in the post-paid segment and new commercial initiatives intended to promote the use of data and
average expenditure per customer.
The total number of lines as of December 31, 2020 amounted to 51.4 million, -3.0 million compared to December
31, 2019 (54.4 million). The change is entirely attributable to the prepaid segment (-3.4 million) and partially
offset by growth in the postpaid segment (+0.4 million), in part due to the consolidation underway in the market
for second SIM cards. Post-paid customers represented 42.4% of the customer base as of December 31, 2020,
3.0 percentage points higher than at December 2019 (39.4%).
EBITDA
EBITDA in 2020 was 8,282 million reais (10,820 million reais in 2019) and the margin on revenues was 48.0%
(62.3% in 2019).
The EBITDA in 2019 benefited from non-recurring net income of 2,760 million reais as the balance of 3,024 million
reais of income related to the recognition of tax credits following the favorable outcome of tax disputes relating
to the inclusion of the ICMS indirect tax in the basis for calculating the PIS/COFINS contribution and 264 million
reais of non-recurring charges for provisions mainly for regulatory disputes and related liabilities, as well as for
Report on Operations of the
TIM Group
Financial and Operating Highlights of the Business Units of the TIM Group
Brazil Business Unit
37
liabilities with customers and/or suppliers, in addition to liabilities in respect of customers and/or suppliers and
charges connected with company reorganization/restructuring.
EBITDA in 2020 reflects the non-recurring charges of 27 million reais mainly related to agreements and the
development of non-recurring projects.
Organic EBITDA, net of the non-recurring component, increased by 3.1% and was calculated as follows:
(millions of reais)
EBITDA
Non-recurring expenses (income)
ORGANIC EBITDA - excluding Non-recurring items
2020
8,282
27
8,309
2019
10,820
(2,760)
8,060
Changes
absolute
(2,538)
2,787
249
%
(23.5)
3.1
The growth is attributable to the improvement in the efficiency of the operating expenses structure during the
COVID-19 emergency.
The respective margin on revenues stood at 48.1%, an increase in organic terms of 1.7 percentage points
compared to 2019.
EBITDA in the fourth quarter of 2020 was 2,336 million reais, increased by 38 million euros compared with the
fourth quarter of 2019.
Net of non-recurring income (expenses), the margin on revenues for the fourth quarter of 2020 was 50.5% (50.1%
in the fourth quarter of 2019).
The changes in the main cost items are shown below:
(million euros)
2020
(a)
1,070
236
318
(8)
2019
(b)
1,450
323
523
(5)
Acquisition of goods and services
Employee benefits expenses
Other operating expenses
Change in inventories
EBIT
(millions of reais)
2020
(c)
2019 Changes
(d)
(c-d)
6,298
1,392
1,874
(43)
6,405
1,425
2,301
(20)
(107)
(33)
(427)
(23)
EBIT for 2020 was 2,801 million reais (5,726 million reais in 2019).
In 2019, EBIT also benefited from the non-recurring net income of 2,760 million reais recorded at EBITDA level.
Organic EBIT, net of the non-recurring component, in 2020 amounted to 2,828 million reais (2,966 million reais
in 2019), with a margin on revenues of 16.4% (17.1% in 2019).
Organic EBIT, net of the non-recurring component, is calculated as follows:
(millions of reais)
EBIT
Non-recurring expenses (income)
ORGANIC EBIT - excluding Non-recurring items
2020
2,801
27
2,828
2019
5,726
(2,760)
2,966
Changes
absolute
(2,925)
2,787
(138)
%
(51.1)
(4.7)
The EBIT of the first quarter of 2020 totaled 974 million reais (1,250 million reais in the fourth quarter of 2019).
Net of non-recurring income (expenses), the EBIT margin for the fourth quarter of 2020 was 21.4% (27.3% in the
fourth quarter of 2019).
Report on Operations of the
TIM Group
Financial and Operating Highlights of the Business Units of the TIM Group
Brazil Business Unit
38
MAIN COMMERCIAL DEVELOPMENTS
Domestic
Consumer
TIM is driving the country’s digital revolution, continuing to invest in innovation through the development of fixed
and mobile Ultra Broadband networks, platforms and highly customized quality services to satisfy customer
needs for the home, education, work and leisure. TIM is increasingly committed to spreading a digital culture,
offering innovative, flexible and convergent products that boast not only the best fixed and mobile connectivity
but also a complete range of multimedia content, with films, TV series, sport, music, video games and major
events, delivered through decoders, smart TVs, the Web and mobile apps, as well as smart home solutions and
services.
As part of its convergence development, in February 2020 TIM launched TIM Unica, a new concept that
encompasses fixed, mobile, content and smart home by introducing a series of benefits for the family network.
The cornerstone becomes the home’s Fiber connection and the possibility for the customer to charge all the
family’s SIMs to the fixed line’s bill as a single payment instrument, thus enjoying unlimited GB for all the
smartphones of the components. The domiciliation of the bill, the common means of payment, the clarity and
transparency of the monthly expense for family communications make TIM Unica a priority tool for retention
and churn rate reduction. The advantages for customers joining the TIM Unica world are enriched over time by
combining solutions and benefits that embrace content and the smart home, with dedicated promos and
benefits.
The push towards convergence is further represented by the launch of the new simplified Fiber portfolio with a
Best Technology Available approach, with benefits for customers who choose domiciliation. The back-to-school
plan has been enriched with a fundamental concept, “WiFi Certified by TIM technicians”. In fact, with TIM
SUPER WIFI, TIM has started a new process to enhance one of its key distinctive assets: our On Field Technicians.
Only with TIM can the customer have certified quality WiFi in every corner of the home thanks to the on-site
intervention of our technicians who install the Fiber, configure the home system while also installing any
repeaters, and issue the customer with the certification of WiFi operation and quality in every corner of the
home. The distinctive element in the configuration of the home system is the new TIM Hub+ modem, the first in
Italy with WiFi 6, an integral part of the high-quality performance of TIM Fiber.
As part of the process of deploying fiber in Italy since November 2020, TIM was the first operator to offer its
customers the offer dedicated to the broadband plan by joining phase 1 of the vouchers made available by the
Italian Government for low-income families. The TIM Super Voucher offer used for the initiative has a 500-euro
bonus for connectivity and the purchase of a product, PC or tablet exclusively on the market offered by TIM.
In addition to the deployment of fiber, TIM has also presided over the Ultra BroadBand market as a whole, in
February launching TIM Super FWA, a new FWA offer including voice, which thanks to FWA technology and
dedicated indoor or outdoor modems, makes it possible to browse the Internet with 30 Megabyte download and
3 Megabyte upload performance even in areas without fiber coverage (White Areas). In order to meet customers’
growing browsing demands, in 2020 the offer was enriched with the Unlimited GB Option.
In addition, to support the activation of new FWA customers, the TIM FWA Rechargeable offer was launched in
September 2020, with a structure and selling proposition aimed at meeting the needs of specific market
segments, such as second homes, smart working, distance learning, students and ethnic groups.
Throughout 2020, TIM continued to support the adoption of new fiber technology with offers for ADSL customers
already covered by the FTTCab and FTTH service to upgrade to the new technology without additional costs and
leveraging on new offer content different to that of the market. The Smart Home and Safe Web browsing security
services in the TIM Super portfolio are examples of this, as well as convergence with family SIMs with an ad hoc
mobile profile linked to the Fiber offer or GB benefits linked to fixed-line direct debit payments, and, as of
September, the new TIM Per TE Casa offer, dedicated to the Customer Base.
Close strategic partnerships with major players play a decisive role in supporting the Fixed-line segment, as does
the significant content push and the launch of bundled offers for home use with the use of the TIM box decoder
(the “magic box”) and Fiber quality. TIMVISION is today the leading aggregator of sports and entertainment
content with the most complete and competitive offer on the Italian television market: new original productions,
films, series, sports and animation for the whole family thanks to partnerships with the biggest players in the
sector.
In March 2020, the Mondo Disney+ offer was launched exclusively for all fixed network customers, which offers
all the entertainment of TIMVISION Plus and Disney+ in a single package, with no time constraints.
Since May 2020, TIM and Netflix have strengthened their partnership with the launch of the Mondo Netflix offer,
which brings together the complete Netflix experience, TIMVISION Plus and the TIMVISION Box decoder.
Report on Operations of the
TIM Group
Commercial Developments
39
In June 2020, with the return of the SERIE A TIM championship post lockdown, TIM relaunched its Sport offer,
which, thanks to partnerships with NOW TV and DAZN, includes all sports content from the two partners in a
single offer at an exclusive price for all TIM BB and UBB customers, also including entertainment from TIMVISION
Plus and the TIM Box decoder.
In September 2020, the new Mondo Intrattenimento [Entertainment World] offer was introduced, which
combines all the exclusive content from Disney+, Netflix and TIMVISION Plus, with access from the home TV to
all partner content and the TIMVISION catalog from a single interface, thanks to the TIMVISION Box, included in
the offer.
Mondo Intrattenimento is also included in the TIM SUPER WiFi TV offer, giving TIM customers a complete home
offering with the power of TIM Fiber, certified WiFi and all the entertainment of Disney+, Netflix and TIMVISION
Plus.
In June 2020, an important partnership was signed with Google for the joint development of innovative Smart
Home services and for the marketing of Google Nest products: TIM was the first telco in the world to integrate
its voice and multimedia services into Google products and has accelerated the convergence of core offerings
and innovative solutions. Today, TIM customers can enjoy the TIMMusic service from Nest voice assistants and,
through the new TIM Voce Smart service, make and receive calls to any fixed network number, using home
connectivity and hands free mode.
For Mobile, in 2020 TIM continued to support the development of Ultra Broadband, consolidating 4G/4.5G and
developing 5G.
At national level, 4G technology has now reached more than 7,700 municipalities, covering over 99% of the
population. The company continued the roll-out to Italy’s major cities of 4.5G services (LTE Advanced
technology), which offer data connection speeds of up to 700 Megabits per second.
TIM’s technological leadership was confirmed with the development of 5G, which is fundamental for the
innovation of mobile services that can revolutionize the lives of citizens, consumers and businesses alike, steering
the country towards a dimension in which everything is smarter and more connected: from public safety to
transport, from environmental monitoring to health, tourism and culture, and even applications for media,
education and virtual reality.
TIM 5G is already available with services for citizens and businesses in Italy's main cities with speeds of up to 2
Gigabytes per second: 2020 has seen the steady development of the network with the complete coverage of
cities such as Milan (90%), various tourist locations as well as specific locations such as the world’s first eco-
friendly Green Pea shopping mall in Turin.
Technological leadership means a competitive edge for TIM, which is fundamental for making it mark in a highly
competitive market. By making the most of the distinctive quality of the network, TIM has been able to continue
its “value” strategy and focus on the quality of its offering, maintaining a premium position on the market.
2020 was also a year of great commitment to schools, teachers and students with important initiatives to
support distance learning during the Coronavirus emergency. With this objective, TIM launched the “E-learning
Card” initiative, dedicated to all mobile customers. The initiative is part of the various activities that TIM is
promoting to support schools and is aimed in particular at teachers and students who, in this way, will have the
opportunity to browse without traffic limits on the main distance learning platforms without using up their GB.
Another essential aspect of its business strategy was customer retention, with the focus on reducing churn rates
and stabilizing customer spending. With this in mind, offer portfolios were launched on the market with content
benefits and discounted fees for customers who choose direct debit or credit card debit as their payment
method. Moreover, throughout 2020 TIM continued to invest in developing the value of the customer base with
increasingly personalized upselling, cross-selling and churn prevention actions, thanks to the use of Big Data
Analytics to support the achievement of profitability targets.
Plus, to increase customer retention and satisfaction, TIM Party was launched, the loyalty program for all TIM
customers that can only be accessed online. With its innovative and distinctive positioning, TIM Party also aims
to increase service penetration, act as a showcase for the launch of multimedia products and services and
enhance sponsorships, as well as increase the digitalization of the customer base and the acquisition of approval.
The program has three levels: extensive benefits for all customers joining the program; specific benefits for
clusters selected based on how long customers have been with TIM and the presence of several TIM services
(3Play, 4Play); competitions with prizes.
During the COVID emergency period, TIM Party promptly modified its schedule to meet new customer needs
and was the touchpoint of choice for the unlimited GB offer to all TIM consumer customers.
Report on Operations of the
TIM Group
Commercial Developments
40
Finally, and still with a view to improving customer loyalty, during February 2020 agreements between TIM S.p.A.
and Santander Consumer Bank S.p.A. were signed, launching a partnership to offer a consumer credit platform
dedicated to TIM's customers, as announced in November 2019.
Thanks to this partnership, TIM sales points already offered TIM customers financing for the purchase of products
with installment plans in 2020. They will subsequently also offer personal loans, credit cards and insurance
products designed to meet customers' needs, with a high degree of innovation and digitalization, both of which
have always been hallmarks of the two companies.
The launch of consumer credit services in 2020 was only the first step in a process that was strengthened and
expanded through the development of a new joint venture, authorized to operate as a financial intermediary
and named TIMFin, which will enable TIM to further reduce debt and optimize credit costs. TIM customers will
also gain quick and easy access to customized and transparent financial and insurance solutions, strengthening
and improving the continuity of customer relationships.
TIM is the first telephony operator in Italy, and to date still the only one to include refurbished products in its
smartphone price list. After an initial test in 2019 on the iPhone 7 32GB in limited quantities, it continued in 2020
on the iPhone 8 64GB and then with the “Super Green” packaging (no accessories and packaged with
environmentally friendly materials).
TIM’s Smartphones portfolio over the course of 2020 increasingly expanded to include 5G technology, making up
over one third of references, thanks to the introduction of 5G on Top Seller products such as the iPhone 12 family
and the achievement of public price points lower than 300 euros. 5G was also introduced in Mobile Broadband
(Mi-Fi routers) with a premium placement.
Small Medium Business
TIM’s work in the Small Medium Business segment during 2020 developed the following main areas:
■ defense of the customer base with reinforcement of retention and prevention actions through the use of
advanced analytics and improvement of customer management processes;
■
improvement in customer experience in particular in the areas of billing and technical and commercial
assistance;
■ specialization of the commercial offer on the two macro segments SOHO and SME with the launch of the
new TIM Unica Business offer on SOHOs and TIM Comunica on SMEs;
■
relaunch of TIM’s positioning in the SMB sector with the new marketing campaign centered on quality,
assistance and convergent offers;
■ expansion of the ICT offer through advanced connectivity solutions (VoIP) and partnerships with major
market players, such as Google;
■
reinforcement of commercial oversight of the most valuable customers with an increase in the number of
customers managed in the portfolio;
■ development of the stores channel as a new commercial Touch Point for VAT-registered small traders;
■ attention to administrative and commercial management actions for customers with bad debt.
In 2020, SOHO businesses and SMEs were impacted by COVID-related closures and business slowdowns. TIM
assisted its customers with specific support actions: free GB and fiber connection at subsidized prices in the
periods of greatest crisis. In general, the primary objectives for 2020 were to support and defend the customer
base and to consolidate TIM’s position as a national player that can meet the connectivity, convergence and IT
needs for SMB customers. This objective was pursued by strengthening the commercial front end to manage all
churn risk customers with COVID-related difficulties. Solutions were offered to customers to better manage their
connectivity or smart working needs and loyalty actions were developed for the most loyal customers (e.g.
GigaxTe program or repositioning of higher spending customers). These actions were enabled by new insight
analytics tools: predictive big data models, new segmentation based on goods sectors, launch of the personas
model and industrial district development models.
In order to improve customer satisfaction, a plan was launched to improve customer experience, in particular in
the following areas: billing, with the development of a new layout and the optimization of the convergent bill;
technical assistance, with improvement in the management of long-term and repeated faults; commercial
assistance, with the new customer segmentation in order to guarantee a level of service consistent with the
needs and value of customers; digital, with the new public area of the TIM Business website and the new app
with the main commercial and care functions.
As for the offerings aimed at the SOHO segment, 2020 saw several updates:
■ TIM’s position as a single, converging point of reference for customers was strengthened through the launch
of the “TIM Unica Business” brand, which demonstrates how the synergy between TIM’s fixed, mobile and
Report on Operations of the
TIM Group
Commercial Developments
41
■
■
ICT services can represent the best for customers in terms of reliability and benefits, supported by ongoing
radio, web and TV campaigns highlighting its advantages and opportunities;
the focus was on the innovation and quality of the TIM network, through the enhancement of 5G on mobile
and FTTH technology for fixed;
the offer portfolio was renewed, simplifying it in order to meet the needs of a market that needs more and
more data traffic to manage its work, including remotely; in this regard, moreover, the offer was enriched
with a range of included ICT services, in partnership with the best market players, in order to give customers
the best online tools for their business and for the increasingly urgent digital transformation in the context
of 2020.
For SMEs, TIM continued the development of its VoIP portfolio called TIM Comunica: since June, it had simplified
and reviewed its pricing, making it highly appealing both to the CB in terms of loyalty and decommissioning, and
to new customers. In addition, the final quarter saw the launch of TIM Comunica Up, the first fully virtual and
natively convergent VoIP offering, capable of responding effectively and with a very short time to market to the
growing demand from SMEs for smart and mobile work. During the year, the process of strengthening the quality
of the VoIP service continued with the activation of new customers on the IMS platform, the introduction of
survey automation and the transition of CTIO platforms.
Also for SME connectivity, 2020 was a year of growth in professional offerings, both Internet and MPLS, with
particular focus on reducing the digital divide in companies: from the new VDSL Long Distance profile, which
finally allows companies to be reached within a radius of over 2 km from the cabinet, to FWA solutions with
dedicated bandwidth which can also be combined with VoIP solutions from the TIM Comunica portfolio.
As far as the ICT proposition is concerned, consolidation took place of the four areas that cover the main needs
of the segment, starting from Information Security, Smart Working, Internet Presence and the Cloud, intended
as computing capacity as well as storage, data backup and the adoption of SaaS solutions.
In addition, with the internal Olivetti and Noovle factories, a review of the services portfolio was initiated to adapt
it to the needs of the segment, with particular reference to the new M2M, IoT and cloud offerings.
With reference to the commercial channels, in 2020 the agencies were optimized, the number of customers
managed with commercial oversight was doubled, the new stores channel was strengthened and the
contribution of the digital channel was increased. Commissioning policies were directed toward higher quality
activations and the promotion of convergence and new IT services.
Enterprise
Once again in 2020, TIM confirmed its primary presence in the business and public administration market, giving
further impetus to its strategy of focusing on the ICT market in the most general sense of the word, increasing
the extent of its services portfolio and investing through all available leverages in strengthening its industrial,
expertise and organizational capabilities.
In this sense, the strategic partnership with Google, finalized in February, and the acquisition of 100% of Noovle
S.r.l., a Google Cloud Premier Partner, finalized in May, should also be viewed in this light, with the aim of having
a distinctive practice of professional services and the ability to develop journey to cloud projects for businesses
and public administrations, using both Google technologies and those of other important partners.
In addition, during Q2 2020, TIM launched a new organization designed to better manage the Large Enterprise
and Public Administration markets, through a model geared towards managing the main industries and sectors
through specifically dedicated organizational functions and the launch of an intense capability building program
for the skills and knowledge necessary to understand and address more deeply the business processes of each
sector and to develop sophisticated offerings and complex projects.
As far as the market is concerned, the impact of the health care emergency in 2020 has not left Large Enterprises
and Public Administration unscathed, highlighting even more the opportunity and potential offered by the
digitalization of processes also in terms of resilience of business processes, not only in terms of accelerating the
most innovative sectors.
From this point of view, as for the Consumer market and for Small and Medium Enterprises, TIM has also been
at the center of the country system in supporting the extraordinary load of connectivity and smart working
services needs of Large Enterprises, through various proposals of digital solidarity that, among others, saw the
first solutions of connectivity and collaboration services based on TIM and Google Cloud joint solutions, also
together with other partners such as the Intesa Sanpaolo Group.
Among other key initiatives to support the health emergency, TIM also provided:
■ support to schools for digital distance learning thanks to a set of bundled solutions dedicated to Digital
Teaching and the world of education with web platform solutions, fixed and mobile connectivity bundled
with latest generation devices and modems, tablets and notebooks, and endpoint security solutions for
individual school needs. Through the
students and teaching staff and perimeter security for
www.lascuolacontinua.it website, TIM supports teachers in the optimal use of tools and platforms dedicated
Report on Operations of the
TIM Group
Commercial Developments
42
to distance learning such as WeSchool and G Suite for Education, already used by many students, in order
to ensure the continuity of educational activities;
■ distribution of over 3,000 devices and SIM cards to hospitals involved in the emergency and prisons to
facilitate contact with family members; in collaboration with the National Deaf Association over 1,000
devices were supplied for deaf people and equipped with apps to facilitate the use of LIS (Sign Language)
and for the real-time translation of messages from voice to text and vice versa;
■ support of institutions involved in the crisis including the Italian Civil Protection Department, the
Carabinieri, Confindustria, S. Raffaele Hospital, ASST Mantua to whom physical spaces were made
available with the equipment needed to manage operations in the area, special training programs, platforms,
toll-free numbers and other services to manage the emergency.
The main new developments concerned the areas most in demand and with the highest potential, the so-called
“digital enablers” and, more specifically, the areas of Hybrid Cloud and the IoT.
As already indicated, with the signing of a strategic partnership between TIM and Google Cloud, the two major
groups joined forces to provide the market with the best infrastructure, skills and platforms to create innovative
public, private and hybrid cloud services for the benefit of businesses and public administrations, to support and
drive the acceleration of the digitalization process of the organizations that generally lead the innovation process.
The partnership represents a major innovation for both companies and the market and is based on a high degree
of complementarity: TIM will leverage its unique assets, the Data Centers in Italy, the most important network
infrastructure in the country, the deep knowledge of the Italian market and capillarity. Google will bring its
technology, platforms, skills and “natively” open mindset. Google Cloud will participate with TIM, which will build
6 new highly efficient and environmentally sustainable Data Centers, in the opening of new Cloud regions with
an unprecedented investment by a foreign multinational in Italy, thanks to which customers will benefit from
low latency and high performance cloud services and data. Therefore, to complement the partnership with
Google, TIM acquired Noovle, in order to complete the offer of projects and cloud solutions with its ICT consulting
and system integration skills.
The first immediate result of the partnership already arrived in May, with the signing by the Intesa Sanpaolo
Group of a Memorandum of Understanding with TIM and Google that marks the start of negotiations for an
important project aimed at providing Intesa Sanpaolo with Google’s cloud services on TIM’s Italian Data Centers.
In the following months, important negotiations were initiated and contracts signed with numerous private and
public customers.
As part of the 5G&IoT Offer Tim has consolidated the development of an ecosystem of Vertical Solutions in
collaboration with the Group’s Digital Factories and Selected Supply Chain Partners.
2020 began with the important confirmation of TIM’s ability to innovate, with the award from MISE to 3
partnerships with TIM as the reference 5G operator in 3 of the 6 total winning projects of the “Asse II” call for
tenders for innovation projects based on 5G and emerging technologies. The proposed partnerships with AGID,
the Municipality of Ivrea, the University of Cassino, the Municipality of Artena and the Polytechnic University of
Bari, while also leveraging Olivetti’s IoT solutions, were characterized by the diversification of solutions and use
cases, the ability to innovate and aggregate an ecosystem of interests and skills that maximizes the potential of
5G, introducing new technologies such as Artificial Intelligence, blockchain and big data in smart city contexts.
In general, over the course of 2020, by leveraging all platforms and networks already available, TIM progressively
focused on core capabilities. Major projects in 2020 saw the adoption of TIM’s innovative solutions in terms of
Smart Cities, including the Smart Control Room project developed with the Municipality of Venice, the only one
in Italy, which brings together in one “control booth” technologies to improve the city’s mobility and security by
creating an urban intelligence model.
Always in an approach to verticalize the 5G&IoT Offer, TIM signed agreements with Confagricoltura and
Coldiretti aimed at the development of smart agriculture in Italy and that provide companies in the agri-food
sector with enabling technologies and application solutions (e.g. sensors, blockchain, AI) to reduce the digital
divide in rural and inland areas of Italy and give a new impetus to the sustainable agri-food sector.
In this regard, there are the trials started at the vineyards of the Voerzio-Martini winery in the Langhe area to
improve the quality of wine crops, to improve efficiency and cost-optimization through a targeted use of
resources and treatments, crop control and protection, traceability and improved quality, while also lowering the
environmental impact.
Thanks to the agreement signed in December between TIM and Comau, which follows a two-year field trial,
further acceleration was given to the development of the “Vertical” offer of innovative IoT solutions for the digital
transformation of manufacturing industries by leveraging the potential of 5G and AI. The two companies will
develop new IoT services and products: the first result of the collaboration was the launch of the “Industrial IoTIM
powered by Comau” solution for monitoring and diagnostics, even remotely, of industrial production machinery,
highlighting maintenance and assistance needs through provisional and predictive systems. All of this is thanks
to Ultra Broadband connectivity, TIM’s Edge cloud and Industrial IoT services and the digital technologies of the
in.Grid platform combined with Comau’s extensive expertise in factory automation and robotics. Olivetti, the
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digital farm of the TIM Group, will provide the specialist skills acquired in the IoT, guaranteeing support and
technical assistance at all stages, remotely and in the field.
The main technological partnership projects include the one with Green Pea: TIM was chosen to digitize the
futuristic center, the first “Green retail park” entirely dedicated to eco-friendly shopping designed by the Farinetti
family, which opened in Turin on December 8, 2020.
Brazil
In 2020, TIM Brasil refined its positioning strategy as a leading player in the Brazilian market. We continued our
customer base renewal process on the consumer mobile market, migrating customers from single service day
plans to weekly/monthly recurring plans. We have aggregated more value-added services in terms of variety
and relevance to our customers (e.g. mobile financial services), by developing our service plan offerings and
enhancing our leadership in the 4G network. TIM Live increased its coverage and customer base, while in the B2B
market, IoT initiatives are proving stronger in agribusiness and new opportunities for successful partnerships have
arisen.
■ Marketing and brand positioning: we consolidated the credibility of our brand. A new tag line was launched
that represents our mission as a company, “imagine the possibilities”, and we have a new endorser, the
Brazilian singer IZA - Woman of the Year in 2020. The evolution of our marketing concept and content
allowed TIM to win the prestigious Top of Mind award by “Folha de SP” (one of Brazil’s biggest and most
reliable media groups).
■ Mobile offers: we renewed our offers in all segments following the “beyond connectivity” approach to
increase recognition and avoid commoditization. In terms of hybrid plans, we leveraged our partnership with
C6 (digital bank) that combines mobile financial services with mobility. The partnership has since been
extended to all segments. For the pre-paid segment, we introduced a strong new loyalty program with
gamification and mobile advertising features. And finally, on the post-paid segment, we revamped “TIM
Black” with a broader portfolio of entertainment services (from just Netflix to HBO Go and YouTube Premium)
and premium care services, such as TIM Concierge.
■ Customer Experience: we are constantly working to improve our customer experience and satisfaction
through the use of technology. In this regard, the evolution of AI solutions and our digital channels are key.
In 2020, TIM launched “Tais”, its cognitive assistant and deployment of the Meu TIM app increased YoY.
■ Sales channels: in 2020, we focused on channel productivity and reorganization, from volume to value.
Nonetheless, during the Covid-19 outbreak, especially at the beginning, the priority shifted to supporting our
sales channels. More recently, we strengthened our capillarity in more critical markets such as the State of
São Paulo.
■ Residential market: the focus on investing in FTTH (Fiber To The Home) expansion continues, with higher
speed offers and optimal connection stability. We are present in 31 cities with a customer base growth of
14% in 2020. TIM Live also introduced an innovation by launching the first 400Mbps offering in the Brazilian
market and was recognized for the fifth time by the newspaper “Estadão” as the best broadband service in
Brazil.
■ Corporate: we consolidated our “Leaders with Leaders” strategy in agribusiness and launched the first IoT
marketplace for B2B in Brazil by promoting IoT solutions through partnerships. In addition, we launched the
FCA partnership for connected cars and for industry and mining we are developing a private LTE solution for
business-critical use case management.
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MAIN CHANGES IN THE REGULATORY
FRAMEWORK
Domestic
In this section we report the main changes in the regulatory framework in 2020 in the Domestic region.
As regards the Antitrust proceedings, as well as the proceedings regarding the 28-day invoicing, see the Note
“Disputes and pending legal actions, other information, commitments and guarantees” in the TIM Group
Consolidated Financial Statements at December 31, 2020.
New EU Electronic Communications Code
The (EU) 2018/1972 Directive, which establishes the new European Electronic Communications Code (Code), will
be applicable in Member States after its transposition into national laws, which was to take place by December
21, 2020. To date, Italy has not yet transposed the Code.
The Code reviews and replaces the previous European regulatory framework made up of the Access Directive,
Framework Directive, Authorization Directive and the Universal Service Directive.
The main changes concern the regulation of access/interconnection, spectrum management and Universal
Service obligations.
Access and interconnection regulation
The new rules aim to stimulate investment in very high capacity networks while continuing to protect
competition and the interests of end users.
The new European Electronic Communications Code promotes co-investment as a model for developing Very
High Capacity Networks – VHCNs, providing for the possibility of not imposing ex-ante regulatory obligations on
new VHCNs set up in co-investment in the face of specific binding commitments for operators with Significant
Market Power (SMP) on the conditions of access and the opening up of the co-investment offer.
The new Code also provides for a lighter regulatory regime for SMP companies that have developed a the
“wholesale only” model, where the National Regulatory Authority (NRA) may exempt SMP operators who offer
communication services from certain obligations, including cost orientation electronics exclusively in wholesale
markets, imposing only the obligations of access, non-discrimination and fair and reasonable pricing on them.
Finally, the Code also privileges the obligation of accessing infrastructures over other ex ante obligations and
extends the possibility of imposing symmetric obligations of access to essential network infrastructures beyond
the first distribution/concentration point. Longer market review periods (five years instead of three) are
introduced to offer operators greater certainty. The new measures mentioned so far aim to encourage
investments in the new VHCNs.
Regulation of fixed and mobile termination of voice calls
In December 2020, the European Commission adopted the Delegated Regulation concerning the setting of
maximum voice termination rates (fixed and mobile) at EU level, as required by the new Code. The Regulation
will enter into force (following publication in the Official Journal) by February 2021 if neither the Parliament nor
the European Council objects. European caps (EU maximum prices) on termination rates will be applicable to
operators providing fixed and mobile termination services (replacing the prices set by national regulators) from
the first day of the third month following their entry into force.
The maximum EU fixed termination price is 0.07 eurocents/min.
The maximum EU mobile termination price is 0.2 eurocents/min.
In order to allow for a gradual transition, a three-year glide path is applied with the following values for Italy: 0.67
eurocents/min in 2021, 0.55 eurocents/min in 2022 and 0.40 eurocents/min in 2023, landing at 0.2 eurocents/min
in 2024.
Under certain conditions, which should in principle guarantee price reciprocity, these caps also apply to the
termination of calls originating outside the EU.
Recommendation on Relevant Markets
In December 2020, the European Commission published the new Recommendation on Relevant Markets, which
replaces the previous Recommendation 2014/710/EU. The new Recommendation defines only two markets (both
wholesale) as opposed to the previous five markets:
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1. Wholesale local access provided at a fixed location;
2. Wholesale dedicated capacity.
Wholesale call termination on individual public telephone networks provided at a fixed location and wholesale
voice call termination on individual mobile networks (former Markets 1 and 2) and wholesale central access
provided at a fixed location for mass-market products (former Market 3b) were removed from the list. The
obligations in effect in the markets removed from the list remain in effect until further market analysis by the
National Regulatory Authority (NRA). NRAs may define (and regulate) additional markets to those included in
the new Recommendation, including those in the previous Recommendation on Relevant Markets, only where
they can prove that, based on the national context, three conditions are cumulatively met (the so-called “triple
test”): (i) high and non-transitory barriers to entry; (ii) market structure not evolving towards effective
competition over the relevant time frame; and (iii) insufficiency of antitrust legislation alone to address any
market failures.
Spectrum management
The new Code introduces new rules for the development of mobile networks and 5G, including the minimum
duration of the rights to use frequencies, equal to 15 years with the possibility of an extension of an additional 5
years. A subsidized regime for the installation of small cells was also introduced as was:
■ consistency of installation rules at national level;
■
■
■
installations not subject to individual preventive permits (with some exceptions);
installations not subject to contributions or charges in addition to administrative charges;
right of access under fair, reasonable, transparent and non-discriminatory conditions to any physical
infrastructure controlled by public authorities (e.g. light poles, road signs, etc.).
On June 30, 2020, the European Commission adopted Implementing Regulation (EU) 2020/911 (applicable from
December 21, 2020), which defines the physical and technical characteristics of the small cells that fall within
the scope of the subsidized regime.
“Connectivity” Recommendation
European Commission Recommendation (EU) 2020/1307, dated September 18, 2020, requires Member States to
urgently adopt and implement a common Union toolbox to reduce the cost of deploying VHCNs and ensure
timely and investment-friendly access to 5G radio spectrum, to foster connectivity in support of economic
recovery from the Covid-19 crisis in the Union. In close cooperation with the European Commission, the Member
States should reach an agreement on the toolkit by March 30, 2021.
Universal Service obligations
The Code provides an obligation for all broadband internet access service and fixed location voice
communication services providers to ensure "financial accessibility" for residential users (in particular those with
a low-income or special social needs). However, Member States are free to impose universal service obligations
(including coverage obligations where necessary) on designated companies (as is currently the case in Italy,
where TIM is the designated company).
Each Member State must decide what is appropriate broadband Internet access; the access speed must at least
allow end users to use the services listed in Annex V of the Code.
A Member State can continue to impose obligations related to public telephony, if the need for this service is
determined on the basis of national circumstances.
There are no longer specific QoS-Quality of Service obligations related to the provision of the universal service.
Member States can also choose the public and/or sectoral financing methods for costs relating to the universal
service:
The changes introduced by the Code will presumably lead to a revision of the universal service regime currently
applied in Italy.
While awaiting transposition of the new Code into Italian legislation, the Authority has already implemented the
provision that repeals the obligations regarding minimum quality objectives for access and voice telephony
services defined by the Authority and imposed only on operators responsible for providing the universal service
(in Italy, only TIM). This eliminated the current asymmetry between TIM and its competitors who, despite offering
the same access and voice telephony services, were not subject to any quality obligations, any supervisory action
or any disputes regarding compliance with the corresponding annual quality objectives.
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BEREC Regulation
The 2018/1971 Regulation revises the operating rules for the Body of European Regulators for Electronic
Communications (BEREC) and the tasks assigned to it. In particular, these include:
■ assisting and advising the Commission, at its request, in relation to drafting legislative proposals in the field
of electronic communications, including any proposals to amend the Regulation or Code;
■ preparing guidelines for the implementation of the Code (e.g. geographic mapping of access networks, Very
High Capacity Networks – VHCN and co-investment, symmetric obligations);
■
the BEREC and Commission double-lock veto on decisions relating to the imposition of symmetric obligations
beyond the first distribution or concentration point and non-imposition of obligations in the presence of
binding commitments on co-investment in VHCN (introduced in the Code).
The Regulation does not amend the governance of BEREC: with continued provision for BEREC and the BEREC
Office, the latter being an EU agency with legal personality.
In 2020, BEREC adopted several non-binding guidelines aimed at guiding national authorities’ implementation
of the new EU Code provisions. In particular, the following guidelines are provided:
■
the definition of VHCN (Very High Capacity Network): this definition defines the thresholds of some
technical parameters that could mean that fixed networks that are not entirely fiber up to the
building/location of the end user qualify as VHCNs;
■ co-investment in new VHCNs: specifics are provided regarding the application of the criteria of article 76 of
the Code, which allows new VHCNs built by the SMP operator in co-investment with other operators not to
be subject to regulatory obligations (i.e. to be removed from regulation ex-ante);
■ symmetrical infrastructure access obligations: indications are provided regarding the application of article
61(3) of the Code, which provides for the possibility for National Authorities to impose access obligations on
non-SMP operators where this is justified by the presence of barriers to the replicability of network elements
(e.g. in the case of installation infrastructure or vertical infrastructure inside buildings);
■
the geographical mapping of broadband networks: this defines the data to be used and the methods to be
followed for mapping the current network coverage of Next Generation Access (NGA) networks and, where
applicable, future networks in accordance with article 22 of the Code.
Intra-EU international communications regulation
The BEREC regulation also introduces caps for intra-EU international calls and SMSs only for fixed-line and mobile
consumer customers.
The caps for intra-EU international calls and SMSs were applied from May 15, 2019, for a duration of 5 years, so
until May 14, 2024:
■ 19 euro cents/min (+VAT) for international intra-EU calls;
■ 6 euro cents/SMS (+VAT) for intra-EU international SMSs.
Wholesale fixed-line markets
Fixed network access market analysis
The final provision published on August 8, 2019 defines the obligations and economic conditions for wholesale
access services for the period 2018-2021.
The main decisions relate to:
■
■
repeal of TIM's qualification as an operator with Significant Market Power (SPM) in the access market - and,
consequently, repeal of all ex ante regulatory obligations - in the municipality of Milan and confirmation of
SPM operator qualification for the rest of the National territory;
repeal of the obligation to guide the cost of bitstream copper and fiber service prices in 26 municipalities
considered "contestable" (list to be updated annually); the possibility to apply, in the same municipalities,
different VULA prices from the national average value set by the Authority starting from 2021, if certain
conditions to be defined by the Authority are met, through a specific procedure put in place with resolution
no. 481/19/CONS published on February 4, 2020;
■ Wholesale access rates for copper and fiber for 2018 equal to those of 2017, unless there is a limited reduction
in the VULA FTTC fee;
■ gradual increase in the full unbundling price (ULL) and bitstream price on copper in the 2019-2021 period;
■ sub loop unbundling (SLU) price stability in the 2019-2021 period;
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■ gradual decrease in fiber access prices (VULA FTTC and FTTH) and price differentiation of the bandwidth,
starting in 2021, depending on whether the access line is on a copper or NGA network;
■
repeal of the current prior AGCom notification obligations and verification of ex ante "replicability" for
flagship offers with speeds greater than or equal to 100 Mbit/s and, in other cases, reduction of prior
notification period from 30 to 20 days;
■ definition of the process and timing for the decommissioning of TIM exchanges;
■ possibility of using vectoring in FTTC cabinets where alternative operators have not requested sub loop
unbundling (SLU) lines;
■ elimination of current asymmetries in procedures to change TIM network operator between processes to
return to TIM and changing from TIM to alternative operators.
In November 2020, AGCom concluded the preliminary reliability assessment of TIM’s voluntary separation project
for the creation of FiberCop (the Newco that will acquire the secondary copper and fiber access network currently
held by TIM and Flash Fiber, a subsidiary of TIM and owned by KKR Infrastructure Fund and Fastweb).
With Resolution no. 637/20/CONS, published in December 2020, the Authority initiated the procedure relating to
the coordinated analysis of the markets for fixed network access services pursuant to article 50-ter of the Code
and, at the same time, launched the public consultation on the project for the voluntary separation of TIM’s fixed
access network.
Once the first phase of consultation on the FiberCop Project is complete, AGCom will be able to continue its
coordinated analysis with more available elements, both with reference to the regulatory framework
(transposition of the new European Electronic Communications Code at national level and adoption of the new
Recommendation on Relevant Markets) and initial feedback received from interested parties on the project’s
general impact on TIM’s fixed network access markets.
Infratel Tenders for the subsidizing of Ultra-broadband networks
At the COBUL meeting of May 5, 2020, the Government approved an executive plan for public funding for a total
amount of 2.7 billion euros, providing for the following interventions to support the development of UBB demand
and infrastructure.
■ School Plan 2020-23 (400 million euros)
•
connect 32,213 school complexes (81.4% of the total) to ultrabroadband up to 1 Gbps with 100 Mbps
guaranteed
– all middle and high school complexes throughout Italy
– all primary and kindergarten complexes in "white areas"
■ Voucher Plan (1,146 million euros)
•
Families with ISEE under 20,000 euros (286,542,816.30 euros): 500 euros (200 euros for connectivity +
300 euros for Tablet or PC on loan)
• Other families (320,927,954.20 euros): 200 euros for connectivity of at least 30 Mbps (all technologies
including satellite)
• Companies > 30 Mbit/s (114,617,126.50 euros): 500 euros for connectivity of at least 30 Mbps (all
technologies, including satellite)
•
Fiber companies (401,159,942.80 euros): 2,000 euros for connectivity up to 1 Gbits (fiber)
■ Gray Areas Plan (1,126 million euros)
•
infrastructure of some industrial districts in the "gray areas" on a regional basis and municipalities with
a higher concentration of businesses than the population.
School Plan
After a Public Consultation on the School Plan, which concluded in September, on October 19, 2020, Infratel
published a call for tenders with a deadline for submission of bids on December 4, 2020, which provides for public
funding of 274 million euros split into 7 geographic lots (with a limit of two lots that can be awarded by the same
competitor, who can submit bids for all lots).
Voucher Plan
A first phase of intervention, to be implemented urgently by 2020, concerns less advantaged families (Equivalent
Economic Situation Indicator, or ISEE, threshold up to 20,000 euros) completely without connectivity services, or
with connectivity services below 30Mbit/s.
A second phase of intervention, to be implemented after a public consultation, concerns families with an ISEE
income of up to 50,000 euros and businesses.
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The phase 1 voucher issuing process began on November 9, 2020.
To implement the second phase of the Voucher Plan, Infratel conducted a public consultation, which concluded
in September 2020.
The results of the consultation have not yet been published. At the end of the public consultation, the
intervention plan in question will be submitted to the European Commission pursuant to art. 108, subsection 3
of the TFEU and then regulated by a specific decree of the Italian Minister of Economic Development.
Gray Areas Plan
On June 24, 2020, Infratel launched a new consultation on gray and black area coverage to identify gray areas
for the implementation of the new activities established by the COBUL of May 5, 2020, in order to:
■ monitor the maintenance of the coverage commitments undertaken, pursuant to point 65 of the Community
Guidelines, by the operators who responded to the 2019 Consultation;
■ gather evidence of new implemented or planned activities for the next three years.
In September 2020, Infratel published the monitoring results in order to update the mapping of UBB coverage of
gray and black areas by private operators over the three-year period 2020-2022.
On the basis of the new mapping, it will be possible to define any public interventions in the areas that remain
without VHCN (Very High Capacity Network1) coverage, for which, to date, COBUL has allocated 1.126 billion
euros (to be allocated to covering industrial districts and municipalities with a higher concentration of
companies).
Based on the published results, taking into account the declarations of the Operators until 2022, the homes
potentially affected by public funding interventions amount to more than 4.7 million, or about 22.8% of the total
black and gray buildings placed in consultation.
Wholesale mobile network markets
Mobile termination market analysis
On January 22, 2019, AGCom published its final decision on mobile network termination market analysis
(resolution no. 599/18/CONS). In particular, AGCom established symmetric tariffs for all MNO and full MVNO
operators for the period 2018-2021 (0.98 euro cents in 2018, 0.90 euro cents in 2019, 0.76 euro cents in 2020, 0.67
euro cents in 2021) and confirmed the absence of an obligation to check the termination prices for calls
originating outside the European Economic Area (EEA); however, SMP operators cannot adopt termination rates
that are higher than those applied to Italian operators by operators in non-EEA countries where rates are
regulated.
However, as noted in the European section, in December 2020, the European Commission adopted the
Delegated Regulation concerning the setting of maximum voice termination rates (fixed and mobile) at EU
level, which will enter into force by February 2021 if neither the Parliament nor the European Council objects. EU
caps will be applicable to operators providing fixed and mobile termination services (replacing the prices set by
national regulators) from the first day of the third month following their entry into force. In order to allow for a
gradual transition for the mobile termination, a three-year glide path with the following values is provided for
Italy: 0.67 eurocents/min in 2021, 0.55 eurocents/min in 2022 and 0.40 eurocents/min in 2023, landing at 0.2
eurocents/min in 2024.
Retail fixed-line markets
Universal Service
Net cost
Following ruling no. 4616/2015, published on October 2, 2015, in which the Council of State canceled decision no.
1/08/CIR of AGCom on the retroactive application of the new methodological criteria for calculating the net cost
of the universal service (USO) relating to the 2004-2007 years, the Authority began the public consultation of the
net cost of the total years 2004-2007 with resolution 89/18/CIR, published on July 3, 2018, and subsequent
resolution no. 62/19/CIR, published on May 7, 2019. On September 11, 2019, the Authority published the final
resolution concerning the Net Cost of Use for 2004-2007 (resolution no. 103/19/CIR) in which it recognized the
existence of an unfair charge for TIM of a total of 113.4 million euros to be shared between all fixed-line and
mobile operators. The share payable by the OAOs amounts to approximately 26.6 million euros, calculated net
of installments already paid by the same operators, following the 2004 and 2005 procedures approved "illo
tempore". In relation to past disputes, still “in progress” to date, following ruling no. 3388/15 of the Council of
State, published on July 7, 2015, on September 11, 2019, the Authority launched the public consultation procedure
(resolution no. 102/19/CIR) for an in-depth fixed-mobile substitutability analysis, in line with the path outlined for
1 The following are classed as VHCNs (Very High Capacity Networks):
◦ For fixed network: fiber networks up to or near the building (FTTB/H);
◦ For FWA network: the FWA networks where the fiber optic reaches the Base Transceiver Station (BTS).
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the 2004-2007 years. In this context, ruling no. 6881 of October 8, 2019, in which the Council of State authorized
the return of the shares paid by Vodafone to TIM, for the contested years (1999-2000 and 2002-2003). In light of
the above-mentioned Council of State ruling, which completely reversed the Lazio TAR rulings no. 6458, 6459,
6461 and 6463 of May 23, 2018, in execution of which the public consultation pursuant to resolution no.
102/19/CIR was started, the Authority revoked the aforementioned resolution with decision 190/19/CIR.
On July 21, 2020, AGCom published the public consultation relating to the review of the iniquity of the net cost
of the universal service 1999-2009. In Resolution 263/20/CIR, the Authority defined a new approach to
demonstrate the lawfulness of the participation of mobile operators at the net USO cost for the years in question.
AGCom's view expressed in the consultation is to recognize prima facie the unfairness of the charge for the years
2002-2009. For the previous years 1999-2000, however, the Authority did not recognize the existence of an unfair
charge for TIM.
As a result of this view, the aforementioned Council of State provision no. 6881, which imposed on TIM a refund
of the sums paid by Vodafone, could lose its effectiveness for the years 2002-2003. The final resolution is
expected by early 2021. The extension of the time period subject to renewal until 2009 was necessary following
the recent ruling no. 2542/2020 with which the TAR accepted Vodafone's appeal, in terms of fixed-mobile
substitutability. The opinions on the years 2004-2007, recently renewed by AGCom with resolution 103/19/CIR,
and on which the TAR has not yet expressed an opinion, also hang on the same issue.
On December 4, 2019, AGCom began certification activities for the Net Cost 2010-2013, to be carried out by the
BDO S.p.A. company. The review of the years 2010, 2011 and 2012 has been completed while the 2013 net cost
verification activities were initiated by AGCom on December 18, 2020.
Quality of Service
In relation to the universal service quality objectives:
■ with Resolution no. 651/20/CONS, AGCom fined TIM 58,000.00 euros. The fine was for the failure to reach
the 2019 target set for the “Average operator response time to incoming calls”. Non-compliance was 10”
(actual figures 80” vs. target of 70”);
■ on December 14, 2020 TIM received from the tax authorities the repayment of 115,998.00 euros. Repayment
of the sum originally paid by TIM took place following confirmed Lazio Regional Administrative Court
judgment no. 3948/2018, which (accepting TIM’s appeal no. 2661/08) annulled AGCom Resolution no.
633/07/CONS that fined TIM for alleged failure to meet the 2006 target set for the “Failure rate per access
line”.
Guidelines for voluntary withdrawal
With resolution no. 487/18/CONS, the Authority regulated the ways operators must manage discontinuation and
transfer methods for user contracts.
TIM challenged the resolution regarding the provisions that limit the right to fully recover the costs in case of
withdrawal (discounts from promotions, product installments). The administrative judge dismissed TIM’s appeal,
as the guidelines would not be directly damaging. TIM once again appealed against Resolution no. 487/18/CONS
as a prerequisite for Resolution no. 591/20/CONS by which AGCom ordered TIM to pay an administrative fine for
violation of Resolution no. 487/18/CONS regarding withdrawal.
Freedom to choose Modems
With resolution no. 348/18/CONS, the Authority ratified the principle of user freedom to choose modems for
Internet access.
TIM challenged the resolution in relation to the transitional provisions for customers who have an internet offer
combined with a modem for a fee (sale and rental) in the months preceding the entry into force of resolution
no. 348/18/CONS (December 1, 2018). Following the Council of State order at the end of 2018, which suspended
the transitional provisions pending a hearing being set in the Lazio TAR, and which asked for the hearing set for
October to be brought forward, on January 29, 2019, the Lazio TAR confirmed the public hearing, already set for
October 23, 2019. On January 28, 2020, the TAR rejected TIM's appeal. TIM appealed against the TAR judgment.
In May 2020, TIM notified its customers who had signed up for an Internet access and installment modem
purchase offer before December 1, 2019, that they had the option to sign up for an equivalent Internet offer
without a modem and an allowance for the remaining installments. By signing up for the equivalent offer, the
residual debt in installments on the customer’s bill for the purchase of the modem would not be due, this did
not entail any additional charges for the customer or implied changes to the financial and contractual terms
and conditions for using the active services on the line.
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Authority fees
AGCom contribution fee
On February 24, 2020, AGCom issued resolution no. 434/19/CONS relating to the payment of the AGCom
contribution fee for the year 2020 (calculated on the 2018 financial statements figures). The guidelines for
calculating the contribution fee are unchanged compared to the guidelines for calculating the 2019 contribution
fee. For 2020, AGCom has confirmed the rate of 1.30 per thousand. On the basis of this new rate, TIM paid around
18.134 million euros under reserve.
Privacy and personal data protection
General Data Protection Regulation (GDPR) and Legislative Decree 101/2018
On May 25, 2018, the General Data Protection Regulation (Regulation (EU) no. 2016/679 – “GDPR”) came into
force.
Furthermore, on September 19, 2018, Legislative Decree no. 101 of August 10, 2018 entered into force, which
brought the Code regarding the protection of personal data (Legislative Decree June 30, 2003, no. 196) in line
with the provisions of the GDPR - EU Regulation 2016/679.
To ensure compliance of personal data processing with the GDPR within Group companies, TIM has carried out
the activities provided in the compliance plan.
Of the main changes, the following is noted:
■
■
the appointment of a Data Protection Officer and establishment of related contact points for individuals with
questions relating to the processing of their personal data;
the review of the "System of rules for the application of legislation on personal data protection in the Telecom
Italia Group" was completed in 2018 to bring TIM in line with the provisions of the GDPR, and revision of the
same policy was completed for Group companies September 2019, as a consequence of the entry into force
of Legislative Decree no. 101 of August 10, 2018; in 2020, the System of Rules update addressed, among other
things, the issue of handling employee data in connection with the Covid-19 epidemic emergency;
■
the updating of the numerous policy notice texts on personal data processing, provided by TIM and the other
Group companies to different types of Data Subjects (e.g. customers, employees, visitors).
A specific training project was put in place to raise awareness in the various company departments and illustrate
the policies and procedures issued for applying the legislation on personal data processing. This training was
provided during 2019. In 2020 training was provided to the Sales Departments in relation to the issue of
commercial contacting.
COVID-19 emergency
In light of the COVID-19 emergency, the Data Protection Authority issued provisions and clarifications relating to
the processing of employees' personal data in the workplace.
TIM has ensured it is in compliance with the provisions through various activities. In particular:
■ an ad hoc policy has been drafted relating to the processing of personal data collected through real time
temperature checks of employees and all those who access company premises in accordance with the
provisions of the Prime Minister’s Decree of April 26, 2020;
■
the self-certification to be submitted by employees, certifying whether in the last 14 days they have had
contact with anyone who has tested positive for Covid-19 or coming from areas at risk according to the WHO
guidelines, has been brought into compliance with the Data Protection Authority requirements. The
declaration provides that only the necessary, adequate and relevant data regarding the prevention of Covid-
19 infection is collected without requesting additional information in relation to the person who tested
positive, specific locations visited or other details relating to the private sphere;
■ guidance has been given regarding the processing of personal data of TIM employees and Group companies
collected during serological tests and the related consents to allow third parties to process the information
only if the test is positive.
Spectrum (frequency bands)
In view of the fact that the estimated End of Service date for GSM technology is December 31, 2029, and that
the use of UMTS technology is in very rapid decline, in May 2020 the Italian Ministry of Economic Development
published a public consultation on the End of Sale of products based exclusively on GSM and UMTS technologies
In July 2020, AGCom issued a decision in favor of renewing for eight years until 2029 the rights to use of the TIM,
Vodafone, Iliad and Wind/H3G FDD spectrum in the 2100 MHz band (2x15MHz for TIM and Vodafone, 2x10 MHz
for Iliad, 2X5 MHz for Wind/H3G). According to the rules established by AGCom, the renewal cost for TIM, to be
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paid in 2021, is approximately 240 million euros, with the option to pay in 8 annual installments against a
surcharge totaling approximately 277 million euros.
Following an administrative judgment regarding a different frequency band (3.4-3.6 GHz) in September 2020,
AGCom, as a prudential measure, formally reopened the procedure for determining the renewal price of 2100
MHz frequencies.
In August 2020, following a public consultation launched in May of the same year, AGCom confirmed June 30,
2022 as the end date for the specific GSM coverage obligations, with December 31, 2029 as the GSM End of
Service date.
Regulatory measures for COVID-19
Based on the government "Cura Italia" decree, on March 18, 2020, AGCom adopted a first package of measures
aimed at guaranteeing telecommunication services; this package takes into account the current health
emergency situation and growth in the consumption of services and network traffic.
Two of the four permanent technical working groups set up by AGCom concern:
■
improvement and security of telecommunication networks and services; and
■ protection and facilitation of the use of digital services by consumers.
In implementation of the Decree, which allows AGCom to derogate from some regulatory conditions to better
deal with public interest issues during the current health emergency period, AGCom has defined measures to
improve the conditions of TIM's offer of regulated network services, by providing:
■ a temporary reduction in the regulated wholesale costs of the Ethernet band for copper and fiber access
■
the maximum commitment for the accelerated supply of transport equipment and VLANs necessary for
increasing the bandwidth and for following up the early opening of new NGA cabinets.
In addition, TIM must make its infrastructure available throughout Italy, responding to consumer requests
without discrimination in relation to the country's technology and geographical areas.
AGCom has also asked all operators to make all possible efforts to contribute to the management of the state
of emergency, indicating actions deemed relevant such as:
■
trying to guarantee an increase in the average bandwidth per customer on the fixed network of at least 30%
in the shortest possible time, where technically possible;
■ making every effort, in the absence of coverage with an NGA fixed network and at the request of the
condominium or the legal person responsible for the office, to activate, without any increase in costs until
June 30, 2020, every possible access solution;
■
recommend to final consumers that they use mainly fixed-line access at home (including wi-fi) so as not to
overload the mobile network.
In relation to network adjustments, TIM has significantly increased bandwidth capacity both towards the Big
Internet and on national nodes, improved mobile coverage and is increasing the coverage of the UBB fixed
network.
In relation to the commercial offer for alternative operators, TIM has made price reductions available for the
Ethernet band on the copper and fiber network, is managing requests for bandwidth increase received by the
Other Authorized Operators (AOA) with a high priority and has allowed free and direct access to the TIM data
network through public peering.
Finally, to counter the spread of Covid-19, TIM has defined an operating procedure for safely carrying out
technical network works.
On the other hand, operators voluntarily proposed different measures to their customers. In particular, TIM has
proposed free voice calls, free Gigabits and many other voluntary initiatives in support of remote working and
distance learning.
In view of the continuing state of emergency related to the containment of the Covid-19 pandemic, TIM asked
the Authority to assess, in compliance with the provisions of art. 82 of the “Cura Italia” decree and in accordance
with the guidelines set out in Resolution no. 131/20/CONS, an initiative that provides for the enabling of ADSL
browsing, at no cost to the user, for access lines on which TIM’s “Voice” offer is active. Following consultation
with the market and consumer protection associations, by means of Resolution no. 384/20/CONS AGCom
approved TIM’s initiative, albeit subject to compliance with a number of precautions and clarifications regarding
both transparency vis-à-vis the end user and competitive aspects.
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Extension of the Golden Power rule to 5G technology services
Law Decree Law March 25, 2019, no. 22 and Law Decree July 11, 2019, no. 64
The Law Decree of March 25, 2019, no. 22 amends the Law Decree March 15, 2012, no. 21, converted, with
amendments, by Law May 11, 2012, no. 56 and classifies 5G development as a strategic activity in relation to
defense and national security, which requires stricter controls.
In particular, the following are subject to special powers:
a. the agreement of contracts or agreements for the purchase of goods or services relating to the design,
construction, maintenance and management of 5G service networks;
b. the acquisition of high-tech components necessary for implementation or management;
c.
factors indicating the existence of vulnerabilities that could compromise the integrity and security of
networks and the data sent on them.
In particular, the agreement of contracts and acquisition of high intensity components from subjects outside the
European Union, carry an obligation to notify the Prime Minister to allow a timely exercise of the veto power.
Failure to comply with this notification obligation carries a pecuniary administrative fine equal to twice the value
of the transaction and in any event not less than 1 percent of the turnover of the last financial year.
The Law Decree also provides for the Prime Minister to adopt a decree (DPCM) to identify measures to simplify
the notification methods.
In relation to this, on June 27, 2019, the Government launched a public consultation, for the adoption of the Prime
Ministerial Decree, to take contributions from interested parties on the following issues:
a.
identification of simplified notification methods, possibly differentiated (for example, based on activity
performed, services offered or type of infrastructure concerned);
b. definition of simplified procedures and terms for investigations, in relation to specific circumstances.
Contributions were submitted in July 2019.
On July 11, 2019, Law Decree no. 64, which introduced further changes to the provisions of Law Decree March 15,
2012 no. 21, was converted, with amendments, by the Law of May 11, 2012, no. 56.
In relation to 5G in particular, the new Decree introduces the obligation to notify the Prime Minister, making full
disclosure within ten days of the finalization of a contract or agreement concerning the purchase of goods or
services relating to the design, construction, maintenance and management of 5G networks or the acquisition
of high-tech components for the aforementioned construction or management, when agreed with subjects
outside the European Union, to allow the possible exercise of the veto power or the imposition of specific
requirements or conditions.
The Prime Minister will communicate any possible veto or the imposition of specific requirements or conditions
within forty-five days of notification.
Due to the failure to convert the aforementioned Law Decree no. 64 into law, the Golden Power regulations (both
general and 5G specific) have been further integrated by the provisions of the Law Decree of September 21, 2019,
no. 105, converted with the Law of November 18, 2019, no. 133, containing "Urgent provisions on the cybernetic
national security perimeter". In particular, it provides that the obligations aimed at ensuring cyber security also
apply to companies subject to 5G specific notification obligations. Furthermore, the terms for the assessment of
the possible exercise of special powers by the Government have been extended.
Law Decree no. 23 of April 8, 2020 (adopted with amendments by law no. 40 of June 5, 2020) substantially
amended the general Golden Power regulation: also in relation to the communications sector, the obligation to
notify of participations by foreign entity companies, including those outside the European Union, has been
extended, in cases where the transaction is likely to determine the control over the company in which the equity
investment was purchased.
On December 23, 2020, Decree no. 180 of the Presidency of the Council of Ministers was adopted, containing the
new regulations for the identification of assets of strategic importance in the energy, transport and
communications sectors, subject to the exercise of government powers under the Golden Power.
The measure confirms what has already been established by the previous regulations on telecommunications
and amends some provisions relating to other sectors of strategic importance to Italy.
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Urgent measures for simplification and digital innovation
Decree Law no. 76 of July 16, 2020
Decree Law no. 76 of July 16, 2020 introduced numerous measures aimed at accelerating the process of
administrative simplification and digital innovation also in the electronic communications sector.
In particular, the most important provisions include those that reaffirmed that the State is responsible for the
limits of exposure to electric, magnetic and electromagnetic fields, attention values and quality objectives.
Mayors will therefore not be able to issue Orders to introduce blanket bans on the installation of systems in the
local area.
In addition, the decree simplifies the authorization procedures for the installation of temporary mobile telephony
systems, for the excavation works necessary for laying fiber optic, as well as the procedures for obtaining
authorizations to carry out interventions in areas subject to environmental restrictions.
Budget Law 2021
Italian Law no. 178 of December 30, 2020
The 2021 Budget Law contains numerous provisions of interest to the telecommunications industry.
Measures relating to employment include an increase in the Fondo Nuove Competenze (New Skills Fund), the
extension of the rules governing the expansion contract with an increase to the number of beneficiaries, and the
extension of the possibility to use the incentive redundancy scheme from 4 to 7 years set out by art. 4 of Law no.
92 of June 28, 2012.
The Law also provides incentives for investments made in south Italy (exemption from social security
contributions by private employers, extension of tax credit for companies that acquire assets functional to
technological and digital transformation and for research and development activities), as well as measures
aimed at enhancing educational and digital innovation in schools.
In terms of tax, there has been regulatory change on the single property fee for permanent occupancy with
cables and pipes for the provision of public utility services (governed by the 2020 Budget Law). The “mediated
occupancy” taxation criterion was introduced, which stipulates that, in the event of joint use of infrastructure by
companies providing public services that are not the owners of the above-mentioned licensed infrastructure,
each company will be required to pay the fee based on its respective use.
Brazil
Revision of the model for the provision of telecommunications services
In April 2016, the working group composed of the Ministry of Science, Technology, Innovation and
Communications (MCTIC), now called the Ministry of Communications (Minicom), and Anatel (Brazilian National
Telecommunications Agency) published its final report with a “diagnosis” on the telecommunications industry
and proposed guidelines for the revision of the Brazilian regulatory model. A bill (PLC 79/2016) was then
presented to the National Congress of Brazil to propose amendments to the General Telecommunications Law.
Law 13.879 was approved in 2019 and entered into force on October 4, 2019 establishing a new regulatory
environment for the regulation of telecommunications in Brazil. This is the most significant change in 20 years.
The new telecommunications framework allows fixed-line licensees to adapt their contracts from a concession
scheme to an authorization scheme. This transition from concession to authorization must be requested by the
licensee and requires the approval of Anatel. In return, licensees must, among other conditions, make a
commitment to investment in expanding fixed broadband telephony services to areas with no adequate
competition for these services, in order to minimize inadequacies and inequalities between areas of Brazil.
The change also affects the roles for authorizing the use of radio frequencies, establishing subsequent renewals
(currently limited to only one) and allows the exchange of radio frequencies between operators (secondary
spectrum market).
In June 2020, Decree 10402 was published, which governs the procedure for adapting the concession to the
authorization regime, as well as the definition of the criteria for calculating investment commitments. The
Decree also established guidelines for the extension of radio frequency authorization, which will be held by
Anatel to guarantee greater security for investments in the sector.
Another series of important rules was established by Decree 9612/2018 (“Connectivity Plan”), with a series of
guidelines for the adaptation of conduct terms, the onerous concession of spectrum authorization and
regulatory acts in general, including: (i) expansion of high capacity telecommunications transport networks; (ii)
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increased coverage of mobile broadband access networks; and (iii) broadening the coverage of fixed broadband
access network in areas with no Internet access through this type of infrastructure. This Decree also establishes
that the network resulting from the commitments must be shared from the moment it enters into service, except
where there is adequate competition in the relative reference market.
In relation to the deadlines for the development of pipelines not compliant with current regulations,
authorizations for user licenses to radio frequencies, and the introduction of other statutory provisions generally,
planned investments (as identified by Anatel and approved by the MCTIC) will focus primarily on the expansion
of mobile and fixed-line broadband networks and on specific areas of the country. Telecommunications networks
built under the investment plan will have shared access.
Revision of Competition Rules
In November 2012, the Brazilian regulator Anatel introduced instruments for the market analysis, the
identification of operators with significant market power (SMP) and the consequent imposition of ex-ante
obligations (Plano Geral de Metas de Competição – PGMC).
Anatel has established a number of asymmetrical obligations on all markets for operators with a Significant
Market Power (SMP).
In July 2018, Anatel published the new PGMC revising some points and defining two new markets: (i)
interconnection for mobile services; and (ii) high capacity data transmission. TIM Brasil has been identified as the
SMP operator for: (i) mobile network terminals; (ii) national roaming; and (iii) high capacity data transport (in five
municipalities).
Measures adopted for the SMP operator in these markets include a requirement to offer national roaming
services for non-SMP operators. The obligation for vertically integrated fixed network operators with an SMP to
access the copper network (e.g. leased lines, bitstream and full unbundling) has been maintained.
Since 2016, fixed interconnection rates have been based on a cost-oriented approach. In December 2018, Anatel
published the relevant deeds nos. 9,918/2018 and 9,919/2018, which determined specific benchmark tariffs
effective February 2020. Prior to their entry into force, Anatel began reviewing these deeds and, on February 24,
2020, published the new deeds nos. 986/2020 and 987/2020.
Revision of the Service Quality Regulation
In December 2019, Anatel approved the new Telecommunication Services Quality Regulation (RQUAL), based on
a reactive regulation. In this new model, quality is measured on the basis of three indicators - a Service Quality
Index, a Perceived Quality Index and a User Complaints Index - and operators are classified into five categories
(A to E). Based on this reactive regulation, Anatel will be able to take measures according to specific cases, such
as consumer compensation, the adoption of an action plan or the adoption of precautionary measures to ensure
quality standard improvements.
The new regulation is expected to enter into force by 2021; until the work group consisting of Anatel, operators,
and the Quality Assurance Support Authority (ESAQ) defines the objectives, criteria, and reference values of the
indicators, Anatel will continue to monitor the old indicators that maintain similarity to the new ones established
in the new RQUAL. The criteria and reference values will be established in the next 12 months from the launch
of the Working Group.
700 MHz and Analog TV switch off
In September 2014, TIM won the tender for the award of the 700 MHz (4G/LTE) band frequencies, for a price of
1.7 billion reais, and with additional commitments of 1.2 billion reais (in four annual installments, adjusted for
inflation) as a contribution to the consortium established by the tender (“EAD”) for all the operators (TIM, Algar,
Claro and Vivo) awarded the contract for managing the freeing up of the 700 MHz band through the switch off
of analog TV, the redistribution of channels and the clean-up of interference. To that end, the first payment (370
million reais) was made in April 2015 and another two payments (for a total of 860 million reais) were both made
in January 2017, while the final installment (142 million reais) was duly paid in January 2018.
Since 2016, the spectrum has been freed up for mobile operation and in June 2019, all municipalities became
available, meaning that 100% of the Brazilian population is covered by the 700 MHz LTE network.
Throughout 2020, EAD will have to meet the remaining auction obligations, concluding the relocation of
broadcasters and provisions on interference solutions relating to completion of the switch off process and the
full availability of the spectrum for mobile operators.
"Marco Civil da Internet" and Network Neutrality
The “Marco Civil da Internet” (MCI), approved in April 2014 by Brazilian Law no. 12965/2014, defined network
neutrality as the “duty to treat different data packages in the same way, without distinction based on content,
origin and destination, service, terminal or application”. On May 11, 2016, Brazilian Presidential Decree no.
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8771/2016 was published, which regulates exceptions to the principle of net neutrality, set out in article 9 of the
mentioned law.
In August 2017, the oversight board (“GS”) of the Administrative Council for Economic Defense (CADE) handed
down a decision in favor of Brazil’s mobile TLC providers, which excluded the imposition of fines in relation to a
preliminary investigation into alleged unfair competition in “zero rating” offers and promotions on Internet data
consumption. The oversight board heard the depositions of various parties, including the Ministry of Science,
Technology, Innovation and Communications (MCTIC) and Anatel, and concluded that Internet business models
should not be banned ex-ante, but instead should be monitored comprehensively to prevent any cases of unfair
competition.
Strategic Digital Transformation and the Internet of Things
In March 2018, the E-Digital Decree (9319/2018 Decree) was published, in order to identify about 100 strategic
actions to encourage competition and the country’s level of online productivity, while increasing connectivity
and digital inclusion levels. These actions seek to address the digital economy’s main strategic questions,
including connectivity infrastructure, data use and protection, the IoT and IT security.
The Decree on the National Plan for the Internet of Things (Decree 9854/2019) was published in June 2019 to
regulate and promote this technology in Brazil. The IoT is referred to as the “infrastructure integrating the
provision of value-added services with the ability to physically or virtually connect things using devices based on
existing information and communication technology and their evolution, with interoperability. The Decree lists
the following topics, defining them as necessary to further support the National Plan for the Internet of Things:
(i) science, technology and innovation; (ii) international integration; (iii) education and professional training; (iv)
connectivity and interoperability infrastructure; (v) regulation, security and privacy; (vi) economic feasibility.
In order to develop an IoT environment in the country, Law 14,108/2020 was passed. This law exempts base
stations and equipment that integrate machine-to-machine (M2M) ecosystems from FISTEL (an administrative
tax collected by Anatel) for 5 years and, in addition, extinguishes the previous license. The definition and
regulation of M2M communication systems are established by Anatel.
Data protection
On August 14, 2018, the Brazilian President promulgated the General Data Protection Law (Law 13709/2018). The
new provisions, as promulgated by the President, are closer to the GDPR, including significant extra-territorial
application and considerable fines of up to 2% of the Company's global turnover of the previous financial year.
In December 2018, Provisional Measure 869/2018 passed by the former President amended Law 13709 to create
the National Data Protection Authority (ANPD), within the structure of the Presidency of the Republic, which
implies greater control by the State and, among other aspects, extending the entry into force of the Law to 24
months (August 2020), within which all legal persons must adjust their data processing activities to these new
regulations.
In July 2019, Provisional Measure 869/2018 was converted into Law 13853, which provides for the maintenance
of the ANPD, as a federal public administration body, part of the executive branch, with a transitory nature, for
at least 2 years, when it may be transformed, by the executive branch, into an indirect federal public
administration entity”.
In June 2020, draft law no. 1,179/2020 was converted into draft law no. 14,010/2020, which postponed the entry
into force of the General Data Protection Law, only for the provisions related to fines and penalties, to August
2021. The other provisions of the law take effect from August 2020, as originally proposed. In addition, Decree
mo. 10,474/2020 (National Data Protection Authority) came into force in August 2020, establishing the ANPD
(Autoridade Nacional de Dados Pessoais), which is responsible for, among other things: developing guidelines for
the National Data Protection Policy; supervising companies and applying sanctions; and issuing regulations and
procedures on personal data protection.
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COMPETITION
Domestic
The market
During 2020, the Italian TLC market continued to contract in value due to strong competition and the effects of
the health emergency.
The onset of the health emergency caused by the SARS-CoV-2 pandemic, which hit Italy before other European
countries, has had consequences on the economy, social behaviors and digital habits, also generating effects on
the market and the telecommunications industry.
From the beginning of March to mid-May, during the lockdown period, restrictions were applied to economic
activities and social behaviors, which triggered significant events with effects on the use of ICT services, such as
the wide diffusion of smart working at Italian companies and the public administration, a strong growth in the
use of most digital services including those of public administration, a sudden increase in video communication
services for private and work needs, and a massive diffusion of distance learning services, made necessary by
the temporary interruption to in-person classes at universities and in all schools of all levels.
The main effect on telecommunications networks was a sudden increase in traffic, which from March 15-30,
2020 exceeded 70%, with peaks of 90% (particularly during working hours), highlighting a strong unexpressed
potential in the use of digital tools that came to light due to restrictions.
In terms of long-term trends, the development of Broadband and UltraBroadBand continues to be the main
factor of market evolution. The greater availability of UltraBroadBand will allow operators to develop convergent
offers that combine Media & Entertainment, IT and Digital services with TLC services. The offer of these services
will further boost adoption by broadband customers.
The Italian telecommunications market remains highly competitive, with the greatest impact of market
dynamics on voice and data connectivity services. Furthermore, in the new digital world, telecommunications
operators have to deal with Over The Top - OTT and device manufacturers with completely different competitive
assets and logic.
The traditional business models of the various market players are, therefore, changing over time to exploit new
opportunities and meet the challenges posed by the new entrants:
■
■
the Media & Entertainment sector, with the growing importance of the Internet as a complementary
distribution platform, is seeing profound transformations. In 2020, the Italian television market saw the
further development of over-the-top (OTT) on demand video services (VOD and SVOD), combined with the
growing diffusion of OTT services that include linear video content. The central role of the broadband
network in these new use modes sees players such as the above-mentioned OTT, telecommunications
operators and Consumer Electronics manufacturers take on an increasingly important role;
in the Information and Communication Technology market, where, although there was overall growth in
2020, the traditional fixed-line and mobile TLC component contracted, in favor of IT components related to
digital transformation, especially for large companies, for example with the adoption of Cloud solutions for
their technological infrastructures. In this sector, telecommunications operators have been strengthened,
including through partnerships, to take advantage of the growth that, in the next few years, will be driven by
the digitalization of SMEs and regulatory changes, such as the increasingly stringent rules relating to IT
security;
■ Consumer Electronics manufacturers are developing services that can be accessed through the Internet by
leveraging handset ownership and user experience management, breaking the relationship between
customers and TLC providers.
With regard to the current positioning of telecommunications providers in converging markets, on the other
hand, as partially described above, the following is taking place with different levels of progress:
■ development of new Media & Entertainment services (TV, Music, Gaming) and new Digital services (Smart
Home, Digital Advertising, Mobile Payment-Digital Identity);
■ development of Innovative Services in the IT market, particularly Cloud, IoT and Cybersecurity services.
After the frequencies were awarded in 2018 and the launch of the service by TIM and Vodafone in 2019, 2020
was characterized by the progressive deployment of the 5G network and the launch of 5G by WindTre, Fastweb
and Iliad.
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All operators are moving to take advantage of the various opportunities in new vertical markets (e.g. energy &
utilities, smart cities, smart manufacturing, automotive, eHealth) and provide new services, enable new
production processes and increase efficiency in optimized product management.
Competition in Fixed-line Telecommunications
The fixed-line telecommunications market has continued to see a decline in access and voice revenues, while
broadband and ultra-broadband revenues have shown growth. In recent years, service providers have
concentrated mainly on expanding the penetration of broadband and ultra-broadband services and defending
Voice revenues by introducing bundled voice, broadband and service deals in a highly competitive environment
with consequent pricing pressure.
After four quarters of steady decline, in June 2020 the total number of fixed lines showed a significant increase
compared to the previous quarter, followed by a similar reduction in September, signs of likely stabilization.
The market scenario involves significant infrastructural activities, by TIM and other parties, firstly Open Fiber (a
company controlled by ENEL and CDP), Infratel (a company belonging to the Ministry of Economic Development)
and Fastweb who have presented and are still working on extensive development plans for their fiber optic
telecommunications networks in many areas of the country.
On August 31, 2020, TIM announced the agreement with KKR Infrastructure and Fastweb for the establishment
of FiberCop, the NewCo to which TIM’s secondary network will be conferred (from the roadside cabinets to
customers’ homes) along with the fiber network developed by FlashFiber, the joint venture in which TIM has an
80% and Fastweb a 20% stake.
On the same day, TIM signed a Letter of Intent with CDP Equity (CDPE) intended to implement the wider plan for
a single national network (AccessCo) through the merger of FiberCop and Open Fiber. Under the terms of the
agreement, TIM will own at least 50.1% of AccessCo and the independence and third-party status of the
company will be guaranteed by a shared governance mechanism with CDPE.
Both initiatives are open to co-investment with other operators.
Competition in the Italian fixed-line telecommunications market is also characterized by the presence of other
service providers besides TIM, such as WindTre, Fastweb, Vodafone, and Tiscali, which have business models
focused on different segments of the market. 2020 saw Sky’s entry into UltraBroadBand connectivity with its Sky
WiFi offering.
In 2020, Sky’s offering was based on a wholesale agreement signed with Open Fiber. It announced an extension
to other wholesale operators including Fastweb.
At the end of 2020, fixed accesses in Italy (including OLO Infrastructured and FWA-Fixed Wireless Accesses)
were estimated to be slightly down on the previous year. Competition in the access market led to a gradual
reduction in TIM's market share.
With regard to the broadband market, there was a progressive increase in the penetration of UltraBroadBand
lines with speeds above 30 Mbs compared to the total Broadband and UltraBroadBand lines; in September 2020
they reached a penetration rate of 64.4%. The spread of broadband continues to be driven by the penetration of
enabled devices (such as Smart TVs, Smart Speaker, connected devices), but also by growing demand for fast
connections and access to new over-IP services that are becoming increasingly widespread (Media &
Entertainment, IT and Digital services).
Competition in Mobile Telecommunications
The mobile market has continued to see the rationalization of second and third SIM cards for human
communications and growth of SIM cards for machine to machine (M2M) communications.
Alongside innovative services that have already caught on and are under full-scale development, as in the case
of mobile apps, there are other market environments, associated with the development of mobile broadband,
with major potential for growth in the medium term, such as the Internet of Things and mobile payment.
The competitive scenario of the Italian mobile telecommunications market in 2020 continues to be characterized
by an aggressive offer from the operator Iliad in terms of price and volume of data, albeit in slight moderation
compared to the previous two years. The operator continues to win over customers and consequently gain a
market share to the detriment of other infrastructured operators, mainly WindTre, while TIM has shown a greater
resilience, thanks also to the contribution from the second brand, Kena Mobile.
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The foregoing has continued to lead to a drop in service spending, even though competitive pressure on tariffs
is easing with the main mobile operators tending to increase the prices of bundle offers in the face of the increase
in quality of services offered by the network performance.
The competition on 5G has started with the simultaneous presence of TIM, Vodafone, WindTre, Iliad and Fastweb
for mobility offers and a progressive coverage of the main cities. The deployment of 5G in the business segment
to enable specialized solutions for vertical markets has also begun, with 1 in 5 companies already taking action
to use this new technology as an enabler of the digitalization of production processes.
Brazil
In 2020, the macroeconomic scenario was characterized by an unusually harsh change in paradigm, which led
to new behavior and consumer habits. As in many countries, the lock-down protocols had a negative impact on
the economy, increasing uncertainty, postponing investments, reducing income and employment in a bid to
prevent the loss of human lives. On the other hand, the digital transformation has reached another level, putting
telecommunications companies firmly in the spotlight, offering up new possibilities and bringing people into
contact with each other, driving on advanced services like food and drug deliveries, the streaming of contents
and video calls.
Although we continue to be in a situation of political uncertainty, above all in respect of the capacity of the
government to fulfill some of the liberal economic programs such as the administrative and tax reforms, and to
manage the impacts of the COVID-19 pandemic, the Brazilian economy looks to a recovery. Employment, which
achieved poor results, just like in the 2016 recession, is back at the levels it recorded at the start of 2020. Despite
the fact that negative growth is expected for the Brazilian GDP in 2020, for 2021 an economic recovery is forecast
in excess of 3%. As confirmation of this positive sentiment, the Bovespa index (“IBOV” - the Brazilian stock
market indicator) shows the confidence of the market, achieving pre-pandemic results.
Despite the improvement in financial performance indicators, economic conditions are still difficult, with the
budget deficit and increasing debts (for central governments, federal states and municipalities) carrying a risk
that can only be managed with more structural reform, for which Congress's approval is needed. The current
government has recognized the need to maintain the reforms as a top priority, together with the privatization of
some companies (such as Eletrobras, Telebras, Correios and DataPrev) to allow constant growth of the economy
in the coming years and to improve infrastructure investment.
The mobile telecommunications sector has seen some rationality prevail in the market and in competition, with
service providers staying focused on developing their offers on the characteristics and service range of their
commercial offers, rather than pursuing aggressive pricing policies. Finally, but no less important, the reduction
from 4 to 3 main mobile players and the increase in infrastructure companies can lead to a better allocation of
capital and return on investments.
In the prepaid segment, the main objective of market players has been to raise the percentage for the use of
services by leveraging the ongoing SIM card consolidation process in the market, by encouraging migration to
weekly (and monthly) plans or hybrid plans (Controle postpaid) by offering a range of bundled service packages
on the basis of the different needs of customers (unlimited voice calls or data packages). The strategy’s aim is
to improve the mix of the customer base and guarantee greater stability (together with reducing the churn rate)
and growth of the ARPU. The market’s prepaid customer base had dropped by -4.6% YoY in November 2020.
The postpaid mobile segment records an increase in the customer base, mainly supported by the hybrid Controle
segment (in particular by migrations of prepaid customers), although “pure” postpaid lines have also recorded a
certain degree of growth. This growth is based on offer segmentation strategies, through the introduction of
distinctive characteristics in the use of data services (e.g. unlimited use of data on specific apps such as
WhatsApp, Facebook, Twitter, Netflix, etc.) in pursuing a “More for More” policy logic that aims to guarantee a
greater stability of prices and an effective repositioning of the customer base on higher value offers (voice + data
+ contents). The total market postpaid customer base (excluding M2M) had grown by +4.7% YoY in November
2020.
Service quality is still an element of differentiation. Telecommunication providers that have invested more in the
development of 4G networks (coverage and capacity) and in the improvement of processes shaping customers’
experience will have a greater ability to apply premium prices, as customers raise their expectations and place
growing importance on the quality of data services and higher value content. The main mobile operators already
provide 4G coverage for over 98% of the Brazilian population (up to November 2020, latest data available), with
the three main players offering average 4G availability in excess of 79% (according to the July 2020 Opensignal
report).
The fixed broadband market recorded a growth of +10.1% on an annual basis in November 2020, mainly driven
by smaller market operators (+39.6% YoY), which tend to offer cheaper services, particularly in areas where
traditional operators have limited infrastructures. As a result, traditional incumbent operators are suffering sharp
downturns to their customer base. Penetration rates across the population are still quite low (approximately 51%
Report on Operations of the
TIM Group
Competition
59
of houses) when compared to several countries, which means there are good opportunities for medium-term
growth, underpinned by the improving macroeconomic situation.
In this context, since 2017, TIM adopted a business strategy for TIM Live to leverage its fiber network
infrastructure, offering ultra-broadband Internet services, through FTTC and notably FTTH, not only in some of
the largest cities of Brazil, but also in cities where opportunities arise for such high-quality service. Therefore, TIM
Live has increased its presence, reaching 32 cities by the end of November 2020 and the figure is expected to
continue growing over the next few years. TIM Live had a customer base of more than 640 thousand users
(growth of 15.4% YoY). In order to achieve faster, smarter growth of the footprint, TIM is evolving organically to
create an SPV Open Infra, together with an investor partner and leveraging its last mile fiber infrastructures.
Report on Operations of the
TIM Group
Competition
60
CONSOLIDATED FINANCIAL POSITION AND
CASH FLOWS PERFORMANCE
Non-current assets
■ Goodwill: decreased by 236 million euros, from 23,083 million euros at December 31, 2019 to 22,847 million
euros at December 31, 2020, principally due to the effect of the negative exchange difference relative to the
goodwill of the Brazil Business Unit1 (-247 million euros). During 2020, there was also an increase of 11 million
euros due to the acquisition of control and related consolidation with the integral method, starting from May
21, 2020, of Noovle S.r.l. and its subsidiaries (Domestic Business Unit).
Further details are provided in the Note "Goodwill" to the Consolidated Financial Statements at December
31, 2020 of the TIM Group.
■
Intangible assets with a finite useful life: these fell by 927 million euros, from 7,667 million euros at the end
of 2019 to 6,740 million euros at December 31, 2020, representing the balance of the following items:
•
•
•
capex (+ 1,197 million euros);
amortization charge for the year (-1,627 million euros);
other disposals, exchange differences and other changes (for a net negative balance of -497 million euro,
of which -496 million euro of exchange differences essentially relating to the Brazil Business Unit).
■ Tangible assets: these fell by 870 million euros, from 14,011 million euros at the end of 2019 to 13,141 million
euros at December 31, 2020, representing the balance of the following items:
•
•
•
capex (+2,138 million euros);
amortization charge for the year (-2,301 million euros);
other disposals, exchange differences and other changes (for a net negative balance of -707 million euro,
of which -701 million euro of exchange differences essentially relating to the Brazil Business Unit).
■ Rights of use of third-party assets: these fell by 502 million euros, from 5,494 million euros at the end of
2019 to 4,992 million euros at December 31, 2020, representing the balance of the following items:
•
investments (+74 million euros) and increases in lease contracts (+1,288 million euros). Increases in lease
contracts include 368 million euros, related to the recognition of new rights of use of INWIT S.p.A. assets,
following the coming into effect on March 31, 2020 of the new Master Service Agreement (MSA) between
TIM S.p.A. and INWIT S.p.A. (now jointly controlled), which regulates hospitality services on INWIT sites;
•
amortization charge for the year (-688 million euros);
• disposals, exchange differences and other changes (for a negative net balance of -1,176 million euros)
including the derecognition of rights of use relative to previous lease agreements stipulated with
Vodafone, equal to 266 million euros, as a result of the new Master Service Agreement (MSA) between
TIM S.p.A. and INWIT S.p.A. coming into effect. Exchange differences are negative for -466 million euros
and mainly relate to the Brazil Business Unit. Other changes included the lower value of the rights of use
recorded as a result of contractual changes during the year.
■ Other non-current assets: increased by 8,961 million euros mainly due to the booking by the Parent
Company TIM S.p.A. of deferred tax assets following the tax recognition of higher values booked in
accordance with Decree Law 104/2020, Art. 110, paragraph 8 and 8 bis (6,569 million euros). Other non-
current assets increased also due to the recording of the investment in the joint venture INWIT (2,713 million
euros at December 31, 2020), following its deconsolidation as a result of the dilution by the TIM Group of the
investment in the company’s capital, consequent to the merger by incorporation of Vodafone Towers S.r.l.
into INWIT.
1The spot exchange rate used for the translation into euro of the Brazilian real (expressed in terms of units of local currency per 1 euro) was 6.3768 at
December 31, 2020 and 4.52808 at December 31, 2019.
Report on Operations of the
TIM Group
Consolidated Financial Position and Cash Flows Performance
61
Consolidated equity
Consolidated equity amounted to 28,840 million euros (22,626 million euros at December 31, 2019), of which
26,215 million euros attributable to Owners of the Parent (20,280 million euros at December 31, 2019) and 2,625
million euros attributable to non-controlling interests (2,346 million euros at December 31, 2019). In greater detail,
the changes in consolidated equity were the following:
(million euros)
At the beginning of the year
Total comprehensive income (loss) for the year
Dividends approved by:
TIM S.p.A.
Other Group companies
Change in the scope of consolidation
INWIT – deconsolidation
Daphne 3 - capital increase
Issue of equity instruments
Other changes
At the end of the year
12.31.2020
22,626
5,836
(378)
(316)
(62)
—
(644)
1,334
43
23
28,840
12.31.2019
21,747
1,206
(296)
(166)
(130)
(44)
—
—
4
9
22,626
Report on Operations of the
TIM Group
Consolidated Financial Position and Cash Flows Performance
62
Cash flows
The Net financial debt carrying amount amounted to 23,326 million euros, down by 4,342 million euros compared
to December 31, 2019 (27,668 million euros).
The table below summarizes the main transactions that had an impact on the change in adjusted net financial
debt:
Change in adjusted net financial debt
(million euros)
EBITDA
Capital expenditures on an accrual basis
Change in net operating working capital:
Change in inventories
Change in trade receivables and other net receivables
Change in trade payables
Changes of mobile licenses acquisition payable/spectrum
Other changes in operating receivables/payables
Change in provisions for employee benefits
Change in operating provisions and Other changes
Net operating free cash flow
Of which Operating Free Cash Flow related to the mobile licenses
acquisition/spectrum
% of Revenues
Sale of investments and other disposals flow
Share capital increases/reimbursements, including incidental
expenses
Financial investments
Dividends payment
Increases in lease contracts
Finance expenses, income taxes and other net non-operating
requirements flow
Impact of the application of IFRS 16 at 1/1/2019
Reduction/(Increase) in adjusted net financial debt from
continuing operations
Reduction/(Increase) in net financial debt from Discontinued
operations/Non-current assets held for sale
Reduction/(Increase) in adjusted net financial debt
Equity Free Cash Flow
(million euros)
NET OPERATING FREE CASH FLOW
Mobile licenses acquisition/spectrum
Financial management
Income taxes and other
EQUITY FREE CASH FLOW
2020
(a)
6,739
(3,409)
772
20
484
(193)
(110)
571
(628)
(170)
3,304
(110)
20.9
1,294
1,164
(25)
(390)
(1,288)
283
—
4,342
—
4,342
2019
Changes
(b)
8,151
(3,784)
(549)
129
—
(28)
(18)
(632)
(246)
235
3,807
(18)
21.2
160
10
(5)
(279)
(1,140)
(1,414)
(3,553)
(2,414)
16
(2,398)
(a-b)
(1,412)
375
1,321
(109)
484
(165)
(92)
1,203
(382)
(405)
(503)
(92)
(0.3) pp
1,134
1,154
(20)
(111)
(148)
1,697
3,553
6,756
(16)
6,740
2020
2019
Changes
3,304
110
(1,186)
186
2,414
3,807
18
(1,372)
(122)
2,331
(503)
92
186
308
83
Report on Operations of the
TIM Group
Consolidated Financial Position and Cash Flows Performance
63
In addition to what has already been described with reference to EBITDA, the change in adjusted net financial
debt for the first half of 2020 was particularly impacted by the following:
Capital expenditures and for mobile telephone licenses/spectrum
Capex amounted to 3,409 million euros in 2020 (3,784 million euros in 2019).
Capital expenditures and for mobile telephone licenses/spectrum are broken down by operating segment as
follows:
(million euros)
Domestic
Brazil
Other Operations
Adjustments and eliminations
Consolidated Total
% of Revenues
In particular:
2020
2,748
661
—
—
3,409
21.6
% weight
80.6
19.4
—
—
100.0
2019
Changes
% weight
77.0
23.0
—
—
100.0
2,912
872
—
—
3,784
21.1
(164)
(211)
—
—
(375)
0.5pp
■
■
the Domestic Business Unit posted investments of 2,748 billion euros, -164 million euros, -107 million euros
in organic terms, compared to FY 2019, with a view to optimizing processes, particularly as a result of the
restrictions imposed by the COVID-19 emergency;
the Brazil Business Unit reported expenditures equal to 661 million euros in 2020 (872 million euros in 2019).
Excluding the impact of changes in exchange rates (-218 million euros), capex grew by 7 million euros, mainly
to strengthen the mobile UltraBroadBand infrastructure and the development of the fixed broadband
business of TIM Live.
Change in net operating working capital
The change in Net operating working capital for FY 2020 reflects a positive change of 772 million euros, mainly
as a consequence of the change in trade receivables (+484 million euros) and other changes in operating
receivables/payables (+571 million euros).
Change in provisions for employee benefits
These reduce by a total of 628 million euros, primarily due to redundancies and the reclassification to payables
of amounts not yet liquidated in relation to redundancy plans, already provisioned during previous years. Further
details are provided in the Note on “Provisions for employee benefits” in the Consolidated Financial Statements
of the TIM Group at December 31, 2020.
Sale of investments and other disposals flow
In FY 2020, this is positive for 1,294 million euros and mainly benefits from the deconsolidation of INWIT S.p.A.,
as well as collections deriving from sales by the TIM Group of INWIT shares totaling approximately 7.3% of the
share capital. Further details are provided in the Note “Equity investments” to the Consolidated Financial
Statements at December 31, 2020 of the TIM Group.
Report on Operations of the
TIM Group
Consolidated Financial Position and Cash Flows Performance
64
In FY 2019, the flow was positive for 160 million euros and mainly referred to the sale of Persidera S.p.A. (142
million euros), as well as to other sales of equity investments and to disposals of non-current assets taking place
within the normal operating cycle.
Share capital increases/reimbursements, including incidental costs
In FY 2020, the flow is positive for 1,164 million euros, mainly as a consequence of the contribution made by
shareholders outside the Group to the share capital increases of subsidiaries. More specifically, they include the
increase in capital of Daphne 3, a newly-established holding company controlled by TIM and in which TIM has
contributed a total of 30.2% of INWIT shares. With this share capital increase, the consortium of institutional
investors led by Ardian has taken its percentage stake held in Daphne 3 to 49%.
Increases in lease contracts
In FY 2020, the item amounted to 1,288 million euros (1,140 million euros in 2019).
Increases in lease contracts include the higher value of user rights entered following new lease agreements
payable, increases in lease payments and renegotiations of existing agreements.
In particular, in FY 2020 this includes 368 million euros, related to the recognition of new rights of use of INWIT
S.p.A. assets, following the new Master Service Agreement (MSA) between TIM S.p.A. and INWIT S.p.A. coming
into effect on March 31, 2020.
For further details, see the Note "Rights of use assets" of the Consolidated financial statements at December 31,
2020 of the TIM Group.
Financial expenses, income taxes and other net non-operating
requirements flow
In 2020 the item had a total positive balance of 283 million euros. It mainly includes outflows relative to financial
management components, as well as the payment and reimbursement of income taxes and changes in non-
operating payables and receivables.
Sales of receivables to factoring companies
It should be noted that sales without recourse of trade receivables to factoring companies completed during
2020 resulted in a positive effect on the adjusted net financial debt at December 31, 2020 amounting to 1,970
million euros (1,958 million euros at December 31, 2019).
Following the request made by TIM S.p.A. for the Patent box benefit for the five-year period 2015-2019 and the
consequent agreement reached with the Revenue Agency for 2015 and that relating to complementary assets
for 2016-2019, the benefit of the tax periods 2015 and 2016 was cumulatively included in the IRES and IRAP
adjustment declarations for 2016, presented on September 25, 2020, while the benefit for the tax periods 2017
and 2018 was used in the IRES and IRAP declarations for the tax period 2019 send on December 10, 2020. In
particular, as regards the IRES, the greater 2016 credit of 123 million euros and the 2019 credit of 180 million euros
were requested as refund from the Revenue Agency in the related declarations and then transferred and
collected respectively on September 30, 2020 and December 21, 2020.
Report on Operations of the
TIM Group
Consolidated Financial Position and Cash Flows Performance
65
Net financial debt
Net financial debt is composed as follows:
(million euros)
Non-current financial liabilities
Bonds
Amounts due to banks, other financial payables and liabilities
Non-current financial liabilities for lease contracts
Current financial liabilities (*)
Bonds
Amounts due to banks, other financial payables and liabilities
Current financial liabilities for lease contracts
Financial liabilities directly associated with Discontinued
operations/Non-current assets held for sale
Total gross financial debt
Non-current financial assets
Securities other than investments
Non-current financial receivables for lease contracts
Financial receivables and other financial assets
Current financial assets
Securities other than investments
Current financial receivables arising from lease contracts
Financial receivables and other financial assets
Cash and cash equivalents
Financial assets relating to Discontinued operations/Non-current
assets held for sale
Total financial assets
Net financial debt carrying amount
Reversal of fair value measurement of derivatives and related
financial liabilities/assets
Adjusted net financial debt
Breakdown as follows:
Total adjusted gross financial debt
Total adjusted financial assets
(*) of which current portion of medium/long-term debt:
Bonds
Amounts due to banks, other financial payables and liabilities
Current financial liabilities for lease contracts
12.31.2020
(a)
12.31.2019
(b)
Changes
(a-b)
18,856
4,799
4,199
27,854
988
2,689
631
4,308
—
32,162
—
(43)
(2,267)
(2,310)
(1,092)
(55)
(162)
(4,829)
(6,138)
—
(8,448)
23,714
(388)
23,326
30,193
(6,867)
988
1,541
628
19,773
5,832
4,576
30,181
1,958
1,224
639
3,821
655
34,657
—
(51)
(2,100)
(2,151)
(877)
(58)
(122)
(3,138)
(4,195)
(65)
(6,411)
28,246
(578)
27,668
32,782
(5,114)
1,958
446
639
(917)
(1,033)
(377)
(2,327)
(970)
1,465
(8)
487
(655)
(2,495)
—
8
(167)
(159)
(215)
3
(40)
(1,691)
(1,943)
65
(2,037)
(4,532)
190
(4,342)
(2,589)
(1,753)
(970)
1,095
(11)
The financial risk management policies of the TIM Group are aimed at minimizing market risks, fully hedging
exchange rate risk and optimizing interest rate exposure through appropriate diversification of the portfolio,
which is also achieved by using carefully selected derivative financial instruments. Such instruments, it should
be stressed, are not used for speculative purposes and all have an underlying asset, which is hedged.
In addition, to determine its exposure to interest rates, the Group sets an optimum composition for the fixed-
rate and variable-rate debt structure and uses derivative financial instruments to achieve that composition.
Taking into account the Group's operating activities, the optimum mix of medium/long-term non-current
financial liabilities has been established, on the basis of the nominal amount, at a range of 65%–75% for the
fixed-rate component and 25%–35% for the variable-rate component.
In managing market risks, the Group has adopted Guidelines for the "Management and control of financial risk"
and mainly uses IRS and CCIRS derivative financial instruments.
Report on Operations of the
TIM Group
Consolidated Financial Position and Cash Flows Performance
66
To provide a better representation of the true performance of Net Financial Debt, in addition to the usual
indicator (renamed “Net financial debt carrying amount”), the TIM Group reports a measure called “Adjusted net
financial debt”, which neutralizes the effects caused by the volatility of financial markets. Given that some
components of the fair value measurement of derivatives (contracts for setting the exchange and interest rate
for contractual flows) and of derivatives embedded in other financial instruments do not result in actual
monetary settlement, the Adjusted net financial debt excludes these purely accounting and non-monetary
effects (including the effects of IFRS 13 – Fair Value Measurement) from the measurement of derivatives and
related financial assets/liabilities.
For further details, see the "Alternative performance indicators" chapter.
Adjusted net financial debt was 23,326 million euros as of December 31, 2020, 4,342 million euros lower than
on December 31, 2019 (27,668 million euros). The reduction was due in part to solid generation of free cash flow,
obtained in part by optimization of working capital, which allowed payment of dividends on ordinary and savings
shares of TIM S.p.A. for total 316 million euros (as compared with 166 million euros paid in 2019 to savings shares
only), payment of the installment for the 5G license (110 million euros), as well as the effects of the INWIT
transaction. In particular, with regard to INWIT we point out the deconsolidation of the company's debt (643
million euros compared to December 31, 2019) which broadly compensated for new debts for leases to INWIT,
now under joint control (368 million euros), after the ending of financial lease contracts with Vodafone (214
million euros), the collection of dividends (256 million euros, of which 214 million euros was in extraordinary
dividends) and the sale of 4.3% of the holding (400 million euros). On October 2, 2020, disposals were made by
TIM S.p.A. to Daphne 3 S.p.A. of 14.8% of the investment in INWIT (1,345 million euros) and to Canson of 1.2% of
the investment in INWIT (109 million euros). On December 4, 2020, following the exercise of an option maturing
at year-end, TIM S.p.A. sold the remaining share held in INWIT, equal to 1.8% (161 million euros) to Canson.
Therefore, following these transactions, as at December 31, 2020, INWIT was held 30.2% by Daphne 3 S.p.A., a
subsidiary held 51% by TIM S.p.A.
Additionally, following the request made by TIM S.p.A. for the Patent box benefit for the five years 2015-2019,
303 million euros has already been collected.
For a better understanding of the information, the table below shows the various ways by which the Net Financial
Debt can be shown:
(million euros)
Net financial debt carrying amount
Reversal of fair value measurement of derivatives and related
financial liabilities/assets
Adjusted net financial debt
Leasing
Leasing – Discontinued operations/Non-current assets held for
sale:
Adjusted net financial debt - After Lease
12.31.2020
(a)
23,714
(388)
23,326
(4,732)
—
18,594
12.31.2019
(b)
28,246
(578)
27,668
(5,204)
(571)
21,893
Changes
(a-b)
(4,532)
190
(4,342)
472
571
(3,299)
Net financial debt carrying amount amounted to 23,714 million euros at December 31, 2020, a decrease of 4,532
million euros compared to December 31, 2019 (28,246 million euros). Reversal of the fair value measurement of
derivatives and related financial liabilities/assets recorded a change of 190 million euros compared to December
31, 2019 substantially following the fall in US dollar interest rates and the relevant revaluation of hedging on US
currency bonds. This change is adjusted by the booked Financial Debt with no monetary effect.
Adjusted Net Financial Debt – After Lease (net of the impact of all leases), which is a parameter adopted by
main European peers, was equal to 18,594 million euros at December 31, 2020, down by 3,299 million euros
compared to December 31, 2019 (21,893 million euros). The reduction is lower than shown in the Adjusted net
financial debt, as the effects of the deconsolidation/new payables due to IFRS 16 in relation to the INWIT
transaction, and the effects of the exchange rate on the payables due to IFRS 16 in Brazil, are not taken into
account.
Report on Operations of the
TIM Group
Consolidated Financial Position and Cash Flows Performance
67
Gross financial debt
Bonds
Bonds at December 31, 2020 totaled 19,844 million euros (21,731 million euros at December 31, 2019).
Repayments totaled a nominal 19,249 million euros (21,162 million euros at December 31, 2019).
Changes in bonds over 2020 are shown below:
(millions of original currency)
Repayments
Telecom Italia S.p.A. 719 million euros 4.000% (1)
TIM S.A. 1,000 million BRL 104.10% CDI
Telecom Italia S.p.A. 547 million euros 4.875% (2)
(1)
(2)
Net of buy-backs totaling 281 million euros made by the company in 2015.
Net of buy-backs totaling 453 million euros made by the company in 2015.
Currency
Amount
Repayment date
Euro
BRL
Euro
719
1,000
547
21-Jan-20
15-Jul-20
25-Sep-20
With reference to Telecom Italia S.p.A. 2002–2022 bonds, reserved for subscription by employees of the Group,
the nominal amount at December 31, 2020 was 217 million euros, up by 12 million euros compared to December
31, 2019 (205 million euros).
Revolving Credit Facility and Term Loan
The following table shows committed credit lines available at December 31, 2020.
(billion euros)
Revolving Credit Facility – maturing January 2023
Bridge to Bond Facility – maturing May 2021
Total
12.31.2020
Agreed
5.0
1.7
6.7
Drawn down
—
—
—
12.31.2019
Agreed
5.0
—
5.0
Drawn down
-
-
-
At December 31, 2020, TIM had bilateral Term Loans for 1,500 million euros with various banking counterparties
and overdraft facilities for 490 million euros, drawn down for the full amount.
On May 18, 2020 TIM created a new credit line, structured as a bridge to bond, for later issuing on the bond
market, for 1.7 billion euros and initially maturing after 12 months, with the option of extension for another 12
months.
On January 18, 2021, TIM issued its first 8-year Sustainability Bond for an amount of 1 billion euros, coupon
1.625%.
On January 19, 2021, TIM decided to totally cancel the unused 1.7 billion euro Bridge to Bond line.
Maturities of financial liabilities and average cost of debt
The average maturity of non-current financial liabilities (including the current portion of medium/long-term
financial liabilities due within 12 months) was 9.74 years.
The average cost of the Group’s debt, considered as the cost for the year calculated on an annual basis and
resulting from the ratio of debt-related expenses to average exposure, stood at approximately 3.7%, while the
average cost of the Group's debt "After Lease" was equal to approximately 3.4%.
For details on the maturities of financial liabilities in terms of expected nominal repayment amounts, as
contractually agreed, see the Notes “Financial liabilities (non-current and current)” in the Consolidated Financial
Statements at December 31, 2020 of the TIM Group.
Report on Operations of the
TIM Group
Consolidated Financial Position and Cash Flows Performance
68
Current financial assets and liquidity margin
The TIM Group’s available liquidity margin amounted to 12,621 million euros, equal to the sum of:
■
■
“Cash and cash equivalents” and “Current securities other than investments” for a total of 5,921 million euros
(4,015 million euros at December 31, 2019);
the totals for the Revolving Credit Facility, of 5,000 million euros, and the Bridge to Bond Facility, of 1,700
million euros, fully available.
This margin is sufficient to cover Group financial liabilities (current and otherwise) falling due over the next 30
months.
In particular:
Cash and cash equivalents amounted to 4,829 million euros (3,138 million euros at December 31, 2019). The
different technical forms of investing available cash can be analyzed as follows:
■ maturities: investments have a maximum maturity of three months;
■ counterparty risk: investments by the European companies are made with leading banking, financial and
industrial institutions with high credit quality. Investments by the companies in South America are made
with leading local counterparties;
■ Country risk: deposits have been made mainly in major European financial markets.
Current securities other than investments amounted to 1,092 million euros (877 million euros at December 31,
2019): These forms of investment represent alternatives to the investment of liquidity with the aim of improving
returns. They included a total of 320 million euros of Italian and European treasury bonds held by Telecom Italia
Finance S.A., 447 million euros of bonds purchased by Telecom Italia Finance S.A. with different maturities, all
with an active market and consequently readily convertible into cash, and 325 million euros of investments in
monetary funds by the Brazil Business Unit. The purchases of the above government bonds, which, pursuant to
Consob Communication no. DEM/11070007 of August 5, 2011, represent investments in “Sovereign debt
securities”, have been made in accordance with the Guidelines for the "Management and control of financial
risk" adopted by the TIM Group.
In the fourth quarter of 2020, adjusted net financial debt amounted to 23,326 million euros, down by 2,143
million euros compared to September 30, 2020 (25,469 million euros): the improvement is due to positive cash
generation and the transaction involving the INWIT shares, described previously.
(million euros)
Net financial debt carrying amount
Reversal of fair value measurement of derivatives and related
financial liabilities/assets
Adjusted net financial debt
Breakdown as follows:
Total adjusted gross financial debt
Total adjusted financial assets
12.31.2020
(a)
23,714
(388)
23,326
30,193
(6,867)
30.9.2020
(b)
25,632
(163)
25,469
30,319
(4,850)
Changes
(a-b)
(1,918)
(225)
(2,143)
(126)
(2,017)
Report on Operations of the
TIM Group
Consolidated Financial Position and Cash Flows Performance
69
CONSOLIDATED DATA – TABLES OF DETAIL
To follow, the Separate Consolidated Income Statements, Consolidated Statements of Comprehensive Income,
Consolidated Statements of Financial Position, Consolidated Statements of Cash Flows as well as Other
Information of the TIM Group.
Separate Consolidated Income Statements
(million euros)
Revenues
Other operating income
Total revenues and operating income
Acquisition of goods and services
Employee benefits expenses
Other operating expenses
Change in inventories
Internally generated assets
Operating profit (loss) before depreciation and
amortization, capital gains (losses) and impairment
reversals (losses) on non-current assets (EBITDA)
Depreciation and amortization
Gains/(losses) on disposals of non-current assets
Impairment reversals (losses) on non-current assets
Operating profit (loss) (EBIT)
Share of profits (losses) of associates and joint ventures
accounted for using the equity method
Other income/(expenses) from investments
Finance income
Finance expenses
Profit (loss) before tax from continuing operations
Income tax expense
Profit (loss) from continuing operations
Profit (loss) from Discontinued operations/Non-current
assets held for sale
Profit (loss) for the year
Attributable to:
Owners of the Parent
Non-controlling interests
2020
2019
Changes
(a-b)
(a)
15,805
211
16,016
(6,173)
(2,639)
(961)
(6)
502
6,739
(4,616)
(11)
(8)
2,104
18
454
1,143
(2,322)
1,397
5,955
7,352
—
7,352
7,224
128
(b)
17,974
933
18,907
(6,463)
(3,077)
(1,625)
(128)
537
8,151
(4,927)
(49)
—
3,175
(3)
3
946
(2,382)
1,739
(513)
1,226
16
1,242
916
326
absolute
(2,169)
(722)
(2,891)
290
438
664
122
(35)
(1,412)
311
38
(8)
(1,071)
21
451
197
60
(342)
6,468
6,126
(16)
6,110
6,308
(198)
%
(12.1)
(77.4)
(15.3)
4.5
14.2
40.9
95.3
(6.5)
(17.3)
6.3
77.6
—
(33.7)
—
—
20.8
2.5
(19.7)
—
—
—
—
—
(60.7)
Report on Operations of the
TIM Group
Consolidated Data – Tables of detail
70
Consolidated Statements of Comprehensive Income
In accordance with IAS 1 (Presentation of Financial Statements), the following Consolidated Statements of
Comprehensive Income include the Profit (loss) for the year as shown in the Separate Consolidated Income
Statements and all non-owner changes in equity.
(million euros)
Profit/(Loss) for the year
Other components of the Consolidated Statement of Comprehensive
Income
Other components that will not be reclassified subsequently to
Separate Consolidated Income Statement
Financial assets measured at fair value through other comprehensive
income:
Profit (loss) from fair value adjustments
Income tax effect
Remeasurements of employee defined benefit plans (IAS 19):
Actuarial gains (losses)
Income tax effect
Other comprehensive income (loss) of associates and joint ventures
accounted for using the equity method
Profit (loss)
Income tax effect
Total other components that will not be reclassified subsequently to
Separate Consolidated Income Statement
Other components that will be reclassified subsequently to Separate
Consolidated Income Statement
Financial assets measured at fair value through other comprehensive
income:
Profit (loss) from fair value adjustments
Loss (profit) transferred to Separate Consolidated Income Statement
Income tax effect
Hedging instruments:
Profit (loss) from fair value adjustments
Loss (profit) transferred to Separate Consolidated Income Statement
Income tax effect
Exchange rate differences on translating foreign operations:
Profit (loss) on translating foreign operations
Loss (profit) on translating foreign operations transferred to Separate
Consolidated Income Statement
Income tax effect
Other comprehensive income (loss) of associates and joint ventures
accounted for using the equity method
Profit (loss)
Loss (profit) transferred to Separate Consolidated Income Statement
Income tax effect
Total other components that will be reclassified subsequently to
Separate Consolidated Income Statement
Total other components of the Consolidated Statement of
Comprehensive Income
Total comprehensive income (loss) for the year
Attributable to:
Owners of the Parent
Non-controlling interests
(a)
(b)
(c)
(d)
(e=b+c+d)
(f)
(g)
(h)
(i)
(k=f+g+h+i)
(m=e+k)
(a+m)
2020
7,352
2019
1,242
(4)
—
(4)
6
(1)
5
—
—
—
1
5
—
—
5
(253)
373
(30)
90
(1,612)
—
—
(1,612)
—
—
—
—
(1,517)
(1,516)
5,836
6,199
(363)
4
—
4
(44)
10
(34)
—
—
—
(30)
(19)
(5)
8
(16)
367
(227)
(17)
123
(113)
—
—
(113)
—
—
—
—
(6)
(36)
1,206
916
290
Report on Operations of the
TIM Group
Consolidated Data – Tables of detail
71
Consolidated Statements of Financial Position
(million euros)
Assets
Non-current assets
Intangible assets
Goodwill
Intangible assets with a finite useful life
Tangible assets
Property, plant and equipment owned
Rights of use assets
Other non-current assets
Investments in associates and joint ventures
accounted for using the equity method
Other investments
Non-current financial receivables for lease contracts
Other non-current financial assets
Miscellaneous receivables and other non-current
assets
Deferred tax assets
Total Non-current assets
Current assets
Inventories
Trade and miscellaneous receivables and other
current assets
Current income tax receivables
Current financial assets
Current financial receivables arising from lease
contracts
Securities other than investments, other financial
receivables and other current financial assets
Cash and cash equivalents
Current assets sub-total
Discontinued operations /Non-current assets held
for sale
of a financial nature
of a non-financial nature
(a)
Total Current Assets
Total Assets
(b)
(a+b)
12.31.2020
(a)
12.31.2019
(b)
Changes
(a-b)
22,847
6,740
29,587
13,141
4,992
2,728
54
43
2,267
2,114
7,496
14,702
62,422
242
4,346
86
55
1,254
4,829
6,138
10,812
—
—
—
10,812
73,234
23,083
7,667
30,750
14,011
5,494
11
52
51
2,100
2,585
942
5,741
55,996
260
4,857
149
58
999
3,138
4,195
9,461
65
4,582
4,647
14,108
70,104
(236)
(927)
(1,163)
(870)
(502)
2,717
2
(8)
167
(471)
6,554
8,961
6,426
(18)
(511)
(63)
(3)
255
1,691
1,943
1,351
(65)
(4,582)
(4,647)
(3,296)
3,130
Report on Operations of the
TIM Group
Consolidated Data – Tables of detail
72
(million euros)
Equity and Liabilities
Equity
Equity attributable to owners of the Parent
Non-controlling interests
Total Equity
Non-current liabilities
Non-current financial liabilities for financing
contracts and others
Non-current financial liabilities for lease contracts
Employee benefits
Deferred tax liabilities
Provisions
Miscellaneous payables and other non-current
liabilities
Total Non-Current Liabilities
Current Liabilities
Current financial liabilities for financing contracts
and others
Current financial liabilities for lease contracts
Trade and miscellaneous payables and other
current liabilities
Income tax payables
Current liabilities sub-total
Liabilities directly associated with Discontinued
operations/Non-current assets held for sale
of a financial nature
of a non-financial nature
(c)
(d)
Total Current Liabilities
Total Liabilities
Total Equity and Liabilities
(e)
(f=d+e)
(c+f)
12.31.2020
(a)
12.31.2019
(b)
Changes
(a-b)
26,215
2,625
28,840
23,655
4,199
724
277
770
3,602
33,227
3,677
631
6,588
271
11,167
—
—
—
11,167
44,394
73,234
20,280
2,346
22,626
25,605
4,576
1,182
248
725
3,214
35,550
3,182
639
7,218
84
11,123
655
150
805
11,928
47,478
70,104
5,935
279
6,214
(1,950)
(377)
(458)
29
45
388
(2,323)
495
(8)
(630)
187
44
(655)
(150)
(805)
(761)
(3,084)
3,130
Report on Operations of the
TIM Group
Consolidated Data – Tables of detail
73
Consolidated Statements of Cash Flows
(million euros)
2020
2019
Cashflow from operating activities:
Profit (loss) from continuing operations
Adjustments for:
Depreciation & amortization
Impairment losses (reversals) on non-current assets (including investments)
Net change in deferred tax assets and liabilities
Losses (gains) realized on disposals of non-current assets (including
investments)
Share of losses (profits) of associates and joint ventures accounted for using the
equity method
Change in provisions for employee benefits
Change in inventories
Change in trade receivables and other net receivables
Change in trade payables
Net change in income tax receivables/payables
Net change in miscellaneous receivables/payables and other assets/liabilities
Cash flows from (used in) operating activities
Cash flows from investing activities:
Purchases of intangible, tangible and rights of use assets on a cash basis
Capital grants received
Acquisition of control of companies or other businesses, net of cash acquired
Acquisitions/disposals of other investments
Change in financial receivables and other financial assets (excluding hedging
and non-hedging derivatives under financial assets)
Proceeds from sale that result in a loss of control of subsidiaries or other
businesses, net of cash disposed of
Proceeds from sale/repayments of intangible, tangible and other non-current
assets
Cash flows from (used in) investing activities
Cash flows from financing activities:
Change in current financial liabilities and other
Proceeds from non-current financial liabilities (including current portion)
Repayments of non-current financial liabilities (including current portion)
Changes in hedging and non-hedging derivatives
Share capital proceeds/reimbursements (including subsidiaries)
Dividends paid
Changes in ownership interests in consolidated subsidiaries
Cash flows from (used in) financing activities
Cash flows from (used in) Discontinued operations/Non-current assets held for
sale
Aggregate cash flows
Net cash and cash equivalents at beginning of the year
Net foreign exchange differences on net cash and cash equivalents
Net cash and cash equivalents at end of the year
7,352
4,616
36
(6,538)
(441)
(18)
(628)
20
484
(231)
708
1,191
6,551
(3,477)
24
(7)
(11)
(251)
(33)
678
(3,077)
(1,771)
1,470
(2,790)
310
1,164
(390)
(2)
(2,009)
—
1,465
3,202
(159)
4,508
1,226
4,927
31
271
47
3
(246)
129
—
(181)
114
(387)
5,934
(3,649)
28
—
(4)
231
125
14
(3,255)
(545)
4,527
(4,412)
(415)
10
(279)
—
(1,114)
16
1,581
1,631
(10)
3,202
(a)
(b)
(c)
(d)
(e=a+b+c+d)
(f)
(g)
(h=e+f+g)
Report on Operations of the
TIM Group
Consolidated Data – Tables of detail
74
Purchases of intangible, tangible and rights of use assets
(million euros)
Purchase of intangible assets
Purchase of tangible assets
Purchase of rights of use assets
Total purchase of intangible, tangible and rights of use assets on an accrual basis
Change in payables arising from purchase of intangible, tangible and rights of use
assets
Total purchases of intangible, tangible and rights of use assets on a cash basis
Additional Cash Flow information
(million euros)
Income taxes (paid)/received
Interest paid
Interest income received
Dividends received
Analysis of net cash and cash equivalents
2020
(1,197)
(2,138)
(1,362)
(4,697)
1,220
(3,477)
2019
(1,064)
(2,644)
(1,216)
(4,924)
1,275
(3,649)
2020
2019
223
(1,520)
448
256
(118)
(1,750)
589
1
(million euros)
2020
2019
Net cash and cash equivalents at beginning of the year:
Cash and cash equivalents - from continuing operations
Bank overdrafts repayable on demand – from continuing operations
Cash and cash equivalents - from Discontinued operations/Non-current assets
held for sale
Bank overdrafts repayable on demand – from Discontinued operations/Non-
current assets held for sale
Net cash and cash equivalents at the end of the year:
Cash and cash equivalents - from continuing operations
Bank overdrafts repayable on demand – from continuing operations
Cash and cash equivalents - from Discontinued operations/Non-current assets
held for sale
Bank overdrafts repayable on demand – from Discontinued operations/Non-
current assets held for sale
3,138
(1)
65
—
3,202
4,829
(321)
—
—
4,508
1,917
(286)
—
—
1,631
3,138
(1)
65
—
3,202
The additional disclosures required by IAS 7 are provided in the Note “Net Financial Debt” to the TIM Group
Consolidated Financial Statements at December 31, 2020.
Report on Operations of the
TIM Group
Consolidated Data – Tables of detail
75
Other information
Average salaried workforce
(equivalent units)
Average salaried workforce – Italy
Average salaried workforce – Outside Italy
Total average salaried workforce (1)
2020
40,140
8,959
49,099
2019
42,630
9,287
51,917
Changes
(2,490)
(328)
(2,818)
(1)
Includes employees with temp work contracts: 9 average employees in Italy in 2020; 5 average employees in Italy in 2019.
Headcount at year end
(units)
Headcount – Italy
Headcount – Outside Italy
Total headcount at year end (1)
12.31.2020
42,680
9,667
52,347
12.31.2019
45,266
9,932
55,198
Changes
(2,586)
(265)
(2,851)
(1)
Includes employees with temp work contracts: 9 employees at 12/31/2020; 5 employees in Italy at 12/31/2019.
Headcount at year end – Breakdown by Business Unit
(units)
Domestic
Brazil
Other Operations
Total
12.31.2020
42,925
9,409
13
52,347
12.31.2019
45,496
9,689
13
55,198
Changes
(2,571)
(280)
—
(2,851)
Report on Operations of the
TIM Group
Consolidated Data – Tables of detail
76
AFTER LEASE INDICATORS
TIM Group, in addition to the conventional financial performance measures established by the IFRS, uses certain
alternative performance measures in order to present a better understanding of the trend of operations and
financial condition. Specifically, following the adoption of IFRS 16, the TIM Group presents the following additional
alternative performance indicators:
EBITDA ADJUSTED AFTER LEASE - TIM GROUP
(million euros)
ORGANIC EBITDA - excluding non-recurring items
Lease payments
EBITDA adjusted After Lease (EBITDA-AL)
EBITDA ADJUSTED AFTER LEASE - DOMESTIC
(million euros)
ORGANIC EBITDA - excluding non-recurring items
Lease payments
EBITDA adjusted After Lease (EBITDA-AL)
EBITDA ADJUSTED AFTER LEASE - BRAZIL
(million euros)
ORGANIC EBITDA - excluding non-recurring items
Lease payments
EBITDA adjusted After Lease (EBITDA-AL)
2020
7,063
(814)
6,249
2019
Changes
absolute
%
7,505
(853)
6,652
(442)
39
(403)
(5.9)
4.5
(6.1)
2020
2019
Changes
absolute
%
5,658
(523)
5,135
6,144
(577)
5,567
(486)
54
(432)
(7.9)
9.4
(7.8)
2020
2019
Changes
absolute
%
1,412
(291)
1,121
1,369
(276)
1,093
43
(15)
28
3.1
(5.6)
2.5
ADJUSTED NET FINANCIAL DEBT AFTER LEASE - TIM GROUP
(million euros)
Adjusted net financial debt
Leasing
Adjusted net financial debt - After Lease
12.31.2020
23,326
(4,732)
18,594
12.31.2019
27,668
(5,775)
21,893
Changes
(4,342)
1,043
(3,299)
TIM GROUP EQUITY FREE CASH FLOW AFTER LEASE
(million euros)
EQUITY FREE CASH FLOW
Leasing
EQUITY FREE CASH FLOW AFTER LEASE
2020
2,414
(799)
1,615
2019
2,331
(797)
1534
Changes
83
(2)
81
Report on Operations of the
TIM Group
After Lease indicators
77
SUSTAINABILITY ASPECTS
Even more than in previous years, TIM has expressed the fact of its being a “system” business whose dimensions,
capillary nature, human capital and infrastructural and technological assets, have allowed everyone to connect,
confirming its role as essential service immediately after the health response to the pandemic.
In an increasingly digital world, the capacity becomes strategic to find a sustainable balance between new
business models, new classes of services, new working methods and new professional skills that contribute to
achieving the 17 Sustainable Development Goals of the 2030 UN Agenda, goals that have become even more
urgent following the coronavirus pandemic.
The analysis carried out in 2020, to identify the topics of interest to stakeholders in respect of the social-
environmental and economic impacts that the business activities generate within and outside the Company,
took into account the extraordinary social-economic context and sought to verify the impact of the COVID-19
pandemic on the material topics identified in 2019, modifying names and descriptions with respect to any
emerging topics. The analysis also showed how essential it was for TIM to play a lead role in developing digital
expertise and knowledge in its own dimension and in a capacity as enabler for a new digital society. The strong
stakeholder focus on the role of the Company as a facilitator for the development of an inclusive digital society
was also confirmed by the analysis.
The results of stakeholder engagement, as emerging from the materiality matrix, are reflected in the
Sustainability Plan, the heart of the Group’s 2020-2022 Strategic Plan, available at the following link:
gruppotim.it/en/investors/reports-presentations/presentations-webcasts
The plan of actions in support of the environmental, social and governance strategy aims to obtain a significant,
concrete impact on business development, which has adopted the goals of environmental protection and social
inclusion that translate into becoming carbon neutral by 2030, increasing the domestic eco-efficiency indicator
by 50% and reducing indirect emissions by 70% by 2025, also thanks to continuous investment in renewable
energies.
In the area of company commitment, TIM works constantly to overcome the geographic digital divide, to
contribute towards social and digital inclusion and strengthen the skills of its people, thanks to custom training
programs, also aimed at reducing the churn rate in new employees.
The Plan’s objectives for 2020 have all been achieved, with the excellent performance of the “Engagement”
cluster, which has improved by 16 points, exceeding the growth objective of 14 points, expected for the end of
2022.
It is in this scenario that TIM’s first sustainability bond for 1 billion euros comes, issued in January 2021, which
has been much appreciated on the financial market.
Safeguarding health and the management of human capital in
times of COVID
The period of the health emergency has modified the working paradigms and called for an intervention on
multiple fronts so that the business continuity and health of people would continue to be guaranteed; this has
resulted in an extension of work from a remote position, alongside an appropriate organization of work,
reinforcing the sense of belonging in the Group people.
To avoid stopping business while limiting potential contagion, smart-working was rapidly extended to more than
32,000 employees in Italy, with the distribution of approximately 6,400 personal computers, as well as the
development of software solutions to allow for the use of personal PCs/tablets too, whilst awaiting completion
of the corporate equipment plan, envisaged for all our people.
In April, TIM and the trade unions, in the shared aim of safeguarding the health of all workers, stipulated a
memorandum of understanding on how to handle the second phase of the COVID-19 emergency, to identify the
most suitable strategies to address the health emergency and the guidelines and consequent measures to be
implemented. The guidelines, prepared with the collaboration of experts in the analysis and assessment of
preventive measures and prophylaxis, were aimed at redefining the organization of work in such a way as to
guarantee the best possible personal protection, in respect of the provisions issued by the competent
government and health authorities for a gradual return to the office on a geographic and organizational basis.
August saw the successful completion of the meetings with the trade unions aiming to define not only the
manner by which to return to the office in a transitional phase, but also an innovative working model, which
combines the digitization of processes with the rethinking of spaces and smart work organization, optimizing the
experience of remote working seen during the emergency.
Report on Operations of the
TIM Group
Sustainability aspects
78
The new model aims to support business performance and, at the same time, improve quality of life, focusing
on flexibility, autonomy and professional responsibility.
Thanks to the climate of collaboration and trust consolidated in the last year and a half of industrial relations, a
route has been started that will be constructed and assisted over time, aware of the necessary cultural leap the
parties will be called to make in the medium-term.
Digitization has profoundly changed the work and in this context, TIM has begun an intense, timely adjustment
of its organizational and production models through the introduction of organizational and technological
innovations. This major transformation can only be achieved through a raising of the level of human capital
employed in the company, expanding and redefining the competences held. In this context, November saw the
achievement of a specific agreement for reorganizing working hours, on which basis part of the working hours
are allocated to specific worker skill development courses. Training uses the resources made available by the
New Skills Fund of Anpal1 .
In the understanding, the parties have also shared the comprehensive project prepared by TIM “NexTIM for 2021”,
which envisages a total of more than 3 million hours of training, 19 update courses, 101 courses, the involvement
of the entire domestic corporate population and a custom plan for each participant.
The program, which was launched in December 2020, has three main lines: innovation of the organization, tools
and technologies; improvement of the production processes; and a focus on digital competences.
Materiality analysis
As required by Legislative Decree 254/2016 and according to the requirements of the Global Reporting Initiative
Standards, TIM carried out the materiality analysis process again in 2020, to identify the socio-environmental
and governance priorities against which define the Three-Year Sustainability Plan and to report business activity,
its results and its impact internally and externally of the Company.
Process to identify the material topics
For 2020, TIM took into account the extraordinary social-economic context and sought to verify the impact of
the COVID-19 pandemic on the material topics identified in 2019, modifying names and descriptions with respect
to any emerging topics.
The taxonomy2 to be used in the semantic analysis engine has been updated: to this end, as well as considering
the references3 in the context of “sustainability” and “digital” used in 2019, institutional sources referring to
“COVID-19” have also been taken into account. Merely by way of example, but not limited to, the following are
noted:
■ The GSM Association “GSMA COVID-19 Privacy Guidelines”;
■
■
“Joint Statement from the Commission and the Body of European Regulators for Electronic Communications
on coping with the increased demand for network connectivity due to the Covid-19 pandemic”, drafted by
the BEREC together with the EU;
“COVID-19 Crisis Response: Digital Development Joint Action Plan and Call for Action”, prepared jointly by
the ITU, World Bank, GSMA and World Economic Forum.
The semantic motor engine has thus analyzed 101 public and non-public4, national and international5
documents, both within and outside the company6, focused on the TIM relevant 2019 topics that focused on the
pandemic. Through the iterations and on the basis of occurrences7 in the various documents, for each 2019 topic
new topics have been successfully identified, emerging from the changed context.
In order to obtain the significance of the material topics for the company, an internal questionnaire was given to
a significant sample of representative contact people from all the company's departments.
1 Italian national active labor policies agency
2Each taxonomy is made up of interrelated concepts and keywords with different correlation and significance levels. Each taxonomy was constructed
using both Italian and English terms.
3 Such as, for example, the Global Reporting Initiative Standard, ISO 26000, or the Sustainable Development Goals.
4 Such as, for example: “Dotazioni, competenze e abitudini digitali degli italiani nell’era Covid 19_rapporto” (Digital equipment, skills and habits of the
Italians in the era of COVID-19_report), published by Censis on behalf of TIM and under the scope of the “Risorgimento Digitale” project.
5 Such as, for example: “Il digitale in Italia: mercati, dinamiche e policy” (Digital in Italy: markets, dynamics and policies), prepared in June 2020 by
Confindustria digitale and Anitec-Assinform or “COVID-19 and the world of work”, published by the International Labour Organization (ILO).
6 Such as, for example: “Le reti e gli effetti delle misure di confinamento” (Networks and the effects of lock-down measures) of the TIM Study Center.
7The occurrences identify the number of times that a concept (or a specific term) is detected within the document by the semantic engine and provide
an indication of the significance of the topic detected in the context of the document.
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As stated, collecting external points of view was facilitated by the use of innovative tools such as semantics and
big data analysis8, as well as a collaboration platform9.
At the end of this initial screening, the company was able to draw up a list of topics representing the following
macro areas:
■ Correctness of corporate conduct and business resilience
■ Adjusting stakeholder engagement to the acceleration of change
■ Monitoring the pursuit of ESG goals in corporate strategies
■ Management of employment relationships
■ Developing the Company's human resources
■ Managing the health and safety of workers
■ Correctness and innovation in customer relations
■ Safeguarding privacy, cybersecurity and personal data security
■ Strengthening of infrastructures and network reliability
■ Safeguarding diversity and promoting equal opportunities in the company
■ Supporting the spread of technology, digital skills and Research and Development
■ Capacity building of the players in the supply chain
■ Protection of the most vulnerable people from Internet risks
■ Promoting and safeguarding human rights
■ Reducing energy consumption and combating climate change
■ Communicating the impacts of electromagnetic emissions
■ Promoting the development of an inclusive digital society and access to digital services
This approach has enabled TIM to expand stakeholder engagement and dynamically observe topics in order to
measure their trends over time.
8In keeping with activities of the previous year, stakeholders involved in engagement activities were surveyed, in addition to many other entities, for
a total of approximately 500, concerning the 8 categories of TIM stakeholders. Three types of sources were identified for the analysis:
•
•
•
9 a questionnaire was provided to engage and consult stakeholders, via the collaborative platform, from the categories: customers, suppliers,
competitors, institutions, environment, community, persons, also collecting suggestions and feedback.
documents issued by stakeholders (in particular sustainability reports);
statements issued on company websites;
discussions on social networks concerning the themes identified thanks to TIM Data Room activities.
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Results at a glance
At the end of the analysis, TIM attributed a relevance score based on the occurrence of the topics10.
The activity resulted in the following materiality matrix:
STRENGHTENING OF
INFRASTRUCTURES AND
NETWORK RELIABILITY
CORRECTNESS AND
INNOVATION IN
CUSTOMER RELATIONS
DEVELOPING THE
COMPANY’S HUMAN
RESOURCES
MONITORING THE PURSUIT OF ESG GOALS IN
CORPORATE STRATEGY
CORRECTNESS OF
CORPORATE CONDUCT AND
BUSINESS RESILIENCE
SAFEGUARDING
PRIVACY AND
PERSONAL DATA
PROTECTION AND
SECURITY
PROMOTING THE DEVELOPMENT OF AN INCLUSIVE DIGITAL
SOCIETY
MANAGING THE
HEALTH AND
SAFETY OF
WORKERS
MANAGEMENT OF
EMPLOYMENT
RELATIONSHIPS
SUPPORTING THE SPREAD OF
TECHNOLOGY, DIGITAL SKILLS AND
R&D
ADJUSTING STAKEHOLDER
ENGAGEMENT TO THE ACCELERATION
OF CHANGE
REDUCING ENERGY CONSUMPTION
AND COMBATING CLIMATE
CHANGE
COMMUNICATING THE IMPACTS
OF ELECTROMAGNETIC
EMISSIONS
SAFEGUARDING DIVERSITY
AND PROMOTING EQUAL
OPPORTUNITIES IN THE
COMPANY
12. CAPACITY BUILDING OF THE
PLAYERS IN THE SUPPLY CHAIN
E
C
N
A
V
E
L
E
R
M
T
I
PROMOTING AND
SAFEGUARDING HUMAN
RIGHTSI
PROTECTION OF THE MOST VULNERABLE
PEOPLE FROM INTERNET RISKS
GOVERNANCE TOPICS
SOCIAL TOPICS
ENVIRONMENTAL TOPICS
STAKEHOLDERS RELEVANCE
The key issues for the Group and its stakeholders reflect the Sustainable Development Goals which TIM believes
it can help achieve to a greater extent through its own personnel, technologies and services, adopting business
policies that promote and safeguard human rights and the environment.
Specifically, the relevant Goals are:
■ No. 4: Quality education
■ No. 5: Gender equality
■ No. 7: Affordable and clean energy
■ No. 8: Decent work and economic growth
■ No. 9: Industry, innovation and infrastructure
■ No. 10: Reduced inequalities
■ No. 11: Sustainable cities and communities
■ No. 12: Responsible consumption and production
10Scores ranged from 1 to 5, where 1 is the minimum frequency, 5 the maximum frequency, 3 the average frequency (calculated from the average
occurrence of the topics taken into consideration). 2 and 4 are attributed in proportion to the minimum, average and maximum scores. Finally, the
final score was calculated, weighted by the significance attributed to each source according to the different time amplitude covered in the analysis.
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■ No. 13: Fight against climate change;
■ No. 16: Peace, justice and strong institutions.
In the 2020 review of material topics, stakeholders highlighted the growing importance attributed to the capacity
of the Company to interact with its suppliers (“Capacity building of the players in the supply chain”), to strengthen
the skills of its people (“Human capital development”) and to play its leadership role in the country’s digital
development to facilitate community progress (“Supporting the spread of technology, digital skills and Research
and Development”).
Validation and Review
The validation of the topics and the entire materiality analysis process was carried out by the SM&PIA
Department of Financial Reporting, Accounting & Sustainability Performance, with the support of RE2N and TIM
Data Room11. The review phase is due to take place as a preparatory stage prior to the next reporting cycle, with
the aim of also submitting the results of the analyses carried out, updated in the following year, to specific
stakeholder engagement activities.
11 Tim Data Room is the group structure that analyzes digital data from the network through listening, reporting and benchmarking activities
(https://www.linkedin.com/showcase/10989548/admin/).
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RESEARCH AND DEVELOPMENT
Approach to innovation, choice of topics, innovation governance
process
The research and development of innovative technologies and services, processes and business models,
represents a key factor in the keeping up with the profound transformations of ICT, as well as an asset acting as
a driving force for customers and the national system, helping to overcome the socio-cultural barriers that limit
the opportunity to participate in the information society and enjoyment of the relative benefits.
TIM has always considered innovation to be a strategic asset and takes great care in governing individual aspects,
from its strategic role to its responsibility, objectives and policy.
In 2020, TIM continued to strengthen an innovation model that leverages the concept of essential eco-system
to feed into a virtuous circle for the scouting, incubation and planning of innovative initiatives. This takes concrete
form, on the one hand, through the labs as multi-site centers, open virtually and connected in a single digital
environment to support open innovation and, on the other, through the collaboration with certain universities of
excellence, thereby creating a synergy focused on the digital transformation of the company and which certifies
TIM as reference partner in Italy.
In line with this, the Group has taken action in several ways:
■ by continuing the action to strengthen internal innovation lines, focusing laboratory activities and research
groups on key aspects of the development of the fixed and mobile network towards future 5G1 standards
and ultrabroadband, and issues concerning service platforms and new operations systems;
■ by selecting, speeding up and co-creating innovative ideas, products and services from the world of start-
ups2 and small and medium enterprises (SMEs), in line with emerging innovative trends of interest for TIM,
in order to improve the commercial offer and internal processes and foster the growth of the ecosystem of
Italian start-ups through the corporate accelerator. TIM WCap (Working Capital) leverages the principles of
“Open Innovation” (and on the five territorial hubs (Milan, Bologna, Rome, Naples and Catania), in order to
foster a contamination that does not only regard the world of start-ups, but rather also extends to include
global ICT players (like Cisco) and the main Italian universities (like Federico II of Naples, in whose premises
the Naples hub was developed);
■ by catalyzing on the innovation capacity of startups with the TIM WCap acceleration program and
investment in risk capital made by TIM Ventures, TIM's corporate venture capital3. In 2020, in particular, TIM
developed the “Smart Spaces Hackathon”, a marathon for the design of new smart spaces and an initiative
pursued in collaboration with Google Cloud and Codemotion.
Innovation management is overseen, with different missions, by the Technology Architectures & Innovation
Department and by engineers, and involves various internal and external stakeholders of the Company:
■ other areas of the company involved from time to time, both as internal customers for the innovation output
solution and as centers of expertise on the topic;
■
■
traditional and digital partners, for the joint go2market4 of digital services;
research centers and universities, for cooperation and joint projects. In 2020, research contracts were
stipulated with eight Italian universities, for a total value of about 1.2 million euros;
■ on an international level, a vast set of standardization entities, associations, alliances, telco open
communities, which play a key role in the evolution of the TLC industry/segment for networks, platforms and
services, in which TIM operates in partnership with the main industry stakeholders. In 2020, despite the
international crisis caused by the pandemic, TIM confirmed its interest in adhering to the main
standardization entities and associations with 30 registrations for a total commitment of approximately one
million euros. It has also activated major interaction not only with the associations strictly linked to the world
of telecommunications but also with other industrial segments, such as automotive and industry 4.0.
Participation in the international entities has allowed TIM to increase its intellectual property, both in terms
of acquiring know-how and through direct contribution, aimed at promoting its industrial strategy and
intellectual property (with the approval of solutions based on TIM patents in standards).
■ on a national level, numerous collaborations are in place with various Ministries, the European Union, and
Public bodies (such as the National Research Board and local administrations) to pursue projects financed
1 Acronym for fifth generation mobile standards and technology.
2 New companies characterized by a high degree of innovation.
3 TIM Ventures is the company of the TIM group that invests in corporate venture capital.
4 It can be defined as the strategy of an organization, which uses internal and external resources (such as the sales team) to offer its unique value
proposal to customers and obtain competitive advantage
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through the participation in tenders and partnership initiatives. Under this scope, 2020 saw a continuation
of the collaboration that had begun in 2019 with Competence Industry Manufacturing 4.0 , aimed at fostering
the transfer of technological competences and innovation in production processes, products and business
models.
TIM's technological evolution is based on the TIM Technological Plan, part of the Business Plan; specifically, the
Technological Plan identifies technology strategy in terms of guidelines, specific technologies and roadmaps to
adopt in the long term. The three-year technological plan is the reference policy for the Group and includes also
the technological evolution plans of subsidiaries. The qualitative and/or quantitative goals have been given an
annual framework. They are defined so that they can be objectively measured in compliance with quality
standards (ISO 9001) and environmental standards (ISO 14001), and operational innovation processes; in the
same way as TIM processes, in general, are based on Telemanagement Forum's reference standard E-Tom5.
Overall, in 2020 TIM committed around 1,300 people to working on technological innovation and engineering in
Italy, for an overall investment for the Company of 1,070 million euros.
Activities towards the future of mobility and networks: initiatives for 5G
O-RAN and Edge Computing are considered key to allowing 5G to express its technological and business
potential. Open Radio Access Network (O-RAN) is a concept based on the interoperability and standardization of
the elements of the 4G and 5G radio access network, including a unified interconnection standard for open
source software elements and hardware of various suppliers. Edge Computing shifts the processing of traffic
and service from a centralized cloud to the end of the network and closer to the customer, thereby enabling the
maximum exploitation of high speed and low latency in the network.
2020 set the stage for various 5G initiatives pursued by TIM, namely:
■ during the last stage of the Giro d'Italia in Milan, visitors could follow the time-trial race through 5G
smartphones in multi-streaming mode, while enjoying on-demand 4K, 360-degree videos live;
■
■
trials began to improve the quality of vine-growing. Using 5G technologies integrated with other innovative
tools such as drones, sensors, artificial intelligence, big data and blockchain, the testing made it possible to
collect data on weather conditions, soil characteristics and crop health;
the first connection in Europe capable of permanently exceeding a downlink speed of 4 Gbps on a 5G live
network, with 26 Gigahertz (GHz) millimeter-wave (mmWave) frequencies acquired in the Italian Ministry of
Economic Development’s 5G auction;
■ continuing on from the first trial started in Turin in recent years, the 5G revolution started out from Venice,
to develop the smart cities of the future: a “director's cabin” at the service of the municipal authority, citizens
and visitors, which can improve the city’s mobility and safety. The initiative offers a virtuous example of
public-private collaboration; with the contribution of Olivetti, the Group's digital farm for IoT solutions, TIM
has expanded and enriched the Smart Control Room project functions for the city of Venice;
■
together with the Metropolitan City of Genoa, the University of Genoa, Ericsson and Himarc, TIM was
awarded the tender run by the Ministry for Economic Development for the supply of 5G smart roads solutions
in various areas of the Metropolitan City of Genoa. The project envisages the start-up of trials based on 5G
technology, aimed at monitoring the road traffic and safety infrastructures.
All the 5G technology development activities are always accompanied by an articulated technical
communication activity, which ranges from an editorial level to a promotional one, with scientific educational
events and the organization of specific visits to customers at the TIM innovation laboratories of Turin and Rome.
Research with Universities
In 2020, the participatory research and development activities focused firmly on a model that can guarantee a
vision of the eco-system that pursues open innovation, including through collaboration with certain universities
of excellence.
As mentioned, the economic commitment was approximately 1.2 million euros, on specific research activities, in
particular:
■
the multi-year collaboration between TIM and the Polytechnic University of Turin can optimize the subjects
chosen for the projects in line with the strategic plan. The 23 research projects activated in 2020 focused on
5 The Business Process Framework (eTOM) can be considered an operating model structure for telecommunication service providers; the model
describes the corporate processes required, defines the key elements and the way in which they should interact. eTOM is a standard managed by the
TM Forum, an association for service providers and their suppliers in the telecommunications and entertainment segments.
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specific main topics such as Augmented Reality, Cyber Security, Customer Hyper Experience, Cloud Native &
Edge Powered, Space Communication, Hype-Next Technology and 5G Intensive Services, without forgetting
the consolidation and evolution of 5G towards the sixth generation mobile technology;
■
research projects defined under the scope of the MED (Ministry of Economic Development) Bari Matera 5G
project are pursued. The trial, which was concluded in June 2020, sees TIM collaborate with six academic
bodies: the National Research Center, the Scuola Superiore Sant’Anna in Pisa, the Polytechnic of Bari, the
University of Bari, the University of Basilicata and the University of Salento. In 2020, the 8 research projects
focused on 5G and the development of new use scenarios in the numerous application areas developed by
the trial. One of the projects was dedicated to assessing the socio-economic impact linked to 5G trials;
■ collaboration was resumed with the University of Catania, within the "Joint Open Lab (JoL)" of Catania
framework, an instrument with which TIM works to accelerate the finalization and its market activities for
development of 5G. In order to pursue these objectives, a convention has been stipulated to collaborate in
exploring and implementing architectural solutions and innovative services that exploit the benefits of 5G,
with the aim of optimizing the know-how and assets obtained towards initiatives involving local players (e.g.
municipalities) and national ones (participation in MED tenders). The 4 projects of 2020 are focused on the
topics of Augmented Analytic, 5G Intensive Services and Cloud Native & Edge Powered;
■ collaboration has continued with the State University of Milan, both with the tutoring of two research
doctorates (PhDs) and by stipulating a three-year agreement, within which a research project began in 2019
to create a "family activity recognition" module, using data acquired by sensors to provide service and
content suggestions to family members through the digital family assistant.
Funded research activities
TIM has always been active in innovative and research initiatives funded by the European Union and by national
public administrations. This has allowed it to take part in international projects on topics that are essential for
the Company and to attract, for the Innovation Department only, financing of around 16 million euros in the
three years 2018-2020. In this area, it has been involved in activities carried out as part of funded projects
concerning 5G, virtualization and intelligent mobility services, on one hand, furthering its own expertise and on
the other, gaining a prominent position in the international sphere, which is a precursor to the preliminary
“Beyond 5G” activities, which will lead to the definition of a new generation of mobile systems.
Patents and Intellectual Property Rights6
In 2020, the Group's patent portfolio was consistent with that of previous years; indeed, there was a slight
increase in assessment activities for patenting and new filings. In addition, the rationalization of the patent
portfolio has led to some patents being abandoned which, with technological evolution, are no longer of any
value. The Group's patent areas relate to the entire ICT sector, with specific excellence in the mobile sector, in
particular in radio access, where TIM is among the leading TLC operators in the world.
In detail, the TIM patents portfolio, relative to approximately 550 patented inventions, at end 2020 comprises
approximately 3,200 patent applications and patents, of which approximately 90% are patents (granted by 37
patents offices).
One significant aspect of patent activity is the large number of patents that have stemmed from the
collaborations with universities and research institutes: 12 % of patented inventions are the result of such
synergies.
Participation in two patent pools7 on 3G and 4G/LTE (Long Term Evolution), with two patent inventions essential
for the relative standard, should also be noted. The Patent Pool acquired new participants over the course of the
year (bringing the current total to 28 license-holders) and granted several licenses to 55 companies.
6 Intellectual Property Rights.
7 It is a consortium of companies that agree to grant a single license for their patents, necessary for a given technology concerned by the standard.
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Research and Development in Brazil
The Architecture & Innovation Technology department8 is responsible for TIM SA Research and Development
(R&D) activities; its main responsibilities are to define technological innovation for the network and information
technology, determine evolutionary needs for new technologies and devices and link architectural guidelines
and strategic partnerships, to use the new business models and ensure the network infrastructure evolution is
in line with the corporate strategy.
In 2020, the Architecture & Innovation Technology department was made up of 52 colleagues, including
telecommunications, electrical and electronic, IT and other engineers with professional skills and experience,
which cover all areas of network knowledge, meeting the need to innovative and supporting research and
development activities.
TIM Lab is the multifunction environment focused on innovation, which also plays a strategic role in supporting
credibility tests and trials, as well as proofs of concepts, collaborating with the main suppliers and technology
partners through knowledge sharing, technological infrastructure for interoperability tests, staff assessment and
the definition of technical requirements; in synergy with the R&D department, it facilitates innovation activities
and promotes partnerships with universities and research institutes.
The TIM Lab Innovation Center in Barra da Tijuca, in the State of Rio de Janeiro, has a surface area of 650 m2 and
can also be used as an innovation space open to new opportunities, guiding innovation on the Brazilian
telecommunications market and acting as national point of reference for R&D9.
To strengthen the validation capacity regarding new software, features, solutions, technologies, services and
devices, in 2020-2022, TIM has planned additional investments for over 10 million reais.
The Architecture & Innovation Technology Department has continued to work on projects and initiatives for the
evolution of the business of TIM SA, which can be grouped into the following macro groups:
■ next generation network;
■ with positive impact on the environment and society;
■
future Internet applications;
■ Open Lab Initiatives.
Next generation network projects
The reassignment of the 1,800 MHz, 850 MHz and 2,100 MHz bands from 2G/3G to 4G, with a multilayer
distribution configuration gives TIM SA three important competitive advantages:
■ a reduction in costs for the LTE implementation10;
■
■
the increase in the LTE coverage area and the enabling of the carrier aggregation strategy, improving the
customer experience through a higher reach;
the best indoor coverage. In addition to the expansion of coverage, use of the 850/1,800/2,100 MHz
bandwidths could increase the capacity in cities already covered by the LTE bandwidth at 2.6 GHz, at limited
additional cost.
In this scenario, over 99% of current LTE terminals are compatible with the 1,800 MHz, 2,600 MHz bands and
other available bands. Therefore, the implementation of the multilayer LTE continues to be an excellent strategy
that benefits from the spread of devices.
The implementation of the 700 MHz LTE layer has continued to significantly improve coverage expansion and
indoor penetration, promoting the spread of LTE on a national level and consolidating TIM’s leadership in LTE.
89% of TIM SA’s current user base of LTE devices is 700 MHz enabled (December 2020).
At the end of December 2020, 3,294 cities had 700 MHz LTE coverage equivalent to over 95% of the urban
population; spectrum cleaning was completed in June 2019 in all cities of Brazil, enabling a bandwidth of
700MHZ. At end 2021, more than 3,700 cities are expected to be covered by TIM SA in the 700 MHz band, as per
the 2020-23 business plan.
8Architecture and Innovation Technology, within the Chief Technology and Information Office (CTIO).
9 TIM Lab of TIM SA also collaborates with TIMLab Italy, which has more than 50 years of experience
10 Long Term Evolution.
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Projects entailing a reduction of energy consumption
The expansion of "RAN Sharing 4G", in partnership with other mobile operators in Brazil, aims to define the
architectural requirements, technical assumptions and specifications for the "LTE RAN sharing11" solution,
optimizing network resources and costs12. At present, this is the largest agreement for RAN sharing worldwide
and it supplies 4G services to the main cities of Brazil
The RAN sharing agreement allows TIM to promote the evolution of the spread of LTE in the Brazilian campaign,
effectively sharing access and backhaul13. Currently, 4G RAN Sharing is based on three national partners,
expanding the benefits and efficiency of this technical model. Following tests and the consequent activation of
energy saving functions and solutions, according to the access technology (2G, 3G and 4G) and coverage
conditions, it showed a reduction of up to 10%.
Next generation network projects, future Internet applications, positive
impact on the environment and society
Internet of Things It was back in 2018 that TIM SA launched the very first commercial NB-IoT14 network in South
America, to develop innovative services, aware that the mass introduction of the IoT can change the mobile
telephony market considerably, because it leverages the creation of services and - amongst others - is a potential
tool for agricultural uses, the connection of cars, traceability solutions and social-health care. In 2020, access to
the NB-IoT network was extended.
In 2019, two major milestones were achieved, namely the activation of an E-SIM (Embedded SIM15) platform and
the acquisition of an IoT/M2M platform, which was integrated into the TIM infrastructure in 2020, bringing with
it new business opportunities.
Agrobusiness - Since 2018, together with Nokia and BR Digital, TIM SA has been focusing on agro-food potential
in Brazil, offering connections in rural areas (not only for business applications but also for the digital inclusion of
agrobusiness employees and residents of small towns). TIM strengthened its position in relation to vertical
agriculture in 202016, with the creation of the ConnectarAgro ecosystem (conectaragro.com.br) which brings
together TIM, solution providers for the agro segment and telecommunication solution providers.
5G -The commercial launch was announced by TIM SA’s CEO early 2020 during an on-line event attended by
about 20,000 colleagues; the launch will regard three cities of Brazil: Bento Gonçalves (RS), Itajubá (MG) and Três
Lagoas (MS).
Open Lab initiatives
TIM SA joined the Telecom Infra Project (TIP) in 2017, an initiative founded by Facebook, SK Telecom, Deutsche
Telekom, Nokia, Intel and other companies, which aims to create a new approach to building and implementing
the telecommunications network infrastructure. TIM SA transformed TIM Lab into the first TIP Community Lab
in Latin America, available to TIP members to create universal standards for solutions (initially transport
networks, Open Optical Packet Transport working group), to overcome the challenges related to interoperability
of different supplier products.
In 2018, TIM SA also joined a new working group within the TIP, together with Vodafone and Telefonica, called
DCSG (Disaggregated Cell Site Gateway17). This project is an opportunity to define a common set of operator
requirements and coordinate with companies that manufacture devices, which have wider and more flexible
capacities and are cheaper; in June this year, the main functions of the solution were demonstrated with the
help of Facebook, core EDGE suppliers and TIP members. In 2020, TIM and the TIP partners completed their
validation of the TSS (Total Site Solution), an inexpensive, unrestricted 4G NodeB solution, powered by solar
energy and connected by satellite to the core TIM network, to be used in remote zones with low population
density. During the year, TIM also adhered to the OpenRAN initiative with the OpenField project, to validate
OpenRAN 4G and 5G solutions focused on the separation of hardware and software at a RAN level.
11Sharing the Radio Access Network.
12 Infrastructure costs are mainly associated with the introduction of new radiating systems and other electronic components, passive site
infrastructure and transport networks; therefore, the sharing of the resources supplied by LTE RAN makes for a significant optimization of costs for
telecommunications operators.
13In the telecommunications sector, a backhaul network or return network is the portion of a hierarchical network that includes intermediate
connections between the core network (or backbone network) and the small sub-networks at the "margins" of the same hierarchical network..
14 Narrowband Internet of Things (NB-IoT) is an LPWAN (Low Power Wide Area Network) radio technology standard developed by 3GPP to enable
communication with a wide range of cellular devices and services.
15It is a minuscule chip incorporated into a device (in particular, smartphones), which is far smaller than traditional telephone SIM cards.
16Above ground crops in closed large system greenhouses, which are on several height levels, air-conditioned and automated. These systems are
75% more productive than traditional field agriculture and consume about 95% less water. Furthermore, they have no geographical constraints, they
can also be used in urban areas and offer fresh and zero-km products.
17 Based on an open and unbundled architecture, the new DCSG is designed for the economic backhaul of mobile site traffic in existing mobile
networks and emerging 5G infrastructures.
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CONSOLIDATED NON-FINANCIAL STATEMENT
TIM, as a Relevant Public Interest Entity (PIE), has prepared and presented a “Consolidated non-financial
statement” as a “separate report”, as provided for by article 5 Statement positioning and disclosure regime of
Legislative Decree 254/2016, on the disclosure of non-financial information and diversity information by some
companies and some large groups. Moreover, a report (statement) issued by the appointed external auditor
pursuant to article 3, subsection 10 of Legislative Decree 254/2016 is annexed to the “Consolidated non-financial
statement”; the assignment was given to EY S.p.A.
The Consolidated Non-Financial Statement is available in the sustainability section of the website gruppotim.it.
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EVENTS SUBSEQUENT TO DECEMBER 31, 2020
For details of subsequent events, see the specific Note "Events Subsequent to December 31, 2020" in the
Consolidated and Separate Financial Statements as at December 31, 2020 of the TIM Group and TIM S.p.A.,
respectively.
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BUSINESS OUTLOOK FOR THE YEAR 2021
The strategy outlined in the 2021-2023 Strategic Plan is hinged on the business objectives achieved and on the
solid financial basis assured thanks to having surpassed the cash generation and debt reduction targets recorded
in the previous two years. The technological evolution and expansion of fixed, mobile, cloud and data center
infrastructure has been sped up and strengthened by the partnerships started with world leaders like Google in
Cloud, Disney in TV contents, Vodafone in mobile telephony towers and KKR and Fastweb in the development
of super high-speed fiber.
The new three-year plan called “Beyond Connectivity” sets itself the primary objective of expanding on the
Group’s business beyond mere connectivity, leveraging the convergence of the different business areas,
continuing to simultaneously increase the efficiency of the traditional core business. The plan also takes into
account the deterioration of the economic prospects as a consequence of the COVID-19 pandemic.
All business units play a key role in achieving the industrial, financial and sustainability targets of the 2021-2023
Plan:
■ Consumer: consolidates the convergence model developed, increasing the drive on “adjacent” services (TV,
smart home, security), the digitization of processes and the improvement of the custom experience. A
stabilization or moderate growth is consequently envisaged to fixed and mobile ARPU as well as significant
growth in the volumes of digital services. The actions envisaged will make it possible to keep the fixed lines
stable and ensure a constructive dynamic for Mobile Number Portability on the mobile.
■ TIMVISION: in the context of the services envisaged by the Plan, TIMVISION is the heart of the consumer
market strategy and will continue to enrich the offer that transformed the service on the most complete TV
platform of the Italian market, aggregating the very best entertainment and sports contents of the main
industry players (e.g.: Disney, Netflix, SKY, Dazn, Amazon, Discovery).
■ Business: the positioning outlined, in the hallmark of the previous plans, confirms the aim of consolidating
TIM as reference supplier and top quality partner of integrated solutions for SMEs and major companies. In
this context, the adjacent market with the greatest development prospects is that of the ICT services and, in
particular, cloud and data center, which can use the contribution of both the strategic partner Google Cloud
and the new dedicated pole, Noovle, created to this end. The same model, with specialized factories, will be
adopted to develop new business opportunities with Olivetti in the IoT, Telsy in cybersecurity and Sparkle for
international connectivity services, expanded both geographically and in terms of the portfolio of “beyond
connectivity” services.
■ Wholesale: after the satisfactory results recorded in 2020, the aim of protecting the market share will
continue to be pursued maintaining leadership in ultrabroadband coverage. We will aim to make the most
of opportunities arising from unregulated services, in line with the previous plan, also offering other operators
services beyond connectivity, such as data centers.
We will also continue to seek to increase process efficiency and strengthen technological leadership in terms of
quality and innovation. In terms of total coverage, the objective is confirmed of closing the digital divide
throughout the country and today, nationwide (99% of the country), we already record a speed ranging between
30 and 200 Mbps. TIM is committed at the same time to taking speed to more than 1 GB, thanks to coverage
with Fiber to the Home (FTTH) technology: FiberCop will reach 76% of property units of gray and black areas by
2025 (56% of technical property units nationwide). At the same time, the FTTC networks will reach 93% of
families with an active telephone line by 2023 (91% already today), in addition to coverage with mobile
technology, FWA and satellite. The first three regions for which the digital divide will be “closed” are, after Apulia
(completed in 2020), Friuli-Venezia Giulia in the first quarter of 2021 and Lombardy thereafter.
In mobile, modernization of the 4G network continues, along with the development of 5G, with the aim of
reaching national 5G coverage by 2025.
The commitment has been further strengthened to make TIM a “sustainable” group, thanks to a series of actions,
which come in addition to those already planned, to implement improvements in terms of environmental
impact, the circular economy, digital inclusion and ESG governance, thanks to new, more advanced reporting
tools.
The financial targets for the 2021-2023 plan are available on the website gruppotim.it.
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MAIN RISKS AND UNCERTAINTIES
Risk governance is a strategic tool for value creation.
The TIM Group has adopted a Risk Management model that is constantly evolving, aligned with international
regulations and standards, to allow the identification, assessment and management of risks in a uniform way
within Group companies, highlighting potential synergies between the actors involved in the assessment of the
internal control and risk management system.
The Risk Management process is designed to identify potential events that may affect the business, to manage
the risk within acceptable limits and to provide reasonable confidence about the achievement of business
objectives.
The Risk Management Model adopted by the TIM Group
■ classifies risks based on their impact into Strategic (resulting from the evolution of factors underpinning the
main assumptions used for the development of the Strategic Plan) and Operational (resulting from the
evolution of risk factors, both endogenous and exogenous, which can compromise the achievement of
business objectives);
■ assesses the risks not just individually but also in terms of the risk portfolio (correlation analyses);
■
identifies and updates the overall set of risks to which the Group is exposed through the analysis of the
Business Plan, the monitoring of the reference context (macroeconomic, regulatory, etc.), cyclical monitoring
with the Risk Owners, in order to intercept any changes and/or new risk scenarios, specific analyses on the
risks to which the corporate assets may be exposed.
The business outlook for 2021 could be affected by risks and uncertainties caused by a multitude of factors, the
majority of which are beyond the Group's control.
In this context we highlight the health emergency due to the spread of COVID-19. In addition, non-exhaustively,
the following additional factors are mentioned: a change in market context, entry of new potential competitors
in the fixed-line and mobile sectors, the initiation of procedures by Authorities and consequent delays in the
implementation of new strategies, any constraints connected to the exercise of the Golden Power special powers
by the Government with effects - currently not foreseeable - in terms of strategic choices and progress of the
already announced three-year objectives which may entail, for some, different timing than that initially
scheduled or relative achievement with new and more joined-up paths.
Risks related to the business and industry
Risks related to competition
The telecommunications market is characterized by strong competition that may reduce market share in the
geographical areas where the TIM Group is engaged as well as erode prices and margins. Competition is focused
on innovative products and services and on the capacity to move towards higher levels of convergence in service
and expand it to the content offering, but also on the price competition in both traditional and other services.
The use of new technologies (IoT) and new knowledge and customer management tools (Big Data) represent
enabling factors in the mitigation of competition risks, however failure to exploit these opportunities could
become an additional element of risk.
In terms of infrastructural competition, also considering the recent agreement for the establishment of the
company FiberCop, which aims to speed up the country’s fiber coverage, the development of alternative
operators could represent a threat for TIM, also beyond the Plan period.
Competitive risks in the Brazilian market lie in the rapid transition of the business model tied to traditional services
and the potential consolidation of the sector. As the consumption patterns of consumers change (migration
from voice to data services), service providers need to act swiftly in upgrading their infrastructure and
modernizing their portfolios of products and services. In this context, the TIM Brasil group could be impacted by
the need to upgrade its technologies and infrastructure rapidly and by greater competition, in the form of
aggressive sales strategies and potential business combinations in the sector. In addition, the slow recovery from
the country’s major economic crisis, the delay in the necessary structural reforms, the COVID-19 pandemic and
all the restrictions imposed to fight its spread, directly affected consumption, in particular in the prepaid
segment.
Risks related to the development of fixed and mobile networks
To maintain and expand our customer portfolio in each of the markets in which the TIM Group operates, it is
necessary to maintain, update and improve existing networks in a timely manner. A reliable and high-quality
network is necessary to maintain the customer base and minimize terminations to protect the Company's
revenues from erosion.
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The maintenance and improvement of existing installations depend on the Group's ability to:
■ deliver network development plans within the time-frames contemplated by business development plans
and with the necessary level of effectiveness/efficiency;
■ upgrade the capabilities of the networks to provide customers with services that are closer to their needs;
■
increase the geographical coverage of innovative services;
■ upgrade the structure of the systems and the networks to adapt it to new technologies;
■ sustaining the necessary level of capital expenditure in the long term.
Cybersecurity risks
Cyber risk is on the increase worldwide and as such requires continual monitoring by TIM, given the sheer amount
of IT assets the company manages in terms of own TLC infrastructure and assets necessary to deliver services
to customers.
In view of these considerations, considerable attention was paid to protecting networks from main threats (e.g.
viruses, malware, hackers, data theft). With a wide range of attackers (Cyber-Criminals, Cyber-Terrorists, Insiders,
etc.), TIM carries out activities not only to safeguard its infrastructure but also – with a strong sense of
responsibility – to protect customers' information assets, that are a priority target for the company.
As regards prevention, TIM monitors cyber risk analyses, defining security plans for the company's IT assets, to
identify the actions necessary to mitigate cyber risk in advance and guarantee a security by design approach,
also monitoring the plans of these actions and controls on actual adoption in the field.
As for its response to cyber attacks, the Security Operation Center (SOC), operates 24/7, 365 days a year, in order
to manage IT security incidents and help limit their impacts. TIM has also implemented an insurance program
to cover cyber risks.
Business Continuity Risks
The TIM Group's success depends heavily on the ability to ensure the continuous and uninterrupted delivery of
the products and services we provide through the availability of processes and the relating supporting assets,
which are sensitive to various internal and external threats. TIM has adopted a “Business Continuity Model
System” framework in line with international standards, to analyze and prevent these risks.
TIM considers Business Continuity a fundamental factor for the protection of the Group's Value and Reputation,
in the provision of its services and in full compliance with customer contracts, sector regulations and, more
generally, consistency with reference methodologies and best practice.
TIM implements an ongoing management and governance process, supported by the Company Management,
which ensures that the necessary steps are taken to identify the impact of potential losses, that recovery plans
and strategies are practicable, and that continuity of services is guaranteed through training programs, tests,
exercises and periodic updating and revision activities.
TIM also carries out period risk assessments of the corporate assets with a view to assessing and mitigating the
risks of possible direct damages and/or interruptions of business, equally implementing specific insurance
programs to cover these risks.
Starting February 2020, the BCMS model and in particular the Business Continuity Plans were also used as tools
to ensure maximum operating conditions in the face of the COVID-19 health emergency. The timely adoption by
all corporate Departments of the continuity measures defined has made it possible to adopt suitable strategies
to continue operating from both a remote position and in on-field operations, always guaranteeing the health
and safety of employees.
Fraud risks
Technological progress means that increasingly sophisticated tools and techniques, which are quick acting and
have a considerable economic impact, are available for fraudulent activity.
“Conventional” phenomena such as subscription, interconnection, and commercial fraud currently generate the
highest part of revenue loss and will continue to be significant in the near future, however new types of Internet-
style fraud will gradually gain more ground (Internet spamming/phishing, service reselling, VoIP bypass, etc.).
Furthermore, some specific types of provided services (e.g. wholesale interconnection, voice or data services) are
potentially at risk of third party use for the construction of fictitious transaction schemes, tax avoidance offenses
and/or international money laundering.
The TIM Group has an established organizational model based on the governance of fraud and a separate
operational governance system for managing and combating fraud.
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The procedure to combat external fraud, drawing on company processes at risk of the offenses contemplated in
Italian Legislative Decree no. 231/2001 being committed, sets out internal control mechanisms, including
instructions on how employees and Company staff/partners (including suppliers) must behave (Prevention). In
the Detection stage, potential cases of fraud are identified and after a preliminary check of the possible grounds
the cases may be subject to Investigation and Tackling. To complete the fraud management end-to-end cycle,
the results of actions taken are assessed with monitoring and any actions to improve the fraud management
process are identified.
The fight against internal fraud, implemented in compliance with the limits imposed by the recently updated
trade union agreements prohibiting distance monitoring of staff at work, is carried out through the detection of
information relating to the concentration of anomalous operations that flag-up possible cases of serious
wrongdoing.
Risks linked to the main sustainability topics
For many years now, the Group has been actively involving and systematically consulting with its stakeholders
with a view to improving the company’s environmental, social and governance (ESG) performances. The results
of engagement activities, as seen from the materiality matrix, are reflected in the Sustainability Plan, the heart
of the Group’s three-year Strategic Plan.
The plan of action in support of the ESG strategy aims to assure a concrete, significant impact on business
development, which has upheld goals of environmental protection and social inclusion.
Reducing energy consumption and combating climate change
More specifically, the Group has set itself the goal of becoming carbon neutral by 2030, reducing indirect
emissions by 70% and increasing its domestic eco-efficiency by 50% by 2025. In this respect, the failure to limit
energy consumption, as well as having a negative impact on the climate, may result in failure to make savings
on costs.
The measures adopted by TIM include:
■
initiatives and projects aimed at minimizing the environmental impact of the corporate business, of
customers using ICT products and the supply chain;
■ energy efficiency improvements on more than 300 sites under the scope of the plants and CED;
■
increased use of energy from renewable sources in the corporate processes.
The continuous increase in global average temperatures is having a significant impact on natural
events/disasters.
The negative consequences linked to climate change (e.g. floods, wind storms, etc.) can also impact the
corporate assets (tangible damages) and Business Continuity (Business Interruption). To this end, TIM has
specifically assessed, mitigated and monitored risks deriving from such events, as well as taken out suitable
insurance cover.
Social inclusion
The digital divide is a huge obstacle to the dissemination of digitization and the correlated connectivity services,
with the risk of commercial repercussions. The “Operazione Risorgimento Digitale”, which began in 2019, is the
first major free school for the spread of digital skills in Italy and the main project for inclusion that seeks to bridge
the digital divide involving the country’s less urbanized areas.
Personnel competences and engagement
The capacity to attract and retain qualified, specialized, motivated personnel is key to the success in pursuing
the strategic goals and achieving a suitable level of customer experience.
TIM has launched a hiring program, searching out professional profiles that are compatible with the company
reindustrialization/reorganization plan and a program for all personnel for the adjustment of competences in
support of requalification, reskilling and upskilling processes, also regarding important insourcing of evolved and
traditional, technical-specialized core activities.
Following the 2019 Engagement Survey, the plan for TIM personnel has been prepared, with the aim of increasing
engagement over a 3-year period.
The plan includes more than 180 actions, of those already in progress, those concerned by revision and those
introduced ex-novo, which look to personal well-being, organization and personal support, to ensure a better
time working in the company and, in turn, comes under the scope of the broader TIM Sustainability Plan.
For more information on the individual sustainability topics, see the 2020 Sustainability Report.
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Financial risks
The TIM Group may be exposed to financial risks, such as risks arising from fluctuations in interest rates and
exchange rates, credit risk, liquidity risk and risks related to the performance of the equity markets in general,
and – more specifically – risks related to the performance of the share price of the TIM Group companies. These
risks may adversely impact the earnings and the financial structure of the Group. Accordingly, to manage those
risks, the TIM Group has established guidelines, at central level, which must be followed for operational
management, identification of the most suitable financial instruments to meet set goals, and monitoring the
results achieved. In particular, in order to mitigate the liquidity risk, the TIM Group aims to maintain an "adequate
level of financial flexibility", in terms of cash and syndicated committed credit lines, enabling it to cover
refinancing requirements at least for the next 12-18 months.
The potential impact of Brexit in terms of financial risk is not considered significant for the TIM Group. In addition,
the financial risk management policies adopted provide for the full hedging of exchange rate risk and the
minimization of exposure to interest rate and counterparty risk and are also effective in the Brexit context.
Risks associated with the macroeconomic conditions
COVID-19
The continued health emergency for the spread of COVID-19 and the additional restrictive orders issued by
national and foreign authorities, coupled with the worsening of the global macroeconomic scenario and the risk
of deterioration of the credit profile of certain customer segments, could lead to slowdowns in business activities,
deriving from the limitation of certain types of technical and commercial interventions, difficulties encountered
by customers and discontinuity in the supply chain, with negative impacts on the overall results of the Group.
The management of this emergency requires, also in consideration of the public service provided, the
implementation of all activities relating to the operational continuity of business processes with the aim of
ensuring the operation of the services provided and the protection of employees’ health.
Risks related to macro-economic factors
The TIM Group's economic and financial situation depends on the influence of numerous macroeconomic
factors, such as economic growth, consumer confidence, interest rates and exchange rates in the markets where
the group operates.
The third quarter of 2020 revealed a lesser slowing to the Italian economy but a worsening of the virus in the last
few months of the year, with the consequent restrictions, albeit with different levels of intensity in the different
regions, had a negative impact on the profit for the last quarter of 2020 (-7% on the fourth quarter of 2019).
On an annual level, the Italian economy suffered more than other Eurozone countries in respect of the COVID-
19 emergency (Italy’s GDP estimate is -9.1% vs 2019; EMU GDP estimate is -7.2% vs 2019). The global context
continues to be dominated by the difficulties and uncertainties deriving from the evolution of the pandemic,
which affect growth forecasts for 2021. A recovery is only expected starting from the second quarter of 2021, as
the vaccines are progressively rolled out and expansive monetary and tax policies maintained. Over the next few
years, implementation of the Next Generation EU program will act as a stimulus of investments. The pandemic
has brought about a major decline in both production and family consumptions: industrial production has
recorded a significant decline of approximately 12%, as has family consumption (-11.1%).
Consumption has contracted significantly, especially in the services sector, as a result of the measures adopted
to limit contagion and a greater caution by consumers in spending during the pandemic. The Italian
government's measures to limit the contagion and support household incomes will have a positive impact on
demand, and will also lead to a severe increase in public debt.
In Brazil, after three years of modest growth, the results expected for 2020 have been influenced significantly by
the COVID-19 pandemic emergency and the restrictions imposed to limit its spread. According to the Focus
Report of the Brazilian Central Bank (BACEN)– a reduction in the Brazilian GDP is expected of -4.40% in 2020, as
compared with 1.1% growth booked in 2019.
After a devastating first half of 2020, when the pandemic led to the closure of commercial activities, major
restrictions in travel and a considerable outflow of capital, which had already begun in 2019, the scenario in the
second half of the year changed and the third quarter recorded strong GDP growth. 2020 did not recover the
level of activities at end 2019, but growth expectations are higher than those forecast for the first half of the
year.
Recently, after the adoption of strict measures restricting travel and ordering social distancing, in a bid to reduce
the transmission of COVID-19, the gradual relieving of the restrictive measures and the return to economic
activities should reduce the negative effects on the results booked by TIM Brasil early 2020, which saw a
reduction in revenues in both the prepaid and postpaid segments. It is not yet possible, however, to predict if the
Brazilian economy and the results of TIM Brasil will return to pre-crisis levels.
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Risks relating to the legislative and regulatory context
Regulatory risks
The electronic communications industry is highly regulated. As such, new decisions by the Communications
Authority (AGCom) may lead to changes in the regulatory framework that may affect the expected results of
the Group and the guidance announced to the market. In addition, the position of significant market power held
by TIM In the fixed-line access markets and the structure of the mobile markets results in high levels of scrutiny
from the Italian Antitrust Authority (AGCM) over competition in the sector.
The main elements that introduce uncertainty are:
■
lack of predictability in start-up timing and consequent final decisions in new proceedings by AGCom and
AGCM;
■ AGCom decisions with retroactive effect (for example, the revision of prices applicable to past years and the
effectiveness and actual implementation of repricing policies, also following administrative rulings);
■ AGCom decisions that can influence technological choices, with a potential impact on the timing of return
on infrastructure investment;
■ any AGCM decisions that can limit TIM's competitive capacity (for example, in terms of minimum retail prices
to guarantee replicability);
■ any inadequacy in the implementation of processes and systems for the management of regulated services,
identified by AGCom or AGCM;
■ any AGCom or AGCM decisions that impose constraints on the pricing of fixed-line and mobile offers on the
basis of consumer protection legislation.
Compliance risks
The TIM Group may be exposed to risks of non-compliance due to non-observance/breach of internal (self-
regulation, such as, for example, bylaws, code of ethics) and external rules (laws, regulations, new accounting
standards and Authority orders), with consequent judicial or administrative penalties, financial losses or
reputational damage.
The TIM Group aims to ensure that processes, and, therefore, the procedures and systems governing them, and
corporate conduct comply with legal requirements. The risk is associated with potential time lags in making the
processes compliant with regulatory changes or whenever non-conformances are identified and is monitored by
the dedicated internal control system.
General Data Protection Regulation (GDPR)
Compliance with Commission Regulation (EU) 2016/679 (General Data Protection Regulation, GDPR), directly
applicable as from May 25, 2018 and enacted in Italy by Legislative Decree no. 101/2018 is particularly important.
This Regulation has increased administrative fines considerably compared to the Data Protection Act previously
in effect, and in some cases fines of up to 20 million euros may be administered, or in the case of companies, of
up to 4% of their global annual turnover of the previous year, if this amount is higher than 20 million euros.
Starting from the operating model already in use with pre-existing Privacy regulations, the TIM Group extended
the tools necessary to ensure compliance with the GDPR, also activating specific organizational oversights. In
particular, a steering committee was established on compliance with the GDPR, overseen by the company’s
senior management and that provides guidance in pursuing the conformity objectives. The conformity
assessments have been submitted to the committee, along with the results of the ex-ante and ex-post controls
carried out by the Group Data Protection Officer, who operates autonomously, in accordance with segregation
of duties and who is a member of the Company’s Internal Control System. The Company’s operative processes
have been adapted according to the principle of privacy-by-design, with special attention paid to the commercial,
relations with customers and technological processes, adopting the methods defined by corporate regulations
dedicated to the application of the GDPR and which incorporates the directives of the Data Protection Authority.
Personal data processing is subject to preventive assessment according to the indications of the European Data
Protection Board (EDPB), it is censused and the related responsibilities are attributed to the suitable managerial
level of the Company’s organization, as envisaged by the Privacy Code in application of the accountability
principle laid down by the GDPR.
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Health and Safety at Work
TIM is compliant with safety at work requirements, also thanks to the definition and periodic updating of the Risk
Assessment Document. TIM also has insurance cover in place to protect the company population.
As regards the management of the impacts of the COVID-19 pandemic, TIM immediately took all steps necessary
to fully implement the emergency provisions issued by the government and regional authorities, in multiple
tranches, to limit the virus contagion.
Weekly smart working has been extended to all professional figures able to do so, including call center operators,
and specific prevention and protection protocols defined, modulated taking into account the specific nature of
the work at hand, for all those needing to continue to work on-field (technicians, store operators and data center
operators), equipping them with suitable Personal Protection Equipment and, in line with the legal guidance and
taking into account government and health authority guidelines, in accordance with Italian Legislative Decree
no. 81/2008, a specific document has been formalized dedicated to COVID-19 and setting out all personnel
protection measures aimed at preventing contagion.
In addition, TIM has supported employees with dedicated initiatives, such as:
■ a continuous information and awareness-raising campaign intended for all personnel;
■ a health welfare campaign, of voluntary adhesion, based on serological tests aiming to verify the degree of
immunity to COVID-19 by means of antibody response, intended mainly for personnel who have continued
to work in the field during the emergency;
■ a flu vaccine campaign, again voluntary, for all TIM Group personnel;
■ psychological support from external professionals;
■ specific procedures for handling any cases of ascertained or suspected positivity to COVID-19, as well as
specific insurance cover for employees in the event of hospitalization following contagion with COVID-19.
Golden Power
The "Golden Power" Decrees that give the government special powers over corporate structures in the defense
and national security sectors, as well as for activities of strategic importance in the telecommunications sector,
affect the public-private relationship, also adding value to the technological assets and services included in the
Golden Power perimeter, with content derived from the pursued institutional purpose.
In summary, the Prime Minister established that the Company is subject to the obligations pursuant to Legislative
Decree no. 21/2012 (special powers rules) on September 28, 2017, as a business that:
■ carries out “activities of strategic importance for the defense and national security system” (as per article 1
of the Decree Law) and
■ possesses networks and systems “necessary to ensure the minimum supply and operation of essential public
services” and goods and relationships “of strategic importance for the national interest” in the
communications sector (as per article 2 of the same Decree Law).
The regulatory architecture relating to TIM, consequently, involved a first phase in 2017 on the issue of the Prime
Ministerial Decrees of October 16 and November 2.
The government's ruling was subsequently integrated with the Law of May 20, 2019, no. 41 which included
measures relating to electronic broadband communication services based on 5G technology within a wider
framework of urgent measures”.
With the aforementioned ruling of October 16, 2017, the Prime Minister exercised the special powers provided for
in article 1 of the Golden Power Decree by imposing specific provisions and conditions on TIM and the Sparkle
and Telsy subsidiaries. The measures concern corporate and organizational governance; in particular, the Prime
Minister requires the presence on the respective Boards of Directors of a Security Chief Executive Officer -
currently coinciding with the Chief Executive Officer - (who has Italian citizenship and security authorization) and
the establishment of a Security Organization unit.
With a ruling on November 2, 2017, the Prime Minister's Office also exercised the special powers provided for in
article 2 of the Golden Power Decree, through the imposition of further requirements and conditions.
With the subsequent implementing decrees of September 5, 2019 and July 6 and August 7, 2020, the Legislator
imposed the exercise of special powers in relation to the supply of 5G technology produced outside the EU,
stating that these communication services constitute activities of strategic importance for the National Defense
and Security system.
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Risks relating to legal proceedings and the Regulatory
Authorities
The TIM Group has to deal with disputes and litigation with tax authorities and government agencies, regulators,
competition authorities, other telecommunications operators and other entities. The possible impacts of such
proceedings are generally uncertain. In the event of settlement unfavorable to the Group, these issues may,
individually or as whole, have an adverse effect, which may even be significant, on its operating results, financial
position and cash flows.
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INFORMATION FOR INVESTORS
TIM S.p.A. Share Capital at December 31, 2020
Share Capital
Number of ordinary shares (without nominal value)
Number of savings shares (without nominal value)
Number of TIM S.p.A. ordinary treasury shares
Number of TIM S.p.A. ordinary shares held by Telecom Italia Finance S.A.
Percentage of ordinary treasury shares held by the Group to total share capital
Market capitalization (based on December 2020 average prices)
11,677,002,855.10 euros
15,329,466,496
6,027,791,699
35,179,709
126,082,374
0.76%
8,458 million euros
On May 25, 2016, the Shareholders’ Meeting approved amendments to the company name, introducing the
name “TIM S.p.A.” as an alternative to “Telecom Italia S.p.A.”.
TIM S.p.A. ordinary and savings shares are listed on the Italian stock exchange (FTSE index), whereas the ordinary
shares of TIM S.A. are listed in Brazil (BOVESPA index).
Code
Stock exchange
Bloomberg
Reuters
TIM-Telecom Italia
ordinary shares
savings shares
TIM S.A.
IT0003497168
TIT IM
TLIT.MI
IT0003497176
TITR IM
TLITn.MI
BRTIMSACNOR5
TIMS3 BZ
TIMS3.SA
Ordinary shares of TIM S.A. were also listed on the NYSE (New York Stock Exchange); share prices are set through
ADS (American Depositary Shares) representing 5 ordinary shares of TIM S.A.
From October 8, 2019, the deregistration of TIM S.p.A. securities, previously listed on the NYSE (through ordinary
and savings American Depositary Shares), took effect with the consequent end to the information obligations
for TIM pursuant to U.S. Securities Exchange Act of 1934.
The operation had no consequences for the listing and trading of TIM's ordinary and savings shares on the Borsa
Italiana.
The decision to delist from the NYSE was made with the aim of simplification and cost saving, without prejudice
to the high standards of corporate governance, a solid internal control system and transparent economic and
financial information (including the publication on the gruppotim.it website of the English translations of
financial statements, press releases and other regulated information material).
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Shareholders
Shareholder composition according to the Shareholders Book at December 31, 2020, supplemented by
communications received and other available sources of information (ordinary shares):
TIM Group 1.05%
Italian Institutional
Investors 3.73%
Vivendi 23.75%
Foreign Institutional
Investors 39.23%
Other Shareholders
22.43%
Cassa Depositi e
Prestiti 9.81%
MAJOR HOLDINGS IN SHARE CAPITAL
Taking into account the entries in the Shareholders Book, communications sent to Consob and to the Company
pursuant to Italian Legislative Decree 58 of February 24, 1998, Article 120, and other available sources of
information, the relevant holdings of TIM S.p.A.’s ordinary share capital are as follows1:
Results of investments above the threshold of 3%
Holder
Type of ownership
Percentage of ownership
Vivendi S.A.
Cassa Depositi e Prestiti S.p.A.(a)
Canada Pension Plan Investment Board (b)
Direct
Direct
Direct
23.75%
9.81%
3.19%
(a) Following the evidence of attendance at the TIM Shareholders’ Meeting of March 29, 2019, confirmed at the meeting of April 23, 2020, and the
collection of the dividend relative to FY 2019, assigned for payment on June 24, 2020.
(b) Following the evidence of the collection of the dividend relative to FY 2019, assigned for payment on June 24, 2020.
Results of investments above the threshold of 1% and until 3%
With resolution no. 21326 of April 9, 2020 (which repealed the previous resolution no. 21304 of March 17, 2020),
Consob provided, pursuant to art. 120, paragraph 2-bis, of Legislative Decree 58 of February 24, 1998, for a period
1 The percentages refer to the total ordinary shares making up TIM’s share capital, as resulting from the last deposit with the Register of Companies
as at the update date. In particular, following the November 27, 2020 issue of 126,343,913 ordinary shares following the public offering for subscription
in exchange for payment reserved for employees under the scope of the “2020 Broad-Based Share Ownership Plan”, all ordinary shares making up
the share capital of TIM come to 15,329,466,496 and this was registered with the Register of Companies on December 28, 2020.
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of three months starting from April 11, 2020 – and unless revoked earlier – the additional 1% threshold, beyond
which the obligation arises to communicate to the investee company and Consob, pursuant to art. 120,
paragraph 2, of Legislative Decree 58 of February 24, 1998.
Consob followed this resolution with addition resolutions. By resolution no. 21434 of July 08, 2020, Consob
sanctioned the provisions pursuant to resolutions nos. 21326 and 21327 of April 09, 2020 on the identification of
additional thresholds of communication of corporate investments and declarations of intent in companies with
a particularly broad-based ownership structure - the lists of which were updated by resolutions no. 21352 of May
06, 2020 and 21404 of June 17, 2020 - were extended for three months, from July 12, 2020 until October 12, 2020,
with the deadline then having been extended until January 13, 2021 by resolution of October 07, 2020.
By resolution no. 21672 of January 13, 2021, Consob last extended this deadline for another three months, from
January 14 to April 13, 2021.
As a consequence of the communications made in accordance with said resolutions passed over time, Consob
has disclosed the following investments in the ordinary share capital of TIM held directly:
■ Novator Capital Ltd. 2.986%, controlled by The Future Holdings Trust (*) - transaction date October 15, 2020.
On the same date, the investment held by Partners Telecom Sarl, of equal entity, was zeroed. Following the
increase in ordinary shares making up the share capital, as acknowledged in note (1), the percentage held
drops to 2.962%.
■ Bank of Italy 1.011% - transaction date September 16, 2020 (settlement date September 18, 2020). Following
the increase in ordinary shares making up the share capital, as acknowledged in note (1), the percentage
held drops to 1.002%.
■ Norges Bank 1.053% – transaction date June 8, 2020. Following the increase in ordinary shares making up
the share capital, as acknowledged in note (1), the percentage held drops to 1.045%.
(*) Irrevocable, discretion trust, regulated by the law of Guernsey and administered by BB Trustees SA, as trustee. The Settlor is Bjorgolfur Thor
Bjorgolfsson; the protector is Frank Pitt. The trust beneficiaries are Bjorgolfur Thor Bjorgolfsson and children. The Trustee has full powers and
no powers of intervention of beneficiaries or third parties are envisaged (additional information provided in accordance with Consob
communication no. 0066209 of August 02, 2013).
Other available sources of information
Paul E. Singer last notified Consob and the Company, pursuant to Art. 120 of Italian Legislative Decree no. 58 of
February 24, 1998, of having reduced, with effect from May 12, 2020, his shareholding by way of indirect
ownership with voting rights in TIM to 0.136% (equivalent of 0.135% in relation to the new quantity of ordinary
shares making up the share capital, as acknowledged in note (1)). In this communication, Paul E. Singer reported,
pursuant to art. 119 of the Consob Issuers Regulation, a long participation through the stipulation by Elliott
International L.P. and Elliott Associates L.P of equity swap contracts with JP Morgan expiring on May 30, 2023,
booking an aggregated investment of 4.998% of the ordinary share capital of TIM (equivalent to 4.956% in
relation to the new quantity of ordinary shares making up the share capital, as acknowledged in note (1)).
Common Representatives
■ The special meeting of the savings shareholders held on May 24, 2019 renewed the appointment of Dario
Trevisan as the common representative for three financial years, up to the approval of the financial
statements for the year ended December 31, 2021.
■ By decree of July 3, 2020, the Milan Court appointed Antonio Franchi as the common representative of the
bondholders for the loan “Telecom Italia S.p.A. 2002-2022 a Tasso Variabile, Serie Speciale Aperta, riservato
in sottoscrizione al personale del Gruppo TIM, in servizio e in quiescenza“ (Telecom Italia S.p.A. 2002-2022
Floating Rate bonds, Open Special series, reserved for subscription by serving or retired employees of the TIM
Group). The Bondholders' Meeting, convened for the appointment of the common representative on April
16, 2020, was not quorate.
Report on Operations of the
TIM Group
Information for Investors 100
Rating at December 31, 2020
At December 31, 2020, the three rating agencies – Standard & Poor's, Moody's and Fitch Ratings – rated TIM as
follows:
STANDARD & POOR'S
MOODY'S
FITCH RATINGS
Rating
BB+
Ba2
BB+
Outlook
Negative
Negative
Stable
Waiver of the obligation to publish disclosure documents for
extraordinary transactions
On January 17, 2013, the Board of Directors of TIM S.p.A. resolved to exercise the option, as per article 70
paragraph 8 and article 71 paragraph 1-bis of the Consob Regulation 11971/99, to waive the obligations to publish
disclosure documents in the event of significant operations such as mergers, demergers, capital increases by
means of the transfer of assets in kind, acquisitions and disposals.
Conditions for the listing of shares of parent companies
established and regulated by the law of states outside the
European Union
TIM S.p.A. confirms the existence as at December 31, 2020 of the conditions referred to in article 15, paragraph
1, letter a), b) and c), point i) of Consob Regulation no. 20249/2017 as amended, for the listing of their shares on
regulated markets.
Report on Operations of the
TIM Group
Information for Investors 101
RELATED-PARTY TRANSACTIONS
In accordance with Article 5, paragraph 8 of Consob Regulation 17221 of March 12, 2010 concerning “Related-
party transactions” and the subsequent Consob Resolution 19974 of April 27, 2017, no significant transactions
were conducted in 2020, as defined by Article 4, paragraph 1a of the aforementioned regulation, that had a
material impact on the financial position or the performance of the TIM Group and TIM S.p.A. in 2020.
In addition, there were no changes or developments with respect to the related party transactions described in
the 2019 Report on Operations which had a significant effect on the financial position or on the performance of
the TIM Group and TIM S.p.A. in 2020.
Related-party transactions, when not dictated by specific laws, were conducted at arm's length. They were
performed in compliance with the internal procedure, which sets forth rules designed to ensure the transparency
and fairness of the transactions in accordance with Consob Regulation 17221/2010. The current procedure is
available on the website gruppotim.it, under the Group section/Governance System channel.
For information on relationships with related parties, see the Financial Statement Formats and the "Related
party transactions" Notes of Consolidated Financial Statements and the Separate Financial Statements.
Report on Operations of the
TIM Group
Transactions with related parties
102
ALTERNATIVE PERFORMANCE MEASURES
In this Report on Operations, in the TIM Group Consolidated Financial Statements and in the Separate Financial
Statements of the Parent, TIM S.p.A., for the year ended December 31, 2020, in addition to the conventional
financial performance measures established by IFRS, certain alternative performance measures are presented
for a better understanding of the TIM Group performance of operations and financial position. Such measures,
which are presented in the periodical financial reports (annual and interim), should, however, not be considered
as a substitute for those required by IFRS.
In particular, following the adoption of IFRS 16, the TIM Group also presents the following additional alternative
performance indicators:
■ EBITDA adjusted After Lease (“EBITDA-AL”), calculated by adjusting the Organic EBITDA, net of the non-
recurring items, from the amounts connected with the accounting treatment of the lease contracts
according to IFRS 16. This financial measure is used by TIM as the financial target in internal presentations
(business plans) and in external presentations (to analysts and investors). It represents a useful unit of
measurement for the evaluation of the operating performance of the Group (as a whole and at the Business
Unit level) and of the Parent, TIM S.p.A., in addition to EBIT;
■ Adjusted net financial debt After Lease, calculated by excluding from the adjusted net financial debt the
net liabilities related to the accounting treatment of lease contracts according to IFRS 16. TIM believes that
the Adjusted net financial debt After Lease represents an indicator of the ability to meet its financial
obligations;
■ Equity Free Cash Flow After Lease, calculated by excluding from the Equity Free Cash Flow the amounts
related to lease payments. In particular, this measure is calculated as follows:
+ Equity Free Cash Flow
- Principal share of lease charges
This financial measure is used by TIM as the financial target in internal presentations (business plans) and in
external presentations (to analysts and investors) and is a useful indicator of the ability to generate Free Cash
Flow.
The other alternative performance measures used are described below:
■ EBITDA: this financial measure is used by TIM as the financial target in internal presentations (business
plans) and in external presentations (to analysts and investors). It represents a useful unit of measurement
for the evaluation of the operating performance of the Group (as a whole and at the Business Unit level) and
of the Parent, TIM S.p.A., in addition to EBIT. These measures are calculated as follows:
Profit (loss) before tax from continuing operations
+ Finance expenses
- Finance income
+/- Other expenses (income) from investments (1)
+/- Share of profits (losses) of associates and joint ventures accounted for using the equity method (2)
EBIT - Operating profit (loss)
+/- Impairment losses (reversals) on non-current assets
+/- Losses (gains) on disposals of non-current assets
+ Depreciation and amortization
EBITDA – Operating profit before depreciation and amortization, capital gains (losses) and impairment reversals (losses) on non-
current assets
(1)“Expenses (income) from investments” for TIM S.p.A..
(2) Line item in Group consolidated financial statements only.
Report on Operations of the
TIM Group
Alternative Performance Measures
103
■ Organic change and impact of the non-recurring items on revenues, EBITDA and EBIT: these measures
express changes (amount and/or percentage) in Revenues, EBITDA and EBIT, excluding, where applicable,
the effects of the change in the scope of consolidation, the exchange differences and the non-recurring
events and transactions. TIM believes that this method of presentation provides a more complete and
effective interpretation of the Group's operating performance (as a whole and with reference to the Business
Units) and of the Parent; it is therefore also used in the presentations to analysts and investors. This Report
on Operations provides a reconciliation between the “reported figure” and the “organic excluding the non-
recurring component” figure.
■ EBITDA margin and EBIT margin: TIM believes that these margins represent useful indicators of the ability
of the Group, as a whole and at Business Unit level, and of the Parent to generate profits from its revenues.
In fact, EBITDA margin and EBIT margin measure the operating performance of an entity by analyzing the
percentage of revenues that are converted into EBITDA and EBIT, respectively. Such indicators are used by
TIM in internal presentations (business plans) and in external presentations (to analysts and investors) in
order to illustrate the results from operations also through the comparison of the operating results of the
financial year being reported with those of the previous years.
■ Net financial debt: TIM believes that the Net Financial Debt represents an accurate indicator of its ability to
meet its financial obligations. It is represented by Gross Financial Debt less Cash and Cash Equivalents and
other Financial Assets. The Report on Operations includes two tables showing the amounts taken from the
statements of financial position and used to calculate the Net Financial Debt of the Group and Parent.
To provide a better representation of the true performance of Net Financial Debt, in addition to the usual
indicator (renamed “Net financial debt carrying amount”), the TIM Group reports a measure called “Adjusted
net financial debt”, which neutralizes the effects caused by the volatility of financial markets. Given that
some components of the fair value measurement of derivatives (contracts for setting the exchange and
interest rate for contractual flows) and of derivatives embedded in other financial instruments do not result
in actual monetary settlement, the Adjusted net financial debt excludes these purely accounting and non-
monetary effects (including the effects of IFRS 13 – Fair Value Measurement) from the measurement of
derivatives and related financial assets/liabilities.
Net financial debt is calculated as follows:
Non-current financial liabilities
+
Current financial liabilities
+
Financial liabilities directly associated with Discontinued operations/Non-current assets held for sale
+
A)
Gross financial debt
+ Non-current financial assets
+
+
B)
C=(A - B) Net financial debt carrying amount
D)
E=(C +D) Adjusted net financial debt
Current financial assets
Financial assets relating to Discontinued operations/Non-current assets held for sale
Financial assets
Reversal of fair value measurement of derivatives and related financial liabilities/assets
■ Equity Free Cash Flow (EFCF): this financial measure is used by TIM as the financial target in internal
presentations (business plans) and external presentations (to analysts and investors), shows cash generation
and is intended as the net cash flow before payments relating to dividend and investments in frequencies.
Therefore, it represents the Free Cash Flow available for dividend payments, debt repayment, impacts of
leasing transactions and investment in frequencies. This measure excludes the financial impact of any
acquisition and/or disposal of equity investments.
The Equity Free Cash Flow measure is calculated as follows:
+ Operating Net Free Cash Flow
-
-
-
- Dividend payment and Change in Equity
Impact for leasing
Payment of licenses
Financial impact of acquisitions and/or disposals of shareholdings
Report on Operations of the
TIM Group
Alternative Performance Measures
104
2020
TIM S.p.A.
Revenues 12,030
Millions
of Euros
Key operating and financial data
EBITDA
EBITDA MARGIN
EBITDA ADJUSTED AFTER LEASE
5,180
Millions
of Euros
45.5%
organic
excluding
non recurrent
4,892
Millions
of Euros
NET FINANCIAL DEBT CARRYING AMOUNT
27,324
Millions
of Euros
ADJUSTED NET FINANCIAL DEBT - AFTER LEASE
21,875
Millions
of Euros
CAPITAL EXPENDITURES & LICENSES
2,485
Millions
of Euros
HEADCOUNT AT YEAR END
38,178
numbers
REVIEW OF KEY OPERATING AND FINANCIAL
DATA - TIM S.P.A.
Main changes in the corporate structure
The main changes in the corporate structure made during 2020 are reported in this section.
INFRASTRUTTURE WIRELESS ITALIANE S.p.A. - INWIT S.p.A.
With reference to INWIT S.p.A., on March 31, 2020, the merger through absorption of Vodafone Towers S.r.l. with
INWIT S.p.A. was completed.
Also:
■ on April 23, 2020, a package of shares, equal to 4.3% of the share capital of INWIT, were sold in an accelerated
book-building procedure reserved for institutional investors;
■ on October 02, 2020, TIM and Ardian, a world leading private investment firm operating in infrastructures,
completed the agreement announced on June 24, 2020 for a partial sharing of the investment in INWIT
S.p.A. The operation entailed the purchase by a consortium of institutional investors led by Ardian of 49% of
Daphne 3 S.p.A., a newly-established holding company controlled by TIM, to which TIM contributed 30.2% of
the shares of INWIT. The holding company took over from TIM - for the portion of INWIT shares transferred
- in the shareholders' agreement stipulated between TIM and Vodafone Europe B.V., by virtue of which, they
jointly control INWIT;
■
the residual direct equity investment held by TIM S.p.A. in INWIT, equal to 3% of the share capital, of INWIT,
has been sold to an SPV managed and assisted by Canson Capital Partners (Guernsey) Limited. More
specifically, on October 2, 2020, 1.2% was first sold and then on December 4, 2020, the remaining 1.8%.
Following the 2020 transactions, TIM S.p.A. has indirect control over INWIT through the subsidiary Daphne 3
S.p.A.
Acquisition of the control of Noovle S.r.l.
On May 21, 2020, TIM S.p.A. finalized the acquisition of 100% of the shares in Noovle S.r.l., an Italian ICT consulting
and system integration company, specialized in supplying cloud solutions and projects and one of Google Cloud's
leading partners on the Italian market.
The transaction enables TIM to expand its offering of innovative public, private and hybrid cloud services, and
consolidate expertise to accelerate the digitalization of companies, from SMEs to large industries, the public
administration and health sector.
Partial demerger of the “Digital School” BU from the company Olivetti S.p.A. in the
favor of TIM S.p.A.,
The transaction took place with statutory and tax effects from December 1, 2020.
Merger by incorporation of TN Fiber S.r.l., TIM Vision S.r.l. and HR Services S.r.l. into
TIM S.p.A
The mergers took place respectively on September 30, 2020, on October 1, 2020 and on December 31, 2020; all
transactions have their tax and accounting effects backdated to January 1, 2020.
The table below reports the effects of corporate operations indicated on the financial position of TIM S.p.A. at
January 1, 2020:
Report on Operations of
TIM S.p.A.
Review of Key Operating and Financial Data
106
TIM S.p.A.
(million euros)
Assets
Non-current assets
Intangible assets
Tangible assets
Rights of use assets
Other non-current assets
Current assets
Total assets
Liabilities
Equity
Non-current liabilities
Current liabilities
Total Liabilities and Equity
TIM S.p.A.
1.1.2020
TN Fiber
S.r.l.
1.1.2020
TIM Vision
S.r.l.
1.1.2020
HR Services
S.r.l.
1.1.2020
Merger
adjustments
TIM S.p.A.
post-merger
1.1.2020
57,494
30,159
10,591
4,906
11,838
5,786
63,280
18,174
34,793
10,313
63,280
24
—
4
17
3
28
52
38
13
1
52
13
13
—
6
19
1
—
18
19
3
1
1
1
33
36
12
12
12
36
(53)
—
—
(11)
(42)
(83)
(136)
(39)
(11)
(86)
(136)
57,481
30,173
10,596
4,912
11,800
5,770
63,251
18,186
34,807
10,258
63,251
Non-recurring events
In 2020 and 2019, TIM S.p.A. recognized net non-recurring operating expenses connected with events and
transactions that by their nature do not recur as part of continuing operations, which are reported when their
amount is material. Non-recurring charges include, among others, any goodwill impairment changes, provisions
for regulatory disputes and potential liabilities related to them, liabilities with customers and/or suppliers, and
charges associated with corporate reorganization/restructuring and prior-year adjustments.
In detail:
(million euros)
Non-recurring expenses/(income)
Revenues
Revenue adjustments
Other operating income
Recovery of operating expenses
Acquisition of goods and services and Change in inventories
Employee benefits expenses
Expenses related to agreements and the development of non-recurring
projects
Charges connected to corporate reorganization/restructuring and other
charges
Other operating expenses
Other charges and provisions
Impact on Operating profit (loss) before depreciation and amortization, capital
gains (losses) and impairment reversals (losses) on non-current assets
Impact on EBIT - Operating profit (loss)
(EBITDA)
2020
39
39
—
—
58
58
69
69
145
145
311
311
2019
15
15
(21)
(21)
14
14
248
248
412
412
668
668
Non-recurring events for the year 2020 included, in particular:
■ 39 million euros in adjustment to revenues, of which 38 million euros related to discounts consequent to the
initiatives of TIM S.p.A. in support of customers to deal with the COVID-19 emergency;
■ 58 million euros in expenses related to agreements and the development of non-recurring projects as well
as costs for purchases relating to procurement made necessary to address the health emergency;
■ 69 million euros, connected mainly with corporate reorganization/restructuring processes and other costs;
■ 145 million euros in operating costs, mainly referring to provisions made and expenses connected with credit
management deriving from the deterioration of the macroeconomic context following the COVID-19
Report on Operations of
TIM S.p.A.
Review of Key Operating and Financial Data
107
TIM S.p.A.
emergency, expenses for regulatory sanctions and expenses connected with agreements and the
development of non-recurring projects.
Non-recurring expenses in 2019 mainly included revenue adjustments of previous years (15 million euros), other
income for 21 million euros, connected with the recognition of the receivable for the reimbursement of the fine
relating to the Antitrust proceeding I761, expenses connected with corporate restructuring processes (248 million
euros) and other expense mainly referring to provisions made for disputes and litigation (412 million euros).
Operating Performance
(million euros)
2020
2019
Revenues
EBITDA
EBITDA Margin
Organic EBITDA excluding non-recurring
Organic EBITDA Margin excluding non-recurring
EBITDA adjusted After Lease
EBIT
EBIT Margin
Organic EBIT Margin excluding non-recurring
Profit (loss) for the year
Capital expenditures
Net financial debt
Adjusted net financial debt
Adjusted Net Financial Debt After Lease
Headcount at year end (number)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(a)
12,030
5,180
43.1 %
5,491
45.5 %
4,892
1,576
13.1 %
15.6 %
7,161
2,485
12.31.2020
(a)
27,324
25,783
21,875
38,178
(b)
13,137
5,482
41.7 %
6,150
46.8 %
5,326
1,722
13.1 %
18.2 %
382
2537
12.31.2019
(b)
31,283
29,740
25,084
40,237
(1) Details are provided under “Alternative Performance Measures”.
Revenues
% Change
organic
excluding
non-recurring
(a-b)
(8.4)
(5.5)
1.4 pp
(8.5)
— pp
(8.2)
(10.7)
(10.7)
(1.3) pp
(8.1)
(21.0)
(2.6) pp
—
—
(2.0)
Change Amount
(a-b)
(3,959)
(3,957)
(3,209)
(2,059)
2020 revenues totaled 12,030 million euros (13,137 million euros in 2019), with a decrease of 1,107 million euros,
equal to -8.4%. Revenues for the financial year include 39 million euros relating to non-recurring revenues, of
which 38 million euros connected to the commercial initiatives of TIM S.p.A. to support customers to deal with
the COVID-19 emergency; 2019 was affected by non-recurring charges of 15 million euros relating to adjustments
to revenues from previous years.
Revenues from Stand-Alone Services amounted to 10,759 million euros (-915 million euros compared to 2019,
equal to 7.8%) and are affected by the regulatory and competitive scenario, and by the restrictions connected
with the health emergency. In particular, revenues from Fixed market Stand-alone services fell (-581 million
euros, -6.8% compared to the previous year), as did revenues from Mobile market Stand-alone services (-360
million euros, -9.7% compared to previous year).
Handset and Bundle & Handset revenues, including changes to work in progress, amounted to 1,271 million
euros in 2020, down 192 million euros on 2019, also due to the lower footfall for sales outlets following the
restrictive measures implemented to handle the COVID-19 emergency.
The sales segments show the following changes compared to 2019:
Report on Operations of
TIM S.p.A.
Review of Key Operating and Financial Data
108
TIM S.p.A.
(million euros)
Revenues
Consumer
Business
Wholesale
Other
In particular:
2020
12,030
5,892
3,953
1,910
275
2019
Changes
13,137
6,574
4,455
1,836
272
(1,107)
(682)
(502)
74
3
■ Consumer: 2020 revenues of the Consumer segment totaled 5,892 million euros and decreased by 682
million euros on 2019 (-10.4%), suffering the impact of the competitive context and greater regulation of
commercial processes. The trend seen in total revenues also applied to revenues from stand-alone services,
which amounted to 5,172 million euros, down by 628 million euros (-10.8% compared to the previous year).
In particular:
• Revenues for Mobile segment stand-alone services were equal to 2,334 million euros, down 235 million
euros (-9.2%) compared to 2019, mainly due to the regulatory context, the competition and the
restrictions imposed by the health emergency;
•
revenues from Fixed Stand-alone services amounted to 2,871 million euros, down on 2019 (-382
million euros, -11.7%), mainly due to the reduction in ARPU levels and the lesser Customer Base.
Revenues for Handsets and Bundles & Handsets in the Consumer segment amounted to 720 million euros,
down 54 million euros compared to 2019 (-7.1%), and reflected – especially in the mobile sector – the change in
business strategy on products to protect margins and the restrictions to travel connected with the COVID-19
emergency.
■ Business: revenues for the Business segment amounted to 3,953 million euros, down by 502 million euros
on 2019 (-11.3%, of which -9.3% for revenues from the stand-alone services component). In particular:
• Total mobile revenues in 2020 amounted to 911 million euros with a decrease (-151 million euros
compared to 2019, -14.3%) which in particular reflects the lower revenues from stand-alone services (-
14.4%) following a reduction in ARPU levels;
• Total Fixed revenues in 2020 amounted to 3,102 million euros, down 352 million euros on last year (-
10.2%), with a reduction in stand-alone service revenues (-7.5%) impacted by a price performance that
was partially offset by the increase in ICT service revenues.
■ Wholesale Market: National Wholesale segment revenues in 2020 came to 1,910 million euros, up by 74
million euros (+4.0%) compared to 2019, driven mainly by the growth in accesses in the Ultra Broadband
segment.
EBITDA
EBITDA in 2020 amounted to 5,180 million euros (5,482 million euros in 2019), with an EBITDA margin of 43.1%
(41.7% in 2019), up 1.4 percentage points.
Organic EBITDA - net of the non-recurring items amounted to 5,491 million euros; the EBITDA margin was
45.5% (46.8% in 2019) and records a reduction of 659 million euros on last year. Performance was impacted by
the launch on March 31, 2020 of the new Master Service Agreement (MSA) between TIM S.p.A. and INWIT S.p.A.,
now jointly controlled by TIM-Vodafone, regulating hosting services on INWIT sites. The new MSA provides for
accounting for the amounts in costs for services on an accrual basis, with the exception of the 3,500 strategic
sites, which are accounted for as leases under IFRS 16, for a duration of 8 years, given that control of those
strategic sites still belongs to TIM S.p.A. For lack of this impact, organic EBITDA net of the non-recurring
component would have recorded a reduction on 2019 of approximately 470 million euros.
In 2020 TIM S.p.A. recorded net non-recurring expenses for a total of 311 million euros, of which 106 million euros
due to the COVID-19 emergency in Italy. Further details are provided in the Note “Significant non-recurring events
and transactions” of the Separate Financial Statements at December 31, 2020 of TIM S.p.A.
Report on Operations of
TIM S.p.A.
Review of Key Operating and Financial Data
109
TIM S.p.A.
In 2019, TIM S.p.A. recognized non-recurring charges of the Domestic and Brazil Business Units, totaling 668
million euros, mainly relating to provisions for regulatory disputes and potential related liabilities, to liabilities
with customers and/or suppliers and to charges related to corporate reorganization/restructuring as well as to
the aforementioned adjustments to revenues from previous years;
Organic EBITDA, net of the non-recurring component, is calculated as follows:
(million euros)
EBITDA
Non-recurring expenses (Income)
ORGANIC EBITDA - excluding Non-recurring items
2020
2019
Absolute
changes
%
5,180
311
5,491
5,482
668
6,150
(302)
(357)
(659)
(5.5)
(10.7)
The following elements also affected EBITDA:
■ Other operating income
(million euros)
Late payment fees charged for telephone services
Recovery of employee benefits expenses, purchases and services
rendered
Capital and operating grants
Damages, penalties and recoveries connected with litigation
Estimate revisions and other adjustments
Other
Total
■ Acquisition of goods and services
(million euros)
Acquisition of goods
Revenues due to other TLC operators and costs for
telecommunications network access services
Commercial and advertising costs
Professional and consulting services
Power, maintenance and outsourced services
Lease and rental costs
Other
Total acquisition of goods and services
% of Revenues
2020
40
16
31
17
59
26
189
2020
926
692
957
114
1,018
306
598
4,611
38.3
2019
Changes
48
37
27
17
36
33
198
(8)
(21)
4
—
23
(7)
(9)
2019
Changes
1,076
693
926
86
1,060
258
497
4,596
35.0
(150)
(1)
31
28
(42)
48
101
15
3.3 pp
These are up 15 million euros on 2019 and suffer the impact consequent to said start-up of the new Master
Service Agreement (MSA) with INWIT S.p.A. For lack of this impact, purchases of materials and services would
have recorded a reduction on 2019 of approximately 170 million euros, above all on purchases for resale, as a
result of the reduction in volumes sold of mobile terminals, in line with the repositioning of the commercial
strategies currently in progress. The reduction was also affected by restrictions related to the COVID-19
emergency, especially in the mobile area.
■ Employee benefits expenses
Report on Operations of
TIM S.p.A.
Review of Key Operating and Financial Data
110
TIM S.p.A.
(million euros)
Ordinary employee expenses and costs
Restructuring expenses and allocations to employee and other
provisions
Total Employee benefits expenses
2020
2,124
69
2,193
2019
Changes
2,244
248
2,492
(120)
(179)
(299)
Employee benefits expenses decreased by 299 million euros compared to 2019. The main factors that drove this
change were:
•
•
reduction of 120 million euros of ordinary employee costs, mainly due to benefits related to the reduction
of the average salaried workforce, equal to a total of -2,191 employees on average. Following the
mergers of TN Fiber and HR Services in TIM S.p.A., which took place respectively on September 30, 2020
and December 31, 2020, an average total of 340 employees were acquired;
reduction of 179 million euros in corporate restructuring expenses, relating to expenses and provisions
made under the scope of the corporate restructuring plan.
The headcount at December 31, 2020 amounted to 38,516 employees, a decrease of 1,721 compared to
December 31, 2019 (40,237).
■ Other operating expenses
(million euros)
Write-downs and expenses in connection with credit
management
Provision charges
TLC operating fees and charges
Indirect duties and taxes
Penalties, settlement compensation and administrative fines
Association dues and fees, donations, scholarships and
traineeships
Other
Total
2020
328
1
42
53
120
10
51
605
2019
Changes
402
414
43
63
64
10
65
1,061
(74)
(413)
(1)
(10)
56
—
(14)
(456)
Other operating expenses for 2020 include a non-recurring item of 145 million euros, referred to provisions and
expenses mainly connected with credit management in connection with the COVID-19 emergency (46 million
euros), charges for regulatory sanctions and expenses related to agreements and the development of non-
recurring projects. In particular, in relation to credit management, it is noted that the macroeconomic scenario
with a sharp reduction in GDP caused by the pandemic worsened the Expected Credit Loss of some of the
customers. Consequently, the provision for bad debt was adjusted according to the expected loss differential.
With reference to the impairment and expenses connected with credit management, we note that the reduction
is the consequence of a program to optimize processes aimed at increasing the efficiency of credit management,
all round, intervening on the whole process involving the customer. More specifically, reference is made to the
acceptance, management and collection of debt through to the assessment model of the new commercial
offers.
The non-recurring component of 2019, amounting to 412 million euros, mainly referred to regulatory disputes
and related liabilities and to liabilities with customers and/or suppliers.
Depreciation, amortization and capital expenditures
2020 amortization and depreciation came to 3,582 million euros (3,719 million euros in 2019) and are as follows:
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(million euros)
Amortization of intangible assets with a finite useful life
Depreciation of tangible assets and rights of use assets
Total
2020
1,290
2,292
3,582
2019
Changes
1,222
2,497
3,719
68
(205)
(137)
Specifically, amortization of intangible assets increased by 68 million euros mainly following the start of
software systems and service creation projects.
Depreciation of tangible assets owned dropped by 68 million euros following the lesser investments on various
items including, in particular, subscriber connection units and SL self-switches, UMTS plants and LTE
transmission plants and UMTS RMC systems.
Depreciation of rights of use assets dropped by 137 million euros, determined by a reduction of 164 million euros
on property lease contracts and 3 million euros on other leased assets, partially offset by an increase of 30 million
euros on rights of use for leased plant and equipment, due to investments connected with the acquisition of IRU
transmission capacity.
Capex totaled 2,485 million euros (equal to 2,537 million euros in 2019), with a decrease of 52 million euros.
Details are as follows:
(million euros)
Investments in intangible assets with a finite useful life
Investments in tangible assets and rights of use assets
Total
2020
959
1,526
2,485
2019
Changes
819
1,718
2537
140
(192)
(52)
Specifically, the reduction noted in investments in tangible assets and rights of use of third party assets, equal
to 192 million euros, is mainly due to lesser investments in tangible assets, as described above.
Investments in intangible assets record an increase of 140 million euros consequent, amongst others, to a
different composition of investments dedicated to the development of the Core Network, characterized by a
technological evolution that is increasingly focused on automation and digitization, with accordingly greater
intangible investments.
Gains/(losses) on disposals of non-current assets
The item is negative for 14 million euros (negative for 41 million euros in 2019), mainly due to capital losses from
disposals of rights of use contracts for 44 million euros, partially offset by capital gains on disposals of rights of
use for 30 million euros, following the renegotiation of lease contracts and, in particular, the derecognition of the
rights of use connected with the previous lease contracts stipulated with INWIT.
Impairment reversals (losses) on non-current assets
The item shows losses of 8 million euros (none in 2019), mainly following the provisions made for inventory
differences for plant warehouse materials held at external company sites.
In preparing the Annual Report for 2020, TIM S.p.A. carried out an impairment test on the goodwill. The results
of that testing, carried out in accordance with the specific procedure adopted by the TIM Group, confirmed the
amounts of Goodwill. Further details are provided in the Note “Goodwill” in the Separate Financial Statements
of TIM S.p.A. at December 31, 2020.
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EBIT
2020 EBIT is 1,576 million euros (1,722 million euros in 2019), down 146 million euros on the previous year, with
an EBIT margin of 13,1% (13.1% in 2019).
Organic EBIT, net of the non-recurring component, amounted to 1,887 million euros (2,390 million euros in
2019), with an EBIT margin of 15.6% (18.2% in 2019) and suffers the effect of the same dynamics already reported
for EBITDA. In detail, in 2020, TIM S.p.A. recorded net non-recurring expenses for a total of 311 million euros; 2019
EBIT suffered the negative impact of non-recurring expenses for 668 million euros.
Further details on non-recurring items are provided in the Note “Significant non-recurring events and
transactions” of the Separate Financial Statements at December 31, 2020 of TIM S.p.A.
Organic EBIT, net of the non-recurring component, is calculated as follows:
(million euros)
EBIT
Non-recurring expenses (Income)
ORGANIC EBIT - excluding Non-recurring items
Income (expenses) from investments
2020
2019
Changes
absolute
%
1,576
311
1,887
1,722
668
2,390
(146)
(357)
(503)
(8.5)
(21.0)
This item, amounting to 551 million euros (117 million euros in 2019), is broken down as follows:
(million euros)
Dividends
Other income and gains on disposals of investments
Losses on disposals of investments
Impairment losses on financial assets
Sundry expenses from investments
Total
In particular, we report:
2020
331
227
—
(7)
—
551
2019
Changes
141
35
(26)
(28)
(5)
117
190
192
26
21
5
434
■ dividends mainly referred to the subsidiary TI Finance (75 million euros) and the associate INWIT S.p.A. (256
million euros). In 2019, dividends mainly referred to the then subsidiary INWIT S.p.A. (76 million euros) and
the subsidiaries TI Finance (53 million euros) and Persidera (10 million euros);
■ net capital gains - of 227 million euros - are mainly related to the 2020 sales of INWIT shares; more
specifically, they refer:
•
•
•
•
51 million euros to the transfer made on April 23, 2020, of a package of shares equal to 4.3% of the share
capital of INWIT, through an accelerated book-building procedure reserved for institutional investors;
144 million euros to the sale made on October 02, 2020 to Daphne 3 S.p.A. of 142,090,396 INWIT shares,
representing 14.80% of INWIT’s share capital;
13 million euros to the transfer by TIM to an SPV managed and assisted by Canson Capital Partners
(Guernsey) Limited of an investment in INWIT equal to approximately 1.2% of the related share capital
(corresponding to 11,522,400 INWIT shares), again on October 2, 2020;
19 million euros to the transfer by TIM to the same SPV of an additional share in INWIT equal to 1.8% of
its share capital (corresponding to 17,030,535 shares) following the December 2020 exercise of the
relevant purchase option.
■
impairment losses referred to the impairment of investment in the subsidiary Olivetti. In 2019, impairment
losses mainly referred to the write-down of the investments held in the subsidiary Olivetti (18 million euros),
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Tim Tank (3 million euros), Timvision (2 million euros), Tn Fiber (1 million euros), as well as in the associate
Tiglio I (4 million euros).
Finance income (expenses), net
Finance income (expenses) show a net expense of 961 million euros (negative for 1,267 million euros in 2019),
which breaks down as follows:
(million euros)
Finance income
Finance expenses
Total net financial income (expenses)
2020
1,012
(1,973)
(961)
2019
Changes
1,195
(2,462)
(1,267)
(183)
489
306
The positive change mainly derives from the lower finance expenses connected to the reduction in interest rate
levels and also benefits from the positive effects of changes in certain currency and accounting non-monetary
items relating to the measurement of derivative instruments at fair value.
Income tax expense
In 2020, tax income is recorded for 5,995 million euros (tax for 190 million euros in 2019). Tax proceeds mainly
relate to the recording of deferred tax assets as a consequence of the tax recognition of higher amounts booked
in accordance with Decree Law 104/2020, Art. 110, paragraph 8 and 8 bis (5,877 million euros). Further details are
provided in the Note “Income tax (current and deferred)” of the Financial Statements at December 31, 2020 of
TIM S.p.A.
They also benefited from the positive tax effect due to the lower taxes paid in previous years and generated
following the ruling signed on August 3, 2020 with the Italian Revenues Agency for application of the “patent
box” facilitation in income tax and IRAP (regional production tax) tax returns for TIM S.p.A. for the years 2015 -
2019 (299 million euros).
Profit (loss) for the year
The profit for 2020 was positive in the amount of 7,161 million euros (profit of 382 million euros in 2019) and
benefits from the positive effect of net non-recurring income for 5,831 million euros.
In comparable terms, the FY 2020 result would be positive by approximately 1.3 billion euros, up by approximately
0.4 billion euros on FY 2019.
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Financial Position and Cash Flows Performance
Financial position structure
(million euros)
Assets
Non-current assets
Goodwill
Other intangible assets
Tangible assets
Rights of use assets
Other non-current assets
Deferred tax assets
Current assets
Inventories, trade and miscellaneous receivables and other
current assets
Current income tax receivables
Current financial assets
Equity and Liabilities
Equity
Non-current liabilities
Current liabilities
Non-current assets
12.31.2020
12.31.2019
Changes
61,804
23,051
5,500
10,335
4,096
11,485
7,337
5,567
3,608
39
1,920
67,371
25,008
32,717
9,646
67,371
57,494
24,341
5,818
10,591
4,906
10,956
882
5,786
3,886
67
1,005
63,280
18,174
34,793
10,313
63,280
4,310
(1,290)
(318)
(256)
(810)
529
6,455
(219)
(278)
(28)
915
4,091
6,834
(2,076)
(667)
4,091
■ Goodwill: this reduces by 1,290 million euros on December 31, 2019, following the specified sales of INWIT
shares between April and December 2020;
■ Other intangible assets: these fell by 318 million euros, from 5,818 million euros at the end of 2019 to 5,500
million euros at December 31, 2020, representing the balance of the following items:
•
capex (+959 million euros);
• Amortization charge for the year (-1,290 million euros);
• disposals, reclassifications and other changes (+13 million euros).
■ Tangible assets: decreased by 256 million euros, representing the sum of the following:
•
capex (+1,468 million euros);
• Amortization charge for the year (-1,750 million euros);
• disposals, reclassifications and other changes (+26 million euros).
■ Right of use assets: decreased by 810 euros, representing the sum of the following:
•
investments and increases in lease contracts (+947 million euros). Increases in lease contracts include
368 million euros, related to the recognition of new rights of use of INWIT S.p.A. assets, following the
coming into effect on March 31, 2020 of the new Master Service Agreement (MSA) between TIM S.p.A.
and INWIT S.p.A. (now jointly controlled), which regulates hospitality services on INWIT sites;
• Amortization charge for the year (-542 million euros);
• disposals, reclassifications and other changes (-1,215 million euros). These include the impacts
connected with the derecognition of the rights of use connected with the previous lease contracts
stipulated with INWIT (777 million euros) and with Vodafone (266 million euros), following the
effectiveness of the new Master Service Agreement (MSA) stipulated between TIM S.p.A. and INWIT
S.p.A.
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■ Deferred tax assets: increased by 6,455 million euros mainly due to the booking of deferred tax assets
following the tax recognition of higher values booked in accordance with Decree Law 104/2020, Art. 110,
paragraph 8 and 8 bis (6,569 million euros).
Equity
Equity amounted to 25,008 million euros, up by 6,834 million euros compared to December 31, 2019 (18,174
million euros). The changes in equity over 2020 and 2019 are detailed in the following table:
(million euros)
At the beginning of the year
Profit (loss) for the year
Dividends approved
Merger of Noverca S.r.l. into TIM S.p.A.
Merger of HR Services S.r.l. into TIM S.p.A.
Broad-Based Share Ownership Plan 2020
Issue of equity instruments and other changes
Movements in the reserve for financial assets measured at fair value through other
comprehensive income and derivative hedging instruments
Movements in the reserve for remeasurements of employee defined benefit plans
(IAS 19)
At the end of the year
Cash flows
Change in net financial debt
(million euros)
EBITDA
Capital expenditures on an accrual basis
Change in net operating working capital:
Change in inventories
Change in trade receivables and other net receivables
Change in trade payables
Change in payables for mobile telephone licenses
Other changes in operating receivables/payables
Change in provisions for employee benefits
Change in operating provisions and Other changes
Net operating free cash flow
of which operating free cash flow connected with the purchase
of mobile telephone licenses
% of Revenues
Sale of investments and other disposals flow
Financial investments
Dividends flow
Increases in finance leasing contracts
Share capital increases/reimbursements
Finance expenses, income taxes and other net non-operating
requirements flow
Net impact of the application of IFRS 16 at 1/1/2019
Reduction/(Increase) in net financial debt
2020
5,180
(2,485)
591
12
217
287
(110)
185
(611)
(122)
2,553
(110)
21.2
1,822
(101)
14
(889)
8
552
—
3,959
12.31.2020
12.31.2019
18,174
7,161
(317)
—
12
44
5
(75)
4
25,008
18,138
382
(166)
1
—
—
3
(154)
(30)
18,174
2019
Changes
5,482
(2,537)
337
107
107
128
(18)
13
(260)
183
3,205
(18)
24.4
154
(43)
(26)
(861)
—
(1,412)
(2,940)
(1,923)
(302)
52
254
(95)
110
159
(92)
172
(351)
(305)
(652)
(92)
(3.2)
1,668
(58)
40
(28)
8
1,964
2,940
5,882
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Equity Free Cash Flow
(million euros)
NET OPERATING FREE CASH FLOW
Mobile licenses acquisition/spectrum
Financial management
Income taxes and other
EQUITY FREE CASH FLOW
2020
2,553
110
(1,033)
430
2,060
2019
Changes
3,205
18
(1,211)
216
2,228
(652)
92
178
214
(168)
The reduction in net operating free cash flow in 2020 as compared with 2019 (-652 million euros) is mainly
connected with the reduction recorded by the EBITDA (-302 million euros), the change in provisions for employee
benefits (-351 million euros) and the change in operating provisions and other changes (-305 million euros),
partially offset by the dynamics of the current assets (+254 million euros), in particular trade receivables and
payables and the lesser need for investments (+52 million euros).
In addition to what has already been described with reference to EBITDA, the change in net financial debt in
2020 was particularly impacted by the following:
Capex flow
Capex totals 2,485 million euros (2,537 million euros in 2019), down 52 million euros, mainly determined by lesser
investments in tangible assets and rights of use on leased assets (-192 million euros), offset by greater
investments in intangible assets (+140 million euros).
Sale of investments and other disposals flow
Positive for 1,822 million euros and refers for 1,816 million euros to the collection from the specified transactions
regarding INWIT. In 2019, this was positive for 154 million euros and referred for 142 million euros to the collection
from the sale of ownership interest in the subsidiary Persidera S.p.A.
Financial investments flow
Amounted to 101 million euros and referred primarily to investment account payments to cover subscriptions of
new share capital issued by the subsidiaries Olivetti (25 million euros), Flash Fiber (48 million euros), Tim Tank (6
million euros), Telsy (5 million euros) and the purchase of the investment in the subsidiary Noovle Srl and Noovle
S.p.A. (13 million euros) and in the associate Tim Fin (3 million euros). In 2019, it amounted to 43 million euros
and referred primarily to investment account payments to cover subscriptions of new share capital issued by the
subsidiaries Flash Fiber (39 million euros) and Tim Tank (3 million euros).
Increases in finance leasing contracts
This item amounts to 889 million euros (861 million euros in 2019).
Increases in finance leasing contracts include the higher value of user rights entered following new lease
contracts payables, increase of lease payments and renegotiations of existing contracts. In particular, this
includes 368 million euros, related to the recognition of new rights of use of INWIT S.p.A. assets, following the
new Master Service Agreement (MSA) between TIM S.p.A. and INWIT S.p.A. coming into effect on March 31, 2020.
Share capital increases/reimbursements, including incidental costs
These total 8 million euros and derive from the issue of ordinary shares to service the 2020 Broad-Based Share
Ownership Plan subscribed by employees of the TIM Group companies and employees of TIM S.p.A., for the
shares subscribed without using severance indemnity (bank transfer or loan).
Finance expenses, income taxes and other net non-operating
requirements flow
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TIM S.p.A.
Finance expenses, income taxes and other net non-operating requirements flow mainly includes the payment
of income taxes, net finance expenses, and the change in non-operating receivables and payables.
Sales of receivables to factoring companies
Sales of trade receivables to factoring companies completed during 2020 resulted in a positive effect on the net
financial debt at December 31, 2020 amounting to 1,919 million euros (1,818 million euros at December 31, 2019).
Following the request made by TIM S.p.A. for the Patent box benefit for the five-year period 2015-2019 and the
consequent agreement reached with the Revenue Agency for 2015 and that relating to complementary assets
for 2016-2019, the benefit of the tax periods 2015 and 2016 was cumulatively included in the IRES and IRAP
adjustment declarations for 2016, presented on September 25, 2020, while the benefit for the tax periods 2017
and 2018 was used in the IRES and IRAP declarations for the tax period 2019 send on December 10, 2020. In
particular, as regards the IRES, the greater 2016 credit of 123 million euros and the 2019 credit of 180 million euros
were requested as refund from the Revenue Agency in the related declarations and then transferred and
collected respectively on September 30, 2020 and December 21, 2020.
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FINANCIAL STATEMENTS– TIM S.p.A.
Separate Income Statements
(million euros)
2020
2019
Revenues
Other income
Total operating revenues and other income
Acquisition of goods and services
Employee benefits expenses
Other operating expenses
Change in inventories
Internally generated assets
Operating profit (loss) before depreciation and
amortization, capital gains (losses) and impairment
reversals (losses) on non-current assets (EBITDA)
Depreciation and amortization
Gains/(losses) on disposals of non-current assets
Impairment reversals (losses) on non-current assets
Operating profit (loss) (EBIT)
Income (expenses) from investments
Finance income
Finance expenses
Profit (loss) before tax
Income tax expense
Profit (loss) for the year
(a)
12,030
189
12,219
(4,611)
(2,193)
(605)
(11)
381
5,180
(3,582)
(14)
(8)
1,576
551
1,012
(1,973)
1,166
5,995
7,161
(b)
13,137
198
13,335
(4,596)
(2,492)
(1,061)
(107)
403
5,482
(3,719)
(41)
—
1,722
117
1,195
(2,462)
572
(190)
382
Change
(a-b)
amount
%
(1,107)
(9)
(1,116)
(15)
299
456
96
(22)
(302)
137
27
(8)
(146)
434
(183)
489
594
6,185
6,779
(8.4)
(4.5)
(8.4)
(0.3)
12.0
43.0
89.7
(5.5)
(5.5)
3.7
65.9
-
(8.5)
—
(15.3)
19.9
—
—
—
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Statements of Comprehensive Income
In accordance with IAS 1 (Presentation of Financial Statements), the following Statements of Comprehensive
Income include the Profit (loss) for the year as shown in the Separate Income Statements and all non-owner
changes in equity.
(million euros)
Profit (loss) for the year
Other components of the Statements of Comprehensive Income
Other components that will not be reclassified subsequently to Separate
Income Statements
Financial assets measured at fair value through other comprehensive
income:
Profit (loss) from fair value adjustments
Income tax effect
Remeasurements of employee defined benefit plans (IAS 19):
Actuarial gains (losses)
Income tax effect
Share of other comprehensive income (loss) of associates and joint
ventures accounted for using the equity method
Profit (loss)
Income tax effect
Total other components that will not be reclassified subsequently to
Separate Income Statements
Other components that will be reclassified subsequently to Separate
Income Statements
Financial assets measured at fair value through other comprehensive
income:
Profit (loss) from fair value adjustments
Loss (profit) transferred to the Separate Income Statement
Income tax effect
Hedging instruments:
Profit (loss) from fair value adjustments
Loss (profit) transferred to the Separate Income Statement
Income tax effect
Share of other comprehensive income (loss) of associates and joint
ventures accounted for using the equity method
Profit (loss)
Loss (profit) transferred to the Separate Income Statement
Income tax effect
Total other components that will be reclassified subsequently to Separate
Income Statements
Total other components of the Statements of Comprehensive Income
Total comprehensive income (loss) for the year
(a)
(b)
(c)
(d)
(e=b+c+d)
(f)
(g)
(h)
(i= f+g+h)
(k= e+i)
(a+k)
2020
7,161
(4)
—
(4)
6
(2)
4
—
—
—
—
4
—
(1)
3
(409)
312
23
(74)
—
—
—
—
(71)
(71)
7,090
2019
382
3
—
3
(40)
10
(30)
—
—
—
(27)
(36)
25
1
(10)
(202)
8
47
(147)
—
—
—
—
(157)
(184)
198
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Statements of Financial Position
(million euros)
Assets
Non-current assets
Intangible assets
Goodwill
Intangible assets with a finite useful life
Tangible assets
Property, plant and equipment owned
Rights of use assets
Other non-current assets
Investments
Non-current financial receivables for lease contracts
Other non-current financial assets
Miscellaneous receivables and other non-current assets
Deferred tax assets
Total Non-current assets
Current assets
Inventories
Trade and miscellaneous receivables and other current
assets
Current income tax receivables
Current financial assets
Current financial receivables arising from lease contracts
Securities other than investments, other financial
receivables and other current financial assets
Cash and cash equivalents
(a)
Current assets sub-total
Discontinued operations/Non-current assets held for sale
Total Current Assets
Total Assets
(b)
(a+b)
12.31.2020
(a)
12.31.2019
(b)
Changes
(a-b)
23,051
5,500
28,551
10,335
4,096
7,245
17
2,490
1,733
7,337
18,822
61,804
144
3,464
39
44
110
1,766
1,920
5,567
—
5,567
67,371
24,341
5,818
30,159
10,591
4,906
6,861
16
2,333
1,746
882
11,838
57,494
155
3,731
67
54
122
829
1,005
4,958
828
5,786
63,280
(1,290)
(318)
(1,608)
(256)
(810)
384
1
157
(13)
6,455
6,984
4,310
(11)
(267)
(28)
(10)
(12)
937
915
609
(828)
(219)
4,091
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Tables of detail – TIM S.p.A. 121
(million euros)
12.31.2020
(a)
12.31.2019
(b)
Changes
(a-b)
Equity and liabilities
Equity
Share capital issued
less: Treasury shares
Share capital
Additional paid-in capital
Other reserves and retained earnings (accumulated
losses), including profit (loss) for the year
Total Equity
Non-current liabilities
Non-current financial liabilities for financing contracts and
others
Non-current financial liabilities for lease contracts
Employee benefits
Deferred tax liabilities
Provisions
Miscellaneous payables and other non-current liabilities
Total Non-current liabilities
Current liabilities
Current financial liabilities for financing contracts and others
Current financial liabilities for lease contracts
Trade and miscellaneous payables and other current
Income tax payable
liabilities
Current liabilities sub-total
Liabilities directly associated with Discontinued
operations/Non-current assets held for sale
Total Current Liabilities
Total Liabilities
Total Equity and Liabilities
11,677
(19)
11,658
2,133
11,217
25,008
24,440
3,506
676
—
618
3,477
32,717
3,342
463
5,610
231
9,646
—
9,646
42,363
67,371
11,677
(21)
11,656
2,094
4,424
18,174
26,182
4,002
1,106
2
528
2,973
34,793
3,787
666
5,843
17
10,313
—
10,313
45,106
63,280
—
2
2
39
6,793
6,834
(1,742)
(496)
(430)
(2)
90
504
(2,076)
(445)
(203)
(233)
214
(667)
—
(667)
(2,743)
4,091
(c)
(d)
(e)
(f=d+e)
(c+f)
Report on Operations of
TIM S.p.A.
Tables of detail – TIM S.p.A. 122
Statements of Cash Flows
(million euros)
Cashflow from operating activities:
Profit (loss) for the year
Adjustments for:
Depreciation & amortization
Impairment losses (reversals) of non-current assets (including
investments)
Net change in deferred tax assets and liabilities
Losses (gains) realized on disposals of non-current assets (including
investments)
Change in provisions for employee benefits
Change in inventories
Change in trade receivables and other net receivables
Changes in trade payables
Net change in income tax receivables/payables
Net change in miscellaneous receivables/payables and other
assets/liabilities
Cash flows from (used in) operating activities
Cash flows from investing activities:
Purchases of intangible, tangible and rights of use assets on a cash
Contributions for plants received
basis
Cash arising from corporate actions
Acquisitions/disposals of other investments
Change in financial receivables and other financial assets (excluding
hedging and non-hedging derivatives under financial assets)
Proceeds received from the sale of investments in subsidiaries
Proceeds from sale/repayments of intangible, tangible, rights of use
assets and other non-current assets
Cash flows from (used in) investing activities
Cash flows from financing activities:
Change in current financial liabilities and other
Proceeds from non-current financial liabilities (including current
portion)
Repayments of non-current financial liabilities (including current
portion)
Changes in hedging and non-hedging derivatives
Share capital proceeds/reimbursements
Dividends paid
Cash flows from (used in) financing activities
Aggregate cash flows
Net cash and cash equivalents at beginning of the year
Net cash and cash equivalents at end of the year
(a)
(b)
(c)
(d=a+b+c)
(e)
(f=d+e)
2020
2019
7,161
3,582
43
(6,433)
(212)
(611)
12
217
(23)
694
56
4,486
(2,285)
24
51
(101)
(62)
—
1,822
(551)
(732)
1,022
(2,809)
93
8
(317)
(2,735)
1,200
45
1,245
382
3,719
57
55
32
(260)
107
107
(121)
100
217
4,395
(2,307)
28
14
(43)
241
142
12
(1,913)
(886)
3,814
(4,796)
(187)
—
(166)
(2,221)
261
(216)
45
Report on Operations of
TIM S.p.A.
Tables of detail – TIM S.p.A. 123
Purchases of intangible, tangible and rights of use assets
(million euros)
Purchases of intangible assets
Purchases of tangible assets
Purchases of rights of use assets
Total purchase of intangible, tangible and rights of use assets on an
accrual basis
Change in payables arising from purchases of intangible, tangible and
rights of use assets
Total purchase of intangible, tangible and rights of use assets on a
cash basis
Additional Cash Flow Information
(million euros)
Income taxes (paid)/received
Interest expense paid
Interest income received
Dividends received
Analysis of Net Cash and Cash Equivalents
(million euros)
Net cash and cash equivalents at the beginning of the year:
Cash and cash equivalents
Bank overdrafts repayable on demand
Net cash and cash equivalents at the end of the year:
Cash and cash equivalents
Bank overdrafts repayable on demand
2020
(959)
(1,468)
(947)
(3,374)
1,089
(2,285)
2019
(819)
(1,658)
(921)
(3,398)
1,091
(2,307)
2020
249
(1,389)
465
331
2019
(28)
(1,689)
655
140
2020
2019
829
(784)
45
1,765
(520)
1,245
885
(1,101)
(216)
829
(784)
45
The additional disclosures required by IAS 7 are provided in the Note “Net Financial Debt” in the Separate
Financial Statements of TIM S.p.A. as at December 31, 2020.
Report on Operations of
TIM S.p.A.
Tables of detail – TIM S.p.A. 124
AFTER LEASE INDICATORS - TIM S.p.A.
The Company, in addition to the conventional financial performance measures established by the IFRS, uses
certain alternative performance measures in order to present a better understanding of the trend of operations
and financial condition. In particular, following the adoption of IFRS 16, TIM presents the following additional
alternative performance indicators:
TIM S.p.A. EBITDA ADJUSTED AFTER LEASE
(million euros)
ORGANIC EBITDA - excluding non-recurring items
Lease payments
EBITDA adjusted After Lease (EBITDA-AL)
TIM S.p.A. ADJUSTED NET FINANCIAL DEBT AFTER LEASE
(million euros)
Adjusted net financial debt
Leasing
Adjusted net financial debt - After Lease
TIM S.p.A. EQUITY FREE CASH FLOW AFTER LEASE
(million euros)
EQUITY FREE CASH FLOW
Leasing
EQUITY FREE CASH FLOW AFTER LEASE
2020
2019
Absolute
5,491
(599)
4,892
changes
(659)
225
(434)
6,150
(824)
5,326
%
(10.7)
(27.3)
(8.1)
12.31.2020
25,783
(3,908)
21,875
12.31.2019
29,740
(4,656)
25,084
2020
2,060
(558)
1,502
2019
2,228
(684)
1,544
Changes
(3,957)
748
(3,209)
Changes
(168)
126
(42)
Report on Operations of
TIM S.p.A.
Tables of detail – TIM S.p.A. 125
Net financial debt
Net financial debt is composed as follows:
(million euros)
Non-current financial liabilities
Bonds
Amounts due to banks, other financial payables and liabilities
Finance lease liabilities
Current financial liabilities (1)
Bonds
Amounts due to banks, other financial payables and liabilities
Finance lease liabilities
Total Gross financial debt
Non-current financial assets
Non-current financial receivables for lease contracts
Financial receivables and other financial assets
Current financial assets
Securities other than investments
Current financial receivables arising from lease contracts
Financial receivables and other financial assets
Cash and cash equivalents
Total financial assets
Net financial debt carrying amount
Reversal of fair value measurement of derivatives and related
financial liabilities/assets
Adjusted net financial debt
Breakdown as follows:
Total adjusted gross financial debt
Total adjusted financial assets
(1) of which current portion of medium/long-term debt:
Bonds
Amounts due to banks, other financial payables and liabilities
Finance lease liabilities
12.31.2020
(a)
12.31.2019
(b)
Changes
(a-b)
14,506
9,934
3,506
27,946
864
2,478
463
3,805
31,751
(17)
(2,490)
(2,507)
—
(44)
(110)
(1,766)
(1,920)
(4,427)
27,324
(1,541)
25,783
28,825
(3,042)
864
1,356
456
15,118
11,064
4,002
30,184
1,603
2,184
666
4,453
34,637
(16)
(2,333)
(2,349)
—
(54)
(122)
(829)
(1,005)
(3,354)
31,283
(1,543)
29,740
31,992
(2,252)
1,603
905
666
(612)
(1,130)
(496)
(2,238)
(739)
294
(203)
(648)
(2,886)
(1)
(157)
(158)
—
10
12
(937)
(915)
(1,073)
(3,959)
2
(3,957)
(3,167)
(790)
(739)
451
(210)
The non-current portion of gross financial debt amounted to 27,946 million euros (30,184 million euros at the
end of 2019) and represented 88% of total gross financial debt.
In line with the Group's objectives in terms of debt composition and in accordance with the Guidelines adopted
for the "Management and control of financial risk", TIM S.p.A., in securing both third-party and intercompany
loans, uses IRS and CCIRS derivative financial instruments to hedge its liabilities.
Derivative financial instruments are designated as fair value hedges for managing exchange rate risk on financial
instruments denominated in currencies other than euro and for managing interest rate risk on fixed-rate loans.
Derivative financial instruments are designated as cash flow hedges when the objective is to fix the exchange
rate and interest rate of future variable contractual flows.
Adjusted net financial debt amounted to 25,783 million euros at December 31, 2020, a decrease of 3,957 million
euros compared to December 31, 2019 (29,740 million euros). The reduction was due in part to solid generation
of free cash flow, obtained in part by optimization of working capital, which allowed payment of dividends on
ordinary and savings shares of TIM S.p.A. for total 317 million euros (as compared with 166 million euros paid in
2019 to savings shares only), payment of the installment for the 5G license (110 million euros), as well as the
effects of the INWIT transaction. In particular, with regard to INWIT we point out the deconsolidation of the
company's debt (780 million euros compared to December 31, 2019) which broadly compensated for new debts
incurred for leases to INWIT, now under joint control (368 million euros), after the ending of financial lease
contracts with Vodafone (214 million euros), the collection of dividends (256 million euros, of which 214 million
euros was in extraordinary dividends) and the sale of 4.3% of the holding (400 million euros). On October 2, 2020,
sales were made by TIM S.p.A. to Daphne 3 S.p.A. of 14.8% of the investment in INWIT (1,345 million euros) and
to Canson of 1.2% of the investment in INWIT (109 million euros). On December 04, 2020, following the exercise
Report on Operations of
TIM S.p.A.
Review of Key Operating and Financial Data of
TIM S.p.A.
126
of an option maturing at year-end, TIM S.p.A. sold the remaining share held in INWIT, equal to 1.8% (161 million
euros) to Canson. Therefore, following these transactions, as at December 31, 2020, INWIT was held 30.2% by
Daphne 3 S.p.A., a subsidiary held 51% by TIM S.p.A.
Additionally, following the request made by TIM S.p.A. for the Patent box benefit for the five years 2015-2019,
303 million euros has already been collected.
For a better understanding of the information, the table below shows the various ways by which the Net Financial
Debt can be shown:
(million euros)
Net financial debt carrying amount
Reversal of fair value measurement of derivatives and related
financial liabilities/assets
Adjusted net financial debt
Leasing
Adjusted net financial debt - After Lease
12.31.2020
27,324
(1,541)
25,783
(3,908)
21,875
12.31.2019
31,283
(1,543)
29,740
(4,656)
25,084
Changes
(3,959)
2
(3,957)
748
(3,209)
The Net Financial Debt carrying amount at December 31, 2020 amounted to 25,783 million euros, down 3,957
million euros on December 31, 2019 (31,283 million euros); and reflects the impact of the application of the new
accounting standard IFRS 16 (Leases). Reversal of the fair value measurement of derivatives and related financial
liabilities/assets recorded a change of 2 million euros compared to December 31, 2019, with the impact
attributable to the significant decline in US dollar interest rates being limited to just a few hedges and offset by
the lesser decline in euro rates. This valuation is adjusted by the booked Financial Debt with no monetary effect.
Adjusted Net Financial Debt – After Lease (net of the impact of all leases), which is a parameter adopted by
main European peers, was equal to 21,875 million euros at December 31, 2020, down by 3,209 million euros
compared to December 31, 2019 (25,084 million euros). The reduction is lower than shown in the Adjusted net
financial debt, as the effects of the deconsolidation/new payables due to IFRS 16 in relation to the INWIT
transaction.
Gross financial debt
Bonds
Bonds at December 31, 2019 totaled 15,370 million euros (16,721 million euros at December 31, 2019). Their
nominal repayment amount was 14,974 million euros, a decrease of 1,392 million euros compared to December
31, 2019 (16,366 million euros).
Changes in bonds over 2020 are shown below:
(millions of original currency)
Currency
Amount
Repayment date
Repayments
Telecom Italia S.p.A. 719 million euros 4.000% (1)
Telecom Italia S.p.A. 547 million euros 4.875% (2)
(1)
(2)
Net of buy-backs totaling 281 million euros made by the company in 2015.
Net of buy-backs totaling 453 million euros made by the company in 2015.
Euros
Euro
719
547
21-Jan-20
25-Sep-20
With reference to Telecom Italia S.p.A. 2002–2022 bonds, reserved for subscription by employees of the Group,
the nominal amount at December 31, 2020 was 217 million euros, up by 12 million euros compared to December
31, 2019 (205 million euros).
Revolving Credit Facility and Term Loan
The following table shows committed credit lines available at December 31, 2020.
Report on Operations of
TIM S.p.A.
Review of Key Operating and Financial Data of
TIM S.p.A.
127
(billion euros)
Revolving Credit Facility – maturing January 2023
Bridge to Bond Facility – maturing May 2021
Total
12.31.2020
12.31.2019
Agreed
Drawn down
Agreed
Drawn down
5.0
1.7
6.7
—
—
—
5.0
—
5.0
—
—
—
At December 31, 2020, TIM had bilateral Term Loans for 1,500 million euros with various banking counterparties
and overdraft facilities for 490 million euros, drawn down for the full amount.
On May 18, 2020 TIM created a new credit line, structured as a bridge to bond, for later issuing on the bond
market, for 1.7 billion euros and initially maturing after 12 months, with the option of extension for another 12
months.
On January 18, 2021, TIM issued its first 8-year Sustainability Bond for an amount of 1 billion euros, coupon
1.625%.
On January 19, 2021, TIM decided to totally cancel the unused 1.7 billion euros Bridge to Bond line.
Maturities of financial liabilities
The average maturity of non-current financial liabilities (including the current portion of medium/long-term
financial liabilities due within 12 months) was 9.31 years.
Details of the maturities of financial liabilities in terms of expected nominal repayment amounts, as
contractually agreed, are provided in the Note “Financial Liabilities (non-current and current)” of the Separate
Financial Statements of TIM S.p.A. at December 31, 2020.
Financial assets and liquidity margin
Financial assets totaled 4,427 million euros (3,354 million euros at December 31, 2019), of which 763 million euros
relating to financial receivables from Group companies.
Of that total, 1,920 million euros (1,005 million euros at December 31, 2019) was classified as current financial
assets.
The available liquidity margin of TIM S.p.A. amounted to 8,466 million euros, equal to the sum of:
■
■
“Cash and cash equivalents” and “Current securities other than investments” for a total of 1,766 million euros
(829 million euros at December 31, 2019);
the new Revolving Credit Facility of 5,000 million euros and the Bridge to Bond Facility of 1,700 million euros,
totally available.
This margin is amply sufficient to cover the financial liabilities due.
In particular:
Cash and cash equivalents amounted to 1,766 million euros (829 million euros at December 31, 2019). The
different technical forms of investing available cash can be analyzed as follows:
■ Maturities: investments have a maximum maturity of three months;
■ Counterparty risk: investments are made with leading banking and financial institutions with high-credit-
quality;
■ Country risk: deposits have been made mainly in major European financial markets.
Report on Operations of
TIM S.p.A.
Review of Key Operating and Financial Data of
TIM S.p.A.
128
RECONCILIATION OF CONSOLIDATED EQUITY
(million euros)
Equity and Profit (Loss) for the year of TIM S.p.A.
Equity and Profit (Loss) for the year of
consolidated companies, net of the share
attributable to Non-controlling interest
Consolidation adjustments on the Equity and Profit
(Loss) for the year attributable to Owners of the
Parent:
elimination of carrying amount of consolidated
investments
impairment losses of consolidated companies
included in the results of parent companies
elimination of goodwill recognized in Parent
financial statements
recognition of positive differences arising from
purchase of investments, of which:
- goodwill
- goodwill attributed to INWIT (Asset held for
sale)
- allocation of the purchase price to the net
assets acquired and liabilities assumed in
business combinations
measurement of hedging derivatives at Group
level
effect of elimination of carrying amount of
Parent's shares held by Telecom Italia Finance
intra-group dividends
change in share of losses (profits) from sale of
investments
other adjustments
Equity and Profit (Loss) for the year attributable
to Owners of the Parent
Equity and Profit (Loss) for the year attributable to
Non-controlling interests
Equity and Profit (Loss) for the year in the
Consolidated Financial Statements
Profit (loss) for the year
2020
2019
Equity at 12/31
2020
2019
7,161
382
25,008
18,174
391
946
13,461
14,634
—
9
—
—
—
1
(22)
—
(558)
220
22
7,224
128
7,352
—
27
—
—
—
(1)
46
—
(426)
(26)
(32)
916
326
(22,158)
9,515
(23,051)
22,749
—
2
901
(48)
(256)
246
(154)
26,215
2,625
1,242
28,840
(27,257)
12,628
(24,341)
22,944
3,036
(2)
755
(70)
—
—
(221)
20,280
2,346
22,626
Report on Operations of
TIM S.p.A.
Reconciliation of Consolidated Equity
129
CORPORATE BOARDS AT DECEMBER 31, 2020
Board of Directors
The Ordinary Shareholders’ meeting of TIM, held on May 4, 2018, appointed a new Board of 15 Directors and for
a three-year term of office (up to the approval of the financial statements at December 31, 2020). At its first
meeting on May 7, 2018, the Board of Directors appointed Fulvio Conti as its Chairman, and Amos Genish as Chief
Executive Officer of the Company.
At the Board of Directors’ meeting held on July 24, 2018, the director Dante Roscini was appointed Lead
Independent Director, tasked with supporting the chairman (an independent) in coordinating the board’s work,
and with the powers and responsibilities identified in the Borsa Italiana Corporate Governance Code.
In the meeting of November 13, 2018, the Board of Directors revoked all the powers granted to the director Amos
Genish, provisionally assigning them to the Chairman of the Board of Directors, Fulvio Conti; on November 18,
2018, the Board of Directors appointed Luigi Gubitosi as Chief Executive Officer and General Manager, granting
him executive powers.
On February 21, 2019, the Board of Directors resolved to override the exclusion of the powers already assigned
in November 2018 to the Head of Security from the perimeter of powers of the Chief Executive Officer, Luigi
Gubitosi, as Security Chief Executive Officer pursuant to the regulations Golden Power.
On June 27, 2019, the Board of Directors took note of the resignation of Amos Genish as Director, unanimously
co-opting director Franck Cadoret in his place.
On September 26, 2019, the Board of Directors took note of the resignation of Fulvio Conti as Chairman and
Director and at the meeting of October 21, 2019 co-opted Salvatore Rossi, appointing him Chairman.
The Shareholders' Meeting of April 23, 2020 resolved to confirm the directors of the company (expiring at the
approval of the financial statements at December 31, 2020) Messrs. Franck Cadoret and Salvatore Rossi.
The Board of Directors meeting held at the conclusion of the Shareholders' Meeting resolved to confirm Mr.
Salvatore Rossi as Chairman of the Board of Directors and Mr. Franck Cadoret as a member of the Sustainability
and Strategies Committee.
The current power structure of the Company provides:
■
■
to the Chairman, the powers and responsibilities contemplated by law, the Articles of Association and
corporate governance arrangements;
to the Chief Executive Officer, all powers necessary to perform acts pertinent to the Company’s business,
except for the powers reserved by law and the Articles of Association to the Board of Directors.
The composition of the Company's Board of Directors at December 31, 2020 was therefore:
Chairman
Chief Executive Officer and General Manager
Directors
Secretary to the Board
Report on Operations of
TIM S.p.A.
Salvatore Rossi (independent)
Luigi Gubitosi
Alfredo Altavilla (independent)
Paola Bonomo (independent)
Franck Cadoret
Giuseppina Capaldo (independent)
Maria Elena Cappello (independent)
Massimo Ferrari (independent)
Paola Giannotti de Ponti (independent)
Marella Moretti (independent)
Lucia Morselli (independent)
Dante Roscini (Lead Independent Director)
Arnaud Roy de Puyfontaine
Agostino Nuzzolo
Rocco Sabelli (independent)
Michele Valensise (independent)
Corporate Boards at December 31, 2020 130
The following board committees were in place at December 31, 2020:
■ Control and Risk Committee: composed of the Directors: Paola Giannotti de Ponti (Chairman), Massimo
Ferrari, Marella Moretti, Lucia Morselli and Michele Valensise;
■ Nomination and Remuneration Committee: composed of board members: Alfredo Altavilla (Chairman),
Paola Bonomo, Giuseppina Capaldo, Rocco Sabelli, and Michele Valensise;
■ Related Parties Committee: composed of the Directors: Lucia Morselli (Chairwoman), Giuseppina Capaldo,
Maria Elena Cappello, Marella Moretti, and Dante Roscini;
■ Sustainability and Strategies Committee (renamed by the Board of Directors on March 10, 2020, which
amended the mission of the Strategic Committee, including the task of checking the consistency of Telecom
Italia's objectives and management with environmental, social and corporate sustainability criteria): made
up of the Chairman of the Board of Directors, Salvatore Rossi, the Chief Executive Officer, Luigi Gubitosi, and
the Directors Paola Bonomo (from March 10, 2020), Franck Cadoret (confirmed on April 23, 2020), Maria Elena
Cappello (from March 10, 2020), Arnaud Roy de Puyfontaine, Massimo Ferrari and Rocco Sabelli.
Board of Statutory Auditors
The Ordinary Shareholders’ Meeting of April 24, 2018 appointed the Company's Board of Statutory Auditors for
a term of office that will end with the approval of the 2020 financial statements.
The Board of Statutory Auditors of the Company is now composed as follows:
Chairman
Standing Auditors
Alternate Auditors
Roberto Capone
Giulia De Martino
Anna Doro
Marco Fazzini
Francesco Schiavone Panni
Andrea Balelli
Antonia Coppola
Franco Dalla Sega
Laura Fiordelisi
Independent Auditor
The engagement for the independent auditing of the financial statements of TIM S.p.A. for the nine-year period
2019-2027 was awarded to EY S.p.A. by the shareholders’ meeting of March 29, 2019.
Executive responsible for preparing the corporate accounting
documents
At the meeting of May 20, 2019, the Board of Directors appointed Giovanni Ronca (Head of the Group
Administration, Finance and Control Function) as the manager responsible for preparing the financial reports of
TIM S.p.A.
Report on Operations of
TIM S.p.A.
Corporate Boards at December 31, 2020 131
MACRO-ORGANIZATION CHART
Report on Operations of
TIM S.p.A.
Macro-Organization Chart 132
• HR SERVICES (1) • FONDAZIONE TIM CHIEF REVENUE OFFICER F. RIGONI CHIEF TECHNOLOGY & INFORMATION OFFICER M. GAMBERINI CHIEF OPERATIONS OFFICER S. SIRAGUSA PRESIDÊNCIA TIM PARTICIPAÇÕES P. LABRIOLA C. BARDELLI G. RONCA INVESTOR RELATIONS L. SALE S. CANTAGALLO C. NARDELLO LEGAL & TAX A. NUZZOLO PROCUREMENT CHIEF REGULATORY AFFAIRS & WHOLESALE MARKET OFFICER G. MOGLIA BRAND STRATEGY, MEDIA & MULTIMEDIA ENTERTAINMENT L. JOSI SECURITY S. GRASSI CHIEF STRATEGY, BUSINESS DEVELOPMENT & TRANSFORMATION OFFICER CHIEF FINANCIAL OFFICER HUMAN RESOURCES, ORGANIZATION & REAL ESTATE • TELECOM ITALIA SPARKLE A. PICARDI • FLASH FIBER COMPLIANCE G. LEONE AUDIT G. CARIOLA INSTITUTIONAL COMMUNICATIONS, SUSTAINABILITY PROJECTS & SPONSORSHIP N. GRASSI CHIEF PUBLIC AFFAIRS OFFICER • OLIVETTI • TELSY DATA OFFICER M. ARCIULO PARTNERSHIP, ALLIANCES & TIM CLOUD PROJECT C. D’ASARO BIONDO (1) Merger into TIM S.p.A. effective December 31, 2020
CONTENTS
TIM GROUP CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Position ................................. 135
Separate Consolidated Income Statement ......................................... 137
Consolidated Statements of Comprehensive Income ....................... 138
Consolidated Statements of Changes in Equity ................................ 139
Consolidated Statements of Cash Flows ............................................. 140
142
Note 1 Form, content and other general information ...............................................................
144
Note 2 Accounting policies ............................................................................................................
160
Note 3 Scope of consolidation ......................................................................................................
163
Note 4 Business combinations ......................................................................................................
164
Note 5 Goodwill ...............................................................................................................................
167
Note 6 Intangible assets with a finite useful life ........................................................................
169
Note 7 Tangible assets ...................................................................................................................
171
Note 8 Rights of use assets ...........................................................................................................
174
Note 9 Investments ........................................................................................................................
178
Note 10 Financial assets (non-current and current) ..................................................................
180
Note 11 Miscellaneous receivables and other non-current assets ...........................................
182
Note 12 Income tax expense (current and deferred) .................................................................
186
Note 13 Inventories .........................................................................................................................
186
Note 14 Trade and miscellaneous receivables and other current assets ................................
189
Note 15 Discontinued operations / Non-current assets held for sale ......................................
191
Note 16 Equity .................................................................................................................................
195
Note 17 Financial liabilities (non-current and current) ..............................................................
201
Note 18 Net financial debt ............................................................................................................
Note 19 Financial risk management ............................................................................................
204
210
Note 20 Derivatives ........................................................................................................................
214
Note 21 Supplementary disclosures on financial instruments .................................................
219
Note 22 Employee benefits ...........................................................................................................
222
Note 23 Provisions ..........................................................................................................................
223
Note 24 Miscellaneous payables and other non-current liabilities ..........................................
224
Note 25 Trade and miscellaneous payables and other current liabilities ...............................
226
Note 26 Disputes and pending legal actions, other information, commitments and
244
Note 27 Revenues ...........................................................................................................................
guarantees .......................................................................................................................................
244
Note 28 Other operating income ..................................................................................................
245
Note 29 Acquisition of goods and services ..................................................................................
246
Note 30 Employee benefits expenses ..........................................................................................
247
Note 31 Other operating expenses ...............................................................................................
247
Note 32 Internally generated assets ............................................................................................
248
Note 33 Depreciation and amortization ......................................................................................
249
Note 34 Gains/(losses) on disposals of non-current assets ......................................................
250
Note 35 Impairment reversals (losses) on non-current assets .................................................
251
Note 36 Other income (expenses) from investments................................................................
252
Note 37 Finance income and expenses .......................................................................................
254
Note 38 Profit (loss) for the year ...................................................................................................
255
Note 39 Earnings per share ...........................................................................................................
258
Note 40 Segment reporting...........................................................................................................
261
Note 41 Related party transactions ..............................................................................................
272
Note 42 Equity compensation plans ............................................................................................
276
Note 43 Significant non-recurring events and transactions .....................................................
Note 44 Positions or transactions resulting from atypical and/or unusual operations .........
278
279
Note 45 Other information ............................................................................................................
282
Note 46 Events subsequent to December 31, 2020 ...................................................................
284
Note 47 List of companies of the TIM Group ...............................................................................
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
Assets
(million euros)
Non-current assets
Intangible assets
Goodwill
Intangible assets with a finite useful life
Tangible assets
Property, plant and equipment owned
Right of use assets
Other non-current assets
Investments in associates and joint ventures accounted
for using the equity method
Other investments
Non-current financial receivables from lease contracts
Other non-current financial assets
Miscellaneous receivables and other non-current assets
Deferred tax assets
Total Non-current assets
Current assets
Inventories
Trade and miscellaneous receivables and other current
assets
Current income tax receivables
Current financial assets
Current financial receivables arising from lease
contracts
Securities other than investments, other financial
receivables and other current financial assets
Cash and cash equivalents
Current assets sub-total
Discontinued operations /Non-current assets held for
sale
of a financial nature
of a non-financial nature
(a)
Total Current Assets
Total Assets
(b)
(a+b)
Notes
12.31.2020 of which
with
related
parties
12.31.2019 of which
with
related
parties
5)
6)
7)
8)
9)
9)
10)
10)
11)
12)
13)
14)
12)
10)
15)
22,847
6,740
29,587
13,141
4,992
2,728
54
43
2,267
2,114
7,496
14,702
62,422
242
4,346
86
55
1,254
4,829
6,138
10,812
—
—
—
10,812
73,234
—
—
—
—
347
—
—
—
—
—
—
—
—
—
61
—
—
—
—
—
—
—
—
—
—
23,083
7,667
30,750
14,011
5,494
11
52
51
2,100
2,585
942
5,741
55,996
260
4,857
149
58
999
3,138
4,195
9,461
65
4,582
4,647
14,108
70,104
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8
—
—
—
—
—
—
—
—
—
—
Consolidated financial statements
of the TIM Group
Consolidated Statements of Financial Position 135
Equity and liabilities
(million euros)
Notes
12.31.2020 of which
with
related
parties
12.31.2019 of which
with
related
parties
Equity
Share capital issued
less: Treasury shares
Share capital
Additional paid-in capital
Other reserves and retained earnings (accumulated
losses), including profit (loss) for the year
Equity attributable to owners of the Parent
Non-controlling interests
Total Equity
Non-current liabilities
Non-current financial liabilities for financing contracts
and others
Non-current financial liabilities for lease contracts
Employee benefits
Deferred tax liabilities
Provisions
Miscellaneous payables and other non-current liabilities
Total Non-current liabilities
Current liabilities
Current financial liabilities for financing contracts and
others
Current financial liabilities for lease contracts
Trade and miscellaneous payables and other current
liabilities
Income tax payables
Current liabilities sub-total
Liabilities directly associated with Discontinued
operations/Non-current assets held for sale
of a financial nature
of a non-financial nature
(c)
(d)
16)
17)
17)
22)
12)
23)
24)
17)
17)
25)
12)
15)
Total Current Liabilities
Total Liabilities
Total Equity and Liabilities
(e)
(f=d+e)
(c+f)
11,677
(89)
11,588
2,133
12,494
26,215
2,625
28,840
23,655
4,199
724
277
770
3,602
33,227
3,677
631
6,588
271
11,167
—
—
—
11,167
44,394
73,234
—
—
—
—
—
—
—
—
—
313
—
—
—
3
—
50
163
—
—
—
—
—
—
—
11,677
(90)
11,587
2,094
6,599
20,280
2,346
22,626
25,605
4,576
1,182
248
725
3,214
35,550
3,182
639
7,218
84
11,123
655
150
805
11,928
47,478
70,104
—
—
—
—
—
—
—
—
—
1
—
—
—
1
—
—
61
—
—
—
—
—
—
—
Consolidated financial statements
of the TIM Group
Consolidated Statements of Financial Position 136
SEPARATE CONSOLIDATED INCOME
STATEMENTS
(million euros)
Revenues
Other operating income
Total revenues and operating income
Acquisition of goods and services
Employee benefits expenses
Other operating expenses
Change in inventories
Internally generated assets
Operating profit (loss) before depreciation and
amortization, capital gains (losses) and impairment
reversals (losses) on non-current assets (EBITDA)
of which: impact of non-recurring items
Depreciation and amortization
Gains/(losses) on disposals of non-current assets
Impairment reversals/(losses) on non-current assets
Operating profit (loss) (EBIT)
of which: impact of non-recurring items
Share of profits (losses) of associates and joint ventures
accounted for using the equity method
Other income (expenses) from investments
Finance income
Finance expenses
Profit (loss) before tax from continuing operations
of which: impact of non-recurring items
Income tax expense
Profit (loss) from continuing operations
Profit (loss) from Discontinued operations/Non-current
assets held for sale
Profit (loss) for the year
of which: impact of non-recurring items
Attributable to:
Owners of the Parent
Non-controlling interests
(euros)
Earnings per share:
(Basic) Earnings per share
Ordinary Share
Savings Share
of which:
from Continuing operations attributable to the Owners of the Parent
Diluted earnings per share
Ordinary Share
Savings Share
of which:
from Continuing operations attributable to the Owners of the Parent
Ordinary Share
Savings Share
Ordinary Share
Savings Share
notes
27)
28)
29)
30)
31)
32)
43)
33)
34)
35)
43)
9)
36)
37)
37)
43)
12)
15)
38)
43)
39)
Year of which
with
2020
related
parties
94
1
(363)
(89)
(2)
—
—
15,805
211
16,016
(6,173)
(2,639)
(961)
(6)
502
Year of which
with
2019
related
parties
4
—
(147)
(96)
—
—
—
17,974
933
18,907
(6,463)
(3,077)
(1,625)
(128)
537
6,739
(324)
(4,616)
(11)
(8)
2,104
(324)
18
454
1,143
(2,322)
1,397
121
5,955
7,352
—
7,352
6,048
7,224
128
8,151
(71)
(4,927)
(49)
—
3,175
(89)
(3)
3
946
(2,382)
1,739
(122)
(513)
1,226
16
1,242
(146)
916
326
—
—
—
—
—
—
—
—
Year
2019
0.04
0.05
0.04
0.05
0.04
0.05
0.04
0.05
(39)
—
—
—
—
—
(15)
—
Year
2020
0.34
0.35
0.34
0.35
0.33
0.34
0.33
0.34
Consolidated financial statements
of the TIM Group
Separate Consolidated Income Statement 137
STATEMENTS OF COMPREHENSIVE INCOME
Note 16
(million euros)
Profit/(Loss) for the year
Other components of the Consolidated Statement of Comprehensive
Income
Other components that will not be reclassified subsequently to
Separate Consolidated Income Statement
Financial assets measured at fair value through other comprehensive
Profit (loss) from fair value adjustments
income:
Income tax effect
Remeasurements of employee defined benefit plans (IAS 19):
Actuarial gains (losses)
Income tax effect
Share of other comprehensive income (loss) of associates and joint
ventures accounted for using the equity method
Profit (loss)
Income tax effect
Total other components that will not be reclassified subsequently to
Separate Consolidated Income Statement
Other components that will be reclassified subsequently to Separate
Consolidated Income Statement
Financial assets measured at fair value through other comprehensive
income:
Profit (loss) from fair value adjustments
Loss (profit) transferred to Separate Consolidated Income Statement
Income tax effect
Hedging instruments:
Profit (loss) from fair value adjustments
Loss (profit) transferred to Separate Consolidated Income Statement
Income tax effect
Exchange differences on translating foreign operations:
Profit (loss) on translating foreign operations
Loss (profit) on translating foreign operations transferred to Separate
Consolidated Income Statement
Income tax effect
Share of other comprehensive income (loss) of associates and joint
ventures accounted for using the equity method
Profit (loss)
Loss (profit) transferred to Separate Consolidated Income Statement
Income tax effect
Total other components that will be reclassified subsequently to
Separate Consolidated Income Statement
Total other components of the Consolidated Statement of
Comprehensive Income
Total comprehensive income (loss) for the year
Attributable to:
Owners of the Parent
Non-controlling interests
(a)
(b)
(c)
(d)
(e=b+c+d)
(f)
(g)
(h)
(i)
(k=f+g+h+i)
(m=e+k)
(a+m)
Year
2020
7,352
Year
2019
1,242
(4)
—
(4)
6
(1)
5
—
—
—
1
5
—
—
5
(253)
373
(30)
90
(1,612)
—
—
(1,612)
—
—
—
—
(1,517)
(1,516)
5,836
6,199
(363)
4
—
4
(44)
10
(34)
—
—
—
(30)
(19)
(5)
8
(16)
367
(227)
(17)
123
(113)
—
—
(113)
—
—
—
—
(6)
(36)
1,206
916
290
Consolidated financial statements
of the TIM Group
Consolidated Statements of Comprehensive Income 138
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Changes from January 1, 2019 to December 31, 2019
(million euros)
Share
capital
Additional
paid-in
capital
Equity attributable to Owners of the Parent
Reserve for
hedging
instruments
Reserve for
financial assets
measured at
fair value
through other
comprehensive
income
Reserve for
remeasurements
of employee
defined benefit
plans (IAS 19)
Reserve for
exchange
rate
differences
on
translating
foreign
operations
Other
reserves and
retained
earnings
(accumulated
losses),
including
profit (loss)
for the year
Share of
other
profits
(losses) of
associates
and joint
ventures
accounted
for using
the equity
method
Total Non-controlling
interest
Total equity
11,587
Balance at
December 31,
2018
Changes in
equity during
the year:
Dividends approved
Total comprehensive
income (loss) for the
year
Issue of equity
instruments
Change in the scope of
consolidation
Other changes
Balance at
December 31,
2019
—
11,587
2,094
30
(563)
(1,340)
(90)
—
7,810 19,528
2,219
21,747
—
—
—
—
—
2,094
—
(12)
—
—
1
19
—
123
—
—
—
—
(77)
—
—
—
—
(34)
—
—
—
(440)
(1,417)
(124)
—
—
—
—
—
—
(166)
(166)
(130)
(296)
916
916
290
1,206
4
—
(3)
4
—
(2)
—
(44)
11
4
(44)
9
8,561 20,280
2,346
22,626
Changes from January 1, 2020 to December 31, 2020
(million euros)
Share
capital
Additional
paid-in
capital
Note 16
Equity attributable to Owners of the Parent
Reserve for
hedging
instruments
Reserve for
financial assets
measured at
fair value
through other
comprehensive
income
Reserve for
remeasurements
of employee
defined benefit
plans for 19
euros (IAS 19)
Reserve for
exchange
rate
differences
on
translating
foreign
operations
Balance at
December 31,
2019
Changes in equity during
the year:
11,587
2,094
19
(440)
(1,417)
(124)
Share of
other
profits
(losses) of
associates
and joint
ventures
accounted
for using
the equity
method
—
Total Non-controlling
interest
Total equity
Other
reserves and
retained
earnings
(accumulated
losses),
including
profit (loss)
for the year
8,561 20,280
2,346
22,626
1
Dividends approved
—
Total comprehensive
income (loss) for the year
—
Issue of equity
instruments
INWIT –
deconsolidation
Daphne 3 - capital
increase
—
Other movements
Balance at
December 31,
2020
11,588
—
—
—
—
39
—
—
—
2,133
—
1
—
—
—
—
20
—
90
—
—
—
—
—
(1,121)
—
—
—
—
—
5
—
—
—
—
(350)
(2,538)
(119)
—
—
—
—
—
—
—
(316)
(316)
7,224 6,199
3
—
—
9
43
—
—
9
(62)
(363)
—
(644)
1,334
14
(378)
5,836
43
(644)
1,334
23
15,481 26,215
2,625
28,840
Consolidated financial statements
of the TIM Group
Consolidated Statements of Changes in Equity 139
CONSOLIDATED STATEMENTS OF CASH FLOWS
(million euros)
Notes
Cashflow from operating activities:
Profit (loss) from continuing operations
Adjustments for:
Depreciation & amortization
Impairment losses (reversals) on non-current assets (including
investments)
Net change in deferred tax assets and liabilities
Losses (gains) from realization of non-current assets (including
investments)
Share of losses (profits) of associates and joint ventures accounted for
using the equity method
Change in provisions for employee benefits
Change in inventories
Change in trade receivables and other net receivables
Change in trade payables
Net change in receivables/payables for income taxes
Net change in miscellaneous receivables/payables and other
assets/liabilities
Cash flows from (used in) operating activities
Cash flows from investing activities:
Purchases of intangible, tangible and rights of use assets on a cash basis
Capital grants received
Acquisition of control of companies or other businesses, net of cash
acquired
Acquisitions/disposals of other investments
Change in financial receivables and other financial assets (excluding
hedging and non-hedging derivatives under financial assets)
Proceeds from sale that result in a loss of control of subsidiaries or other
businesses, net of cash disposed of
Proceeds from sale/repayments of intangible, tangible and other non-
current assets
Cash flows from (used in) investing activities
Cash flows from investing activities:
(a)
(b)
Change in current financial liabilities and other
Proceeds from non-current financial liabilities (including current portion)
Repayments of non-current financial liabilities (including current
portion)
Changes in hedging and non-hedging derivatives
Share capital proceeds/reimbursements (including subsidiaries)
Dividends paid (*)
Changes in ownership interests in consolidated subsidiaries
Cash flows from (used in) financing activities
Cash flows from (used in) Discontinued operations/Non-current assets
held for sale
Aggregate cash flows
Net cash and cash equivalents at beginning of the year
Net foreign exchange differences on net cash and cash equivalents
Net cash and cash equivalents at end of the year
(*) of which to related parties:
(c)
(d)
(e=a+b+c+d)
(f)
(g)
(h=e+f+g)
Year
2020
7,352
4,616
36
(6,538)
(441)
(18)
(628)
20
484
(231)
708
1,191
6,551
(3,477)
24
(7)
(11)
(251)
(33)
678
(3,077)
(1,771)
1,470
(2,790)
310
1,164
(390)
(2)
(2,009)
—
1,465
3,202
(159)
4,508
36
Year
2019
1,226
4,927
31
271
47
3
(246)
129
—
(181)
114
(387)
5,934
(3,649)
28
—
(4)
231
125
14
(3,255)
(545)
4,527
(4,412)
(415)
10
(279)
—
(1,114)
16
1,581
1,631
(10)
3,202
—
Consolidated financial statements
of the TIM Group
Consolidated Statements of Cash Flows 140
Purchases of intangible, tangible and rights of use assets
(million euros)
Purchases of intangible assets
Purchases of tangible assets
Purchases of rights of use assets
Total purchase of intangible, tangible and rights of use assets on an
accrual basis (*)
Change in payables arising from purchase of intangible, tangible and
rights of use assets
Total purchases of intangible, tangible and rights of use assets on a
cash basis
(*) of which from related parties:
Notes
6)
7)
8)
Additional Cash Flow information
(million euros)
Income taxes (paid)/received
Interest expense paid
Interest income received
Dividends received
Analysis of net cash and cash equivalents
(million euros)
Net cash and cash equivalents at the beginning of the year:
Cash and cash equivalents - from continuing operations
Bank overdrafts repayable on demand – from continuing operations
Cash and cash equivalents - from Discontinued operations/Non-current
assets held for sale
Bank overdrafts repayable on demand – from Discontinued
operations/Non-current assets held for sale
Net cash and cash equivalents at the end of the year:
Cash and cash equivalents - from continuing operations
Bank overdrafts repayable on demand – from continuing operations
Cash and cash equivalents - from Discontinued operations/Non-current
assets held for sale
Bank overdrafts repayable on demand – from Discontinued
operations/Non-current assets held for sale
Year
2020
(1,197)
(2,138)
(1,362)
(4,697)
1,220
(3,477)
378
Year
2020
223
(1,520)
448
256
Year
2020
3,138
(1)
65
—
3,202
4,829
(321)
—
—
4,508
Year
2019
(1,064)
(2,644)
(1,216)
(4,924)
1,275
(3,649)
2
Year
2019
(118)
(1,750)
589
1
Year
2019
1,917
(286)
—
—
1,631
3,138
(1)
65
—
3,202
The additional disclosures required by IAS 7 are provided in the Note “Net financial debt” to these consolidated
financial statements.
Consolidated financial statements
of the TIM Group
Consolidated Statements of Cash Flows 141
NOTE 1
FORM, CONTENT AND OTHER GENERAL
INFORMATION
Form and content
Telecom Italia S.p.A. (the “Parent Company”), also known in short as “TIM S.p.A.”, and its subsidiaries form the
“TIM Group” (the “Group”).
TIM is a joint-stock company (S.p.A.) organized under the laws of the Republic of Italy.
The registered offices of the Parent, TIM, are located in Milan, Italy at Via Gaetano Negri 1.
The duration of TIM S.p.A., as stated in the company's bylaws, extends until December 31, 2100.
The TIM Group operates mainly in Europe, cand South America.
The Group is engaged principally in the communications sector and, particularly, the fixed and mobile national
and international telecommunications sector.
The TIM Group's Consolidated Financial Statements at December 31, 2020, have been prepared on a going
concern basis (further details are provided in the Note “Accounting Policies”) and in accordance with the
recognition and measurement criteria of the International Financial Reporting Standards issued by the
International Accounting Standards Board and endorsed by the European Union (designated as “IFRS”), as well
as laws and regulations in force in Italy.
In 2020, the Group adopted accounting policies consistent with those of the previous year, except for the changes
to the accounting standards issued by the IASB and in force as of January 1, 2020. See the Note "Accounting
policies" for more details.
The consolidated financial statements have been prepared under the historical cost convention, except for
financial assets, which are measured at the fair value recognized in the other components of the comprehensive
income, financial assets measured at fair value through the income statement, and derivative financial
instruments, which have been measured at fair value. The carrying amounts of hedged assets and liabilities have
been adjusted to reflect fair value changes for hedged risks (fair value hedge).
In accordance with IAS 1 (Presentation of Financial Statements) comparative information included in the
consolidated financial statements refers, unless otherwise indicated, to the previous year.
The TIM Group consolidated financial statements as at December 31, 2020 are expressed in euro (rounded to the
nearest million unless otherwise indicated).
The publication of the consolidated financial statements for the year ended December 31, 2020 of the TIM Group
was approved by resolution of the Board of Directors on February 23, 2021.
Financial statement formats
The financial statement formats adopted are consistent with those indicated in IAS 1. In particular:
■
■
the Consolidated statements of financial position have been prepared by classifying assets and liabilities
according to the "current and non-current" criterion;
the Separate Consolidated Income Statement have been prepared by classifying operating costs by nature
of expense as this form of presentation is considered more appropriate and representative of the specific
business of the Group, conforms to internal reporting, and is in line with the TIM Group's industrial sector.
In addition to EBIT or Operating profit (loss), the Separate Consolidated Income Statement includes the
alternative performance measure of EBITDA or Operating profit (loss) before depreciation and amortization,
Capital gains (losses) and Impairment reversals (losses) on non-current assets.
In particular, besides EBIT, EBITDA is used by TIM as the financial target in internal presentations (business
plans) and in external presentations (to analysts and investors), as a useful unit of measurement for the
evaluation of the operating performance of the Group (as a whole and at the Business Unit level).
Consolidated financial statements
of the TIM Group
Note 1
Form, content and other general information
142
EBIT and EBITDA are calculated as follows:
Finance expenses
Finance income
Profit (loss) before tax from continuing operations
+
-
+/- Other expenses (income) from investments
+/- Share of profits (losses) of associates and joint ventures accounted for using the equity method
EBIT - Operating profit (loss)
+/- Impairment losses (reversals) on non-current assets
+/- Losses (gains) on disposals of non-current assets
+
EBITDA – Operating profit before depreciation and amortization, capital gains (losses) and impairment reversals (losses) on
non-current assets
Depreciation and amortization
■
■
the Consolidated statements of comprehensive income include the profit or loss for the year as shown in
the Separate Consolidated Income Statement and all other non-owner changes in equity;
the Consolidated statements of cash flows have been prepared by presenting cash flows from operating
activities according to the "indirect method", as permitted by IAS 7 (Statement of Cash Flows).
Furthermore, as required by Consob Resolution 15519 of July 27, 2006, in the Separate Consolidated Income
Statement, income and expenses relating to transactions which by nature do not occur during normal operation
(non-recurring transactions) have been specifically identified and their impacts on the main intermediate levels
have been shown separately, when they are significant. Specifically, non-recurring income/(expenses) include,
for instance: income/expenses arising from the sale of properties, plant and equipment, business segments and
investments; expenses stemming from company reorganization and streamlining processes and projects, also
in connection with corporate transactions (mergers, spin-offs, etc.); expenses resulting from litigation and
regulatory fines and related liabilities; other provisions and related reversals; costs for the settlement of disputes
other than regulatory disputes; adjustments, realignments and other non-recurring items, also relating to
previous years; impairment losses on the goodwill and/or other intangible and tangible assets. Certain costs
related to the COVID-19 pandemic are also identified as non-recurring charges.
Also, in reference to the above Consob Resolution, the amounts relating to balances or transactions with related
parties have been shown separately in the consolidated financial statements.
Segment reporting
An operating segment is a component of an entity:
■
that engages in business activities that generate revenues and costs (including revenues and costs relating
to transactions with other components of the same entity);
■ whose operating results are regularly reviewed by the entity's chief operating decision-maker (the Board of
Directors, for the TIM Group) to make decisions about resources to be allocated to the segment and to assess
results; and
for which separate financial information is available.
■
In particular, the operating segments of the TIM Group are organized according to their geographic location
(Domestic and Brazil) for the telecommunications business.
The term "operating segment" is considered synonymous with "Business Unit".
The operating segments of the TIM Group are as follows:
■ Domestic: includes operations in Italy for voice and data services on fixed and mobile networks for end
customers (retail) and other operators (wholesale), the operations of the Telecom Italia Sparkle group, which,
at international level (Europe, the Mediterranean and South America), develops fiber optic networks for
wholesale customers, the operations of Olivetti (products and services for Information Technology), and, up
to March 31, 2020, INWIT S.p.A. (a company operating in the electronic communications infrastructure sector,
and in particular the infrastructure for hosting radio transmission equipment for mobile telephone networks,
both for TIM and other operators) and the units supporting the Domestic sector. See the section “Financial
and Operating Highlights of the Business Units of the TIM Group – Domestic Business Unit” of the Report on
Operations for more details;
■ Brazil: includes mobile and fixed telecommunications operations in Brazil (TIM S.A.);
■ Other Operations: include the financial companies (Telecom Italia Capital S.A. and Telecom Italia Finance
S.A.) and other minor companies not strictly related to the TIM Group's core business.
Consolidated financial statements
of the TIM Group
Note 1
Form, content and other general information
143
NOTE 2
ACCOUNTING POLICIES
Going concern
The consolidated financial statements for the business year 2020 have been prepared on a going concern basis,
as there is the reasonable expectation that TIM will continue conducting its business in the foreseeable future
(and, in any event, over a period of at least twelve months).
In particular, the following factors have been taken into consideration:
■
the main risks and uncertainties (that are for the most part of an external nature) to which the Group and
the various activities of the TIM Group are exposed:
•
•
•
•
•
the changes in the general macroeconomic situation in the Italian, European and Brazilian market,
including the effects deriving from the continued state of COVID-19 health emergency, as well as the
volatility of financial markets in the Eurozone, partly following the UK’s Brexit;
variations in business conditions, also related to competition;
changes to laws and regulations (price and rate variations);
outcomes of legal disputes and proceedings with regulatory authorities, competitors and other parties;
financial risks (interest rate and/or exchange rate trends, changes in the Group's credit rating by rating
agencies);
the optimal mix between risk capital and debt capital, as well as the policy for the remuneration of risk
capital, as described in the section "Share capital information" under the Note "Equity";
the policy for financial risk management (market risk, credit risk and liquidity risk), as described in the Note
"Financial risk management".
Based on these factors, the Management believes that, at the present time, there are no elements of uncertainty
regarding the Group’s ability to continue as a going concern.
Principles of consolidation
The consolidated financial statements include the financial statements of all subsidiaries from the date on which
control over such subsidiaries commences until the date on which control ceases.
The date of all the subsidiaries' financial statements coincides with that of the Parent company, TIM.
Control exists when the Parent company TIM S.p.A. has all the following:
■ decision-making power over the investee, which includes the ability to direct the relevant activities of the
investee, i.e. the activities that significantly affect the investee's returns;
■ entitlement to the variable profits or losses commensurate with its shareholding in the investee;
■
the ability to use its decision-making to determine the amount of the returns relating to its shareholding in
the entity.
TIM assesses whether it controls an investee if facts and circumstances indicate that there are changes in one
or more of the three control elements.
In the preparation of the consolidated financial statements, the global amounts of the assets, liabilities, costs
and revenues of the consolidated companies are recognized on a line-by-line basis, while the share of equity and
the year's result of non-controlling interest is recognized is disclosed separately under appropriate items in the
consolidated statements of financial position, in the separate consolidated income statement and in the
consolidated statements of comprehensive income.
Under IFRS 10 (Consolidated financial statements), the comprehensive loss (including the profit or loss for the
year) is attributed to the Owners of the Parent and to non-controlling interest even when the equity of non-
controlling interest has a deficit balance.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
144
All intragroup balances and transactions and any gains and losses arising from intragroup transactions are
eliminated in consolidation.
The carrying amount of the investment in each subsidiary is eliminated against the corresponding share of equity
in each subsidiary, after adjustment, if any, to fair value at the date of acquisition of control. At that date, goodwill
is recorded as an intangible asset, as described below, whereas any gain from a bargain purchase (or negative
goodwill) is recognized in the separate consolidated income statement.
All the assets and liabilities expressed in currencies other than euro of foreign consolidated entities that are
included in the consolidation are translated using the exchange rates in effect at the reporting date (the current
exchange rate method), while the related revenues and costs are translated at the average exchange rates for
the year. Exchange differences resulting from the application of this method are classified as equity until the
entire disposal of the investment or upon loss of control of the foreign subsidiary. Upon partial disposal, without
losing control, the proportionate share of the cumulative amount of exchange differences related to the disposed
interest is recognized as non-controlling interest equity. The cash flows of foreign consolidated subsidiaries
expressed in currencies other than euro included in the consolidated statements of cash flows are translated
into euro at the average exchange rates for the year.
Goodwill and fair value adjustments arising from the allocation of the purchase price of a foreign entity are
recorded in the relevant foreign currency and are translated using the year-end exchange rate.
Under IFRS 10, changes in a parent's ownership interest in a subsidiary that do not result in a loss of control are
accounted for as equity transactions. In such circumstances, the carrying amounts of controlling and non-
controlling interests shall be adjusted to reflect the changes in their relative interests in the subsidiary. Any
difference between the amount by which the non-controlling interest is adjusted and the fair value of the
consideration paid or received shall be recognized directly in equity and attributed to the Owners of the Parent.
Under IFRS 10, the parent company in case of loss of control of a subsidiary:
■ derecognizes:
•
•
the assets (including any goodwill) and the liabilities;
the carrying amount of any non-controlling interest;
■
recognizes:
•
•
•
•
the fair value of any consideration received;
the fair value of any residual investment retained in the former subsidiary;
any gain or loss resulting from the transaction, in the separate consolidated income statement;
the reclassification to the separate consolidated income statement of the amounts previously
recognized in other comprehensive income in relation to the subsidiary.
In the consolidated financial statements, investments in associates and joint ventures are accounted for using
the equity method, as provided, respectively, by IAS 28 (Investments in Associates and Joint Ventures) and IFRS
11 (Joint Arrangements).
Associates are enterprises in which the Group holds at least 20% of the voting rights or exercises significant
influence, but no control or joint control over their financial and operating policies.
A joint venture is a joint control arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the entity.
Joint control is the contractually agreed sharing of control of a business that exists only when decisions about
the relevant business require the unanimous consent of the parties sharing control.
Associates and joint ventures are included in the consolidated financial statements from the date on which
significant influence or joint control commences until the date on which significant influence or joint control
ceases.
Under the equity method, on initial recognition the investment in an associate or joint venture is recognized at
cost, and the carrying amount is increased or decreased to recognize the investor's share of the profit or loss of
the investee after the date of acquisition. The investor's share of the investee's profit or loss is recognized in the
separate consolidated income statement. Dividends received from an investee reduce the carrying amount of
the investment.
Adjustments to the carrying amount may also be necessary for changes in the investee's other comprehensive
income (i.e. those arising from foreign exchange translation differences). The investor's share of those changes
is recognized in the investor's other comprehensive income.
If an investor's share of losses of an associate or a joint venture equals or exceeds its interest in the associate or
joint venture, the investor discontinues recognizing its share of further losses. After the investor's interest is
reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the investor
has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If
the associate or joint venture subsequently reports profits, the investor resumes recognizing its share of those
profits only after its share of the profits equals the share of losses not recognized.
Any other long-term interests (some types of preference shares and long-term loans) in an associate or joint
venture are measured in accordance with IFRS 9.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
145
Gains and losses resulting from "upstream" and "downstream" transactions between an investor (including its
consolidated subsidiaries) and its associate or joint venture are recognized in the investor's financial statements
only to the extent of unrelated investors' interests in the associate or joint venture.
The investor's share of profits and losses of the associate or joint venture arising from said transactions is
eliminated.
Intangible assets
Goodwill
In accordance with IFRS 3 (Business Combinations), goodwill is recognized in the financial statements at the date
of acquisition of control of a business and is determined as the excess of (a) over (b), as follows:
a) the aggregate of:
▪
▪
▪
the consideration transferred (measured in accordance with IFRS 3; it is generally recognized on the basis
of the fair value at the acquisition date);
the amount of any non-controlling interest in the acquiree measured proportionally to the non-
controlling interest share of the acquiree's identifiable net assets shown at the related fair value;
in a business combination achieved in stages, the acquisition date fair value of the acquirer's previously
held equity interest in the acquiree;
b) the fair value of the identifiable assets acquired net of the identifiable liabilities assumed, measured at the
date of acquisition of control.
IFRS 3 requires, inter alia, the following:
▪
▪
incidental costs incurred in connection with a business combination to be charged to the separate
income statement;
in a business combination achieved in stages, the acquirer to remeasure its previously held equity interest
in the acquiree at its fair value at the date of acquisition of control and recognize the resulting gain or
loss, if any, in the separate income statement.
Goodwill is classified in the statement of financial position as an intangible asset with an indefinite useful life.
Goodwill initially recognized is subsequently reduced only by cumulative impairment losses (for more details, see
the section "Impairment of intangible assets, tangible assets and rights of use assets - Goodwill", below). In case
of loss of control of a subsidiary, the relative amount of goodwill is taken into account in calculating the gain or
loss on disposal.
Development costs
Costs incurred internally for the development of new products and services represent either intangible assets
(mainly costs for software development) or tangible assets. These costs are capitalized only when all the
following conditions are satisfied: i) the cost attributable to the development phase of the asset can be measured
reliably, ii) there is the intention, the availability of financial resources and the technical ability to complete the
asset and make it available for use or sale, and iii) it can be demonstrated that the asset will be able to generate
future economic benefits. Capitalized development costs comprise only incurred expenditures that can be
attributed directly to the development process for new products and services.
Capitalized development costs are amortized systematically over the estimated product or service life, so that
the amortization method reflects the way in which the asset's future economic benefits are expected to be
consumed by the entity.
Other intangible assets with a finite useful life
Other purchased or internally-generated intangible assets with a finite useful life are recognized as assets, in
accordance with IAS 38 (Intangible Assets), when the use of the asset is likely to generate future economic
benefits and when the cost of the asset can be reliably measured.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
146
Such assets are recorded at purchase or production cost and amortized on a straight-line basis over their
estimated useful lives; the amortization rates are reviewed annually and revised if the current estimated useful
life is different from that estimated previously. The effect of such changes is recognized prospectively in the
separate consolidated income statement.
Tangible assets
Property, plant and equipment
Property, plant and equipment are recognized at purchase or production cost. Subsequent expenditures are
capitalized only if they increase the future economic benefits embodied in the related item of property, plant and
equipment. All other expenditures are expensed as incurred.
The cost of these assets also includes the expected costs of dismantling the asset and restoring the site, if a
legal or constructive obligation exists. The corresponding liability is recognized at its present value in a provision
for risks and charges in the liabilities. The recognition in the separate consolidated income statement of the
capitalized expenditure is done over the useful life of the related tangible assets through their depreciation.
The calculation of estimates for dismantling costs, discount rates and the dates in which such costs are expected
to be incurred is reviewed annually at each financial year-end. Changes in the above liability must be recognized
as an increase or decrease of the cost of the relative asset; the amount deducted from the cost of the asset must
not exceed its carrying amount. The excess, if any, is recorded immediately in the separate consolidated income
statement, conventionally under the line item "Depreciation".
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets.
Depreciation rates are reviewed annually and revised if the current estimated useful life is different from that
estimated previously. The effect of such changes is recognized prospectively in the separate consolidated income
statement.
Land, including land pertaining to buildings, is not depreciated.
Rights of use assets
In accordance with IFRS 16, lease liabilities are presented through the recognition of a financial liability in the
statement of financial position consisting in the present value of future lease payments, against the recognition
of the right of use of the leased asset.
On the commencement date of the lease, the right of use is recognized at cost including: the amount of the
initial measurement of the lease liability, any lease payments made at or before the commencement date, initial
direct costs incurred for the signature of the lease and the present value of the estimated restoration and
dismantling costs set out in the lease, less any incentives.
Subsequently, the right of use is amortized over the term of the lease (or the useful life of the asset, if lower),
subject to impairment and adjusted for any remeasurement of the lease liability.
Capitalized borrowing costs
Under IAS 23 (Borrowing Costs), the Group capitalizes borrowing costs only if they are directly attributable to the
acquisition, construction or production of an asset that takes a substantial period of time (conventionally more
than 12 months) to get ready for its intended use or sale.
Capitalized borrowing costs are recorded in the separate consolidated income statement and deducted directly
from the "finance expense" line item to which they relate.
Impairment of intangible, tangible and rights of use assets
Goodwill
Goodwill is tested for impairment at least annually or more frequently whenever events or changes in
circumstances indicate that goodwill may be impaired, as set forth in IAS 36 (Impairment of Assets); however,
when the conditions that gave rise to an impairment loss no longer exist, the original amount of goodwill is not
reinstated.
The test is generally conducted at the end of every year, so the date of testing is the year-end closing date of
the financial statements. Goodwill acquired and allocated during the year is tested for impairment at the end of
the year in which the acquisition and allocation took place.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
147
For the purpose of verifying its recoverability, goodwill is allocated, from the acquisition date, to each of the cash-
generating units, or groups of cash-generating units, that is expected to benefit from the combination.
If the carrying amount of the cash-generating unit (or group of cash-generating units) exceeds the recoverable
amount, an impairment loss is recognized in the separate consolidated income statement. The impairment loss
is first recognized as a deduction of the carrying amount of goodwill allocated to the cash-generating unit (or
group of cash-generating units) and only subsequently applied to the other assets of the cash-generating unit
in proportion to their carrying amount, up to the recoverable amount of the assets with a finite useful life. The
recoverable amount of a cash-generating unit (or group of cash-generating units) to which goodwill is allocated
is the higher between the fair value less costs to sell and its value in use.
In calculating the value in use, the estimated future cash flows are discounted to present value using a discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. The
future cash flows are those arising from an explicit time horizon between three and five years, as well as those
extrapolated to estimate the terminal value. The long-term growth rate used to estimate the terminal value of
the cash-generating unit (or group of cash-generating units) is assumed not to be higher than the average long-
term growth rate of the segment, country or market in which the cash-generating unit (or group of cash-
generating units) operates.
The value in use of cash-generating units denominated in foreign currency is estimated in the local currency by
discounting cash flows to present value on the basis of an appropriate rate for that currency. The present value
obtained is translated to euro at the spot rate on the date of the impairment test (in the case of the TIM Group,
the closing date of the financial statements).
Future cash flows are estimated by referring to the current operating conditions of the cash-generating unit (or
group of cash-generating units) and, therefore, do not include either benefits originating from future
restructuring for which the entity is not yet committed, or future investments for the improvement or
optimization of the cash-generating unit.
For the purpose of calculating impairment, the carrying amount of the cash-generating unit is established based
on the same criteria used to determine the recoverable amount of the cash-generating unit, excluding surplus
assets (that is, financial assets, deferred tax assets and net non-current assets held for sale) and includes the
goodwill attributable to non-controlling interest (minority shareholders).
After conducting the goodwill impairment test for the cash-generating unit (or groups of cash-generating units),
a second level of impairment testing is carried out which includes the corporate assets which do not generate
positive cash flows and which cannot be allocated by a reasonable and consistent criterion to the single units.
At this second level, the total recoverable amount of all cash-generating units (or groups of cash-generating
units) is compared to the carrying amount of all cash-generating units (or groups of cash-generating units),
including also those cash-generating units to which no goodwill was allocated, and the corporate assets.
Tangible and intangible assets with finite useful lives and rights of use
assets
At the end of each reporting period, the Group assesses whether there is any indication that an asset – whether
intangible or tangible with finite useful lives or a right-of-use – may be impaired. Both internal and external
sources of information are used for this purpose. Internal sources include obsolescence or physical deterioration,
and significant changes in the use of the asset and the economic performance of the asset compared to
estimated performance. External sources include the market value of the asset, any changes in technology,
markets or laws, trends in market interest rates and the cost of capital used to evaluate investments, and an
excess of the carrying amount of the net assets of the Group over market capitalization.
If there is any indication that an asset – whether tangible or intangible with finite useful lives or a right of use –
has been impaired, then its carrying amount is reduced to its recoverable amount. The recoverable amount is
the higher of an asset's fair value less costs to sell, and its value in use. In calculating the value in use, the
estimated future cash flows are discounted to present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or right. If it is not possible to estimate
the recoverable amount, the Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs. Impairment losses are recognized in the separate consolidated income statement.
When the reasons for the impairment subsequently cease to exist, the carrying value of the asset/right-of-use
or of the cash generating unit is increased up to the new estimate of the recoverable amount which, however,
cannot exceed the amount that would have been determined had no impairment loss been recognized. The
reversal of an impairment loss is recognized as income in the separate consolidated income statement.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
148
Financial instruments
Business models for financial assets management
For the management of trade receivables, TIM Group Management has identified different business models
based on the specific nature of the receivables, the type of counterparty and collection times, this was in order
to optimize the management of working capital through the constant monitoring of the payment performance
of customers, the steering of credit collection policies, and the management of programs for the disposal of
receivables, and the activation of factoring consistent with financial planning requirements.
The business models adopted are:
■ Hold to Collect: receivables usually held to maturity, such as trade receivables due from large customers and
the OLOs for the Domestic Business Unit, and all receivables for the Brazil Business Unit; these instruments
fall within the IFRS 9 category “Assets measured at amortized cost”;
■ Hold to Collect and Sell: receivables usually traded massively and on a recurring basis, such as, for the
Domestic Business Unit, receivables due from active consumer, small and business customers held for sale;
these instruments fall under the IFRS 9 category "Financial assets measured at fair value through other
comprehensive income". As required by IFRS 9, the related reserve is reversed to the separate consolidated
income statement when disposed of or impaired.
As part of managing financial assets other than trade receivables, the TIM Group's Management identified its
business models on the basis of how the financial instruments are managed and how their cash flows are used.
This is done to ensure an adequate level of financial flexibility and to best manage, in terms of risks and returns,
the financial resources immediately available through the treasuries of Group companies and in accordance with
the strategies set forth by the Parent TIM.
The business models adopted are:
■ Hold to Collect: financial instruments used to absorb temporary cash surpluses; such instruments are low
risk and mostly held to maturity; they are measured at amortized cost;
■ Hold to Collect and Sell: monetary or debt instruments used to absorb short/medium-term cash surpluses;
such instruments are low risk and generally held to maturity, or otherwise sold to cover specific cash
requirements; they are measured at fair value through other consolidated comprehensive income;
■ Hold to Sell: monetary, debt and equity trading instruments used to dynamically manage cash surpluses not
managed under the business models identified above; such instruments are higher risk and traded
repeatedly over time; they are measured at fair value through the separate consolidated income statement.
Other investments
Other investments (other than those in subsidiaries, associates and joint ventures) are classified as non-current
or current assets if they will be kept in the Group's portfolio for a period of more or not more than 12 months,
respectively.
Other investments are classified as “financial assets measured at fair value through consolidated profit or loss”
(FVTPL), as current assets.
At the purchase time of each investment, IFRS 9 provides for the irrevocable option to recognize these
investments in "financial assets measured at fair value through other consolidated comprehensive income"
(FVTOCI) as non-current or current assets.
The other investments classified as “financial assets measured at fair value through other comprehensive
income” are measured at fair value; changes in the fair value of these investments are recognized in a special
equity reserve under the other components of the statements of comprehensive income (Reserve for financial
assets measured at fair value through other comprehensive income), without reclassification to the separate
income statement when the financial asset is disposed of or impaired. Dividends are recognized in the separate
consolidated income statement.
Changes in the value of other investments classified as "financial assets at fair value through profit or loss" are
recognized directly in the separate consolidated income statement.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
149
Securities other than investments
Securities other than investments, included among non-current or current assets, depending on the business
model adopted and the contractual flows envisaged, fall among financial assets measured at amortized cost,
or measured at fair value through other comprehensive income or at fair value though profit or loss.
Securities other than investments classified as current assets are those that, by decision of the directors, are
intended to be kept in the Group's portfolio for a period of not more than 12 months, and are classified:
■ as "financial assets measured at amortized cost" (AC) when held to maturity (originally more than 3 months
but less than 12 months, or, although they had an original maturity of more than 12 months, they have been
bought in a period during which maturity was included between 3 and 12 months);
■ as "financial assets measured at fair value through other consolidated comprehensive income" (FVTOCI)
when held in the scope of a business model whose objective is to sell the financial asset and/or collect the
contractual cash flows. The consolidated "Reserve for financial assets measured at fair value through other
comprehensive income" is reversed to the separate consolidated income statement when the financial asset
is disposed of or impaired;
■ as “financial assets measured at fair value through consolidated profit or loss" (FVTPL) in the other cases.
Cash and cash equivalents
Cash and cash equivalents are recorded, according to their nature, at nominal value or amortized cost.
Cash equivalents are short-term and highly liquid investments that are readily convertible to known amounts of
cash, subject to an insignificant risk of change in value and their original maturity or the remaining maturity at
the date of purchase does not exceed 3 months.
Impairment losses on financial assets
At every closing date, assessments are made as to whether there is any objective evidence that a financial asset
or a group of financial assets has been impaired.
The impairment losses on financial assets is based on the expected credit loss model.
In particular:
■
■
impairment on trade receivables and on contract assets is carried out using the simplified approach that
involves estimating the loss expected over the life of the receivable at the time of initial recognition and on
subsequent measurements. For each customer segment, the estimate is principally made by calculating
the average expected uncollectibility, based on historical and statistical indicators, possibly adjusted using
forward-looking elements. For some categories of receivables characterized by specific risk elements,
specific measurements are made on individual credit positions;
the impairment of financial assets other than trade receivables is calculated on the basis of a general
model which estimates expected credit losses over the following 12 months or over the residual life of the
asset in the event of a substantial worsening of its credit risk.
Derivative financial instruments
As allowed by IFRS 9, the TIM Group decided to continue to apply the hedge accounting provisions contained in
IAS 39 instead of those of IFRS 9.
Derivatives are used by the TIM Group to manage its exposure to exchange rate and interest rate risks and to
diversify the parameters of debt, so that costs and volatility can be reduced within pre-established operational
limits.
In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when:
■ at the inception of the hedge, the hedging relationship is formally designated and documented;
■
■
■
the hedge is expected to be highly effective;
its effectiveness can be reliably measured;
the hedge is highly effective throughout the financial reporting periods for which it is designated.
All derivative financial instruments are measured at fair value in accordance with IAS 39.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
150
When derivative financial instruments qualify for hedge accounting, the following accounting treatment applies:
■ Fair value hedge – Where a derivative financial instrument is designated as a hedge of the exposure to
changes in fair value of an asset or liability due to a particular risk, the gain or loss from re-measuring the
hedging instrument at fair value is recognized in the separate consolidated income statement. The gain or
loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and
is recognized in the separate consolidated income statement.
■ Cash flow hedge – Where a derivative financial instrument is designated as a hedge of the exposure to
variability in cash flows of an asset or liability or a highly probable expected transaction, the effective portion
of any gain or loss arising from the fair value adjustment of the derivative financial instrument is recognized
directly in a specific equity reserve (Reserve for fair value adjustment of hedging derivative instruments). The
cumulative gain or loss is removed from equity and recognized in the separate consolidated income
statement during the same business years in which the hedged transaction is recognized in the separate
consolidated income statement. The gain or loss associated with the ineffective portion of a hedge is
recognized in the separate consolidated income statement immediately. If the hedged transaction is no
longer considered to be probable, the gains or losses not yet realized included in the equity reserve are
immediately recognized in the separate consolidated income statement.
For derivatives for which a hedging relationship has not been designated, changes in value compared to initial
recognition are recognized directly in the separate consolidated income statement.
Financial liabilities
Financial liabilities include financial payables, including payables for advances on assignments of receivables
where the assignment does not transfer substantially all the risks and rewards, as well as other financial
liabilities, including derivative financial instruments and liabilities in respect of assets recognized under finance
leases recognized in accordance with IFRS 16.
In accordance with IFRS 9, they also include trade and other payables.
Reverse factoring transactions are also classified under trade payables. The TIM Group has reverse factoring
agreements in place, through which TIM gives its bank partners a mandate to pay its suppliers as invoices
become due. Suppliers participating in these programs have the rights to sell (without any cost for the TIM Group)
receivables due from the Group. They can exercise this right at their total discretion and incurring all the costs to
benefit from collection before the contractual due date.
Financial liabilities other than derivatives are initially recognized at fair value and subsequently measured at
amortized cost.
Financial liabilities hedged by derivative instruments designed to manage exposure to changes in the value of
liabilities (fair value hedge derivatives) are measured at fair value in accordance with the hedge accounting
principles of IAS 39: the gains and losses deriving from subsequent fair value adjustments, only as regards the
covered component, are recognized in the separate consolidated income statement and counterbalanced by
the effective portion of the gain or loss deriving from the corresponding fair value measurements of the hedge
instrument.
Financial liabilities hedged by derivative instruments designed to manage exposure to variability in cash flows
(cash flow hedge derivatives) are measured at amortized cost in accordance with the hedge accounting
principles of IAS 39.
Transfer of receivables
The TIM Group transfers receivables through factoring agreements. These transfers, in the majority of cases, are
characterized by the transfer of substantially all the risks and rewards of ownership of the receivables to third
parties, therefore meeting the requirements of IFRS 9 for derecognition. Special service agreements, under which
the purchasers grant TIM S.p.A. a mandate to oversee the collection and management of receivables, have been
entered into to maintain the relationship between the Company and its customers.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
151
Inventories
Inventories are measured at the lower of purchase or production cost and estimated realizable value; the cost is
determined using the weighted average cost formula for each movement, while the estimated realizable value
is determined by observing general prices at the end of the year. Provision is made for obsolete and slow-moving
inventories based on their expected future use and estimated realizable value.
Non-current assets held for sale/Discontinued operations
Non-current assets held for sale or discontinued groups whose carrying amount will mainly be recovered through
sale, rather than through ongoing use, are classified as held for sale and shown separately from other assets
and liabilities in the consolidated statements of financial position. The corresponding amounts for the previous
year are not reclassified in the consolidated statements of financial position, but are instead shown separately
in a specific column for changes in assets and liabilities in the year in which non-current assets held for sale or
discontinued groups are classified as such.
Discontinued operations are a component of an entity that has been terminated or classified as held for sale
and that:
■
■
■
represents a major business line or geographical area of operation; or
is part of a single coordinated plan to discontinue a separate major line of business or geographical area of
operation; or
is a subsidiary acquired exclusively with a view to resale.
The results arising from Discontinued Operations – whether discontinued or classified as held for sale – are
shown separately in the separate consolidated income statement, net of tax effects. The corresponding values
for the previous periods, where present, are reclassified and reported separately in the separate consolidated
income statement, net of tax effects, for comparative purposes.
Non-current assets held for sale or discontinued groups classified as held for sale are first recognized in
compliance with the appropriate IFRS applicable to each specific asset and liability, and subsequently measured
at the lower of the carrying amount and fair value, less cost to sell.
Any subsequent impairment losses are recognized as a direct adjustment to non-current assets (or discontinued
groups) classified as held for sale, with a contra-entry in the separate consolidated income statement.
An upward revision of value is, instead, recognized for each subsequent increase in the fair value of an asset less
cost to sell, but not in excess of the previously recognized cumulative impairment loss.
As required by IFRS 5 (Non-current assets held for sale and discontinued operations), an entity shall not depreciate
(or amortize) non-current assets classified as held for sale or being part of a discontinued group.
Finance expenses and other expenses attributable to the liabilities of a discontinued group classified as held for
sale must continue to be recognized.
Provisions for employee benefits
Provision for employee severance indemnity
Employee severance indemnity, mandatory for Italian companies pursuant to Article 2120 of the Italian Civil
Code, is deferred compensation based on the employee's years of service and on the compensation earned by
the employee during the service period.
Under IAS 19 (Employee Benefits), the employee severance indemnity, so calculated, is considered a "Defined
benefit plan" and the related liability to be recognized in the statement of financial position (Provision for
employee severance indemnities) is determined by actuarial calculations.
The recognition of changes in actuarial gains/losses or re-measurement is recognized in other components of
the Consolidated Statements of Comprehensive income. Service cost of Italian companies that employ less than
50 employees, as well as interest expenses related to the "time value" component of actuarial calculations (the
latter classified as Finance expenses), are recognized in the separate consolidated income statement.
Starting from January 1, 2007, the Italian Law gave employees the choice to either allocate their accruing
indemnity to supplementary pension funds or it as an obligation of the Company. Companies that employ at
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
152
least 50 employees must transfer the employee severance indemnity to the "Treasury fund" managed by INPS,
the Italian Social Security Institute. Consequently, the Group's obligation to INPS and the contributions to
supplementary pension funds take the form, under IAS 19, of "Defined contribution plans".
Equity compensation plans
The companies of the Group provide additional benefits to certain managers of the Group through equity
compensation plans (for example stock options and long-term incentive plans). The above plans are recognized
in accordance with IFRS 2 (Share-Based Payment).
As specified in IFRS 2, such plans represent a component of the beneficiaries' compensation. Therefore, for plans
providing for compensation in equity instruments, the cost is the fair value of such instruments at the grant date
and is recognized in the separate consolidated income statement in the "Employee benefits expenses" over the
period between the grant date and the vesting date with a contra-entry to an equity reserve denominated "Other
equity instruments". Changes in the fair value subsequent to the grant date do not affect the initial
measurement. At the end of each year, adjustments are made to the estimate of the number of rights that will
vest up to expiry. The impact of the change in estimate is recorded as an adjustment to "Other equity
instruments" with a contra-entry to "Employee benefits expenses".
The portion of the plans that specifies the payment of compensation in cash is recognized in liabilities as a
contra-entry to "Employee benefits expenses"; at the end of each year said liability is measured at fair value.
Provisions
The Group records provisions for risks and charges when, having a present legal or constructive obligation to a
third party, as a result of a past event, an outflow of Group resources is likely to be required to meet that
obligation, and when the amount of the obligation can be estimated reliably.
When the effect of the time value is material and the payment date of the obligations can be reasonably
estimated, the provision is determined by discounting the given expected cash flows by taking into account the
risks associated with the obligation. The increase in the provision due to the passage of time is recognized in the
separate consolidated income statement as "Finance expenses".
Government grants
Government grants are recognized when there is a reasonable certainty that they will be received and that the
Group will satisfy all the conditions established for their granting by the government, government agencies and
equivalent local, national or international entities.
Government grants are systematically recognized in the separate income statement over the periods in which
the Group recognizes the expenses that the grants are intended to offset as costs.
Government grants related to assets received for the acquisition and/or construction of non-current tangible
assets are recorded as deferred income in the statement of financial position and systematically credited to the
separate income statement over the useful life of the systems the grants relate to.
Treasury shares
Treasury shares are recognized as a deduction from equity. In particular, treasury shares are accounted for as a
deduction from the share capital issued in the amount corresponding to the “accounting par value", that is the
ratio of total share capital and the number of issued shares, while the excess cost of acquisition over the
accounting par value is presented as a deduction from "Other reserves and retained earnings (accumulated
losses), including profit (loss) for the year".
Foreign currency transactions
Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign
exchange rate prevailing at the statement of financial position date. Exchange differences arising from the
settlement of monetary items or from their conversion at rates different from those at which they were initially
recorded during the year or at the end of the prior year are recognized in the separate consolidated income
statement.
Revenues
Revenues are the gross inflows of economic benefits of the period arising from the conduction of the company's
ordinary business. Amounts collected on behalf of third parties, such as sales taxes, goods and services taxes
and value added taxes, are not economic benefits which flow to the entity and do not result in increases in
equity. Therefore, they are excluded from revenues.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
153
The process underlying the recognition of revenues follows the steps set out in IFRS 15:
■
identification of the contract: this takes place when the parties approve the contract (with commercial
substance) and identify the respective rights and obligations: in other terms, the contract must be legally
binding, the rights to receive goods and/or services and the terms of payment can be clearly identified, and
the Group considers receipt of payment as probable;
■
identification of the performance obligations: the main performance obligations identified, i.e. promises to
transfer goods and services that are distinct, are services rendered (including voice and data traffic and ICT
solutions) to retail customers, services rendered to wholesale customers, and sale of products;
■ determination of the transaction price: this is the total amount contracted with the other party regarding
the entire contractual term; the Group has determined that the contractual term is the one arising from the
contractual obligations between the parties or, in lack of these obligations, it is by convention one month;
■ allocation of the transaction price to the performance obligations: the allocation is made proportionately
to the respective stand-alone selling prices calculated based on the list prices (if present) or estimated by
applying an appropriate margin to the cost of purchase/production of the good/service.
Revenues from activating the connectivity service are not a performance obligation; they are therefore
allocated to the contractual performance obligations (typically to services).
For offerings which include the sale of devices and service contracts (bundle offerings), the Group allocates
the contractual transaction price to the performance obligations of the contract, proportionately to the stand
alone selling prices of the single performance obligations;
■
recognition of revenues: revenues are stated net of discounts, allowances, and returns in connection with
the characteristics of the type of revenue:
▪ Revenues from services rendered
Revenues from services rendered are recognized in the separate income statements according to the
stage of completion of the service, that is based on actual consumption.
Traffic revenues from interconnection and roaming are reported gross of the amounts due to other TLC
operators.
Revenues for delivering information or other content are recognized on the basis of the amount invoiced
to the customer, when the service is rendered directly by the Group. In the event that the Group is acting
as agent (for example, for non-geographic numbers) only the commission received from the content
provider is recognized as revenue.
Revenues from prepaid traffic are recorded on the basis of effective consumption. Deferred revenues for
traffic already collected but not yet consumed are recorded in “Trade and miscellaneous payables and
other current liabilities” in the consolidated statements of financial position.
Revenues for services rendered are generally invoiced and collected bimonthly/monthly for retail
customers, or invoiced monthly and collected in 40-60 days for wholesale customers.
▪ Revenues from sales
Revenues from sales (telephone products and others) are recognized upon delivery when control of the
assets is transferred to the customers.
The devices sold separately from the services are invoiced at the time of delivery; collection takes place
on demand or based on installment plans (up to 48 monthly installments). The devices sold as part of
bundle offerings are invoiced at the time of delivery and usually collected in 24 monthly installments.
The recognition of revenues can generate the recognition of an asset or liability deriving from contracts. In
particular:
▪ Contract assets are the right to a consideration in exchange for goods or services that have been
transferred to the customer, when the right is conditioned on something other than the passage of time.
▪ Contract liabilities are the obligation to transfer goods or services to the customer for which the Group
has received (or for which it is due) a consideration from the customer.
Contract costs (incremental costs of obtaining a contract and costs to fulfill a contract; mainly technical
activation costs and costs for sales network commissions) are deferred and recognized through separate
consolidated profit or loss depending on the expected term of the contractual relationship with the customers.
The TIM Group avails of the practical expedient, permitted under IFRS 15, of recognizing the incremental costs of
obtaining a contract in the consolidated income statement if the amortization period is one year or less.
The recoverability of contract assets and deferred costs is periodically assessed.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
154
Research and advertising costs
Research and advertising costs are directly expensed to the separate consolidated income statement in the year
in which they are incurred.
Financial income and expenses
Finance income and expenses are recognized on an accrual basis and include: interest accrued on the related
financial assets and liabilities using the effective interest rate method; changes in the fair value of derivatives
and other financial instruments measured at fair value through the income statement; gains and losses on
foreign exchange and financial instruments (including derivatives).
Dividends
Dividends received from companies other than subsidiaries, associates and joint ventures are recognized in the
separate consolidated income statement on an accrual basis, i.e. in the year in which they become receivable
following the resolution by the shareholders' meeting for the distribution of dividends of the investee companies.
Dividends payable to third parties are reported as a change in equity in the year in which they are approved by
the shareholders' meeting.
Income tax expense (current and deferred)
Income tax expense include all taxes calculated on the basis of the taxable income of the companies of the
Group.
Current and deferred income tax expense is calculated using all the elements and information available at the
reporting date, taking into account current laws and considering all the elements that could give rise to
uncertainties in the determination of the amounts due to the tax authorities, as provided for in IFRIC 23.
Income taxes are recognized in the separate consolidated income statement, except to the extent that they
relate to items directly charged or credited to equity, in which case the related tax effect is recognized in the
relevant equity reserves. The amount of the income tax expense relating to each item included as "Other
components of the Consolidated Statements of Comprehensive income" is indicated in the Statement of
comprehensive income.
The provisions for taxes that could arise from the remittance of the undistributed earnings of subsidiaries are
made only where there is the actual intention to remit such earnings.
Deferred tax liabilities / assets are recognized using the "Balance sheet liability method". They are calculated on
all the temporary differences that arise between the taxable base of assets and liabilities and the related carrying
amounts in the consolidated financial statements, except for those differences related to investments in
subsidiaries, which will not reverse in the foreseeable future. Deferred tax assets relating to losses carried forward
are recognized to the extent that a future taxable income will be probably available against which they can be
recovered. Tax assets and liabilities are offset, separately for current and deferred taxes, when income taxes are
levied by the same tax authority and when there is a legally enforceable offsetting right. Deferred tax assets and
liabilities are determined by adopting the tax rates expected to be applicable in the respective jurisdictions of the
countries in which the Group companies operate, in the years in which those temporary differences are expected
to be recovered or settled.
The other taxes, other than income taxes, are included in "Other operating expenses".
Earnings per share
Basic earnings per ordinary share is calculated by dividing the Group's profit attributable to ordinary shares by
the weighted average number of ordinary shares outstanding during the year, and excluding treasury shares.
Similarly, basic earnings per savings share is calculated by dividing the Group's profit attributable to savings
shares by the weighted average number of savings shares outstanding during the year.
For diluted earnings per ordinary share, the weighted average number of shares outstanding during the year is
adjusted by assuming the subscription of all the potential deriving shares - for example, by exercising rights on
shares with dilutive effects. The Group profit is also adjusted to reflect the impact of these transactions net of
the related tax effects.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
155
Use of estimates
The preparation of consolidated financial statements and related disclosure in conformity with IFRS requires
management to make estimates and assumptions based also on subjective judgments, past experience and
assumptions considered reasonable and realistic in relation to the information known at the time of the
estimate. Such estimates have an effect on the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, as well as on the amount of revenues
and costs during the year. Actual results could differ, even significantly, from those estimates owing to possible
changes in the factors considered in the determination of such estimates. Estimates are reviewed periodically.
The most significant accounting estimates that involve a high level of subjective assumptions and judgments by
directors are set out below.
Financial statements area
Accounting estimates
Goodwill impairment
Impairment of tangible and intangible
assets with finite useful lives and right-
of-use assets
Business combinations
The impairment test on goodwill is carried out by comparing the carrying amount of
cash-generating units and their recoverable amount. The recoverable amount of a
cash-generating unit is the higher of fair value, less costs to sell, and its value in use.
This complex valuation process entails the use of methods such as the discounted
cash flow method, which uses assumptions to estimate cash flows. The recoverable
amount depends significantly on the discount rate used in the discounted cash flow
model, as well as the expected future cash flows and the growth rate used for the
extrapolation. The key assumptions used to determine the recoverable amount for
the different cash-generating units, including a sensitivity analysis, are detailed in the
Note "Goodwill".
At the end of each reporting period, the Group assesses whether there is any
indication that an asset – whether tangible or intangible with finite useful lives or a
right-of-use – has been impaired. Both internal and external sources of information
are used for this purpose.
Identifying the impairment indicators, estimating future cash flows and calculating
the fair value of each asset requires the Management to make significant estimates
and assumptions in calculating the discount rate to be used, and the useful life and
residual value of the assets. These estimates can have a significant impact on the fair
value of the assets and on the amount of any impairment write-down.
The recognition of business combinations requires that assets and liabilities of the
acquiree be recorded at their fair value at the control acquisition date, as well as the
possible recognition of goodwill. These values are determined through a complex
estimation process.
Provision for bad debts
Depreciation and amortization
Capitalization/deferment of costs
Lease liabilities and rights of use assets The value of lease liabilities and corresponding rights of use is determined by
calculating the present value of the lease payments, also bearing in mind whether the
renewal of the lease is reasonably certain.
The capitalization/deferment of internal and external costs is a process that entails
elements of estimation and valuation. Specifically, it involves the valuation of: i) the
likelihood that capitalized costs will be recovered through correlated future revenues;
and ii) the effective increase in the future economic benefits embodied in the related
asset.
Impairment on trade receivables and on contract assets is carried out using the
simplified approach that involves estimating the loss expected over the life of the
receivable at the time of initial recognition and on subsequent measurements. For
each customer segment, the estimate is principally made by calculating the average
expected uncollectibility, based on historical and statistical indicators, possibly
adjusted using forward-looking elements. For some categories of receivables
characterized by specific risk elements, specific measurements are made on individual
credit positions.
Changes in the economic conditions of the markets, technology and competitive
forces could significantly affect the estimated useful lives of tangible and intangible
non-current assets and may lead to a difference in the timing, and thus on the
amount of depreciation and amortization expense.
As regards the provisions for restoration costs, the estimate of future costs to
dismantle tangible assets and restore the site is a complex process that requires the
valuation of the liabilities arising from such dismantling and restoration obligations,
which seldom are entirely defined by laws, administrative regulations or contract
clauses, and which normally are to be complied with after an interval of several years.
The accruals related to legal, arbitration and fiscal disputes, as well as regulatory
proceedings, are the result of a complex estimation process based upon the
probability of an unfavorable outcome. Provisions for employee benefits, especially
the provision for employee severance indemnities, are calculated using actuarial
assumptions; changes in such assumptions could have a material impact on such
liabilities.
Accruals, contingent liabilities and
employee benefits
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
156
Revenues
Contract costs (IFRS 15)
tax expense
Income
deferred)
(current and
Derivative instruments and equity
instruments
The recognition of revenues is influenced by estimates of the amount of discounts,
rebates and returns to be reported as a direct adjustment to revenues, as well as the
methods for defining individual product or service stand-alone selling prices and for
determining the duration of the contract when there are renewal options.
The recognition of the costs of obtaining and fulfilling contracts is influenced by the
estimated expected duration of the relationship with the customer, calculated on the
basis of the historical turnover indexes and future estimates. However, this estimate
is subject to fluctuations and could only represent customers' future behavior in a
limited way, especially if there are new commercial offers or changes in the
competitive environment.
Income taxes (current and deferred) are calculated in each country in which the Group
operates according to a prudent interpretation of the applicable tax laws. This process
sometimes involves complex estimates to determine taxable income and deductible
and taxable temporary differences between the carrying amounts and the taxable
amounts. In particular, deferred tax assets are recognized to the extent that future
taxable income will be available against which they can be recovered. The
measurement of the recoverability of deferred tax assets, recognized based on both
unused tax loss carry-forwards to future years and deductible temporary differences,
takes into account the estimate of future taxable income and is based on conservative
tax planning.
The fair value of derivative instruments and equity instruments is determined both
using valuation models which also take into account subjective measurements such
as, for example, cash flow estimates, expected volatility of prices, etc., and on the
basis of prices existing in regulated markets or quotations provided by financial
counterparts. For further details, please also see the Note "Supplementary disclosures
on financial instruments".
As per IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) paragraph 10, in the absence of
a standard or interpretation that specifically applies to a transaction, the Management shall use its judgment in
developing and applying an accounting policy that results in consolidated financial statements that represent
faithfully the financial position, financial performance and cash flows of the Group, reflect the economic
substance of transactions, and are neutral, prudential and complete in all material aspects.
New standards and interpretations endorsed by the EU and in
force from January 1, 2020
As required by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), the following is a brief
description of the IFRS in force commencing as of January 1, 2020.
Amendments to IFRS 9 (Financial Instruments), IAS 39 (Financial Instruments: Recognition and
Measurement) and IFRS 7 (Financial Instruments: additional disclosure – Interest-rate benchmark reform
Commission Regulation (EU) 2020/34 was issued on January 15, 2020, implementing amendments to IFRS 9 –
Financial Instruments, IAS 39 – Financial Instruments: recognition and measurement and IFRS 7 – Financial
Instruments: additional disclosure.
The amendments refer to some specific hedge accounting requirements and provide facilitation in relation to
the potential effects of uncertainty caused by the IBOR reform.
Moreover, the amendments require companies to provide additional disclosure on investors concerning the
hedging relations directly affected by these uncertainties.
The adoption of these amendments had no effect on the consolidated financial statements at December 31,
2020.
Amendments to References to the Conceptual Framework in IFRS Standards
On November 29, 2019 was issued, implementing the Commission Regulation (EU) 2019/2075 revised version of
the Conceptual Framework for Financial Reporting, at EU level. The main changes with respect to the 2010
version concern:
■ a new chapter on measurement;
■ better definitions and guidance, particularly with regard to the definition of liabilities;
■ clarifications of important concepts, such as "stewardship", prudence and uncertainty in measurements.
A document was also published updating references in IFRS to the previous Conceptual Framework.
The adoption of these amendments had no effect on the consolidated financial statements at December 31,
2020.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
157
Amendments to IAS 1 and IAS 8 (Definition of Material)
On November 29, 2019, Commission Regulation (EU) 2019/2104 was issued, implementing some amendments
to IAS 1 (Presentation of Financial Statements) and IAS 8 (Accounting Policies, Changes in Accounting Estimates
and Errors).
These amendments clarify the definition of "material" and align the definition used in the “Conceptual
Framework” with that used in individual IFRS. The definition of "material", as revised by the amendments, is:
“Information is material if omitting, misstating or obscuring it could reasonably be expected to influence
decisions that the primary users of general-purpose financial statements make on the basis of those financial
statements, which provide financial information about a specific reporting entity.”
The adoption of these amendments had no effect on the consolidated financial statements at December 31,
2020.
Amendments to IFRS 3 (Business Combinations)
On April 21, 2020, Commission Regulation (EU) 2020/551 was issued, implementing some amendments to IFRS
3 (Business Combinations). These amendments concern the definition of "business" and help the entity
determine whether an acquisition is a "business" or a group of assets.
Based on the new definition, a business is: “An integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing goods or services to customers, generating investment
income (such as dividends or interest) or generating other income from ordinary activities. The amendments
also clarify that in order to be considered a business, an acquisition must include inputs and a substantial process,
that together contribute to the ability to generate outputs”.
The adoption of these amendments had no effect on the consolidated financial statements at December 31,
2020.
Amendments to IFRS 16 Leases for concessions related to COVID -19
On October 9, 2020, Regulation EU 2020/1434 was issued, endorsing various amendments to IFRS 16 to simplify
matters for lessees in the recognition of rent concessions due to COVID-19.
By way of practical expedient, a lessee can choose not to consider that a reduction in rental charges granted by
a lessor constitutes an amendment to the lease contract. This practical expedient only applies to reductions in
rents that are a direct consequence of COVID-19 and only if all the conditions envisaged by the amendment in
question are met.
A lessee applying this practical expedient must provide a disclosure.
These changes must be applied retrospectively for all years starting after June 1, 2020. Early application is
permitted.
The adoption of these amendments had no effect on the consolidated financial statements at December 31,
2020.
New Standards and Interpretations issued by IASB but not yet
applicable
At the date of preparation of these consolidated financial statements, the IASB had issued the following new
Standards and Interpretations which have not yet come into force and have not yet been endorsed by the EU:
New Standards / Interpretations adopted by UE but not yet applicable
Amendments to IFRS 4 Insurance contracts – Deferment of IFRS 9
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Reform of the interest rates benchmark -
Phase 2
New Standards and Interpretations not yet in force and not yet endorsed by the EU
Amendments to: IFRS 3 Business combinations; IAS 16 Property, Plant and equipment; IAS 37
Provisions, Contingent Liabilities and Contingent Assets; Annual cycle of improvements 2018-2020
Amendments to IAS 1 Presentation of Financial Statements: classification of liabilities as current or
non-current
Amendments to IAS 1 Presentation of Financial Statements: Information regarding accounting
standards
Amendments to IAS 8 Accounting Standards, changes in accounting estimates and Errors: Definition
of estimates
IFRS 17 (Insurance contracts), including amendments to IFRS 17
Mandatory
application starting
from
1/01/2021
1/01/2021
1/01/2022
1/01/2023
1/01/2023
1/01/2023
1/01/2023
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
158
The potential impacts on the Group consolidated financial statements from the application of these standards
and interpretations are currently being assessed.
With regard to the process of reforming benchmark interest rates, no particular impact on the hedges in Hedge
Accounting is expected in 2021.
More specifically, TIM has adhered to the 2020 IBOR Fallback Protocol published by the ISDA on October 23, which
defines the fallback mechanisms (compounded RFR in arrears plus a spread adjustment) following the
realization of a permanent cessation trigger or pre-cessation trigger; the switch must in any case not cause any
major changes in cash flow hedges to the fixed-rate underlyings in currency nor to the fair value hedges of
underlyings in euros (the process of replacing the Euribor would appear to be late in respect of that of the Libor).
The situation that requires the closest attention and analysis is that of the variable rate intercompany loans
hedged in Hedge Accounting on TIM S.p.A.; if, on the one hand, adhesion to the ISDA protocol assures the
adjustment of the derivative conditions, the possibility will be monitored to accordingly also adjust the
underlying items, so as to safeguard the effectiveness of the hedges.
Consolidated financial statements
of the TIM Group
Note 2
Accounting policies
159
NOTE 3
SCOPE OF CONSOLIDATION
Investments in consolidated subsidiaries
Composition of the Group
TIM holds a majority of the voting rights in all the subsidiaries included in the scope of consolidation.
A complete list of consolidated subsidiaries is provided in the Note "List of companies of the TIM Group".
Scope of consolidation
The changes in the scope of consolidation at December 31, 2020 compared to December 31, 2019 are listed
below.
Entry/exit/merger of subsidiaries into/out of the scope of consolidation:
Company
Entry:
Business Unit
Month
NOOVLE S.r.l.
GLOBAL SPACE TRE S.r.l.
NOOVLE AI S.r.l.
NOOVLE FRANCE Sasu
NOOVLE INTERNATIONAL SAGL
NOOVLE MALTA Ltd
NOOVLE SICILIA S.c.a.r.l.
NOOVLE SLOVAKIA S.r.o.
DAPHNE 3 S.p.A.
TIM MY BROKER S.r.l.
NOOVLE S.p.A.
FIBERCOP S.p.A.
FIBERCO SOLUÇÕES DE INFRAESTRUTURA LTDA
New acquisition
New acquisition
New acquisition
New acquisition
New acquisition
New acquisition
New acquisition
New acquisition
New establishment
New establishment
New establishment
New establishment
New establishment
Exit:
INFRASTRUTTURE WIRELESS ITALIANE S.p.A. (INWIT
S.p.A.)
TI SPARKLE BOLIVIA S.r.l.
Dilution
Liquidated
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Brazil
Domestic
Domestic
Mergers:
TIM PARTICIPAÇÕES S.A.
TN FIBER S.r.l.
TIMVISION S.r.l.
H.R. SERVICES S.r.l.
Merged into TIM S.A. Brazil
Merged into TIM
S.p.A.
Merged into TIM
S.p.A.
Merged into TIM
S.p.A.
Domestic
Domestic
Domestic
May 2020
May 2020
May 2020
May 2020
May 2020
May 2020
May 2020
May 2020
July 2020
August 2020
October 2020
November 2020
December 2020
March 2020
November 2020
September 2020
September 2020
October 2020
December 2020
With reference to INWIT S.p.A., on March 31, 2020, the merger through absorption of Vodafone Towers S.r.l. with
INWIT S.p.A. was completed. The transaction, which enabled the creation of Italy's leading tower operator,
Consolidated financial statements
of the TIM Group
Note 3
Scope of consolidation
160
diluted the TIM Group's stake in the capital of INWIT from 60% to 37.5%; therefore, as of March 31, 2020, INWIT
S.p.A. is accounted for using the equity method.
INWIT S.p.A. was presented as "Asset held for sale" from the Consolidated Financial Statements as at December
31, 2019 and until the completion of the aforementioned merger; therefore, TIM Group consolidated economic
data and cash flows for FY 2020 include economic data and cash flows of INWIT S.p.A. for the first quarter of
2020, net of amortization and depreciation for the period, as required by IFRS 5.
Also:
■ on April 23, 2020, through an accelerated book-building procedure reserved to institutional investors, TIM
S.p.A. transferred a share package of 4.3% of INWIT’s share capital;
■ on October 2, 2020, TIM and Ardian, world leading private investment firm operating in infrastructures,
completed the agreement announced on June 24, 2020 for a partial sharing of the investment in INWIT. The
operation entailed the purchase by a consortium of institutional investors led by Ardian of 49% of Daphne 3,
a newly-established holding company controlled by TIM, to which TIM contributed 30.2% of the shares of
INWIT. The holding company has taken over from TIM - for the portion of INWIT shares transferred - in the
shareholders' agreement stipulated between TIM and Vodafone, by virtue of which, they jointly control
INWIT;
the residual direct equity investment held by TIM S.p.A. in INWIT, equal to around 3% of the share capital, of
INWIT, has been sold to an SPV managed and assisted by Canson Capital Partners (Guernsey) Limited. More
specifically, on October 2, 2020, 1.2% was first sold and then on December 4, 2020, the remaining 1.8%.
■
For further details, see the note "Investments".
The breakdown by number of subsidiaries and associates of the TIM Group is as follows:
Companies:
subsidiaries consolidated line-by-line
joint ventures accounted for using the equity method
associates accounted for using the equity method
Total companies
Companies:
subsidiaries consolidated line-by-line
joint ventures accounted for using the equity method
associates accounted for using the equity method
Total companies
12.31.2020
Overseas
46
—
—
46
12.31.2019
Overseas
43
—
—
43
Italy
20
2
10
32
Italy
16
—
12
28
Total
66
2
10
78
Total
59
—
12
71
Further details are provided in the Note "List of companies of the TIM Group".
Consolidated financial statements
of the TIM Group
Note 3
Scope of consolidation
161
Subsidiaries with a significant non-controlling interest
At December 31, 2020, the TIM Group held investments in subsidiaries, with significant non-controlling interest,
in relation to the TIM Brasil group.
The figures provided below, stated before the netting and elimination of intragroup accounts, have been
prepared in accordance with IFRS and reflect adjustments made at the acquisition date to align the assets and
liabilities acquired to their fair value.
TIM Brasil group – Brazil Business Unit
Non-controlling interest accounted at December 31, 2020 for 33.4% of the capital of TIM S.A., coinciding with the
corresponding voting rights.
Financial Position Data Tim Brasil group
(million euros)
Non-current assets
Current assets
Total Assets
Non-current liabilities
Current liabilities
Total Liabilities
Equity
of which Non-Controlling Interests
Income statement Data TIM Brasil group
(million euros)
Revenues
Profit (loss) for the year
of which Non-Controlling Interests
12.31.2020
12.31.2019
5,246
1,662
6,908
1,558
1,339
2,897
4,011
1,232
2020
2,933
297
104
7,538
1,896
9,434
2,104
1,847
3,951
5,483
1,681
2019
3,937
799
272
Financial Data of the TIM Brasil group
The aggregate cash flows generated in 2020 was - 93 million euros, with a negative exchange rate effect of 151
million euros, without which cash flow would have generated a positive amount of 58 million euros.
In 2019, aggregate cash flows generated a positive amount of 262 million euros, essentially due to a negative
exchange rate effect of 12 million euros, without which cash flow would have generated a positive 274 million
euros.
Lastly, again with reference to the TIM Brasil group and in accordance with the amount shown in the Report on
Operations - “Main risks and uncertainties” section, the main risk factors that could lead, even significantly, to
restrictions on the operations of the TIM Brasil group are listed below:
■
Strategic risks (risks related to macroeconomic and political factors, as well as risks associated with foreign
exchange restrictions and competition);
■ Operational risks (risks related to business continuity and development of the fixed and mobile networks,
as well as risks associated with litigation and disputes);
■
■
Financial risks;
Regulatory and Compliance risks.
Consolidated financial statements
of the TIM Group
Note 3
Scope of consolidation
162
NOTE 4
BUSINESS COMBINATIONS
Acquisition of control on the Noovle Group
On May 21, 2020, TIM S.p.A. finalized the acquisition of 100% of the shares in Noovle S.r.l., an Italian ICT consulting
and system integration company, specialized in supplying cloud solutions and projects and one of Google Cloud's
leading partners on the Italian market.
With effect from this date, Noovle S.r.l. and its subsidiaries (Noovle group) have been consolidated line-by-line.
The transaction enables TIM to expand its offering of innovative public, private and hybrid cloud services, and
consolidate expertise to accelerate the digitalization of companies, from SMEs to large industries, the public
administration and health sector.
The business combination was recognized in the accounts as follows:
■
■
■
a consideration of 13 million euros.
all Assets acquired and Liabilities undertaken of the acquired companies were measured for recognition at
fair value.
in addition to the value of the Assets acquired and Liabilities undertaken, Goodwill equal to 11 million
euros was recognized, along with Other intangible assets for 4 million euros and Deferred tax liabilities for
1 million euros, determined as shown in the next few tables:
(million euros)
Valuation of the consideration
Value of assets acquired
Value of liabilities undertaken
Goodwill, Other intangible assets and Deferred tax liabilities
(a)
(b)
(c)
(a–b-c)
Values at fair value
13
31
(32)
14
Noovle Group – values at acquisition date
(million euros)
Goodwill
Other non-current assets
Current assets
of which Cash and cash equivalents
Total assets
Total non-current liabilities
Of which Non-current financial liabilities
Total current liabilities
Of which Current financial liabilities
Total liabilities
Net assets
Values
at fair value
Carrying amounts
11
7
28
1
46
4
2
29
2
33
13
(a)
(b)
(a-b)
-
3
28
1
31
3
2
29
2
32
(1)
Note also that if the acquisition of Noovle S.r.l. and its subsidiaries had been completed on 1 January 2020, the
consolidated financial statements of the TIM Group as at December 31, 2020 would have recorded revenues
approximately 14 million euros higher, with insignificant effects on the net result for the year.
Consolidated financial statements
of the TIM Group
Note 4
Business combinations
163
NOTE 5
GOODWILL
Goodwill shows the following breakdown and changes for 2019 and 2020:
(million euros)
12.31.2018
Increase
Decrease
Impairment
Exchange
differences
Held for
sale INWIT
12.31.2019
Domestic
Brazil
Other activities
Total
(million euros)
Domestic
Brazil
Other activities
Total
25,899
870
—
26,769
—
—
(68)
(68)
—
—
—
(18)
(18)
(3,600)
(3,600)
22,231
852
—
23,083
12.31.2019
Increase
Decrease
Impairment
22,231
852
—
23,083
11
11
—
—
Exchange
differences
(247)
(247)
12.31.2020
22,242
605
—
22,847
In accordance with IAS 36, goodwill is not subject to amortization, but is tested for impairment on at least an
annual basis, when preparing the company’s consolidated financial statements.
In 2020, Goodwill fell by 236 million euros, from 23,083 million euros at the end of 2019 to 22,847 million euros at
December 31, 2020. In detail:
■ With reference to the Domestic cash generating unit, the item records an increase of 11 million euros
relative to the booking of goodwill connected with the acquisition of Noovle S.r.l. and its subsidiaries (for
more details, see the note on “Business combinations”);
■
the figure also fell by 247 million euros due to exchange differences on goodwill allocated to the Brazil CGU.
The gross carrying amounts of goodwill and the relative accumulated impairment losses from January 1, 2004
(date of allocation to the Cash-Generating Units – CGUs)) to December 31, 2020 and 2019 can be summarized
as follows:
(million euros)
Domestic
Brazil
Other activities
Total
12.31.2020
Accumulated
impairment
losses
(16,445)
(146)
—
(16,591)
Gross
carrying
amount
38,687
751
—
39,438
Net
carrying
amount
22,242
605
—
22,847
Gross
carrying
amount
38,676
1,055
—
39,731
12.31.2019
Accumulated
impairment
losses
(16,445)
(203)
—
(16,648)
Net
carrying
amount
22,231
852
—
23,083
The figures for the Brazil CGU are stated in euros, converted at the spot exchange rate at the closing date of the
financial statements; the carrying amount of goodwill for the CGU corresponds to 3,854 million reais.
Consolidated financial statements
of the TIM Group
Note 5
Goodwill
164
The impairment test was carried out in two phases: in the first phase, the recoverable amount of the assets
attributed to the individual CGUs to which goodwill is allocated was estimated; in the second phase, analyses
were carried out considering the Group’s activities as a whole, which did not show any impairment.
As regards the checks referred to in the first phase, the cash generating units (or groups of units) to which
goodwill is allocated are as follows:
Segment
Domestic
Brazil
Cash-Generating Units (or groups of units)
Domestic
Brazil
According to the applicable accounting rules, the “recoverable value” of the CGUs was equal to the higher of
“fair value net of disposal costs” and “value in use”.
The value configurations used to determine the recoverable value at December 31, 2020 of the CGUs in question
were for Domestic the value in use and for Brazil the fair value. Specifically, for Brazil the fair value was
determined on the basis of the market capitalization at the end of the year.
The values are expressed in local currency, and hence in EUR for the Domestic CGUs and BRL for the Brazil CGU.
For the Brazil CGU, the recoverable amount of the assets was denominated in the functional currency and
subsequently translated at the spot exchange rate at the reporting date.
For the Domestic CGU, the value in use estimate was made – in accordance with IAS 36 and with valuation
principles and best practices – based on the expected cash flows in different scenarios. The various expected
cash flows were then summarized into an average normal cash flow, determined with the aid of Experts (expert
appraisers and industry experts) and based on the data from the 2021-2023 Business Plan approved by the Board
of Directors. In particular, expected average cash flows were measured for the three years of the 2021-2023
Business Plan, plus an additional two years on the basis of extrapolated data, for which future cash flows were
explicitly forecast for a period of five years (2021-2025). The extrapolation of data for 2024-2025 enabled market
and competition trends that will become manifest beyond the time horizon of the Business Plan to be captured.
As regards the estimate of the terminal value, the sustainable long-term cash flow was assumed to be the
extrapolation of the estimated cash flow at 2025, adjusted as necessary to take into consideration a suitable
level of long-term capital expenditure. Furthermore, with specific reference to the incremental share of the value
deriving from 5G license use, and therefore from the development of new and innovative business areas, a
measurement model has been adopted that takes into account the net incremental flows for a defined period
of time which is based on the duration of the license. This approach is consistent with the need to include in the
configuration of value, on one hand the outflows deriving from the payment of the license (2019 - 2022) and the
Capex to support its development (as per the Business Plan), and on the other the positive net flows from the
incremental business component of the license acquisition that will develop over a broad period of time and over
the 5 years of explicit forecast.
The 2021-2023 Business Plan incorporates various assessments on the potential exogenous and endogenous
risks as well as the related action taken to combat and respond to such, also taking into account the current
COVID-19 epidemiological emergency. In order to define the average normal cash flow for the impairment test,
the management, with the aid of Experts, identified additional risk factors, making changes to the amounts
and/or in the time distribution of future cash flows, giving greater weight to the external evidence available.
The cost of capital used to discount the future cash flows in the estimates of value in use:
■ was estimated using the Capital Asset Pricing Model (CAPM), which is one of the generally accepted
application criteria referred to in IAS 36;
■
■
reflects the current market estimates of the time value of money and the specific risks of the groups of
assets; includes appropriate yield premiums for country risk;
it was calculated using comparative market parameters to estimate the “Beta coefficient” and the
weighting coefficient of the equity and debt capital components;
For the Domestic CGU it was as follows:
Consolidated financial statements
of the TIM Group
Note 5
Goodwill
165
■
■
■
the weighted average cost of capital (WACC rate) used to discount the future cash flows and the equivalent
rate before tax;
details are also provided of the growth rate used to estimate the residual value after the explicit forecast
period (the G-Rate), expressed in nominal terms and related to the cash flows in their functional currency;
implicit capitalization rates resulting from the difference between the cost of capital, after tax, and the G-
Rate.
Significant parameters for the estimates of value in use
WACC
WACC before tax
Growth rate beyond the explicit period (g)
Capitalization rate after tax (WACC-g)
Capitalization rate before tax (WACC-g)
Capex/Revenues, perpetual
Domestic
4.73%
6.33%
0.5%
4.23%
5.83%
19.2%
The growth rate of the terminal value “g” of the Domestic CGU was estimated taking into account the expected
outlook during the explicit forecast period and is consistent with the range of growth rates applied by analysts
who monitor TIM shares.
The phase of capital expenditure, competitive positioning and the technological infrastructure operated were
taken into account in estimating the level of investment needed to sustain the perpetual development of cash
flows after the explicit forecast period.
In addition to average normal cash flows, to take into account the market operator’s perspective, sensitivity
analyses were conducted on the risk factors identified with the Experts to determine the value in use of the
Domestic CGU.
The differences between recoverable amounts and net carrying amounts for the CGUs considered totalled:
(million euros)
Difference between recoverable and net carrying amounts
Domestic
+14,313
Brazil
+1,395
Therefore, given all the above elements, no impairment losses were recorded in 2020; the goodwill values
recognized in the financial statements are therefore confirmed.
In estimating the recoverable amounts, simulations were conducted on the results with respect to changes in
the relevant parameters. Below are the parameters that, if considered individually and on a consistent basis,
make the recoverable value equal to the net carrying amount.
Parameters that make the value in use equal to the carrying amount
WACC before tax
Capitalization rate before tax (WACC-g)
Capex/Revenues, perpetual
Domestic
8.32%
7.82%
27.20%
With regard to the Brazilian CGU, the change in the price per share, compared to the reference quotation
considered for the purposes of the financial statements, which would make the recoverable value equal to the
carrying amount is equal to -25%.
In addition to average normal cash flows, to take into account the market operator’s perspective, sensitivity
analyses were conducted on the main risk factors identified with the Experts and to determine the value in use
of the Domestic CGU. As a result of these analyses, the recoverable value is in any case higher than the net
carrying amount.
Consolidated financial statements
of the TIM Group
Note 5
Goodwill
166
NOTE 6
INTANGIBLE ASSETS WITH A FINITE USEFUL
LIFE
The item decreased by 927 million euros compared to December 31, 2019. The breakdown and movements are
as follows.
(million euros)
12.31.2018
IFRS 16
reclassifications
Investments
Depreciation
and
amortization
(Impairment
losses)
Reversals
Disposals
Exchange
differences
Capitalized
borrowing costs
Other
changes
12.31.2019
Held
for sale
INWIT
Industrial patents
and intellectual
property rights
Concessions,
licenses, trademarks
and similar rights
Other intangible
assets
Work in progress and
advance payments
Total
2,095
3,261
33
3,500
8,889
726
(1,187)
(445)
(445)
15
2
346
1,089
(486)
(2)
(1,675)
—
(1)
(1)
(14)
(23)
2
(35)
481
(1)
2,100
2,076
(30)
9 (2,680)
(153)
9
(10)
(11)
4,398
3
1,166
7,667
(million euros)
12.31.2019
Investments
Depreciation and
amortization
(Impairment
losses) Reversals
Disposals
Exchange
differences
Other
changes
12.31.2020
Industrial patents and
intellectual property
rights
Concessions, licenses,
trademarks and similar
rights
Other intangible assets
Work in progress and
advance payments
Total
2,100
4,398
3
1,166
7,667
649
6
—
542
1,197
(1,152)
(473)
(2)
(1,627)
(195)
387
1,789
(288)
(1)
(12)
(496)
2
4
(393)
—
3,645
4
1,302
6,740
(1)
(1)
—
Investments in 2020 amounted to 1,197 million euros (1,089 million euros in 2019) and included 231 million euros
in internally generated assets (238 million euros in 2019). Further details are provided in the Note “Internally
generated assets”.
Industrial patents and intellectual property rights at December 31, 2020 essentially consist of applications
software purchased outright and user license rights acquired, amortized over a period between 2 and 5 years,
relating to TIM S.p.A. (1,303 million euros) and the Brazil Business Unit (429 million euros).
Concessions, licenses, trademarks and similar rights at December 31, 2020 mainly refer to the residual cost
of telephone licenses and similar rights (3,000 million euros for TIM S.p.A., 601 million euros for the Brazil
Business Unit). Compared with December 31, 2019, the item reduces by 753 million euros, mainly due to the
period amortization/depreciation for 473 million euros, in addition to the exchange effect for -288 million euros.
Consolidated financial statements
of the TIM Group
Note 6
Intangible assets with a finite useful life
167
The residual amount of telephone licenses and similar rights in operation at December 31, 2020 (3,601 million
euros) and their useful lives are detailed below:
Type
Residual amount
at 12.31.2020
Useful life
Maturity:
TIM S.p.A.:
UMTS
UMTS 2100 MHz
WiMax
LTE 1800 MHz
LTE 800 MHz
LTE 2600 MHz
1452-1492 MHz band
900 and 1800 MHz band
3600-3800 MHz band (5G)
26.5-27.5 GHz band (5G)
Tim Brasil group:
GSM and 3G (UMTS)
4G (LTE - 700 MHz)
(million euros)
(years)
134
7
2
77
540
60
148
493
1,509
30
50
551
18
12
15
18
17
17
14
11
19
19
15
15
12.31.2021
12.31.2021
05.31.2023
12.31.2029
12.31.2029
12.31.2029
12.31.2029
12.31.2029
12.31.2037
12.31.2037
From 2023 to 2031
2030
Amortization
expense for
2020
(million euros)
134
7
1
9
60
6
16
55
89
2
21
67
Work in progress and advance payments mainly refer to the Parent (1,197 million euros) of which 680 million
euros related to rights in 694-790 MHz (5G) bandwidth frequencies, not yet operating, of TIM S.p.A. They also
include work in progress mainly related to software developments and investments for the digital evolution of
Network Infrastructures. “Other changes” refers to the commissioning that took place during the year.
Depreciation and impairment losses have been recorded in the income statement as components of EBIT.
The gross carrying amount, accumulated impairment losses and accumulated depreciation at December 31,
2020 and December 31, 2019 can be summarized as follows:
(million euros)
Industrial patents and intellectual property rights
Concessions, licenses, trademarks and similar rights
Other intangible assets
Work in progress and advance payments
Total intangible assets with a finite useful life
(million euros)
Industrial patents and intellectual property rights
Concessions, licenses, trademarks and similar rights
Other intangible assets
Work in progress and advance payments
Total intangible assets with a finite useful life
12.31.2019
Gross
carrying
amount
11,312
8,726
612
1,166
21,816
Accumulated
impairment
losses
—
—
—
—
—
Accumulated
depreciation
(9,212)
(4,328)
(609)
—
(14,149)
12.31.2020
Gross
carrying
amount
10,852
8,100
460
1,302
20,714
Accumulated
impairment
losses
—
—
—
—
—
Accumulated
depreciation
(9,063)
(4,455)
(456)
—
(13,974)
Net
carrying
amount
2,100
4,398
3
1,166
7,667
Net
carrying
amount
1,789
3,645
4
1,302
6,740
With regard to the gross carrying amounts of intangible assets with a finite useful life, in 2020, disposals of 324
million euros were made by the Parent Company, relating to intellectual property rights, fully amortized, which
mainly concerned obsolete releases of system software.
Consolidated financial statements
of the TIM Group
Note 6
Intangible assets with a finite useful life
168
NOTE 7
TANGIBLE ASSETS
Property, plant and equipment owned
The item decreased by 870 million euros compared to December 31, 2019. The breakdown and movements are
as follows.
(million euros)
12.31.201
8
IFRS 16
reclassifications
Capital
expenditure
s
Depreciation
and
amortization
Impairment
(losses) /
reversals
Disposals Exchange
differences
Other
changes
Land
Buildings (civil and
industrial)
Plant and
equipment
Manufacturing and
distribution
equipment
Other
Construction in
progress and
advance payments
Total
250
588
12,096
31
358
928
14,251
3
6
(1)
1,792
5
118
720
2,644
(27)
(28)
(38)
(2,272)
(12)
(147)
Held
for
sale
INWIT
(30)
12.31.2019
226
577
3
21
(21)
(43)
633
(210)
11,974
(3)
(3)
2
54
26
350
(2,469)
—
(4)
(28)
(2)
(48)
(45)
(739)
(26) (285)
858
14,011
(million euros)
12.31.2019 Investments
Depreciation
and
amortization
Impairment
(losses) /
reversals
Disposals Exchange
differences
Other
changes
12.31.2020
Land
Buildings (civil and
industrial)
Plant and
equipment
Manufacturing and
distribution
equipment
Other
Construction in
progress and
advance payments
Total
226
577
9
18
11,974
1,491
26
350
4
102
(35)
(2,115)
(11)
(140)
(3)
(1)
(7)
(3)
(5)
(623)
(1)
(36)
23
486
3
34
858
14,011
514
2,138
(2,301)
(8)
(8)
(2)
(14)
(34)
(701)
(530)
16
229
577
11,206
22
309
798
13,141
Land comprises both built-up land and available land and is not subject to depreciation. The figure for
December 31, 2020 refers primarily to TIM S.p.A. (217 million euros)
Buildings (civil and industrial) almost exclusively include buildings for industrial use hosting telephone
exchanges, or for office use and light constructions. The figure for December 31, 2020 referred primarily to TIM
S.p.A. (553 million euros).
The item Plant and machinery includes the technological infrastructure used for the provision of
telecommunications services (transport and distribution of voice/data traffic). The figure for December 31, 2020
referred primarily to TIM S.p.A. (8,662 million euros) and the Brazil Business Unit (1,546 million euros).
Consolidated financial statements
of the TIM Group
Note 7
Tangible assets
169
Manufacturing and distribution equipment consists of instruments and equipment used for the operation and
maintenance of plant and equipment and refers mainly to TIM S.p.A.
The item Other mainly consists of hardware for the functioning of the Data Center and for work stations,
furniture and fixtures and, to a minimal extent, transport vehicles and office machines.
Construction in progress and advance payments refer to the internal and external costs incurred for the
acquisition and internal production of tangible assets, which are not yet in use.
In 2020, investments were down by 506 million euros compared to the previous year, not only due to the
exchange rate trends but mainly following the different timing of FTTCab development programs and network
investments in general, in addition to the lesser tangible investments necessary to the development of the
Parent Company’s Core Network, characterized by a technological evolution that is ever more driven towards
automation and digitization. They include 271 million euros of internally generated assets (299 million euros in
2019); further details are provided in the Note “Internally generated assets”.
Depreciation, impairment losses and reversals have been recorded in the income statement as components of
EBIT.
Depreciation for the years 2020 and 2019 was calculated on a straight-line basis over the estimated useful lives
of the assets according to the following minimum and maximum rates:
Buildings (civil and industrial)
Plant and equipment
Manufacturing and distribution equipment
Other
2% - 5.55%
3% - 50%
20 %
10% - 50%
The gross carrying amount, accumulated impairment losses and accumulated depreciation at December 31,
2020 and December 31, 2019 can be summarized as follows:
(million euros)
Land
Buildings (civil and industrial)
Plant and equipment
Manufacturing and distribution equipment
Other
Construction in progress and advance payments
Total
(million euros)
Land
Buildings (civil and industrial)
Plant and equipment
Manufacturing and distribution equipment
Other
Construction in progress and advance payments
Total
Gross
carrying
amount
229
1,890
70,293
317
3,323
858
76,910
12.31.2019
Accumulated
impairment
losses
(3)
—
(12)
(1)
(2)
(18)
12.31.2020
Accumulated
depreciation
Net
carrying
amount
226
577
(1,313)
11,974
(58,307)
26
(290)
350
(2,971)
858
(62,881) 14,011
Accumulated
Gross
impairment
carrying
losses
amount
(3)
232
—
1,907
(12)
69,814
324
(1)
3,152
(2)
806 (8)
(26)
76,235
Accumulated
depreciation
(1,330)
(58,596)
(301)
(2,841)
(63,068)
Net
carrying
amount
229
577
11,206
22
309
798
13,141
With regard to the gross carrying amounts of tangible assets, it is worth mentioning that in 2020, TIM S.p.A.
carried out disposals for a total value of 425 million euros, mainly in relation to fully depreciated assets. The
assets most affected were: civil buildings (13 million euros), switching systems (9 million euros), infrastructures
and broadband connections (147 million euros), rented equipment (46 million euros), poles (33 million euros)
and underground and aerial network (157 million euros).
Consolidated financial statements
of the TIM Group
Note 7
Tangible assets
170
NOTE 8
RIGHTS OF USE ASSETS
The item decreased by 502 million euros compared to December 31, 2019. The breakdown and movements are
as follows.
(million euros)
12.31.2018
IFRS 16
reclassifications
Adoption of
IFRS 16
Investments
Increases in
lease
contracts
Depreciation
and
amortization
Disposals
Exchange
differences
Other
changes
12.31.2019
Held for
sale
INWIT
Property
Plant and equipment
Other
Construction in
progress and
advance payments
Total
—
—
—
—
—
1,408
747
149
64
2,368
2,388
1,082
33
—
3,503
39
20
17
76
797
322
21
(475)
(264)
(44)
(56)
(1)
(3)
(9)
(23)
1,140
(783)
(60)
(32)
(61) (633)
(2)
20
(1)
(4)
(37)
(82) (636)
3,398
1,901
151
44
5,494
(million euros)
12.31.2019
Investments Increases in lease
contracts
Depreciation and
amortization
Disposals
Exchange
differences
Other
changes
12.31.2020
Property
Plant and equipment
Other
Construction in
progress and
advance payments
Total
3,398
1,901
151
44
5,494
12
30
32
74
869
396
23
(397)
(252)
(39)
(112)
(234)
(4)
(129)
(335)
(2)
1,288
(688)
(350)
(466)
(730)
403
(8)
(25)
(360)
2,911
1,909
121
51
4,992
FY 2020 investments primarily refer to the Domestic Business Unit (62 million euros) and to the Brazil Business
Unit (12 million euros) and mainly relate to the acquisition of IRU transmission capacity and improvements and
incremental expenses incurred on leased third-party movable or immovable property. Investments in work in
progress and advance payments mainly relate to improvements in progress.
Since March 31, 2020, the new Master Service Agreement (MSA) between TIM S.p.A. and INWIT S.p.A., now
jointly controlled by TIM-Vodafone, has been in effect, regulating hosting services on INWIT sites.
In particular, the MSA regulates the following services:
■
the availability of the electromagnetic and physical space for the installation and management of
necessary equipment for the provision of mobile service and services for the supply of power and air
conditioning systems;
■ monitoring and security services;
■ management and maintenance services;
■ electricity supply service;
■ measurement and monitoring service of the physical and electromagnetic space.
Consolidated financial statements
of the TIM Group
Note 7
Tangible assets
171
It is a set of services to guarantee operators (TIM and Vodafone) the management of technological devices,
which use the frequencies that are currently available to the two Operators, functional to the provision of mobile
services to customers.
The effectiveness of the new MSA contract, which comes under the scope of the operation involving the
establishment - through the merger by incorporation of Vodafone Towers S.r.l. in INWIT - of the first Italian
Tower Operator, has resulted in the following on a consolidated level:
■
■
■
the derecognition of rights of use related with previous lease agreements stipulated with Vodafone (266
million euros included in the “Disposals” flow). The termination of previous lease agreements led to the
recognition of net capital losses for approximately 2 million euros in the separate consolidated income
statement.
the recognition of new rights of use for INWIT S.p.A. (Increases from finance lease agreements”) and a
corresponding financial liability for 368 million euros;
the derecognition of liabilities with Vodafone, related to previous lease agreements.
The new MSA also provides for accounting for the amounts in costs for services on an accruals basis, with the
exception of the 3,500 strategic sites, which are accounted for as leases under IFRS 16, for a duration of 8 years,
given that control of those strategic sites still belongs to TIM S.p.A.
The increases in finance leasing contracts in FY 2020, equal to 1,288 million euros, refer in particular to the
Domestic Business Unit (781 million euros) and the Brazil Business Unit (507 million euros).
These increases include the higher value of the rights of use recorded as a result of new leases, increases of
lease payments and renegotiations of agreements existing both land and buildings for office use and industrial
relationship over time, to infrastructure sites for the mobile telephone network infrastructure and network.
In accordance with IFRS 16 (Leases), lease liabilities are presented through the recognition of a financial liability
in the statement of financial position at the present value of future lease payments, against the recognition of
a rights-of-use asset of the leased asset.
In FY 2020, we note the increase of 368 million euros in connection with the recording, for the portion that can
be classified as a “lease”, of the specified new MSA contract stipulated with INWIT.
Depreciation and impairment losses have been recorded in the income statement as components of EBIT.
The disposals are representative of the carrying amount of the assets from lease agreements that terminated
early. In FY 2020, the aforementioned impact associated with the derecognition of the rights of use connected
with the previous lease agreements entered into with Vodafone (266 million euros) is noted.
Other changes included, inter alia, transfers to operating activities and the lower value of the rights of use
recorded as a result of contractual changes during the year. In 2020, they mainly refer to the Brazil Business
Unit (-248 million euros) and the Domestic Business Unit (-112 million euros).
The item Property includes buildings and land under passive leases and the related building adaptations,
essentially attributable to the Parent (2,588 million euros) and the Brazil Business Unit (298 million euros).
The item Plant and equipment mainly includes rights of use on infrastructures for telecommunications
services. These refer to the Brazil Business Unit (880 million euros), the Parent (825 million euros) and the
Telecom Italia Sparkle group (204 million euros). This includes, inter alia, the recognition of the value of the
telecommunications towers sold by the TIM Brasil group to American Tower do Brasil and subsequently
repurchased in the form of a finance lease.
The item Other mainly comprises the leases on motor vehicles.
Consolidated financial statements of
the TIM Group
Note 8
Rights of use assets
172
The gross carrying amount, accumulated impairment losses and accumulated depreciation at December 31,
2020 and December 31, 2019 can be summarized as follows:
(million euros)
Property
Plant and equipment
Other
Construction in progress and advance payments
Total
(million euros)
Property
Plant and equipment
Other
Construction in progress and advance payments
Total
12.31.2019
Accumulated
impairment
losses
(13)
(278)
(291)
Accumulated
depreciation
(1,921)
(653)
(125)
(2,699)
Net
carrying
amount
3,398
1,901
151
44
5,494
12.31.2020
Accumulated
impairment
losses
(13)
(271)
(284)
Accumulated
depreciation
(2,151)
(867)
(146)
(3,164)
Net
carrying
amount
2,911
1,909
121
51
4,992
Gross
carrying
amount
5,332
2,832
276
44
8,484
Gross
carrying
amount
5,075
3,047
267
51
8,440
Impairment losses on “Plant and equipment”, mainly relating to prior years, refers to the Indefeasible Rights of
Use (IRU) for the transmission capacity and cables for international connections acquired by the Telecom Italia
Sparkle group.
With reference to the gross carrying amounts of rights of use of third-party assets, in 2020 TIM S.p.A. carried
out disposals for a total value of 1,553 million euros, in particular relating to: leased properties (1,161 million
euros), base transceiver stations (278 million euros), leased land (64 million euros), improvements in third party
establishments (17 million euros), rights of use of IRU fiber (13 million euros) and leased cars (12 million euros).
Consolidated financial statements of
the TIM Group
Note 8
Rights of use assets
173
NOTE 9
INVESTMENTS
Investments in associates and joint ventures accounted for
using the equity method
Investments in associates and joint ventures accounted for using the equity method are reported below in
detail.
(million euros)
Tiglio I
NordCom
W.A.Y.
Other
Total Associates
TIMFin
INWIT
Total Joint Ventures
Total investments accounted for using the equity method
The changes in this item are broken down as follows:
12.31.2020
1
5
4
3
13
2
2,713
2,715
2,728
12.31.2019
1
5
3
2
11
—
—
11
(a)
(b)
(a+b)
(million euros)
12.31.2018 Investments
Disposals and
reimbursements
of capital
Valuation
using equity
method
Other changes
12.31.2019
Tiglio I
Nordcom
W.A.Y.
Other
Total Associates
Alfiere
Total Joint Ventures
Total investments accounted
for using the equity method
5
5
3
3
16
—
—
16
—
1
1
1
(1)
(1)
(1)
(1)
(2)
(4)
1
(3)
(1)
(1)
(3)
(1)
1
5
3
2
11
—
—
11
(million euros)
12.31.2019 Investments
Disposals and
reimbursements
of capital
Valuation
using equity
method
Other
changes
12.31.2020
Tiglio I
Nordcom
W.A.Y.
Other
Total Associates
TIMFin
INWIT
Total Joint Ventures
Total investments accounted
for using the equity method
1
5
3
2
11
—
—
11
1
1
3
—
3
4
—
(659)
(659)
(659)
1
1
(1)
(238)
(239)
(238)
—
3,610
3,610
3,610
1
5
4
3
13
2
2,713
2,715
2,728
Consolidated financial statements
of the TIM Group
Note 9
Investments
174
The list of investments accounted for using the equity method is presented in the Note "List of companies of
the TIM Group".
Investments in associates accounted for using the equity method of the TIM Group are not material either
individually or in aggregate form.
∂
With reference to the INWIT equity investment, it is recalled that since March 31, 2020, following the merger into
INWIT S.p.A. of Vodafone Tower S.r.l., with consequent dilution of the equity investment held by TIM in the capital
of the company from 60% to 37.5%, it has been measured using the equity method (for further details, see the
note "Scope of consolidation").
Such dilution resulted in the recognition of a net capital gain for 441 million euros in the ambit of "Other income
from investment" in the separate consolidated income statement of the TIM Group.
Similarly to that done by INWIT, the valuation using the equity method flow includes the portion pertaining to
the positive economic result of the investee including the greater amortization charge, at consolidated level, of
the assets to which part of the greater value deriving from the corporate integration transaction of Vodafone
Towers S.r.l. in INWIT was allocated.
With reference to the changes to the INWIT equity investment during FY 2020:
■
■
the flow “other changes” includes the carrying amount of the equity investment at March 31, 2020 following
the deconsolidation of the company;
the "disposals and reimbursements of capital" flow includes the effects deriving from the sale of:
•
•
•
a share package equal to 4.3% of the share capital of INWIT, through an accelerated book-building
procedure reserved for institutional investors completed on April 23, 2020;
a share package equating to 1.2% of the share capital of INWIT sold on October 02, 2020 to an SPV
managed and assisted by Canson Capital Partners (Guernsey) Limited;
a share package equating to 1.8% of the share capital of INWIT in respect of the exercise of a purchase
option on December 4, 2020 by the SPV established by Canson Capital Partners (Guernsey) Limited.
These disposals led to a comprehensive gross inflow of approximately 670 million euros for the TIM Group
and the recognition of a comprehensive capital gain of 11 million euros in the ambit of "Other income from
investment" in the Separate Consolidated Income Statement.
■
the "valuation using the equity method" flow includes the portion pertaining to the positive economic result
of the investee including, similarly to that done by INWIT, the greater amortization charge, at consolidated
level, of the assets to which part of the greater value deriving from the corporate integration transaction of
Vodafone Towers S.r.l. in INWIT (18 million euros) has been allocated. This flow also includes the reduction
in the carrying amount of the equity investment for dividends received during the year (256 million euros).
As per the agreement signed on March 25, 2020, the INWIT shares in TIM's portfolio became subject to a
shareholders' agreement with Vodafone Europe BV, which has identically conferred its entire stake in INWIT
under the agreement, with consequent joint control of TIM and Vodafone Europe on the company, without
carrying out management and coordination activities. Each of the two partners has undertaken not to purchase
INWIT shares in any capacity, without the prior consent of the other, and in any case to refrain from any deed
that involves the obligation to make a mandatory public purchase offer on INWIT.
TIM and Vodafone Europe have undertaken to ensure that the INWIT Board of Directors, for the entire duration
of the agreement (as per law: three-year period), provides for the presence – without prejudice to the
appointment mechanisms provided for in the articles of association – of an equal number of directors appointed
respectively by TIM and Vodafone Europe. (i) alternation between the directors of the two parties for the selection
of chairman and chief executive officer (who for the duration of the agreement will not be chosen from among
the directors appointed by the same party), in the absence of a different agreement, as well as (ii) the renewal
of the collective body before the expiry of the agreement are also provided for.
TIM and Vodafone Europe have also undertaken to consult each other with due advance notice on the agenda
of each INWIT meeting, possibly identifying a common approach, to which, however, they will not be bound. In
Consolidated financial statements
of the TIM Group
Note 9
Investments
175
the event that the strengthened majority required by the INWIT articles of association for the adoption of
decisions on certain matters should not be reached during two consecutive meetings, a deadlock procedure may
be activated, with a committee made up of two representatives from each party tasked with resolving the
matter. Moreover, unless otherwise agreed in writing, the parties to the agreement will not be bound by the
decision taken by the committee and will be able to freely exercise their voting rights at the meeting.
After a decision by the INWIT Board of Directors (which will take into account, among other things, the business
plan, growth and cash flow expectations, rating considerations and strategic options available), TIM and
Vodafone Europe have agreed that INWIT will aim to distribute an annual dividend corresponding to at least
80% of the net profits resulting from the financial statements, adjusted for one-off and extraordinary items.
They noted that INWIT's initial leverage should not exceed 6.0x net financial debt/EBITDA and that it will be
reduced over time to obtain medium-term leverage in line with the capital structure of other listed companies
operating in the same sector.
TIM and Vodafone Europe have undertaken not to transfer the investment held in INWIT, without prejudice to (i)
joining take over bids and/or exchange offers promoted by third parties; (ii) the transfer to third parties with the
prior written consent of the other party adhering to the agreement; (iii) the transfer to another company directly
or indirectly controlled by, controlling, or subject to joint control with, the transferring party, provided that the
transferee adheres to the agreement and the obligation to re-transfer the shareholding to the transferring
shareholder is expressly provided if the relationship between the transferee and the transferring party ceases.
On June 24, 2020, TIM and Vodafone Europe signed a specific agreement for the partial exemption from the lock-
up and standstill commitment to allow:
■
■
the signing of an agreement between TIM and Ardian for the acquisition by a consortium of investors led by
Ardian of 49% of a newly created vehicle controlled by TIM ("TIM SPV” now Daphne 3), which was to
purchase, in part by contribution in kind and in part through a sale and purchase transaction, a total number
of INWIT shares from TIM representing 30.2% of the relative share capital, it being understood that TIM SPV
would have to sign a consent agreement to the shareholders' agreement between Vodafone Europe and
TIM, of which TIM will also remain a part as long as it directly holds INWIT shares;
the transfer, by Vodafone Europe to third parties, of all or part of its investment in INWIT, subject to the
retaining of a direct or indirect stake of at least 25.1% of the share capital of the company with right to vote.
In the event that a stake should be reached of 25.1% in the share capital of INWIT, TIM and TIM SPV will in
turn have the right to transfer all or part of their stake in INWIT, on condition that they continue to hold
jointly at least 25.1% of the INWIT share capital with voting rights;
■
the signing between TIM and a special purpose vehicle constituted by Canson of a contract for the sale from
TIM to Canson of a total investment of up to 3% of the share capital of INWIT.
On October 2, 2020, TIM and Ardian completed the agreement announced on June 24, 2020 for a partial sharing
of the investment in INWIT. The operation entailed the purchase by a consortium of institutional investors led by
Ardian of 49% of Daphne 3, a newly-established holding company controlled by TIM, to which TIM contributed a
total of 30.2% of INWIT shares; this percentage, upon completion of the sales made to the SPV managed and
assisted by Canson Capital Partners (Guernsey) Limited, as mentioned previously, at present represents the entire
indirect investment of TIM in INWIT. The holding company has taken over from TIM - in the shareholders'
agreement stipulated between TIM and Vodafone Europe, by virtue of which, joint control is exercised over INWIT.
The equivalent value of the transaction for TIM was 1.35 billion euros, as compared with a valuation of the INWIT
share of 9.47 euros (ex dividend).
Relations between TIM (which retains control over the holding company) and the consortium led by Ardian
(hereinafter the “Ardian Consortium”) are governed by a specific shareholders' agreement, which grants the
Ardian Consortium minority governance rights over both the holding company and INWIT. More specifically, the
agreement envisages the designation by the Ardian Consortium of an INWIT director in the Daphne 3 share,
meeting independence requirements, with the commitment by TIM to do everything within its power to make
sure that the director designated by the Ardian Consortium is appointed by the board of directors of INWIT as
member of the Related Parties Committee and Chairman of the company’s Appointments and Remuneration
Committee. Through the preventive consultation of the parties (or of the INWIT directors respectively
designated), TIM acknowledges the Ardian Consortium a right of veto where the INWIT board of directors should
be called to resolve on certain matters, as well as a right of veto for the Ardian Consortium in the board of
directors and shareholders' meeting of Daphne 3. These are all rights exclusively intended to protect the
Consolidated financial statements
of the TIM Group
Note 9
Investments
176
investment made by the Ardian Consortium, which do not affect the control and direction and coordination of
TIM over Daphne 3 and - through the latter - TIM’s joint control over INWIT, together with Vodafone Europe
(taken over on November 19, 2020 by Central Tower Holding Company B.V., an indirect Dutch subsidiary of
Vodafone Group Plc, just like Vodafone Europe).
Essential information on the shareholders' agreements (i) between TIM and Vodafone and (ii) between TIM and
Ardian can be consulted on the INWIT website (inwit.it).
∂
As part of the initial agreements aimed – inter alia – at integrating Vodafone towers into INWIT, TIM and
Vodafone Italia have undertaken to purchase services over the next 10 years offered by INWIT (small cell, hosting
on existing sites and new sites to be built) to an extent that guarantees INWIT a Net Present Value Target, which
is calculated taking into account the value of the various services and the relative phasing over time.
TIM and Vodafone Italia will have the right to modify the mix and phasing of the services initially envisaged,
including backhauling services, as long as they guarantee the same contribution to INWIT in terms of Net Present
Value.
Investments in structured entities
The TIM Group does not hold investments in structured entities.
Other investments
Other investments refer to the following:
(million euros)
12.31.2018 Investments
Assicurazioni Generali
Fin.Priv.
Northgate CommsTech
Innovations Partners L.P.
Other
Total
3
16
16
14
49
(million euros)
12.31.2019 Investments
Fin.Priv.
Northgate CommsTech
Innovations Partners L.P.
Other
Total
21
19
12
52
Disposals and
reimbursements
of capital
(3)
3
3
(3)
Disposals and
reimbursements
of capital
6
1
7
—
Valuation at
fair value
Other changes
12.31.2019
5
(2)
3
—
—
21
19
12
52
Valuation at
fair value
Other
changes
12.31.2020
(5)
(5)
16
25
13
54
—
The investment in Assicurazioni Generali was sold on July 19, 2019.
At December 31, 2020, the TIM Group had a subscription commitment for units in the Northgate CommsTech
Innovations Partners L.P. Fund for 9.5 million USD, equal to approximately 7.7 million euros at the exchange rate
as at December 31, 2020.
As permitted by IFRS 9, TIM now measures all Other Investments at “Fair value through other comprehensive
income (FVTOCI)”.
Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial
instruments".
Consolidated financial statements
of the TIM Group
Note 9
Investments
177
NOTE 10
FINANCIAL ASSETS (NON-CURRENT AND
CURRENT)
Non-current and current financial assets are broken down below:
(million euros)
Other non-current financial assets
Securities other than investments
Receivables from employees
Hedging derivatives relating to hedged items classified as non-current
assets/liabilities of a financial nature
Non-hedging derivatives
Other financial receivables
Financial receivables for lease contracts
Total non-current financial assets
Securities other than investments, other financial receivables and
other current financial assets
Securities other than investments
Measured at amortized cost (AC)
Measured at fair value through other comprehensive income (FVTOCI)
Measured at fair value through profit or loss (FVTPL)
Financial receivables and other current financial assets
Liquid assets with banks, financial institutions and post offices (with
maturity over 3 months)
Receivables from employees
Hedging derivatives relating to hedged items classified as current
assets/liabilities of a financial nature
Non-hedging derivatives
Other short-term financial receivables
Financial receivables for lease contracts
Cash and cash equivalents
(a)
(b)
(c)
(d)
Total current financial assets
Financial assets relating to Discontinued operations/Non-current
assets held for sale
Total non-current and current financial assets
e=(b+c+d)
(f)
g=(a+e+f)
12.31.2020
12.31.2019
—
40
1,970
44
213
2,267
43
2,310
—
767
325
1,092
—
13
97
50
2
162
1,254
55
4,829
6,138
—
8,448
—
43
2,051
6
—
2,100
51
2,151
—
728
149
877
—
13
101
5
3
122
999
58
3,138
4,195
65
6,411
Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial
instruments".
Financial receivables for lease contracts refer to:
■
finance leases on user rights and equipment;
■ commercial offers for TIM Consumer and Business customers involving the rental of ADSL routers;
■ contracts for the rental of products to TIM customers with ancillary services ("full rent formula") and leasing
contracts entered into in prior years by Teleleasing with TIM customers;
■ agreements for the sale of network infrastructure in IRU with deferred collection over time recognized using
the financial method envisaged by IFRS 16 given the contractual term substantially close to the economic
life of the asset.
Consolidated financial statements
of the TIM Group
Note 10
Financial assets (non-current and current)
178
Hedging derivatives relating to hedged items classified as non-current assets/liabilities of a financial nature
mainly refer to the mark-to-market spot valuation component of the hedging derivatives, whereas hedging
derivatives relating to hedged items classified as current assets/liabilities of a financial nature refer to
accrued income on such derivative contracts.
Non-hedging derivatives consist mainly of the mark-to-market component of the non-hedging derivatives of
the Brazil Business Unit. More specifically, they include 25 million euros in relation to the option to subscribe
shares of C6 Bank with which TIM S.A. entertains commercial relations.
Further details are provided in the Note "Derivatives".
Other financial receivables refer 200 million euros to the Vendor Loan that TIM S.p.A. is owed by Ardian (through
the financial vector Impulse I) following the transaction by means of which TIM S.p.A. conferred 30.2% of INWIT’s
shares to Daphne 3.
Securities other than investments included in current financial assets relate to:
■ 767 million euros of listed securities, of which 320 million euros of Italian and European treasury bonds
purchased by Telecom Italia Finance S.A., as well as 447 million euros of bonds purchased by Telecom Italia
Finance S.A. with different maturities, all with an active market and consequently readily convertible into
cash. Under IFRS 9 and consistently with the Business model, such securities are classified as financial assets
measured at fair value through other comprehensive income (FVTOCI). The purchases of the above
government bonds, which, pursuant to Consob Communication no. DEM/11070007 of August 5, 2011,
represent investments in “Sovereign debt securities”, have been made in accordance with the Guidelines for
the "Management and control of financial risk" adopted by the TIM Group;
■ 325 million euros of investments in monetary funds by the Brazil Business Unit, which, under IFRS 9, are
classified as financial assets measured at fair value through profit or loss (FVTPL).
On the basis of two securities lending agreements signed with Telecom Italia Finance S.A. on November 27, 2019
and thereafter renewed on April 28, 2020, TIM S.p.A. received on loan until February 2, 2021 (renewable term) 98
million euros (nominal) of BTP 03/01/2023 and 150 million euros of BTP 04/15/2021; starting December 1, 2019,
TIM S.p.A loans these securities to the counterparty NatWest.
On January 27, 2021, TIM S.p.A. renewed the securities lending agreement in place with Telecom Italia Finance
S.A., which envisages the lending until February 15, 2023 of 98 million euros (nominal) of BTP 3/1/2023.
On January 29, 2021, TIM S.p.A. borrowed until October 5, 2023 (subject to renewal) 24 million euros (nominal) in
BTP 10/15/2023 and 67.5 million euros (nominal) in BTP 2/1/2026; furthermore TIM S.p.A. lent the counterparty
NatWest said securities in compliance with the agreement stipulated on December 21, 2020.
From an accounting standpoint, in compliance with IAS/IFRS, the assets are shown exclusively in the financial
statements of Telecom Italia Finance S.A., which retains the risks and benefits associated with the position.
Further details are provided in the Note "Accounting standards".
Cash and cash equivalents increased by 1,691 million euros compared to December 31, 2019 and were broken
down as follows:
(million euros)
Liquid assets with banks, financial institutions and post offices
Checks, cash and other receivables and deposits for cash flexibility
Securities other than investments (due within 3 months)
Total
12.31.2020
4,433
—
396
4,829
12.31.2019
2,655
—
483
3,138
The different technical forms of use of available cash at December 31, 2020 had the following characteristics:
■ maturities: investments have a maximum maturity of three months;
■ counterparty risk: deposits have been made with leading high-credit-quality banks and financial institutions
with a rating of at least BBB according to Standard & Poor's with regard to Europe, and with leading local
counterparts with regard to investments in South America;
■ Country risk: deposits have been made mainly in major European financial markets.
Securities other than investments (due within three months) included 395 million euros (482 million euros at
December 31, 2019) of Brazilian bank certificates of deposit (Certificado de Depósito Bancário) held by the Brazil
Business Unit with premier local banking and financial institutions.
Consolidated financial statements
of the TIM Group
Note 10
Financial assets (non-current and current)
179
NOTE 11
MISCELLANEOUS RECEIVABLES AND OTHER
NON-CURRENT ASSETS
These decreased by 471 million euros compared to December 31, 2019. The figure breaks down as follows:
(million euros)
Miscellaneous receivables (non-current)
Other non-current assets
Deferred contract costs
Other cost deferrals
Total
12.31.2020
516
1,522
76
1,598
2,114
of which
Financial
Instruments
151
151
12.31.2019
987
1,554
44
1,598
2,585
of which
Financial
Instruments
245
245
(a)
(b)
(a+b)
Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial
instruments".
Miscellaneous non-current receivables totaled 516 million euros (987 million euros at December 31, 2019) and
included Non-current income tax receivables of 64 million euros (84 million euros at December 31, 2019).
This item was mainly due to the Brazil Business Unit (467 million euros; 944 million euros at December 31, 2019).
In particular, the Brazil Business Unit at December 31, 2020 had non-current receivables for indirect taxes totaling
296 million euros, including receivables arising from the favorable outcome of tax disputes related to the
inclusion of ICMS indirect tax in the basis of the calculation of the PIS/COFINS contribution (for more details, see
the note on "Pending disputes and legal action, other information, commitments and guarantees" and
receivables for court deposits of 126 million euros (225 million euros at December 31, 2019).
Other non-current assets amounted to 1,598 million euros (1,598 million euros at December 31, 2019). They
mainly break down as follows:
■
Deferred contract costs of 1,522 million euros (1,554 million euros at December 31, 2019), mainly related
to the deferral of costs related to the activation and acquisitions of new contracts with customers.
Contractual costs (mainly technical activation costs and commissions for the sales network) were deferred
and charged to the separate consolidated income statement according to the expected duration of the
contractual relationship with customers (on average around 3 years for the mobile business and 7 years for
the fixed-line business).
Total (non-current and current) deferred contract costs amounted to 2,139 million euros (2,172 million
euros at December 31, 2019) and break down as follows:
(million euros)
Deferred contract costs
Non-current deferred contract costs
Current deferred contract costs
Total
(million euros)
Deferred contract costs
Contract acquisition costs
Contract execution costs
Total
12.31.2020
12.31.2019
1,522
617
2,139
1,554
618
2,172
12.31.2020
12.31.2019
1,132
1,007
2,139
1,146
1,026
2,172
Consolidated financial statements of the
TIM Group
Note 11
Miscellaneous receivables and other non-current assets
180
Changes to comprehensive deferred contract costs in FY 2020 are as follows:
(million euros)
12.31.2019
Increase
Contract acquisition costs
Contract execution costs
Total
1,146
1,026
2,172
366
232
598
Release to
income
statement
(372)
(251)
(623)
Exchange
differences and
other changes
(8)
—
(8)
12.31.2020
1,132
1,007
2,139
The deferred contract costs will be recognized in the income statement for future years and, in particular,
of around 617 million euros in 2021, based on the amount at December 31, 2020 without taking into account
the new deferred portions.
(million euros)
12.31.2020
Contract acquisition costs
Contract execution costs
Total
2021
355
262
617
1,132
1,007
2,139
year of recognition in the income statement
2025
2024
2023
2022
268
236
504
188
197
385
132
149
281
93
94
187
After
2025
96
69
165
■
Other deferred costs of 77 million euros, mainly attributable to the Parent and to companies of the Brazil
Business Unit and the Telecom Italia Sparkle group.
Consolidated financial statements of the
TIM Group
Note 11
Miscellaneous receivables and other non-current assets
181
NOTE 12
INCOME TAX EXPENSE (CURRENT AND
DEFERRED)
CURRENT INCOME TAX RECEIVABLES
Non-current and current income tax receivables at December 31, 2020 amounted to 150 million euros (233
million euros at December 31, 2019).
Specifically, they consisted of:
■ non-current income tax receivables of 64 million euros (84 million euros at December 31, 2019);
■ current income tax receivables of 86 million euros (149 million euros at December 31, 2019), relating to the
companies of the Brazil Business Unit (39 million euros) and the Domestic Business Unit (47 million euros).
In addition, as regards IRES of the Parent Company TIM S.p.A., receivables were transferred for 303 million
euros, also originating from the patent box benefit.
Deferred tax assets and deferred tax liabilities
The net balance of 7,219 million euros at December 31, 2020 (694 million euros at December 31, 2019) breaks
down as follows.
(million euros)
Deferred tax assets
Deferred tax liabilities
Total
12.31.2020
7,496
(277)
7,219
12.31.2019
942
(248)
694
Deferred tax assets at December 31, 2020 mainly referred to the Domestic Business Unit, at 7,383 million euros.
At December 31, 2019, deferred tax assets mainly referred to the Domestic Business Unit, at 919 million euros.
As at December 31, 2020, the Parent Company TIM S.p.A. benefits from the possibility of realigning the tax values
to the greater value of the assets booked, specifically the value of goodwill of 23,051 million euros, as envisaged
by Decree Law 104/2020, Art. 110, subsections 8 and 8 bis. This will result, in exchange for payment of substitute
tax in the amount of 3% of the realigned value (692 million euros), in the deduction over 18 years, starting 2021,
of the tax amortization of the realigned value of 23,051 million euros. These deductions will generate benefits in
terms of IRES and IRAP, recognized as at December 31, 2020 amongst deferred tax assets for 6,569 million euros.
Deferred tax assets recorded are entirely recoverable, taking into account the possible absorption through future
taxable income of the Parent Company, including considering the carrying forward, with no limit in time, of the
IRES losses that may be verified in the event of a temporary incapacity of taxable income.
Deferred tax liabilities mainly refer to Telecom Italia Capital for 252 million euros (213 million euros at December
31, 2019) and the Domestic Business Unit for 13 million euros (12 million euros at December 31, 2019).
Since the presentation of deferred tax assets and liabilities in the financial statements takes into account the
offsets by legal entity when applicable, the composition of the gross amounts before offsets is presented below:
(million euros)
Deferred tax assets
Deferred tax liabilities
Total
12.31.2020
7,931
(712)
7,219
12.31.2019
1,578
(884)
694
Consolidated financial statements
of the TIM Group
Note 12
Current and deferred income taxes
182
The temporary differences which made up this line item at December 31, 2020 and 2019, as well as the
movements during 2020 were as follows:
(million euros)
12.31.2019 Recognized
in profit or
loss
Recognized
in equity
Change in scope
of consolidation
and other
changes
12.31.2020
Deferred tax assets
Tax loss carried forward
Derivatives
Provision for bad debts
Provisions for risks and charges
Taxed depreciation and amortization
Tax realignment pursuant to Decree Law
104/2020 Art. 110
Other deferred tax assets
Total
Deferred tax liabilities
Derivatives
Business combinations - for step-up of net
assets in excess of tax basis
Accelerated depreciation
Brazil BU - exclusion of ICMS from the PIS and
COFINS calculation basis
Other deferred taxes
Total
Total deferred tax assets net of deferred tax
liabilities
180
598
174
397
104
—
125
1,578
(472)
(96)
(13)
(226)
(77)
(884)
694
(36)
3
(28)
(111)
(8)
6,569
41
6,430
(24)
2
(44)
173
(18)
89
6,519
24
(1)
23
(39)
(1)
(40)
(17)
(44)
(20)
(26)
(10)
(100)
3
28
4
53
35
123
23
100
625
126
260
96
6,569
155
7,931
(532)
(67)
(53)
—
(60)
(712)
7,219
The expirations of deferred tax assets and deferred tax liabilities at December 31, 2020 were the following:
(million euros)
Within 1 year
Beyond 1 year Total at 12.31.2020
Deferred tax assets
Deferred tax liabilities
Total deferred tax assets net of deferred tax liabilities
670
(65)
605
7,261
(647)
6,614
7,931
(712)
7,219
At December 31, 2020, the TIM Group had unused tax loss carryforwards of 1,730 million euros, mainly relating
to the Brazil Business Unit and the company Telecom Italia Finance, with the following expiration dates:
Year of expiration
2021
2022
2023
2024
2025
Expiration after 2025
Without expiration
Total unused tax loss carryforwards
(million euros)
—
1
1
3
1
29
1,695
1,730
Unused tax loss carryforwards considered in the calculation of deferred tax assets amounted to 323 million euros
at December 31, 2020 (536 million euros at December 31, 2019) and mainly referred to the Parent Company TIM
S.p.A. and to the Brazil Business Unit. Deferred tax assets were recognized as it was considered probable that
taxable income will be available in the future against which the tax losses can be utilized.
Consolidated financial statements
of the TIM Group
Note 12
Current and deferred income taxes
183
On the other hand, deferred tax assets relative to foreign subsidiaries of 354 million euros (393 million euros at
December 31, 2019) were not recognized on 1,408 million euros of tax loss carry-forwards since, at the reporting
date, their recoverability was not considered probable.
At December 31, 2020, deferred tax liabilities were not recognized on approximately 0.8 billion euros of tax-
suspended reserves and undistributed earnings of subsidiaries, because the TIM Group is in a position to control
the timing of the distribution of those reserves and it is probable that those accumulated earnings will not be
distributed in the foreseeable future. The contingent liabilities relating to taxes that should be recognized, if these
reserves are distributed, are in any case not significant.
Income tax payable
Current income tax payables amounted to 764 million euros (145 million euros at December 31, 2019). They break
down as follows:
(million euros)
Income tax payables:
non-current
Current
Total
12.31.2020
12.31.2019
493
271
764
61
84
145
The current portion, of 271 million euros, mainly refers to the Brazil Business Unit (18 million euros) and the
Domestic Business Unit (237 million euros) and includes the first installment of the substitute tax pursuant to
Decree Law 104/2020, Art. 110, paragraphs 8 and 8 bis of the Parent Company (231 million euros). The non-
current portion, of 493 million euros, refers to the Brazil Business Unit (31 million euros) and the Domestic
Business Unit (462 million euros) and includes the additional two installments of substitute tax pursuant to
Decree Law 104/2020, Art. 110, paragraphs 8 and 8 bis of the Parent Company (461 million euros)
Income tax expense
The income tax expense for FYs 2020 and 2019 is detailed below:
(million euros)
Current taxes for the year
Net difference in prior year estimates
Total current taxes
Deferred taxes
Total taxes on income from continuing operations
Taxes on income from Discontinued operations/Non-current assets held
for sale
Total income tax expense for the year
(a)
(b)
(a+b)
2020
777
(197)
580
(6,535)
(5,955)
—
(5,955)
2019
274
(33)
241
272
513
(16)
497
The lesser current tax for years prior to 2020 reflects the effects of the actual tax return of the Parent Company,
with respect to the estimate made in the 2019 financial statements on the basis of the information available at
the time, in addition to the effects deriving from the ruling signed on August 3, 2020 with the Revenue Agency
for the application of the “patent box” benefit (299 million euros, of which IRES for 254 million euros and IRAP for
45 million euros).
They also reflect the greater tax from previous years of the Brazil Business Unit, mainly consequent to the
procedural changes in the determination of the tax effects deriving from the exclusion of the ICMS tax from the
basis used to calculate the PIS/COFINS contribution.
Income tax also benefits from the recording of deferred tax assets as a consequence of the tax recognition of
higher amounts booked in accordance with Decree Law 104/2020, Art. 110, paragraph 8 and 8 bis for a total of
6,569 million euros (of which 5,532 million euros IRES and 1,037 million euros IRAP).
2019 benefited from lower Parent taxes (-244 million euros) partially offset by the higher deferred tax liabilities
recognized by the Brazil Business Unit mainly against non-recurring income relating to tax credits following the
favorable outcome of the disputes relating to the inclusion of the ICMS tax in the basis for calculating the
PIS/COFINS contribution.
Consolidated financial statements
of the TIM Group
Note 12
Current and deferred income taxes
184
The reconciliation between the theoretical tax expense, using the IRES tax rate in force in Italy (24%), and the
effective tax expense for the years ended December 31, 2020 and 2019 is as follows:
(million euros)
Profit (loss) before tax from continuing operations
Theoretical income tax from continuing operations
Income tax effect on increases (decreases) in variations:
Tax losses of the year not considered recoverable
Tax losses from prior years not recoverable (recoverable) in future years
Previous years' IRES
Prepaid IRES tax pursuant to Decree Law 104/2020, Art. 110
Brazil: different tax rate compared to the theoretical rate in force in Italy
Brazil: investment incentives
Other net differences
Effective taxes recognized in the Income Statement, excluding IRAP and
substitute tax
IRAP
Substitute tax pursuant to Decree Law 104/2020 Art. 110
Total effective taxes recognized in the Income Statement from continuing
operations
Effective taxes recognized in the Income Statement from Discontinued
operations/Non-current assets held for sale
Total effective taxes recognized in the Income Statement
(a)
(b)
(a)+(b)
2020
1,397
335
1
(20)
(299)
(5,532)
33
(28)
(137)
(5,647)
(1,000)
692
(5,955)
—
(5,955)
2019
1,739
417
2
(2)
(19)
—
100
(44)
(51)
403
110
—
513
(16)
497
For the analysis of the tax burden related to the Profit (loss) before tax from continuing operations, the impact
of IRAP and substitute tax has been kept separate to avoid any distorting effect, since these taxes only apply to
Italian companies and are calculated on a tax base other than pre-tax profit.
Consolidated financial statements
of the TIM Group
Note 12
Current and deferred income taxes
185
NOTE 13
INVENTORIES
These decreased by 18 million euros compared to December 31, 2019. The figure breaks down as follows:
(million euros)
Raw materials and supplies
Work in progress and semifinished products
Finished goods
Total
12.31.2020
2
2
238
242
12.31.2019
1
2
257
260
Inventories essentially consist of fixed and mobile telecommunications equipment and handsets and related
accessories, as well as office products, special printers and gaming terminals.
Inventories consist of 204 million euros for the Domestic Business Unit (215 million euros at December 31, 2019)
and 38 million euros for the Brazil Business Unit (45 million euros at December 31, 2019).
The period reduction is mainly connected with not only the effect of the change in the exchange rate for the
Brazil Business Unit (-14 million euros), but also the decreasing trends regarding the purchase of mobile
telephony devices and accessories, associated with a more closely targeted commercial and procurement policy
adopted by TIM S.p.A.
Inventories are stated net of a provision for bad debts amounting to 13 million euros (17 million euros at
December 31, 2019).
NOTE 14
TRADE AND MISCELLANEOUS RECEIVABLES
AND OTHER CURRENT ASSETS
These decreased by 511 million euros compared to December 31, 2019. The figure breaks down as follows:
(million euros)
Trade receivables:
Receivables from customers
Receivables from other telecommunications operators
Miscellaneous receivables (current)
Receivables due from others
Other current assets
Contract assets
Deferred contract costs
Other cost deferrals
Other
Total
12.31.2020
of which
Financial
Instruments
12.31.2019
of which
Financial
Instruments
2,140
765
2,905
516
25
617
217
66
925
4,346
2,140
765
2,905
85
25
25
3,015
2,437
815
3,252
691
34
618
176
86
914
4,857
2,437
815
3,252
119
34
34
3,405
(a)
(b)
(c)
(a+b+c)
Consolidated financial statements
of the TIM Group
Note 14
Trade and miscellaneous receivables and other current assets
186
Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial
instruments".
The analyses of the aging of the financial instruments included in Trade and miscellaneous receivables and other
current assets at December 31, 2020 and December 31, 2019 are provided below:
(million euros)
12.31.2020
Trade and miscellaneous receivables
and other current assets
3,015
of which
non-
overdue
2,388
of which
overdue
627
(million euros)
12.31.2019
Trade and miscellaneous receivables
and other current assets
3,405
of which
non-
overdue
2,642
of which
overdue
763
0-90 days
of which overdue from:
181-365
days
102
91-180
days
133
116
0-90 days
of which overdue from:
181-365
days
118
91-180
days
100
254
More than
365 days
276
More than
365 days
291
Non-overdue receivables fell by 254 million euros compared to December 31, 2019.
This trend is mainly due to the decreases in 2020 of TIM S.p.A. (83 million euros), the Telecom Italia Sparkle group
companies (18 million euros) and Olivetti (18 million euros), partly offset by the entry of the Noovle group
companies into the scope of consolidation (20 million euros); the Brazil Business Unit similarly records a reduction
in non past-due receivables (-168 million euros, including a negative exchange rate effect of approximately 160
million euros).
Overdue receivables fell 136 million euros compared to December 31, 2019.
This change was mainly due to the decreases in 2020 of the Parent Company (56 million euros), the Telecom
Italia Sparkle Group companies (26 million euros), and the Brazil Business Unit (60 million euros, including a
negative exchange rate effect of approximately 50 million euros).
Trade receivables amounted to 2,905 million euros (3,252 million euros at December 31, 2019) and are stated
net of the provision for bad debts of 627 million euros (757 million euros at December 31, 2019). They included 13
million euros (30 million euros at December 31, 2019) of medium/long-term receivables, of which 7 million euros
for agreements for the sale of transmission capacity under Indefeasible Rights of Use (IRU).
Trade receivables mainly related to TIM S.p.A. (2,142 million euros) and the Brazil Business Unit (495 million
euros).
Movements in the provision for bad debts were as follows:
(million euros)
At January 1
Provision charges to the income statement
Utilization and decreases
Change in scope
Exchange differences and other changes
At December 31
12.31.2020
757
282
(369)
1
(44)
627
12.31.2019
769
368
(361)
(14)
(5)
757
More specifically, the provision for bad debt at December 31, 2020 suffered the provisions made in 2020 for a
total of 282 million euros, of which 41 million euros are non-recurring of the Domestic Business Unit in connection
with the COVID-19 health emergency, which resulted in a worsening of the expected credit losses of customers,
consequent to the expected deterioration of the macroeconomic context. For more details, see the Note “Non-
recurring Events and Transactions”.
Consolidated financial statements
of the TIM Group
Note 14
Trade and miscellaneous receivables and other current assets
187
Miscellaneous receivables (current) refer to other receivables amounting to 516 million euros (691 million euros
at December 31, 2019) and are net of a provision for bad debts of 48 million euros (49 million euros at December
31, 2019). Details are as follows:
(million euros)
Advances to suppliers
Receivables from employees
Tax receivables
Receivables for grants from the government and public entities
Sundry receivables
Total
12.31.2020
22
10
254
29
201
516
12.31.2019
10
11
376
44
250
691
Tax receivables mainly relate to the Brazil Business Unit (245 million euros) and are related to local indirect taxes;
specifically, they include the recognition of current tax receivables resulting from the favorable outcome of tax
disputes relating to the inclusion of the indirect tax ICMS (tax on the movement of goods and services) in the
basis for calculating the PIS/COFINS contribution, the use of which began as early as the end of 2019.
Receivables for grants from the government and public entities (29 million euros) mainly relate to Ultra-
Broadband-UBB and Broadband-BB projects. The grants are recognized to the income statement when the
related systems are commissioned.
Sundry receivables mainly include:
■ TIM S.p.A. receivables for with-recourse assignments to factoring companies (37 million euros);
■ miscellaneous receivables from other TLC operators of TIM S.p.A. (34 million euros);
■ TIM S.p.A. receivables in relation to the Universal Service (32 million euros);
■ TIM S.p.A. receivables from social security and pension institutions (24 million euros).
Other current assets include:
■ Contract assets with customers: this item includes the effect of the early recognition of revenues for those
bundle contracts (such as bundles of products and services) with individual performance obligations with a
different recognition timing, in which the goods recognized “at a point in time” are sold at a discounted price,
or for those contracts which, by providing for a discount for a period of time shorter than the minimum
contract term, require, pursuant to IFRS 15, a reallocation of the discount over the minimum contractual
term. Contract Assets at December 31, 2020 amounted to 25 million euros (34 million euros at December 31,
2019), net of the related write-down provision of 2 million euros and drop by 9 million euros, since the reversal
to the income statement of the previously accumulated balance was substantially offset by the need to
distribute discounts granted to customers temporally over the minimum contractual term, with particular
reference to those connected with the impact of COVID-19;
■ Deferred contract costs amount to 617 million euros (618 million euros at December 31, 2019) and are
contract costs (mainly technical activation costs and commissions for the sales network) deferred and
recognized in the separate income statement according to the expected duration of the contractual
relationship with customers (on average around 3 years for the mobile business and 7 years for the fixed-
line business). Further details on Deferred contract costs are provided in the Note “Miscellaneous receivables
and other non-current assets”.
■ Other deferred costs mainly concern:
•
•
•
the Parent Company essentially for the deferral of costs related to rental charges and other lease and
rental costs (139 million euros), the deferral of costs for the purchase of products and services (28 million
euros), deferral of after-sales expenses on application offers (19 million euros), insurance premiums (4
million euros) and maintenance fees (2 million euros);
the Telecom Italia Sparkle group, mainly concerning the deferral of costs connected with leases for
circuits and maintenance fees (12 million euros);
the Brazil Business Unit, essentially for insurance premiums (around 7 million euros).
Consolidated financial statements
of the TIM Group
Note 14
Trade and miscellaneous receivables and other current assets
188
NOTE 15
DISCONTINUED OPERATIONS/NON-CURRENT
ASSETS HELD FOR SALE
This item is null at December 31, 2020.
At December 31, 2019 the item referred to the Assets and Liabilities of the company Infrastrutture Wireless
Italiane S.p.A. (INWIT).
Concerning INWIT, we remind readers that:
■ on December 19, 2019 the INWIT Shareholders’ Meeting approved the merger by incorporation of Vodafone
Towers S.r.l. into INWIT;
■ on March 6, 2020 the European Commission cleared the combination of INWIT’s passive network
infrastructure with Vodafone Italy’s towers;
■ on March 25, 2020 the merger between INWIT and Vodafone Towers S.r.l. in INWIT was finalized with the
execution of the related agreements for the merger of Vodafone Towers S.r.l. with INWIT;
■ The merger became effective from March 31, 2020;
The finalization of the merger involved the dilution of the INWIT stake owned by the TIM Group in the share
Capital of this company from 60% to 37.5%. As a result, as of this date, INWIT S.p.A. has been measured using
the equity method.
For further details, see the note "Investments".
The dilution also resulted in the recognition of a net capital gain of 441 million euros in the item "Other income
from investment" of the TIM Group's Separate Consolidated Income Statement for 2020.
At December 31, 2019, considering that the completion of the integration transaction described above by 2020
was highly probable, INWIT was presented as an “Asset held for sale”.
The composition of the Assets and Liabilities held for sale is detailed below:
(million euros)
Discontinued operations/Non-current assets held for sale:
of a financial nature
of a non-financial nature
Total
Liabilities directly associated with Discontinued operations/Non-
current assets held for sale
of a financial nature
of a non-financial nature
Total
Net value of assets held for sale
12.31.2020
12.31.2019
—
—
—
—
—
—
65
4,582
4,647
655
150
805
3,842
(a)
(b)
(a-b)
The assets of a financial nature are broken down as follows:
(million euros)
Non-current financial assets
Current financial assets
Total
12.31.2020
—
—
—
12.31.2019
—
65
65
Consolidated financial statements
of the TIM Group
Note 15
Discontinued operations/Non-current assets held for sale
189
Non-financial assets are broken down as follows:
(million euros)
Non-current assets
Intangible assets
Tangible assets
Rights of use assets
Other non-current assets
Current Assets
Total
Financial liabilities are broken down as follows:
(million euros)
Non-current financial liabilities
Current financial liabilities
Total
Non-financial liabilities are broken down as follows:
(million euros)
Non-current liabilities
Current liabilities
Total
12.31.2020
12.31.2019
3,611
284
636
9
4,540
42
4,582
12.31.2019
552
103
655
12.31.2019
105
45
150
—
—
12.31.2020
—
—
—
12.31.2020
—
—
—
∂
FY 2019 Profit from Discontinued operations/Non-current assets held for sale was 16 million euros and reflected
a partial repayment of taxes, whose collection became certain during the year, connected to the sale of the
Sofora-Telecom Argentina group in 2016.
Consolidated financial statements
of the TIM Group
Note 15
Discontinued operations/Non-current assets held for sale
190
NOTE 16
EQUITY
Composed as follows:
(million euros)
Equity attributable to Owners of the Parent
Non-controlling interest
Total
12.31.2020
26,215
2,625
28,840
12.31.2019
20,280
2,346
22,626
As regards the Equity attributable to Owners of the Parent, its composition is detailed below:
(million euros)
Share capital
Additional paid-in capital
Other reserves and retained earnings (accumulated losses), including profit
(loss) for the year
Reserve for financial assets measured at fair value through other
comprehensive income
Reserve for hedging instruments
Reserve for exchange rate differences on translating foreign operations
Reserve for remeasurements of employee defined benefit plans (IAS 19)
Other profits (losses) of associates and joint ventures accounted for
using the equity method
Sundry reserves and retained earnings (accumulated losses), including
profit (loss) for the year
Total
20
(350)
(2,538)
(119)
—
15,481
12.31.2020
11,588
2,133
12,494
12.31.2019
11,587
2,094
6,599
19
(440)
(1,417)
(124)
—
8,561
26,215
20,280
At December 31, 2020, the share capital was 11,588 million euros, already net of treasury shares for 89 million
euros (11,587 million euros, already net of treasury shares for 90 million euros at December 31, 2019).
The reduction in treasury shares was related to the sale of shares based on the "Special Award 2016-2019"
compensation plan.
For further details, please refer to the Note “Equity Compensation Plans”.
Parent Company share capital carries a restriction on tax suspension for an amount of 11,104 million euros (1,191
million at December 31, 2019). The increase on December 31, 2019 of 9,913 million euros meets the condition
laid down by Decree Law 104/2020, Art. 110, subsection 8, in connection with the tax recognition of the higher
booked values. Further details are provided in the Note “Shareholders' Equity” of the Separate Financial
Statements at December 31, 2020 of TIM S.p.A.
Movements in share capital during 2020 are presented in the following tables:
Reconciliation between the number of shares outstanding at December 31, 2019 and December 31, 2020
(number of shares)
Ordinary shares issued
less: treasury shares
Ordinary shares outstanding
Savings shares issued and outstanding
Total TIM S.p.A. shares issued
Total TIM S.p.A. shares outstanding
at 12/31/2019
15,203,122,583
(163,754,388)
15,039,368,195
6,027,791,699
21,230,914,282
21,067,159,894
Share
assignment/issue
126,343,913
2,492,305
128,836,218
—
126,343,913
128,836,218
(a)
(b)
(c)
(d)
(a+d)
(c+d)
15,329,466,496
(161,262,083)
15,168,204,413
6,027,791,699
21,357,258,195
21,195,996,112
as at 12.31.2020 % on the Share
Capital
71.78 %
28.22 %
100.00 %
Consolidated financial statements
of the TIM Group
Note 16
Equity
191
Reconciliation between the value of shares outstanding at December 31, 2019 and December 31, 2020
(million euros)
Ordinary shares issued
less: treasury shares
Ordinary shares outstanding
Savings shares issued and outstanding
Total TIM S.p.A. share capital issued
Total TIM S.p.A. share capital outstanding
Share capital at
12/31/2019
Change in share
capital
Share
capital at
12/31/2020
(a)
(b)
(c)
(d)
(a+d)
(c+d)
8,362
(90)
8,272
3,315
11,677
11,587
—
1
1
—
—
1
8,362
(89)
8,273
3,315
11,677
11,588
The total value of ordinary treasury shares at December 31, 2020, amounting to 507 million euros, was recorded
as follows: the part relating to accounting par value (89 million euros) recognized as a deduction from the share
capital issued and the remaining part as a deduction from Other reserves and retained earnings (accumulated
losses), including profit (loss) for the year.
Disclosure on share capital
The ordinary and savings shares of TIM S.p.A. are listed in Italy (FTSE index).
In the shareholder resolutions passed to increase share capital against cash payments, the pre-emption right
can be excluded to the maximum extent of ten percent of the pre-existing share capital, on condition that the
issue price corresponds to the market price of the shares and that this is confirmed in a specific report issued by
the firm charged with the audit of the Company.
The Group sources itself with the capital necessary to fund its business development and operation
requirements; the sources of funds are found in a balanced mix of equity, permanently invested by the
shareholders, and debt capital, to guarantee a balanced financial structure and minimize the total cost of capital,
with a resulting advantage to all the stakeholders.
Debt capital is structured according to different maturities and currencies to ensure an adequate diversification
of the sources of funding and an efficient access to external sources of financing (taking advantage of the best
opportunities offered in the financial markets of the euro, U.S. dollar and Pound sterling areas to minimize costs),
taking care to reduce the refinancing risk.
The remuneration of equity is proposed by the board of directors to the shareholders’ meeting, during which the
annual financial statements are approved, based upon market trends and business performance, once all the
other obligations are met, including debt servicing. Therefore, to ensure an adequate remuneration of capital,
safeguard company continuity and business development, the Group constantly monitors the change in debt
levels in relation to equity, the level of net debt and the operating margin of industrial operations.
Privileges of savings shares
The privileges of TIM S.p.A. savings shares are indicated below:
■
the profit shown in the duly approved financial statements, after deducting the amount to be allocated to
the legal reserve, must be distributed to the holders of savings shares in an amount up to 5% of the 0.55
euros per share;
■ after assigning preferred dividends to the savings shares, the distribution of which is approved by the
shareholders' meeting, the remaining profit shall be allocated among all the shares, so that savings shares
are entitled to higher overall dividends than ordinary shares would be entitled to the extent of 2% of 0.55
euros per share;
Consolidated financial statements
of the TIM Group
Note 16
Equity
192
■ when, in any one year, dividends of below 5% of the 0.55 euros per share are paid to the savings shares, the
difference is determined as an increase of the privileged dividend in the next two subsequent years;
■
in the event of a distribution of reserves, savings shares have the same rights as the other shares. Moreover,
when there is no profit or insufficient profit is reported in the financial statements for a given year to satisfy
the aforesaid savings shares privileges, the Shareholders’ Meeting called to approve those financial
statements may choose to satisfy the dividend right and/or the higher dividend right by distributing available
reserves. The distribution of available reserves for such payments excludes the application of the mechanism
extending the right to the preferred dividend not paid through the distribution of profits for the following two
years;
■
the reduction of share capital as a result of losses does not affect the savings shares except for the amount
of the loss which is not covered by the portion of the share capital represented by the other shares;
■ upon the wind-up of TIM S.p.A., the savings shares have a pre-emption right in the reimbursement of capital
up to the amount of 0.55 euros per share;
■
in the event of the cessation of trading in the Company's ordinary or savings shares, the holder of savings
shares may ask TIM S.p.A. to convert his/her shares into ordinary shares, using the method selected during
a special session of the shareholders' meeting called for that purpose within two months of being excluded
from trading.
Additional paid-in capital, totaling 2,133 million euros, increases by 39 million euros on December 31, 2019 as a
consequence of the November 27, 2020 issue of 126,343,913 ordinary shares to service the “2020 Broad-Based
Employee Share Ownership Plan” approved by Telecom Italia S.p.A.’s Shareholders' Meeting on April 23, 2020.
The share premium reserve is entirely restricted under tax suspension in accordance with Decree Law 104/2020,
Art. 110, subsection 8.
Other reserves moved through the Statements of comprehensive income include:
■ The Reserve for financial assets measured at fair value through other comprehensive income, positive for
20 million euros at December 31, 2020, increased by 1 million euros compared to the figure at December 31,
2019. In particular, the change in 2020 includes the profits from the securities portfolio of Telecom Italia
Finance (1 million euros, of which 0.5 million euros were realized), the profits related to other financial assets
held by the Parent Company TIM (4 million euros) and the expenses related to the equity investment in
Fin.Priv. of the Parent Company TIM (4 million euros). This reserve is expressed net of deferred tax liabilities
of 1 million euros (at December 31, 2019, it was expressed net of deferred tax liabilities of 1 million euros).
■ The Reserve for hedging instruments had a negative balance of 350 million euros at December 31, 2020,
(negative 440 million euros at December 31, 2019). This reserve is stated net of deferred tax assets of 110
million euros (at December 31, 2019, it was stated net of deferred tax assets of 140 million euros). In
particular, this reserve includes the effective portion of gains or losses on the fair value adjustments of
derivatives designated as hedges of the exposure to volatility in the cash flows of assets or liabilities
recognized in the financial statements ("cash flow hedge").
■ The Reserve for exchange rate differences on translating foreign operations showed a negative balance
of 2,538 million euros at December 31, 2020 (negative 1,417 million euros at December 31, 2019) and mainly
related to exchange rate differences resulting from the translation into euros of the financial statements of
companies belonging to the Brazil Business Unit (negative for 2,550 million euros versus negative for 1,439
million euros at December 31, 2019).
■ The Reserve for remeasurements of employee defined benefit plans, negative for 119 million euros,
decreased by 5 million euros compared to December 31, 2019. This reserve is stated net of deferred tax assets
of 30 million euros (at December 31, 2019, it was stated net of deferred tax assets of 31 million euros). In
particular, this reserve includes the recognition of changes in actuarial gains (losses).
■ The Other profits (losses) of associates and joint ventures accounted for using the equity method is nil at
both December 31, 2020 and December 31, 2019.
Other sundry reserves and retained earnings (accumulated losses), including profit (loss) for the year
amounted to 15,481 million euros and increased by 6,920 million euros, as detailed below:
Consolidated financial statements
of the TIM Group
Note 16
Equity
193
(million euros)
Profit (loss) for the year attributable to Owners of the Parent
Dividends approved - TIM S.p.A.
Issue of equity instruments
Other changes
Change for the year in Sundry reserves and retained earnings (accumulated losses),
including profit (loss) for the year
2020
7,224
(316)
3
9
6,920
2019
916
(166)
4
(3)
751
Part of Other sundry reserves and Accrued profits (losses), including profit for the year of TIM S.p.A. are restricted
under tax suspension in accordance with Decree Law 104/2020, Art. 110, subsection 8..
For more details, reference is made to the “Shareholders' equity” Note of the Parent Company:
In 2020, dividends deliberated by TIM S.p.A. are 316 million euros and refer to the distribution to Shareholders of
a dividend of 0.0100 euro per ordinary share and 0.0275 euro per savings share, gross of statutory withholding
taxes.
In 2019, the dividends deliberated by TIM S.p.A. were 166 million euros and referred to savings shares (dividend
per share of 0.0275 euros).
Non-controlling interests, amounting to 2,625 million euros, mainly refer to Daphne 3 S.p.A. (1,337 million euros)
and the companies of the Brazil Business Unit (1,232 million euros) and shows an increase of 279 million euros
compared to December 31, 2019, as detailed below:
(million euros)
Profit (loss) for the year attributable to Non-controlling interest
Group Company dividends paid to non-controlling shareholders
Changes in the Reserve for exchange differences on translating foreign operations
INWIT – deconsolidation
Daphne 3 - capital increase
Change in the scope of consolidation
Other changes
Change for the year in Equity attributable to Non-controlling interests
2020
128
(62)
(491)
(644)
1,334
—
14
279
2019
326
(130)
(36)
—
—
(44)
11
127
The Group company dividends paid to minority shareholders mainly referred to the Brazil Business Unit for 61
million euros. 2019 dividends mainly referred to the Brazil Business Unit for 75 million euros and to INWIT for 51
million euros.
The Reserve for exchange rate differences on translating foreign operations attributable to non-controlling
interest shows a negative balance of 1,167 million euros at December 31, 2020 (negative for 676 million euros at
December 31, 2019), relating entirely to exchange rate differences arising from the translation into euros of the
financial statements of the companies belonging to the Brazil Business Unit.
Future potential changes in share capital
Details of "Future potential changes in share capital" are presented in the Note "Earnings per share".
Consolidated financial statements
of the TIM Group
Note 16
Equity
194
NOTE 17
FINANCIAL LIABILITIES (NON-CURRENT AND
CURRENT)
Non-current and current financial liabilities (gross financial debt) are broken down as follows:
(million euros)
Non-current financial liabilities for financing contracts and others
Medium/long-term financial payables:
Bonds
Convertible bonds
Payables to banks
Other financial payables
Other medium/long-term financial liabilities:
Hedging derivatives relating to hedged items classified as non-current
assets/liabilities of a financial nature
Non-hedging derivatives
Other liabilities
Non-current financial liabilities for lease contracts
Total non-current financial liabilities
Current financial liabilities for financing contracts and others
Short-term financial payables:
Bonds
Convertible bonds
Payables to banks
Other financial payables
Other short-term financial liabilities:
Hedging derivatives relating to hedged items classified as current
assets/liabilities of a financial nature
Non-hedging derivatives
Other liabilities
(a)
(b)
c=(a+b)
Current financial liabilities for lease contracts
Total current financial liabilities (*)
Financial liabilities directly associated with Discontinued
operations/Non-current assets held for sale
Total Financial liabilities (Gross financial debt)
(d)
(e)
f=(d+e)
(g)
h=(c+f+g)
12.31.2020
12.31.2019
16,898
1,958
2,772
185
21,813
1,832
10
—
1,842
23,655
4,199
27,854
982
6
2,506
119
3,613
62
2
—
64
3,677
631
4,308
—
32,162
17,848
1,925
3,996
176
23,945
1,659
1
—
1,660
25,605
4,576
30,181
1,952
6
1,048
114
3,120
62
—
—
62
3,182
639
3,821
655
34,657
Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial
instruments".
Consolidated financial statements
of the TIM Group
Note 17
Financial liabilities (non-current and current)
195
Gross financial debt according to the original currency of the transaction is as follows:
12.31.2020
12.31.2019
USD
GBP
BRL
YEN
ILS
EUROS
Total excluding Held for Sale
Held for Sale
Total
(millions of foreign
currency)
5,899
389
8,415
20,030
54
(million euros) (millions of foreign
currency)
5,683
389
9,444
20,030
60
4,807
433
1,320
158
14
25,430
32,162
—
32,162
(million euros)
5,059
457
2,086
164
15
26,221
34,002
655
34,657
For the exchange rates used for the conversion of amounts in foreign currency, see the Note "Additional
information".
The breakdown of gross financial debt by effective interest-rate levels applicable to the original currency is
provided below, excluding the effect of any derivative hedging instruments:
(million euros)
Up to 2.5%
From 2.5% to 5%
From 5% to 7.5%
From 7.5% to 10%
Over 10%
Accruals/deferrals, MTM and derivatives
Total excluding Held for Sale
Held for Sale
Total
12.31.2020
6,047
13,497
6,692
1,906
1,317
2,703
32,162
—
32,162
12.31.2019
5,627
13,793
8,059
2,211
1,794
2,518
34,002
655
34,657
Following the use of hedging derivative instruments, on the other hand, gross financial debt by nominal interest
rate level is:
(million euros)
Up to 2.5%
From 2.5% to 5%
From 5% to 7.5%
From 7.5% to 10%
Over 10%
Accruals/deferrals, MTM and derivatives
Total excluding Held for Sale
Held for Sale
Total
12.31.2020
15,640
8,052
3,352
1,098
1,317
2,703
32,162
—
32,162
12.31.2019
13,224
11,474
3,747
1,245
1,794
2,518
34,002
655
34,657
Consolidated financial statements
of the TIM Group
Note 17
Financial liabilities (non-current and current)
196
The maturities of financial liabilities according to the expected nominal repayment amount, as defined by
contract, are the following:
Details of the maturities of financial liabilities – at nominal repayment amount:
(million euros)
Convertible bonds
Loans and other financial liabilities
Financial lease liabilities
Total
Current financial liabilities
Total
2021
2022
564
1,467
572
2,603
1,148
3,751
3,101
1,265
575
4,941
—
4,941
maturing by Dec. 31 of the year:
2023
2024
2025 After 2025
2,417
650
525
3,592
—
3,592
3,222
189
508
3,919
—
3,919
2,000
579
429
3,008
—
3,008
7,945
317
2,162
10,424
—
10,424
Total
19,249
4,467
4,771
28,487
1,148
29,635
The main components of financial liabilities are commented below.
Bonds are broken down as follows:
(million euros)
Non-current portion
Current portion
Total carrying amount
Fair value adjustment and measurements at amortized cost
Total nominal repayment amount
12.31.2020
16,898
982
17,880
(631)
17,249
12.31.2019
17,848
1,952
19,800
(638)
19,162
Convertible bonds consist of the unsecured equity-linked bond for 2,000 million euros, with a coupon of 1.125%,
issued by TIM S.p.A., convertible into newly-issued ordinary shares, maturing in 2022. This item is broken down
below:
(million euros)
Non-current portion
Current portion
Total carrying amount
Fair value adjustment and measurements at amortized cost
Total nominal repayment amount
12.31.2020
1,958
6
1,964
36
2,000
12.31.2019
1,925
6
1,931
69
2,000
The nominal repayment amount of bonds and convertible bonds totaled 19,249 million euros, down by 1,913
million euros compared to December 31, 2019 (21,162 million euros) as a result of new issues, repayments and
the exchange effect in 2020.
Consolidated financial statements
of the TIM Group
Note 17
Financial liabilities (non-current and current)
197
The following table lists the bonds issued by companies of the TIM Group, by issuing company, expressed both
at the nominal repayment amount, net of bond repurchases, and at market value:
Currency
Total
(millions)
Nominal
repayment
amount
(million
euros)
Coupon
Issue date Maturity
date
Issue price
(%)
Market
price at
12.31.2020
(%)
Market
value at
12.31.2020
(million
euros)
1/23/2014 1/25/2021
1/01/2002 1/01/2022
2/10/2010 2/10/2022
3/26/2015 3/26/2022
1/16/2015 1/16/2023
5/19/2006 5/19/2023
1/19/2017 7/19/2023
1/20/2016 1/19/2024
1/11/2019 4/11/2024
5/30/2014 5/30/2024
4/15/2019 4/15/2025
9/30/2016 9/30/2025
6/28/2018 1/28/2026
5/25/2016 5/25/2026
10/12/2017 10/12/2027
3/17/2005 3/17/2055
563.6
(b) 217.2
883.9
(c) 2,000
1,000
375
1,000
750
1,250
1,500
1,000
1,000
750
1,000
1,250
670
564
217
884
2,000
1,000
417
1,000
750
1,250
1,222
1,000
1,000
750
1,000
1,250
670
14,974
4.500%
6-month Euribor (base 365)
5.250%
1.125%
3.250%
5.875%
2.500%
3.625%
4.000%
5.303%
2.750%
3.000%
2.875%
3.625%
2.375%
5.250%
Bonds issued by TIM S.p.A.
Euro
Euro
Euro
Euro
Euro
GBP
Euro
Euro
Euro
USD
Euro
Euro
Euro
Euro
Euro
Euro
Subtotal
Bonds issued by Telecom Italia Finance S.A. and guaranteed by TIM S.p.A.
Euro
Subtotal
Bonds issued by Telecom Italia Capital S.A. and guaranteed by TIM S.p.A.
USD
USD
USD
USD
Subtotal
Total
815
815
815
815
3,260
19,249
1,000
1,000
1,000
1,000
1,015
1,015
7.750%
1,015
6.375%
10/29/2003 11/15/2033
6.000% 10/06/2004 9/30/2034
7/18/2006 7/18/2036
7.200%
6/04/2008 6/04/2038
7.721%
1/24/2003 1/24/2033
99.447
100
99.295
100
99.446
99.622
99.288
99.632
99.436
100
99.320
99.806
100
100
99.185
99.667
100.527
100
106.072
99.757
105.512
109.783
104.845
107.340
108.418
109.065
104.932
106.935
106.152
110.396
104.428
127.584
(a) 109.646
148.031
99.558
99.081
99.440
100
124.298
121.666
135.574
140.168
567
217
938
1,995
1,055
458
1,049
805
1,355
1,333
1,049
1,069
796
1,104
1,305
855
15,950
1,503
1,503
1,013
992
1,105
1,142
4,252
21,705
(a) Weighted average issue price for bonds issued with multiple tranches.
(b) Reserved for employees.
(c) Bond convertible into newly-issued TIM S.p.A. ordinary treasury shares.
The regulations and the Offering Circulars relating to the bonds of the TIM Group are available on the corporate
website gruppotim.it.
The following table lists the changes in bonds during 2020:
Repayments
(millions of original currency)
Telecom Italia S.p.A. 719 million euros 4.000% (1)
TIM S.A. 1,000 million BRL 104.10% CDI
Telecom Italia S.p.A. 547 million euros 4.875% (2)
Currency Amount
719
1,000
547
Euro
BRL
Euro
Repayment date
21-Jan-20
15-Jul-20
25-Sep-20
(1)
(2)
Net of buy-backs totaling 281 million euros made by the company in 2015.
Net of buy-backs totaling 453 million euros made by the company in 2015.
Medium/long-term payables to banks of 2,772 million euros (3,996 million euros at December 31, 2019) decreased
by 1,224 million euros. Short-term payables to banks totaled 2,506 million euros (1,048 million euros at December
31, 2019) and included 1,470 million euros of the current portion of medium/long-term payables to banks.
Consolidated financial statements
of the TIM Group
Note 17
Financial liabilities (non-current and current)
198
The other medium/long-term financial payables totaled 185 million euros (176 million euros at December 31,
2019), 155 million euros of which refer to the Telecom Italia Finance S.A. loan for JPY 20,000 million, maturing in
2029. Other short-term other financial payables amount to 119 million euros (114 million euros at December 31,
2019) and include 7 million euros of the current portion of other medium/long-term financial payables.
Medium/long-term financial liabilities for lease contracts amounted to 4,199 million euros (4,576 million euros
at December 31, 2019), whilst short-term payables totaled 631 million euros (639 million euros at December 31,
2019) and included 628 million euros in the current portion of financial liabilities for medium/long-term lease
contracts.
With reference to the financial lease liabilities recognized in 2020 and 2019, the following is noted:
(million euros)
Principal reimbursements
Cash out interest portion
Total
12.31.2020
699
256
955
12.31.2019
792
336
1,128
Hedging derivatives relating to items classified as non-current financial liabilities amount to 1,832 million euros
(1,659 million euros at December 31, 2019). Hedging derivatives relating to items classified as current financial
liabilities totaled 62 million euros (62 million euros at December 31, 2019).
Non-hedging derivatives classified as non-current financial liabilities came to 10 million euros (1 million euros
at December 31, 2019), while non-hedging derivatives classified under current financial liabilities amounted to 2
million euros (zero million euros at December 31, 2019). These also include the measurement of derivatives
which, although put into place for hedging purposes, do not meet the formal requirements to be considered as
such under IFRS.
Covenants and negative pledges in place at December 31, 2020
Bonds issued by the TIM Group do not contain financial covenants (e.g. ratios such as Debt/EBITDA,
EBITDA/Interest, etc.) or clauses that result in the automatic early redemption of the bonds in relation to events
other than the insolvency of the TIM Group1; furthermore, the repayment of the bonds and the payment of
interest are not covered by specific guarantees nor are there commitments provided relative to the assumption
of future guarantees, except for the full and unconditional guarantees provided by TIM S.p.A. for the bonds issued
by Telecom Italia Finance S.A. and Telecom Italia Capital S.A..
Since these bonds have been placed principally with institutional investors in main world capital markets
(Euromarket and USA), the terms which regulate the bonds are in line with the market practice for similar
transactions effected on these same markets; consequently, for example, there are commitments not to use the
company’s assets as collateral for loans (negative pledges).
Regarding loans taken out by TIM S.p.A. from the European Investment Bank (EIB), at December 31, 2020 the
nominal total of outstanding loans was 850 million euros, none of it backed by a bank guarantee.
The two EIB loans signed on December 14, 2015 and November 25, 2019 contain the following covenants:
■
in the event the company becomes the target of a merger, demerger or contribution of a business segment
outside the Group, or sells, disposes of or transfers assets or business segments (except in certain cases,
expressly provided for), it shall immediately inform the EIB which shall have the right to ask for guarantees
to be provided or changes to be made to the loan contract, or, only for certain loan contracts, the EIB shall
have the option to demand the immediate repayment of the loan (should the merger, demerger or
contribution of a business segment outside the Group compromise the Project execution or cause a prejudice
to EIB in its capacity as creditor);
■ TIM undertook to ensure that, for the entire duration of the loan, the total financial debt of the Group
companies other than TIM S.p.A. – except for the cases when that debt is fully and irrevocably secured by
TIM S.p.A. – is lower than 35% (thirty-five percent) of the Group's total financial debt;
■
“Inclusion clause", under which, in the event TIM commits to uphold financial covenants in other loan
contracts (and even more restrictive clauses for the 2015 direct risk loan, including, for instance, cross default
clauses and commitments restricting the sale of goods) that are not present in or are stricter than those
granted to the EIB, the EIB will have the right – if, in its reasonable opinion, it considers that such changes
1A change of control event can result in the early repayment of the convertible bond of TIM S.p.A., as further detailed below.
Consolidated financial statements
of the TIM Group
Note 17
Financial liabilities (non-current and current)
199
may have a negative impact on TIM's financial capacity – to request the provision of guarantees or an
amendment of the loan contract in order to establish an equivalent provision in favor of the EIB;
■
"Network Event", under which, in the event of the disposal of the entire fixed network or of a substantial part
of it (in any case, more than half in quantitative terms) to third parties not controlled by the Company, or in
the event of disposal of the controlling interest in the company in which the network or a substantial part of
it has previously been transferred, TIM must immediately inform the EIB, which may then opt to demand
collateral or an amendment of the loan contract or choose an alternative solution.
The loan agreements of TIM S.p.A. do not contain financial covenants (e.g. ratios such as Debt/EBITDA,
EBITDA/Interests, etc.) which would oblige the Company to repay the outstanding loan if the covenants are not
observed.
The loan agreements contain the usual other types of covenants, including the commitment not to pledge the
Company’s assets as collateral for loans (negative pledge) and the commitment not to change the business
purpose or sell the assets of the Company unless specific conditions exist (e.g. the sale takes place at fair market
value). Covenants with basically the same content can be found in the export credit loan agreement.
In the Loan Agreements and the Bonds, TIM is required to provide notification of change of control. Identification
of the occurrence of a change of control and the applicable consequences – including, at the discretion of the
investors, the establishment of guarantees or the early repayment of the amount paid in cash or as shares and
the cancellation of the commitment in the absence of agreements to the contrary – are specifically covered in
the individual agreements.
In addition, the outstanding loans generally contain a commitment by TIM, whose breach is an Event of Default,
not to implement mergers, demergers or transfers of business, involving entities outside the Group. Such an
Event of Default may entail, upon request of the Lender, the early redemption of the drawn amounts and/or the
annulment of the undrawn commitment.
The documentation of the loans granted to certain companies of the Tim Brasil group contain general obligations
to comply with certain financial ratios (e.g. capitalization ratios, debt servicing ratios and debt ratios), as well as
the usual other covenants, under penalty of a request for the early repayment of the loan.
Finally, as at December 31, 2020, no covenant, negative pledge or other clause relating to the debt position, had
in any way been breached or violated.
Revolving Credit Facility
The following table shows committed credit lines available at December 31, 2020.
(billion euros)
Revolving Credit Facility – maturing January 2023
Bridge to Bond Facility – maturing May 2021
Total
12.31.2020
Agreed
5.0
1.7
6.7
Drawn down
—
—
—
12.31.2019
Agreed
5.0
—
5.0
Drawn down
—
—
—
At December 31, 2020, TIM had bilateral Term Loans for 1,500 million euros with various banking counterparties
and overdraft facilities for 490 million euros, drawn down for the full amount.
On May 18, 2020 TIM created a new credit line, structured as a bridge to bond, for later issuing on the bond
market, for 1.7 billion euros and initially maturing after 12 months, with the option of extension for another 12
months.
On January 18, 2021, TIM issued its first 8-year Sustainability Bond for an amount of 1 billion euros, coupon
1.625%.
On January 19, 2021, TIM decided to totally cancel the unused 1.7 billion euro Bridge to Bond line.
TIM's rating at December 31, 2020
At December 31, 2020, the three rating agencies – Standard & Poor's, Moody's and Fitch Ratings – rated TIM as
follows:
STANDARD & POOR'S
MOODY'S
FITCH RATINGS
Rating
BB+
Ba2
BB+
Outlook
Negative
Negative
Stable
Consolidated financial statements
of the TIM Group
Note 17
Financial liabilities (non-current and current)
200
NOTE 18
NET FINANCIAL DEBT
The following table shows the net financial debt at December 31, 2020 and December 31, 2019, calculated in
accordance with the criteria indicated in the “Recommendations for the Consistent Implementation of the
European Commission Regulation on Prospectuses”, issued on February 10, 2005 by the European Securities &
Markets Authority (ESMA) and adopted by Consob.
For the purpose of determining such figure, the amount of financial liabilities has been adjusted by the effect
of the relative hedging derivatives recorded in assets and the receivables arising from financial subleasing.
This table also shows the reconciliation of the net financial debt determined according to the criteria indicated
by the ESMA with the net financial debt calculated according to the criteria of the TIM Group.
(million euros)
Non-current financial liabilities
Current financial liabilities
Financial liabilities directly associated with Discontinued
operations/Non-current assets held for sale
Total Gross Financial Debt
Non-current financial assets (°)
Non-current financial receivables arising from lease contracts
Non-current hedging derivatives
Current financial assets
Securities other than investments
Current financial receivables arising from lease contracts
Financial receivables and other current financial assets
Cash and cash equivalents
Financial assets relating to Discontinued operations/Non-current
assets held for sale
Net financial debt as per Consob communication DEM/6064293/2006
(ESMA)
Non-current financial assets (°)
Securities other than investments
Other financial receivables and other non-current financial assets
Net financial debt (*)
Reversal of fair value measurement of derivatives and related financial
liabilities/assets
Adjusted net financial debt
(a)
(b)
(c)
(d=a+b+c)
(e)
(f=d+e)
(g)
(f+g)
12.31.2020
27,854
4,308
—
32,162
(43)
(1,970)
(2,013)
(1,092)
(55)
(162)
(4,829)
—
(6,138)
24,011
—
(297)
(297)
23,714
(388)
23,326
12.31.2019
30,181
3,821
655
34,657
(51)
(2,051)
(2,102)
(877)
(58)
(122)
(3,138)
(65)
(4,260)
28,295
—
(49)
(49)
28,246
(578)
27,668
(°) At December 31, 2020 and at December 31, 2019, “Non-current financial assets” (b+e) amounted to 2,310 million euros and 2,151 million euros,
respectively.
(*) As regards the effects of related party transactions on net financial debt, reference should be made to the specific table included in the Note
"Related party transactions ".
Consolidated financial statements
of the TIM Group
Note 18
Net financial debt
201
The following additional disclosures are provided in accordance with IAS 7:
Additional cash flow information required by IAS 7
(million euros)
Financial payables
(medium/long-term):
Bonds
Convertible bonds
Amounts due to banks
Other financial payables
of which short-term
Finance lease liabilities
(medium/long-term):
of which short-term
Other financial liabilities
(medium/long-term):
Hedging derivative liabilities
relating to hedged items classified
as non-current assets/liabilities of
a financial nature
Non-hedging derivative liabilities
Other liabilities
of which short-term
Short-term financial payables:
Payables to banks
Other financial payables
Financial liabilities directly
associated with Discontinued
operations/Non-current assets
held for sale:
Total financial liabilities (gross
financial debt)
Hedging derivative receivables
relating to hedged items classified
as current and non-current
assets/liabilities of a financial
nature
Non-hedging derivative
receivables
Cash movements Non-cash movements
12.31.2019 Receipts
and/or
issues
Payments
and/or
reimbursements
Exchange
rate
differences
Fair value
changes
Other changes
and
reclassifications
12.31.2020
19,800
1,931
4,373
183
26,287
2,342
5,215
5,215
639
1,721
1
—
1,722
62
671
107
778
655
655
(a)
(b)
(c)
(d)
(e)
(1,437)
(649)
(5)
(2,091)
(490)
(32)
(6)
(528)
(670)
(670)
(511)
(511)
577
5
582
850
850
99
9
108
2
2
—
—
—
—
38
38
—
(29)
(29)
(f=a+b+c+d+e)
34,657
1,470
(2,790)
(929)
19
19
—
75
2
77
(2)
(2)
—
94
(12)
33
(27)
15
9
(57)
(57)
17,880
1,964
4,242
192
24,278
2,465
4,827
4,827
628
(1)
(1)
365
8
373
(664)
(664)
1,894
12
—
1,906
64
1,036
115
1,151
—
—
(340)
32,162
(g)
(h)
2,152
11
(344)
58
259
25
2,067
94
Total
(i=f-g-h)
32,494
1,470
(2,790)
(643)
(190)
(340)
30,001
Consolidated financial statements
of the TIM Group
Note 18
Net financial debt
202
Additional Cash Flow information
The value of the paid and collected interest expense recognized in the Report on Operations takes into account
the movements relating to transactions in CCIRS derivatives to hedge foreign currency underlying instruments
in both the asset component (collections) and liability component (payments) without netting the positions.
(million euros)
Interest expense paid
Interest income received
Net total
2020
(1,520)
448
(1,072)
2019
(1,750)
589
(1,161)
To consider the components of CCIRS derivatives as a single transaction, a representation is given with interest
flows in and out shown net. This approach gives the following results:
(million euros)
Interest expense paid
Interest income received
Net total
2020
(1,209)
137
(1,072)
2019
(1,341)
180
(1,161)
Consolidated financial statements
of the TIM Group
Note 18
Net financial debt
203
NOTE 19
FINANCIAL RISK MANAGEMENT
Financial risk management objectives and policies of the TIM
Group
The TIM Group is exposed to the following financial risks in the ordinary course of its business operations:
■ Market risk: stemming from changes in interest rates and exchange rates in connection with financial assets
that have been originated and financial liabilities that have been assumed;
■ Credit risk: representing the risk of non-fulfillment of obligations undertaken by the counterparty with regard
to the liquidity investments of the Group;
■ Liquidity risk: connected with the need to meet short-term financial commitments.
These financial risks are managed by:
■
■
■
■
■
the establishment, at central level, of guidelines for directing operations;
the work of an internal committee that monitors the level of exposure to market risks in accordance with
pre-established general objectives;
the identification of the most suitable financial instruments, including derivatives, to reach pre-established
objectives;
the monitoring of the results achieved;
the exclusion of the use of financial instruments for speculative purposes.
The policies for the management and the sensitivity analyses of the above financial risks by the TIM Group are
described below.
Identification of risks and analysis
The TIM Group is exposed to market risks, as a result of changes in interest rates and exchange rates, in the
markets in which it operates or has bond issues, mainly in Europe, the United States, Great Britain and Latin
America.
The financial risk management policies of the TIM Group are directed towards diversifying market risks, hedging
exchange rate risk in full and minimizing interest rate exposure by an appropriate diversification of the portfolio,
which is also achieved by using carefully selected derivative financial instruments.
The Group defines an optimum composition of its debt structure by balancing fixed and variable-rates and uses
derivative financial instruments to achieve that debt composition. In consideration of the Group's operating
activities, the optimum combination of medium/long-term non-current financial liabilities has been identified,
on the basis of the nominal amount, in the 65%-75% range for the fixed-rate component and in the 25%-35%
range for the variable-rate component.
In managing market risk, the Group has adopted Guidelines on "Management and control of financial risk" and
mainly uses the following financial derivatives:
■
Interest Rate Swaps (IRS), to modify the profile of the original exposure to interest rate risks on loans and
bonds, both fixed and variable;
Consolidated financial statements
of the TIM Group
Note 19
Financial risk management
204
■ Cross Currency and Interest Rate Swaps (CCIRS) and Currency Forwards, to convert loans and bonds issued
in currencies other than euro – principally in US dollars and British pounds – to the functional currencies of
the operating companies.
Derivative financial instruments are designated as fair value hedges for managing exchange rate and interest
rate risks on instruments denominated in currencies other than euro and for managing interest rate risk on fixed-
rate loans. Derivative financial instruments are designated as cash flow hedges when the objective is to pre-set
the exchange rate of future transactions and the interest rate.
All derivative financial instruments are entered into with banking and financial counterparties with at least a
“BBB-” rating from Standard & Poor’s or an equivalent rating and a non-negative outlook. The exposure to the
various market risks can be measured by using the sensitivity analysis, as set forth in IFRS 7. This analysis
illustrates the effects produced by a given and assumed change in the levels of the relevant variables in the
various reference markets (exchange rates, interest rates, prices) on finance income and expenses and, at times,
directly on equity. The sensitivity analysis was performed based on the suppositions and assumptions indicated
below:
■ sensitivity analyses were performed by applying reasonably likely changes in the relevant risk variables to
the amounts in the consolidated financial statements at December 31, 2020;
■ changes in value of fixed-rate financial instruments, other than derivatives, produced by changes in the
reference interest rates, generate an impact on profit only when, in accordance with IAS 39 and IFRS 9, they
are accounted for at their fair value through profit and loss. All fixed-rate instruments, which are accounted
for at amortized cost, are not subject to interest rate risk as defined by IFRS 7;
■
in the case of fair value hedge relationships, fair value changes of the underlying hedged item and of the
derivative instrument, due to changes in the reference interest rates, offset each other almost entirely in the
income statement for the year. As a result, these financial instruments are not exposed to the interest rate
risk;
■ changes in the value of designated financial instruments in a cash flow hedge relationship, produced by
changes in interest rates, generate an impact on the debt level and on equity; accordingly, they are included
in this analysis;
■
the changes in value, produced by changes in the reference interest rates, of variable-rate financial
instruments, other than derivatives, which are not part of a cash flow hedge relationship, generate an impact
on the finance income and expenses for the year; accordingly, they are included in this analysis.
Exchange rate risk – Sensitivity analysis
At December 31, 2020 (and also at December 31, 2019), the exchange rate risk of the Group’s loans denominated
in currencies other than the functional currency of the consolidated financial statements was hedged in full.
Accordingly, a sensitivity analysis was not performed on the exchange rate risk.
Interest rate risk – Sensitivity analysis
The change in interest rates on the variable component of payables and liquidity may lead to higher or lower
finance income and expenses, while changes in the level of the expected interest rate affect the fair value
measurement of the Group's derivatives. In particular:
■ with regard to derivatives that convert the liabilities contracted by the Group to fixed rates (cash flow
hedging), in line with international accounting standards that regulate hedge accounting, the fair value
(mark-to-market) measurement of such instruments is set aside in a specific unavailable Equity reserve. The
combined change of the numerous market variables to which the mark-to-market calculation is subject
between the transaction inception date and the measurement date renders any assumption about the trend
of the variables of little significance. As the contract expiration date approaches, the accounting effects
described will gradually be absorbed until they cease to exist;
■
if at December 31, 2020 the interest rates in the various markets in which the TIM Group operates had been
100 basis points higher/lower compared to the actual rates, then higher/lower finance expenses, before the
Consolidated financial statements
of the TIM Group
Note 19
Financial risk management
205
income tax effect, would have been recognized in the income statement of 36 million euros (54 million euros
at December 31, 2019).
Refer to Note "Accounting Policies" for the potential risk generated by the reform of benchmark interest rates.
Allocation of the financial structure between fixed rate and variable
rate
As for the allocation of the financial structure between the fixed-rate component and the variable-rate
component, for both financial assets and liabilities, reference should be made to the following tables. These
tables have been prepared by taking into account the nominal repayment/investment amount (since that
amount expresses the effective interest rate exposure of the Group) and, as far as financial assets are concerned,
the intrinsic nature (financial characteristics and duration) of the transactions under consideration rather than
the stated contractual terms alone. Bearing that in mind, a transaction whose characteristics (short or very short
time frame and frequent renewal) are such that the interest rate is periodically reset on the basis of market
parameters, even though the contract does not call for re-fixing the interest rate (as in the case of bank deposits),
has been considered in the variable rate category.
Total Financial liabilities (at the nominal repayment amount)
(million euros)
Bonds
Loans and other financial liabilities
Total non-current financial liabilities
(including the current portion of
medium/long-term financial liabilities)
Total current financial liabilities (*)
Total excluding Held for Sale
Held for Sale
Total
12.31.2020
Variable
rate
4,551
3,836
8,387
546
8,933
—
8,933
Fixed
rate
14,698
5,402
20,100
602
20,702
—
20,702
Total
19,249
9,238
28,487
1,148
29,635
—
29,635
12.31.2019
Variable
rate
4,760
3,884
8,644
278
8,922
30
8,952
Fixed
rate
16,402
5,550
21,952
495
22,447
627
23,074
Total
21,162
9,434
30,596
773
31,369
657
32,026
Total Financial assets (at the nominal investment amount)
(million euros)
Cash and cash equivalents
Securities
Other receivables
Total excluding Held for Sale
Held for Sale
Total
12.31.2020
Variable
rate
4,433
837
54
5,324
—
5,324
Fixed
rate
—
638
747
1,385
—
1,385
Total
4,433
1,475
801
6,709
—
6,709
12.31.2019
Variable
rate
2,655
749
104
3,508
65
3,573
Fixed
rate
—
604
787
1,391
—
1,391
Total
2,655
1,353
891
4,899
65
4,964
With regard to variable-rate financial instruments, the contracts provide for revisions of the relative parameters
to take place within the subsequent 12 months.
Effective interest rate
As to the effective interest rate, for the categories where that parameter can be determined, such parameter
refers to the original transaction net of the effect of any derivative hedging instruments.
The disclosure, which is provided by class of financial asset and liability, has been determined, for purposes of
calculating the weighted average, using the carrying amount adjusted by accruals, prepayments, deferrals and
Consolidated financial statements
of the TIM Group
Note 19
Financial risk management
206
fair value adjustments: this is therefore the amortized cost, net of accruals and any changes in fair value, as a
consequence of hedge accounting.
Total financial liabilities
(million euros)
Bonds
Loans and other financial liabilities
Total excluding Held for Sale
Held for Sale
Total
12.31.2020
12.31.2019
Adjusted carrying
amount
19,117
10,341
29,458
—
29,458
Effective interest
rate (%)
4.47
3.54
4.14
—
4.14
Adjusted carrying
amount
20,978
10,506
31,484
650
32,134
Effective interest
rate (%)
4.53
4.12
4.39
2.56
4.36
Total Financial assets
(million euros)
Cash and cash equivalents
Securities
Other receivables
Total excluding Held for Sale
Held for Sale
Total
12.31.2020
12.31.2019
Adjusted carrying
amount
4,433
1,475
362
6,270
—
6,270
Effective interest
rate (%)
0.01
0.36
1.25
0.16
—
0.16
Adjusted carrying
amount
2,655
1,353
153
4,161
65
4,226
Effective interest
rate (%)
0.05
0.33
3.35
0.26
0.00
0.26
As for financial assets, the weighted average effective interest rate is not essentially influenced by the existence
of derivatives.
As for market risk management using derivatives, reference should be made to the Note "Derivatives".
Credit risk
Exposure to credit risk for the TIM Group consists of possible losses that could arise from the failure of either
commercial or financial counterparties to fulfill their assumed obligations. To measure this risk over time for
impairment of financial assets (trade receivables due from customers included), the introduction of IFRS 9
required switching from the incurred loss model pursuant to IAS 39 to the expected credit loss model.
Such exposure mainly stems from general economic and financial factors, the potential occurrence of specific
insolvency situations of some borrowers and other more strictly technical-commercial or administrative factors.
TIM Group’s maximum theoretical exposure to credit risk is represented by the carrying amount of the financial
assets and trade receivables recorded in the financial statements, excluding guarantees received, described in
the Note "Disputes and pending legal actions, other information, commitments and guarantees".
Risk related to trade receivables is managed using customer scoring and analysis systems. For specific categories
of trade receivables, the Group also makes use of factoring, mainly on a "non-recourse" basis.
Provision charges for bad debts are recorded for specific credit positions that have an element of individual risk.
On credit positions that do not have such characteristics, provision charges are recorded by customer segment
according to the average uncollectibility estimated on the basis of statistics. Further details are provided in the
Note "Trade and miscellaneous receivables and other current assets".
Financial assets other than trade receivables are written down for impairment on the basis of a general model
which estimates expected credit losses over the following 12 months, or over the residual life of the asset in the
event of a substantial increase in its credit risk. The expected credit loss is calculated based on the default
probability and the percentage of credit that cannot be recovered in the event of a default (the loss given default).
The model adopted to calculate the expected credit loss is based on the Bloomberg Credit Risk Model, a model
developed by Bloomberg which, starting from Merton's distance-to-default (“DD”) concept, estimates the
Consolidated financial statements
of the TIM Group
Note 19
Financial risk management
207
probability of default together with the recovery rate. At the same time, the loss given default is defined as the
non-recoverable component of the post-default financial asset.
In particular, the DD - based on balance sheet data - is enriched with a series of additional information by country
(macroeconomic, risk), business sector and individual company, as well as accounting adjustments aimed at
ensuring uniformity of the model's outputs; finally, through a non-linear function of the DD, the default
probability is obtained.
As regards the current COVID-19 pandemic, use of the Bloomberg Credit Risk Model, which, as mentioned, also
takes into account the political and economic situation of the various Countries in the short and medium/long-
term (from 3 months to 5 years), ensures that all risk components are adequately reflected in the measurement
of the credit risk.
In order to improve credit risk and reduce pressure on working capital, in February 2020, the corporate joint
venture TIM-SCB JV S.p.A. was established, with an investment of 51% by Santander Consumer Bank (SCB) and
49% by TIM. The partnership with SCB aims to develop and distribute financial products to finance the purchase
by TIM customers of products relative to the world of telecommunications and the transfer without recourse of
trade receivables .
On November 3, 2020, the new corporate entity received authorization from the Bank of Italy to grant loans to
the public in accordance with Article 106 et seq. of the Consolidated Banking Act (TUB). In the last few months
of 2020 and early 2021, various corporate steps were completed, including the change in the company name
from TIM-SCB JV S.p.A. to TIMFin S.p.A.
Moreover, as regards credit risk relating to the asset components which contribute to the determination of "Net
financial debt", it should be noted that the management of the Group's liquidity is guided by conservative criteria
and is principally based on the following:
■ Money market management: the investment of temporary excess cash resources;
■ Bond portfolio management: the investment of medium-term liquidity, as well as the improvement of the
average yield of the assets.
In order to mitigate the risk of the non-fulfillment of the obligations undertaken by the counterparty, deposits of
the European companies are made with leading banking and financial institutions rated no lower than
investment grade and with a non-negative outlook, and investments by the companies in South America are
made with leading local counterparties. Moreover, deposits are made generally for periods of less than three
months. With regard to other temporary investments of liquidity, there is a bond portfolio in which the
investments have a low risk level. All investments have been carried out in compliance with the Group Guidelines
on "Management and control of financial risk".
In order to minimize credit risk, the Group also pursues a diversification policy for its investments of liquidity and
allocation of its credit positions among different banking counterparties. Consequently, there are no significant
positions with any one single counterparty.
Liquidity risk
The Group pursues the objective of achieving an "adequate level of financial flexibility", which is expressed by
maintaining a current treasury margin to cover the refinancing requirements at least for the next 12 months with
irrevocable bank lines and liquidity.
As at December 31, 2020, the liquidity margin available for the TIM Group is 12,621 million euros, with an increase
of 3,606 million euros with respect to end 2019 (9,015 million euros). The impact of the COVID-19 pandemic has
not, therefore, entailed any liquidity risk. Furthermore, on January 18, 2021, TIM S.p.A. issued its first 8-year
Sustainability Bond for an amount of 1 billion euros, coupon 1.625%.
13% of gross financial debt at December 31, 2020 (nominal repayment amount) will become due in the next 12
months.
Current financial assets at December 31, 2020, together with unused committed bank lines, are sufficient to fully
cover the Group’s financial liabilities due for the next 30 months.
The following tables report the undiscounted contractual cash flows of gross financial debt at nominal
repayment amounts and the interest flows, determined by using conditions and interest/exchange rates at
December 31, 2020. The portions of principal and interest of the hedged liabilities includes both the
Consolidated financial statements
of the TIM Group
Note 19
Financial risk management
208
disbursements and the receipts of the relative hedging derivatives. Specifically, the interest portions of "Loans
and other financial liabilities" also include those relating to derivatives hedging for both loans and bonds.
Financial liabilities – Maturities of contractually expected disbursements
(million euros)
Convertible bonds
Loans and other financial liabilities (*)
Finance lease liabilities
Non-current financial liabilities
Current financial liabilities
Total
maturing by 12/31 of the year:
2024
2023
2025
2021
2022
After
2025
Total
Principal
Interest portion
Principal
Interest portion
Principal
Interest portion
Principal
Interest portion
Principal
Interest portion
Principal
Interest portion
7,945 19,249
564 3,101 2,417 3,222 2,000
591
7,429
481 4,089
705
763
800
189
4,467
317
579
650
1,467 1,265
(55)
(644)
(338)
(40)
(65)
(58)
(88)
572
4,771
2,162
429
508
525
575
1,467
141
165
191
218
245
507
2,603 4,941 3,592 3,919 3,008 10,424 28,487
8,252
582 4,258
701
831
923
957
1,148 — — — —
1,148
—
3
3 — — — —
—
3,751 4,941 3,592 3,919 3,008 10,424 29,635
8,255
582 4,258
701
831
960
923
(*) These include hedging and non-hedging derivatives.
Derivatives on financial liabilities – Contractually expected interest flows
(million euros)
Disbursements
Receipts
Hedging derivatives – net disbursements
(receipts)
Disbursements
Receipts
Non-Hedging derivatives – net
disbursements (receipts)
Total net disbursements (receipts)
2021
293
(391)
(98)
232
(270)
(38)
(136)
2022
293
(390)
(97)
79
(77)
2
(95)
maturing by 12/31 of the year:
2025
215
(276)
(61)
4
(4)
—
(61)
2023
287
(381)
(94)
5
(7)
(2)
(96)
2024
238
(313)
(75)
12
(17)
(5)
(80)
After
2025
1,908
(2,353)
(445)
—
—
—
(445)
Total
3,234
(4,104)
(870)
332
(375)
(43)
(913)
Market value of derivative instruments
In order to determine the fair value of derivatives, the TIM Group uses various valuation models.
The mark-to-market calculation is determined by the present value discounting of the interest and notional
future contractual flows using market interest rates and exchange rates.
The notional amount of IRS does not represent the amount exchanged between the parties and, therefore, is
not a measurement of credit risk exposure, which, instead, is limited to the amount of the difference between
the interest rates paid/received.
The market value of CCIRSs, on the other hand, also depends on the differential between the reference exchange
rate at the date of signing the contract and the exchange rate at the date of measurement, since CCIRSs involve
the exchange of the reference interest and principal, in the respective denomination currencies.
Options are measured according to the Black & Scholes or Binomial models and involve the use of various
measurements factors, such as: the lifetime horizon of the option, the risk-free rate of return, current price,
volatility and any cash flows (e.g. dividend) of the underlying financial instrument, and the exercise price.
Consolidated financial statements
of the TIM Group
Note 19
Financial risk management
209
NOTE 20
DERIVATIVES
For hedge accounting we continued to apply the rules established by IAS 39.
Derivative financial instruments are used by the TIM Group to hedge its exposure to foreign exchange rate risks,
to manage interest rate risk and to diversify the parameters of debt so that costs and volatility can be reduced
to within predetermined operational limits.
Derivative financial instruments existing at December 31, 2020 are principally used to manage debt positions.
They include interest rate swaps (IRSs) used to reduce the interest rate exposure of fixed-rate bank loans and
bonds, as well as cross currency and interest rate swaps (CCIRSs), currency forwards and foreign exchange
options to convert the loans/receivables secured in currencies different from the functional currencies of the
various Group companies.
IRS predict or may entail, at specified maturity dates, the exchange of interest flows with counterparties,
calculated on a reference notional amount, at the agreed fixed or variable rates.
The same also applies to CCIRS, which may predict, in addition to the settlement of periodic interest flows, the
exchange of reference principal in the respective denomination currencies, at maturity and possibly spot.
Hedging: economic relationship between underlying
instrument and derivatives
Hedging relationships recorded in hedge accounting at 12/31/2020 belong to two categories: i) hedging of the
fair value of bond issues denominated in euros and ii) hedging of cash flows from income flows of bond issues
denominated in currencies other than the euro.
In the first case, the hedged risk is represented by the fair value of the bond attributable to euro interest rates
and is hedged by IRS. The current value of both the underlying and derivative instruments, depends on the
structure of the Euro market interest rates at the basis of the calculation of discount factors and floating interest
flows of the derivative. In particular, interest rate fluctuations translate as changes in the discount factors of the
fixed-interest expense flow on the underlying instrument; on the derivative, changes in the discount factor of
interest income will occur, as well as changes in the nominal flow of variable interest (only partially corrected by
the discounting effect). The effects induced on the derivative are opposite, in accounting terms, to the effects
on the underlying instrument.
In the second case, the hedged risk is represented by the variability in cash flows (and the repayment of the
nominal amount) generated by exchange rates; hedging comprises combinations of IRS and CCIRS that
synthetically transform fixed rate foreign currency income flows into fixed rate euro flows. In this case, exchange
rate oscillations will usually produce contrary effects on the underlying and on the derivative as the asset leg of
the latter faithfully reflects the underlying, while the liability leg is denominated in euros and is therefore
insensitive to the exchange rate.
Hedges: determination of the hedge ratio
The types of hedging implemented by the Group require the adoption of a hedge ratio equal to 1:1, as the types
of risk hedged (interest rate and exchange rate risks) are such as to generate economic effects in the underlying
instruments that can only be offset by the same notional quantities of derivative instruments.
Hedges: potential sources of ineffectiveness
The contractualization of derivatives to hedge financial risks takes place at arm's length and aims to completely
neutralize the effects produced by such instruments.
Consolidated financial statements
of the TIM Group
Note 20
Derivatives
210
However, in practice, both fair value hedges and cash flows hedges, although financially perfect, may not
guarantee an absolute accounting effectiveness due to the many counterparty banks involved, to the peculiar
nature of certain derivatives in terms, for example, of fixing and/or indexing of variable parameters, and to the
possible imperfect coincidence between critical terms.
The following table indicates total financial derivatives of the TIM Group at December 31, 2020 and 2019; in
compliance with standard IFRS 7, notional amounts are shown with reference to all the derivative instruments
involved in the hedges.
The following tables break down financial derivatives by type of risk for each kind of hedging, separating financial
assets and liabilities. For CCIRS, the notional amount refers to the contractual value in euros, for IRS in a currency
other than the euro, the value is indicated at the market exchange rate.
Type
(million euros)
Hedged risk
Interest rate risk
Interest rate risk and
currency exchange rate
risk
Interest rate risk
Interest rate risk and
currency exchange rate
risk
Interest rate swaps
Cross Currency and
Interest Rate Swaps
(CCIRS)
Total Fair Value Hedge Derivatives
Interest rate swaps
Cross Currency and
Interest Rate Swaps
(CCIRS)
Total Cash Flow Hedge Derivatives
Total Non-Hedge Accounting Derivatives
Total TIM Group's Derivatives
Notional
amount at
12/31/2020
Notional amount
at 12/31/2019
Spot Mark-to-
Market ((*)Clean
Price) at
12/31/2020
Spot Mark-to-
Market* (Clean
Price) at
12/31/2019
4,334
—
4,334
5,594
5,042
10,636
604
15,574
4,334
—
4,334
4,871
5,206
10,077
151
14,562
192
—
192
421
(519)
(98)
82
176
152
—
152
258
(57)
201
10
363
* The Spot Mark-to-Market above represents the market valuation of the derivative, net of the accrued portion of the flow in progress.
Fair value hedges
(million euros)
Interest rate swaps
Assets
Liabilities
Cross Currency and Interest Rate
Swaps (CCIRS)
Assets
Liabilities
Derivative instruments (spot value)
Accruals
Derivative instruments (gross value)
Underlying instruments (1)
Accounting item
Hedging derivatives relating to
hedged items classified as current
assets/liabilities of a financial
nature - Current/non-current
assets.
Hedging derivatives relating to
hedged items classified as current
assets/liabilities of a financial
nature - Current/non-current
assets.
Bonds - Current/non-current
liabilities
Notional
value
Carrying
amount
Change in
fair value
for the year
a)
4,334
192
41
192
—
—
—
—
192
24
216
(4,504)
b)
—
a)+b)
4,334
4,334
—
41
of which the fair value adjustment
Fair value adjustment and
measurements at amortized cost
c)
Ineffectiveness
Fair value adjustment for hedging
settled in advance (2)
a)+b)+c)
(1)
(2)
Includes the amortized cost value of bonds currently hedged plus the fair value adjustment.
Referred to bonds no longer hedged, which are therefore not presented in the table.
(186)
(38)
3
(116)
Consolidated financial statements
of the TIM Group
Note 20
Derivatives
211
Cash flow hedges
(million euros)
Accounting item
Notional
value
Carrying
amount
Change in
fair value
for the year
Change in
cumulative
fair value
Interest rate swaps
Assets
Liabilities
Cross Currency and Interest Rate
Swaps (CCIRS)
Assets
Liabilities
Hedging derivatives
relating to hedged items
classified as current /(non
current) assets/liabilities of
a financial nature -
Current/non-current
assets.
Hedging derivatives
relating to hedged items
classified as current/(non
current) assets/liabilities of
a financial nature -
Current/non-current
assets.
Derivative instruments (spot value)
Accruals
Derivative instruments (gross value)
of which equity reserve gains and
losses
Determination of ineffectiveness
Change in derivatives
Change in underlying instruments (3)
Ineffectiveness (4)
Positive fair value
adjustment of financial
derivatives - non-hedging
a)
5,594
421
163
1,405
(984)
212
(49)
b)
5,042
(519)
(462)
a)+b)
10,636
329
(848)
(98)
55
(43)
(337)
(125)
(299)
167
c)
d)
c)+d)
24
(2)
19
Equity reserve
Equity reserve balance
of which due to the fair value of
hedging settled in advance
Reclassification to P&L
Negative reversal of the reserve
for the fair value adjustment of
hedging derivatives (cash flow
hedges)
(460)
(1)
—
(3) Hypothetical derivatives used in measuring the effectiveness of cash flow hedges.
(4) The ineffectiveness, due to its nature and calculation, does not necessarily coincide with the difference in cumulative changes in the fair value of
derivatives and the underlying instrument; the effect due to the adoption of CVA/DVA is not considered.
The change in the equity reserve attributable to the effective hedging component is equal to 167 million euros
and comprises:
Consolidated financial statements
of the TIM Group
Note 20
Derivatives
212
Changes in the equity cash flow
hedge reserve
(million euros)
Balance
12/31/2019
Changes
Hedging
instrument gains
/ losses
Reversal from
reclassification
Reversal from
fair value
adjustment of
hedging settled
in advance
(580)
167
(66)
Change in the effective fair value
of derivatives
Change in the CVA/DVA
Reversal for ineffectiveness 2019
Amortization in P&L of the fair
value of hedging settled in
advance
Other
Overall change
None of the parameters represented includes any income tax effect.
16
—
Balance
12/31/2020
Other
(460)
4
120
The transactions hedged by cash flow hedges will generate cash flows and produce economic effects in the
income statement in the periods indicated in the following table:
Denomination
currency
GBP
JPY*
JPY**
USD
USD
USD
USD
USD
Notional amount
in denomination
currency
(millions)
375
20,000
20,000
1,000
1,500
1,000
1,000
1,000
Start of
period
End of
period
Rate applied
Interest
period
Jan-21 May-23
Jan-21 Oct-29
Jan-21 Oct-29
Jan-21 Nov-33
Jan-21 May-24
Jan-21 Sept-34
July-36
Jan-21
Jun-38
Jan-21
5.875%
Annually
5.000% Semiannually
0.750% Semiannually
6.375% Semiannually
5.303% Semiannually
6.000% Semiannually
7.200% Semiannually
7.721% Semiannually
Hedging of
notional
amount in
euro
552
(millions)
174
138
849
1,099
794
791
645
Hedging of
rate in euro
5.535%
5.940%
0.696%
5.994%
4.226%
4.332%
5.884%
7.470%
* Income cash flows are denominated in USD and calculated on a notional amount of USD 187.6 million.
** Hedging of the sole income cash flow following a step-up on the loan.
The method selected to test the effectiveness retrospectively and, whenever the main terms do not fully
coincide, prospectively, for cash flow hedge derivatives and fair value hedge derivatives is the Volatility Risk
Reduction (VRR) Test. This test assesses the ratio between the portfolio risk (meaning the derivative and the item
hedged) and the risk of the hedged item taken individually. In essence, the portfolio risk must be significantly
lower than the risk of the hedged item.
Consolidated financial statements
of the TIM Group
Note 20
Derivatives
213
NOTE 21
SUPPLEMENTARY DISCLOSURES ON FINANCIAL
INSTRUMENTS
Measurement at fair value
For the purposes of the comparative information between the carrying amounts and the fair value of financial
instruments, required by IFRS 7, the majority of the non-current financial liabilities of the TIM Group consist of
bonds, whose fair value is directly observable in the financial markets, as they are financial instruments that,
due to their size and diffusion among investors, are commonly traded on the relevant markets (see Note "Non-
current and current financial liabilities"). For other types of financing, however, the following assumptions have
been made in determining fair value:
■
■
■
for variable-rate loans, the nominal repayment amount has been assumed;
for fixed-rate loans, the present value of future cash flows at the market interest rates of December 31,
2020 has been assumed;
the carrying amount has been used for some types of loans granted by government institutions for social
development purposes, for which fair value cannot be reliably calculated.
Lastly, for the majority of financial assets, their carrying amount constitutes a reasonable approximation of
their fair value since these are short-term investments that are readily convertible into cash.
The fair value measurement of the financial instruments of the Group has been classified in the three levels set
out in IFRS 7. In particular, the fair value hierarchy introduces the following levels of input:
■ Level 1: prices quoted in active markets;
■ Level 2: prices calculated using observable market inputs;
■ Level 3: prices calculated using inputs that are not based on observable market data.
The following tables contain, for assets and liabilities at December 31, 2020 and December 31, 2019 and in
accordance with the categories established by IFRS 9, the supplementary information on financial instruments
required by IFRS 7 and the schedules of gains and losses. They do not include Discontinued operations/Non-
current assets held for sale and Liabilities directly associated with Discontinued operations/Non-current assets
held for sale.
Key for IFRS 9 categories
Financial assets measured at:
Amortized cost
Fair value through other comprehensive income
Fair value through profit or loss
Financial liabilities measured at:
Amortized cost
Fair value through profit or loss
Hedging Derivatives
Not applicable
Amortized cost
Fair value through other comprehensive income
Fair value through profit or loss
Amortized cost
Fair value through profit or loss
Hedging Derivatives
Not applicable
Acronym
AC
FVTOCI
FVTPL
AC
FVTPL
HD
n.a.
Consolidated financial statements
of the TIM Group
Note 21
Supplementary disclosures on financial instruments
214
Carrying amount and fair value hierarchy for each category/class of financial asset/liability and
comparison with their fair value at 12/31/2020
(million euros)
Notes
IFRS 9
categories
Carrying
amount in
financial
statements
at
12/31/2020
Amortized
cost
Amounts recognized in financial
statements
Fair value
recognized in
the
statements of
comprehensive
income
Fair value
through
profit or
loss
Levels of hierarchy or of
fair value
Level 1 Level 2 Level 3
Fair Value
at
12/31/2020
Amounts
recognized
in the
financial
statements
pursuant
to IFRS 16
ASSETS
Financial assets measured at
amortized cost
Non-current assets
Receivables from employees
Other financial receivables
Miscellaneous non-current
receivables
Current assets
Receivables from employees
Other short-term financial
receivables
Cash and cash equivalents
Trade receivables
Other current receivables
Contract assets
Financial assets measured at fair
value through other
comprehensive income
Non-current assets
Other investments
Securities other than investments
Current assets
Trade receivables:
Securities other than investments
Financial assets measured at fair
value through profit or loss
Non-current assets
Non-hedging derivatives
Current assets
Securities other than investments
Non-hedging derivatives
Hedging Derivatives
Non-current assets
Hedging derivatives
Current assets
Hedging derivatives
Financial receivables for lease
contracts
Non-current assets
Current assets
Total
AC
8,263
8,263
—
—
8,263
(10)
(10)
(11)
(10)
(10)
(10)
(14)
(14)
(14)
(9)
(10)
(14)
(10)
(10)
(10)
(10)
(10)
(10)
(10)
(10)
40
213
151
13
2
4,829
2,905
85
25
821
54
—
767
419
44
325
50
2,067
1,970
97
98
43
55
11,668
FVTOCI
FVTPL
HD
n.a.
40
213
151
13
2
4,829
2,905
85
25
—
—
—
821
—
54
—
—
767
—
1,851
1,778
73
16
38
—
—
767
44 —
325
50
1,970 —
97 —
419
44
325
50
216
192
24
8,263
2,672
635 1,092 2,177
38
821
419
2,067
98
43
55
98
98
11,668
Consolidated financial statements
of the TIM Group
Note 21
Supplementary disclosures on financial instruments
215
The financial instruments belonging to hierarchy level 3 of fair value are represented by the following Other
investments recognized as Non-current assets, for which directly or indirectly observable prices on the market
are not available:
■ Northgate CommsTech Innovations Partners L.P.;
■ Banca UBAE;
■
Istituto Europeo di Oncologia;
■ Other minor companies.
Northgate CommsTech Innovations Partners L.P. was measured based on the latest available Net Asset Value
reported by the fund manager.
Banca UBAE, Istituto Europeo di Oncologia and the other minor companies were measured on the basis of an
analysis, deemed reliable, of their main assets and liabilities.
The profit/(loss) recognized in Other components of the Consolidated Statements of Comprehensive Income
were recognized within the scope of the Reserve for financial assets measured at fair value through other
comprehensive income.
(million euros)
Notes
IFRS 9
categories
Carrying
amount in
financial
statements
at
12/31/2020
Amortized
cost
Amounts recognized in financial
statements
Fair value
recognized in
the
statements of
comprehensive
income
Fair value
through
profit or
loss
AC/HD
29,875
29,875
Levels of hierarchy
or of fair value
Level 1
Level 2
Fair Value at
12/31/2020
Amounts
recognized
in the
financial
statements
pursuant to
IFRS 16
32,299
LIABILITIES
Financial liabilities measured at
amortized cost
Non-current liabilities
Financial payables (medium/long-
term)
Current liabilities
Financial payables (short-term)
Trade and miscellaneous payables
and other current liabilities
Contract liabilities
Financial liabilities measured at fair
value through profit or loss
Non-current liabilities
Non-hedging derivatives
Current liabilities
Non-hedging derivatives
Hedging Derivatives
Non-current liabilities
Hedging derivatives
Current liabilities
Hedging derivatives
Financial liabilities for lease
contracts
Non-current liabilities
Current liabilities
Total
(17)
(17)
(25)
(25)
(17)
(17)
(17)
(17)
(17)
(17)
FVTPL
HD
n.a.
21,813
21,813
3,613
4,329
120
12
10
2
1,894
1,832
62
4,830
4,199
631
36,611
3,613
4329
120
12
10
2
—
—
—
1,894
1,832
62
10
2
1,832
62
29,875
1,894
12
—
1,906
12
1,894
4,830
4,199
631
4,830
5,103
39,308
Consolidated financial statements
of the TIM Group
Note 21
Supplementary disclosures on financial instruments
216
Carrying amount and fair value hierarchy for each category/class of financial asset/liability and comparison with their fair
value at 12/31/2019
(million euros)
Notes
IFRS 9
categories
Carrying
amount at
12/31/2019
Amortized
cost
Amounts recognized in financial
statements
Fair value
recognized in
the
statements of
comprehensive
income
Fair value
through
profit or
loss
Levels of hierarchy or of
fair value
Level 1 Level 2 Level 3
Amounts
recognized
in the
financial
statements
pursuant
to IFRS 16
Fair Value
at
12/31/2019
6,847
ASSETS
Financial assets measured at
amortized cost
Non-current assets
Receivables from employees
Other financial receivables
Miscellaneous non-current
receivables
Current assets
Receivables from employees
Other short-term financial
receivables
Cash and cash equivalents
Trade receivables
Other current receivables
Contract assets
Financial assets measured at fair
value through other
comprehensive income
Non-current assets
Other investments
Securities other than
investments
Current assets
Trade receivables:
Securities other than
investments
Financial assets measured at fair
value through profit or loss
Non-current assets
Non-hedging derivatives
Current assets
Securities other than
investments
Non-hedging derivatives
Hedging Derivatives
Non-current assets
Hedging derivatives
Current assets
Hedging derivatives
Financial receivables for lease
contracts
Non-current assets
Current assets
Total
AC
6,847
6,847
—
—
(10)
(10)
(11)
(10)
(10)
(10)
(14)
(14)
(14)
43
—
245
13
3
3,138
3,252
119
34
43
—
245
13
3
3,138
3,252
119
34
FVTOCI
780
—
780
—
780
(9)
(10)
(14)
(10)
52
—
728
160
(10)
(10)
(10)
(10)
(10)
(10)
(10)
6
149
5
2,152
2,051
101
109
51
58
10,048
FVTPL
HD
n.a.
21
31
52
—
—
728
—
—
728
—
—
160
6
149
5
173
152
21
6 —
149
5
2,051 —
101 —
—
1,979
1,899
80
6,847
2,759
333
877 2,184
31
160
2,152
109
51
58
109
109
10,048
Consolidated financial statements
of the TIM Group
Note 21
Supplementary disclosures on financial instruments
217
(million euros)
Notes
IFRS 9
categories
Carrying
amount at
12/31/2019
Amortized
cost
Amounts recognized in financial
statements
Fair value
recognized in
the
statements of
comprehensive
income
Fair value
through
profit or
loss
Levels of hierarchy
or of fair value
Level 1
Level 2
Fair Value at
12/31/2019
Amounts
recognized
in the
financial
statements
pursuant to
IFRS 16
LIABILITIES
Financial liabilities measured at
amortized cost
Non-current liabilities
Financial payables (medium/long-
term)
Current liabilities
Financial payables (short-term)
Trade and miscellaneous payables
and other current liabilities
Contract liabilities
Financial liabilities measured at fair
value through profit or loss
Non-current liabilities
Non-hedging derivatives
Current liabilities
Non-hedging derivatives
Hedging Derivatives
Non-current liabilities
Hedging derivatives
Current liabilities
Hedging derivatives
Financial liabilities for lease
contracts
Non-current liabilities
Current liabilities
Total
AC/HD
31,745
31,745
(17)
23,945
23,945
(17)
(25)
(25)
3,120
4,527
153
1
3,120
4,527
153
FVTPL
HD
n.a.
(17)
(17)
(17)
(17)
1
—
1,721
1,659
62
5,215
4,576
639
38,682
33,126
—
—
1
1,721
5,215
4,576
639
5,215
5,664
40,512
1
1
—
—
—
—
1,721
1,659
62
1
—
1,659
62
Gains and losses by IFRS 9 category - Year 2020
(million euros)
Assets measured at amortized cost
Assets and liabilities measured at fair value through profit or loss
Assets measured at fair value recognized in the statements of
comprehensive income
Liabilities measured at amortized cost
Total
Gains and losses by IFRS 9 category - Year 2019
(million euros)
Assets measured at amortized cost
Assets and liabilities measured at fair value through profit or loss
Assets measured at fair value recognized in the statements of
comprehensive income
Liabilities measured at amortized cost
Total
31,745
1,721
1
—
1,722
IFRS 9
categories
AC
FVTPL
Net gains/(losses)
2020
(441)
108
FVTOCI
AC
3
(967)
(1,297)
IFRS 9
categories
AC
FVTPL
Net gains/(losses)
2019 (1)
(584)
(2)
FVTOCI
AC
2
(1,099)
(1,683)
of which interest
23
961
984
of which interest
34
1,082
1,116
(1)
of which 2 million euros relates to fees and expenses not included in the effective interest rate calculation on financial assets/liabilities other than those at fair
value through profit or loss.
Consolidated financial statements
of the TIM Group
Note 21
Supplementary disclosures on financial instruments
218
NOTE 22
PROVISIONS FOR EMPLOYEE BENEFITS
These decreased by 661 million euros compared to December 31, 2019. The figure breaks down as follows:
(million euros)
Provision for employee severance
indemnities
Provision for pension and other plans
Provision for termination benefit incentives
and corporate restructuring
Total other provisions for employee
benefits
Total
of which:
non-current portion
current portion (*)
12.31.2018
Increases/
Present value
Decrease Exchange
differences
and other
changes
Held for
sale
INWIT
12.31.2019
(a)
(b)
(a+b)
887
22
710
732
1,619
1,567
52
44
4
256
260
304
(88)
(2)
(402)
(404)
(492)
—
(2)
(5)
(5)
(5)
—
(2)
841
24
559
583
1,424
1,182
242
(*) The current portion refers only to Other provisions for employee benefits.
(million euros)
(a)
(b)
(a+b)
Provision for employee severance
indemnities
Provision for pension and other plans
Provision for termination benefit incentives
and corporate restructuring
Total other provisions for employee
benefits
Total
of which:
non-current portion
current portion (*)
12.31.2019
Increases/
Present value
12.31.2020
Decrease Exchange
differences
and other
changes
841
24
559
583
1,424
1,182
242
—
1
34
35
35
(142)
(2)
(552)
(554)
(696)
2
—
(2)
(2)
—
701
23
39
62
763
724
39
(*) The current portion refers only to Other provisions for employee benefits.
The Provision for employee severance indemnities (T.F.R.) only refers to Italian companies and decreased on
the whole by 140 million euros. The decreases of 142 million euros relating to indemnities paid during the year
to employees who terminated employment or for advances.
The invariance recorded in “Increases/Present value” is as follows:
Consolidated financial statements
of the TIM Group
Note 22
Provisions for employee benefits
219
(million euros)
(Positive)/negative effect of curtailment
Current service cost (*)
Finance expenses
Net actuarial (gains) losses for the year
Total
Effective return on plan assets
2020
(1)
—
6
(5)
—
2019
(8)
—
10
42
44
there are no plan assets
(*) The fees to be paid in to the INPS Treasury Fund or to supplementary pension schemes are accounted for under “Employee benefits expenses”
as “Social security expenses”, the item that only includes the expenses of companies with less than 50 employees.
The positive impact of the curtailment, amounting to 1 million euros, was linked to extraordinary advances made
in respect of the previous processing.
The net actuarial gains recognized at December 31, 2020 amounted to 5 million euros (net actuarial losses of 42
million euros in 2019), are essentially connected with the inflation rate forecast, which went from 1.2% at
December 31, 2019 to 0.8% at December 31, 2020; the discount rate also changed, going from the 0.77% used at
December 31, 2019 to 0.34% at December 31, 2020.
According to national law, the amount of provision for employee severance indemnities to which each employee
is entitled depends on the period of service and must be paid when the employee leaves the company. The
amount of severance indemnity due upon termination of employment is calculated on the basis of the period of
employment and the taxable compensation of each employee. This liability is adjusted annually based on the
official cost-of-living index and legally-set interest. The liability is not associated with any vesting condition or
period or any funding obligation; accordingly, there are no assets servicing the provision. The liability is recognized
net of the partial prepayments of the provision and payments of the amounts obtained by employees for the
reasons permitted by the applicable regulations.
Under the regulations introduced by Italian Legislative Decree 252/2005 and Law no. 296/2006 with which, for
companies with at least 50 employees, the severance indemnities accruing from 2007 are assigned, as elected
by the employees, to either the INPS Treasury Fund or to supplementary pension funds and take the form of a
"defined contribution plan".
However, for all companies, the revaluations of the amounts in the provision for employee severance indemnities
existing at the election date, and also the amounts accrued and not assigned to supplementary pension plans
for companies with less than 50 employees, are retained in the provision for employee severance indemnities. In
accordance with IAS 19, the provision has been recognized as a "defined benefit plan".
In application of IAS 19, employee severance indemnities have been calculated using the "Projected Unit Credit
Method" as follows:
■
■
■
the future possible benefits which could be paid to each employee registered in the program in the event of
retirement, death, disability, resignation etc. have been projected on the basis of a series of financial
assumptions (cost-of-living increases, interest rate, increase in compensation etc.). The estimate of future
benefits includes any increases for additional service seniority, as well as the estimated increase in the
compensation level at the measurement date – only for employees of companies with less than 50
employees during the year 2006;
the average present value of future benefits has been calculated, at the measurement date, on the basis of
the annual interest rate adopted and of the probability that each benefit actually has to be paid;
the liability of each company concerned has been calculated as the average present value of future benefits
that will be generated by the existing provision at the measurement date, without considering any future
accruals (for companies with at least 50 employees during the year 2006) or by identifying the amount of
the average present value of future benefits which refer to the past service already accrued by the employee
in the company at the measurement date (for the others), i.e. adopting the "service pro-rate".
Consolidated financial statements
of the TIM Group
Note 22
Provisions for employee benefits
220
The following assumptions have been made:
FINANCIAL ASSUMPTIONS
Inflation rate
Discount rate
Employee severance indemnities annual increase rate
Annual real wage growth:
equal to or less than 40 years of age
over 40 but equal to or less than 55 years of age
over 55 years of age
DEMOGRAPHIC ASSUMPTIONS
Probability of death
Probability of disability
Probability of resignation:
up to 40 years of age
from 41 to 50 years of age
from 51 to 59 years of age
from 60 to 64 years of age
over 65 years of age
Probability of retirement
Executives
0.80% per annum
0.34% per annum
2.10% per annum
1.0% per annum
0.5% per annum
0.0% per annum
Non-executives
0.80% per annum
0.34% per annum
2.10% per annum
1.0% per annum
0.5% per annum
0.0% per annum
Executives
Mortality tables
RG48 other advertising
by Ragioneria
Generale dello Stato
Non-executives
Mortality tables
RG48 other advertising
by Ragioneria
Generale dello Stato
INPS tables divided by age
and sex
INPS tables divided by age
and sex
2.00%
2.00%
1.00%
None
None
1.00%
0.50%
0.50%
0.50%
None
100% om achievement of the AGO requirements aligned
with D.L. 4/2019
1.5%
per annum
1.5%
per annum
Probability of receiving at the beginning of the year an advance
from the provision for severance indemnities accrued equal to 70%
The application of the above assumptions resulted in a liability for employee severance indemnities of 701 million
euros at December 31, 2020 (841 million euros at December 31, 2019).
Reported below is a sensitivity analysis for each significant actuarial assumption adopted to calculate the liability
as at year end, showing how the liability would have been affected by changes in the relevant actuarial
assumption that were reasonably possible at that date, stated in amounts.
The weighted average duration of the obligation of the Parent amounted to 10.2 years.
CHANGES IN ASSUMPTIONS
Turnover rate:
+0.25 p.p.
- 0.25 p.p.
Annual inflation rate:
Annual discount rate:
+0.25 p.p.
- 0.25 p.p.
+0.25 p.p.
- 0.25 p.p.
Amounts
(million euros)
2
(2)
(11)
11
15
(15)
The Provision for pension and other plans amounted to 23 million euros at December 31, 2020 (24 million euros
at December 31, 2019) and mainly represented pension plans in place at foreign companies of the Group.
The Provision for termination benefit incentives and corporate restructuring decreased in total by 520 million
euros, mainly as a result of redundancies and the reclassification to payables of amounts not yet paid, relating
to plans already set aside in previous years (overall equal to 552 million euros). Increases, amounting to 34 million
euros, are related to the effective exits of the Parent Company in the year 2020 (also through the application of
Article 4 of Law 92 of June 28, 2012, as defined by that in the Trade Union Agreement of February 26, 2019 and
the Trade Union Agreement signed June 4, 2020) and to the provision made for exits based on the application
of Article 4 of Law 92 of June 28, 2012 following the agreements signed with trade unions on April 22, 2020 by
Olivetti and Telecom Italia Trust Technologies, and on April 17, 2020 by Telecontact.
Consolidated financial statements
of the TIM Group
Note 22
Provisions for employee benefits
221
NOTE 23
PROVISIONS FOR RISKS AND CHARGES
These decreased compared to December 31, 2019, by 147 million euros and are broken down as follows:
(million euros)
Provision for taxation and tax risks
Provision for restoration costs
Provision for legal disputes
Provision for commercial risks
Provision for risks and charges on
investments and corporate transactions
Other provisions
Total
of which:
non-current portion
current portion
12.31.2019
Increase Taken to the
Income
Statement
12.31.2020
Used
directly
Exchange
differences
and other
changes
83
260
869
30
21
26
7
18
85
1
—
1
1,289
112
725
564
(1)
—
—
(1)
—
—
(2)
(3)
(7)
(178)
(7)
—
(23)
(19)
3
(29)
6
—
—
67
274
747
29
21
4
(218)
(39)
1,142
770
372
The non-current portion of provisions for risks and charges mainly related to the provision for restoration costs
and some of the provision for legal disputes. More specifically, in accordance with accounting policies, the total
amount of the provision for restoration costs is calculated by re-measuring the amounts for which a probable
outlay is envisaged, based on the estimated inflation rates for the individual due dates, and subsequently
discounted to the reporting date based on the average cost of debt, taking into account expected cash outflows.
The provision for taxation and tax risks decreased by 16 million euros compared to December 31, 2019. This
change mainly reflects the transactions involving the Brazil Business Unit, as well as the effect of changes in
exchange rates (-22 million euros), again attributable to the Brazil Business Unit.
The provision for restoration costs refers to the provision for the costs expected to be incurred for the restoration
of leased properties and sites used in the mobile telephony sector and for the dismantling of certain assets
(particularly batteries and wooden piling) mainly by the parent company (268 million euros) and the Brazil
Business Unit (5 million euros).
The provision for legal disputes included the provision for litigation with employees and other counterparties.
At December 31, 2020, it included 666 million euros for the Parent and 76 million euros for the Brazil Business
Unit. Draw downs mainly related to the Domestic Business Unit (123 million euros) and the Brazil Business Unit
(55 million euros) and were mainly related to settlement agreements reached.
The provision for commercial risks relates to the Domestic Business Unit and mainly the Parent Company TIM
S.p.A.
The provision for risks and charges on investments and corporate-related transactions is unchanged
compared to the previous year.
Other provisions for risks and charges decreased by 22 million euros compared to December 31, 2019 and was
essentially attributable to the Domestic Business Unit.
Consolidated financial statements
of the TIM Group
Note 23
Provisions for risks and charges
222
NOTE 24
MISCELLANEOUS PAYABLES AND OTHER NON-
CURRENT LIABILITIES
Miscellaneous payables and other non-current liabilities rose by 388 million euros compared to December 31,
2019. The figure breaks down as follows:
(million euros)
Miscellaneous non-current payables
Payables to social security agencies
Income tax payables (*)
Other payables
12.31.2020
12.31.2019
Other non-current liabilities
Deferred revenues from customer contracts (Contract liabilities)
Other deferred revenue and income
Capital grants
501
493
1,748
2,742
106
460
294
860
3,602
379
61
1,808
2,248
94
553
319
966
3,214
(a)
(b)
(a+b)
12.31.2020
12.31.2019
494
7
501
298
799
369
10
379
217
596
Total
(*) Analyzed in the Note "Income tax expense".
Miscellaneous non-current payables include:
■ Payables to social security agencies amounting to 501 million euros, mainly relating to the aforementioned
debt position with INPS for the application of the 2015 and subsequent agreements signed in 2018, 2019 and
2020, relating to Article 4, paragraphs 1-7ter, of Law 92 of June 28, 2012 (for further details see the Note
“Employee benefits expenses”). This debt position (non-current and current portion) is as follows:
(million euros)
Non-current payables
Due from 2 to 5 years after the end of the reporting period
Due beyond 5 years after the end of the reporting period
Current payables
Total
■ other payables equal to 1,748 million euros at December 31, 2020. The item mainly refers to the debt for the
non-current portion, equal to 1,738 million euros (55 million euros recognized as current payables) for the
purchase - which took place in 2018 - of the rights-of-use for the frequencies in the 694-790 MHz, 3600-3800
MHz and 26.5-27.5 GHz bands, to be allocated on 5G mobile communication services.
The other non-current liabilities include:
■ Deferred revenues from contracts with customers (contract liabilities) of 106 million euros (94 million
euros at December 31, 2019) which are reversed to the income statement according to the duration of the
contractual obligations between the parties, averaging 24 months; therefore, the balance as at December
31, 2020 will be reversed to the income statement generally by 2022. In particular, the item includes:
•
TIM S.p.A. deferred revenues for subscription charges and rent and maintenance payments (64 million
euros);
TIM S.p.A. deferred revenues for network access subscription charges (28 million euros).
•
• Deferred revenues for activation and installation fees charged on new TIM S.p.A. customer contracts (8
million euros): in this regard, it is noted that under IFRS 15 activation/installment revenues are allocated
to other contract obligations and recognized throughout the period of performance of the contract, as
they do not relate to separate performance obligations;
■ Other deferred revenue and income totaling 460 million euros; the item consisted of the non-current portion
(approx. 115 million euros) of the deferred gain on the sale and lease-back of telecommunication towers by
the Brazil Business Unit; this item also includes deferred revenues related to agreements for the sale of the
transmission capacity (lease operating income).
■ Capital grants, which came to 294 million euros at December 31, 2020: the item represents the component
still to be released to the income statement based on the remaining useful life (estimated at around 18
years) of the assets that the grants refer to and is mainly connected to the development of the
infrastructures on the Ultra-Broadband-UBB and Broadband-BB projects.
Consolidated financial statements
of the TIM Group
Note 24
Miscellaneous payables and other non-current liabilities
223
NOTE 25
TRADE AND MISCELLANEOUS PAYABLES AND
OTHER CURRENT LIABILITIES
These decreased by 630 million euros compared to December 31, 2019. The figure breaks down as follows:
(million euros)
Trade payables
Payables due to suppliers
Payables to other telecommunication operators
Tax payables
Miscellaneous payables
Payables for employee compensation
Payables to social security agencies
Payables for TLC operating fee
Dividends approved, but not yet paid to shareholders
Other
Employee benefits (except for employee severance
indemnities) for the current portion expected to be
settled within 1 year
Provisions for risks and charges for the current portion
expected to be settled within 1 year
Other current liabilities
Liabilities from customer contracts (Contract
liabilities)
Other deferred revenue and income
Other
Total
(a)
(b)
(c)
(d)
(a+b+c+d)
12.31.2020
of which
Financial
Instruments
12.31.2019
of which
Financial
Instruments
3,689
444
4,133
226
166
428
80
33
263
39
372
1,381
741
86
21
848
6,588
3,689
444
4,133
33
163
196
120
120
4,449
3,937
386
4,323
245
197
338
15
50
300
242
564
1,706
823
101
20
944
7,218
3,937
386
4,323
50
154
204
153
153
4,680
Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial
instruments".
Trade payables amounting to 4,133 million euros (4,323 million euros at December 31, 2019), mainly refer to TIM
S.p.A. (3,198 million euros) and to the companies of the Brazil Business Unit (528 million euros); as regards TIM
S.p.A., the reduction in trade payables reflects the trend in payments of bills payable.
Tax payables amounted to 226 million euros and mainly consisted of both the tax payables of the Brazil Business
Unit (103 million euros) and the related payables of TIM S.p.A.: the amount owed to the tax authorities for tax
payables withheld as withholding agent (72 million euros), the VAT payable (24 million euros) and the amount
payable for the government concession tax (7 million euros).
Miscellaneous payables include, among others, the current debt position towards INPS in relation to the
application of the 2015 and subsequent agreements signed in 2018, 2019 and 2020, relating to Article 4,
paragraphs 1-7ter, of Law 92 of June 28, 2012, as described in the Note “Miscellaneous payables and other non-
current liabilities”.
Consolidated financial
statements of the TIM Group
Note 25
Trade and miscellaneous payables and other current liabilities
224
Other current liabilities amounted to 848 million euros (944 million euros at December 31, 2019). They break
down as follows:
■ Liabilities from customer contracts (Contract liabilities), totaling 741 million euros. This item includes
liabilities to customers related to the obligations of Group companies to transfer goods and services for which
have received a consideration. Liabilities with customers are shown below, which generally have a maturity
within 12 months; therefore, the figure at December 31, 2020 will be paid back substantially by December 31,
2021.
In particular:
•
•
•
contract liabilities amounting to 19 million euros; the item includes bundle contracts (good and services
packages) with performance obligations with different timing for the recognition of revenues and
consequent deferral of the fees originally recognized. The decrease recognized in the year (-38 million
euros) was mainly linked to the launch of commercial offers that no longer require a fixed duration and
the reversal to the income statement of the balance previously accumulated;
customer-related items, equal to 377 million euros; the item includes trade payables following
contractual relationships, such as the payable for prepaid traffic and the subscription fees charged in
advance;
progress payments and advances equal to 80 million euros relating to trade payables following
prepayments, such as deposits made by subscribers for telephone calls;
• deferred revenues from customer contracts, equal to 265 million euros essentially include:
– Parent Company deferred revenues for rent and maintenance fees (109 million euros);
– Parent Company deferred revenues for interconnection fees (119 million euros);
– Parent Company deferred revenues on activation and installation of new contracts with customers
(10 million euros).
■ Other deferred revenue and income amounted to 86 million euros. They mainly refer to deferred revenues
from transmission capacity transfer contracts and deferred revenues from real estate leases (lease operating
income).
Consolidated financial
statements of the TIM Group
Note 25
Trade and miscellaneous payables and other current liabilities
225
NOTE 26
DISPUTES AND PENDING LEGAL ACTIONS,
OTHER INFORMATION, COMMITMENTS AND
GUARANTEES
A description is provided below of the most significant judicial, arbitration and tax disputes in which TIM Group
companies are involved at December 31, 2020, as well as those that came to an end during the period.
The TIM Group has posted liabilities totaling 511 million euros for those disputes described below where the risk
of losing the case has been considered probable.
It should be noted that for some disputes described below, on the basis of the information available at the closing
date of the Annual Financial Report and with particular reference to the complexity of the proceedings, their
progress, and elements of uncertainty of a technical-trial nature, it was not possible to make a reliable estimate
of the size and/or times of possible payments, if any. Moreover, in those cases in which disclosure of information
on a dispute could seriously jeopardize the position of TIM or its subsidiaries, only the general nature of the
dispute is described.
Lastly, as regards proceedings with the Antitrust Authority, please note that based on Article 15, paragraph 1 of
Law 287/1990 (“Antitrust regulations”), the Authority has the right to impose an administrative sanction
calculated on the turnover of the Group in cases of breaches considered serious.
A) Significant disputes and pending legal actions
International tax and regulatory disputes
At December 31, 2020, companies belonging to the Brazil Business Unit were involved in tax or regulatory
disputes, the outcome of which is estimated as a possible loss totaling around 16.6 billion reais (16.2 billion reais
at December 31, 2019). The main types of dispute are listed below, classified according to the tax to which they
refer.
Federal taxes
On March 22, 2011, TIM Cellular S.A. (company incorporated into TIM S.A. starting from October 31, 2018) was
served notice of a tax assessment issued by the Federal Tax Authorities of Brazil for a total sum of 1,265 million
reais as of the date of the notification, including fines and interest, as a result of the completion of a tax
investigation concerning financial years 2006, 2007, 2008 and 2009 for the companies TIM Norwest
Telecomunicações S.A. and TIM Nordeste S.A. (formerly Maxitel), which have been progressively incorporated
into TIM Celular with the aim of rationalizing the corporate structure in Brazil.
The assessment notice includes various adjustments; the main challenges may be summarized as follows:
■ non-recognition of the fiscal effects of the merger of TIM Nordeste Telecomunicações S.A. and Maxitel S.A.;
■ non-recognition of the tax-deductibility of the amortization of goodwill relating to the purchase of Tele
Nordeste Celular Participações S.A. (“TNC”);
■ non-recognition of certain tax offsets;
■ denial of the SUDENE regional tax benefit, due to alleged irregularities in the management and reporting of
the benefit itself.
The adjustments included in the assessment notice were disputed by TIM Celular, in administrative court, with
the filing of its first objections on April 20, 2011. On April 20, 2012, TIM Celular received notification of the decision
of the administrative court of first instance which confirmed the findings set out in the assessment notice; TIM
Celular promptly filed an appeal against this decision on May 21, 2012.
The Company, as confirmed by specific legal opinions, believes it is unlikely that significant disbursements can
be expected.
Still in relation to the federal level of taxation, the following additional disputes should also be noted:
■ challenges regarding offsetting against previous tax losses;
■
■
further challenges regarding the tax deductibility of the amortization of goodwill;
imposition of income tax on certain types of exchange rate differences;
Consolidated financial statements
of the TIM Group
Note 26
Disputes and pending legal actions, other information,
226
commitments and guarantees
■
■
imposition of withholding taxes on certain types of payments to foreign entities (for example, payments for
international roaming);
further challenges regarding offsets made between taxes payable and group company credit positions.
Overall, the risk for these cases, considered to be possible, amounts to 4.3 billion reais (4.3 billion reais at
December 31, 2019).
State taxes
Within the scope of the state levy, there are numerous challenges regarding ICMS, and in particular:
■ challenges concerning the reduction of the tax base due to discounts granted to customers, as well as
challenges regarding the use of tax credits declared by group companies, with respect to the return of loaned
telephone handsets, and following the detection of contract frauds to the detriment of the companies;
■ subjection of some fees owed to group companies and classified by them as fees for services other than
telecommunications to ICMS;
■ challenges over the use of the "PRO-DF" tax benefit originally granted by some States, and subsequently
declared unconstitutional (the challenge refers to the actual credit due to ICMS, declared by the TIM Cellular
on the basis of the aforementioned tax benefits);
■ challenges relating to the use of ICMS credits claimed by Group companies as a result of the acquisition of
tangible assets, and in relation to the supply of electricity to the companies, as well as in application of the
provisions on acting as a withholding agent;
■
fines imposed on group companies for irregularities in tax return compliance.
In February 2018 the State of São Paulo notified two tax assessments regarding ICMS to TIM Celular, for a total
amount of 679 million reais (at the date of the assessment, including fines and interest). The first assessment
(344 million reais) regarded a challenge of ICMS credits in relation to acting as a withholding agent, applicable
when equipment is bought and distributed in different States. The second assessment (335 million reais)
challenged ICMS credits deriving from the "special credit" recognized by the company to its pre-paid customers,
against subsequent top-ups.
In June 2018 the State of São Paulo notified two further tax assessments to TIM Celular, again relating to ICMS,
for a total amount of 369 million reais (at the date of the assessment, including fines and interest). This
assessment too relates to ICMS credits deriving from the "special credit" recognized by the company to its pre-
paid customers against subsequent top-ups, as well as to the fines imposed for ICMS breaches. For a minor part
of the claim, the company decided to authorize payment of the amount requested, instead of starting legal
proceedings, benefiting from a discount on the fine. The dispute thus continues for the remaining amount, 296
million reais.
Furthermore, in late March 2020, the State of São Paulo issued a further tax assessment to the Company (TIM
S.A., as the incorporating company of TIM Celular), for a total amount of 362 million reais (at the date of the
assessment, including fines and interest). The notice is based on two alleged infringements: (i) objection
regarding ICMS credits deriving from the "special credit" recognized by the company to its prepaid customers,
against subsequent top-ups, for the period April- October 2015; and (ii) the discrepancy between the information
submitted with periodic reports and figures on taxes paid (discrepancy due to differences in reporting
arrangements).
Overall, the risk for these cases, considered to be possible, amounts to 8.6 billion reais (8.2 billion reais at
December 31, 2019).
Municipal taxes
Among disputes classified with a "possible" degree of risk, there are some relating to municipal taxes for a total
amounting to around 0.7 billion reais (around 0.7 billion reais at December 31, 2019).
FUST and FUNTTEL
The main challenges about contributions to the regulatory body (Anatel), and in particular in terms of FUST and
FUNTTEL, concern whether or not interconnection revenues should be subject to these contributions.
Overall, the risk for these cases, considered to be possible, amounts to 3 billion reais (3 billion reais at December
31, 2019).
∂
Consolidated financial statements
of the TIM Group
Note 26
Disputes and pending legal actions, other information,
227
commitments and guarantees
Exclusion of ICMS from the PIS/COFINS tax base
In March 2017, the Supreme Federal Court of Brazil recognized the inclusion of ICMS in the calculation of the
PIS/COFINS contribution as unconstitutional. The companies of the TIM Brasil Group (formerly TIM Nordeste, TIM
Celular and TIM S.A.) have been involved in legal proceedings since 2006, with reimbursement requests related
- as allowed - to the previous five years, and therefore with effect from 2001.
During 2018, following a definitive and indisputable decision, the Company recognized a receivable of 353 million
reais, of which 159 million reais for tax and 194 million reais for legal revaluations (amounts relating to the then
TIM Nordeste).
During 2019, as a result of two final decisions (TIM Celular S.A. and TIM S.A.), the company posted an additional
receivable of 3,024 million reais, of which 1,795 million reais for tax and 1,229 million reais for statutory
revaluation.
The use of recognized tax receivables started from the end of 2019 and continued in 2020, in compliance with
the formal certification procedures established by the Brazilian tax authorities.
Administrative offence charge pursuant to Legislative Decree 231/2001
for the TIM Security Affair
In December 2008 TIM received notification of the application for its committal for trial for the administrative
offence specified in articles 21 and 25, subsections 2 and 4, of legislative decree no. 231/2001 in relation to the
affairs that involved several former employees of the Security function and former collaborators of the Company
charged – among other things – with offences involving corruption of public officials, with the object of acquiring
information from confidential files. In May 2010 TIM definitively ceased to be a defendant in the criminal trial,
the Judge for the Preliminary Hearing having approved the motion for settlement of the proceedings (plea
bargaining) presented by the Company. In the hearing before Section One of the Milan Court of Assizes, TIM acted
in the dual role of civil party and civilly liable party. In fact, on the one hand it was admitted as civil party against
all the defendants for all charges, and on the other it was also cited as the party with civil liability pursuant to
article 2049 of the Italian Civil Code for the actions of the defendants in relation to 32 civil parties. Telecom Italia
Latam and Telecom Italia Audit and Compliance Services (now incorporated into TIM) also participated in the
hearing as civil parties, having filed appearances since the Preliminary Hearing and brought charges against the
defendants for hacking. After the lengthy evidence hearings, 22 civil parties filed claims for compensation, also
against TIM as civilly liable party, for over 60 million euros (over 42 million euros of which requested by a single
civil party). The Company itself, as civil party, also summarized its conclusions against the defendants, requesting
that they be found liable for all the damages suffered as a result of the facts of the case. In February 2013, Section
1 of the Milan Court of Assizes issued the first instance judgement, sentencing the defendants to terms of
imprisonment of between 7 years and 6 months and one year. The Court also recognized that there had been
non-pecuniary damage to some of the civil parties as a consequence of the alleged facts, and sentenced the
defendants, jointly and severally with civilly liable party TIM, to compensate said damages, totaling 270,000
euros (in part jointly and severally with Pirelli) plus legal fees; at the same time the Court also sentenced the
defendants to pay compensation for pecuniary and non-pecuniary damages incurred by the Company, granting
it a provisional sum of 10 million euros. The judgement also recognized the existence of non-pecuniary damage
to the companies Telecom Italia Latam and Telecom Italia Audit & Compliance Services, sentencing the
defendants to pay compensation for damages on an equitable basis of 20,000 euros for each company. In
November 2013 the grounds for the judgment in the first instance were published (which, for its part, the
Company decided not to contest). At the end of the appeal, which was brought by the convicted defendants,
the judgement in the first instance was partly reversed. The appeal judge acknowledged that the time-limit had
expired on the majority of the charges and made an order not to proceed against the defendants who had been
convicted in the lower court, with the exception of two former private investigators, who were found guilty of
the offense of revealing information which was subject to a prohibition on disclosure. As for the civil judgements,
the Court revoked those made by the judge of first instance and ruled in favor of three ministries, AGCM and the
Revenues Agency. The Court also decided to revoke the provisional sum of 10 million euros awarded to the
Company as civil party at the end of the proceedings in the court of first instance, making a generic ruling that
the defendants should pay compensatory civil damages. Finally, the appeal judge also rejected all the demands
for compensation advanced in the appeals by certain civil parties for a total of about 60 million euros, in respect
of which the Company has the role of party liable for damages. At the end of the appeal, therefore, the civil
rulings settled in the first instance were confirmed which TIM, as the party liable for damages, had already paid
to the damaged requesting parties. The three defendants brought an appeal to the Court of Cassation against
the judgement of the second instance issued by the Milan Appeal Court of Assizes. In April 2018 the Supreme
Court confirmed the convictions of the defendants and canceled the civil rulings, referring the issue generically
to the civil court, for a more careful assessment of the claims made, above all concerning the quantum of
evidence. It also canceled and referred the confiscation in favor of the State, which will have to be reassessed by
a different section of the Milan Crown Court of Appeal under the scope of proceedings not involving the Company.
Consolidated financial statements
of the TIM Group
Note 26
Disputes and pending legal actions, other information,
228
commitments and guarantees
Golden Power Case
In August 2017 the Prime Minister's office brought proceedings against TIM (as well as Vivendi) in order to verify
the fact that TIM has an obligation to notify, pursuant to the Golden Power law, Vivendi’s acquisition of corporate
control of TIM and the strategic assets it holds. In September 2017, the proceedings in question concluded by
affirming that this obligation did exist for TIM with effect from May 4, 2017 (the date of the Shareholders’ Meeting
that renewed TIM’s corporate bodies).
As a result of this decision by the Presidency of the Council of Ministers, new and separate administrative
proceedings started for the imposition on TIM of a financial penalty laid down by the Golden Power law for non-
compliance with the aforementioned obligation to notify. These proceedings ended on May 8, 2018 with the
imposition of a financial penalty of 74.3 million euros.
The Company, is convinced that it has the legal arguments to demonstrate that it was under no obligation to
notify the control exercised over it by Vivendi, filed separate extraordinary appeals to the President of the
Republic to request the abrogation of the order of September 2017 and before the Lazio Regional Administrative
Court (TAR) against the aforementioned order of May 8, 2018, which imposed a financial penalty, requesting its
precautionary suspension. In relation to the appeal to the Lazio TAR against the aforementioned provision of May
8, 2018, which imposed the financial penalty, the Court, after granting, in July 2018, the application of the
Company and thereby suspending payment of the fine, subsequently rejected, with the provisional ruling of May
2019, the exception of inadmissibility of the appeal on the sanction of 74.3 million euros; suspended the ruling
preliminarily with respect to the extraordinary appeal concerning the obligation of notification pursuant to the
Golden Power rules, and further suspended the execution of the challenged measure.
It should also be noted that in May 2018 a guarantee bond for 74.3 million euros was issued in favor of the
Presidency of the Council, requested for the submission by TIM before the Lazio TAR of the request for a
precautionary suspension of the collection of the fine imposed for alleged breach of Article 2 of Decree Law no.
21 of March 15, 2012 (the "Golden Power" law).
Furthermore, TIM appealed before the Lazio TAR and then appealed before the Council of State against the
provision with which Consob, on September 13, 2017, affirmed Vivendi's control over TIM. In December 2020, the
Council of State issued a final judgment upholding TIM’s appeal and canceling the provision by Consob, a
significant premise to the entire subsequent proceedings of the Presidency of the Council in relation to the
obligation to Golden Power notification as described above.
On the other hand, the President of the Council of Ministers exercised the special powers prescribed in the Golden
Power law through two specific measures in October and November 2017, with which it imposed specific
prescriptions and conditions on TIM S.p.A. and on the companies of the Telecom Italia Sparkle group and Telsy
Elettronica e Telecomunicazioni (now Telsy S.p.A.).
The prescriptions, according to the Administrative Authority, are essentially connected to the circumstance that
these companies, in part, perform activities that are relevant for national security and as far as TIM is concerned
to the circumstance that it also owns the infrastructure and the systems used to provide access to end-users of
services covered by the universal service obligation.
Any failure on the part of the recipients of the measures to execute said conditions and prescriptions is penalized
in the same way as failure to notify significant deeds for the purpose of the application of the so-called Golden
Power.
The companies subject to the prescriptions are required to send periodic reports to a special Monitoring
Committee established at the office of the Prime Minister in order to verify compliance with the aforementioned
prescriptions.
In December 2017 the Group sent to the Presidency of the Council of Ministers the first compliance report
outlining all the proposals and activities put in place to carry out the prescriptions. This report is then followed
by interim reports, as required by the applicable legislation.
Nevertheless, also for this case TIM has already filed two extraordinary appeals to the President of the Republic
to request the cancellation (i) of the imposition of the measures pursuant to Art. 1 of Law Decree no 21/2012 and
(i) the imposition of measures pursuant to Art. 1 of Law Decree no. 21/2012.
As stated, the assumption for exercising special powers was (erroneously, according to the Company) referred
to the de facto control resulting from the outcome of the Shareholders’ Meeting of May 4, 2017 and to the
direction and coordination of TIM by Vivendi. Both these circumstances no longer apply, since: at the
Shareholders' Meeting of May 4, 2018, the slate presented by the shareholders Elliott International LP, Elliott
Associates LP and The Liverpool Limited Partnership received the majority vote; the Board of Directors was re-
appointed with 13 independent directors out of a total of 15, with only 5 from the slate presented by Vivendi;
thus, Vivendi no longer has direction and coordination, nor is there de facto control.
In consequence, the Company has asked the Presidency of the Council of Ministers to repeal the two Decrees,
while, in the alternative, expressing its willingness to collaborate in the redrafting of the prescriptions applied to
TIM, to take account of the changed situation.
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of the TIM Group
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The Presidency of the Council of Ministers, in a decree issued on July 6, 2018, deemed that it could not further
exercise its special powers, reaffirming the validity of the two Decrees it had previously issued, and rejected the
application for their repeal.
The justification for this refusal is the purported circumstance that the new governance arrangements of the
Company are alleged to be currently characterized by extreme variability; this, it is argued, means that the
measures through which the special powers have been exercised cannot be surmounted, given the need to
protect the public interest in the security and operation of the networks.
Consequently, the Company lodged an appeal with additional reasons as part of the appeals already lodged
against the Prime Minister's decrees of October 16 and November 2, 2017 and against the Prime Minister's
resolution of July 6, 2018, rejecting the appeal for revocation presented by the Company on the outcome of the
changed situation in corporate governance. With a non-final ruling published in May 2019, the Lazio TAR: (i)
accepted TIM's request for provisional measures to suspend the fine conditional on the offer of the guarantee;
(ii) granted the suspension of the procedure in order to wait for the final judgment in the (injurious) case pending
before the President of the Republic regarding the notification obligation, pursuant to the Golden Power
provisions; (iii) rejected the request to close the case.
Italian Competition Authority Case A428
At the conclusion of case A428, in May 2013, Italian Competition Authority AGCM imposed two administrative
sanctions of 88,182,000 euros and 15,612,000 euros on TIM for abuse of its dominant position. The Company
allegedly (i) hindered or delayed activation of access services requested by OLOs through unjustified and
spurious refusals; (ii) offered its access services to final customers at economic and technical conditions that
allegedly could not be matched by competitors purchasing wholesale access services from TIM itself, only in
those geographic areas of the Country where disaggregated access services to the local network are available,
and hence where other operators can compete more effectively with the Company.
TIM appealed against the decision before the Regional Administrative Court (TAR) for Lazio, applying for payment
of the fine to be suspended. In particular, it alleged: infringement of its rights to defend itself in the proceedings,
the circumstance that the organizational choices challenged by AGCM and allegedly at the base of the abuse of
the OLO provisioning processes had been the subject of specific rulings made by the industry regulator (AGCom),
the circumstance that the comparative examination of the internal/external provisioning processes had in fact
shown better results for the OLOs than for the TIM retail department (hence the lack of any form of inequality
of treatment and/or opportunistic behavior by TIM), and (regarding the second abuse) the fact that the conduct
was structurally unsuitable to reduce the margins of the OLOs.
In May 2014, the judgement of the Lazio TAR was published, rejecting TIM's appeal and confirming the fines
imposed in the original order challenged. In September 2014 the Company appealed against this decision.
In May 2015, with the judgement no. 2497/15, the Council of State found the decision of the court of first instance
did not present the deficiencies alleged by TIM and confirmed the AGCM ruling. The company had already
proceeded to pay the fines and the accrued interest.
In a decision notified in July 2015, AGCM started proceedings for non-compliance against TIM, to ascertain if the
Company had respected the notice to comply requiring it to refrain from undertaking behaviors analogous to
those that were the object of the breach ascertained with the concluding decision in case A428 dated May 2013.
On January 13, 2017, TIM was served notice of AGCM’s final assessment, which recognized that TIM had complied
in full with the A428 decision and, as such, the conditions for the imposition of a fine for non-compliance were
not present.
AGCM recognizes, furthermore, that TIM's behavior subsequently to the 2013 proceedings has been directed
towards continuous improvement of its performance in the supply of wholesale access services concerning not
only the services which were the subject of the investigation, but also the new super-fast broadband access
services. In assessing compliance, AGCM recognized the positive impact of the implementation, albeit not yet
completed, of TIM's New Equivalence Model (NME). The AGCM decision orders TIM to: (i) proceed with the
implementation of the NME until its completion which is expected to be by April 30, 2017; (ii) to inform the
Authority about the performance levels of the systems for providing wholesale access services and about the
completion of the corresponding internal reorganization plan by the end of May 2017. The Company quickly
complied with both orders, and AGCOM communicated its satisfaction on August 9, 2017.
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Vodafone lodged an appeal with the Lazio Regional Administrative Court against the final decision in the
proceedings for non-compliance taken by AGCM. TIM filed an appearance, as in the other lawsuits filed in March
2017 by the operators CloudItalia, KPNQWest Italia and Digitel.
Vodafone (A428)
In August 2013, Vodafone, as incorporating company of operator Teletu, submitted to the Milan Court a huge
claim for damages for presumed abusive and anticompetitive behavior (founded principally on ICA case A428)
which TIM allegedly implemented in the period 2008 - 2013. The pecuniary claim was quantified by Vodafone as
an estimated sum of between 876 million euros and 1,029 million euros.
In particular, Vodafone alleged technical boycotting activities, with refusal to activate lines requested for Teletu
customers (in the period from 2008 to the month of June 2013), together with the adoption of allegedly abusive
price policies for wholesale network access services (period from 2008 to the month of June 2013). Furthermore,
the other party complained of the presumed application of discounts to business customers greater than those
envisaged ("margin squeezing") and the carrying out of presumed illegal and anticompetitive winback practices
(in the period from the second half of 2012 to the month of June 2013).
TIM filed an appearance, challenging the claims made by the other party regarding the merits and the amount
and making a counterclaim. Following the August 2016 decision by the Court of Cassation which confirmed that
the Milan Court had jurisdiction to decide the dispute, the merits of the case will be decided at the hearing in
December 2016.
With writ of summons before the Milan Court served in May 28, 2015, Vodafone filed additional damages claims,
all based on the same AGCM A428 decision and referring to alleged damages suffered between July 2013 and
December 2014 (and hence over a period subsequent to that of the damages claim reported above), for a total
amount of around 568.5 million euros.
The case also contains a reservation of further damages to be quantified, during the proceedings, for the
following periods, the claimant alleging that the presumed abusive conduct of TIM continued. TIM filed an
appearance, challenging the claims made by the other party regarding the merits and the amount and making
a counterclaim.
By order of October 6, 2016, the judge received Vodafone’s application for the two A428 lawsuits brought by it to
be joined. At the end of the reinstatement proceedings of 21 December, the terms were established for the
preliminary briefs and a hearing was fixed for July 11, 2017 for the admission of evidence. When the first
preliminary brief was filed, following the favorable outcome for TIM of proceedings A428-C (which confirmed the
absence of improper conduct by the Company under A428 after 2011), Vodafone decided nonetheless to file
further claims for 2015-2016, thus restating its total claim to be 1,812 million euros, which was also disputed and
rebutted by TIM.
Colt Technology Services
With writ of summons before the Milan Court served in August 2015, the operator Colt Technology Services filed
a damages claim based on the A428 decision, requesting compensation for alleged damages suffered from 2009
to 2011 as a result of purportedly inefficient and discriminatory conduct by TIM in the wholesale service supply
process. The damage claimed was quantified as 27 million euros in loss of profits for the alleged non-acquisition
of new customers, or for the alleged impossibility of supplying new services to the customers it had already
acquired; the other party also formulated a request for compensation for the damages to its image and
commercial reputation. This case follows the extrajudicial claim for approximately 23 million euros, previously
advanced by Colt in June 2015, which the Company rejected in its entirety. TIM filed an appearance, contesting
all of the plaintiff’s allegations.
COMM 3000 S.p.A. (formerly KPNQWest Italia S.p.A.)
With writ of summons before the Rome Court, COMM 3000 S.p.A. (formerly KPNQWest Italia S.p.A.) filed a
damages claim for a total of 37 million euros in compensation for alleged anticompetitive and abusive conduct
over the period 2009–2011, in the form of technical boycotting (refusals to activate wholesale services – KOs).
The claim was based on the contents of the decision of the Italian Antitrust Authority that settled the A428 case.
TIM filed an appearance, contesting all of the plaintiff’s allegations. In the judgment with ruling in April 2019, the
Court of Rome partially received the petitions of COMM 3000 S.p.A. (formerly KPNQWest Italia S.p.A.), sentencing
TIM to pay an amount significantly lower than the amount in the counterparty's damages claim. In June 2019,
TIM filed an appeal against the ruling, requesting full rejection of the claims presented by COMM 3000 S.p.A.
(formerly KPNQWest Italia S.p.A.) in the ruling of first instance and, in July, obtained the suspension of payment
of a significant portion of the amount defined in the ruling.
Teleunit
With a writ of summons before the Rome Court, Teleunit has claimed 35.4 million euros in compensation from
TIM, based on the known decision of the Italian Competition Authority that settled the A428 case. Specifically,
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the other party complained that in the period 2009/2010 it had suffered abusive conduct on TIM's part in the
form of technical boycotting (refusals to activate network access services – KOs), and anticompetitive practices
in the form of margin squeezing (excessive squeezing of discount margins, considered abusive inasmuch as they
cannot be replicated by competitors). TIM filed an appearance, contesting all of the plaintiff’s allegations. In
October 2020, the dispute was settled by the parties at no extra cost to the company on the income statement.
With a writ of summons issued in October 2009 before the Milan Appeal Court, Teleunit asked that TIM's alleged
acts of abuse of its dominant position in the premium services market be ascertained. The plaintiff quantified its
damages at a total of approximately 362 million euros. TIM filed an appearance, contesting the claims of the
other party.
After the ruling of January 2014 with which the Court of Appeal declared that it was not competent in this matter
and referred the case to the Court, Teleunit reinstated the case before the Milan Court the following April. TIM
filed an appearance in the reinstated proceedings challenging the plaintiff’s claims.
In its judgement of May 2017, the Milan Court rejected Teleunit's claim in its entirety, and ordered the company
to pay the legal costs of the case. This judgement was appealed by Teleunit, in June 2017, before the Milan Court
of Appeal. TIM filed an appeal challenging the arguments presented by the other party and asking that the
judgement in the first instance be fully confirmed. With an order in March 2018 the Milan Court of Appeal
declared Teleunit's appeal pursuant to art. 348-bis of the Italian Code of Civil Procedure to be manifestly without
foundation, and hence inadmissible. In May 2018 Teleunit appealed the judgement of the Court of Appeal to the
Court of Cassation. TIM lodged a counter-appeal seeking confirmation in full of the order being appealed (and
thus of the judgment at first instance).
Siportal
Siportal has filed a lawsuit against TIM with the Court of Rome, by which Siportal has sued for approximately
48.4 million euros of compensation for alleged damages from abusive conduct in the form of technical
boycotting over the period 2009–2011 and from the knock-on effects of the abuse until 2015, with the loss of
commercial partners and the non-acquisition of new customers (the latter quantified for 25 million euros of
damages). The claims are based on the decision of the Italian Antitrust Authority that settled the A428 case. TIM
filed an appearance, contesting all of the plaintiff’s allegations. The Court of Rome decided in favor of Siportal
on the an of the alleged plaintiff; the case will continue with the Court Appointed Expert. TIM reserves every right
to protect its own interests. In October 2020, the dispute was settled by the parties at no extra cost to the
company on the income statement.
MC-Link
With writ of summons before the Rome Court, MC-Link filed a damages claim for a total of 51 million euros in
compensation for alleged anticompetitive and abusive conduct over the period 2009–2012, in the form of
technical boycotting (refusals to activate wholesale services – KOs). The claim was based on the contents of the
decision of the Italian Antitrust Authority that settled the A428 case. TIM filed an appearance, contesting all of
the plaintiff’s allegations.
Eutelia and Clouditalia Telecomunicazioni
With a writ of summons dated May 2020, Eutelia
in Extraordinary Administration and Clouditalia
Telecomunicazioni S.p.A., purchaser of Eutelia's TLC branch, brought an action against TIM before the Court of
Rome, making claims for damages, of around 40 million euros, for damages allegedly suffered, in the period
2009-2012, following the technical boycott and margin squeeze conduct, subject of the AGCM A428 procedure.
TIM filed an appearance contesting the claims of the other party and formulating a counterclaim reserving the
right to quantify the damages suffered in the course of the proceedings.
Antitrust Case I761
With a ruling issued on July 10, 2013, AGCM (the Italian Competition Authority) extended to TIM the investigation
started in March of the same year into some firms active in the fixed network maintenance sector. The
investigation aims to establish if an agreement exists that is prohibited under article 101 of the Treaty on the
Functioning of the European Union. The proceedings were initiated after Wind filed two complaints in which the
ICA was informed that, based on an invitation to bid for the assignment of network corrective maintenance
services, it had encountered substantial uniformity of prices offered by the aforementioned enterprises and a
significant difference from the offers submitted subsequently by other and different companies.
The ICA alleged that TIM carried out a role of coordinating the other parts of the procedure, both during the
formulation of the offers requested by Wind and in relation to the positions represented to communications
regulator AGCom.
TIM challenged these proceedings before the Administrative Court (TAR), sustaining that the ICA does not have
competence in this matter.
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On July 7, 2014, the ICA notified the objective extension of the proceedings to check if the Company, abusing its
dominant position, put in place initiatives that might influence the conditions of the offer of accessory technical
services when the offers of the maintenance businesses to Wind and Fastweb were being formulated. With the
extension provision, the ICA has also extended the deadline for closing the proceedings from the original date of
July 31, 2014 to July 31, 2015. This extension was also challenged before the Lazio Administrative Court (TAR)
sustaining that the Italian Competition Authority does not have competence in this matter.
In November 2014, for reasons of procedural economy and also convinced that it was acting legitimately, TIM
presented to the Authority a proposal of undertakings in order to resolve the competition concerns subject of
the investigation. In its resolution of December 19, 2014, the ICA considered that these undertakings were not
manifestly groundless and later ordered their publication for the purposes of market testing.
On March 25, 2015, the ICA definitively rejected the aforesaid undertakings, considering them not suitable for
removing the anticompetitive aspects investigated.
On July 21, 2015 the Communication of the Results of the Investigation was served on the parties to the
proceedings, in which the Offices of ICA expressed their position in the sense of (i) archiving the complaints
regarding the abuse of dominant position and (ii) confirming, instead, that there exists between TIM and the
maintenance firms an agreement to coordinate the economic offers drawn up for Wind and Fastweb, and to
prevent the unbundled supply of the ancillary technical services.
On December 16, 2015, the final order was issued, confirming the conclusions of the Communication of the
Results of the Investigation, sustaining that, between 2012 and 2013, there existed an agreement that restricted
competition, and as a result imposed a fine of 21.5 million euros on the Company, paid in March 2016. The
relevant market is the corrective maintenance (assurance) market and, more precisely, the market for
troubleshooting the TIM LLU lines. The purpose of the conduct maintained by the Company and the network
firms would have been to limit competition and prevent the evolution of forms of unbundled supply of ancillary
technical services.
TIM appealed the order before the Lazio Regional Administrative Court. In judgement no. 09554/2016 issued in
September 2016, the appeal was dismissed, and the Company appealed this decision to the Council of State. On
the outcome of the proceedings, with the ruling of December 2019, the Council of State, deciding in favor of TIM,
annulled the AGCM I761 provision and referred the task of conducting a new investigation to AGCM, within the
limits that decided by the Council of State itself. In 2020, TIM obtained the return of amounts paid by way of
sanction.
Wind (I761)
With writ of summons before the Milan Court, Wind filed a damages claim against TIM for approximately 57
million euros, recently increased during the case to approximately 58 million euros, in compensation for damages
arising from alleged anticompetitive conduct which AGCM had fined in the I-761 case (concerning corrective
maintenance). According to the plaintiff, this conduct delayed and hindered its ability to obtain more favorable
conditions in the unbundled purchase of service to repair faults on the LLU access lines, and their effects, initially
stated to have been lasted until December 2015 and subsequently alleged by Wind to be ongoing. TIM has filed
an appearance challenging the claims made by the other party. In December 2020, the case was settled as part
of a global settlement with Wind Tre.
Vodafone (I761)
With a writ of summons before the Milan Court, Vodafone has sued TIM and some network companies, bringing
claims for compensation from the Company for around 193 million euros for damages arising from alleged anti-
competitive conduct censured in the known ICA case I-761 (on corrective maintenance) referring to the period
from 2011 to 2017.
Vodafone contests the alleged breach of the competition rules carried out by TIM, in the wholesale markets
giving access to its fixed network (LLU lines; Bitstream; WLR), through the abuse of a dominant market position
and an unlawful agreement with the maintenance companies to maintain the monopoly on the offer of
corrective maintenance services on its network. Specifically, the restrictive agreement allegedly concerned the
coordination, by the Company, of the economic terms and conditions contained in the bids for maintenance
services prepared by the aforementioned companies for OAOs, with artificially high prices with respect to the
cost of the maintenance included in the regulated access fee, with a view to discouraging the disaggregation of
the service itself. The Company filed an appearance, contesting all of the other party’s requests.
Italian Competition Authority Case A514
In June 2017 the Italian Competition Authority (AGCM) started proceedings A514 against TIM, to ascertain a
possible abuse of its dominant market position in breach of article 102 of the “Treaty on the Functioning of the
European Union”. The proceedings were started based on some complaints filed in May and June 2017, by
Infratel, Enel, Open Fiber, Vodafone and Wind Tre, and concerns a presumed abuse of TIM's dominant position
in the market for wholesale access services and for retail services using the broadband and ultra-broadband
fixed network. In particular, the ICA hypothesized that TIM had adopted conduct aimed at: i) slowing and
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hindering the course of the Infratel tender processes so as to delay, or render less remunerative the entry of
another operator in the wholesale market; ii) pre-emptively securing customers on the retail market for
ultrabroadband services by means of commercial policies designed to restrict the space of customer
contendibility remaining for the competitor operators.
After the start of the proceedings, the Authority's officials carried out an inspection at some of TIM’s offices in
the month of July 2017. On November 2, 2017, TIM filed a defense brief in which, in support of the correctness of
its actions, it challenged all the arguments that the conduct it had allegedly engaged in, and which was the
subject of the case, was unlawful.
On February 14, 2018, AGCM resolved to extend the scope of the case to investigate further behavior concerning
TIM's wholesale pricing strategy on the market for wholesale access to broadband and ultrabroadband, and the
use of the confidential information of customers of the alternative operators.
On July 5, 2018 TIM filed proposed undertakings which, if accepted by the Authority, would close the investigation
without any offense being established or sanction being administered. The undertakings were considered as
admissible by the Authority, that market tested them in August and September.
On October 30, 2018, TIM replied to observations made by third parties and modified its proposed undertakings.
With its decision notified on December 4, 2018, the Italian Antitrust Authority once and for all rejected the
proposed series of undertakings as it considered them unsuitable in light of the objections raised.
On March 4, 2019, TIM requested AGCM for an extension of the deadline for closing the proceedings (initially set
for May 31, 2019).
On April 10, 2019, AGCM resolved to extend the deadline for conclusion of the proceedings until September 30,
2019. On May 17, 2019, AGCM notified TIM of the results of the investigation (CRI). In the CRI, AGCM essentially
confirmed the case for the prosecution outlined in the start-up and extension of the proceedings orders.
On June 12, 2019 AGCM extended the deadline for deposit of TIM's final defense to September 20, 2019 and set
the final hearing for September 25, 2019.
On September 18, 2019, AGCM resolved to extend the deadline for conclusion of the proceedings until February
28, 2020.
On March 6, 2020, TIM was notified of the decision to close the investigation: AGCM ruled that TIM had abused
its dominant position, finding that TIM had put in place an anti-competitive strategy designed to hinder the
competitive development of investment in UltraBroadBand network infrastructure.
The fine imposed on TIM for the anti-competitive offense is 116,099,937.60 euros. TIM appealed the
aforementioned fine before the Lazio TAR, contesting both the merits of the accusations and the amount of the
imposed fine.
On June 25, 2020 TIM sent the so-called compliance report as ordered in the final provision. The Lazio TAR has
scheduled a hearing for oral discussion for November 3, 2021.
Open Fiber
In March 2020, Open Fiber (OF) sued TIM before the Court of Milan, claiming damages of 1.5 billion euros for
alleged abuse of an exclusive and dominant position in relation to OF. The alleged actions consist of: (i) pre-
emptive investments in FTTC networks in white areas; (ii) initiating specious legal action to obstruct Infratel
tenders; (iii) spurious repricing of certain wholesale services; (iv) commercial lock-in offers on the retail market;
(v) false disclosure to AGCom in connection with the approval of a wholesale offer and spreading rumors about
TIM being interested in acquiring OF; (vi) discriminatory access conditions to TIM passive infrastructure. TIM filed
an appearance, contesting the arguments of. Enel S.p.A. intervened in the proceedings, asking that TIM be
ordered to compensate all damages suffered and being suffered by Enel and OF.
TIM challenged the A514 fine measure before the Lazio TAR, which was widely referred to by the counterparty in
the writ of summons.
Vodafone
In January 2021, Vodafone Italia S.p.A. summonsed TIM to the Court of Milan, making a claim for damages of
approximately 100 million euros for damages allegedly suffered as a consequence of the unlawful conduct of
TIM, as sanctioned by the AGCM, with the provision that concluded case A514.
The conduct of TIM sanctioned by the Authority allegedly resulted in a slowing of the penetration of UBB
infrastructures on the market of white areas and, consequently, the delayed or failed acquisition of new
customers by Vodafone, as well as a hindrance to acquiring additional customers as a result of the alleged
binding practices over the whole of national territory. TIM will file an appearance with a series of solid legal
arguments for its own protection.
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Fastweb
In February 2021, Fastweb S.p.A. summonsed TIM to the Court of Milan, making a claim for damages of
approximately 996 mln euros for damages allegedly suffered as a consequence of the unlawful conduct of TIM,
as sanctioned by the AGCM, with the provision that concluded case A514, as well as allegedly opportunistic
suspensions of activation orders sent by Fastweb.
Fastweb complains that TIM allegedly delayed the wholesale offer of ultrabroadband services by Open Fiber in
the white areas, consequently slowing the offer of said services by Fastweb to its end customers in these areas;
binding practices were implemented in relations with the end customer, hindering access to the market by
alternative operators (including Fastweb). In addition, TIM allegedly instrumentally managed the supply process
of wholesale access services to its fixed broadband and ultrabroadband network, opportunistically suspending
the activation orders submitted by Fastweb and thereby hindering its activation of new customers. TIM will file
an appearance laying out solid arguments refuting Fastweb’s claims.
Antitrust Case I799
At its meeting on February 1, 2017, AGCM initiated an investigation for possible breach of Article 101 of the TFEU
(prohibition of agreements that restrict competition) against TIM S.p.A. and Fastweb S.p.A., following the signing
of an agreement aimed at setting up a cooperative joint venture called Flash Fiber S.r.l.. TIM, in agreement with
Fastweb, submitted some amendments to the agreements signed, in the form of proposed undertakings, aimed
at closing the investigation without any breach being ascertained and, therefore, without any fine.
On March 28, 2018, AGCM resolved to approve the undertakings, making them binding on the Parties, and closed
the case without imposing any fine.
On January 30, 2019, TIM sent the planned annual report on the provided coverage to AGCM, supplemented by
a subsequent communication dated March 29, 2019. TIM transmitted further details to AGCM in July and AGCM
acknowledged it on October 15, 2019. On January 31, 2020 TIM sent AGCM the third report on the implementation
of the commitments made.
On June 11, 2018 Open Fiber S.p.A. and Wind Tre S.p.A. filed separate appeals to the Lazio Regional
Administrative Court (TAR) against the order closing case I799 with the acceptance of the undertakings. They
allege that this order has a series of procedural and substantial defects.
Open Fiber S.p.A. also asked for the precautionary suspension of the order.
In a ruling of March 2020, the Regional Administrative Court rejected in full the appeal by Open Fiber S.p.A.. A
hearing on the merits has not yet been scheduled for Wind Tre's appeal.
Vodafone
In June 2015 Vodafone issued proceedings for damages in the Milan Court for alleged abuse of a dominant
position by TIM in the bitstream “NGA” and “VULA” fiber access services market, initially claiming around 4.4
million euros, increased to a figure ranging from 30 to 48.9 million euros.
The plaintiff complained that TIM allegedly had engaged in abusive conduct by way of aggressive price offers to
win customers and by hindering Vodafone’s access to the fiber network to make it more difficult for the party to
provide ultra-broadband services to its customers.
TIM has filed an appearance, challenging the claims of the plaintiff in full and, subsequently, the revised estimate
of damages made in 2016 during the case.
Eutelia and Voiceplus
In June 2009, Eutelia and Voiceplus asked that alleged acts of abuse by TIM of its dominant position in the
premium services market (based on the public offer of services provided through so-called Non Geographic
Numbers) be investigated. The complainants quantified their damages at a total of approximately 730 million
euros.
The case follows a precautionary procedure in which the Milan Appeal Court prohibited certain behaviors of the
Company relating to the management of some financial relations with Eutelia and Voiceplus concerning the Non
Geographic Numbers, for which TIM managed the payments from the end customers, on behalf of such OLOs
and in the light of regulatory requirements. After the ruling with which the Milan Court of Appeal accepted TIM's
objections, declaring that it was not competent in this matter and referring the case to the Civil Court, Eutelia in
extraordinary administration and Voiceplus in liquidation resubmitted the matter to the Milan Court. The first
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hearing took place in the month of March 2014. TIM filed an appearance challenging the claims of the other
parties. After the collapse of Voiceplus, the Milan Court declared the case suspended, in an order in September
2015. The case was later resumed by Voiceplus.
With a judgment issued in February 2018, the Milan Court accepted TIM's defense and rejected the plaintiffs’
claim for compensation, ordering them, jointly and severally, to pay the legal costs. In March 2018 Eutalia and
Voiceplus proposed an appeal against the judgement in the first instance.
TIM appealed against the claim, requesting confirmation in full of the judgment in the first instance. The appeal
of Eutelia and Voiceplus was fully rejected with the judgment of August 5, 2019. In December 2019 Eutelia and
Voiceplus appealed to the Court of Cassation over the judgment of the Court of Appeal. TIM notified a
counterclaim asking confirmation of the ruling appealed against.
28 day billing
Resolution 121/17/CONS introduced instructions on billing intervals for telephony, prescribing, for fixed telephony,
that the interval should be monthly, or multiples thereof, and, for mobile telephony, that it should be at least
four-weekly. TIM appealed Resolution 121/17/CONS to the Regional Administrative Court. The judgment rejecting
the appeal was published in February 2018. TIM appealed this judgment to the Council of State in June 2018. On
September 23, 2020, the non-definitive ruling was published whereby the Council of State joined the appeals
submitted by TIM, Vodafone, Fastweb and Wind Tre and ordered the prejudicial deferral to the European Union
Court of Justice (EUCJ) on whether or not the Authority had the power to regulate the frequency of renewal of
the commercial offers and invoicing periods, at the same time rejecting the other grounds of appeal submitted
by the operators and suspending proceedings. In February 2021, TIM filed its written observations on the requests
for prejudicial judgment with the EUCJ.
With its Resolution 499/17/CONS, having confirmed the breach of Resolution 121/17/CONS, AGCom fined TIM
1,160,000 euros, ordering it to make provision – when the billing cycle was restored to monthly intervals or
multiples thereof – to return the amounts corresponding to the fee for the number of days that, from June 23,
2017, had not been used by the users in terms of the supply of service due to the misalignment of the four-weekly
and monthly billing cycles. TIM also appealed this second resolution to the Regional Administrative Court of Lazio,
asking for its precautionary suspension which, on February 22, 2018, was accepted by the Regional Administrative
Court of Lazio limited to the part relating to the reimbursement orders.
Subsequently, Law no 172 of December 4, 2017 decreed that contracts for the supply of electronic
communications services should obligatorily prescribe that the renewal of offers and the billing of services be
based on a month, or multiples thereof. TIM adapted to this order within the period of time prescribed by law,
namely within 120 days of the date it came into force (April 5, 2018).
In March 2018, with Decision 112/2018/CONS AGCom (i) cautioned TIM, with regard to fixed-line voice services
only, against postponing the starting date of invoices issued after the return to monthly invoicing by the same
number of days as those presumably deducted starting from June 23, 2017 with the four-weekly invoicing cycle;
and (ii) revoked the preceding resolution 499/17/CONS in the part in which TIM was ordered to repay the amounts
presumably lost from June 23, 2017 onwards, with the four-weekly billing cycle. This resolution was also
challenged by with an additional submission triggered as part of the appeal against resolution 499/17/CONS, with
a request for single precautionary measures, which was provisionally granted until the hearing before the Council
on April 11, 2018 with a Presidential Decree published on March 26, 2017.
Under Presidential Decree 9/18/PRES, AGCom amended the provisions of Decision 112/18/CONS requiring the
deferment of billing once the billing cycle was restored to monthly intervals, or multiples thereof, while also
ordering that the timescales for complying with the order would be identified after hearings with the operators
and the main consumer protection associations. TIM and the other operators affected by the presidential decree
waived the precautionary petition against Resolution 112/18/CONS. In May 2018, TIM therefore appealed AGCom
Presidential Decree 9/18/PRES and Resolution 187/18/CONS which ratified this decree.
In July 2018, AGCom issued resolution 269/18/CONS, with which it set December 31, 2018 as the date by which
the operators must return to their fixed network customers a number of days of service equal to those eroded
as an effect of 28-day billing, or propose to the affected customers any alternative compensatory measures,
after having notified them to AGCom. TIM, in keeping with actions taken and arguments made, intends to appeal
this resolution.
In September 2018, TIM appealed Resolution 297/18/CONS in which AGCom imposed a fine of 696,000 euros for
having continued to adopt – in violation of AGCom resolution 121/17/CONS – four-weekly billing and renewal of
consumer offers as from February 16, 2018 (and until March 31, 2018).
With the judgment published in November 2018, the TAR canceled the pecuniary administrative sanction of 1.16
million euros imposed with Resolution 499/17/CONS, and confirmed the obligation of restitutio in integrum to
the fixed-line customers by December 31, 2018. TIM submitted its preventive appeal before the Council of State
to interrupt execution of said decision and, with its ruling of December 20, 2018, the Council of State, in upholding
TIM's appeal, interrupted the effectiveness of the aforesaid decision for the reversal order only, until March 31,
2019.
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In November, 2018, AGCom published resolution 521/18/CONS with which it imposed a sanction of 1,044,000
euros on TIM. The sanction was imposed for breach of the transparency rules and rights to withdraw in amending
the contractual terms and conditions of the mobile offers applied to customers starting from April 8, 2018
following restoration of monthly billing. TIM appealed this resolution as well to the Regional Administrative Court
in January 2019. Following a new application submitted by TIM, the Council of State, with its ruling published on
March 20, 2019, extended the precautionary measure to suspend the effectiveness of the decision until May 21,
2019 while awaiting publication of the grounds for the judgment.
Having acknowledged the publication of the grounds of the ruling handed down on May 10, 2019, the Council on
May 21, 2019 ordered postponement of discussion of the application for precautionary measures to the Council
meeting of July 4, 2019 in order to allow TIM to finalize its additional grounds with a new application for
precautionary measures. Following this hearing, the Council of State rejected TIM's application to suspend
execution of the ruling of the Regional Administrative Court with its ruling published on July 5, 2019, so it is
operational starting from May 21, 2019. The hearing to discuss the introductory appeal and additional grounds
submitted by TIM in the meantime is still, as of writing, to be set. On July 12, 2019 the ruling mechanisms with
which the Council of State rejected the similar appeals made by Vodafone, Wind Tre and Fastweb were published
and in February 2020 the judgments containing the grounds were published.
In September 2019, TIM also challenged resolution 221/19/CONS, before the Regional Administrative Court (TAR),
with which the sanction pursuant to Resolution 499/17/CONS, canceled by the Regional Administrative Court of
Lazio, was recalculated to the amount of 580,000.00 euros, with the maximum fine provided for by Art. 98,
paragraph 16 of the CCE in force at the time of the events applied.
In August 2019, AGCom initiated new proceedings (CONT 12/19/DTC) for failure to comply with the order to
refund the days eroded by billing every 28 days for fixed network and convergent customers, according to the
procedures established with resolutions nos. 112/18/CONS and 269/18/CONS. On conclusion of these
proceedings, by means of Resolution 75/20/CONS, the Authority found that TIM did not comply with the above
resolutions, imposing a fine of 3 million euros. The measure was challenged by TIM before the TAR in July 2020.
In June 2019, TIM had in any case decided to offer its fixed network customers, active prior to the March 31, 2018
and subjected to billing every 28 days, the possibility of accepting a compensatory solution, an alternative to
refunding the eroded days pursuant to AGCom resolution no. 269/18/CONS. Subsequently, from September 2019,
TIM decided to also accept requests for the refund of the eroded days. In both cases, TIM informed customers
with several messages in the bill, on the web in the main newspapers. The initiatives just described were
communicated to AGCom as part of the aforementioned penalty proceedings.
Antitrust Case I820
On February 19, 2018, AGCM initiated a I820 preliminary proceeding against the companies TIM, Vodafone,
Fastweb and Wind Tre and the industry association ASSTEL to investigate the alleged existence of an agreement
among the major fixed-line and mobile telephone operators to restrict competition by coordinating their
respective commercial strategies, in breach of Article 101 of the TFEU.
The presumed coordination, according to the opening provision of the proceedings by AGCM, would take the
form of implementation of the obligation introduced by Article 19-quinquiesdecies of Legislative Decree 148/2017
(converted by Law 172/2017) which requires operators of electronic communication services to send out monthly
(or monthly multiples) bills and renewed offers for fixed and mobile services.
On March 21, 2018, AGCM issued a provisional precautionary measure against all the operators involved in the
proceedings with which it ordered the suspension, pending the proceedings, of the implementation of the
agreement concerning the determination of repricing communicated to users at the time of reformulating the
billing cycle in compliance with Law 172/17 and to independently redetermine its commercial strategy. With its
decision no. 27112 of April 11, 2018, AGCM confirmed the precautionary measure.
On June 12, 2018, TIM filed an appeal with the TAR for the quashing of said measure.
In its session on June 27, 2018, AGCM took note of the brief submitted by TIM regarding compliance with the
precautionary measure.
On July 17, 2019, AGCM resolved to extend the deadline for conclusion of the proceedings until January 31, 2020.
In the findings of the preliminary inquiry (CRI) communicated by AGCM to TIM, the Offices confirm the existence
of a unique, complex and continuous agreement restricting competition between Telecom, Vodafone, Fastweb
and Wind Tre, with the facilitation of the Asstel category association.
On October 10, TIM filed its final brief, and the final hearing was held on October 15 at AGCM.
On January 31, 2020, TIM was notified of the decision to close the investigation, in which AGCM confirmed the
existence of the agreement between Telecom, Vodafone, Fastweb and WindTre, but excluding Asstel from
participation in the agreement. The fine imposed on TIM for participation in the anti-competitive agreement was
114,398,325 euros. In April 2020, TIM also challenged the sanction order and following the motion, the public
hearing was scheduled for May 26, 2021.
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Antitrust Case I850
By decision given on December 15, 2020, the Italian Competition Authority (AGCM) started an investigation in
regard to the company Telecom Italia S.p.A., Fastweb S.p.A., Teemo Bidco S.r.l., FiberCop S.p.A., Tiscali Italia S.p.A.
and KKR & Co. Inc., to ascertain the existence of any breaches of article 101 of the TFEU.
More specifically, the investigation regards the contracts governing the establishment and operation of FiberCop
and the supply agreements with Fastweb and Tiscali.
AGCM intends to verify that such agreements do not hinder competition between operators in the medium and
long-term and assure the rapid modernization of the country’s fixed telecommunications infrastructures.
The case should be concluded by December 31, 2021.
Vodafone Dispute – Universal Service
In a decision published in July 2015, the Council of State rejected the appeal lodged by AGCom and TIM against
the judgment of the Lazio Administrative Court (TAR) on the financing of the universal service obligations for the
period 1999–2003. With this judgement the judge had granted the appeals by Vodafone, annulling AGCom
decisions 106, 107, 109/11/CONS on the renewal of the related proceedings, which included Vodafone among the
subjects required to contribute, for a sum of approximately 38 million euros. Essentially, the judgement confirms
that the Authority has not demonstrated the particular degree of "replaceability" between fixed and mobile
telephony for mobile operators to be included among the subjects required to repay the cost of the universal
service, which means that AGCom needs to issue a new ruling.
TIM has filed an application with AGCom to renew the proceedings, and an appeal against the judgement of the
Court of Appeal to the Court of Cassation (which subsequently ruled that the appeal was inadmissible).
In April 2016 Vodafone appealed against the Ministry of Economic Development (MISE) and TIM to the Council
of State, for non-compliance with the judgement of the Council of State. This appeal referred to AGCom decision
109/11/CONS (2003 yearly payment, on the basis of which Vodafone had paid the sum of approximately 9 million
euros as contribution, restitution of which was requested).
In its judgment of November 2016, the Council of State rejected the appeal, referring to the Regional
Administrative Court (TAR) the decision on the methods of compliance. In February 2017, Vodafone presented
the Lazio Regional Administrative Court with four new appeals against the Ministry of Economic Development
and TIM regarding observance of the ruling, upheld on appeal, countermanding the resolutions for the years
1999–2003 and repayment of the aforesaid amounts of around 38 million euros already paid to the Ministry of
Economic Development as a contribution.
With a judgment issued in June 2018, the TAR rejected all of Vodafone's appeals for observance, and, as
requested by TIM, expressly affirmed that AGCom must renew the proceedings, particularly with regard to the
determination of the degree of replaceability between fixed and mobile telephony. Vodafone challenged the four
judgments before the Council of State, which, with a decision of October 2019, upheld Vodafone's appeal and
confirmed the restitutory obligation of the sums in question applicable to TIM.
Dispute relative to "Adjustments on license fees" for the years 1994-
1998
With regard to the judgements sought in previous years concerning the Ministry of Communications' request for
payment of the balance of the amounts paid in concession charges for the years 1994-1998 (for a total of 113
million euros), the Administrative Court (TAR) for Lazio rejected the Company’s appeal against the request for
adjustment of the license fee for 1994 in the amount of approximately 11 million euros, 9 million euros of which
against turnover not received due to bad debts. TIM lodged an appeal. On the outcome of proceedings, with the
ruling of December 2019, the Council of State partially accepted TIM's position, establishing the principle,
according to which, the receivables referring to 1994 not collected for reasons not attributable to the operator,
could have been deducted from the tax base for calculating the concession fee.
With two further judgements the Administrative Court (TAR) for Lazio, reiterating the reasons expressed
previously, also rejected the appeals in which the Company challenged the requests for payment of outstanding
balances of license fees for the years 1995 and 1996-1997-1998, in the amount of approximately 46 million euros.
TIM has appealed before the Council of State also against these judgements.
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With reference to the 1998 fee adjustment (equal to about 41 million), the Lazio TAR, by TAR order of December
2018, suspended the judgment, raising preliminary questions with the EU Court of Justice on the correct scope
of EC Directive no. 97/13 (in the matter of general authorizations and individual licenses in the field of
telecommunications services on the basis of the currently pending litigation on the 1998 license fee, currently
pending before the Rome Court of Appeal and illustrated in a subsequent paragraph).
The referred questions were based, inter alia, on the question posed to the Court of Justice on the possible
conflict between the aforementioned EC Directive 97/13 and national law, which extended the obligation for
telecommunications license-holders to pay the license fee for 1998 (commensurate with a portion of turnover),
despite the liberalization process underway. In its judgment of March 2020, the EU Court of Justice held that the
EU regulatory system must be interpreted as not allowing national legislation to extend to 1998 the obligation
imposed on a telecommunications undertaking that was previously the concession holder (such as TIM) to pay
a fee calculated on the basis of turnover and not only the administrative costs connected with the granting,
management, control and implementation of the general authorizations and individual licenses scheme. The
Court held, inter alia, that the Council of State – having held in its judgment 7506/2009 that the fee imposed for
1998 on TIM, the holder of an authorization existing on the date of entry into force of Directive 97/13, was due –
interpreted national law in a way that was incompatible with EU law, as interpreted by the Court in its judgment
of February 21, 2008. Following the judgment of the EU Court of Justice, the opinion on the final calculation of
the 1998 charges was summarized before the Lazio Regional Administrative Court, which, in a judgment given
last February, declared TIM’s appeal as unacceptable for procedural reasons, namely due to the prevalence of
the formal ruling consisting of judgment no. 7506/09; in substantive terms, on the other hand, the judgment of
the EU Court of Justice once again ascertained the European Community unlawful nature of the credit claim by
the PA to obtain payment of the 1998 charges and, consequently, the final balance. The company will challenge
the judgment of the Lazio Regional Administrative Court in the required manner.
Wind Tre
With writ of summons before the Milan Court, served in April 2019, Wind Tre S.p.A. filed a damages claim against
TIM for approximately 255 million euros in compensation for damages arising from alleged anticompetitive
conduct in the years 2014-2018. More specifically, according to Wind Tre, TIM allegedly illegally used information
gained when supplying provisioning and wholesale services assurance through its sales division to convince
customers to return to TIM or to activate the new user with TIM; carried out commercial promotion activity for
TIM through its technical personnel when repairing failures or activating Wind Tre users; behaved unfairly in order
to get Wind Tre customers to switch over to TIM. To support its arguments, Wind Tre also pleads some elements
that emerged during the investigation for the AGCM A514 case. TIM has filed an appearance, fully contesting the
claims of the other party and making a counterclaim, based on facts similar to those put forward by the plaintiff,
reserving the right to quantify the damages suffered. In its initial pleadings, Wind Tre extended its claims to June
2019 and quantified the damages claimed at approximately 346 million euros. TIM has made its counterclaim
for around 20 million euros for damage to its commercial image, as well as damage due to loss of customers, to
be quantified in the course of the proceedings, possibly on an "ex aequo et bono" basis. In December 2020, the
case was settled as part of a global settlement with Wind Tre.
Poste
There are some pending actions brought, at the end of the 1990s, by Ing. C. Olivetti & C. S.p.A. (now TIM) against
Poste, the Italian postal service, concerning non-payment of services rendered under a series of contracts to
supply IT goods and services. The judgements issued in the lower courts established an outcome that was
partially favorable to the ex-Olivetti, and have been appealed against by Poste in individual rehearings.
In this respect, while a 2009 judgement of the Rome Appeal Court confirmed one of the outstanding payables
to TIM, another judgement by the same Court declared void one of the disputed contracts. After this judgement,
Poste had issued a writ for the return of approximately 58 million euros, opposed by TIM given that the judgement
of the Supreme Court for amendment of the above judgement is still pending.
After the 2012 judgement of the Supreme Court that quashed and remanded the decision of the Appeal Court
on which the order was based, the Rome Court declared that the matter of issue in the enforcement proceedings
was discontinued, since the claim made by Poste had been rejected. The judgement was resubmitted to another
section of the Rome Appeal Court. In ruling no. 563 of January 25, 2019, the Rome Court of Appeal at the time of
proceedings, reversing the Company's previous unfavorable appeal, confirmed the contract's validity and, with
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it, the legitimacy of TIM's view of the amount already collected, of which Poste had requested reimbursement.
This ruling was challenged by Poste with appeal filed with the Court of Cassation, notified on July 31, 2019, which
TIM challenged with relevant counter appeal.
Elinet S.p.A. Bankruptcy
In 2014, the trustees in the bankruptcy of Elinet S.p.A., and subsequently the trustees of Elitel S.r.l. and Elitel
Telecom S.p.A. (the parent, at the time, of the Elitel group) appealed the judgment by which the Court of Rome
dismissed the damages claim brought by the trustees of the Elinet-Elitel group, filing a new damages claim for
a total of 282 million euros. The Company is alleged to have exercised management and control powers over the
plaintiff, and, with it, over the Elitel group (an OLO in which TIM has never held any equity interest) through the
management of trade receivables. TIM filed an appearance, challenging the claims made by the other party. The
judgment on the appeal was handed down with ruling in July 2019, which with reference to TIM confirmed full
legality of its conduct and total non-existence of any element of management and coordination. The receivers
of Elinet S.p.A. and Elitel Telecom S.p.A. appealed to the Court of Cassation in January 2020 to obtain the
annulment of the judgment in the second instance. The receiver of Elitel S.r.l. has not filed an appeal with the
Court of Cassation and, consequently, the total claim for damages has been reduced to 244 million euros. TIM
notified a counterclaim asking confirmation of the ruling appealed against.
Antitrust proceedings PS11532 – “TIM in Nave”
Launched on December 4, 2019 prompted by complaints filed by several consumers, the proceedings, for the
“TIM in Nave” service with the challenge of Deceptiveness on customer information profiles and aggressiveness
profiles. “TIM in Nave” is not an ancillary service, but, in full compliance with the sector regulations, a type of
roaming tariff which is activated when the customer is under the maritime coverage network. Significant
commitments were made to improve information, making the consumer fully aware of how “TIM in Nave” works.
Proceedings ended on July 28, 2020 with the imposition of a fine equal to 1.8 million euros. Similar proceedings
also ended against the other major operators. TIM appealed the measure to the Regional Administrative Court
of Lazio, asking for its cancellation and alternatively the reduction of the fine.
Antitrust Case IP 327 - IBAN discrimination
Officially started on December 23, 2019 by the Authority, the proceedings concern the alleged non-compliance
with the provisions of PV4 on IBAN Discrimination, dated April 2019. In particular, AGCM disputed that the direct
debit process on the web channel is not yet automated and therefore the customer is not autonomous in
managing this activity. TIM eliminated all forms of discrimination between Italian banks and SEPA area banks
with the complete automation of the web domiciliation process. Proceedings ended on July 3, 2020 with the
imposition of a fine of 500,000 euros. Similar proceedings also ended against the other major operators.
Brazil - Opportunity Arbitration
In May 2012, TIM and Telecom Italia International N.V. (now merged in Telecom Italia Finance) were served with
a notice of arbitration proceedings brought by the Opportunity group, claiming compensation for damages
allegedly suffered for presumed breach of a settlement agreement signed in 2005. Based on the claimant’s
allegations, the damages relate to circumstances that emerged in the criminal proceedings pending before the
Milan Court regarding, inter alia, unlawful activities engaged in by former employees of TIM.
The investigatory phase having been completed, the hearing for oral discussion took place in November 2014,
after which the parties filed their concluding arguments in preparation for the decision on the case.
In September 2015, the Board of Arbitration declared the proceedings closed, as the award was going to be filed.
Subsequently, the Board of Arbitration allowed the parties to exchange short arguments and the ICC Court
extended the term for the filing of the award.
In September 2016 the ICC Court notified the parties of its judgment, based on which the Court of Arbitration
rejected all the claims made by the Opportunity group and decided that the legal costs, administrative costs and
costs for expert witnesses should be split between the parties (the “2016 Arbitration Award”).
In April 2017 the Opportunity group filed an appeal against the 2016 Arbitration Award before the Paris Court of
Appeal.
In November 2017, TIM and Telecom Italia Finance received from the Secretariat of the ICC’s International Court
of Arbitration notice of a Request for Revision of the 2016 Arbitration Award, filed by the Opportunity group,
asking for a new award. A Board of Arbitration was subsequently established.
In October 2018, TIM and Telecom Italia Finance requested proceedings with the Paris Court of Appeal to be
suspended, in the light of proceedings pending with the Court of Arbitration of the International Chamber of
Commerce to review the same 2016 Arbitration Award. In November 2018, the Paris Court of Appeal suspended
the proceedings until the decision is taken by the Court of Arbitration in the review proceedings.
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As regards the proceedings to review the 2016 Arbitration Award, in October 2019 the ICC held the discussion
hearing in Paris. In August 2020, the Arbitration Court issued the award rejecting the Request for Revision
presented by the Opportunity Group (the “2020 Arbitration Award”). In December 2020, the Opportunity group
filed an appeal against the 2020 Arbitration Award before the Paris Court of Appeal.
Iliad
By summons served during the first quarter of 2020, Iliad Italia S.p.A. sued TIM before the Court of Milan for
alleged anti-competitive conduct, including through the Kena Mobile brand, which was allegedly aimed at
hindering its entry to and consolidation in the mobile phone market in Italy, seeking damages of at least 71.4
million euros.
TIM filed an appearance, fully disputing the requests of Iliad Italia S.p.A.; and, in turn, submitting a counterclaim
in accordance with Art. 2598 of the Italian Civil Code, with reference to the denigration implemented by Iliad
Italia S.p.A. in regard to TIM and formulating a symmetrical claim for compensation for damages. In the first
preliminary brief, Iliad updated its claim for damages, taking it to 242.8 million euros. The next hearing is
scheduled for April 13, 2021.
B) Other information
Mobile telephony – criminal proceedings
In March 2012 TIM was served notice of the conclusion of the preliminary enquiries, which showed that the
Company was being investigated by the Public Prosecutor of Milan pursuant to the Legislative Decree n. 231/2001,
for the offences of handling stolen goods and counterfeiting committed, according to the alleged allegations, by
fourteen employees of the so-called “ethnic channel”, with the participation of a number of dealers, for the
purpose of obtaining undeserved commissions from TIM.
The Company, as the injured party damaged by such conduct, had brought two legal actions in 2008 and 2009
and had proceeded to suspend the employees involved in the criminal proceedings (suspension later followed
by dismissal). It has also filed an initial statement of defense, together with a technical report by its own expert,
requesting that the proceedings against it be suspended, and that charges of aggravated fraud against the
Company be brought against the other defendants. In December 2012, the Public Prosecutor's Office filed a
request for 89 defendants and the Company itself to be committed for trial.
During the preliminary hearing, the Company was admitted as civil party to the trial and, in November 2013, the
conclusions in the interest of the civil party were filed, reaffirming TIM's total lack of involvement in the offences
claimed.
At the end of the preliminary hearing, which took place in March 2014, the Judge for the Preliminary Hearing
committed for trial all the defendants (including TIM) who had not asked for their situation to be settled with
alternative procedures, on the grounds that “examination in a trial” was needed. In April 2016, at the end of the
first part of the trial, the Public Prosecutor asked for TIM to be sentenced to pay an administrative fine of 900
thousand euros, but decided not to ask for confiscation of any of the presumed profits of the offences (quantified
in the committal proceedings as totaling several million euros), based on the assumption that TIM had in any
inadequacies. While acknowledging the considerable
event remedied the presumed organizational
redimensioning of the accusations, the Company has reiterated its total non-involvement in the facts at issue.
In November 2016 the Court gave a verdict acquitting the Company on the grounds that there was no case to
answer. All the individuals charged were also acquitted on various grounds.
The Public Prosecutor appealed the acquittal and appealed to the Court of Cassation "per saltum”. In January
2019, the Italian Supreme Court of Cassation agreed to the appeal and therefore ordered that the documents of
the proceedings be sent to the Milan Court of Appeal.
The proceedings were assigned to Chambers IV of the Milan Court of Appeal and are awaiting scheduling of the
hearing.
Dispute concerning the license fees for 1998
TIM has issued civil proceedings against the office of the Prime Minister for compensation of the damage caused
by the Italian State through appeal judgement no.7506/09 by the Council of State that, in the view of the
Company, violates the principles of current European community law.
The main claim which the proceedings are founded on is based on community jurisprudence that recognizes the
right to assert the responsibility of the State in relation to violation of rights recognized in community law and
injured by a judgement that has become definitive, in respect of which no other remedy may be applied. The
judgement of the Council of State definitively denied TIM the right to obtain restitution of the concession charge
for 1998 (totaling 386 million euros for Telecom Italia and 143 million euros for the former TIM Company, plus
interest), already denied by the Lazio regional administrative court despite the favorable and binding opinion of
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the European Court of Justice in February 2008. This judgement concerned the conflict between EC Directive
97/13 on general authorizations and individual licenses in the telecommunications services industry, and the
national regulations that had deferred, for 1998, the obligation to pay the fee payable by telecommunications
concession holders, despite the intervening deregulation process. The Company then proposed an alternative
compensation claim, within the sphere of the same proceedings, for tort pursuant to art. 2043 of the Italian Civil
Code. The compensation claimed has been quantified as approximately 529 million euros, plus legal interest and
revaluation. The Avvocatura di Stato filed an appearance and submitted a counterclaim for the same sum. The
case is subject to eligibility analysis by the Court, which declared the inadmissibility of TIM's main claim (case for
damages for manifest breach of community law pursuant to law 117/88). However, this decision was amended
in favor of the Company on appeal. In March 2015 the Rome Court issued its judgement in the first instance,
declaring the Company's application inadmissible.
In 2015, TIM has appealed the decision, and the case is now pending the hearing specifying the nature of the
forms of order sought. The Court of Appeal has scheduled the hearing for closing arguments for April 2, 2019.
Thereafter, without any new procedural activities having taken place, the Court of Appeal incontrovertibly
deferred the hearing for closing arguments first to 2020 and then to 2021 (from when the terms for conclusion
and replies shall run, which will be followed shortly thereafter by the issue of the judgment). These deferrals
were followed by the latest, of January 15, 2021, scheduling the new hearing for January 25, 2022.
On the matters underlying the case, the following must be noted:
■ on the considered lack of jurisdiction of the Court of Rome (concerned by the judgment of the Court of Rome
appealed by TIM) to judge the liability of the Italian government for the work of senior magistrates (in the
case in point, the Council of State), which would have led to the declared inadmissibility of the claim in
accordance with Art. 5, law no. 117/1978 (old text) - the United Chambers of the Court of Cassation ruled with
judgment no. 14842 on June 7, 2018, confirming the jurisdiction of the Court of Rome and, therefore, the
correctness of TIM’s choice to base its lawsuit in the Court of Rome;
■ on the unlawful nature of the conduct of the Italian government - and, therefore, on the liability of the State-
Court in accordance with Law no. 117/1998 - once again, the EU Court of Justice has ruled, deciding on the
prejudicial matter raised by the Lazio TAR in other, connected proceedings, in its judgment given on March
4, 2020 in C-34/19, stressing that TIM was not required to pay the charges demanded by the State for 1998
and, therefore, confirming the clear violation by the Council of State of European Community law (also
because in clear conflict with the decision already given by the EU Court of Justice on February 21, 2008 in
C-296/06, as, moreover, already ruled by the Court of Appeal of Rome, Chambers I, in Decree of January 31,
2012, which sanctioned the procedural admissibility of TIM’s lawsuit);
■ on the matter of the right to repeat the charges paid for 1998 - the Court of Cassation ruled in its judgment
no. 18603 given on September 7, 2020, rejecting the appeal brought by the Presidency of the Council against
the judgment whereby the Court of Appeal of Rome had upheld the claim for compensation made by
Vodafone (payment of charges for 1998) for the same title in separate proceedings.
In short, the company paid the charges disputed in 1998; it promptly challenged the administrative provision that
had unfairly required said payment, before the administrative court; the administrative proceedings before the
Council of State concluded negatively in 2009 (despite the recalled opposite judgment of the European Court of
Justice); the civil proceedings of first instance concluded in March 2015 with a judgment of rejection for grounds
of admissibility (then solved in the sense indicated by the company with the referenced judgment of Cassation
in United Chambers no. 14842/18) and more than 6 years after the first instance judgment - going from deferral
to deferral - the appeal judgment (that could only uphold the mentioned judgments of the Court of Justice and
the Court of Cassation) has not yet been issued (nor, on the basis of these repeated deferrals, can the company
forecast when it will be given).
The company is examining the various scenarios and legal claims (national, European Community, etc.) that may
contribute towards defining the appeal dispute. It is considered, in fact, that the principles of the reasonable
duration of the trial, in accordance with subsection 2 of article 111 of the Constitution and in accordance with
article 6 of the European Convention on Human Rights, are violated by these events, considering: (i) the year in
which payment was made of the undue charges is 1998; (ii) the value of these charges is approximately 529
million euros plus interest from that date; (iii) the extremely long procedural process has not even led to an
appeal judgment (started in 2015 and with an unpredictable conclusion, given the continuous deferrals); (iv) the
circumstance that the legal matter appears to be readily able to be settled, as not one but two judgments have
already been given by the EU Court of Justice declaring payment of the charges to be incompatible with
European Community legislation (judgments that have currently been ignored by the national court).
In these analyses aimed at settling the appeal judgment, it must be noted that on January 25, 2021, the Company
filed a request to bring the hearing forward with the Rome Court of Appeal (it had been postponed, as mentioned,
to January 25, 2022); the idea of this was to prevent yet another deferral of the case, which - as we know - regards
breach of not one but two decisions given inter partes on the same matter, by the European Union Court of
Justice, due to clear violation of European law by the State-Court. By order given on February 08, 2021, the Court
of Appeal of Rome (second chambers specialized in business matters) considered the petition for an earlier trial
Consolidated financial statements
of the TIM Group
Note 26
Disputes and pending legal actions, other information,
242
commitments and guarantees
to be admissible, scheduling the hearing for November 30, 2021. The company trusts that by bringing forward
the hearing date, the dispute may be settled on appeal within a reasonable time-frame.
Vodafone (formerly TELETU)
By writ of summons of February 2012, TIM summonsed the operator TeleTu (today incorporated into Vodafone)
to the Court of Rome for having unduly impeded customers intending to return to TIM. The damages claim has
been quantified for approximately 93 million euros. By judgment of December 2020, the Court ascertained that
from July 2008 to October 2011, TELETU pursued illegal competition pursuant to art. 2598 of the Italian Civil Code
in connection with requests for migration to TIM, ordering it to compensate TIM for the amount of 1,378,000
euros plus interest and revaluation.
Other liabilities related to the sale of assets and shareholdings
As part of agreements for the sale of assets and companies, the TIM Group has undertaken guarantees to
indemnify the buyers for liabilities mainly connected with legal, tax, social security, and labor law issues, for an
amount normally set as a percentage of the purchase price.
To cover such contingent liabilities, amounting to a total of around 300 million euros, provisions totaling
approximately 9 million euros have been allocated solely for those cases for which payment is considered likely.
Furthermore, we report that in relation to the disposal of assets and investments, the TIM Group has
commitments to pay additional indemnities under specific contractual provisions, the contingent liability of
which cannot be measured at present.
C) Commitments and guarantees
Guarantees, net of back-to-back guarantees received, amounted to 53 million euros.
The guarantees provided by third parties to Group companies, amounting to 6,044 million euros, related to
guarantees provided by banks and other financial institutions as a guarantee of the proper performance of
contractual obligations.
In particular, the following should be noted:
■ The TIM Group issued six guarantees in favor of the Ministry of Economic Development for a total of 1,922
million euros for the deferment of the payment of the amount due for the acquisition of user rights to
frequencies in the 694-790 MHz, 3600-3800 MHz and 26.5-27.5 GHz bands, which will be reserved for 5G
mobile telecommunications services. At December 31, 2020, the remaining guarantee was 1,794 million
euros;
■ The insurance guarantees, which totaled 812 million euros, mainly refer to guarantee financing by the TIM
Group in applying legal provisions for contracts of Public Administrations and similar bodies.
■
the TIM Group issued guarantees in favor of INPS in support of the application - by TIM and some Group
companies - of Article 4 of Italian Law 92 of June 28, 2012, for the voluntary redundancy of employees
meeting the requirements; the total amount of the guarantees issued is 1,280 million euros, of which 1,208
million euros for TIM S.p.A. and 72 million euros for Group companies.
Furthermore, in May 2018, TIM issued a surety to the Prime Minister’s Office for 74.3 million euros to secure an
appeal to the Lazio Administration Court for a provisional stay of the administrative fine levied on TIM following
the preliminary investigation connected with the penalty proceeding initiated under Article 2 of Decree Law 21
of 3/15/2012 (the "Golden Power" law).
There are also surety bonds on the telecommunication services in Brazil for 81 million euros.
Assets guaranteeing financial liabilities
With reference to the subsidized loan contracts granted by the Brazilian Development Bank BNDES (Banco
Nacional de Desenvolvimento Econômico e Social) to Tim Celular, now merged into TIM S.A. and for which
specific covenants had been issued, it should be noted that these loans were fully repaid during 2020.
Consolidated financial statements
of the TIM Group
Note 26
Disputes and pending legal actions, other information,
243
commitments and guarantees
NOTE 27
REVENUES
These decreased by 2,169 million euros compared to 2019. The breakdown is as follows:
(million euros)
Equipment sales
Services
Total
2020
1,402
14,403
15,805
2019
1,647
16,327
17,974
Revenues from telecommunications services are presented gross of amounts due to other TLC operators, equal
to 1,198 million euros (1,205 million euros in 2019), included in Costs of services.
Revenues from services in 2020 include revenues for voice and data services on fixed and mobile networks for
Retail customers for 8,734 million euros and for other Wholesale operators for 2,793 million euros.
In 2020, adjustments were booked of non-recurring revenues for 38 million euros, connected with the
commercial initiatives of TIM S.p.A. to support customers in dealing with the COVID-19 emergencies. For more
details, see the Note “Significant non-recurring Events and Transactions”.
For a breakdown of revenues by operating segment/geographical area, reference should be made to the Note
"Segment Reporting".
NOTE 28
OTHER OPERATING INCOME
These decreased by 722 million euros compared to 2019. The breakdown is as follows:
(million euros)
Late payment fees charged for telephone services
Recovery of employee benefits expenses, purchases and services rendered
Capital and operating grants
Damages, penalties and recoveries connected with litigation
Estimate revisions and other adjustments
Brazil Business Unit tax proceeds
Other
Total
2020
46
14
34
24
59
—
34
211
2019
59
50
33
20
36
685
50
933
In 2019, tax proceeds included, among others, the income related to the recognition in the Brazil Business Unit
of tax receivables resulting from the favorable outcome of disputes relating to the inclusion of the ICMS indirect
tax in the basis for calculating the PIS/COFINS contribution, for which the Company has been suing since 2006,
with refund requests referring - as permitted - to the previous five years, and therefore with effect from 2001.
The proceeds, amounting to 685 million euros, included 407 million euros in tax refunds and 278 million euros for
legal revaluation.
Consolidated financial statements
of the TIM Group
Note 27
Revenues
244
NOTE 29
ACQUISITION OF GOODS AND SERVICES
Acquisitions of goods and services decreased by 290 million euros compared to 2019. The breakdown is as
follows:
(million euros)
Acquisition of raw materials and merchandise
Acquisition
Costs of services:
Revenues due to other TLC operators
Costs for telecommunications network access services
Commissions, sales commissions and other selling expenses
Advertising and promotion expenses
Professional and consulting services
Utilities
Maintenance
Outsourcing costs for other services
Mailing and delivery expenses for telephone bills, directories and other
materials to customers
Other service expenses
Lease and rental costs:
Rent and leases
TLC circuit subscription charges
Other lease and rental costs
Total
(a)
(b)
(c)
(a+b+c)
2020
1,203
1,198
116
996
196
216
435
277
348
46
706
4,534
51
87
298
436
6,173
2019
1,396
1,205
119
1,133
218
220
472
244
403
63
562
4,639
68
110
250
428
6,463
In 2020, non-recurring operating costs were incurred in reference to procurement and various costs for
approximately 16 million euros, which became necessary for the management of the COVID-19 health
emergency, mainly due to the acquisition of personal protection equipment and thermoscanners, and costs for
environmental hygiene services. For more details, see the Note “Significant non-recurring Events and
Transactions”.
In 2020, costs for leased assets include around 11 million euros in short-term lease payments of modest value
(approximately 20 million euros in 2019).
Consolidated financial statements
of the TIM Group
Note 29
Acquisition of goods and services
245
NOTE 30
EMPLOYEE BENEFITS EXPENSES
These amounted to 2,639 million euros, down 438 million euros compared with 2019 and were broken down as
follows:
(million euros)
Employee benefits expenses
Wages and salaries
Social security expenses
Other employed benefits
Costs and provisions for temp work
Miscellaneous expenses for personnel and other labor-related services rendered
Charges for termination benefit incentives
Corporate restructuring expenses
Other
Total
2020
2019
1,804
647
146
2,597
—
1
38
3
42
2,639
1,950
716
143
2,809
—
9
256
3
268
3,077
(a)
(b)
(c)
(a+b+c)
Employee benefits expenses mainly related to the Domestic Business Unit for 2,401 million euros (2,753 million
euros in 2019) and to the Brazil Business Unit for 236 million euros (323 million euros in 2019).
“Corporate restructuring expenses” amounted to 38 million euros. Provisions are related to the effective exits of
the Parent Company in the year 2020 (also through the application of Article 4 of Law 92 of June 28, 2012, as
defined by that in the Trade Union Agreement of February 26, 2019 and the Trade Union Agreement signed June
4, 2020) and to the provision made for exits based on the application of Article 4 of Law 92 of June 28, 2012
following the agreements signed with trade unions on April 22, 2020 by Olivetti and Telecom Italia Trust
Technologies, and on April 17, 2020 by Telecontact. Expenses totaling 256 million euros were recognized in 2019.
In 2020, non-recurring costs were incurred for approximately 7 million euros, made necessary to address the
COVID-19 health emergency. For more details, see the Note “Non-recurring Events and Transactions”.
The average salaried workforce, including personnel with temp work contracts, stood at 49,099 employees in
2020 (51,917 in 2019). A breakdown by category is as follows:
(number of units)
Executives
Middle Management
White collars
Blue collars
Employees on payroll
Employees with temp work contracts
Total average salaried workforce
2020
587
4,083
44,420
—
49,090
9
49,099
2019
566
4,157
47,188
1
51,912
5
51,917
Headcount in service at December 31, 2020, including personnel with temp work contracts, stood at 52,347
employees (55,198 at December 31, 2019), showing a decrease of 2,851 employees.
Consolidated financial statements
of the TIM Group
Note 30
Employee benefits expenses
246
NOTE 31
OTHER OPERATING EXPENSES
Other operating expenses decreased by 664 million euros compared to 2019. The breakdown is as follows:
(million euros)
Write-downs and expenses in connection with credit management
Provision charges
TLC operating fees and charges
Indirect duties and taxes
Penalties, settlement compensation and administrative fines
Association dues and fees, donations, scholarships and traineeships
Other
Total
of which, included in the supplementary disclosure on financial instruments
2020
423
43
199
96
120
12
68
961
423
2019
577
497
268
124
58
12
89
1,625
577
In 2020, non-recurring operating costs were incurred for a total of 46 million euros, mainly referring to provisions
and expenses connected with credit management deriving from the deterioration of the macroeconomic
context as a consequence of the COVID-19 pandemic. For more details, see the Note “Significant non-recurring
Events and Transactions”.
Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial
instruments".
NOTE 32
INTERNALLY GENERATED ASSETS
These decreased by 35 million euros compared to 2019. The breakdown is as follows:
(million euros)
Intangible assets with a finite useful life
Tangible assets
Total
2020
231
271
502
2019
238
299
537
They mainly refer to labor costs for technical staff dedicated to the design, construction and testing of network
infrastructure and systems, as well as software development and development of network solutions,
applications and innovative services.
Consolidated financial statements
of the TIM Group
Note 31
Other operating expenses
247
NOTE 33
DEPRECIATION AND AMORTIZATION
These decreased by 311 million euros compared to 2019. The breakdown is as follows:
(million euros)
Amortization of intangible assets with a finite useful life
Industrial patents and intellectual property rights
Concessions, licenses, trademarks and similar rights
Other intangible assets
Depreciation of tangible assets owned
Buildings (civil and industrial)
Plant and equipment
Manufacturing and distribution equipment
Other
Depreciation of rights of use assets
Property
Plant and equipment
Other
Total
2020
1,152
473
2
1,627
35
2,115
11
140
2,301
397
252
39
688
4,616
2019
1,187
486
2
1,675
38
2,272
12
147
2,469
475
264
44
783
4,927
(a)
(b)
(c)
(a+b+c)
For further details refer to the Notes "Tangible and intangible assets with finite useful lives", "Tangible assets"
and "Right-of-use assets".
For a breakdown of depreciation and amortization by operating segment/geographical area, reference should be
made to the Note "Segment Reporting".
Consolidated financial statements
of the TIM Group
Note 33
Depreciation and amortization
248
NOTE 34
GAINS/(LOSSES) ON DISPOSALS OF NON-
CURRENT ASSETS
This item is broken down below:
(million euros)
Gains on disposals of non-current assets:
Gains on the retirement/disposal of intangible, tangible and user rights on
rental
Gains on the disposal of investments in subsidiaries
Losses on disposals of non-current assets:
Losses on the retirement/disposal of intangible, tangible and user rights on
rental
Losses on the disposal of investments in subsidiaries
Total
(a)
(b)
(a-b)
2020
29
—
29
40
—
40
(11)
2019
14
—
14
45
18
63
(49)
In 2019, the item “loss on the disposal of investments in consolidated companies” is related to the sale of the
company Persidera S.p.A.
Following the sale of Persidera, which generated proceeds of 142 million euros, as required by IAS 36, paragraph
86 the derecognition of the associated goodwill amounting to 68 million euros was carried out, with the result
shown in the table.
In the Separate Financial Statements, this disposal transaction generated a total gain of about 8 million euros.
Consolidated financial statements
of the TIM Group
Note 34
Gains/(losses) on disposals of non-current assets
249
NOTE 35
IMPAIRMENT REVERSALS (LOSSES) ON NON-
CURRENT ASSETS
This item is broken down below:
(million euros)
Reversals of impairment losses on non-current assets:
on intangible assets
on tangible assets
Impairment losses on non-current assets:
on intangible assets
on tangible assets
Total
2020
—
—
—
(a)
—
8
8
(8)
(b)
(a-b)
2019
—
—
—
—
—
—
—
Impairment losses for the year 2020 were mainly due to the provisions made by the Parent Company TIM S.p.A.
in view of inventory differences for plant warehouse materials held at external company sites.
Consolidated financial statements
of the TIM Group
Note 35
Impairment reversals (losses) on non-current assets
250
NOTE 36
OTHER INCOME (EXPENSES) FROM
INVESTMENTS
Details are as follows:
(million euros)
Dividends from Other investments
Net gains on the sale of investments in associates and joint ventures
accounted for using the equity method
Other income
Total
of which, included in the supplementary disclosure on financial instruments
2020
—
452
2
454
2
2019
1
2
—
3
1
In 2020, the item comprises “Net gains on the sale of investments in associates and joint ventures accounted for
using the equity method" relating to:
■ 441 million euros for the net capital gain recognized following the dilution of the TIM Group investment in
INWIT S.p.A. capital from 60% to 37.5%, following the merger of INWIT with Vodafone Towers;
■ 7 million euros, related to the capital gain linked to the transfer on April 23, 2020, of a package of shares
equal to 4.3% of the share capital of INWIT, were sold in an accelerated book-building procedure reserved
for institutional investors;
■ 2 million euros relating to the capital gain connected with the sale of a share package equating to 1.2% of
the share capital of INWIT sold on October 2, 2020 to an SPV managed and assisted by Canson Capital
Partners (Guernsey) Limited;
■ 2 million euros relating to the capital gain connected with the sale of a share package equating to
approximately 1.8% of the share capital of INWIT in respect of the exercise of a purchase option by the SPV
established by Canson Capital Partners (Guernsey) Limited;
For further details, see the note "Investments".
“Other income” for 2020 relates to income distributed by the fund Northgate CommsTech Innovations Partners
L.P..
In 2019, this item was positive by 3 million euros. Specifically, “gains on disposals of investments in associates
and joint ventures accounted for using the equity method” mainly related to the sale of the investment of TIM
S.p.A. in Alfiere S.p.A.
Consolidated financial statements
of the TIM Group
Note 36
Other income (expenses) from investments
251
NOTE 37
FINANCE INCOME AND EXPENSES
Finance income (expenses) showed a net expense of 1,179 million euros (expense of 1,436 million euros in 2019)
and comprises:
(million euros)
Finance income
Finance expenses
Net finance income/(expenses)
The items break down as follows:
(million euros)
Interest expenses and other finance expenses:
Interest expenses and other costs relating to bonds
Interest expenses to banks
Interest expenses to others
Interest expenses on financial lease liabilities
Commissions
Miscellaneous finance expenses (*)
Interest income and other finance income:
Interest income
Income from financial receivables, recorded in Non-current assets
Income from securities other than investments, recorded in Non-current
assets
Income from securities other than investments, recorded in Current assets
(*)
Miscellaneous finance income
Total net finance interest/(expenses)
(a)
Other components of financial income and expense:
Net exchange gains and losses
Net result from derivatives
Net fair value adjustments to fair value hedge derivatives and underlyings
Net fair value adjustments to non-hedging derivatives
Total other components of financial income and expense
Total net financial income (expenses)
of which, included in the supplementary disclosure on net financial
instruments
(*) of which IFRS 9 impact:
(b)
(a+b)
(million euros)
Income/Expenses from IFRS 9 reserve impairment on financial assets
measured at FVTOCI
Reversal of IFRS 9 impairment reserve on financial assets measured through
FVTOCI
Impairment losses on financial assets other than investments
2020
1,143
(2,322)
(1,179)
2019
946
(2,382)
(1,436)
2020
2019
(872)
(65)
(20)
(283)
(1,240)
(74)
(124)
(198)
55
2
—
11
27
95
(1,343)
(51)
109
3
103
164
(1,179)
(876)
2020
(1)
1
—
(962)
(74)
(21)
(356)
(1,413)
(67)
(211)
(278)
76
—
—
26
19
121
(1,570)
3
133
9
(11)
134
(1,436)
(1,107)
2019
(2)
8
—
Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial
instruments".
Consolidated financial statements
of the TIM Group
Note 37
Finance income and expenses
252
For greater clarity of presentation, the net effects relating to derivative financial instruments are summarized in
the following table:
(million euros)
Exchange gains
Exchange losses
Net exchange gains and losses
Income from fair value hedge derivatives
Charges from fair value hedge derivatives
Net result from fair value hedge derivatives
Positive effect of the reversal of the Reserve of cash flow hedge derivatives
to the income statement (interest rate component)
Negative effect of the reversal of the Reserve of cash flow hedge
derivatives to the income statement (interest rate component)
Net effect of the Reversal of the Reserve for fair value adjustment of
cash flow hedge derivatives to the income statement (interest rate
component)
Income from non-hedging derivatives
Charges from non-hedging derivatives
Net result from non-hedging derivatives
Net result from derivatives
Positive fair value adjustments to fair value hedge derivatives
Negative fair value adjustments to Underlying financial assets and liabilities
of fair value hedge derivatives
Net fair value adjustments
Positive fair value adjustments to Underlying financial assets and liabilities
of fair value hedge derivatives
Negative fair value adjustments relating to fair value hedge derivatives
Net fair value adjustments
Net fair value adjustments to fair value hedge derivatives and underlying
instruments
Positive fair value to non-hedging derivatives
Negative fair value adjustments relating to non-hedging derivatives
Net fair value adjustments to non-hedging derivatives
(a)
(b)
(c)
(a+b+c)
(d)
(e)
(d+e)
(f)
(g)
(f+g)
2020
393
(444)
(51)
47
—
47
376
(309)
67
6
(11)
(5)
109
46
(44)
2
6
(5)
1
3
174
(71)
103
2019
141
(138)
3
43
—
43
474
(381)
93
4
(7)
(3)
133
100
(91)
9
1
(1)
—
9
62
(73)
(11)
Consolidated financial statements
of the TIM Group
Note 37
Finance income and expenses
253
NOTE 38
PROFIT (LOSS) FOR THE YEAR
Profit for the year compared to 2019 increased by 6,110 million euros and was broken down as follows:
(million euros)
Profit (loss) for the year
Attributable to:
Owners of the Parent:
Profit (loss) from continuing operations
Profit (loss) from Discontinued operations/Non-current assets held for sale
Profit (loss) for the year attributable to Owners of the Parent
Non-controlling interests:
Profit (loss) from continuing operations
Profit (loss) from Discontinued operations/Non-current assets held for sale
Profit (loss) for the year attributable to Non-controlling interestss
2020
7,352
7,224
—
7,224
128
—
128
2019
1,242
900
16
916
326
—
326
Consolidated financial statements
of the TIM Group
Note 38
Profit (loss) for the year
254
NOTE 39
EARNINGS PER SHARE
Basic earnings per share
Profit (loss) for the year attributable to the Owners of the Parent
Less: additional dividends for the savings shares (0.011 euros per
share and up to capacity)
Average number of ordinary and savings shares
Basic earnings per share – Ordinary shares
Plus: additional dividends per savings share
Basic earnings per share – Savings shares
Basic earnings per share from continuing operations
Profit (loss) from continuing operations attributable to Owners of
the Parent
Less: additional dividends for the savings shares
Average number of ordinary and savings shares
Basic earnings per share from continuing operations – Ordinary
shares
Plus: additional dividends per savings share
Basic earnings per share from continuing operations – Savings
shares
Basic earnings per share from Discontinued operations/Non-
current assets held for sale
Profit (loss) from Discontinued operations/Non-current assets held
for sale
Average number of ordinary and savings shares
Basic earnings per share from Discontinued operations/Non-current
assets held for sale – Ordinary shares
Basic earnings per share from Discontinued operations/Non-current
assets held for sale – Savings shares
Average number of ordinary shares
Average number of savings shares
Total
(million euros)
(millions)
(euros)
(euros)
(million euros)
(millions)
(euros)
(euros)
(million euros)
(millions)
(euros)
(euros)
2020
7,224
(66)
7,158
21,080
0.34
0.01
0.35
7,224
(66)
7,158
21,080
0.34
0.01
0.35
—
21,080
—
2019
916
(66)
850
21,067
0.04
0.01
0.05
900
(66)
834
21,067
0.04
0.01
0.05
16
21,067
—
—
2020
15,051,766,083
6,027,791,699
21,079,557,782
—
2019
15,039,368,195
6,027,791,699
21,067,159,894
Consolidated financial statements
of the TIM Group
Note 39
Earnings per share
255
Diluted earnings per share
Profit (loss) for the year attributable to the Owners of the Parent
Dilution effect of stock option plans and convertible bonds (*)
Less: additional dividends for the savings shares (0.011 euros per
share and up to capacity)
Average number of ordinary and savings shares
Diluted earnings per share – Ordinary shares
Plus: additional dividends per savings share
Diluted earnings per share – Savings shares
Diluted earnings per share from continuing operations
Profit (loss) from continuing operations attributable to Owners of the
Parent
Dilution effect of stock option plans and convertible bonds (*)
Less: additional dividends for the savings shares
Average number of ordinary and savings shares
Diluted earnings per share from continuing operations – Ordinary
shares
Plus: additional dividends per savings share
Diluted earnings per share from continuing operations – Savings
shares
Diluted earnings per share from Discontinued operations/Non-
current assets held for sale
Profit (loss) from Discontinued operations/Non-current assets held for
sale
Dilution effect of stock option plans and convertible bonds
Average number of ordinary and savings shares
Diluted earnings per share from Discontinued operations/Non-current
assets held for sale – Ordinary shares
Diluted earnings per share from Discontinued operations/Non-current
assets held for sale – Savings shares
Average number of ordinary shares (*)
Average number of savings shares
Total
(million euros)
(millions)
(euros)
(euros)
(million euros)
(millions)
(euros)
(euros)
(million euros)
(millions)
(euros)
(euros)
2020
2019
7,224
42
(66)
7,200
22,163
0.33
0.01
0.34
7,224
42
(66)
7,200
22,163
0.33
0.01
0.34
—
—
22,163
—
916
41
(66)
891
22,167
0.04
0.01
0.05
900
41
(66)
875
22,167
0.04
0.01
0.05
16
—
22,167
—
—
—
2019
2020
16,139,213,020
16,134,874,545
6,027,791,699
6,027,791,699
22,162,666,244 22,167,004,719
(*) The average number of ordinary shares also includes the potential ordinary shares relating to the equity compensation plans of employees for
which the (market and non-market) performance conditions have been met, in addition to the theoretical number of shares that are issuable as a
result of the conversion of the unsecured equity-linked convertible bond. Consequently, the “Net profit (loss) for the year attributable to Owners of
the Parent and the “Profit (loss) from continuing operations attributable to Owners of the Parent” were also adjusted to exclude the effects, net of
tax, related to the above-mentioned plans and to the convertible bond (+42 million euros in 2020; +41 million euros in 2019).
Consolidated financial statements
of the TIM Group
Note 39
Earnings per share
256
Future potential changes in share capital
The table below shows future potential changes in share capital, based on the issuance of the convertible bond
by TIM S.p.A. in March 2015, in the 2020 Broad-Based Share Ownership Plan and plans for long-term share
incentives, still outstanding at December 31, 2020:
Number of
maximum shares
issuable
Capital
(thousands of
euros)
Paid-in capital
(thousands of
euros)
Subscription
price per share
(euros)
Capital increases already approved (ordinary
shares)
2020 Broad-based Share Ownership Plan (free issue)
(*)
2020-2022 Long Term Incentive Plan (free issue)
Stock Options
2015 Convertible Bond (ordinary shares)(**)
Bonds
Total
42,114,637
180,000,000
222,114,637
1,112,718,371
1,112,718,371
1,334,833,008
N.A.
N.A.
2,000,000
2,000,000
2,000,000
(*) The maximum number of free issues that can be issued is obtained by applying the ratio of assignment of one third of the 126,343,913 new
ordinary shares issued in exchange for payment on November 27, 2020 (equal to 99.09% of the 127,500,000 offered).
(**) The number of shares that could potentially be issued is indicated subject to any adjustment.
Further information is provided in the Notes “Financial liabilities (non-current and current)” and “Equity
compensation plans”.
Consolidated financial statements
of the TIM Group
Note 39
Earnings per share
257
NOTE 40
SEGMENT REPORTING
a) Segment reporting
The operating segments of the TIM Group, organized for the telecommunications business and the relative
geographical location are as follows:
■ Domestic: includes operations in Italy for voice and data services on fixed and mobile networks for end customers
(retail) and other operators (wholesale), the operations of the Telecom Italia Sparkle group, which, at international
level (Europe, the Mediterranean and South America), develops fiber optic networks for wholesale customers, the
operations of Olivetti (products and services for Information Technology), and, up to March 31, 2020, INWIT S.p.A.
(a company operating in the electronic communications infrastructure sector, and in particular the infrastructure
for hosting radio transmission equipment for mobile telephone networks, both for TIM and other operators) and
the units supporting the Domestic sector.
■ Brazil: includes mobile and fixed telecommunications operations in Brazil (TIM S.A.);
■ Other Operations: include the financial companies (Telecom Italia Capital S.A. and Telecom Italia Finance S.A.)
and other minor companies not strictly related to the TIM Group's core business.
In view of the decision-making process adopted by the TIM Group, segment reporting is presented for financial
operating data.
The results of financial management, income taxes for the year, as well as gains (losses) from Discontinued
operations / Non-current assets held for sale are presented at a consolidated level.
Other Information
Glossary 258
Separate Consolidated Income Statement by Operating Segment
Brazil
(million euros)
Domestic
2019
2020
2
11
39
225
2019
2020
12,874 14,039 2,931 3,935
2
31
12,905 14,078 2,933 3,937
708
200
13,105 14,303 2,944 4,645
(5,129) (5,042) (1,070) (1,450)
(323)
(2,401) (2,753)
(236)
—
(7)
(1)
—
(523)
(639) (1,099)
(318)
(825)
(334)
(249)
(132)
5
(132)
(13)
8
79
416
97
431
5,339 5,708 1,407 2,451
(939) (1,165)
(3,677) (3,761)
11
(60)
Third-party revenues
Intragroup revenues
Revenues by operating segment
Other income
Total revenues and operating income
Acquisition of goods and services
Employee benefits expenses
of which: accruals to employee
severance indemnities
Other operating expenses
of which: write-downs and expenses in
connection with credit management
and provision charges
Change in inventories
Internally generated assets
EBITDA
Depreciation and amortization
Gains/(losses) on disposals of non-
current assets
Impairment reversals (losses) on non-
current assets
EBIT
Share of profits (losses) of associates
and joint ventures accounted for using
the equity method
Other income (expenses) from investments
Finance income
Finance expenses
Profit (loss) before tax from continuing operations
Income tax expense
Profit (loss) from continuing operations
Profit (loss) from Discontinued operations/Non-current assets held for sale
Profit/(Loss) for the year
Attributable to:
Owners of the Parent
Non-controlling interests
—
1,635 1,887
—
476 1,297
(19)
18
—
—
(3)
(8)
8
Revenues by operating segment
(million euros)
Domestic
Brazil
Other activities Adjustments and
2020
—
—
—
—
—
(3)
(1)
(5)
—
—
—
(9)
—
—
—
(9)
—
2019
—
—
—
—
—
(6)
(1)
—
(2)
—
—
—
(9)
(1)
—
—
(10)
—
Consolidated
Total
eliminations
2020
—
(33)
(33)
—
(33)
29
(1)
—
1
—
(1)
7
2
—
—
2019
2020
2019
— 15,805 17,974
—
(41)
—
(41) 15,805 17,974
933
211
—
(41) 16,016 18,907
35 (6,173) (6,463)
— (2,639) (3,077)
(7)
(1)
—
(961) (1,625)
(1)
—
(466) (1,074)
(128)
(6)
(1)
9
537
502
1 6,739 8,151
— (4,616) (4,927)
(49)
(11)
—
—
2
—
—
—
(8)
1 2,104 3,175
—
(3)
18
3
454
946
1,143
(2,322) (2,382)
1,397 1,739
5,955
(513)
7,352 1,226
16
—
7,352 1,242
916
7,224
326
128
Revenues from equipment sales - third
party
Revenues from equipment sales -
intragroup
Total revenues from equipment sales
Revenues from services - third party
Revenues from services - intragroup
Total revenues from services
Total third-party revenues
Total intragroup revenues
Total revenues by operating segment
2020
1,300
2019
1,470
2020
102
2019
177
2020
—
2019
—
Other activities Adjustments and
Consolidated
Total
eliminations
2020
—
2019
2020
— 1,402
2019
1,647
31
—
—
102
—
—
1,300 1,470
177
11,574 12,569 2,829 3,758
2
11,605 12,608 2,831 3,760
12,874 14,039 2,931 3,935
2
12,905 14,078 2,933 3,937
39
31
39
2
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(33)
(33)
—
(33)
(33)
—
—
—
— 1,402 1,647
— 14,403 16,327
—
—
(41)
(41) 14,403 16,327
— 15,805 17,974
—
—
(41)
(41) 15,805 17,974
Consolidated financial statements
of the TIM Group
Note 40
Segment reporting
259
Purchase of intangible assets, tangible assets and rights of use assets by operating segment
(million euros)
Domestic
Brazil
Other activities Adjustments and
2019
2020
871
1,004
1,682 1,964
800
843
2020
193
456
519
2019
193
680
416
2020
—
—
—
3,529 3,635 1,168 1,289
872
2,912 661
2,748
417
507
723
781
—
—
—
2019
—
—
—
—
—
—
Consolidated
Total
eliminations
2020
—
—
—
2020
2019
2019
1,197 1,064
—
— 2,138 2,644
1,216
1,362
—
—
—
—
— 4,697 4,924
3,784
— 3,409
1,140
1,288
—
Purchase of intangible assets
Purchase of tangible assets
Purchase of rights of use assets
Total purchase of intangible assets,
tangible assets and rights of use
assets
of which: capital expenditures
of which: increases in lease/leasing
contracts for right-of-use assets
Headcount by Operating Segment
(number of units)
Headcount
Domestic
Brazil
Other activities
Consolidated Total
12.31.2020 12.31.2019 12.31.2020 12.31.2019 12.31.2020 12.31.2019 12.31.2020 12.31.2019
55,198
45,496
42,925
52,347
9,409
9,689
13
13
Assets and liabilities by Operating Segment
(million euros)
Domestic
Brazil
Other activities
12.31.2020
12.31.2019
12.31.2020
12.31.2019 12.31.2020 12.31.2019 12.31.2020 12.31.2019 12.31.2020 12.31.2019
Adjustments and
eliminations
Consolidated Total
5,098
845
5,943
—
7,498
1,166
8,664
—
44,736 45,342
3,755
3,964
48,491 49,306
11
2,728
Non-current operating assets
Current operating assets
Total operating assets
Investments accounted for using the
equity method
Discontinued operations /Non-current assets held for sale
Unallocated assets
Total Assets
Total operating liabilities
1,739
Liabilities directly associated with Discontinued operations/Non-current assets held for sale
Unallocated liabilities
Equity
Total Equity and liabilities
10,535 10,645
1,191
1
19
20
—
1
6
7
—
(1)
(35)
(36)
—
29
38
(82)
(1) 49,834 52,840
5,117
(19)
4,584
57,957
(20) 54,418
11
2,728
—
4,647
—
7,489
16,088
73,234 70,104
11,673
12,326
805
—
32,721 34,347
28,840 22,626
73,234 70,104
(96)
b) Reporting by geographical area
(million euros)
Italy
Overseas
Total
Revenues
Breakdown by location of
operations
2020
12,638
3,167
15,805
2019
13,815
4,159
17,974
Breakdown by location of
customers
2020
12,018
3,787
15,805
2019
13,178
4,796
17,974
(a)
(b)
(a+b)
c) Information about major customers
None of the TIM Group's customers exceeds 10% of consolidated revenues.
Non-current operating assets
Breakdown by location of
operations
12.31.2020
44,477
5,357
49,834
12.31.2019
45,066
7,774
52,840
Consolidated financial statements
of the TIM Group
Note 40
Segment reporting
260
NOTE 41
RELATED-PARTY TRANSACTIONS
The following tables show the figures relating to related party transactions and the impact of those amounts on
the separate consolidated income statement, consolidated statements of financial position and consolidated
statements of cash flows.
Related-party transactions, when not dictated by specific laws, were conducted at arm's length. They were
performed in compliance with the internal procedure, which sets forth rules designed to ensure the transparency
and fairness of the transactions in accordance with Consob Regulation 17221/2010. The current procedure is
available on the website gruppotim.it, under the Group section/Governance System channel.
The effects of the related party transactions on the Group separate consolidated income statement line items
for 2020 and 2019 are as follows:
SEPARATE CONSOLIDATED INCOME STATEMENT LINE ITEMS 2020
(million euros)
Total
Other related
parties (*)
Associates,
subsidiaries of
associates and
joint ventures
Pension funds Key managers
Total related
parties
% of financial
statement item
Revenues
Other operating income
Acquisition of goods and
services
Employee benefits
expenses
Other operating expenses
Depreciation and
amortization
Finance expenses
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
90
1
250
—
2
39
15
4
—
113
—
—
—
—
16
73
(a)
15,805
211
6,173
2,639
961
4,616
2,322
(b)
94
1
363
89
2
39
15
(b/a)
0.6
0.5
5.9
3.4
0.2
0.8
0.6
SEPARATE CONSOLIDATED INCOME STATEMENT LINE ITEMS 2019
(million euros)
Total
Associates,
subsidiaries of
associates and
joint ventures
Other related
parties (*)
Pension funds Key managers
Total related
parties
% of financial
statement item
Revenues
Acquisition of goods and
services
Employee benefits
expenses
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
2
141
—
2
6
—
20
76
(b)
4
147
96
(b/a)
—
2.3
3.1
(a)
17,974
6,463
3,077
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
261
The effects of related party transactions on the Group separate consolidated statement of financial position line
items at December 31, 2020 and 31 December, 2019, are as follows:
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION LINE ITEMS AT 12/31/2020
(million euros)
Total
Associates,
subsidiaries of
associates and
joint ventures
Other related
parties (*)
Pension funds
Total related
parties
% of financial
statement item
(a)
(b)
(b/a)
—
50
313
313
631
4,199
Net financial debt
Non-current financial
liabilities for lease contracts
Current financial liabilities
for lease contracts
Other statement of
financial position line items
Right of use assets
Trade and miscellaneous
receivables and other
current assets
Miscellaneous payables and
other non-current liabilities
Trade and miscellaneous
payables and other current
2.5
liabilities
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
4,992
4,346
6,588
3,602
347
347
7.0
163
101
1.4
7.9
7.5
0.1
40
50
61
22
57
4
2
3
1
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION LINE ITEMS AT 12/31/2019
(million euros)
Total
Associates,
subsidiaries of
associates and
joint ventures
Net financial debt
(a)
Other related
parties (*)
Pension funds
Total related
parties
% of financial
statement item
(b)
(b/a)
1
—
4,576
Non-current financial
liabilities for lease contracts
Other statement of
financial position line items
Trade and miscellaneous
receivables and other
current assets
Miscellaneous payables and
other non-current liabilities
Trade and miscellaneous
payables and other current
0.8
liabilities
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
4,857
7,218
3,214
0.2
34
61
23
—
—
—
8
4
6
2
1
1
1
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
262
The effects of the related party transactions on the significant Group consolidated statements of cash flows line
items for 2020 and 2019 are as follows:
CONSOLIDATED STATEMENT OF CASH FLOWS LINE ITEMS 2020
(million euros)
Total
(a)
Associates,
subsidiaries of
associates and
joint ventures
Other related
parties (*)
Pension funds
Total related
parties
% of financial
statement item
(b)
(b/a)
Purchase of intangible
assets, tangible assets and
right of use assets on an
accrual basis
Dividends paid
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
4,697
390
378
36
—
36
8.0
9.2
378
CONSOLIDATED STATEMENT OF CASH FLOWS LINE ITEMS 2019
(million euros)
Total
(a)
Associates,
subsidiaries of
associates and
joint ventures
Other related
parties (*)
Pension funds
Total related
parties
% of financial
statement item
(b)
(b/a)
Purchase of intangible
assets, tangible assets and
0.0
right of use assets on an
accrual basis
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
4,924
—
2
2
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
263
Transactions with associates, subsidiaries of associates and
joint ventures
The most significant amounts are summarized as follows:
SEPARATE CONSOLIDATED INCOME STATEMENT LINE ITEMS
(million euros)
Revenues
INWIT S.p.A.
NordCom S.p.A.
Other minor items
Total revenues
Other operating income
Acquisition of goods and services
INWIT S.p.A.
W.A.Y. S.r.l.
Other minor companies
Total Acquisition of goods and
services
Other operating expenses
Depreciation and amortization
Finance expenses
2020
2019
TYPE OF CONTRACT
Voice and data transmission services for company use,
Desktop Management ICT services, IRU transfer of Dark
Optic Fiber and Local Infrastructure, Easy IP ADSL service,
small cell design and construction services, property
leasing, site maintenance, electricity supply and
administrative outsourcing
the period April-
December 2020).
connections and outsourcing.
The amount shown in 2019 included, in addition to the
minor companies, Asscom S.r.l., which was sold in June
2020.
1 Fixed and mobile voice services, equipment, data network
(for
1
2
—
Supply of services for BTS sites, such as the provision of
passive
infrastructure and power supply systems,
monitoring and security services (alarms), management
and maintenance services
Supply, installation and technical assistance services for
geolocation equipment provided as part of offers to TIM
customers, developments of the CCS software platform
dedicated to TIM's Company Car Sharing service.
5
1
6
Penalties for breach of contract on maintenance
management services to INWIT S.p.A. (for the period
April-December 2020)
Amortization of rights of use related to the recognition of
greater non-current assets amortized over the residual
contractual term, towards INWIT S.p.A. (for the period
April-December 2020)
Finance expenses for interest related to financial liabilities
for rights of use granted to INWIT S.p.A. (for the period
April-December 2020)
89
1
—
90
1
242
6
2
250
2
39
15
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
264
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION LINE ITEMS
(million euros)
Net financial debt
Non-current financial liabilities
Current financial liabilities
Other statement of financial position
line items
Right of use assets
Trade and miscellaneous receivables
and other current assets
INWIT S.p.A.
W.A.Y. S.r.l.
Total trade and miscellaneous
receivables and other current assets
Miscellaneous payables and other
non-current liabilities
Trade and miscellaneous payables
and other current liabilities
INWIT S.p.A.
Movenda S.p.A.
W.A.Y. S.r.l.
Other minor companies
Total trade and miscellaneous
payables and other current liabilities
12.31.2020
12.31.2019
TYPE OF CONTRACT
313
50
347
55
2
57
2
98
1
2
—
101
related
financial
liabilities
the
Non-current
recognition of rights of use for lease liabilities with
INWIT S.p.A.
Current financial liabilities related to the recognition
of rights of use for lease liabilities with INWIT S.p.A.
to
Rights of use related to the recognition of greater
non-current assets amortized over the residual
contractual term, towards INWIT S.p.A.
Voice and data transmission services for company
use, Microsoft licenses, supply of apparatus, evolved
ICT services, Vai
hosting, Desktop Management
services and SAP maintenance, email assistance, IoT
platform implementation and management, SAG
security services for the judicial authorities, IRU
transfer of Dark Optic Fiber and Local Infrastructure,
Easy
IP ADSL service, small cell design and
construction services, property leasing, administrative
outsourcing and dividends to collect.
Deferred costs for supply of customized platforms,
application offers and fixed and mobile voice services.
2
2
Deferred contractual revenues from INWIT S.p.A.
Supply of services for BTS sites, monitoring and
security services, management and maintenance
services.
1 Supply and certification of SIM-cards, software
systems.
Supply, installation and technical assistance services
for geolocation equipment provided as part of offers
to TIM customers, developments of the CCS software
platform dedicated to TIM's Company Car Sharing
service.
2
1
4
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
265
CONSOLIDATED STATEMENT OF CASH FLOWS LINE ITEMS
(million euros)
2020
2019
TYPE OF CONTRACT
Purchase of intangible assets,
tangible assets and right of use
assets on an accrual basis
INWIT S.p.A.
Movenda S.p.A.
Other minor items
Total purchase of intangible,
tangible and rights of use assets on
an accrual basis
376
1
1
378
Higher value of rights of use as a result of new
contracts or changes in existing lease contracts (for
the period April-December 2020)
1 Supply and development systems software.
1
2
At December 31, 2020, TIM S.p.A. issued guarantees in favor of the joint venture Alfiere S.p.A. for 14 million euros.
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
266
Transactions with other related parties (both through directors,
statutory auditors and key managers and as participants in
shareholder agreements pursuant to Article 122 of the
Consolidated Law on Finance)
Details are provided below of the transactions with:
■
■
■
Vivendi Group and the companies of the group that it belongs to (as a result of the resolutions of the Board
of Directors of TIM S.p.A. of May 3 and June 1, 2017);
Related companies through Directors appointed on May 4, 2018;
Related companies through Directors whose term of office ended on May 4, 2018;
The most significant amounts are summarized as follows:
(million euros)
Revenues
Other Directors or through
Havas Group
Vivendi group
Total revenues
Acquisition of goods and services
Havas Group
Vivendi group
Total Acquisition of goods and
services
2020
2019
TYPE OF CONTRACT
3
—
1
4
109
4
113
1 Fixed-line and mobile voice services and devices.
1 Fixed and mobile phone services.
Circuit rental services and feasibility study for routing and
submarine cable interface solutions in America.
2
Purchase of media space on behalf of the TIM Group and,
to a lesser extent, development and delivery of advertising
campaigns.
Purchase of musical and television digital content
(TIMmusic and TIMvision) and supply of D&P cloud-based
games (TIMgames).
137
4
141
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
267
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION LINE ITEMS
(million euros)
Net financial debt
Non-current financial liabilities
(million euros)
Other statement of financial position
line items
Trade and miscellaneous receivables
and other current assets
Other Directors or through
Havas Group
Vivendi group
Other minors
Total trade and miscellaneous
receivables and other current assets
Miscellaneous payables and other
non-current liabilities
Trade and miscellaneous payables
and other current liabilities
Other Directors or through
Havas Group
Vivendi group
Total trade and miscellaneous
payables and other current liabilities
12.31.2020
12.31.2019
TYPE OF CONTRACT
—
1 Non-current financial liabilities related to the recognition
of rights of use for lease liabilities
12.31.2020
12.31.2019
TYPE OF CONTRACT
3
—
1
4
1
1
37
2
40
1 Fixed-line and mobile voice services and devices.
4 Prepaid expenses related to costs for advertising
services.
— TV series rights.
1
6
1 Deferred income for IRU sale to the Vivendi group.
—
33
1
34
Purchase of media space on behalf of the TIM Group
and, to a lesser extent, development and delivery of
advertising campaigns.
Purchase of musical and television digital content
(TIMmusic and TIMvision) and supply of D&P cloud-
based games (TIMgames).
CONSOLIDATED STATEMENT OF CASH FLOWS LINE ITEMS
(million euros)
Dividends paid
Vivendi group
Total Dividends paid
2020
36
36
2019
TYPE OF CONTRACT
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
268
Transactions with pension funds
The most significant amounts are summarized as follows:
SEPARATE CONSOLIDATED INCOME STATEMENT LINE ITEMS
(million euros)
Employee benefits expenses
Fontedir
Telemaco
Other pension funds
Total Employee benefits expenses
2020
2019
TYPE OF CONTRACT
9
60
4
73
Contributions to pension funds.
7
65
4
76
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION LINE ITEMS
(million euros)
Trade and miscellaneous payables
and other current liabilities
Fontedir
Telemaco
Other pension funds
Total trade and miscellaneous
payables and other current liabilities
12.31.2020
12.31.2019
TYPE OF CONTRACT
Payables for contributions to pension funds.
3
19
—
22
3
20
—
23
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
269
Remuneration to Key Managers
In 2020, the total remuneration recorded on an accrual basis by TIM or by Group subsidiaries in respect of key
managers amounted to 16.0 million euros (20 million euros in 2019). The figure breaks down as follows:
(million euros)
Short-term remuneration
Long-term remuneration
Employment termination benefit incentives
Share-based payments (*)
Total
2020
11.1 (1)
—
2.3 (0)
2.6 (2)
16.0 (0)
2019
11.9 (3)
0.3 (4)
5.6 (5)
2.2 (0)
20.0 (0)
(*) These refer to the fair value of the rights, accrued to December 31, under the share-based incentive plans of TIM S.p.A. and its subsidiaries (Long
Term Incentive and Plans of the subsidiaries).
(1) of which 1.0 million euros recorded by the subsidiaries;
(2) of which 0.4 million euros recorded by the subsidiaries;
(3) of which 1.2 million euros recorded by the subsidiaries;
(4) of which 0.3 million euros recorded by the subsidiaries;
(5) of which 1.0 million euros recorded by the subsidiaries.
Short-term remuneration is paid during the period it pertains to, and, at the latest, within the six months
following the end of that period and, in 2020, do not include the effects of the reversal of the accruals related to
the 2019 costs amounting to -0.6 million euros.
Long-term remuneration, at December 31, 2019, does not include the effects of the reversal of the accruals
related to the 2018 costs of -0.5 million euros.
The indemnities for early termination of employment, as at December 31, 2019, do not include the effects of the
reversal of the accruals relating to 2018 costs amounting to approximately -0.2 million euros.
The share-based payments at December 31, 2019, do not include the effects of the reversal of the accruals
related to the 2018 costs of the LTI 2018/2020 of -0.4 million euros.
In 2020, the contributions paid in to defined contribution plans (Assida and Fontedir) by TIM S.p.A. or by
subsidiaries of the Group on behalf of key managers, amounted to 135,000 euros (141,000 euros at December
31, 2019).
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
270
In 2020, "Key managers", i.e. those who have the power and responsibility, directly or indirectly, for the planning,
direction and control of the operations of the TIM Group, including directors, were the following:
Directors:
Luigi Gubitosi
Executives:
Pietro Labriola
Lorenzo Forina
Federico Rigoni
Michele Gamberini
Stefano Grassi
Luciano Sale
Giovanni Gionata Massimiliano Moglia
Carlo Nardello
Agostino Nuzzolo
Giovanni Ronca
Elisabetta Romano
Federico Rigoni
Nicola Grassi
Stefano Siragusa
(1) to February 4, 2020;
(2) from February 5, 2020
(3) from March 16, 2020
(4) to August 05, 2020.
Managing Director and Chief Executive Officer of TIM S.p.A.
General Manager
(1)
(2)
Diretor Presidente Tim S.A.
Chief Revenue Office
Chief Technology & Information Officer
Head of Security
Head of Human Resources, Organization & Real Estate
Chief Regulatory Affairs & Wholesale Market Office
Chief Strategy, Customer Experience & Transformation Office
Head of Legal and Tax
Chief Financial Office
(4) Chief Innovation & Partnership Office
(1)
(3)
Head of Procurement
Chief Operations Office
Consolidated financial statements
of the TIM Group
Note 41
Related-parties transactions
271
NOTE 42
EQUITY COMPENSATION PLANS
Equity compensation plans in place at December 31, 2020 are used for retention purposes and to offer long-term
incentives to Group managers and personnel.
A summary is provided below of the plans in place at December 31, 2020.
Description of stock option plans
With regard to the 2014-2016 Stock Option Plan of TIM S.p.A., already in place at December 31, 2019, the exercise
period ended on March 24, 2020 and all assigned, but not exercised, options lapsed.
TIM S.A. (formerly Tim Participações S.A.) Stock Option Plan
On April 10, 2014, the General Meeting of Shareholders of Tim Participações S.A. (now incorporated into TIM S.A.)
approved the long-term incentive plan for managers in key positions in the company and its subsidiaries. Exercise
of the options is not subject to the achievement of specific performance targets, but the exercise price is adjusted
upwards or downwards according to the performance of the Tim Participações S.A. shares in a ranking of Total
Shareholder Return, in which companies in the Telecommunications, Information Technology and Media industry
are compared during each year of validity of the plan.
The vesting period is 3 years (a third per year), the options are valid for 6 years, and the company does not have
the legal obligation to repurchase or liquidate the options in cash, or in any other form.
Year 2014
On September 29, 2014, the grantees of the options were granted the right to purchase a total of 1,687,686
shares. At December 31, 2020, there are no options that can be exercised. Out of the total attributed, 1,558,043
options have been canceled, due to withdrawal of the participants from the company or for having reached the
maturity of 6 years, and 129,643 options have been exercised.
Year 2015
On October 16, 2015, the grantees of the options were granted the right to purchase a total of 3,355,229 shares.
At December 31, 2020, 100% of the options were considered as vested. Of the total options granted, 1,646,080
were canceled by participants leaving the company. Of the remaining balance of 1,709,149 options, 1,687,378
options had been exercised and 21,771 could still be exercised.
Year 2016
On November 8, 2016, the grantees of the options were granted the right to purchase a total of 3,922,204 shares.
At December 31, 2020, 100% of the options were considered as vested. Of the total options granted, 1,727,424
were canceled by participants leaving the company. Of the remaining balance of 2,194,780 options, 1,899,717
options had been exercised and 295,063 could still be exercised.
Description of other equity compensation plans
TIM S.p.A. - Special Award 2016 – 2019
As required by the Regulations, following the approval of the Financial Statements for 2019, the premiums
accrued under the Plan were liquidated. Therefore, in April 2020, a cash bonus of a total of 486,000 euros (20%
of the accrued bonus) was paid to the recipients and a total of 2,492,305 ordinary shares (80% of the accrued
premium) was assigned.
TIM S.p.A. - Long Term Incentive Plan 2018-2020
The Plan, approved by the Shareholders' Meeting of Telecom Italia S.p.A. of April 24, 2018, provided for a three-
year vesting period (2018-2020) and the bonus allocation of Telecom Italia S.p.A. ordinary shares subject to the
achievement of two performance conditions, as assessed by the Board of Directors when approving the TIM
Group's consolidated financial statements at December 31, 2020:
■ average performance of TIM ordinary shares versus the average market performance of a peer basket in the
quarters preceding the start and the end of the period (70% weighting). The peer basket consists of the
following Companies: Deutsche Telekom AG, Vodafone Group PLC, Telefonica SA, Orange SA, BT Group PLC,
Telenor ASA, Swisscom AG, Telia Co AB, Koninklijke KPN NV, Proximus SADP, Elisa OYJ;
Consolidated financial statements
of the TIM Group
Note 42
Equity compensation plans
272
■ cumulative equity free cash flow over the period 2018-2020 (30% weighting). This parameter is linked to the
generation of cash flow, understood as net cash flow before dividends and investments in frequencies.
Represents the Free Cash Flow available for the payment of dividends, the repayment of the debt, the impact
of IAS 17 (finance leases) and the investment in frequencies, and do not include the financial impact of any
acquisition and/or disposal of equity investments (M&A).
The Plan had two grants: a first grant reserved to the Chief Executive Officer, serviced by a maximum of
30,000,000 shares; and the second grant for a select number of Group management (serviced by a maximum
of 55,000,000 shares).
Following final calculation of the results of the 2018-2020 three-year vesting period , the levels will be determined
for achieving the two parameters indicated, thereby quantifying any maturity of quota of the premium in shares.
TIM S.p.A. - Long Term Incentive Plan 2020-2022
The Shareholders' Meeting of April 23, 2020 approved the launch of the new rolling and equity based long-term
incentive plan called LTI 2020-2022. On May 18, 2020, the Board of Directors subsequently launched the first
cycle of the new Plan, for the three-year period 2020-2022, simultaneously assigning it to the CEO.
The first cycle is aimed at around 147 TIM Group staff: the CEO, Top Management and a selected segment of TIM
Group management.
Each cycle of the plan is divided into two parties:
■ Performance Share: free allocation of Company ordinary shares whose maturity is subject to an access gate
linked to the value of the share and to two share and industrial performance conditions, shown below.
■ Attraction/Retention Share: free allocation of Company ordinary shares, the maturity of which is subject to
the continuity of the employment relationship with TIM or TIM Group companies.
In relation to the Performance Share component, the performance conditions are as follows:
■ access gate, represented by the value of the security, which at the end of each cycle must be equal to or
greater than the value of the security at the start of the same cycle (refer to the normal value of the share
equal to the average of the official closing prices of the Stock Exchange 30 days prior to the start and end of
the Plan cycle);
■ NFP/EBITDA ratio, with relative weighting equal to 40%;
■
relative performance (TSR) of the ordinary share compared to a basket of Peers, with a relative weighting of
60%.
A payout bonus/malus mechanism equal to 4% will be applied to both components (Performance Share and
Attraction/Retention Share), linked, in equal measure, to the % growth of use of renewable energy out of total
energy and to the reduction of indirect CO2 emissions.
For the CEO, 100% of the pay opportunity is linked to the Performance Share component. For the remaining
recipient managers, 70% of the Pay Opportunity is linked to the Performance Share and the remaining 30% to
the Attraction/Retention Shares.
TIM S.p.A. – Broad-Based Share Ownership Plan 2020
In implementation of the resolutions passed on April 23, 2020 by the Extraordinary Shareholders' Meeting, and
on May 18, 2020 by the Board of Directors of Telecom Italia S.p.A., the campaign for the 2020 Broad-Based Share
Ownership Plan was commenced on June 16, 2020.
The aim of the Plan was to give Group employees the option to invest in Company shares, to increase their
motivation to achieve corporate objectives and to strengthen their sense of belonging to the business.
The 2020 Broad-Based Share Ownership consisted of an offer to subscribe to ordinary shares of the Company,
for cash, at a discounted price compared to the market price, reserved for employees of the Company or its Italy-
based subsidiaries, excluding "Top Managers".
Employees who hold the subscribed shares for a period of one year following assignment, subject to their
retaining the status of employees, shall receive ordinary shares of the Company free of charge allotted to them
at a ratio of 1 free share (the “Bonus Share”) for every 3 shares subscribed for cash.
There were two alternative and supplementary payment methods envisaged by which to subscribe the shares:
payment in cash by bank transfer and/or advance on Employee Severance Indemnity.
Consolidated financial statements
of the TIM Group
Note 42
Equity compensation plans
273
To service the initiative, a maximum of 127,500,000 new shares were to be issued, to be offered for paid
subscription and, subsequently, a maximum 42,500,000 new shares, without capital increase, for the free
allocation of 1 Bonus Share for every 3 subscribed shares.
The shares were offered from June 16 to October 30, 2020; the shares were subscribed at the unit price of 0.31
euros, corresponding to the mathematical average of the official prices recorded from May 17, 2020 to June 15,
2020, with a 10% discount.
On November 27, 2020, 126,343,913 Telecom Italia ordinary shares were issued to subscribers. In compliance with
said shareholders’ meeting resolution, the issue of the new shares did not result in a share capital increase and
the related equivalent value of subscription was allocated to the share premium reserve.
TIM S.A. (formerly Tim Participações S.A.) – 2018-2020 Long-Term
Incentive Plan
On April 19, 2018, the General Meeting of Shareholders of Tim Participações S.A. (now incorporated into TIM S.A.)
approved the long-term incentive plan for managers in key positions in the company. The plan aims to reward
participants with shares issued by the company, subject to specific time and performance conditions (upon
reaching specific targets). The vesting period is 3 years (annual measurement) and the company does not have
the legal obligation to repurchase or liquidate the shares in cash or in any other form. The portion of shares linked
to performance (70%) is granted 1/3 each year, if the performance target is achieved; the remaining portion of
shares (30%) is granted 3 years after allocation (restricted share).
The plan – in addition to transferring shares to beneficiaries – also includes the possibility of rewarding
participants through the settlement of the amount corresponding in cash.
Year 2018
On April 20, 2018, plan beneficiaries were granted the right to receive a total of 849,932 shares, of which 594,954
performance shares restricted to performance conditions and with gradual vesting over 3 years and 254,978
restricted shares, with a total vesting period of 3 years.
At December 31, 2020, the first and second vesting periods of the program’s performance shares, had ended:
■ First vesting period: in compliance with the results approved on May 29, 2019, 115,949 shares were
transferred to beneficiaries, of which 91,708 relating to the original volume accrued, 20,594 granted
according to the degree to which objectives had been achieved and 3,647 shares as a result of the dividends
distributed during the period. For participants transferred to other Group companies, as per the Plan rules,
payment in cash was considered of the amount corresponding to 3,685 shares (2,915 relative to the original
volume accrued, 654 acknowledged according to the degree to which the objectives had been achieved and
116 due to dividends distributed during the period).
■ Second vesting period: in compliance with the results approved on June 17, 2020, 87,766 shares were
transferred to beneficiaries, of which 83,181 relating to the original volume accrued, 70 discounted according
to the degree to which objectives had been achieved and 4,655 shares for dividends distributed during the
period. For participants transferred to other Group companies, as per the Plan rules, payment in cash was
considered of the amount corresponding to 3,084 shares (2,915 relative to the original volume accrued, 5
acknowledged according to the degree to which the objectives had been achieved and 164 due to dividends
distributed during the period).
At December 31, 2020, of the total assigned of 849,932 shares, 469,619 had been canceled due to the
beneficiaries having left the participating company, 203,715 shares had been transferred to beneficiaries (174,889
relative to the original volume accrued, 20,524 from performance achieved and 8,302 for payment of dividends
in shares) and 6,769 shares had been valued and paid in cash (5,830 relative to the original volume accrued, 659
from performance achieved and 280 for payment of dividends in shares), thereby leaving a balance of 199,594
shares that could be accrued at period end.
Year 2019
On July 30, 2019, plan beneficiaries were granted the right to obtain a total of 930,662 shares, of which 651,462
performance shares restricted to performance conditions and with gradual vesting over 3 years and 279,200
restricted shares, obtain total vesting period of 3 years.
At December 31, 2020, the first vesting period of the performance shares had ended:
■ First vesting period: in compliance with the results approved on July 29, 2020, 309,557 shares were
transferred to beneficiaries, of which 209,349 relating to the original volume accrued, 83,672 acknowledged
according to the degree to which objectives had been achieved and 16,536 shares as a result of the dividends
distributed during the period.
At December 31, 2020, of the total assigned of 930,662 shares, 33,418 had been canceled due to the beneficiaries
having left the participating company and 309,557 shares had been transferred to beneficiaries (of which 209,349
Consolidated financial statements
of the TIM Group
Note 42
Equity compensation plans
274
for accrual, 83,672 from performance achieved and 16,536 for payment of dividends in shares), thereby leaving
a balance of 687,895 shares that could be accrued at period end.
Year 2020
On April 14, 2020, plan beneficiaries were granted the right to receive a total of 796,054 shares, of which 619,751
performance shares restricted to performance conditions and with gradual vesting over 3 years and 176,303
restricted shares, with a total vesting period of 3 years.
As at December 31, 2020, the first vesting period has not yet finished.
Calculation of fair value measurement of the granted options
and rights
Parameters used to determine the fair value – TIM S.p.A.
Plans/Parameters
Exercise
price
(euros)
Nominal
value
(euros)
(1)
Duration
Volatility
(2)
Expected
dividends
(euros)
(3)
Risk-free
interest rate
(4)
LTI Plan 2018-2020 - equity component
LTI Plan 2018-2020 - equity component (two-
year CEO granting)
LTI 2018 – 2020 Plan – equity component (two-
year allocations)
LTI 2018 – 2020 Plan – equity component (two-
year allocations)
LTI Plan 2020-2022
Broad-Based Share Ownership Plan 2020
-
-
-
-
-
-
0.63
0.51
0.48
0.48
0.35
0.333861
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
3 years
2 years
2 years
2 years
3 years
1 year
_
_
_
_
0.01
0.01
-0.552% at
3 years
-0.594% at
2 years
-0.569% at
2 years
-0.570% at
2 years
-0.714% at
3 years
-0.699% at 1
year
(1)
(2)
(3)
(4)
Arithmetic mean of the official prices of the Shares recognized starting from the stock market trading day prior to that of assignment until
the thirtieth previous ordinary calendar day (both included) on the Electronic Stock Exchange organized and managed by Borsa Italiana S.p.A.,
calculated using only the days to which the prices taken as the basis of calculation refer as the divisor, cut off at the second decimal.
Based on the performance objectives of the plan, the TIM share volatility values were considered and, if necessary, also those of the securities
of the major companies of the telecommunications sector ("peer basket").
Dividends have been estimated on the basis of Bloomberg data.
The risk-free interest rate refers to the rate of government securities of the Federal Republic of Germany (market benchmark for transactions
in euros) with due date consistent with the period of reference at the valuation date.
Parameters used for the assignments of TIM S.A. (formerly Tim Participações S.A.)
Plans/Parameters
Share
base
price
(reais)
8.84
8.96
8.13
13.42
8.45
8.10
n.a.
n.a.
n.a.
Nominal
value
(reais)
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
14.41
11.28
14.40
Volatility Duration
Expected
dividends
(reais)
Risk-free
interest rate
51.73%
50.46%
48.45%
44.60%
35.50%
36.70%
n.a.
n.a.
n.a.
6 years
6 years
6 years
6 years
6 years
6 years
3 years
3 years
3 years
-
-
-
-
-
-
n.a.
n.a.
n.a.
11.94% per
annum
8.89% per
annum
10.66% per
annum
10.66% per
annum
16.10% per
annum
11.73% per
annum
n.a.
n.a.
n.a.
Stock option plan 2011
Stock option plan 2012
Stock option plan 2013
Stock option plan 2014
Stock option plan 2015
Stock option plan 2016
2018 PS/RS Plan
2019 PS/RS Plan
2020 PS/RS Plan
The parameters are characteristic of a stock option plan, considering the use of fair value appropriate only for Stock Option Plans.
Effects on the income statement and statement of financial position
Equity compensation plans which call for payment in equity instruments are recorded at fair value (except for
the 2018 Plan of TIM Participações) which represents the cost of such instruments at the grant date and is
recorded in the separate income statements under "Employee benefits expenses" over the period between the
grant date and the vesting period with a contra-entry to the equity reserve "Other equity instruments". For the
portion of the plans that provide for the payment of compensation in cash, the amount is recognized in liabilities
as a contra-entry to "Employee benefits expenses". Equity compensation plans which call for payment in equity
instruments did not have significant impacts either on the income statements or the statements of financial
position or of cash flows of the TIM Group at December 31, 2020.
Consolidated financial statements
of the TIM Group
Note 42
Equity compensation plans
275
NOTE 43
SIGNIFICANT NON-RECURRING EVENTS AND
TRANSACTIONS
The effect of 2020 non-recurring events and transactions on the equity, profit, net financial debt and cash flows
of the TIM Group is set out below in accordance with Consob Communication DEM/6064293 of July 28, 2006. The
non-recurring effects on Equity and Profit (loss) for the year are shown net of tax effects.
(million euros)
Equity
Profit (loss)
for the year
Net financial
debt carrying
amount
Cash
flows (*)
(a)
Carrying amount
Revenue adjustments
Other operating income
Acquisition of goods and services - Expenses related to
agreements and the development of non-recurring projects
and other costs
Employee benefits expenses - Charges related to corporate
reorganization/restructuring and other charges
Other operating expenses - Expenses related to disputes and
regulatory sanctions and potential liabilities related to them,
and expenses related to disputes with former employees and
liabilities with customers and/or suppliers for other provisions
and charges
Other income (expenses) from investments
Miscellaneous finance expenses
Tax realignment pursuant to Decree Law 104/2020 Art. 110
Total non-recurring effects
Income/(Expenses) relating to Discontinued operations
Figurative amount – financial statements
(*) Cash flows refer to the increase (decrease) in Cash and cash equivalents during the year.
(b)
(c)
(a–b-c)
28,840
(28)
1
(46)
(52)
(110)
411
(5)
5,877
6,048
—
22,792
7,352
(28)
1
(46)
(52)
(110)
411
(5)
5,877
6,048
—
1,304
23,714
—
(22)
1,465
—
22
47
(47)
360
(360)
245
(1,286)
—
—
(656)
—
24,370
(245)
638
—
—
8
—
1,457
Consolidated financial statements
of the TIM Group
Note 43
Significant non-recurring events and transactions
276
The impact of non-recurring items on the separate consolidated income statement line items is as follows:
(million euros)
Revenues:
Revenue adjustments
Other operating income:
Brazil Business Unit Tax recovery and Domestic Business Unit operating expenses recovery
effect
Other operating provisions absorption
Acquisition of goods and services, Change in inventories:
Professional expenses, consulting services and other costs
Employee benefits expenses:
Charges connected to corporate reorganization/restructuring and other processes
Other operating expenses:
Other charges and provisions
Impact on Operating profit (loss) before depreciation and amortization, capital gains
(losses) and impairment reversals (losses) on non-current assets (EBITDA)
Gains/(losses) on disposals of non-current assets:
Sale of Persidera S.p.A. (Domestic BU)
Impact on EBIT - Operating profit (loss)
Other income (expenses) from investments:
Net capital gain on INWIT transactions
Net gains on the sale of investments in associates and joint ventures accounted for using
the equity method
Finance expenses:
Miscellaneous finance expenses
Impact on profit (loss) before tax from continuing operations
Tax realignment pursuant to Decree Law 104/2020 Art. 110
Income taxes on non-recurring items
Income/(Expenses) relating to Discontinued operations
Impact on Profit (loss) for the year
2020
(39)
—
1
(64)
(74)
(148)
(324)
—
(324)
452
—
(7)
121
5,877
50
—
6,048
2019
(15)
706
—
(21)
(282)
(459)
(71)
(18)
(89)
—
1
(34)
(122)
—
(40)
16
(146)
The COVID-19 emergency, following the spread of the SARS-CoV-2 virus and pronounced a pandemic by the
World Health Organization (WHO) on March 11, 2020, resulted in the TIM Group incurring non-recurring expenses,
gross of tax effects, for a total of 108 million euros. Adjustments booked of non-recurring revenues in 2020 (38
million euros) were connected with the commercial initiatives of TIM S.p.A. to support customers in dealing with
the COVID-19 emergencies. In addition to the impacts of TIM S.p.A.’s commercial initiatives to support customers,
operating costs have been incurred mainly in relation to provisions and expenses connected with the
management of credits deriving from the worsening of the macroeconomic context (46 million euros), payroll
costs (7 million euros), as well as miscellaneous costs and procurement for approximately 17 million euros, as
have become necessary to handle the health emergency, primarily for the purchase of Personal Protective
Equipment, thermoscanners and environmental hygiene services.
For more details on the tax realignment, see the Note on “Income tax (current and deferred)”.
Consolidated financial statements
of the TIM Group
Note 43
Significant non-recurring events and transactions
277
NOTE 44
POSITIONS OR TRANSACTIONS RESULTING
FROM ATYPICAL AND/OR UNUSUAL
OPERATIONS
In accordance with Consob Communication DEM/6064293 of July 28, 2006, a statement is made to the effect
that in 2020 the TIM Group did not pursue any atypical and/or unusual transactions, as defined by that
Communication.
Consolidated financial statements
of the TIM Group
Note 44
Positions or transactions resulting from atypical
278
and/or unusual operations
NOTE 45
OTHER INFORMATION
a) Exchange rates used to translate the financial statements of
foreign operations (*)
(local currency against 1 euro)
Year-end exchange rates
(statements of financial position)
12.31.2020
12.31.2019
Average exchange rates for the year
(income statements and statements of cash
flows)
2020
2019
Europe
BGN
CZK
CHF
TRY
GBP
RON
RUB
North America
USD
Latin America
VES
BOB
PEN
ARS
CLP
COP
BRL
Other countries
ILS
NGN
(*)
Bulgarian Lev
Czech koruna
Swiss franc
Turkish lira
Pound sterling
Romanian leu
Russian ruble
1.95580
26.24200
1.08020
9.11310
0.89903
4.86830
91.46700
1.95580
25.40800
1.08540
6.68430
0.85080
4.78300
69.95600
1.95580
26.45640
1.07047
8.04599
0.88940
4.83817
82.66883
1.95580
25.66928
1.11263
6.36122
0.87750
4.74547
72.45046
U.S. dollar
1.22710
1.12340
1.14179
1.11954
Venezuelan bolivar -
Soberano
Bolivian Bolíviano
Peruvian nuevo sol
Argentine peso
Chilean peso
Colombian peso
Brazilian real
1356945.08
8.47930
4.44260
103.24940
872.52000
4,202.34000
6.37680
52,308.38000
7.76270
3.72550
67.27490
844.86000
3,688.66000
4.52808
375,274.05000
7.88964
3.99284
80.83685
902.97084
4,215.45981
5.88806
14,692.87000
7.73599
3.73612
53.80911
786.86284
3,673.62602
4.41422
Israeli shekel
Nigerian Naira
3.94470
465.68500
3.88450
344.32200
3.92462
407.22874
3.99076
343.07080
Source: data processed by the European Central Bank, Reuters and major Central Banks.
b) Research and development
Expenditures for research and development activities are represented by external costs, labor costs of dedicated
staff and depreciation and amortization. Details are as follows:
(million euros)
Research and development costs expensed during the year
Capitalized development costs
Total research and development costs (expensed and capitalized)
2020
79
1,043
1,122
2019
55
1,111
1,166
Consolidated financial statements
of the TIM Group
Note 45
Other information
279
The decrease recognized in 2020 was mainly due to the completion of the engineering and deployment and
development activities conducted on the LTE and NGAN networks, which have now reached maturity, partially
offset by greater implementation activities related to the new generation 5G network.
In the 2020 Separate Consolidated Income Statement, a total of 910 million euros of amortization expense was
recorded for development costs, capitalized during the year and in prior years.
Research and development activities carried out by the TIM Group are described in detail in the Report on
Operations (“Research and Development” section).
c) Leasing income
The TIM Group has entered into lease contracts on land and buildings for office and industrial use, mobile
network infrastructure sites and network infrastructure; at December 31, 2020 and at December 31, 2019, the
lease installments at nominal value still to be collected totaled:
(million euros)
12.31.2020
12.31.2019
Within 1 year
From 1 to 2 years after the end of the reporting period
From 2 to 3 years after the end of the reporting period
From 3 to 4 years after the end of the reporting period
From 4 to 5 years after the end of the reporting period
Beyond 5 years after the end of the reporting period
Total
d) Public funds
154
74
62
56
54
54
454
147
113
87
59
46
76
528
Italian Law 124/2017 requires that information on subsidies, contributions, paid assignments and economic
benefits of any kind received from Italian public administrations be provided. In this regard, the following table
shows the disbursements collected by the TIM Group in the years 2020 and 2019:
Distributing entity
Area of intervention
Received in
2020
(million euros)
Received in
2019
(million euros)
Fondimpresa/Fondirigenti
Infratel
MUR (formerly MIUR)
Sundry income (*)
Total
(*) 2020 – MED; Region of Lombardy, Region of Apulia
2019 – Ministry of Economic Development (MiSE); Ministry of the Economy and Finance (MEF); Lazio Region; Piedmont Region; Veneto Region;
Autonomous Province of Trento.
training
construction of Broadband and ultrabroadband
infrastructure
research projects
innovation and digital divide
1
24
3
1
29
4
28
2
—
34
Consolidated financial statements
of the TIM Group
Note 45
Other information
280
e) Directors’ and statutory auditors’ remuneration
Total remuneration due for 2020 to the directors and statutory auditors of TIM S.p.A. for the performance of
these functions at the Parent and in other consolidated companies totaled 4.179 million euros for directors and
0.575 million euros for statutory auditors. In reference to the compensation to which the Directors are entitled, it
should be noted that the amount was calculated by considering only compensation for corporate offices (in
primis those under Article 2389, paragraphs 1 and 3 of the Italian Civil Code), thus excluding amounts relating to
any employment relationship with the companies of the Group and any non-monetary fringe benefits; for a
complete and detailed description of the compensation paid to the directors, reference should be made to the
Compensation Report, available at the Company’s headquarters and on the corporate website at the following
address: gruppotim.it/assemblea.
f) Summary schedule of fees due to the audit firm and other
firms in its network
The following schedule reports the fees due to EY S.p.A. and to the other firms in the EY network for the audit of
the 2020 financial statements, and the fees referring to 2020 for other audit and review services, and for other
services besides audit rendered to the companies of the TIM Group from EY S.p.A. and other firms in the EY
network. The out-of-pocket expenses incurred for these services in 2020 are also shown.
Total
EY network
5,618,321
152,773
(euros)
TIM
S.p.A..
EY S.p.A.
TIM
Subsidiary
Group
Companies
2,927,874 1,151,770 4,079,644
60,000
20,000
40,000
TIM
S.p.A..
Other entities of the EY network
Subsidiary
Companies
TIM
Group
— 1,538,677 1,538,677
92,773
92,773
—
72,000
110,000
Audit services
Auditing services with the issue of
certification
Certification of compliance of the
Consolidated Non-Financial
Statement
Other services
Total 2020 fees due for auditing
and other services to the EY
network
Out-of-pocket expenses
Total
Please also note that in FY 2020, additional auditing costs were booked for FY 2019 in the amount of 585,000 euros for EY S.p.A. due to exceptional
events that could not have been foreseen when drafting the original contractual offer (of which 550,000 euros for TIM S.p.A. and 35,000 euros for TI
Sparkle S.p.A.) due to exceptional events that could not be foreseen in the original contractual offer. A substantial disclosure was given about these
additional costs in the Shareholders’ Meeting of TIM for the 2019 financial statements, held on April 23, 2020.
3,149,874 1,171,770 4,321,644
66,363
36,205
3,180,032 1,207,975 4,388,007
— 1,646,718 1,646,718
—
70,590
70,590
— 1,717,308 1,717,308
72,000
110,000
15,268
—
15,268
—
—
—
—
—
30,158
87,268
110,000
5,968,362
136,953
6,105,315
Consolidated financial statements
of the TIM Group
Note 45
Other information
281
NOTE 46
EVENTS SUBSEQUENT TO DECEMBER 31, 2020
TIM: first Sustainability Bond placed with a maturity of 8 years
On January 11, 2021, TIM successfully completed the issue of its inaugural 1 billion euros Sustainability Bond,
with an 8-year maturity, set to increase the Group’s energy efficiency and finance Green and Social projects.
Demand was above 4 billion euros demonstrating TIM’s strong positioning on the international markets also in
light of the presentation to the financial community, in December 2020, of the Sustainability Financing
Framework which involved over 40 institutional investors.
TIM priced its bond well below the secondary market of reference, setting the annual coupon at 1.625%, the
lowest ever. This transaction also sees TIM extend the average debt maturity and raise new funds for the amount
exceeding the 2021 deadlines.
The proceeds of the new issue will be used to transform the copper network into fiber, which is expected to
deliver significant energy efficiency. Moreover, for the first time in Italy a corporation will invest part of the funds
collected into projects with social value, as envisaged in the Sustainability Financing Framework.
Issuer: TIM S.p.A.
Amount: 1 billion euros
Settlement date: 1/18/2021
Maturity: 1/18/2029
Annual coupon: 1.625%
Issue price: 99.074%
Redemption price: 100.000%.
Noovle S.p.A., the biggest cloud project for Italy
On January 25, 2021 TIM announced the birth of Noovle S.p.A., the new company wholly owned by the TIM Group
intended to become an Italian center of excellence for Cloud and edge computing, boosting the offer of TIM's
innovative public, private and hybrid cloud services to businesses - from SMEs to large industry - and public
administration, accelerating the digital transformation of the country.
The cloud company, which is the result of the experience and digital skills of the TIM Group, its associated Data
Centers and the specialised professionalism of Noovle S.r.l., a company acquired by TIM in May 2020 and one of
the main Google Cloud partners in the Italian market, will focus on the supply of innovative and bespoke
Multicloud services and solutions to TIM customers, ranging from the management of network infrastructure in
its Data Centers, to design and support services, migration to the cloud and support for the related management
activities, using the most advanced technologies based on artificial intelligence and the Internet of Things. The
services offered will allow customers to face the challenges of the digital transformation and improve the user
experience. Noovle wants to support companies in their cloud transformation projects and therefore bring
innovation to the world of work and the digital experience. All these services will have security at their core.
Thanks to a proprietary network of 17 state-of-the-art Data Centers distributed across the country - built
according to the most advanced technological and safety standards and the most recent environmental
sustainability best practices, in compliance with the Group's ESG objectives - the company will offer innovative
resources and services to manage servers, data and information in a secure cloud environment located in Italy.
In particular, TIM will entrust Noovle with the task of building six new Data Centers specialised in the provision of
public and hybrid cloud services, with TIER IV certification, and managing seven Core Data Centers and four
service centers, already in operation, for the widest range of IT solutions, located across the country, from which
TIM's Cloud, hybrid Cloud and Multicloud services are provided. A cutting-edge infrastructure that will cover a
total area of over 50,000 square meters nationally by 2022, with a capacity of up to 100 MW of usable IT power,
closely integrated with TIM's primary fiber optic network to ensure a structural reduction of interconnection
latency between services.
Consolidated financial statements
of the TIM Group
Note 46
Events subsequent to December 31, 2020
282
Noovle starts with around 1,000 professionals and estimates that it will achieve a turnover of 1 billion euros in
2024 with an average annual growth rate of around 20% and an expected EBITDA of around 400 million euros.
The strategic decision to concentrate TIM's cloud services in Noovle is part of a bigger program of major
technological investments the TIM Group is making to develop the latest generation network infrastructure, key
Information Technology and cloud services to support the digitization of the country's production and
administrative fabric.
Noovle will strengthen the alliance already launched between the TIM Group and Google Cloud and will also
make use of important strategic partnerships with the main industry leaders including Atos, Cisco, Citrix,
Microsoft, Salesforce, SAP and VMware.
TIM S.A. obtains right to exercise subscription bonuses at Bank
C6
TIM S.A. obtained, within the scope of the strategic partnership signed with Banco C6 S.A. the right to exercise
subscription bonuses equivalent to an indirect stake of approximately 1.4% of C6's share capital as a result of
reaching, in December 2020, the 1st level of the agreed goals. This right will be exercised when the Company's
management deems to be more appropriate. It is important to note that the Subscription Bonuses will grant TIM
S.A., when exercised, a minority position without control or significant influence over the management of C6.
C6 is a digital bank with outstanding growth in Brazil, being the institution that grew the most in the 3rd quarter
of 2020 and surpassing more than 4 million opened accounts until November. The Bank has approximately 5.3
billion reais in total assets and transacts in its payment platform more than 1.5 billion reais per month.
In less than a year, the Partnership between companies generated a significant number of open accounts
through the combined offers of telecommunications and financial services, which reinforces the relationship
between TIM and C6 with significant results and confirms the innovative and centered character customer
convenience.
Agreement with Trade Unions
On March 8, 2021, an agreement was stipulated with the Trade Unions governing the early redundancy of 1,300
people - in accordance with Article 4, subsections 1 to 7ter of Italian Law no. 92/2012.
All employees accruing pension entitlement by December 31, 2026 and who choose to terminate their contract
of employment by end November 2021, can adhere voluntarily.
The agreement is part of the more comprehensive generational remix and professional renewal process
launched by the company in line with the digital transformation in progress.
Consolidated financial statements
of the TIM Group
Note 46
Events subsequent to December 31, 2020
283
NOTE 47
LIST OF COMPANIES OF THE TIM GROUP
In accordance with Consob Communication DEM/6064293 dated July 28, 2006, the list of companies is provided herein.
The list is divided by type of investment, consolidation method and operating segment.
The following is indicated for each company: name, head office, country and share capital in the original currency. In
addition to the percentage ownership of share capital, the percentage of voting rights in the ordinary shareholders'
meeting, if different from the percentage holding of share capital, and which companies hold the investment.
Company name
Reg. office
Currency
Share capital
% Ownership
% of
voting
rights
Held by
PARENT COMPANY
TIM S.p.A.
SUBSIDIARIES CONSOLIDATED LINE-BY-LINE
DOMESTIC BU
CD FIBER S.r.l.
(design, construction, maintenance and management of
network infrastructure services and high-speed electronic
communication systems)
DAPHNE 3 S.p.A.
(assumption, holding, management and disposal of equity
investments in INWIT)
FIBERCOP S.p.A.
(infrastructures, networks, passive cabled access services to
the premises of end users to be offered to TLC operators
throughout Italy)
FLASH FIBER S.r.l
(development, implementation, maintenance and supply of
the fiber network in Italy)
GLOBAL SPACE TRE S.r.l.
(ICT services)
MED 1 SUBMARINE CABLES Ltd
(construction and management of the submarine cable lev1)
NOOVLE S.p.A.
(design, implementation and management of infrastructures
and data center services)
NOOVLE AI S.r.l.
(ICT services)
NOOVLE FRANCE Sasu
(ICT services)
NOOVLE INTERNATIONAL SAGL
(ICT services)
NOOVLE MALTA Ltd
(ICT services)
NOOVLE S.r.l.
(ICT services)
NOOVLE SICILIA S.c.a.r.l.
(ICT services)
NOOVLE SLOVAKIA S.R.O.
(ICT services)
OLIVETTI S.p.A.
(production and sale of office equipment and information
technology services)
TELECOM ITALIA SAN MARINO S.p.A.
(San Marino telecommunications management)
TELECOM ITALIA SPARKLE S.p.A.
(completion and management of telecommunications
services for public and private use)
TELECOM ITALIA TRUST TECHNOLOGIES S.r.l.
(other operations related to non-classified IT services)
TELECOM ITALIA VENTURES S.r.l.
(investment holding company)
TELECONTACT CENTER S.p.A.
(telemarketing services)
MILAN
ROME
MILAN
MILAN
MILAN
ROME
RAMAT GAN
(ISRAEL)
MILAN
ROVERETO
PARIS
(FRANCE)
PREGASSONA
(SWITZERLAND)
GZIRA
(MALTA)
MILAN
PALERMO
BRATISLAVA
(SLOVAKIA)
IVREA
(TURIN)
BORGO MAGGIORE
(SAN MARINO)
ROME
POMEZIA
(ROME)
MILAN
NAPLES
EUR
11,677,002,855
EUR
EUR
EUR
EUR
EUR
ILS
EUR
EUR
EUR
CHF
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
50,000
100,000
50,000
30,000
10,000
55,886,866
50,000
10,000
20,000
20,000
10,000
300,000
50,000
5,000
10,000,000
1,808,000
200,000,000
7,000,000
10,000
3,000,000
100.0000
51.0000
100.0000
80.0000
100.0000
100.0000
100.0000
100.0000
100.0000
100.0000
90.0000
100.0000
80.0000
85.0000
15.0000
100.0000
100.0000
100.0000
100.0000
100.0000
100.0000
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
NOOVLE S.r.l.
TELECOM ITALIA SPARKLE S.p.A.
TIM S.p.A.
NOOVLE S.r.l.
NOOVLE S.r.l.
NOOVLE S.r.l.
NOOVLE INTERNATIONAL SAGL
TIM S.p.A.
NOOVLE S.r.l.
NOOVLE S.r.l.
TELECOM ITALIA FINANCE S.A.
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
Consolidated financial statements
of the TIM Group
Note 47
List of companies of the TIM Group
284
Company name
Reg. office
Currency Share capital
% Ownership
TELEFONIA MOBILE SAMMARINESE S.p.A.
(development and management of mobile
telecommunications plants and services)
TELENERGIA S.r.l.
(import, export, purchase, sale and trade of electricity)
TELSY S.p.A.
(production, installation, maintenance, reconditioning and
sale of terminals, radio telephones, telecommunications and
electronic systems in general)
TI SPARKLE AMERICAS Inc.
(managed bandwidth services)
TI SPARKLE ARGENTINA S.A.
(managed bandwidth services)
TI SPARKLE AUSTRIA GmbH
(telecommunications services)
TI SPARKLE BELGIUM S.P.R.L. – B.V.B.A.
(telecommunications services)
TI SPARKLE BRASIL PARTIÇIPAÇÕES Ltda
(investment holding company)
TI SPARKLE BRASIL TELECOMUNICAÇÕES Ltda
(managed bandwidth services)
TI SPARKLE BULGARIA EOOD
(telecommunications)
TI SPARKLE CHILE S.p.A.
(managed bandwidth services)
TI SPARKLE COLOMBIA Ltda
(managed bandwidth services)
TI SPARKLE CZECH S.R.O.
(telecommunications services)
TI SPARKLE FRANCE S.A.S.
(installation and management of telecommunications
services for fixed network and related activities)
TI SPARKLE GERMANY GmbH
(telecommunications services)
TI SPARKLE GREECE S.A.
(telecommunications)
TI SPARKLE ISRAEL Ltd
(international wholesale telecommunication services)
TI SPARKLE NETHERLANDS B.V.
(telecommunications services)
TI SPARKLE NORTH AMERICA, Inc.
(telecommunications and promotional services)
TI SPARKLE PANAMA S.A.
(managed bandwidth services)
TI SPARKLE PERU' S.A.
(managed bandwidth services)
TI SPARKLE PUERTO RICO LLC
(managed bandwidth services)
TI SPARKLE ROMANIA S.r.l.
(telecommunications services)
TI SPARKLE RUSSIA LLC
(telecommunications services)
TI SPARKLE SINGAPORE Pte.Ltd
(telecommunications services)
TI SPARKLE SLOVAKIA S.R.O.
(telecommunications services)
TI SPARKLE SPAIN TELECOMMUNICATIONS S.L.
(telecommunications services)
TI SPARKLE ST. CROIX LLC
(managed bandwidth services)
BORGO
MAGGIORE
(SAN MARINO)
ROME
TURIN
MIAMI
(UNITED STATES
OF AMERICA)
BUENOS AIRES
(ARGENTINA)
VIENNA
(AUSTRIA)
BRUXELLES
(BELGIUM)
RIO DE JANEIRO
(BRAZIL)
RIO DE JANEIRO
(BRAZIL)
SOFIA
(BULGARIA)
SANTIAGO
(CHILE)
BOGOTA'
(COLOMBIA)
PRAGUE
(CZECH
REPUBLIC)
PARIS
(FRANCE)
FRANKFURT
(GERMANY)
ATHENS
(GREECE)
RAMAT GAN
(ISRAEL)
AMSTERDAM
(NETHERLANDS)
NEW YORK
(UNITED STATES
OF AMERICA)
PANAMA
LIMA
(PERU)
SAN JUAN
(PUERTO RICO)
BUCAREST
(ROMANIA)
MOSCOW
(RUSSIA)
SINGAPORE
BRATISLAVA
(SLOVAKIA)
MADRID
(SPAIN)
VIRGIN ISLANDS
(UNITED STATES
OF AMERICA)
EUR
EUR
EUR
USD
ARS
EUR
EUR
BRL
BRL
BGN
CLP
COP
CZK
EUR
EUR
EUR
ILS
EUR
USD
USD
PEN
USD
RON
RUB
USD
EUR
EUR
USD
78,000
50,000
5,390,000
10,000
9,998,000
2,735,000
2,200,000
71,563,866
69,337,363
100,000
5,852,430,960
12,635,774,000
6,720,000
18,295,000
25,000
368,760
1,000
18,200
15,550,000
10,000
57,101,788
3,050,000
3,021,560
8,520,000
5,121,120
300,000
1,687,124
1,000
51.0000
100.0000
100.0000
100.0000
100.0000
100.0000
99.9967
0.0033
99.9999
0.0001
99.9999
0.0001
100.0000
100.0000
99.9999
0.0001
100.0000
100.0000
100.0000
100.0000
100.0000
100.0000
100.0000
100.0000
99.9999
0.0001
100.0000
100.0000
99.0000
1.0000
99.9999
0.0001
100.0000
100.0000
100.0000
% of
voting
rights
Held by
TELECOM ITALIA SAN MARINO S.p.A.
TIM S.p.A.
TIM S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TI SPARKLE UK Ltd
TELECOM ITALIA SPARKLE S.p.A.
TI SPARKLE AMERICAS Inc.
TI SPARKLE BRASIL PARTIÇIPAÇÕES Ltda
TI SPARKLE AMERICAS Inc.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TI SPARKLE AMERICAS Inc.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TI SPARKLE AMERICAS Inc.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TI SPARKLE UK Ltd
TELECOM ITALIA SPARKLE S.p.A.
TI SPARKLE NORTH AMERICA,
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
Consolidated financial statements
of the TIM Group
Note 47
List of companies of the TIM Group
285
Company name
Reg. office
Currency Share capital
% Ownership
TI SPARKLE SWITZERLAND GmbH
(telecommunications services)
TI SPARKLE TURKEY TELEKOMÜNIKASYON ANONIM SIRKETI
(telecommunications services)
TI SPARKLE UK Ltd
(value-added and networking services)
TI SPARKLE VENEZUELA C.A.
(managed bandwidth services)
TIESSE S.c.p.A.
(installation and assistance for electronic, IT, telematics and
telecommunications equipment)
TIM MY BROKER S.r.l.
(Insurance brokerage)
TIM RETAIL S.r.l. (formerly 4G RETAIL S.r.l.)
(sale of fixed and mobile telecommunications products and
services and all analog and digital broadcasting equipment)
TIS LAGOS LIMITED
(telecommunications services)
BRAZIL BU
FIBERCO SOLUÇÕES DE INFRAESTRUTURA Ltda
(telecommunications services)
TIM BRASIL SERVIÇOS E PARTICIPAÇÕES S.A.
(investment holding company)
TIM S.A.
(telecommunications services)
OTHER OPERATIONS
OLIVETTI DEUTSCHLAND GmbH
(sale of office equipment and supplies)
OLIVETTI UK Ltd.
(sale of office equipment and supplies)
TELECOM ITALIA CAPITAL S.A.
(financial company)
TELECOM ITALIA FINANCE S.A.
(financial company)
TELECOM ITALIA LATAM PARTICIPAÇÕES E GESTÃO
ADMINISTRATIVA Ltda
(telecommunications and promotional services)
TIAUDIT COMPLIANCE LATAM S.A. (in liquidation)
(internal audit services)
TIM TANK S.r.l.
(fund and securities investments)
ZURICH
(SWITZERLAND)
ISTANBUL
(TURKEY)
LONDON
(UNITED
KINGDOM)
CARACAS
(VENEZUELA)
IVREA
(TURIN)
ROME
MILAN
LAGOS
(NIGERIA)
RIO DE JANEIRO
(BRAZIL)
RIO DE JANEIRO
(BRAZIL)
RIO DE JANEIRO
(BRAZIL)
NURNBERG
(GERMANY)
NORTHAMPTON
(UNITED
KINGDOM)
LUXEMBOURG
LUXEMBOURG
SÃO PAULO
(BRAZIL)
RIO DE JANEIRO
(BRAZIL)
MILAN
CHF
TRY
EUR
VES
EUR
EUR
EUR
2,000,000
65,000,000
3,983,254
10
103,292
10,000
2,402,241
NGN
10,000,000
BRL
BRL
BRL
EUR
GBP
EUR
EUR
BRL
BRL
EUR
1,000
7,169,029,859
13,477,890,508
25,600,000
6,295,712
2,336,000
1,818,691,979
118,925,804
1,500,000
18,600,000
100.0000
100.0000
100.0000
100.0000
61.0000
100.0000
100.0000
99.9999
0.0001
100.0000
99.9999
0.0001
66.5882
0.0164
100.0000
100.0000
100.0000
100.0000
100.0000
69.9996
30.0004
100.0000
% of
voting
rights
Held by
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
OLIVETTI S.p.A.
TIM S.p.A.
TIM S.p.A.
TELECOM ITALIA SPARKLE S.p.A.
TI SPARKLE UK Ltd
TIM S.A.
TELECOM ITALIA FINANCE S.A.
TIM S.p.A.
66.5991 TIM BRASIL SERVIÇOS E PARTICIPAÇÕES
S.A.
TIM S.A.
OLIVETTI S.p.A.
OLIVETTI S.p.A.
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
TIM BRASIL SERVIÇOS E PARTICIPAÇÕES
S.A.
TIM S.p.A.
Consolidated financial statements
of the TIM Group
Note 47
List of companies of the TIM Group
286
Company name
Reg. office
Currency Share capital
% Ownership
% of
voting
rights
Held by
EUR
EUR
EUR
EUR
EUR
ROME
ROME
MILAN
MILAN
MILAN
32.6200
30.2000
24.9998
42.0000
(*)
100,000
600,000,000
133,333
5,000,000
181
ASSOCIATES AND JOINT VENTURES ACCOUNTED FOR USING THE EQUITY METHOD
AREE URBANE S.r.l. (in liquidation)
(real estate management)
INFRASTRUTTURE WIRELESS ITALIANE S.p.A.
(installation and operation of installations and infrastructure
for the management and the sale of telecommunications
services)
MOVENDA S.p.A.
(design, construction and diffusion of Internet sites, products
and computer media)
NORDCOM S.p.A.
(application service provider)
PEDIUS S.r.l.
(implementation of specialized telecommunications
applications, telecommunications services over telephone
connections, VOIP services)
TIGLIO I S.r.l.
(real estate management)
TIGLIO II S.r.l. (in liquidation)
(real estate management)
TIMFIN S.p.A. (formerly TIM-SCB JV S.p.A.)
(carrying out in regard to the public of the concession of
loans in any form and, notably, of any type of finance
disbursed in the form of a personal and consumer loan)
W.A.Y. S.r.l.
(development and sale of geolocation products and systems
for security and logistics)
WEBIDOO S.p.A.
(ICT services)
WESCHOOL S.r.l. (former OILPROJECT S.r.l.)
(research, development, marketing and patenting of all
intellectual property related to technology, information
technology and TLC)
WIMAN S.r.l.
(development, management and implementation of
platforms for social-based Wi-Fi authentication)
(*) Associate over which TIM S.p.A., directly or indirectly, exercises significant influence pursuant to IAS 28 (Investments in Associates and Joint Ventures).
1,000,000
10,000
6,000,000
47.8020
49.4700
49.0000
200,000
16,108
MATTINATA
(FOGGIA)
39.9999
136,383
22,233
MILAN
MILAN
MILAN
MILAN
TURIN
TURIN
EUR
EUR
EUR
EUR
EUR
EUR
EUR
(*)
(*)
(*)
TIM S.p.A.
DAPHNE 3 S.p.A.
TELECOM ITALIA FINANCE S.A.
TIM S.p.A.
TELECOM ITALIA VENTURES S.r.l.
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
OLIVETTI S.p.A.
NOOVLE S.r.l.
TELECOM ITALIA VENTURES S.r.l.
TELECOM ITALIA VENTURES S.r.l.
Company name
Reg. office
Currency Share capital
% Ownership
% of
voting
rights
Held by
EUR
57,000
TRENTO (ITALY)
OTHER SIGNIFICANT EQUITY INVESTMENTS PURSUANT TO CONSOB RESOLUTION NO. 11971 OF MAY 14, 1999 AS AMENDED
CONSORZIO HEALTH INNOVATION HUB (in liquidation)
(development of the market for systems and services for the
social welfare and healthcare sector)
DAHLIA TV S.p.A. (in liquidation)
(pay-per-view services)
FIN.PRIV. S.r.l.
(financial company)
IGOON S.r.l. (in liquidation)
(carpooling scheme to share unused seating capacity in cars
in real time through a mobile App)
INNAAS S.r.l.
(design, development and sale of high-tech software and
hardware)
MIX S.r.l.
(internet service provider)
11,318,833
20,000
16,498
ROME
MILAN
1,000,000
108,700
EUR
EUR
NAPLES
MILAN
ROME
EUR
EUR
EUR
12.5000
10.0786
14.2900
14.2805
15.2539
11.0937
TIM S.p.A.
TIM S.p.A.
TIM S.p.A.
TELECOM ITALIA VENTURES S.r.l.
TELECOM ITALIA VENTURES S.r.l.
TIM S.p.A.
Consolidated financial statements
of the TIM Group
Note 47
List of companies of the TIM Group
287
CERTIFICATION OF THE CONSOLIDATED
FINANCIAL STATEMENTS PURSUANT TO
ARTICLE 81-TER OF THE CONSOB REGULATION
11971 DATED MAY 14, 1999, WITH AMENDMENTS
AND ADDITIONS
1. We, the undersigned, Luigi Gubitosi, as Chief Executive Officer, and Giovanni Ronca, as Manager responsible
for preparing TIM S.p.A. financial reports, certify, having also considered the provisions of Article 154-bis,
paragraphs 3 and 4, of Italian Legislative Decree 58 of February 24, 1998:
–
–
the adequacy in relation to the characteristics of the company and
the effective application of the administrative and accounting procedures used in the preparation of the
consolidated financial statements for the 2020 fiscal year.
2. TIM has adopted the Internal Control – Integrated Framework Model (2013), issued by the Committee of
Sponsoring Organizations of the Treadway Commission, as its framework for the establishment and
assessment of its internal control system, with particular reference to the internal controls for the
preparation of the financial statements.
3. The undersigned also certify that:
3.1.
the Consolidated Financial Statements at December 31, 2020:
a) have been prepared in compliance with the international accounting standards adopted by the
European Union pursuant to Regulation (EC) 1606/2002 of the European Parliament and Council
of July 19, 2002 (International Financial Reporting Standards – IFRS), as well as the legislative and
regulatory provisions in force in Italy, including, in particular, the measures enacted for the
implementation of Article 9 of Italian Legislative Decree 38 of February 28, 2005;
b) agree with the results of the accounting records and entries;
c)
provide a true and fair view of the financial condition, the results of operations and the cash flows
of the Company and its consolidated subsidiaries;
3.2. the report on operations contains a reliable operating and financial review of the Company and of the
Group, as well as a description of their exposure to the main risks and uncertainties. The Report on
Operations also contains a reliable analysis of information concerning significant related party
transactions.
February 23, 2021
Chief Executive Officer
Manager Responsible for
Preparing the Corporate
Financial Reports
_____________(signed)____________
___________(signed)____________
Luigi Gubitosi
Giovanni Ronca
Consolidated financial statements
Certification of the consolidated financial statements 288
of the TIM Group
INDEPENDENT AUDITORS’ REPORT
Consolidated financial statements
Independent auditors’ report 289
of the TIM Group
EY S.p.A.
Via Meucci, 5
10121 Torino
Tel: +39 011 5161611
Fax: +39 011 5612554
ey.com
Independent auditor’s report pursuant to article 14 of Legislative
Decree n. 39, dated 27 January 2010 and article 10 of EU Regulation
n. 537/2014
(Translation from the original Italian text)
To the Shareholders of
TIM S.p.A.
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of TIM Group (the Group), which comprise the
consolidated statement of financial position as at December 31 ,2020, and the consolidated income
statement, the consolidated statement of comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the financial position
of the Group as at December 31, 2020, and of its financial performance and its cash flows for the
year then ended in accordance with International Financial Reporting Standards as adopted by the
European Union and with the regulations issued for implementing art. 9 of Legislative Decree n.
38/2005.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of TIM
S.p.A. in accordance with the regulations and standards on ethics and independence applicable to
audits of financial statements under Italian Laws. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current period. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
EY S.p.A.
Sede Legale: Via Lombardia, 31 - 00187 Roma
Capitale Sociale Euro 2.525.000,00 i.v.
Iscritta alla S.O. del Registro delle Imprese presso la C.C.I.A.A. di Roma
Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. 250904
P.IVA 00891231003
Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998
Iscritta all’Albo Speciale delle società di revisione
Consob al progressivo n. 2 delibera n.10831 del 16/7/1997
A member firm of Ernst & Young Global Limited
We identified the following key audit matters:
Key Audit Matter
Impairment test of goodwill – Domestic
Audit Response
As of December 31, 2020 goodwill amounts to
Euro 22,847 million, and refers for Euro 22,242
million to the Domestic cash generating unit
("CGU") and for Euro 605 million to the Brazil
CGU.
The processes and methodologies used by the
Group to evaluate and determine the
recoverable amount of each CGU, in terms of
value in use, are based on assumptions that are
in some cases complex and that, due to their
nature, imply the use of judgement by
Management, in particular with reference to the
forecast of future cash flows and to the estimate
of the long-term growth and discount rates
applied to the future cash flow forecasts.
Considering the level of judgment required and
the complexity of the assumptions applied in
estimating the recoverable amount of goodwill,
we considered that this area represents a key
audit matter.
Disclosure related to the assessment of goodwill
are reported in note 5 "Goodwill" and in note 2
"Accounting policies" in the paragraphs
"Impairment of intangible and tangible assets"
and "Use of estimates".
Our audit procedures in response to the key
audit matter included, among others:
► the assessment of the processes
implemented by the Group with reference to
the criteria and methodology of the
impairment test;
► the validation of the CGUs perimeter and the
test of the allocation of the carrying value of
the Group’s assets to each CGU;
► the assessment of the future cash flows
forecasts, including comparisons with sector
data and forecasts;
► the assessment of the consistency of the
future cash flows forecasts of each CGU with
the Group business plan;
► the assessment of forecasts in light of their
historical accuracy;
► the assessment of the reasonableness of
long-term growth rates and discount rates.
The procedures referred to in the previous
points also concerned the analysis of the
assessments performed by the independent
experts appointed by the Group.
In performing our analysis, we involved our
experts in valuation techniques, who performed
an independent recalculation and carried out
sensitivity analyses on the key assumptions in
order to determine which changes in the
assumptions could materially affect the
recoverable amount.
Lastly, we reviewed the adequacy of the
disclosure provided in the notes to the
consolidated financial statements with regards
to the valuation of goodwill.
Revenue recognition
TIM Group’s revenues amounted to Euro 15,805
million as of December 31, 2020 and refer
almost entirely to the telecommunications
services rendered to retail and wholesale
customers (other telecommunications
operators).
Procedures over the accounting of revenues
required significant focus in the context of our
audit procedures due to i) a highly complex
accounting process due to the number of
Our audit procedures in response to the key
audit matter included, among others:
► an understanding of the processes underlying
the revenue recognition;
► the understanding and verification of the
design and operation of the relevant controls
over the revenue recognition process;
► the analysis of the application systems
supporting the revenue recognition process;
► the assessment that the accounting policy
commercial offers, the number of underlying
application systems and the related
reconciliation processes and ii) the presence of
certain manual phases in the revenue
recognition process, in particular for services
provided to large customers.
The Group provides the relative disclosure in
Note 27 "Revenues" of the consolidated
financial statements.
Regulatory disputes
As of December 31, 2020, TIM Group is
involved in several regulatory disputes in
progress, many of which are characterized by
significant counterparty requests.
The main disputes concern (i) the so-called
'follow-on' A428 proceedings, which arose
following claims for compensation made by
other Italian telco operators after certain fines
had been imposed by the AGCM to TIM for
market abuse of a dominant position, (ii) the 28-
day billing proceeding, in which AGCOM ordered
TIM to reimburse customers for unused service
days, (iii) the I820 proceeding, started by AGCM
against TIM and other telco operators, to
ascertain a possible conduct restricting market
competition and (iv) the A514, and the related
“follow-on” proposed by some other telco
operators, procedure in which the AGCM
charged TIM with conduct aimed at hindering
the entry on the market of a new operator.
The assessment of the disputes was carried out
by Management, as of 31 December 2020,
based on the opinion of the external lawyers, as
well as considering the latest information
available.
The estimation of the risks connected to the
disputes in which the Group is involved, requires
adopted for the main commercial offers is
consistent with the provisions of the
reference accounting standard;
► the analysis, on a sample basis, of some
significant transactions relating to invoices
issued and invoices to be issued, in order to
verify that the contractual data and the
evidence supporting the actual service
rendered and / or goods transferred were
consistent with the accounting policy
adopted;
► the reconciliation of the management
accounts with the accounting records in
connection with the main balance sheet
items related to customer relations;
► the analysis of the manual journal entries.
We also required external confirmations for a
sample of customers and transactions.
Lastly, we reviewed the adequacy of the
disclosure provided in the notes to the
consolidated financial statements with regards
to the revenue recognition process.
Our audit procedures in response to the key
audit matter included, among others:
► an understanding of the process put in place
by Management for assessing disputes,
accompanied by test of the effectiveness of
the internal controls relevant for this
process;
► inquiries with Management regarding the
main assumptions made in connection with
disputes;
► the analysis of the legal opinions prepared by
external consultants, based on which
Management has based its assessments;
► the analysis of the responses received from
external lawyers following our external
confirmations procedures.
Lastly, we reviewed the adequacy of the
disclosure provided in the notes to the
consolidated financial statements with regards
to the disputes in which the Group is involved,
based on their compliance with the international
accounting standards and their consistency with
the results of our audit procedures.
a high degree of judgment by the Management
and, also considering the complexity of the
regulatory framework, we considered that this
area represents a key audit matter.
Disclosure related to the assessment of the risks
relating to the regulatory disputes in which the
Group is involved is reported in note 26
"Disputes and pending legal actions, other
information, commitments and guarantees".
Fiscal disputes in Brazil
As of December 31, 2020, the TIM Group is
involved in several disputes with the Brazilian
tax authorities.
The maximum potential liability associated with
these disputes, as at December 31, 2020,
amounts to Euro 2,605. With reference to this
potential liability, the Group recognized a
provision of Euro 63 million with regards to the
risks deemed probable.
The assessment of the risk related to the tax
disputes in Brazil in which the Group is involved,
requires a high degree of judgment by the
Management and, also considering the
significance of the amounts involved, we
considered it to be a key audit matter.
Disclosure related to the assessment of the risks
relating to the fiscal disputes in which the Group
is involved is reported in note 26 "Disputes and
pending legal actions, other information,
commitments and guarantees".
Recoverability of deferred tax assets
Our audit procedures in response to the key
audit matter included, among others:
► an understanding of the process put in place
by Management for assessing disputes,
accompanied by test of the effectiveness of
the controls relevant for this process;
► inquiries with Management regarding the
main assumptions made in connection with
disputes;
► the analysis of the legal opinions prepared by
external consultants, based on which
Management has based its assessments;
► the analysis of the responses to our external
confirmations procedures received from
external lawyers, also with the involvement
of our experts in tax disputes.
Lastly, we reviewed the adequacy of the
disclosure provided in the notes to the
consolidated financial statements with regards
to the disputes in which the Group is involved,
based on their compliance with the international
accounting standards and their consistency with
the results of our audit procedures.
As of December 31, 2020, deferred tax assets
amount to Euro 7,496 million in the
consolidated financial statements.
Deferred tax assets refer to the temporary
deductible differences between the book and tax
values of assets and liabilities in the financial
statements.
The recoverability of the carrying amount of
deferred tax assets is subject to Management’s
evaluation and is based on the estimations of
the future taxable income expected in the years
in which them will be reversed.
The processes and methodologies used to
evaluate and determine the recoverable amount
of these assets, are based on assumptions that
Our audit procedures in response to the key
audit matter included, among others:
► the assessment of the assumptions
underlying the estimation of future taxable
income and the reconciliation with the
figures included in the Company's business
plan for the period 2021-2023;
► the assessment of the accuracy of the
forecasts compared to prior periods;
► the assessment of the Management
calculations.
Lastly, we reviewed the adequacy of the
disclosure provided in the notes to the
consolidated financial statements with regards
to the recoverability of deferred tax assets.
are in some cases complex and that, due to
their nature, imply the use of judgement by
Management, in particular with reference to the
consistency of the forecasts of future taxable
income expected by the Company with those
included in the business plan.
Considering the level of judgment required and
the complexity of the assumptions applied in
estimating future taxable amount used to
determine the recoverability of deferred tax
assets, we considered that this area represents
a key audit matter.
Disclosure related to the assessment of
recoverability of deferred tax assets are
reported in note 2 "Accounting policies" in the
paragraphs “Income tax expense (current and
deferred)" and "Use of estimates" and in note
12 “Income tax expense (current and
deferred)".
Responsibilities of Directors and Those Charged with Governance for the
Consolidated Financial Statements
The Directors are responsible for the preparation of the consolidated financial statements that give a
true and fair view in accordance with International Financial Reporting Standards as adopted by the
European Union and with the regulations issued for implementing art. 9 of Legislative Decree n.
38/2005, and, within the terms provided by the law, for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
The Directors are responsible for assessing the Group’s ability to continue as a going concern and,
when preparing the consolidated financial statements, for the appropriateness of the going concern
assumption, and for appropriate disclosure thereof. The Directors prepare the consolidated financial
statements on a going concern basis unless they either intend to liquidate the Parent Company TIM
S.p.A. or to cease operations, or have no realistic alternative but to do so.
The statutory audit committee (“Collegio Sindacale”) is responsible, within the terms provided by the
law, for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but it is not a guarantee that an audit conducted in accordance with International Standards on
Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with International Standards on Auditing (ISA Italia), we have
exercised professional judgment and maintained professional skepticism throughout the audit. In
addition:
we have identified and assessed the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error, designed and performed audit procedures
responsive to those risks, and obtained audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control;
we have obtained an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of Group’s internal control;
we have evaluated the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Directors;
we have concluded on the appropriateness of Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to consider this matter in forming our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going
concern;
we have evaluated the overall presentation, structure and content of the consolidated
financial statements, including the disclosures, and whether the consolidated financial
statements represent the underlying transactions and events in a manner that achieves fair
presentation.
we have obtained sufficient appropriate audit evidence regarding the financial information of
the entities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We have communicated with those charged with governance, identified at an appropriate level as
required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We have provided those charged with governance with a statement that we have complied with the
ethical and independence requirements applicable in Italy, and we have communicated with them all
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we have determined those
matters that were of most significance in the audit of the financial statements of the current period
and are therefore the key audit matters. We have described these matters in our auditor’s report.
Additional information pursuant to article 10 of EU Regulation n. 537/14
The shareholders of TIM S.p.A., in the general meeting held on March 29, 2019, engaged us to
perform the audits of the separate and consolidated financial statements for each of the years ending
December 31, 2019 to December 31, 2027.
We declare that we have not provided prohibited non-audit services, referred to article 5, par. 1, of EU
Regulation n. 537/2014, and that we have remained independent of the Group in conducting the
audit.
We confirm that the opinion on the consolidated financial statements included in this report is
consistent with the content of the additional report to the audit committee (Collegio Sindacale) in
their capacity as audit committee, prepared pursuant to article 11 of the EU Regulation n. 537/2014.
Report on compliance with other legal and regulatory requirements
Opinion pursuant to article 14, paragraph 2, subparagraph e), of Legislative
Decree n. 39 dated 27 January 2010 and of article 123-bis, paragraph 4, of
Legislative Decree n. 58, dated 24 February 1998
The Directors of TIM S.p.A. are responsible for the preparation of the Report on Operations and of the
Report on Corporate Governance and Ownership Structure of TIM Group as at December 31, 2020,
including their consistency with the related consolidated financial statements and their compliance
with the applicable laws and regulations.
We have performed the procedures required under audit standard SA Italia n. 720B, in order to
express an opinion on the consistency of the Report on Operations and of specific information
included in the Report on Corporate Governance and Ownership Structure as provided for by article
123-bis, paragraph 4, of Legislative Decree n. 58, dated 24 February 1998, with the consolidated
financial statements of TIM Group] as at December 31 ,2020 and on their compliance with the
applicable laws and regulations, and in order to assess whether they contain material misstatements.
In our opinion, the Report on Operations and the above mentioned specific information included in
the Report on Corporate Governance and Ownership Structure are consistent with the consolidated
financial statements of TIM Group as at December 31, 2020, and comply with the applicable laws and
regulations.
With reference to the statement required by art. 14, paragraph 2, subparagraph e), of Legislative
Decree n. 39, dated 27 January 2010, based on our knowledge and understanding of the entity and
its environment obtained through our audit, we have no matters to report.
Statement pursuant to article 4 of Consob Regulation implementing Legislative
Decree n. 254, dated 30 December 2016
The Directors of TIM S.p.A. are responsible for the preparation of the non-financial information
pursuant to Legislative Decree n. 254, dated 30 December 2016. We have verified that non-financial
information has been approved by Directors.
Pursuant to article 3, paragraph 10, of Legislative Decree n. 254, dated 30 December 2016, such
non-financial information is subject to a separate compliance report signed by us.
Turin, March 10, 2021
EY S.p.A.
Signed by: Ettore Abate, Auditor
This report has been translated into the English language solely for the convenience of
international readers.
CONTENTS
TIM S.P.A. SEPARATE FINANCIAL STATEMENTS
Statements of Financial Position .......................................................... 300
Separate Income Statements ................................................................ 302
Statements of Comprehensive Income ................................................ 303
Statements of Changes in Equity .......................................................... 304
Cash Flow statement ............................................................................... 305
307
Note 1 Form, content and other general information ...............................................................
309
Note 2 Accounting policies ............................................................................................................
322
Note 3 Goodwill ...............................................................................................................................
324
Note 4 Intangible assets with a finite useful life ........................................................................
327
Note 5 Tangible assets ...................................................................................................................
330
Note 6 Rights of use assets ...........................................................................................................
333
Note 7 Investments ........................................................................................................................
336
Note 8 Financial assets (non-current and current) ....................................................................
338
Note 9 Miscellaneous receivables and other non-current assets ............................................
340
Note 10 Income tax expense (current and deferred) .................................................................
343
Note 11 Inventories .........................................................................................................................
343
Note 12 Trade and miscellaneous receivables and other current assets ................................
347
Note 13 Discontinued operations / Non-current assets held for sale ......................................
348
Note 14 Equity .................................................................................................................................
353
Note 15 Financial liabilities (non-current and current) ..............................................................
359
Note 16 Net financial debt ............................................................................................................
362
Note 17 Financial risk management .............................................................................................
367
Note 18 Derivatives .........................................................................................................................
372
Note 19 Supplementary disclosures on financial instruments .................................................
377
Note 20 Employee benefits ...........................................................................................................
380
Note 21 Provisions ..........................................................................................................................
381
Note 22 Miscellaneous payables and other non-current liabilities ..........................................
383
Note 23 Trade and miscellaneous payables and other current liabilities ...............................
385
Note 24 Disputes and pending legal actions, other information, commitments and
401
Note 25 Revenues ...........................................................................................................................
guarantees .......................................................................................................................................
401
Note 26 Other operating income ..................................................................................................
402
Note 27 Acquisition of goods and services ..................................................................................
403
Note 28 Employee benefits expenses ..........................................................................................
404
Note 29 Other operating expenses ..............................................................................................
404
Note 30 Change in inventories ......................................................................................................
404
Note 31 Internally generated assets ............................................................................................
405
Note 32 Depreciation and amortization ......................................................................................
406
Note 33 Gains/(losses) on disposals of non-current assets ......................................................
406
Note 34 Impairment reversals (losses) on non-current assets .................................................
407
Note 35 Income/(expense) from investments ............................................................................
408
Note 36 Finance income and expenses .......................................................................................
410
Note 37 Related party transactions ..............................................................................................
431
Note 38 Equity compensation plans ............................................................................................
433
Note 39 Significant non-recurring events and transactions .....................................................
435
Note 40 Positions or transactions resulting from atypical and/or unusual operations .........
435
Note 41 Other information ............................................................................................................
437
Note 42 Events subsequent to December 31, 2020 ...................................................................
439
Note 43 List of investments in subsidiaries, associates and joint ventures ............................
STATEMENTS OF FINANCIAL POSITION
Assets
(euros)
Non-current assets
Intangible assets
Goodwill
Intangible assets with a finite
useful life
Tangible assets
Property, plant and equipment
owned
Rights of use assets
Other non-current assets
Investments
Non-current financial
receivables for lease contracts
Other non-current financial
assets
Miscellaneous receivables and
other non-current assets
Deferred tax assets
Total Non-current assets
Current assets
Inventories
Trade and miscellaneous
receivables and other current
assets
INCOME TAX RECEIVABLES
Investments
Current financial assets
Current financial receivables
arising from lease contracts
Securities other than
investments, other financial
receivables and other
current financial assets
Cash and cash equivalents
Current assets sub-total
Discontinued operations/Non-
current assets held for sale
Total Current assets
Total Assets
Notes
12.31.2020
of which with
related parties
12.31.2019
of which with
related parties
3)
4)
5)
2) 6)
7)
8)
8)
9)
10)
11)
12)
10)
8)
13)
(a)
(b)
(a+b)
23,050,788,256
5,500,451,232
28,551,239,488
10,335,288,469
4,095,532,681
7,244,594,938
16,870,793
2,489,871,187
1,733,641,142
7,336,789,781
61,803,828,479
143,772,151
3,464,016,413
39,809,071
18,821,767,841
24,340,444,756
5,818,455,532
30,158,900,288
888,531,000
10,591,121,055
4,905,684,994
1,294,419,000
6,861,203,426
16,335,820
2,332,818,305
1,745,781,815
881,857,275
11,837,996,641
57,493,702,978
155,541,552
3,729,789,412
67,540,811
658,163,000
131,043,000
280,258,000
641,496,000
139,378,000
331,469,000
44,356,056
2,749,000
53,793,050
110,022,447
9,960,000
121,953,712
17,186,000
780,000
1,765,441,712
1,919,820,215
5,567,417,850
—
5,567,417,850
67,371,246,329
92,297,000
829,022,799
1,004,769,561
4,957,641,336
828,494,069
5,786,135,405
63,279,838,383
Separate Financial Statements of
TIM S.p.A.
Statements of Financial Position 300
Notes
12.31.2020
of which with
related parties
12.31.2019
of which with
related parties
Equity and Liabilities
(euros)
Equity
Share capital issued
less: Treasury shares
Share capital
Additional paid-in capital
Legal reserve
Other reserves
Reserve for remeasurements
of employee defined benefit
plans (IAS 19)
Other
Total Other reserves
Retained earnings
(accumulated losses),
including profit (loss) for the
Total Equity
year
Non-current liabilities
Non-current financial liabilities
for financing contracts and
others
Non-current financial liabilities
for lease contracts
Provisions for employee
benefits
Deferred tax liabilities
Provisions for risks and
charges
Miscellaneous payables and
other non-current liabilities
Total Non-current liabilities
Current liabilities
Current financial liabilities for
financing contracts and others
Current financial liabilities for
lease contracts
Trade and miscellaneous
payables and other current
liabilities
Income tax payables
Total Current Liabilities
Total Liabilities
14)
15)
15)
20)
10)
21)
22)
15)
15)
23)
10)
(c)
(d)
(e)
(f=d+e)
Total Equity and Liabilities
(c+f)
11,677,002,855
(19,234,377)
11,657,768,478
2,133,374,023
2,312,977,576
(106,381,744)
1,311,892,366
1,205,510,622
7,698,445,058
25,008,075,757
11,677,002,855
(20,719,608)
11,656,283,247
2,094,207,410
2,293,873,993
(110,564,900)
1,366,969,441
1,256,404,541
873,523,296
18,174,292,487
24,440,361,873
5,665,036,000
26,181,613,166 5,756,665,000
3,505,783,671
809,746,000
4,001,651,991
997,771,000
676,081,097
—
618,128,216
3,477,543,318
32,717,898,175
1,106,545,929
2,352,153
527,779,856
2,973,016,553
34,792,959,648
161,586,000
141,214,000
3,341,906,670
293144000
3,787,097,263 1,330,093,000
462,721,808
63347000
666,329,070
270,191,000
381,348,000
5,609,421,674
231,222,245
9,645,272,397
42,363,170,572
67,371,246,329
497,665,000
5,842,636,759
16,523,156
10,312,586,248
45,105,545,896
63,279,838,383
Separate Financial Statements of
TIM S.p.A.
Statements of Financial Position 301
SEPARATE INCOME STATEMENTS
(euros)
Revenues
Other operating income
Total revenues and operating income
Acquisition of goods and services
Employee benefits expenses
Other operating expenses
Change in inventories
Internally generated assets
Operating profit (loss) before
depreciation and amortization, capital
gains (losses) and impairment
reversals (losses) on non-current
assets (EBITDA)
of which: impact of non-recurring items
Depreciation and amortization
Gains/(losses) on disposals of non-
current assets
Impairment reversals (losses) on non-
current assets
Operating profit (loss) (EBIT)
of which: impact of non-recurring items
Income/(expenses) from investments
Finance income
Finance expenses
Profit (loss) before tax
of which: impact of non-recurring items
Income tax expense
Profit (loss) for the year
of which: impact of non-recurring items
Notes
25)
26)
27)
28)
29)
30)
31)
39)
32)
33)
34)
39)
35)
36)
36)
39)
10)
39)
Year
2020
of which with
related parties
Year
2019
of which with
related parties
12,029,901,155
188,895,769
12,218,796,924
(4,610,694,132)
(2,192,697,306)
(605,118,222)
(11,769,401)
381,424,171
311,682,000 13,136,933,872
197,623,543
8,188,000
13,334,557,415
(4,595,820,812)
(1,015,398,000)
(2,491,870,230)
(78,483,000)
(1,061,237,597)
(2,489,000)
(106,500,060)
403,037,336
333,157,000
11,224,000
(913,114,000)
(84,151,000)
(6,359,000)
5,179,942,034
(311,004,000)
(3,581,638,098)
(14,850,367)
(7,738,314)
1,575,715,255
(311,004,000)
551,366,213
1,012,294,893
(1,972,897,516)
1,166,478,845
(91,116,000)
5,994,990,200
7,161,469,045
5,831,279,000
(141,558,000)
331,004,000
320,045,000
(574,275,000)
5,482,166,052
(668,135,000)
(3,719,256,987)
(41,501,105)
117,583
1,721,525,543
(668,135,000)
116,990,556
1,195,620,784
(2,461,921,850)
572,215,033
(672,642,000)
(190,143,377)
382,071,656
(514,863,000)
(273,443,000)
139,341,000
171,298,000
(1,004,648,000)
Separate Financial Statements of
TIM S.p.A.
Statements of Financial Position 302
STATEMENTS OF COMPREHENSIVE INCOME
Note 12
(euros)
Profit (loss) for the year
Other components of the Statements of Comprehensive Income
Other components that will not be reclassified subsequently to
Separate Income Statements
Financial assets measured at fair value through other comprehensive
income:
Profit (loss) from fair value adjustments
Income tax effect
Remeasurements of employee defined benefit plans (IAS19):
Actuarial gains (losses)
Income tax effect
Other comprehensive income (loss) of associates and joint ventures
accounted for using the equity method
Profit (loss)
Income tax effect
Total other components that will not be reclassified subsequently to
Separate Income Statements
Other components that will be reclassified subsequently to Separate
Income Statements
Financial assets measured at fair value through other comprehensive
income:
Profit (loss) from fair value adjustments
Loss (profit) transferred to the Separate Income Statement
Income tax effect
Hedging derivative instruments:
Profit (loss) from fair value adjustments
Loss (profit) transferred to the Separate Income Statement
Income tax effect
Other comprehensive income (loss) of associates and joint ventures
accounted for using the equity method
Profit (loss)
Loss (profit) transferred to the Separate Income Statement
Income tax effect
Total other components that will be reclassified subsequently to
Separate Income Statements
Total other components of the Statements of Comprehensive Income
Total comprehensive income (loss) for the year
Year
2020
Year
2019
(a)
7,161,469,045
382,071,656
(4,533,712)
51,646
(4,482,066)
5,504,153
(1,320,997)
4,183,156
—
—
—
(298,910)
4,056,453
—
(973,549)
3,082,904
(409,582,216)
312,250,000
23,359,732
(73,972,484)
—
—
—
—
(70,889,580)
(71,188,490)
7,090,280,555
3,227,418
(52,113)
3,175,305
(39,552,345)
9,492,563
(30,059,782)
—
—
—
(26,884,477)
(36,051,956)
24,882,430
1,074,869
(10,094,657)
(201,997,758)
7,856,000
46,594,022
(147,547,736)
—
—
—
—
(157,642,393)
(184,526,870)
197,544,786
(b)
(c)
(d)
(e=b+c+d)
(f)
(g)
(h)
(i= f+g+h)
(k= e+i)
(a+k)
Separate Financial Statements of
TIM S.p.A.
Statements of Comprehensive Income 303
STATEMENTS OF CHANGES IN EQUITY
Changes in Equity from January 1 to December 31, 2019
(euros)
Share capital
Additional paid-in
capital
Reserve for
hedging
instruments
Reserve for
remeasurements
of employee
defined benefit
plans
(IAS 19)
Other reserves and
retained earnings
(accumulated
losses), including
profit (loss) for the
year
Total Equity
Reserve for
financial assets
measured at fair
value through
other
comprehensive
income
17,091,496
Balance at
December 31, 2018
Adoption of IFRS 16
Adjusted balance at
1.1.2019
Changes in equity
during the year:
Dividends approved
Total
comprehensive
income (loss) for the
year
Norverca S.p.A. and
TIM S.p.A. merger
surplus
Issue of equity
instruments
Other movements
Balance at
December 31, 2019
11,656,283,247
2,094,207,410
(992,066,033)
(80,505,118)
11,656,283,247
2,094,207,410
17,091,496
(992,066,033)
(80,505,118)
(6,919,352)
(147,547,736)
(30,059,782)
11,656,283,247
2,094,207,410
1,361,353
11,533,497
(1,139,613,769)
(110,564,900)
5,443,194,051
233,916
5,443,427,967
18,138,205,053
233,916
18,138,438,969
(165,764,272)
382,071,656
(165,764,272)
197,544,786
526,081
526,081
3,516,061
(1,330,491)
5,662,447,002
3,516,061
30,862
18,174,292,487
Changes in Equity from January 1 to December 31, 2020 – Note 14
(euros)
Share capital Additional paid-in
capital
Reserve for financial
assets measured at
fair value through
other
comprehensive
income
Reserve for
hedging
instruments
Reserve for
remeasurements
of employee
defined benefit
plans (IAS 19)
Other reserves and
retained earnings
(accumulated
losses), including
profit (loss) for the
year
Total Equity
Balance at
December 31, 2019
Changes in equity
during the year:
Dividends approved
Total
comprehensive
income (loss) for the
year
Merger by
incorporation
surplus of HR
Services S.r.l. into
TIM S.p.A.
Broad-Based Share
Ownership Plan
2020
Issue of equity
instruments
Other movements
Balance at
December 31, 2020
11,656,283,247
2,094,207,410
11,533,497
(1,139,613,769)
(110,564,900)
5,662,447,002
18,174,292,487
(1,399,162)
(73,972,484)
4,183,156
7,161,469,045
7,090,280,555
(317,443,700)
(317,443,700)
39,166,613
1,485,231
11,657,768,478
2,133,374,023
10,134,335
(1,213,586,253)
(106,381,744)
11,758,020
11,758,020
4,649,454
43,816,067
3,867,672
19,425
12,526,766,918
3,867,672
1,504,656
25,008,075,757
Separate Financial Statements of
TIM S.p.A.
Statements of Changes in Equity 304
STATEMENTS OF CASH FLOWS
(euros)
Cashflow from operating activities:
Profit (loss) for the year
Adjustments for:
Depreciation and amortization
Impairment losses (reversals) on non-current assets (including
investments)
Net change in deferred tax assets and liabilities
Losses (gains) realized on disposals of non-current assets (including
investments)
Change in provisions for employee benefits
Change in inventories
Change in trade receivables and other net receivables
Change in trade payables
Net change in income tax receivables/payables
Net change in miscellaneous receivables/payables and other
assets/liabilities
Cash flows from (used in) operating activities
Cash flows from investing activities:
Purchases of intangible, tangible and rights of use assets on a cash
basis
Contributions for plants received
Cash arising from corporate transactions
Acquisitions/disposals of other investments
Change in financial receivables and other financial assets (excluding
hedging and non-hedging derivatives under financial assets)
Proceeds received from the sale of investments in subsidiaries
Proceeds from sale/repayments of intangible, tangible, rights of use
assets and other non-current assets
Cash flows from (used in) investing activities
Cash flows from financing activities
Change in current financial liabilities and other
Proceeds from non-current financial liabilities (including current
portion)
Repayments of non-current financial liabilities (including current
portion)
Changes in hedging and non-hedging derivatives
Proceeds for increases/repayment of capital
Dividends paid (*)
Cash flows from (used in) financing activities
Aggregate cash flows
Net cash and cash equivalents at beginning of the year
Net cash and cash equivalents at end of the year
(*) of which related parties:
Notes
Year
2020
Year
2019
7,161,469,045
32) 3,581,638,098
43,102,000
382,071,656
3,719,256,987
57,335,000
(6,433,126,000)
55,119,000
(211,775,000)
(610,592,000)
11,770,000
216,587,000
(22,869,000)
693,552,000
56,594,416
31,886,000
(259,846,000)
106,500,000
106,733,000
(120,373,000)
99,830,000
216,689,245
4,486,350,559 4,395,201,888
(2,285,445,000) (2,307,295,000)
28,034,000
23,982,000
7)
13,976,000
50,524,000
(43,472,000)
(101,314,000)
240,825,000
(61,272,000)
142,170,000
—
1,821,958,000
12,183,000
(551,567,000) (1,913,579,000)
(885,905,000)
(732,399,000)
3,814,352,000
1,022,437,000
(2,808,685,000) (4,795,912,000)
(187,407,000)
—
(165,720,000)
(2,735,270,000) (2,220,592,000)
261,030,888
(215,667,084)
92,667,000
7,849,000
(317,139,000)
1,199,513,559
45,363,804
1,244,877,363
45,363,804
(37,686,924)
—
(a)
(b)
(c)
(d=a+b+c)
(e)
(f=d+e)
Separate Financial Statements of
TIM S.p.A.
Statements of Cash Flows 305
Purchases of intangible, tangible and rights of use assets
(euros)
Purchase of intangible assets
Purchase of tangible assets
Purchase of rights of use assets
Total purchase of intangible, tangible and rights of use assets on an
accrual basis (*)
Change in payables arising from purchase of intangible, tangible and rights
of use assets
Total purchase of intangible, tangible and rights of use assets on a cash
basis
(*) of which related parties:
Notes
4 )
5 )
6 )
Year
Year
2019
2020
(819,485,000)
(959,315,000)
(1,467,357,000) (1,657,804,000)
(920,375,000)
(946,769,000)
(3,373,441,000) (3,397,664,000)
1,087,996,000
1,090,369,000
(2,285,445,000) (2,307,295,000)
315,473,000
565,708,000
Additional Cash Flow information
(euros)
Income taxes (paid) received
Interest expense paid
Interest income received
Dividends received
Analysis of Net Cash and Cash Equivalents
(euros)
Net cash and cash equivalents at the start of the year:
Cash and cash equivalents
Bank overdrafts repayable on demand
Net cash and cash equivalents at the end of the year:
Cash and cash equivalents
Bank overdrafts repayable on demand
Year
2019
(27,544,000)
(1,389,399,000) (1,689,383,000)
654,562,000
140,495,000
Year
2020
249,301,000
465,448,000
331,127,000
Year
2020
Year
2019
829,022,799
(783,658,995)
45,363,804
885,426,755
(1,101,093,839)
(215,667,084)
1,765,441,712
(520,564,349)
1,244,877,363
829,022,799
(783,658,995)
45,363,804
The additional disclosures required by IAS 7 are provided in the Note “Net financial debt” to these separate
financial statements.
Separate Financial Statements of
TIM S.p.A.
Statements of Cash Flows 306
NOTE 1
FORM, CONTENT AND OTHER GENERAL
INFORMATION
Form and content
Telecom Italia, TIM in brief, is a joint-stock company (S.p.A.) organized under the laws of the Republic of Italy.
The registered offices of TIM S.p.A. are located in Milan, Italy, at Via Gaetano Negri 1.
The duration of TIM S.p.A., as stated in the company's bylaws, extends until December 31, 2100.
TIM S.p.A. operates in Italy in the fixed and mobile telecommunications sector.
The TIM S.p.A. separate financial statements at December 31, 2020 have been prepared on a going concern basis
(further details are provided in the Note “Accounting Policies”) and in accordance with the International Financial
Reporting Standards issued by the International Accounting Standards Board and endorsed by the European
Union (designated as “IFRS”), as well as laws and regulations in force in Italy.
It should also be noted that in 2020 TIM S.p.A. applied accounting standards consistent with those of the previous
year.
The separate financial statements have been prepared under the historical cost convention except for financial
assets measured at fair value through other comprehensive income, financial assets measured at fair value
through profit or loss and derivative financial instruments which have been measured at fair value. The carrying
amounts of hedged assets and liabilities have been adjusted to reflect the changes in fair value of the hedged
risks (fair value hedge).
In accordance with IAS 1 (Presentation of Financial Statements) comparative information included in the
consolidated financial statements refers, unless otherwise indicated, to the previous year.
The statements of financial position, the separate income statements, the statements of comprehensive
income, the statements of changes in equity and the statements of cash flows are presented in euros (without
cents) and the notes to these separate financial statements in millions of euros, unless otherwise indicated.
The publication of TIM S.p.A.'s separate financial statements for the year ended December 31, 2020 was
approved by resolution of the Board of Directors on February 23, 2021.
However, final approval of the TIM S.p.A. separate financial statements rests with the shareholders’ meeting.
Financial statements formats
The financial statement formats adopted are consistent with those indicated in IAS 1. In particular:
■
■
the separate statements of financial position have been prepared by classifying assets and liabilities
according to the “current and non-current” criterion;
the separate income statement has been prepared by classifying operating expenses by nature of expense,
as this form of presentation is considered more appropriate and representative of the specific business of
the Company, conforms to internal reporting and is in line with industry practice.
In addition to EBIT or Operating profit (loss), the separate income statement includes the alternative
performance measure of EBITDA or Operating profit (loss) before depreciation and amortization, Capital
gains (losses) and Impairment reversals (losses) on non-current assets.
In particular, besides EBIT, EBITDA is used by TIM as the financial target in internal presentations (business
plans) and in external presentations (to analysts and investors). It represents a useful unit of measurement
for the evaluation of the operating performance of TIM S.p.A. EBIT and EBITDA are calculated as follows:
Separate Financial Statements of
TIM S.p.A.
Note 1
Form, content and other general information
307
Finance expenses
Finance income
Profit (loss) before tax from continuing operations
+
-
+/- Income (Expenses) from investments
EBIT - Operating profit (loss)
+/- Impairment losses (reversals) on non-current assets
+/- Losses (gains) on disposals of non-current assets
+
EBITDA – Operating profit before depreciation and amortization, capital gains (losses) and impairment reversals (losses) on
non-current assets
Depreciation and amortization
■
■
the statements of comprehensive income include the profit or loss for the year as shown in the separate
consolidated income statements and all other non-owner changes in equity;
the statement of cash flows has been prepared by presenting cash flows from operating activities according
to the "indirect method", as permitted by IAS 7 (Statement of Cash Flows).
Furthermore, as required by Consob Resolution 15519 of July 27, 2006, in the separate income statement, income
and expenses relating to transactions, which by nature do not occur during normal operation (non-recurring
transactions) have been specifically identified and their impact has been shown separately, when they are
significant. Specifically, non-recurring income/(expenses) include, for instance: income/expenses arising from the
sale of properties, plant and equipment, business segments and investments; expenses stemming from
company reorganization and streamlining processes and projects, also in connection with corporate transactions
(mergers, spin-offs, etc.); expenses resulting from litigation and regulatory fines and related liabilities; other
provisions for risks and charges and related reversals; costs for the settlement of disputes other than regulatory
disputes; adjustments, realignments and other non-recurring items, also relating to previous years; impairment
losses on the goodwill and/or other intangible and tangible assets. Certain costs related to the COVID-19
pandemic are also identified as non-recurring charges.
Also in reference to the above Consob Resolution, the amounts relating to balances or transactions with related
parties have been shown separately in the financial statements.
Separate Financial Statements of
TIM S.p.A.
Note 1
Form, content and other general information
308
NOTE 2
ACCOUNTING POLICIES
Going concern
The separate financial statements for the year ended December 31, 2020 have been prepared on a going concern
basis as there is the reasonable expectation that TIM S.p.A. will continue its operational activities in the
foreseeable future (and in any event for a time horizon of at least twelve months).
In particular, the following factors have been taken into consideration:
■
the main risks and uncertainties (that are for the most part of an external nature) to which TIM is exposed:
•
•
•
•
•
the changes in the general macroeconomic situation in the Italian, European and Brazilian market,
including the effects deriving from the continued state of COVID-19 health emergency, as well as the
volatility of financial markets in the Eurozone, partly following the UK’s Brexit;
variations in business conditions, also related to competition;
changes to laws and regulations (price and rate variations);
outcomes of legal disputes and proceedings with regulatory authorities, competitors and other parties;
financial risks (interest rate and/or exchange rate trends, changes in the Group's credit rating by rating
agencies);
the optimal mix between risk capital and debt capital, as well as the policy for the remuneration of risk
capital, as described in the section "Share capital information" under the Note "Equity";
the policy for financial risk management (market risk, credit risk and liquidity risk), as described in the Note
"Financial risk management".
Based on these factors, the Management believes that, at the present time, there are no elements of uncertainty
regarding TIM S.p.A.’s ability to continue as a going concern.
Intangible assets
Goodwill
In accordance with IFRS 3 (Business Combinations), goodwill is recognized in the financial statements at the
acquisition date (including through mergers or contributions) of companies or business units and is calculated
as the difference between the consideration paid (measured in accordance with IFRS 3, generally determined on
the basis of the fair value at the acquisition date) and the fair value at the acquisition date of the identifiable
assets acquired net of the identifiable liabilities assumed.
Goodwill is classified in the statements of financial position as an intangible asset with an indefinite useful life,
whereas any gain from a bargain purchase or negative goodwill is recognized in the separate income statement.
Goodwill initially recognized is subsequently reduced only by cumulative impairment losses (for more details, see
the section "Impairment of intangible assets, tangible assets and rights of use assets - Goodwill", below).
Development costs
Costs incurred internally for the development of new products and services represent either intangible assets
(mainly costs for software development) or tangible assets. These costs are capitalized only when all the
following conditions are satisfied: i) the cost attributable to the development phase of the asset can be measured
reliably, ii) there is the intention, the availability of financial resources and the technical ability to complete the
asset and make it available for use or sale, and iii) it can be demonstrated that the asset will be able to generate
future economic benefits. Capitalized development costs comprise only incurred expenditures that can be
attributed directly to the development process for new products and services.
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Capitalized development costs are amortized systematically over the estimated product or service life, so that
the amortization method reflects the way in which the asset's future economic benefits are expected to be
consumed by the entity.
Other intangible assets with a finite useful life
Other purchased or internally-generated intangible assets with a finite useful life are recognized as assets, in
accordance with IAS 38 (Intangible Assets), when the use of the asset is likely to generate future economic
benefits and when the cost of the asset can be reliably measured.
Such assets are recorded at purchase or production cost and amortized on a straight-line basis over their
estimated useful lives; the amortization rates are reviewed annually and revised if the current estimated useful
life is different from that estimated previously. The effect of such changes is recognized in the separate
consolidated income statements prospectively.
Tangible assets
Property, plant and equipment
Property, plant and equipment are recognized at purchase or production cost. Subsequent expenditures are
capitalized only if they increase the future economic benefits embodied in the related item of property, plant and
equipment. All other expenditures are expensed as incurred.
The cost of these assets also includes the expected costs of dismantling the asset and restoring the site, if a
legal or constructive obligation exists. The corresponding liability is recognized at its present value as a provision
in the statement of financial position. These capitalized costs are depreciated and charged to the separate
consolidated income statements over the useful life of the related tangible assets.
The calculation of estimates for dismantling costs, discount rates and the dates in which such costs are expected
to be incurred is reviewed annually at each financial year-end. Changes in the above liability must be recognized
as an increase or decrease of the cost of the relative asset; the amount deducted from the cost of the asset must
not exceed its carrying amount. The excess if any, should be recorded immediately in the separate consolidated
income statements, conventionally under the line item "Depreciation".
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. Depreciation rates
are reviewed annually and revised if the current estimated useful life is different from that estimated previously.
The effect of such changes is recognized in the separate consolidated income statements prospectively.
Land, including land pertaining to buildings, is not depreciated.
Rights of use assets
In accordance with IFRS 16, lease liabilities are presented through the recognition of a financial liability in the
statement of financial position consisting in the present value of future lease payments, against the recognition
of the right of use of the leased asset.
On the commencement date of the lease, the right of use is recognized at cost including: the amount of the
initial measurement of the lease liability, any lease payments made at or before the commencement date, initial
direct costs incurred for the signature of the lease and the present value of the estimated restoration and
dismantling costs set out in the lease, less any incentives.
Subsequently, the right of use is amortized over the term of the lease (or the useful life of the asset, if lower),
subject to impairment and adjusted for any remeasurement of the lease liability.
Impairment of intangible, tangible and rights of use assets
Goodwill
Goodwill is tested for impairment at least annually or more frequently whenever events or changes in
circumstances indicate that goodwill may be impaired, as set forth in IAS 36 (Impairment of Assets); however,
when the conditions that gave rise to an impairment loss no longer exist, the original amount of goodwill is not
reinstated.
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The test is generally conducted at the end of every year, so the date of testing is the year-end closing date of
the financial statements. Goodwill acquired and allocated during the year is tested for impairment at the end of
the year in which the acquisition and allocation took place.
For the purpose of verifying its recoverability, goodwill is allocated, from the acquisition date, to each of the cash-
generating units, or groups of cash-generating units, that is expected to benefit from the combination.
If the carrying amount of the cash-generating unit (or group of cash-generating units) exceeds the recoverable
amount, an impairment loss is recognized in the separate income statement. The impairment loss is first
recognized as a deduction of the carrying amount of goodwill allocated to the cash-generating unit (or group of
cash-generating units) and only subsequently applied to the other assets of the cash-generating unit in
proportion to their carrying amount, up to the recoverable amount of the assets with a finite useful life. The
recoverable amount of a cash-generating unit (or group of cash-generating units) to which goodwill is allocated
is the higher between the fair value less costs to sell and its value in use.
In calculating the value in use, the estimated future cash flows are discounted to present value using a discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. The
future cash flows are those arising from an explicit time horizon between three and five years, as well as those
extrapolated to estimate the terminal value. The long-term growth rate used to estimate the terminal value of
the cash-generating unit (or group of cash-generating units) is assumed not to be higher than the average long-
term growth rate of the segment or market in which the cash-generating unit (or group of cash-generating units)
operates.
Future cash flows are estimated by referring to the current operating conditions of the cash-generating unit (or
group of cash-generating units) and, therefore, do not include either benefits originating from future
restructuring for which the entity is not yet committed, or future investments for the improvement or
optimization of the cash-generating unit.
For the purpose of calculating impairment, the carrying amount of the cash-generating unit is established based
on the same criteria used to determine the recoverable amount of the cash-generating unit, excluding surplus
assets (that is, financial assets, deferred tax assets and net non-current assets held for sale).
After conducting the goodwill impairment test for the cash-generating unit (or groups of cash-generating units),
a second level of impairment testing is carried out which includes the corporate assets which do not generate
positive cash flows and which cannot be allocated by a reasonable and consistent criterion to the single units.
At this second level, the total recoverable amount of all cash-generating units (or groups of cash-generating
units) is compared to the carrying amount of all cash-generating units (or groups of cash-generating units),
including also those cash-generating units to which no goodwill was allocated, and the corporate assets.
Tangible and intangible assets with finite useful lives and rights of use
assets
At the end of each reporting period, the Company assesses whether there is any indication that an asset –
whether tangible or intangible with finite useful lives or a right of use – may be impaired. Both internal and
external sources of information are used for this purpose. Internal sources include obsolescence or physical
deterioration, and significant changes in the use of the asset and the economic performance of the asset
compared to estimated performance. External sources include the market value of the asset, changes in
technology, markets or laws, trend in market interest rates and the cost of capital used to evaluate investments,
and an excess of the carrying amount of the net assets of the Company over market capitalization.
If there is any indication that an asset – whether tangible or intangible with finite useful lives or a right of use –
has been impaired, then its carrying amount is reduced to its recoverable amount. The recoverable amount is
the higher of an asset's fair value less costs to sell, and its value in use. In calculating the value in use, the
estimated future cash flows are discounted to present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or right. Where it is not possible to
estimate the recoverable amount, the Company estimates the recoverable amount of the cash-generating unit
to which the asset belongs. Impairment losses are recognized in the separate income statement.
When the reasons for the impairment subsequently cease to exist, the carrying value of the asset/ right of use
or of the cash generating unit is increased up to the new estimate of the recoverable amount which, however,
cannot exceed the amount that would have been determined had no impairment loss been recognized. The
reversal of an impairment loss is recognized as income in the separate consolidated income statements.
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Financial instruments
Business models for financial assets management
For the management of trade receivables, Company Management has identified different business models
based on the specific nature of the receivables, the type of counterparty and collection times, this was in order
to optimize the management of working capital through the constant monitoring of the payment performance
of customers, the steering of credit collection policies, and the management of programs for the disposal of
receivables,
and the activation of factoring consistent with financial planning requirements.
The business models adopted are:
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Hold to Collect: receivables usually held to maturity, such as trade receivables due from large customers
and the OLOs; these instruments fall within IFRS 9 category “Assets measured at amortized cost”;
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Hold to Collect and Sell: receivables usually traded massively and on a recurring basis, such as receivables
due from active consumer, small and business customers held for sale; these instruments fall under IFRS
9 category "Financial assets measured at fair value through other comprehensive income". As required by
IFRS 9, the related reserve is reversed to the separate income statements when disposed of or impaired.
As part of managing financial assets other than trade receivables, Company Management has identified its
business models on the basis of how the financial instruments are managed and how their cash flows are used.
This is done to ensure an adequate level of financial flexibility and to best manage, in terms of risks and returns,
the financial resources immediately available and in accordance with the strategies.
The Business Models adopted are the following:
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Hold to Collect: financial instruments used to absorb temporary cash surpluses; such instruments are low
risk and mostly held to maturity; they are measured at amortized cost;
Hold to Collect and Sell: monetary or debt instruments used to absorb short/medium-term cash surpluses;
such instruments are low risk and generally held to maturity, or otherwise sold to cover specific cash
requirements; they are measured at fair value through other comprehensive income;
Hold to Sell: monetary, debt and equity trading instruments used to dynamically manage cash surpluses
not managed under the business models identified above; such instruments are higher risk and traded
repeatedly over time; they are measured at fair value through profit or loss.
Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries, associates and joint ventures are measured at cost adjusted by impairment losses.
When there is objective evidence of an impairment, recoverability is verified by comparing the carrying amount
of the investment against its recoverable amount consisting of the greater of fair value, net of disposal costs,
and value in use.
Other investments
Other investments (other than those in subsidiaries, associates and joint ventures) are classified as non-current
or current assets if they will be kept in the Company’s portfolio for a period of more or not more than 12 months,
respectively.
Other investments are classified as “financial assets measured at fair value through profit or loss” (FVTPL), as
current assets.
At the purchase time of each investment, IFRS 9 provides for the irrevocable option to recognize these
investments in "financial assets measured at fair value through other comprehensive income" (FVTOCI) as non-
current or current assets.
The other investments classified as “financial assets measured at fair value through other comprehensive
income” are measured at fair value; changes in the fair value of these investments are recognized in a special
equity reserve under the other components of the statements of comprehensive income (Reserve for financial
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assets measured at fair value through other comprehensive income), without reclassification to the separate
income statement when the financial asset is disposed of or impaired. Dividends, on the other hand, are
recognized in the separate income statements.
Changes in the value of other investments classified as "financial assets at fair value through separate profit or
loss" are recognized directly in the separate income statements.
Securities other than investments
Securities other than investments, included among non-current or current assets, depending on the business
model adopted and the contractual flows envisaged, fall among financial assets measured at amortized cost,
or measured at fair value through other comprehensive income or at fair value though profit or loss.
Securities other than investments, classified as current assets, are those that, by decision of the directors, are
intended to be kept in TIM S.p.A.’s portfolio for a period of not more than 12 months, and are included:
■
as "financial assets measured at amortized cost" (AC) when held to maturity (originally more than 3
months but less than 12 months, or, although they had an original maturity of more than 12 months, they
have been bought in a period during which maturity was included between 3 and 12 months);
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as "financial assets measured at fair value through other comprehensive income" (FVTOCI) when held in
the scope of a business model whose objective is to sell the financial asset and/or collect the contractual
flows. The "Reserve for financial assets measured at fair value through other comprehensive income" is
reversed to the separate income statements when the financial asset is disposed of or impaired;
as “financial assets measured at fair value through profit or loss" (FVTPL) in the other cases.
Cash and cash equivalents
Cash and cash equivalents are recorded, according to their nature, at nominal value or amortized cost.
Cash equivalents are short-term and highly liquid investments that are readily convertible to known amounts of
cash, subject to an insignificant risk of change in value and their original maturity or the remaining maturity at
the date of purchase does not exceed 3 months.
Impairment losses on financial assets
At every closing date, assessments are made as to whether there is any objective evidence that a financial asset
or a group of financial assets has been impaired.
The impairment losses on financial assets is based on the expected credit loss model.
In particular:
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impairment on trade receivables and on contract assets is carried out using the simplified approach that
involves estimating the loss expected over the life of the receivable at the time of initial recognition and on
subsequent measurements. For each customer segment, the estimate is principally made by calculating
the average expected uncollectibility, based on historical and statistical indicators, possibly adjusted using
forward-looking elements. For some categories of receivables characterized by specific risk elements,
specific measurements are made on individual credit positions;
the impairment of financial assets other than trade receivables is calculated on the basis of a general
model which estimates expected credit losses over the following 12 months or over the residual life of the
asset in the event of a substantial worsening of its credit risk.
Derivative financial instruments
As allowed by IFRS 9, the Company decided to continue to apply the hedge accounting provisions contained in
IAS 39 instead of those of IFRS 9.
Derivatives are used by the Company to manage its exposure to exchange rate and interest rate risks and to
diversify the parameters of debt so that costs and volatility can be reduced to within pre-established operational
limits.
In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when:
■ at the inception of the hedge, the hedging relationship is formally designated and documented;
■
the hedge is expected to be highly effective;
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■
■
its effectiveness can be reliably measured;
the hedge is highly effective throughout the financial reporting periods for which it is designated.
All derivative financial instruments are measured at fair value in accordance with IAS 39.
When derivative financial instruments qualify for hedge accounting, the following accounting treatment applies:
■ Fair value hedge – Where a derivative financial instrument is designated as a hedge of the exposure to
changes in fair value of an asset or liability due to a particular risk, the gain or loss from re-measuring the
hedging instrument at fair value is recognized in the separate income statements. The gain or loss on the
hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is
recognized in the separate income statement.
■ Cash flow hedge – Where a derivative financial instrument is designated as a hedge of the exposure to
variability in cash flows of an asset or liability or a highly probable expected transaction, the effective portion
of any gain or loss arising from the fair value adjustment of the derivative financial instrument is recognized
directly in a specific equity reserve (Reserve for fair value adjustment of hedging derivative instruments). The
cumulative gain or loss is removed from equity and recognized in the separate income statement at the
same time the hedged transaction affects the separate income statement. The gain or loss associated with
the ineffective portion of a hedge is recognized in the separate income statement immediately. If the hedged
transaction is no longer probable, the cumulative gains or losses included in the equity reserve are
immediately recognized in the separate income statement.
For derivatives for which a hedging relationship has not been designated, changes in value compared to initial
recognition are recognized directly in the separate income statement.
Financial liabilities
Financial liabilities include financial payables, including payables for advances on assignments of receivables
where the assignment does not transfer substantially all the risks and rewards, as well as other financial
liabilities, including derivative financial instruments and liabilities in respect of assets recognized under finance
leases recognized in accordance with IFRS 16.
In accordance with IFRS 9, they also include trade and other payables.
Reverse factoring transactions are also classified under trade payables. TIM has put in place reverse factoring
agreements through which TIM gives partner banks a mandate to pay its suppliers as invoices become due.
Suppliers participating in these programs have the right to sell (without any cost for TIM) receivables due from
TIM. They can exercise this right at their total discretion and incurring all the costs to benefit from collection
before the contractual due date.
Financial liabilities other than derivatives are initially recognized at fair value and subsequently measured at
amortized cost.
Financial liabilities hedged by derivative instruments designed to manage exposure to changes in fair value of
the liabilities (fair value hedge derivatives) are measured at fair value in accordance with the hedge accounting
principles of IAS 39. Gains and losses arising from re-measurement at fair value, to the extent of the hedged
component, are recognized in the separate income statement and are offset by the effective portion of the gain
or loss arising from re-measurement at fair value of the hedging instrument.
Financial liabilities hedged by derivative instruments designed to manage exposure to variability in cash flows
(cash flow hedge derivatives) are measured at amortized cost in accordance with the hedge accounting
principles of IAS 39.
Transfer of receivables
TIM S.p.A. carries out sales of receivables under factoring contracts. These transfers, in the majority of cases, are
characterized by the transfer of substantially all the risks and rewards of ownership of the receivables to third
parties, therefore meeting the requirements of IFRS 9 for derecognition. Special service agreements, under which
the purchasers grant TIM S.p.A. a mandate to oversee the collection and management of receivables, have been
entered into to maintain the relationship between the Company and its customers.
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Inventories
Inventories are measured at the lower of purchase and production cost and estimated realizable value; the cost
is determined using the weighted average cost formula for each movement, while the estimated realizable value
is determined by observing general prices at the end of the year. Provision is made for obsolete and slow-moving
inventories based on their expected future use and estimated realizable value.
Non-current assets held for sale/Discontinued operations
Non-current assets held for sale or disposal groups whose carrying amount will mainly be recovered through
sale, rather than through ongoing use, are classified as held for sale and shown separately from other assets
and liabilities in the separate statements of financial position. The corresponding amounts for the previous year
are not reclassified in the statement of financial position but are instead shown separately in a specific column
in the changes in assets and liabilities in the year in which the non-current assets held for sale or the disposal
groups are classified as such.
Discontinued operations are a component of an entity that has been terminated or classified as held for sale
and that:
■
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represents a major business line or geographical area of operation; or
is part of a single coordinated plan to discontinue a separate major line of business or geographical area of
operation; or
is a subsidiary acquired exclusively with a view to resale.
The results arising from Discontinued Operations – whether disposed of or classified as held for sale – are shown
separately in the separate income statement, net of tax effects. The corresponding values for the previous
periods, where present, are reclassified and reported separately in the separate income statement, net of tax
effects, for comparative purposes.
Non-current assets held for sale or discontinued groups classified as held for sale are first recognized in
compliance with the appropriate IFRS applicable to each specific asset and liability, and subsequently measured
at the lower of the carrying amount and fair value, less cost to sell.
Any subsequent impairment losses are recognized as a direct adjustment to the non-current assets or disposal
groups classified as held for sale and expensed in the separate income statement.
An upward revision of value is, instead, recognized for each subsequent increase in the fair value of an asset less
cost to sell, but not in excess of the previously recognized cumulative impairment loss.
As required by IFRS 5 (Non-current assets held for sale and discontinued operations), an entity shall not
depreciate (or amortize) non-current assets classified as held for sale or being part of a discontinued group.
Finance expenses and other expenses attributable to the liabilities of a discontinued group classified as held for
sale must continue to be recognized.
Provisions for employee benefits
Provision for employee severance indemnity
Employee severance indemnity, mandatory pursuant to Article 2120 of the Italian Civil Code, is deferred
compensation and is based on the employees’ years of service and the compensation earned by the employee
during the service period.
Under IAS 19 (Employee Benefits), the employee severance indemnity, so calculated, is considered a "Defined
benefit plan" and the related liability to be recognized in the statement of financial position (Provision for
employee severance indemnities) is determined by actuarial calculations.
The remeasurements of actuarial gains and losses are recognized in other components of other comprehensive
income. The interest expenses related to the "time value" component of the actuarial calculations (the latter
classified as Finance expenses), are recognized in the separate income statement under financial expenses.
Starting from January 1, 2007, the Italian Law gave employees the choice to either allocate their accruing
indemnity to supplementary pension funds or it as an obligation of the Company. Companies that employ at
least 50 employees must transfer the employee severance indemnity to the "Treasury fund" managed by INPS,
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the Italian Social Security Institute. Consequently, the Group's obligation to INPS and the contributions to
supplementary pension funds take the form, under IAS 19, of "Defined contribution plans".
Equity compensation plans
TIM S.p.A. provides additional benefits to certain managers of the Group companies through equity
compensation plans (for example: stock options and long-term incentive plans). The above plans are recognized
in accordance with IFRS 2 (Share-Based Payment).
In accordance with IFRS 2, such plans represent a component of the beneficiaries' compensation. Therefore, for
the plans that provide for compensation in equity instruments, the cost is represented by the fair value of such
instruments at the grant date, and is recognized in "Employee benefits expenses", for employees of the
Company, and in "Investments", for employees of subsidiaries, over the period between the grant date and
vesting date with a contra-entry to an equity reserve denominated "Other equity instruments". Changes in the
fair value subsequent to the grant date do not affect the initial measurement. At the end of each year,
adjustments are made to the estimate of the number of rights that will vest up to expiry. An adjustment is made
to "Other equity instruments" for the impact of the change in estimate with contra-entry to "Employee benefits
expenses" or "Investments".
For the portion of the plans that provide for the payment of compensation in cash, the amount is recognized in
liabilities as a contra-entry to "Employee benefits expenses" for employees of the Company, and in
"Investments", for employees of subsidiaries; at the end of each year such liability is measured at fair value.
Provisions for risks and charges
The Company records provisions for risks and charges when it has a present obligation, legal or constructive, to
a third party, as a result of a past event, when it is probable that an outflow of resources will be required to satisfy
the obligation and when the amount of the obligation can be estimated reliably.
If the effect of the time value is material, and the payment date of the obligations can be reasonably estimated,
provisions to be accrued are the present value of the expected cash flows, taking into account the risks
associated with the obligation. The increase in the provision due to the passage of time is recognized as "Finance
expenses".
Government grants
Government grants are recognized when there is a reasonable certainty that they will be received and that the
Company will satisfy all the conditions established for their granting by the government, government entities
and equivalent local, national or international entities.
Government grants are recognized in the separate income statement, on a straight-line basis, over the periods
in which the Company recognizes the expenses that the grants are intended to offset as costs.
Government grants related to assets received for the acquisition and/or construction of non-current tangible
assets are recorded as deferred income in the statement of financial position and systematically credited to the
separate income statement over the useful life of the systems the grants relate to.
Treasury shares
Treasury shares are recognized as a deduction from equity. In particular, treasury shares are accounted for as a
deduction from the share capital issued in the amount corresponding to the “accounting par value", that is the
ratio of total share capital and the number of issued shares, while the excess cost of acquisition over the
accounting par value is presented as a deduction from "Other reserves and retained earnings (accumulated
losses), including profit (loss) for the year".
Foreign currency transactions
Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign
exchange rate prevailing at the statement of financial position date. Exchange differences arising from the
settlement of monetary items or from their conversion at rates different from those at which they were initially
recorded during the year or at the end of the prior year, are recognized in the separate consolidated income
statements.
Revenues
Revenues are the gross inflows of economic benefits of the period arising from the conduction of the company's
ordinary business. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and
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value added taxes are not economic benefits which flow to the entity and do not result in increases in equity.
Therefore, they are excluded from revenues.
The process underlying the recognition of revenues follows the steps set out in IFRS 15:
■
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■
■
identification of the contract: takes place when the parties approve the contract (with commercial
substance), and identify the respective rights and obligations: in other terms, the contract must be legally
binding, the rights to receive goods and/or services and the terms of payment can be clearly identified and
the Company considers receipt of payment as probable;
identification of the performance obligations: the main performance obligations identified, i.e. promises
to transfer goods and services that are distinct, are services rendered (including voice and data traffic and
ICT solutions) to retail customers, services rendered to wholesale customers, and sale of products;
determination of the transaction price: is the total amount contracted with the other party regarding the
entire contractual term. The Company has determined that the contractual term is the one arising from
the contractual obligations between the parties or, in lack of these obligations, it is by convention one
month;
allocation of the transaction price to the performance obligations: the allocation is made proportionately
to the respective stand-alone selling prices calculated based on the list prices (if present) or estimated by
applying an appropriate margin to the cost of purchase/production of the good/service.
Revenues from activating the connectivity service are not a performance obligation; they are therefore
allocated to the contractual performance obligations (typically to services).
For offerings which include the sale of devices and service contracts (bundle offerings), the Company
allocates the contractual transaction price to the performance obligations of the contract, proportionately
to the stand-alone selling prices of the single performance obligations;
recognition of revenues: revenues are stated net of discounts, allowances, and returns in connection with
the characteristics of the type of revenue:
• Revenues from services rendered
Revenues from services rendered are recognized in the separate income statements according to the
stage of completion of the service, that is based on actual consumption.
Traffic revenues from interconnection and roaming are reported gross of the amounts due to other TLC
operators.
Revenues for delivering information or other content are recognized on the basis of the amount invoiced
to the customer, when the service is rendered directly by the Company. In the event that the Company
is acting as agent (for example non-geographic numbers) only the commission received from the
content provider is recognized as revenue.
Revenues from prepaid traffic are recorded on the basis of effective consumption. Deferred revenues for
traffic already collected but not yet consumed are recorded in “Trade and miscellaneous payables and
other current liabilities” in the statements of financial position.
Revenues for services rendered are generally invoiced and collected bimonthly/monthly for retail
customers, or invoiced monthly and collected in 40-60 days for wholesale customers.
Revenues from sales
Revenues from sales (telephone products and others) are recognized upon delivery when control of the
assets is transferred to the customers.
The devices sold separately from the services are invoiced at the time of delivery; collection takes place
on demand or based on installment plans (up to 48 monthly installments). The devices sold as part of
bundle offerings are invoiced at the time of delivery and usually collected in 24 monthly installments.
The recognition of revenues can generate the recognition of an asset or liability deriving from contracts. In
particular:
■ Contract assets are the right to a consideration in exchange for goods or services that have been transferred
to the customer, when the right is conditioned on something other than the passage of time.
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■ Liabilities deriving from a contract are the obligation to transfer goods or services to the customer for which
the Company has received (or for which it is due) a consideration from the customer.
Contract costs (incremental costs of obtaining a contract and costs to fulfill a contract; mainly technical
activation costs and costs for sales network commissions) are deferred and recognized through separate profit
or loss depending on the expected term of the contractual relationship with the customers. TIM avails itself of
the practical expedient, provided for by IFRS 15, to recognize the incremental costs for obtaining the contract
entirely in the income statement, provided the amortization period does not exceed 12 months.
The recoverability of contract assets and deferred costs is periodically assessed.
Research and advertising costs
Research costs and advertising expenses are charged directly to the separate consolidated income statements
in the year in which they are incurred.
Financial income and expenses
Finance income and expenses are recognized on an accrual basis and include: interest accrued on the related
financial assets and liabilities using the effective interest rate method; changes in the fair value of derivatives
and other financial instruments measured at fair value through the income statement; gains and losses on
foreign exchange and financial instruments (including derivatives).
Dividends
Dividends received are recognized in the separate income statement in the year in which they become receivable
following the resolution by the shareholders’ meeting for the distribution of dividends of the investee companies.
Dividends payable are reported as a change in equity in the year in which they are approved by the shareholders’
meeting.
Income tax expense (current and deferred)
Income tax expense includes all taxes calculated on the basis of the taxable income of the Company.
Current and deferred income taxes are calculated using all the elements and information available at the
reporting date, taking into account current laws and considering all the elements that could give rise to
uncertainties in the determination of the amounts due to the tax authorities, as provided for in IFRIC 23.
The income tax expense is recognized in the separate income statement, except to the extent that it relates to
items directly charged or credited to equity, in which case the related tax effect is recognized in the relevant
equity reserves. In the Statements of Comprehensive Income, the amount of income tax expense relating to
each item included as "Other components of the Statements of comprehensive income" is indicated.
Deferred tax liabilities / assets are recognized using the "Balance sheet liability method". They are calculated on
all temporary differences that arise between the tax base of an asset or liability and the relevant carrying
amounts in the separate financial statements. Deferred tax assets on tax losses carried forward are recognized
to the extent that a future taxable income will be probably available against which they can be recovered. Tax
assets and liabilities are offset when there is a legally enforceable right of offset. Current and deferred tax assets
and liabilities are determined by adopting the tax rates that are expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
The other taxes, other than income taxes, are included in "Other operating expenses".
Use of estimates
The preparation of separate financial statements and related disclosure in conformity with IFRS requires
management to make estimates and assumptions based also on subjective judgments, past experience and
assumptions considered reasonable and realistic in relation to the information known at the time of the
estimate. Such estimates have an effect on the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, as well as on the amount of revenues
and costs during the year. Actual results could differ, even significantly, from those estimates owing to possible
changes in the factors considered in the determination of such estimates. Estimates are reviewed periodically.
Separate Financial Statements of
TIM S.p.A.
Note 2
Accounting policies
318
The most significant accounting estimates that involve a high level of subjective assumptions and judgments by
directors are set out below.
Financial statements area
Goodwill impairment
Impairment of tangible and
intangible assets with finite useful
lives and rights of use assets
Accounting estimates
The impairment test on goodwill is carried out by comparing the carrying amount of cash-generating units and
their recoverable amount. The recoverable amount of a cash-generating unit is the higher of fair value, less costs
to sell, and its value in use. This complex valuation process entails the use of methods such as the discounted
cash flow method, which uses assumptions to estimate cash flows. The recoverable amount depends
significantly on the discount rate used in the discounted cash flow model, as well as the expected future cash
flows and the growth rate used for the extrapolation. The key assumptions used to determine the recoverable
amount for the different cash-generating units, including a sensitivity analysis, are detailed in the Note
"Goodwill".
At the end of each reporting period, the company assesses whether there is any indication that an asset –
whether tangible or intangible with finite useful lives or a right of use – may be impaired. Both internal and
external sources of information are used for this purpose.
Identifying the impairment indicators, estimating future cash flows and calculating the fair value of each asset
requires the Management to make significant estimates and assumptions in calculating the discount rate to be
used, and the useful life and residual value of the assets. These estimates can have a significant impact on the
fair value of the assets and on the amount of any impairment write-down.
Lease liabilities and rights of use
assets
The value of lease liabilities and corresponding rights of use is determined by calculating the present value of the
lease payments, also bearing in mind whether the renewal of the lease is reasonably certain.
Provision for bad debts
Capitalization/deferment of costs The capitalization/deferment of internal and external costs is a process that entails elements of estimation and
valuation. Specifically, it involves the valuation of: i) the likelihood that capitalized costs will be recovered through
correlated future revenues; and ii) the effective increase in the future economic benefits embodied in the related
asset.
Impairment on trade receivables and on contract assets is carried out using the simplified approach that involves
estimating the loss expected over the life of the receivable at the time of initial recognition and on subsequent
measurements. For each customer segment, the estimate is principally made by calculating the average
expected uncollectibility, based on historical and statistical indicators, possibly adjusted using forward-looking
elements. For some categories of receivables characterized by specific risk elements, specific measurements are
made on individual credit positions.
Changes in the economic conditions of the markets, technology and competitive forces could significantly affect
the estimated useful lives of tangible and intangible non-current assets and may lead to a difference in the
timing, and thus on the amount of depreciation and amortization expense.
Depreciation and amortization
Accruals, contingent liabilities
and provisions for employee
benefits
Revenues
Contract costs (IFRS 15)
Income tax expense (current and
deferred)
Derivative instruments and equity
instruments
As regards the provisions for restoration costs, the estimate of future costs to dismantle tangible assets and
restore the site is a complex process that requires the valuation of the liabilities arising from such dismantling
and restoration obligations, which seldom are entirely defined by laws, administrative regulations or contract
clauses, and which normally are to be complied with after an interval of several years.
The accruals related to legal, arbitration and fiscal disputes, as well as regulatory proceedings, are the result of
a complex estimation process based upon the probability of an unfavorable outcome. Provisions for employee
benefits, especially the provision for employee severance indemnities, are calculated using actuarial
assumptions; changes in such assumptions could have a material impact on such liabilities.
The recognition of revenues is influenced by estimates of the amount of discounts, rebates and returns to be
reported as a direct adjustment to revenues, as well as the methods for defining individual product or service
stand alone selling prices and for determining the duration of the contract when there are renewal options.
The recognition of the costs of obtaining and fulfilling contracts is influenced by the estimated expected duration
of the relationship with the customer, calculated on the basis of the historical turnover indexes and future
estimates. However, this estimate is subject to fluctuations and could only represent customers' future behavior
in a limited way, especially if there are new commercial offers or changes in the competitive environment.
Income taxes (current and deferred) are calculated according to a prudent interpretation of the tax laws in effect.
This process sometimes involves complex estimates to determine taxable income and deductible and taxable
temporary differences between the carrying amounts and the taxable amounts. In particular, deferred tax assets
are recognized to the extent that future taxable income will be available against which they can be recovered.
The measurement of the recoverability of deferred tax assets, recognized based on both unused tax loss carry-
forwards to future years and deductible temporary differences, takes into account the estimate of future taxable
income and is based on conservative tax planning.
The fair value of derivative instruments and equity instruments is determined both using valuation models which
also take into account subjective measurements such as, for example, cash flow estimates, expected volatility
of prices, etc., and on the basis of prices existing in regulated markets or quotations provided by financial
counterparts. For more details, see the Note "Supplementary disclosures on financial instruments".
Separate Financial Statements of
TIM S.p.A.
Note 2
Accounting policies
319
As required by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), paragraph 10, in the
absence of a Standard or an Interpretation that specifically applies to a particular transaction, Management,
through careful subjective evaluation techniques, chooses the accounting methods to adopt with a view to
providing financial statements which faithfully represent the financial position, the results of operations and the
cash flows of the Company, which reflect the economic substance of the transactions, which are neutral,
prepared on a prudent basis and complete in all material respects.
New standards and interpretations endorsed by the EU and in
force from January 1, 2020
As required by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), the following is a brief
description of the IFRS in force commencing as of January 1, 2020.
Amendments to IFRS 9 (Financial Instruments), IAS 39 (Financial
Instruments: Recognition and Measurement) and IFRS 7 (Financial
Instruments: additional disclosure – Interest-rate benchmark reform
Commission Regulation (EU) 2020/34 was issued on January 15, 2020, implementing amendments to IFRS 9 –
Financial Instruments, IAS 39 – Financial Instruments: recognition and measurement and IFRS 7 – Financial
Instruments: additional disclosure.
The amendments refer to some specific hedge accounting requirements and provide facilitation in relation to
the potential effects of uncertainty caused by the IBOR reform.
Moreover, the amendments require companies to provide additional disclosure on investors concerning the
hedging relations directly affected by these uncertainties.
The adoption of these amendments had no effect on the separate financial statements of TIM S.p.A. at
December 31, 2020.
Amendments to References to the Conceptual Framework in IFRS
Standards
On November 29, 2019, was issued, implementing the Commission Regulation (EU) 2019/2075 revised version of
the Conceptual Framework for Financial Reporting, at EU level. The main changes with respect to the 2010
version concern:
■ a new chapter on measurement;
■ best definitions and guidance, particularly with regard to the definition of liabilities;
■ clarifications of important concepts, such as "stewardship", prudence and uncertainty in measurements.
A document was also published updating references in IFRS to the previous Conceptual Framework.
The adoption of these amendments had no effect on the separate financial statements of TIM S.p.A. at
December 31, 2020.
Amendments to IAS 1 and IAS 8 (Definition of Material)
On November 29, 2019, Commission Regulation (EU) 2019/2104 was issued, implementing some amendments
to IAS 1 (Presentation of Financial Statements) and IAS 8 (Accounting Policies, Changes in Accounting Estimates
and Errors).
These amendments clarify the definition of "material" and align the definition used in the “Conceptual
Framework” with that used in individual IFRS. The definition of "material", as revised by the amendments, is:
“Information is material if omitting, misstating or obscuring it could reasonably be expected to influence
decisions that the primary users of general purpose financial statements make on the basis of those financial
statements, which provide financial information about a specific reporting entity.”
The adoption of these amendments had no effect on the separate financial statements of TIM S.p.A. at
December 31, 2020.
Amendments to IFRS 3 (Business Combinations)
On April 21, 2020, Commission Regulation (EU) 2020/551 was issued, implementing some amendments to IFRS
3 (Business Combinations). These amendments concern the definition of "business" and help the entity
determine whether an acquisition is a "business" or a group of assets.
Based on the new definition, a business is: “An integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing goods or services to customers, generating investment
income (such as dividends or interest) or generating other income from ordinary activities. The amendments
also clarify that in order to be considered a business, an acquisition must include inputs and a substantial process,
that together contribute to the ability to generate outputs”.
Separate Financial Statements of
TIM S.p.A.
Note 2
Accounting policies
320
The adoption of these amendments had no effect on the separate financial statements of TIM S.p.A. at
December 31, 2020.
Amendments to IFRS 16 Leases for concessions related to COVID-19
On 10-9-2020, Regulation EU 2020/1434 was issued, endorsing various amendments to IFRS 16 to simplify
matters for lessees in the recognition of rent concessions due to COVID-19.
By way of practical expedient, a lessee can choose not to consider that a reduction in rental charges granted by
a lessor constitutes an amendment to the lease contract. This practical expedient only applies to reductions in
rents that are a direct consequence of COVID-19 and only if all the conditions envisaged by the amendment in
question are met.
A lessee applying this practical expedient must provide a disclosure.
These changes must be applied retrospectively for all years starting after June 1, 2020. Early application is
permitted.
The adoption of these amendments had no effect on the separate financial statements of TIM S.p.A. at
December 31, 2020.
NEW STANDARDS AND INTERPRETATIONS ISSUED BY THE IASB
BUT NOT YET APPLICABLE
At the date of preparation of these separate financial statements, the IASB had issued the following new
standards / interpretations which have not yet come into force:
New Standards / Interpretations adopted by UE but not yet applicable
Amendments to IFRS 4 Insurance contracts – Deferment of IFRS 9
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Reform of the interest rates benchmark - Phase 2
New Standards and Interpretations not yet in force and not yet endorsed by the EU
Amendments to: IFRS 3 Business combinations; IAS 16 Property, Plant and equipment; IAS 37 Provisions,
Contingent Liabilities and Contingent Assets; Annual cycle of improvements 2018-2020
Mandatory
application starting
from
1/01/2021
1/01/2021
1/01/2022
Amendments to IAS 1 Presentation of Financial Statements: classification of liabilities as current or non-current
1/01/2023
Amendments to IAS 1 Presentation of Financial Statements: Information regarding accounting standards
Amendments to IAS 8 Accounting Standards, changes in accounting estimates and Errors: Definition of estimates 1/01/2023
1/01/2023
IFRS 17 (Insurance contracts), including amendments to IFRS 17
1/01/2023
The potential impacts on the separate financial statements from application of these new standards and
interpretations are currently being assessed.
With regard to the process of reforming benchmark interest rates, no particular impact on the hedges in Hedge
Accounting is expected in 2021.
More specifically, TIM has adhered to the IBOR Fallback Protocol 2020 published by the ISDA on October 23, which
defines the fallback mechanisms (compounded RFR in arrears plus a spread adjustment) following the
realization of a permanent cessation trigger or pre-cessation trigger; the switch must in any case not cause any
major changes in cash flow hedges to the fixed-rate underlyings in currency nor to the fair value hedges of
underlyings in euros (the process of replacing the Euribor would appear to be late in respect of that of the Libor).
The situation that requires the closest attention and analysis is that of the variable rate intercompany loans
hedged in Hedge Accounting on TIM S.p.A.; if, on the one hand, adhesion to the ISDA protocol assures the
adjustment of the derivative conditions, the possibility will be monitored to accordingly also adjust the
underlying items, so as to safeguard the effectiveness of the hedges.
Separate Financial Statements of
TIM S.p.A.
Note 2
Accounting policies
321
NOTE 3
GOODWILL
The item at December 31, 2020 amounted to 23,051 million euros, down 1,290 million euros on December 31,
2019, and relates to the goodwill included in the domestic business segment of TIM S.p.A.
The table below shows the changes to Goodwill in 2020:
(million euros)
Goodwill at January 1, 2020
A package of shares was transferred, equal to 4.3% of the share capital of INWIT, in an accelerated
book-building procedure reserved for institutional investors
Sale of the share capital of INWIT to Daphne 3 S.p.A. of 14.80% on October 2, 2020
Sale of 1.2% of the share capital of INWIT to an SPV managed and assisted by Canson Capital Partners
(Guernsey) Limited on October 2, 2020
Sale to the same SPV of the remaining 1.8% of the share capital of INWIT, following the exercise of the
relevant purchase option, in December 2020
Goodwill at December 31, 2020
24,341
(253)
(863)
(70)
(104)
23,051
As a consequence of the transactions that took place in 2020 regarding the investment in Infrastrutture Wireless
Italiane S.p.A. (INWIT), following which on December 31, 2020, TIM S.p.A. exercises indirect control over INWIT
through the subsidiary Daphne 3 S.p.A., the portion of goodwill attributed to the investment in Daphne 3 is 898
million euros, net of that already included in the equity investment.
In accordance with IAS 36, goodwill is not subject to amortization, but is tested for impairment on at least an
annual basis when preparing the separate financial statements of TIM S.p.A., which in preparing the 2020
financial statements carried out impairment testing in accordance with the procedure adopted by the Company.
The recoverable amount of the assets at December 31, 2020 was higher than the net carrying amount and
therefore no impairment losses were recorded.
The recoverable value of the assets was determined in accordance with the impairment test of the Domestic
CGU carried out for the purposes of preparing the Group’s consolidated financial statements and concerned the
domestic business unit of TIM S.p.A., corresponding to the Domestic Cash Generating Unit (CGU) considered for
the purposes of the goodwill impairment test in the consolidated financial statements, after excluding the book
values of the subsidiaries that fall within its perimeter.
The value in use estimate was made – in accordance with IAS 36 and with valuation principles and best practices
– based on the expected cash flows in different scenarios. The various expected cash flows were then
summarized into an average normal cash flow, determined with the aid of Experts (expert appraisers and
industry experts) and based on the data from the 2021-2023 Business Plan approved by the Board of Directors.
In particular, expected average cash flows were measured for the three years of the 2021-2023 Business Plan,
plus an additional two years on the basis of extrapolated data, for which future cash flows were explicitly forecast
for a period of five years (2021-2025). The extrapolation of forecast data for the two-year period 2024-2025 was
carried out in order to intercept market and competitive trends that will become manifest beyond the forecast
horizon of the Business Plan.
As regards the estimate of the terminal value, the sustainable long-term cash flow was assumed to be the
extrapolation of the estimated cash flow at 2025, adjusted as necessary to take into consideration a suitable
level of long-term capital expenditure. Furthermore, with specific reference to the incremental value deriving
from 5G license use and therefore from the development of new and innovative business areas, a measurement
model has been adopted that takes into account the net incremental flows for a defined period of time based
on the duration of the license. This approach is consistent with the need to include in the configuration of value,
on one hand the outflows deriving from the payment of the license (2019 - 2022) and the Capex to support its
development (as per the Business Plan), and on the other the positive net flows from the incremental business
component of the license acquisition that will develop over a broad period of time and over the 5 years of explicit
forecast.
The 2021-2023 Business Plan incorporates various assessments on the potential exogenous and endogenous
risks as well as the related action taken to combat and respond to such, also taking into account the current
COVID-19 epidemiological emergency. In order to define the average normal cash flow for the impairment test,
the management, with the aid of Experts, identified additional risk factors, making changes to the amounts
and/or in the time distribution of future cash flows, giving greater weight to the external evidence available.
The cost of capital used to discount the future cash flows in the estimate of the value in use was determined as
follows:
Separate Financial Statements of
TIM S.p.A.
Note 3
Goodwill
322
■
■
■
it was estimated using the Capital Asset Pricing Model (CAPM), which is one of the generally accepted
application criteria referred to in IAS 36;
it reflects current market estimates of the time value of money and the specific risks associated with the
asset groups, and includes appropriate yield premiums for country risk;
it was calculated using comparative market parameters to estimate the “Beta coefficient” and the weighting
coefficient of the equity and debt capital components;
The following are provided below:
■
■
■
the weighted average cost of capital (WACC rate) used to discount the future cash flows and the equivalent
rate before tax;
the growth rates used to estimate the residual value after the explicit forecast period (the G-Rates), which
are expressed in nominal terms;
implicit capitalization rates resulting from the difference between the cost of capital, after tax, and the G-
Rate.
Principal parameters for the estimates of value in use
WACC
WACC before tax
Growth rate beyond the explicit period (g)
Capitalization rate after tax (WACC-g)
Capitalization rate before tax (WACC-g)
Capex/Revenues, perpetual
TIM S.p.A.
4.73%
6.33%
0.5%
4.23%
5.83%
19.2%
The growth rate of the terminal value “g” was estimated taking into account the expected outlook during the
explicit forecast period and is consistent with the range of growth rates applied by analysts who monitor TIM
shares.
The capital expenditure phase, competitive positioning and technological infrastructure managed were
considered in the estimate of the level of capital expenditure required to sustain the perpetual generation of
cash flows in the period after the explicit forecast period.
In estimating the recoverable amounts, simulations were conducted on the results with respect to changes in
the relevant parameters. Below are the parameters that, if considered individually and on a consistent basis,
make the recoverable value equal to their net carrying amount.
Parameters that make the value in use equal to the carrying amount
WACC before tax
Capitalization rate before tax (WACC-g)
Capex/Revenues, perpetual
TIM S.p.A.
8.25%
7.75%
26.98%
In addition to average normal cash flows, to take into account the market operator’s perspective, sensitivity
analyses were conducted on the main risk factors identified with the Experts to determine the value in use. As a
result of these analyses, the recoverable value was in any case higher than the net carrying amount.
Separate Financial Statements of
TIM S.p.A.
Note 3
Goodwill
323
NOTE 4
INTANGIBLE ASSETS WITH A FINITE USEFUL LIFE
The item decreased by 318 million euros compared to December 31, 2019. The breakdown and movements are
as follows.
(million euros)
12.31.2018
IFRS 16
reclassifications
Investments
Depreciation
and
amortization
Impairment
(losses) /
reversals
Disposals
Other
changes
12.31.2019
Industrial patents and
intellectual property
rights
Concessions, licenses,
trademarks and
similar rights
Other intangible
assets
Work in progress and
advance payments
Total
1,256
2,160
—
2,923
6,339
511
(842)
424
1,349
(120)
(120)
—
1
307
819
(380)
1,719
(1,222)
—
(1) (2,140)
3
(1)
3,379
1
1,089
5,818
(million euros)
12.31.2019
Investments
Mergers/
Conferment
of Branches
of Business
Depreciation
and
amortization
Impairment
(losses) /
reversals
Disposals
Other
changes
12.31.2020
Industrial patents and
intellectual property
rights
Concessions, licenses,
trademarks and
similar rights
Other intangible
assets
Work in progress and
advance payments
Total
1,349
11
482
(910)
371
1,303
3,379
1
1,089
5,818
(379)
(1)
(1,290)
—
(1)
(1)
—
(371)
—
3,000
—
1,197
5,500
—
—
3
14
477
959
The data reflects the mergers by incorporation that took place respectively on September 30, 2020, on October
1, 2020 and on December 31, 2020, all with tax and accounting effects backdated to January 1, 2020, of TN Fiber
S.r.l., TIM Vision S.r.l. and HR Services S.r.l. into TIM S.p.A. More specifically, the values acquired refer for 11 million
euros to patent rights and television licenses and for 3 million euros to intangible assets in progress as a result
of the merger by incorporation of TIM Vision S.r.l..
Industrial patents and intellectual property rights consisted of software patents and television rights. In
particular:
■
television rights for TIM multimedia platforms are amortized over the duration of the contracts;
■ application and plant operation software, purchased outright and with user licenses, is amortized over an
expected useful life of two or three years;
■ patents are amortized over five years.
They decreased by 46 million euros, mainly as a result of period amortization.
Concessions, licenses, trademarks and similar rights mainly related to the unamortized cost of licenses for
mobile and fixed telecommunications services. Compared to December 31, 2019, they are down by 379 million
euros, mainly due to period amortization.
Separate Financial Statements of
TIM S.p.A.
Note 4
Intangible assets with a finite useful life
324
The amount of telephone licenses and similar rights in operation at December 31, 2020 (3,000 million euros) and
their useful lives are detailed below:
Type
Maturity:
Useful life
(Years)
Amortization expense
for 2020
(thousands of euros)
UMTS
UMTS 2100 MHz
WiMax
LTE 1800 MHz
LTE 800 MHz
LTE 2600 MHz
L Band (1452-1492 MHz)
900 and 1800 MHz band
3600-3800 MHz band (5G)
26.5-27.5 GHz band (5G)
Residual amount
at 12.31.2020
(thousands of
euros)
134,279
7,362
2,225
77,139
540,284
59,419
148,236
492,735
1,508,670
29,544
18
12
15
18
17
17
14
11
19
19
12/31/2021
12/31/2021
05/31/2023
12/31/2029
12/31/2029
12/31/2029
12/31/2029
12/31/2029
12/31/2037
12/31/2037
134,279
7,362
921
8,571
60,031
6,602
16,471
54,748
88,745
1,738
Intangible assets in progress and advance payments amounted to 1,197 million euros (1,089 million euros at
December 31, 2019) and rise by 108 million euros. They include 680 million euros relating to the rights to
frequencies in the 694-790 MHz bands that are not yet operational and work in progress mainly relating to
software development and investments for the digital evolution of Network Infrastructures.
In FY 2020, industrial investments came to 959 million euros, up by 140 million euros compared to 2019, mainly
following the greater investments necessary to support the digital evolution of the Core Network and, to a lesser
extent, for new software development projects (e.g. Digital CFO) and to purchase multimedia contents.
They include 180 million euros of internally generated assets (185 million euros in 2019), involving development
and evolutionary maintenance of software programs and platforms and innovative network engineering and
solution, application and service design activities.
Amortization of intangible assets amounted to 1,290 million euros and increased by 68 million euros compared
to the amount recognized in 2019 (1,222 million euros). Amortization is recorded in the income statement under
the components of EBIT.
The gross carrying amount, accumulated impairment losses and accumulated depreciation at December 31,
2020 and December 31, 2019 can be summarized as follows:
(million euros)
Gross carrying
amount
12.31.2019
Accumulated
impairment
losses
Accumulated
depreciation
Net carrying
amount
Industrial patents and intellectual property rights
Concessions, licenses, trademarks and similar rights
Other intangible assets
Work in progress and advance payments
Total
7,060
6,523
56
1,089
14,729
—
(5,711)
(3,144)
(55)
(8,911)
1,349
3,379
1
1,089
5,818
Separate Financial Statements of
TIM S.p.A.
Note 4
Intangible assets with a finite useful life
325
(million euros)
Gross carrying
amount
12.31.2020
Accumulated
impairment
losses
Accumulated
depreciation
Net carrying
amount
Industrial patents and intellectual property rights
Concessions, licenses, trademarks and similar rights
Other intangible assets
Work in progress and advance payments
Total
(*) Includes 1 million euros relating to Impairment losses accrued on the values of the intangible assets of the “Digital School” BU demerged to TIM
S.p.A., with tax and statutory effects from December 1, 2020.
7,610
6,523
56
1,197
15,386
(6,306)
(3,523)
(56)
—
(9,885)
1,303
3,000
—
1,197
5,500
(1)
(*)
(1)
With regard to the gross carrying amounts of intangible assets with a finite useful life, in 2020, disposals of 324
million euros were made, relating to intellectual property rights, fully amortized, which mainly concerned
obsolete releases of system software.
Separate Financial Statements of
TIM S.p.A.
Note 4
Intangible assets with a finite useful life
326
NOTE 5
TANGIBLE ASSETS
The item decreased by 256 million euros compared to December 31, 2019. The breakdown and movements are
as follows.
(million euros)
12.31.2018
IFRS 16
Reclassifications
Investments Depreciation and
amortization
Impairment
(losses) /
reversals
Disposals
Other
changes
12.31.2019
Land
Buildings (civil and
industrial)
Plant and equipment
Manufacturing and
distribution equipment
Other
Construction in
progress and advance
payments
Total
(million euros)
224
574
9,162
30
219
573
10,782
6
1,120
5
41
486
1,658
(25)
(25)
(36)
(1,689)
(12)
(81)
—
(1,818)
(20)
2
21
359
2
33
226
565
8,932
25
187
(3)
(23)
(400)
17
656
10,591
—
12.31.2019 Mergers/Conferment
of Branches of
Business
Investments Depreciation and
amortization
Impairment
(losses) /
reversals
Disposals
12.31.2020
Other
changes
Land
Buildings (civil and
industrial)
Plant and equipment
Manufacturing and
distribution equipment
Other
Construction in
progress and advance
payments
Total
226
565
8,932
25
187
656
10,591
5
9
18
981
4
56
400
1,468
5
(33)
(1,623)
(11)
(83)
(1,750)
(3)
(1)
(4)
232
571
8,660
21
183
22
369
3
23
(8)
(8)
(2)
(10)
668
(378)
39 10,335
The data reflects the mergers by incorporation that took place respectively on September 30, 2020, on October
1, 2020 and on December 31, 2020, all with tax and accounting effects backdated to January 1, 2020, of TN Fiber
S.r.l., TIM Vision S.r.l. and HR Services S.r.l. into TIM S.p.A.. In particular, the values refer for 4 million euros to the
acquisition, following the merger of TN Fiber S.r.l. and for 1 million euros, the acquisition following the merger of
HR Services S.r.l..
Land includes both built-up land (with buildings or light constructions) and other available land (on which various
building works stand that are not recorded in the land registry, such as pylons, building podia, etc.). It should be
noted that land, including land pertaining to buildings, is not depreciated.
The item Buildings (civil and industrial) includes buildings for industrial use hosting telephone exchanges or
offices and light constructions (small prefabricated buildings and stacked containers).
item Plant and machinery represents the technical
infrastructure used for the provision of
The
telecommunications services (transport and distribution of voice/data traffic). In detail it consists of switching
and power supply systems, copper and fiber optic backbones, transmission equipment for fixed and mobile
networks and traffic termination telephone systems used by the various customer segments. This item
decreased by 272 million euros compared to December 31, 2019, mainly as a result of the amortization charge
for the year, partially offset by the capital expenditure and exercisability relating to the underground and
overhead copper network (260 million euros), access and carrier network in fiber optics (218 million euros),
Separate Financial Statements of
TIM S.p.A.
Note 5
Tangible assets
327
subscriber connection units (130 million euros), LTE / UMTS core + access (111 million euros), transmission
equipment including SDH-Wdm (42 million euros), data network and switching (39 million euros), NGAN
equipment (12 million euros), power supply systems (14 million euros) and fixed and mobile commercial products
for customer rental contracts (43 million euros).
The item includes in Other changes the reclassification of 6 million euros from Rights of use assets to Plant and
equipment of the value acquired following the merger of TN Fiber S.r.l., insofar as relative to the rights of use
previously held by TIM over the TN Fiber network acquired through the transaction.
Manufacturing and distribution equipment consists of instruments and equipment used for the operation and
maintenance of plant and equipment.
Other is mostly made up of hardware for the functioning of the Data Centers and for work stations, furniture
and fixtures and, to a minimal extent, transport vehicles and office machines; decreased by 4 million euros
compared to December 31, 2019, as a result of the depreciation and amortization charge for the year (83 million
euros), partially offset by investments (56 million euros), mainly for the purchase of hardware for data centers
and work stations and other changes (23 million euros) mainly referring to the potential exercise of other
hardware types.
Construction in progress and advance payments increased by 12 million euros compared to December 31, 2019
and refers to the internal and external costs incurred for the acquisition and internal production of tangible
assets, which are not yet in use. Other changes include the commissioning of capitalizations from previous years.
Disposals amounted to 10 million euros and mainly related to the sale of tangible fixed assets, including sales
of Dark Fiber for network infrastructures (installation, transmission, access) and the abandonment of sites for
Base Transceiver Stations.
In 2020, industrial investments came to 1,468 million euros, down by 190 million euros compared to 2019, mainly
following the different timing of FTTCab development programs and network investments in general, in addition
to the lesser investments necessary to the development of the Core Network, characterized by a technological
evolution that is ever more driven towards automation and digitization. They include 201 million euros of
internally generated assets (218 million euros in 2019), involving the design, construction and testing of network
infrastructure and access and transmission networks.
Depreciation of tangible assets totaled 1,750 million euros, an increase of 68 million euros compared to 2019.
Depreciation is calculated using the straight-line method over the remaining useful lives of the assets in
accordance with the depreciation plan reviewed annually to take account of useful lives by single class of fixed
asset. The effects of any changes in the useful life are recognized in the separate income statement
prospectively.
Depreciation for the year 2020 is calculated on a straight-line basis over the estimated useful lives of the assets
according to the following minimum and maximum rates:
Buildings (civil and industrial)
Plant and equipment
Manufacturing and distribution equipment
Other
3% – 5.55%
3% - 50%
20%
11% - 33%
The gross carrying amount, accumulated impairment losses and accumulated depreciation at December 31,
2020 and December 31, 2019 can be summarized as follows:
(million euros)
Land
Buildings (civil and industrial)
Plant and equipment
Manufacturing and distribution
equipment
Other
Construction in progress and
advance payments
Total
Gross carrying
amount
226
1,794
62,204
284
2,124
656
67,288
12.31.2019
Accumulated
impairment losses
Accumulated
depreciation
Net carrying amount
(5)
(3)
(8)
(1,229)
(53,267)
(259)
(1,934)
(56,689)
226
565
8,932
25
187
656
10,591
Separate Financial Statements of
TIM S.p.A.
Note 5
Tangible assets
328
(million euros)
Land
Buildings (civil and industrial)
Plant and equipment
Manufacturing and distribution
equipment
Other
Construction in progress and
advance payments
Total
Gross carrying
amount
12.31.2020
Accumulated
impairment losses
(*)
Accumulated
depreciation
Net carrying amount
232
1,822
63,163
291
2,217
676
68,401
(13)
(3)
(8)
(24)
(1,251)
(54,490)
(270)
(2,031)
(58,042)
232
571
8,660
21
183
668
10,335
(*) Includes the amount of 8 million euros relative to Impairment losses accrued on the values of the tangible assets of the company TN Fiber S.r.l.,
merged into TIM S.p.A. on September 30, 2020, with income tax effects backdated to January 1, 2020.
With regard to the gross carrying amounts of non-current tangible assets, in 2020 disposals were made for a
total value of 425 million euros, mainly in relation to fully depreciated assets. The most affected assets were:
civil buildings (13 million euros), switching systems (9 million euros), infrastructures and broadband connections
(147 million euros), rented equipment (46 million euros), poles (33 million euros) and underground and aerial
network (157 million euros).
Separate Financial Statements of
TIM S.p.A.
Note 5
Tangible assets
329
NOTE 6
RIGHTS OF USE ASSETS
This item decreased by 810 million euros compared to December 31, 2019. The breakdown and movements are
as follows.
(million euros)
12.31.2018
IFRS 16
reclassifications
Adoption of
IFRS 16
Investments
Increases in
lease
contracts
Depreciation
and
amortization
Disposals
12.31.2019
Other
changes
Property
Plant and equipment
Equipment
Other
Construction in progress
and advance payments
Total
—
—
—
—
—
—
1,406
228
—
141
64
1,839
2,364
545
—
—
2,909
33
11
16
60
588
263
10
861
(567)
(80)
(32)
(679)
(44)
(1)
(2)
(47)
(11)
13
(39)
(37)
3,769
979
—
117
41
4,906
(million euros)
12.31.2019 Mergers/Conferment
of Branches of
Business
Investments
Increases
in lease
contracts
Depreciation
and
amortization
Impairment
(losses) /
reversals
Disposals
12.31.2020
Other
changes
Property
Plant and equipment
Equipment
Other
Construction in progress
and advance payments
Total
3,769
979
—
117
41
4,906
6
6
12
9
37
58
687
191
11
889
(402)
(111)
(29)
(542)
(880)
(241)
(4)
—
(1,125)
(597)
525
(2)
(22)
(96)
2,589
1,358
—
93
56
4,096
The data reflects the mergers by incorporation that took place respectively on September 30, 2020, on October
1, 2020 and on December 31, 2020, all with tax and accounting effects backdated to January 1, 2020, of TN Fiber
S.r.l., TIM Vision S.r.l. and HR Services S.r.l. into TIM S.p.A. In particular, the values refer for 6 million euros to the
acquisition following the merger of TN Fiber S.r.l. of the value relative to the rights of use conferred previously by
TIM, as shareholder, and concerning the spaces available in the infrastructures owned by TIM within the Province
of Trento. As a consequence of the merger and eliminations of the related reciprocal items, the net value has
been reclassified from Rights of use to Plant and equipment under Tangible assets owned.
Since March 31, 2020, the new Master Service Agreement (MSA) between TIM S.p.A. and INWIT S.p.A., now jointly
controlled by TIM-Vodafone, has been in effect, regulating hosting services on INWIT sites. In particular, the MSA
regulates the following services: the availability of the electromagnetic and physical space for the installation
and management of necessary equipment for the provision of mobile service and services for the supply of power
and air conditioning systems;
■ monitoring and security services;
■ management and maintenance services;
■ electricity supply service;
■ measurement and monitoring service of the physical and electromagnetic space.
It is a bouquet of services to guarantee operators (Vodafone and TIM) the management of technological devices,
which use the frequencies that are currently available to the two Operators, functional to the provision of mobile
services to customers.
The effectiveness of the new MSA contract, which comes under the scope of the comprehensive operation
involving the establishment - through the merger by incorporation of Vodafone Towers S.r.l. in INWIT with the
consequent sale by the TIM Group of its controlling interest in INWIT - of the first Italian Tower Operator, has
resulted in the following for TIM S.p.A.:
■
the derecognition of rights of use related with previous lease agreements stipulated with Inwit (777 million
euros) and with Vodafone (266 million euros included in the “Disposals” flow). The termination of previous
lease agreements led to the recognition of net capital gains for approximately 1 million euros in the Separate
Income Statement;
Separate Financial Statements of
TIM S.p.A.
Note 6
Rights of use assets
330
■
■
the derecognition of finance liabilities with Inwit and Vodafone, related to previous lease agreements;
the recognition of new rights of use for INWIT S.p.A. (“Increases in finance leasing contracts”) and a
corresponding financial liability for 368 million euros.
The new MSA also provides for accounting for the amounts in costs for services on an accruals basis, with the
exception of the 3,500 strategic sites, which are accounted for as leases under IFRS 16, for a duration of 8 years,
given that control of those strategic sites still belongs to TIM S.p.A.
Investments consist of the acquisition of IRU transmission capacity (16 million euros, of which 7 million booked
under Construction in progress and advance payments) and incremental and improvement expenses incurred
for leased property and non-property assets (42 million euros, of which 37 million euros was in Construction in
progress and advance payments and improvements in progress).
Increases in leasing contracts include the higher value of the rights of use recorded as a result of new leases,
increases of lease payments and renegotiations of agreements existing both land and buildings for office use
and industrial relationship over time, to infrastructure sites for the mobile telephone network infrastructure and
network.
In accordance with IFRS 16 (Leases), lease liabilities are presented through the recognition of a financial liability
in the statement of financial position at the present value of future lease payments, against the recognition of a
rights-of-use asset of the leased asset.
The item includes 368 million euros, related to the recognition, for the portion that can be configured as a lease,
of the aforementioned new contract with the associate Inwit. It also includes 148 million euros, connected with
the recording of the 2020 Guaranteed Minimum, pertaining to FY 2020, for the pay-per-use contract with Flash
Fiber.
The item Disposals represents the book value of the assets from property lease contracts (and related
improvements) issued in advance, net of the value of the residual financial debt. The item includes 1,043 million
euros associated with the specified derecognition of the rights of use connected with the previous lease
agreements entered into with INWIT and Vodafone, is noted.
The item Other changes includes the transfers during the year and the changes related to the lower value of
rights of use recorded as a result of contractual changes during the year, mainly for lease liabilities under IFRS16.
Depreciation and impairment losses have been recorded in the income statement as components of EBIT.
The item Property includes buildings and land under financial lease contracts and the related building
adaptations; they decreased by 1,180 million euros compared to the overall value recognized as at January 1,
2020, mainly following said operation relative to the Inwit and Vodafone contracts, classified as Property.
The item Plant and equipment mainly includes rights of use on infrastructures for telecommunications services.
It increased by 379 million euros compared to the overall value recognized as of January 1, 2020, mainly following
said operation relative to the Inwit and Vodafone contracts, classified as Plants.
The item Other mainly comprises the finance leases on cars.
The gross carrying amount, accumulated impairment losses and accumulated depreciation at December 31,
2020 and December 31, 2019 can be summarized as follows:
(million euros)
Gross carrying
amount
12.31.2019
Accumulated
impairment losses
Accumulated
depreciation
Net carrying
amount
Property
Plant and equipment
Equipment
Other
Construction in progress and advance payments
Total
5,882
1,146
227
41
7,296
(13)
(13)
(2,100)
(167)
(110)
(2,377)
3,769
979
—
117
41
4,906
Separate Financial Statements of
TIM S.p.A.
Note 6
Rights of use assets
331
(million euros)
Gross carrying
amount
12.31.2020
Accumulated
impairment losses
Accumulated
depreciation
Net carrying
amount
Property
Plant and equipment
Equipment
Other
Construction in progress and advance payments
Total
4,652
1,672
220
56
6,600
(13)
(13)
(2,050)
(314)
(127)
(2,491)
2,589
1,358
—
93
56
4,096
With regard to the gross carrying amounts of rights of use of third party assets, in 2020 disposals were made for
a total value of 1,553 million euros. The assets most affected were: rights of use over IRU fiber (13 million euros),
improvements in third party establishments (17 million euros), rented land (64 million euros), rented properties
(1,161 million euros), base transceiver stations (278 million euros) and leased cars (12 million euros).
Separate Financial Statements of
TIM S.p.A.
Note 6
Rights of use assets
332
NOTE 7
INVESTMENTS
These increased 384 million euros compared to December 31, 2019 and included:
(million euros)
12.31.2020
of which Financial
Instruments
12.31.2019
of which Financial
Instruments
—
30
30
7,209
6
30
7,245
Subsidiaries
Associates and joint ventures
Other investments
Total
Further details on Financial Instruments are provided in the Note "Supplementary disclosures on financial
instruments".
As permitted by IFRS 9, TIM S.p.A. now measures all Other Investments at fair value through other
comprehensive income (FVTOCI).
In 2020 the transactions with subsidiaries, associates, joint ventures and other equity investments of TIM S.p.A.
were the following:
■
Infrastrutture Wireless Italiane S.p.A. (INWIT): on March 31, 2020, the merger by incorporation took place of
Vodafone Towers S.r.l. into INWIT S.p.A., an operation that made it possible to establish the very first Italian
Tower Operator. In particular, we report:
6,825
3
33
6,861
—
33
33
•
•
•
on April 23, 2020, a package of shares was transferred, equal to 4.3% of the share capital of INWIT, in an
accelerated book-building procedure reserved for institutional investors;
on October 02, 2020, TIM and Ardian, a world leading private investment firm operating in infrastructures,
completed the agreement announced on June 24, 2020 for a partial sharing of the investment in INWIT
S.p.A. The operation entailed the purchase by a consortium of institutional investors led by Ardian of
49% of Daphne 3 S.p.A., a newly-established holding company controlled by TIM, to which TIM
contributed 30.2% of the shares of INWIT S.p.A. The holding company has taken over from TIM - for the
portion of INWIT shares transferred - in the shareholders' agreement stipulated between TIM and
Vodafone Europe B.V., by virtue of which, they jointly control INWIT;
the residual direct equity investment held by TIM S.p.A. in INWIT, equal to 3% of the share capital, of
INWIT, has been sold to an SPV managed and assisted by Canson Capital Partners (Guernsey) Limited.
More specifically, on October 2, 2020, 1.2% was first sold and then on December 3, 2020, the remaining
1.8%.
Following the 2020 transactions, TIM S.p.A. has indirect control over INWIT through the subsidiary Daphne 3
S.p.A.
■ Noovle S.r.l.: on May 21, 2020, TIM S.p.A. finalized the acquisition of 100% of the quotas in Noovle S.r.l., an
Italian ICT consulting and system integration company, specialized in supplying cloud solutions and projects
and one of Google Cloud's leading partners on the Italian market;
■ Daphne 3 S.p.A.: company established on July 24, 2020; the company’s corporate object is the assumption,
holding, management and disposal of equity investments in INWIT - Infrastrutture Wireless Italiane S.p.A.;
■ TIM My Broker S.r.l.: company established on August 4, 2020; the company purpose is mainly insurance
intermediation activities pursuant to art. 106 of Legislative Decree no. 209 of September 7, 2005 as
subsequently amended and supplemented;
■ TN Fiber S.r.l.: was merged into TIM S.p.A. on September 30, 2020, with tax effects backdated to January 1,
2020;
■ TIM Vision S.r.l.: was merged into TIM S.p.A. on October 1, 2020 with tax effects backdated to January 1, 2020;
■ HR Services S.r.l.: was merged into TIM S.p.A. on December 31, 2020, with tax effects backdated to January
1, 2020;
■ Olivetti: partial demerger of the “Digital School” BU in the favor of TIM S.p.A., with statutory and tax effects
from December 1, 2020.
Separate Financial Statements of
TIM S.p.A.
Note 7
Investments
333
Movements during 2020 for each investment and the corresponding amounts at the beginning and end of the
year are reported below. The list of investments in subsidiaries, associates and joint ventures at December 31,
2020 is presented in compliance with Article 2427 of the Italian Civil Code and reported in the Note "List of
investments in subsidiaries, associates and joint ventures".
Investments
(thousands of
euros)
Mergers/
Demergers
Carrying
amount at
12/31/2019
Acq./
Subscr./
Payments
to cover
losses
Disposals/
Reimbursements
Impairment
losses/Reversals
/Adj. Fair value
Other changes
and
reclassifications
(*)
Total
changes
Carrying
amount at
12/31/2020
48,000
50
(575)
(2,182)
25,000
50
12,743
(7)
(5,795)
(7)
11 48,011
50
340,161 340,161
(575)
(6,194) 10,829
50
12,743
—
43
250,435
50
340,161
—
10,829
50
12,743
2,388
— 5,914,971
—
—
—
7,565
160
160
586,886
8
8
(371)
17
2
17
—
5,002
8,506
1,846
12,544
50
19,519
(371)
5,000
(132)
(132)
181
50
202,424
—
—
575
—
—
—
2,388
Investments in subsidiaries
CD FIBER
FLASH FIBER
FIBERCOP
DAPHNE 3
HR SERVICES
OLIVETTI
NOOVLE S.p.A.
NOOVLE S.r.l.
TELECOM ITALIA
CAPITAL
TELECOM ITALIA
FINANCE
TELECOM ITALIA
LATAM
PARTICIPAÇÕES
E GESTÃO
ADMINISTRATIVA
TELECOM ITALIA
SAN MARINO
TELECOM ITALIA
SPARKLE
5,914,971
586,726
7,565
—
8,498
2,217
12,527
50
14,517
313
—
TELECOM ITALIA
TRUST
TECHNOLOGY
TELECOM ITALIA
VENTURES
TELECONTACT
CENTER
TELENERGIA
TELSY
TI AUDIT
COMPLIANCE
LATAM (in
liquidation)
TIM BRASIL
SERVIÇOS E
PARTICIPAÇÕES
TIM RETAIL (ex 4
G RETAIL)
TIM MY BROKER
TIM TANK
TIMVISION
TN FIBER
15,108
—
18,609
761
37,557
6,824,856
10
6,230
97,083
(761)
(37,557)
(41,075)
—
(6,305)
—
—
8
15,116
8
10
10
24,839
6,230
—
(761)
(37,557)
—
334,173 383,876 7,208,732
(*) The column “Other changes and reclassifications” includes 117 thousand euros as fair value of the charges relating to the assignment of
remuneration plans to employees of Telecom Group companies as part of the 2020 Broad-Based Share Ownership Plan.
Separate Financial Statements of
TIM S.p.A.
Note 7
Investments
334
(thousands of
euros)
Mergers/
Demergers
Carrying
amount at
12/31/2019
Disposals/
Reimbursements
Impairment
losses/Reversals
/Adj. Fair value
Other changes
and
reclassifications
Total
changes
Carrying
amount at
12/31/2020
Acq./
Subscr./
Payments
to cover
losses
Investments in associates and joint ventures
AREE URBANE (in
liquidation)
ASSCOM
INSURANCE
BROKERS
20
—
INFRASTRUTTURE
WIRELESS
ITALIANE
NORDCOM
TIGLIO I
TIGLIO II (in
liquidation)
TIMfin
Consorzio EO (in
liquidation)
—
2,143
1,189
119
—
—
3,471
(20)
(1,777,990)
1,777,990
2,940
(31)
—
2,940
(1,778,010)
(31)
1,777,990
—
(20)
—
—
—
(31)
2,940
—
2,889
—
—
—
2,143
1,189
88
2,940
—
6,360
(thousands of
euros)
Mergers/
Demergers
Carrying
amount at
12/31/2019
Acq./
Subscr./
Payments
to cover
losses
Disposals/
Reimbursements
Impairment
losses/Reversals
/Adj. Fair value
Other changes
and
reclassifications
Total
changes
Carrying
amount at
12/31/2020
2,573
20,648
Investments in other companies
BANCA UBAE
FIN. PRIV.(**)
IST.
ENCICLOPEDIA
ITALIANA G.
TRECCANI
ISTITUTO
EUROPEO DI
ONCOLOGIA
Other minor
investments
2,558
3,832
3,265
32,876
6,861,203
678
1,291
(41,075) 101,314
—
Total
Investments
613
(4,667)
50
170
(168)
(4,615)
(10,951)
—
(4,667)
2,573
15,981
663
4,495
170
2,728
—
—
3,723
457
(3,377)
29,500
2,112,163 383,388 7,244,592
(53)
(53)
(1,778,063)
(**) Recognized investment measured at fair value through other comprehensive income (FVTOCI).
Separate Financial Statements of
TIM S.p.A.
Note 7
Investments
335
NOTE 8
NON-CURRENT AND CURRENT FINANCIAL
ASSETS
Non-current and current financial assets were broken down as follows:
(million euros)
12.31.2020
12.31.2019
Non-current financial assets
Financial receivables and other non-current financial assets
Financial receivables from subsidiaries
Financial receivables from associates and joint ventures
Financial receivables from other related parties
Financial receivables for lease contracts
Receivables from employees
Hedging derivatives relating to hedged items classified as non-current
assets/liabilities of a financial nature
Non-hedging derivatives
Other financial receivables
Total non-current financial assets
Current financial assets
Securities other than investments
Measured at amortized cost (AC)
Measured at fair value through other comprehensive income (FVTOCI)
Measured at fair value through profit or loss (FVTPL)
Financial receivables and other current financial assets
Liquid assets with banks, financial institutions and post offices (with
maturity over 3 months)
Financial receivables for lease contracts
Receivables from employees
Hedging derivatives relating to hedged items classified as current
assets/liabilities of a financial nature
Non-hedging derivatives
Financial receivables from parent companies
Financial receivables from subsidiaries
Financial receivables from associates and joint ventures
Other financial receivables
(a)
Cash and cash equivalents
Total current financial assets
Total financial assets
(b)
(c)=(a+b)
500
—
—
17
38
500
1,239
213
2,507
—
—
—
—
—
44
12
46
49
—
1
2
154
1,766
1,920
4,427
491
—
—
16
40
530
1,272
—
2,349
—
—
—
—
—
54
12
48
53
—
6
—
3
176
829
1,005
3,354
Further details on Financial Instruments are provided in the Note "Supplementary disclosures on financial
instruments".
Financial receivables for lease contracts (current and non-current) amounted to 61 million euros (70 million
euros at December 31, 2019) and included the following contractual relationships recognized in accordance with
the financial method envisaged by IFRS 16:
■ commercial offers for Consumer and Business customers involving the rental of ADSL routers (7 million euros,
21 million euros at December 31, 2019);
Separate Financial Statements of
TIM S.p.A.
Note 8
Non-current and current financial assets
336
■ contracts for the rental of products to TIM customers with ancillary services ("full rent formula") and leasing
contracts entered into in prior years by Teleleasing with TIM customers (1 million euros, 4 million euros at
December 31, 2019);
■ agreements for the sale of network infrastructure in IRU with deferred collection over time (32 million euros,
33 million euros at December 31, 2019) recognized using the financial method envisaged by IFRS 16 given
the contractual term substantially close to the economic life of the asset;
■ contracts for the lease of commercial products to customers, for an amount of 21 million euros (12 million
euros at December 31, 2019). For the financial receivables for lease assets are offset by the financial debt for
the corresponding leases payable.
Receivables from employees (current and non-current) amounted to 50 million euros and included the
remaining amount due on loans granted.
Hedging derivatives amounting to 546 million euros (578 million euros at December 31, 2019), consisted of:
■ hedged items classified as non-current assets/liabilities of a financial nature (500 million euros), mainly
pertaining to the mark-to-market spot valuation component of cash flow hedge derivative contracts (of
which 142 million euros entered into with Telecom Italia Finance S.A.) and fair value hedge derivative
contracts;
■ hedged items classified as current assets/liabilities of a financial nature (46 million euros), relating to the
accrued income component of cash flow hedges and fair value hedges.
Non-hedging derivatives amounted to 1,288 million euros (1,325 million euros at December 31, 2019) and
included the asset value of transactions that TIM S.p.A. carries out on behalf of Group companies under
centralized treasury arrangements. This item is offset by the corresponding item classified in financial liabilities.
At December 31, 2020, non-hedging derivatives consisted of:
■
■
items classified under Non-current financial assets (1,239 million euros), which refer to the mark-to-market
spot valuation component of the non-hedging derivatives;
items classified as current financial assets (49 million euros), relating to the accrued income component on
non-hedging derivative contracts.
Further details are provided in the Note "Derivatives".
Other financial receivables refer 200 million euros to the Vendor Loan that TIM S.p.A. is owed by Ardian (through
the financial vector Impulse I) following the transaction by means of which TIM S.p.A. conferred 30.2% of INWIT’s
shares to Daphne 3.
Cash and cash equivalents increased by 937 million euros compared to December 31, 2019 and were broken
down as follows:
(million euros)
Liquid assets with banks, financial institutions and post offices
Checks, cash and other receivables and deposits for cash flexibility
Receivables from subsidiaries
Total
12.31.2020
1,673
—
93
1,766
12.31.2019
828
—
1
829
The different technical forms of investing available cash can be analyzed as follows:
■ maturities: investments have a maximum maturity of three months;
■ counterparty risk: investments are made with leading banking and financial institutions with high credit
quality and with a rating of at least BBB- according to Standard & Poor’s or similar rating agencies;
■ Country risk: deposits have been made mainly in major European financial markets.
Separate Financial Statements of
TIM S.p.A.
Note 8
Non-current and current financial assets
337
NOTE 9
MISCELLANEOUS RECEIVABLES AND OTHER
NON-CURRENT ASSETS
Miscellaneous receivables and other non-current assets at December 31, 2020 breaks down as follows:
(million euros)
12.31.2020 of which Financial
Instruments
12.31.2019 of which Financial
Instruments
Miscellaneous non-current receivables
Miscellaneous receivables from
subsidiaries
Miscellaneous receivables from
associates
Receivables due from others
Other non-current assets
Deferred contract costs
Other cost deferrals
Total
(a)
(b)
(a+b)
3
—
46
49
1,643
41
1,684
1,733
—
—
16
16
—
—
—
16
5
—
39
44
1,680
22
1,702
1,746
—
—
2
2
—
2
Further details on Financial Instruments are provided in the Note "Supplementary disclosures on financial
instruments".
Miscellaneous non-current receivables
The item mainly includes current income tax receivables of 31 million euros (37 million at December 31, 2019).
Other non-current assets
This item dropped by 18 million euros compared to December 31, 2019 and includes:
■ Contract costs deferred for 1,643 million euros (1,680 million euros at December 31, 2019), mainly related to
the deferral of costs connected to the activation and acquisitions of new contracts with customers. Contract
costs (mainly technical setup fees and commissions to the sales network) are deferred and recognized in the
separate income statement according to the expected duration of the contractual relationship with
customers (on average around 3 years for the mobile business and 7 years for the fixed business).
Total deferred contract costs (non-current and current) amounted to 2,301 million euros (2,324 million euros
at December 31, 2019); the breakdown of the total deferred contract costs (non-current and current) at
December 31, 2020 is provided below.
(million euros)
Deferred contract costs
Non-current deferred contract costs
Current deferred contract costs
Total
12.31.2020
12.31.2019
1,643
658
2,301
1,680
644
2,324
Separate Financial Statements of
TIM S.p.A.
Note 9
Miscellaneous receivables and other non-current assets
338
(million euros)
12.31.2019
Increase
Release to
income
statement
Other
changes
12.31.2020
Contract acquisition costs
Contract execution costs
Total deferred contract costs
1,298
1,026
2,324
389
231
620
(393)
(250)
(643)
1,294
1,007
2,301
Total deferred contract costs will be recognized in the income statement of future years of the Company and
in particular, for approximately 658 million euros, in 2021, based on the amount at December 31, 2020
without taking into account the new deferred portions. More specifically:
(million euros)
12.31.2020
year of recognition in the income statement
Deferred contract costs
Contract acquisition costs
Contract execution costs
Total
2021
2022
2023
2024
2025
after
2025
1,294
1,007
2,301
396
262
658
309
236
545
220
197
417
155
149
304
109
94
203
105
69
174
■ Other deferred costs of 41 million euros (22 million euros at December 31, 2019) mainly refer to costs for
leased assets.
Separate Financial Statements of
TIM S.p.A.
Note 9
Miscellaneous receivables and other non-current assets
339
NOTE 10
CURRENT AND DEFERRED INCOME TAXES
CURRENT INCOME TAX RECEIVABLES
Non-current income tax receivables (classified as Miscellaneous receivables and other non-current assets)
amounted to 31 million euros at December 31, 2020 (37 million euros at December 31, 2019); they relate to non-
assigned receivables for taxes and interest resulting from the recognized deductibility from IRES tax of the IRAP
tax calculated on labor costs, relating to years prior to 2012, following the entry into force of Italian Decree Law
16/2012.
Current income tax receivables amount to 40 million euros, down 27 million euros compared to December 31,
2019 (67 million euros), and mainly include the IRAP tax receivable for surplus payments and withholdings of 5
million euros and the IRAP receivable of TIM for 29 million euros for surplus down payments made and for the
benefit deriving from the presentation of supplementary declarations following the ruling signed on August 3,
2020 with the Revenue Agency for the application of the patent box benefit.
In addition, as regards IRES, receivables were transferred for 303 million euros, also originating from the patent
box benefit.
Tax assets and deferred tax liabilities
The net balance is composed as follows:
(million euros)
Deferred tax assets
Deferred tax liabilities
Total
12.31.2020
12.31.2019
7,337
—
7,337
882
(2)
880
As at December 31, 2020, TIM S.p.A. benefits from the possibility of realigning the tax values to the greater value
of the assets booked, specifically the value of goodwill of 23,051 million euros, as envisaged by Decree Law
104/2020, Art. 110, subsections 8 and 8 bis, which enables the tax recognition of the value of goodwill starting
FY 23051. This will result, in exchange for payment of substitute tax in the amount of 3% of the realigned value
(692 million euros), in the deduction over 18 years, starting 2021, of the tax amortization of the realigned value
of 23,051 million euros. These deductions will generate benefits in terms of IRES and IRAP recognized as at
December 31, 2020 amongst deferred tax assets for 6,569 million euros.
Deferred tax assets recorded are entirely recoverable, taking into account the possible absorption through future
taxable income of the Company, including considering the carrying forward, with no limit in time, of the IRES
losses that may be verified in the event of a temporary incapacity of taxable income.
The presentation of deferred tax assets and liabilities in the financial statements takes account of offsets to the
extent that such offsets are legally permitted. The composition of the gross amounts prior to offsetting is
presented below:
(million euros)
Deferred tax assets
Deferred tax liabilities
Total
12.31.2020
12.31.2019
7,381
(44)
7,337
928
(48)
880
Separate Financial Statements of
TIM S.p.A.
Note 10
Current and deferred income taxes
340
The temporary differences which made up this line item at December 31, 2020 and 2019, as well as the
movements during 2020 were as follows:
(million euros)
Deferred tax assets:
12.31.2019 Recognized in
profit or loss
Recognized in
equity
Other
changes
12.31.2020
Provisions for pension fund integration
Law 58/92
Provisions for risks and charges
Provision for bad debts
Financial instruments
Taxed depreciation and amortization
Discounting of provision for employee
severance indemnities
Tax losses
Tax realignment pursuant to Decree
Law 104/2020 Art. 110
Other deferred tax assets
Total
Deferred tax liabilities:
Accelerated depreciation
Deferred gains
Financial instruments
Bond issue expense
Other deferred tax liabilities
Total
Total deferred tax assets net of deferred
tax liabilities
5
308
101
359
101
28
—
—
26
928
(5)
(1)
(2)
(7)
(33)
(48)
880
(1)
(142)
(11)
(9)
(1)
18
6,569
5
6,428
1
1
2
1
5
6,433
4
167
90
383
92
25
18
6,569
33
7,381
(4)
—
(3)
(5)
(32)
(44)
7,337
1
2
3
—
3
24
(2)
22
(1)
(1)
21
The expirations of deferred tax assets and deferred tax liabilities at December 31, 2020 were the following:
(million euros)
Within 1 year
Beyond 1
year
Total
as at 12.31.2020
Deferred tax assets
Deferred tax liabilities
Total deferred tax assets net of deferred tax liabilities
539
(8)
531
6,842
(36)
6,806
7,381
(44)
7,337
Income tax payables
Current tax payables come to 231 million euros at December 31, 2020 (17 million euros at December 31, 2019)
and relate to the first installment of substitute tax pursuant to Decree Law 104/2020, Art. 110, paragraphs 8 and
8 bis; non-current tax payables come to 463 million euros at December 31, 2020 (19 million euros at December
31, 2019) and relate for 461 million euros to the additional two installments of substitute tax pursuant to Decree
Law 104/2020, Art. 110, paragraphs 8 and 8 bis.
Separate Financial Statements of
TIM S.p.A.
Note 10
Current and deferred income taxes
341
Income tax expense
The income tax expense for the years ended December 31, 2020 and 2019 is detailed below.
(million euros)
IRAP taxes for current year
IRES taxes for current year
Substitute tax pursuant to Decree Law 104/2020 Art. 110
Expenses/(income) from tax consolidation
Current taxes of prior years
Total current taxes
Deferred income taxes
Tax realignment pursuant to Decree Law 104/2020 Art. 110
Deferred taxes of prior years
Total deferred taxes
Total income tax expense for the year
2020
62
—
692
—
(316)
438
168
(6,569)
(32)
(6,433)
(5,995)
2019
96
65
—
6
(32)
135
45
—
10
55
190
The current IRES tax rate is 24%, while the effective IRAP rate is 4.5%; the rate of substitute tax for the
realignment of goodwill is 3%.
The income for previous years’ current taxes (316 million euros) reflects the effects of the actual tax return with
respect to the estimate made in the 2019 financial statements on the basis of the information available at the
time. It also benefits from the impact consequent to the definition of the ruling signed on August 3, 2020 with
the Revenue Agency for the application of the “patent box” benefit (299 million euros, of which 254 million euros
IRES and 45 million euros IRAP).
Income tax also benefits from the recording of deferred tax assets as a consequence of the tax recognition of
higher amounts booked in accordance with Decree Law 104/2020, Art. 110, paragraph 8 and 8 bis for a total of
6,569 million euros (of which 5,532 million euros IRES and 1,037 million euros IRAP).
The reconciliation between the theoretical tax charge, calculated on the basis of the IRES tax rate in effect at
December 31, 2020 (24%), and the effective tax charge in the separate financial statements is as follows:
(million euros)
2020
2019
Profit (loss) before tax
From continuing operations
Total profit (loss) before tax
Theoretical income tax
Income tax effect on increases (decreases) in variations:
dividends recognized in income
Impairment losses, gains and losses on investments
non-deductible depreciation, amortization and impairments
non-deductible costs
other items (accelerated depreciation and amortization, economic growth aid (ACE, etc.)
Previous years’ IRES (patent box, etc.)
Deferred IRES tax benefit pursuant to DL 104/2020, Art. 110
Effective income tax recognized in income statement, excluding IRAP tax and Substitute tax
IRAP (including patent box benefit)
Deferred IRAP tax benefit pursuant to DL 104/2020, Art. 110
Substitute tax pursuant to Decree Law 104/2020 Art. 110
Total effective taxes recognized in the Income Statement
1,166
1,166
280
(75)
(12)
3
3
(51)
(299)
(5,532)
(5,683)
33
(1,037)
692
(5,995)
572
572
137
(32)
(1)
4
37
(35)
(19)
—
91
99
—
—
190
For a better understanding of the above reconciliation, the impacts of IRAP and the substitute tax pursuant to
Decree-Law 104/2020 art. 110 have been shown separately so as to avoid any distorting effect arising from the
fact that this tax is calculated on a different tax base to the pre-tax profit.
Separate Financial Statements of
TIM S.p.A.
Note 10
Current and deferred income taxes
342
NOTE 11
INVENTORIES
At December 31, 2020, these amounted to 144 million euros (155 million euros at December 31, 2019) and mainly
consisted of fixed and mobile telecommunications equipment and terminals and the related accessories.
This item decreased by 11 million euros compared to December 31, 2019, mainly due to the reduction in the year
by in both purchases and consumption, with reference to equipment and accessories for mobile telephony, in
application of a more targeted commercial and procurement policy.
No inventories are pledged as collateral.
NOTE 12
TRADE AND MISCELLANEOUS RECEIVABLES
AND OTHER CURRENT ASSETS
Trade and miscellaneous receivables and other current assets at December 31, 2020 breaks down as follows:
(million euros)
12.31.2020 of which Financial
Instruments
12.31.2019 of which Financial
Instruments
Trade receivables:
Receivables from customers
Receivables from other
telecommunications operators
Receivables from subsidiaries
Receivables from associates and joint
ventures
Receivables from other related parties
Customer collections pending credit
Miscellaneous current receivables
Receivables from subsidiaries
Receivables from associates and joint
ventures
Receivables from other related parties
Other receivables
Other current assets
Contract assets
Deferred contract costs
Other cost deferrals
Other
Total
(a)
(b)
(c)
(a+b+c)
1,423
677
163
30
3
9
2,305
8
7
—
202
217
23
658
201
60
942
3,464
1,423
677
163
30
3
9
2,305
—
—
—
78
78
23
—
—
—
23
2,406
1,531
693
245
—
2
13
2,484
9
—
—
313
322
31
644
167
83
925
3,731
1,531
693
245
—
2
13
2,484
—
—
—
112
112
31
—
31
2,627
Further details on Financial Instruments are provided in the Note "Supplementary disclosures on financial
instruments".
Separate Financial Statements of
TIM S.p.A.
Note 11
Inventories
343
The analyses of the aging of the financial instruments included in Trade and miscellaneous receivables and other
current assets at December 31, 2020 and December 31, 2019 are provided below:
(million euros)
12.31.2020
Trade and
miscellaneous
receivables and other
current assets
(million euros)
12.31.2019
Trade and
miscellaneous
receivables and other
current assets
Overdue:
0-90 days 91-180 days 181-365 days
More than
365 days
of which
overdue
of which
not
overdue
current
2,406
1,976
430
45
83
59
243
Overdue:
0-90 days 91-180 days 181-365 days
More than
365 days
of which
overdue
of which
not
overdue
current
2,627
2,125
502
129
54
76
243
Financial instruments included in trade and miscellaneous receivables and other current assets include Assets
deriving from contracts with customers (Contract Assets) for 23 million euros; they decreased by 221 million
euros compared to December 31, 2019. In particular:
■ Current net receivables: are down by 149 million euros, mainly due to the significant reduction in
subscription receivables, consequent to the greater sales of products/services with payment by installments
and the lesser receivables for sales and prepaid offers. This trend is juxtaposed with the increase in wholesale
receivables (due to the dynamics of the fewer transfers without recourse and repricing), roaming receivables
and miscellaneous billing receivables;
■ Overdue net due receivables: are down by 72 million euros, mainly following the reduction in subscription
receivables and receivables related to miscellaneous billing items, phenomena concentrated in the portion
of receivables due in the short-term (0-90 days) and that with high aging (between 181 and 365 days).
Trade receivables
These come to 2,305 million euros (2,484 million euros at December 31, 2019) and are net of the related provision
for bad debts of 496 million euros (549 million euros at December 31, 2019); in particular, the provision for bad
debt at December 31, 2020 is impacted by the provisions made in 2020 for a total of 187 million euros, of which
41 million euros are non-recurring in relation to the COVID-19 emergency, which resulted in a worsening of
Expected Credit Loss of part of the customer base due to the anticipated deterioration of the macroeconomic
context. Further details are provided in the Note “Significant non-recurring events and transactions” of the
Separate Financial Statements at December 31, 2020 of TIM S.p.A.
Movements in the provision for bad debts were as follows:
(million euros)
At January 1
Provision charges to the income statement
Draw downs and other changes
At December 31
12.31.2020
12.31.2019
549
187
(240)
496
541
193
(185)
549
Trade receivables decreased by 179 million euros compared to December 31, 2019, mainly as a result of the
changes in the receivables due from other operators, and from customers. In particular, we report:
■ Receivables from customers: amounted to 1,423 million euros and dropped by 108 million euros compared
to December 31, 2019;
Separate Financial Statements of
TIM S.p.A.
Note 12
Trade and miscellaneous receivables and other current assets
344
■ Receivables from other operators: amounted to 677 million euros and fell by 16 million euros compared to
December 31, 2019;
■ Receivables from consolidated subsidiaries: amounted to 163 million euros and fell by 82 million euros
compared to December 31, 2019; the main components of this item are the supply of TLC equipment and
services to Flash Fiber (96 million euros), TIM Retail (17 million euros), Telecom Italia Sparkle (18 million euros),
TIM S.A. (12 million euros), Olivetti (6 million euros), Telenergia (7 million euros) and Telecontact (3 million
euros);
■ Receivables from associates: amounted to 30 million euros (not present at December 31, 2019) and relate to
the supply of services to INWIT, which has become an associate.
Miscellaneous receivables (current)
Amounted to 217 million euros (net of a provision for bad debts of 48 million euros), decreasing by 105 million
euros compared to December 31, 2019. They include:
■ Receivables from subsidiaries: these amounted to 8 million euros (9 million euros at December 31, 2019)
and mainly were related to receivables from Group companies for the tax consolidation;
■ Receivables from associates and joint venture: amounted to 7 million euros (not present at December 31,
2019) and relate to Inwit, which has become an associate;
■ Other receivables: totaled 202 million euros and break down as follows:
(million euros)
Advances to suppliers
Receivables from employees
Tax receivables
Receivables for grants from the government and public entities
Sundry receivables
Total
12.31.2020
3
8
1
29
161
202
12.31.2019
2
9
35
44
223
313
Tax receivables amounted to 1 million euros and are essentially represented by credit amounts resulting from
tax returns, tax credits, as well as VAT credits on the acquisition of motor vehicles and related accessories
requested for reimbursement pursuant to Law Decree no. 258/2006 converted with amendments by Law no.
278/2006.
Receivables for grants from the government and public entities (29 million euros) mainly relate to Ultra-
Broadband-UBB and Broadband-BB projects. The grants are recognized to the income statement when the
related systems are commissioned.
Sundry receivables mainly include:
■
■
■ miscellaneous receivables from other TLC operators (34 million euros);
■
receivables for with-recourse assignments to factoring companies (37 million euros);
receivables from social security and pension institutions (24 million euros);
receivables for the Universal Service (32 million euros).
Other current assets
Other current assets amounted to 942 million euros and increased by 17 million euros compared to December
31, 2019; they included:
■ Assets resulting from contracts with customers - Contract Assets (23 million euros, 31 million euros at
December 31, 2019): these refer to the advance recognition of revenues for those bundle contracts (such as
product and service packages) with the individual Performance Obligations with different timing for their
recognition, in which goods recognized "at point in time" are sold at a discounted price, or for those contracts
which, envisaging a discount for a period of time less than the minimum contract duration, pursuant to IFRS
15 need the discount to be reallocated over the minimum contract duration. Contract Assets - net of the
related write-down provision of 2 million euros - are down by 8 million euros compared to December 31,
2019, since the reversal to the income statement of the previously accumulated balance was substantially
offset by the need to distribute discounts granted to customers temporally over the minimum contractual
term, with particular reference to those connected with the impact of COVID-19;
Separate Financial Statements of
TIM S.p.A.
Note 12
Trade and miscellaneous receivables and other current assets
345
■ Deferred contract costs (658 million euros, 644 million euros at December 31, 2019): contract costs (mainly
technical setup fees and commissions to the sales network) are deferred and recognized in the separate
income statement according to the expected duration of the contractual relationship with customers (on
average around 3 years for the mobile business and 7 years for the fixed business). For additional details on
the deferred contract costs and their movement during the year, please refer to the Note "Miscellaneous
receivables and other non-current assets";
■ Other cost deferrals: amounted to 201 million euros and mainly related to:
▪
▪
▪
▪
▪
148 million euros for the deferral of costs related to rental fees and other costs of leased assets;
28 million euros for the deferral of costs for the purchase of products and services;
19 million euros for the deferral of after-sales expenses on application offers;
4 million euros for insurance premiums;
2 million euros for maintenance fees.
■ Other (60 million euros, 83 million euros at December 31, 2019): these include approximately 1 million euros
in receivables for works from the subsidiary Flash Fiber. The decrease compared to December 31, 2019 was
mainly linked to lower receivables from network jobs for Public Administration bodies.
Separate Financial Statements of
TIM S.p.A.
Note 12
Trade and miscellaneous receivables and other current assets
346
NOTE 13
DISCONTINUED OPERATIONS/NON-CURRENT
ASSETS HELD FOR SALE
“Discontinued operations/Non-current assets held for sale” are absent at December 31, 2020.
At December 31, 2019, they totaled 828 million euros and related to the carrying amount of the investment in
the company INWIT S.p.A. classified in this line item following the outcome of the 2019 Shareholders' Meeting
which had approved the merger by incorporation of Vodafone Towers S.r.l. into INWIT, with the resulting sale by
the TIM Group of its controlling interest in INWIT, which is highly likely to be concluded by the end of 2020.
On March 31, 2020 the merger by incorporation of Vodafone Towers S.r.l. with INWIT S.p.A. was completed.
Further details are provided in the Note “Investments” of the Separate Financial Statements at December 31,
2020 of TIM S.p.A.
Separate Financial Statements of
TIM S.p.A.
Note 13
Discontinued operations/Non-current assets held for sale
347
NOTE 14
EQUITY
Composed as follows:
(million euros)
Capital issued
less: Treasury shares
Share capital
Additional paid-in capital
Legal reserve
Other reserves:
Merger surplus reserve
Other
Total other reserves
Retained earnings, including profit (loss) for the year
Total
12.31.2020
12.31.2019
11,677
(19)
11,658
2,133
2,313
1,734
(528)
1,206
7,698
25,008
11,677
(21)
11,656
2,094
2,294
1,722
(465)
1,257
873
18,174
Movements in share capital during 2020 are presented in the following tables:
Reconciliation between the number of shares outstanding at 12.31.2019 and at 12.31.2020
(number of shares)
At 12/31/2019
Share
assignment/issue
As at 12.31.2020
% on the
Share Capital
Ordinary shares issued
less: treasury shares
Ordinary shares outstanding
Savings shares issued
and outstanding
Total shares issued
Total shares outstanding
(a)
(b)
(c)
(d)
(a+d)
(c+d)
15,203,122,583
(37,672,014)
15,165,450,569
6,027,791,699
21,230,914,282
21,193,242,268
126,343,913
2,492,305
128,836,218
—
126,343,913
128,836,218
15,329,466,496
(35,179,709)
15,294,286,787
6,027,791,699
21,357,258,195
21,322,078,486
71.78
28.22
100.00
Reconciliation between the value of shares outstanding at 12.31.2019 and at 12.31.2020
(thousands of euros)
Ordinary shares issued
less: treasury shares
Ordinary shares outstanding
Savings shares issued and
outstanding
Total share capital issued
Total share capital
outstanding
(a)
(b)
(c)
(d)
(a+d)
(c+d)
Share capital
at 12/31/2019
Change in
share capital
Share capital at
12/31/2020
8,361,718
(20,720)
8,340,998
3,315,285
11,677,003
11,656,283
19,612
1,485
21,097
(19,612)
—
1,485
8,381,330
(19,235)
8,362,095
3,295,673
11,677,003
11,657,768
Share capital increased by 1,485 thousand euros on December 31, 2019 following the assignment to beneficiaries
of the 2016-2019 Special Award for a total of 2,492,305 ordinary treasury shares.
Separate Financial Statements of
TIM S.p.A.
Note 14
Equity
348
Disclosure on share capital
The ordinary and savings shares of TIM S.p.A. are listed in Italy (FTSE index).
In the shareholder resolutions passed to increase share capital against cash payments, the pre-emption right
can be excluded to the maximum extent of ten percent of the pre-existing share capital, on condition that the
issue price corresponds to the market price of the shares and that this is confirmed in a specific report issued by
the firm charged with the audit of the Company.
The Company sources itself with the capital necessary to fund its requirements for business development and
operations; the sources of funds are found in a balanced mix of equity, permanently invested by the shareholders,
and debt capital, to guarantee a balanced financial structure and minimize the total cost of capital, with a
resulting advantage to all the stakeholders.
Debt capital is structured according to different maturities and currencies to ensure an adequate diversification
of the sources of funding and an efficient access to external sources of financing (taking advantage of the best
opportunities offered in the financial markets of the euro, U.S. dollar and Pound sterling areas to minimize costs),
taking care to reduce the refinancing risk.
The remuneration of equity is proposed by the Board of Directors to the Shareholders’ Meeting, which meets to
approve the annual financial statements, based upon market trends and business performance, once all the
other obligations are met, including debt servicing. Therefore, in order to guarantee an adequate remuneration
of capital, safeguard company continuity and business development, the Company constantly monitors the
change in debt levels in relation to equity, the level of net debt and the operating margin of industrial operations.
Privileges of savings shares
The privileges of TIM S.p.A. savings shares are indicated below:
■
■
■
■
■
■
■
the profit shown in the duly approved financial statements, after deducting the amount to be allocated to
the legal reserve, must be distributed to the holders of savings shares in an amount up to 5% of the 0.55
euros per share;
after assigning preferred dividends to the savings shares, the distribution of which is approved by the
shareholders' meeting, the remaining profit shall be allocated among all the shares, so that savings shares
are entitled to higher overall dividends than ordinary shares would be entitled to the extent of 2% of 0.55
euros per share;
when, in any one year, dividends of below 5% of the 0.55 euros per share are paid to the savings shares, the
difference is determined as an increase of the privileged dividend in the next two subsequent years;
in the event of a distribution of reserves, savings shares have the same rights as the other shares. Moreover,
when there is no profit or insufficient profit is reported in the financial statements for a given year to satisfy
the aforesaid savings shares privileges, the Shareholders’ Meeting called to approve those financial
statements may choose to satisfy the dividend right and/or the higher dividend right by distributing available
reserves. The distribution of available reserves for such payments excludes the application of the mechanism
extending the right to the preferred dividend not paid through the distribution of profits for the following two
years;
the reduction of share capital as a result of losses does not affect the savings shares except for the amount
of the loss which is not covered by the portion of the share capital represented by the other shares;
upon the wind-up of TIM S.p.A., the savings shares have a pre-emption right in the reimbursement of capital
up to the amount of 0.55 euros per share;
in the event of the cessation of trading in the Company's ordinary or savings shares, the holder of savings
shares may ask TIM S.p.A. to convert his/her shares into ordinary shares, using the method selected during
a special session of the shareholders' meeting called for that purpose within two months of being excluded
from trading.
Share capital carries a restriction on tax suspension for an amount of 11,104, subsection 8, million euros (1,191
million at December 31, 2019). The increase on December 31, 2019 of 9,913 million euros meets the condition
laid down by Decree Law 104/2020, Art. 110, subsection 8, in connection with the tax recognition of the higher
booked values.
∂
Additional paid-in capital at December 31, 2020 amounted to 2,133 million euros and increased by 39 million
euros compared to December 31, 2019, following the November 27, 2020 issue of 126,343,913 Telecom Italia
ordinary shares to subscribers of the 2020 Broad-Based Share Ownership Plan. For further details, please refer
Separate Financial Statements of
TIM S.p.A.
Note 14
Equity
349
to the Note “Equity Compensation Plans”. The share premium reserve is entirely restricted under tax suspension
in accordance with Decree Law 104/2020, Art. 110, subsection 8.
The Legal reserve at December 31, 2020, was 2,313 million euros, up by 19 million euros compared to December
31, 2019 due to the allocation of FY 2019 profits. Note that the reserve, in addition to the amount of 1,835 million
euros already restricted at December 31, 2019, is further restricted for 478 million euros in tax suspension in
accordance with Decree Law 104/2020, Art. 110, subsection 8.
Other reserves totaled 1,206 million euros at December 31, 2020, decreasing by 51 million euros compared to
December 31, 2019.
The Other reserves moved through the Statements of Comprehensive Income are broken down as follows:
■ Reserve for remeasurements of employee defined benefit plans (negative 106 million euros): the reserve
increased by 5 million euros compared to December 31, 2019, following the recognition of employee
severance indemnity actuarial gains for the year 2020, after the net fiscal impact;
■ Reserve for fair value adjustment of hedging derivative instruments (a negative 1,214 million euros, down 74
million euros compared to December 31, 2019): this reserve is related to the accounting of cash flow hedge
transactions. In particular, it refers to unrealized gains and losses, net of the related tax effect, arising from
the fair value adjustment of the financial instruments designated as cash flow hedges;
■ Reserve for financial assets measured at fair value through other comprehensive income (10 million euros):
this reserve decreased by 2 million euros compared to December 31, 2019.
The Other reserves also include:
■ Merger surplus reserve (1,734 million euros) increased by 12 million euros compared to December 31, 2019,
following the merger of HR Services S.r.l. with TIM S.p.A., which took place on December 31, 2020, with
accounting and tax effects backdated to January 1, 2020. The merger surplus reserve is entirely restricted
under tax suspension in accordance with Decree Law 104/2020, Art. 110, subsection 8.
■ Reserve for other equity instruments: this reserve amounted to 203 million euros (up by 3 million euros
compared to December 31, 2019) and consisted of:
•
•
•
•
the amount of the 2020 Broad-Based Share Ownership Plan (5 million euros);
the amount of the convertible bond maturing 2015-2022 (186 million euros);
the amount of the 2018-2020 Long Term Incentive Plan, approved by the Shareholders' Meeting on April
24, 2018 (6 million euros);
the amount of the 2020-2022 Long Term Incentive Plan, approved by the Shareholders' Meeting on April
23, 2020 (6 million euros).
For further details, please refer to the Note “Equity Compensation Plans”.
The equity for other instruments reserve for 142 million euros is entirely restricted under tax suspension in
accordance with Decree Law 104/2020, Art. 110, subsection 8.
■ Unavailable reserve originating from the application of Article 7, paragraph 7 of Italian Legislative Decree
38/2005 (521 million euros): unchanged from December 31, 2019. This reserve is entirely restricted under tax
suspension in accordance with Decree Law 104/2020, Art. 110, subsection 8.
■ Miscellaneous reserves (58 million euros). These reserves are entirely restricted under tax suspension in
accordance with Decree Law 104/2020, Art. 110, subsection 8.
Retained earnings (accumulated losses), including profit for the year, was positive by 7,698 million euros at
December 31, 2020, with an increase of 6,825 million euros compared to December 31, 2019. The movements
are connected to the following changes:
■
■
■
increase of 7,161 million euros referred to 2020 profits;
reduction of 317 million euros as a result of the distribution of dividends referred to the 2019 financial
statements, as approved by the Shareholders’ Meeting of April 23, 2020;
reduction of 19 million euros, connected with the provision made to the legal reserve of 5% of the FY 2019
profit, as approved by the Shareholders’ Meeting of April 23, 2020.
Accrued profits (losses), including profit for the year for 7,380 million euros, are restricted under tax suspension
in accordance with Decree Law 104/2020, Art. 110, subsection 8.The following statement provides additional
disclosure on equity and is prepared pursuant to Article 2427, number 7-bis, showing the items in equity
separately according to their source, possibility of utilization and distribution, in addition to their utilization in the
three-year period 2018-2020.
Separate Financial Statements of
TIM S.p.A.
Note 14
Equity
350
Summary pursuant to Article 2427, no. 7-bis
Nature/description
Amount at
12.31.2020
Potential
utilization
Amount
available
Summary of the amounts
utilized
in the three-year perio
2018-2020
for other
reasons
11,658
64
57
521
1,679
for loss
coverage
B
A,B,C 1,679
2,134
1,953
203
64
57
A,B,C 2,134
B
B
A,B,C
A,B,C
(million euros)
Share capital
Capital reserves:
Additional Paid-in capital
Legal reserve
Reserve for other equity instruments
Other reserves
Reserve for remeasurements of defined benefit
plans
Reserve pursuant to Italian Legislative Decree
38/2005, Article 7, paragraph 7
Merger surplus reserve
Profit reserves:
Additional Paid-in capital
Legal reserve
Reserve pursuant to Article 34, Italian Law
576/1975
Sundry reserves
Reserve for fair value adjustment of cash flow
hedges and related underlying instruments
Reserve for available-for-sale financial assets
Reserve for remeasurements of defined benefit
plans
Merger surplus reserve
Profits carried forward
Total
Treasury shares
Amount not distributable (1)
Residual distributable percentage
Key:
A = for increases in capital;
B = for loss coverage;
C = for distribution to shareholders
(1) Represents the amount not distributable as the part of additional paid-in capital needed to supplement the legal reserve to reach 1/5 of the share
capital.
A,B,C (163)
55
A,B,C
537
A,B,C
4,374
(37)
(23)
4,314
A,B,C
B
A,B,C —
12
A,B,C
(163)
55
537
17,865
—
B
(1)
360
—
12
1,841
1,854
(1,214)
10
13
(1)
166
166
Specifically, the amounts shown in the column "Summary of the amounts utilized in the three-year period
2018/2020 – for other reasons” relate to the distribution of dividends.
At December 31, 2020, the Company had tax-suspended reserves of 14,281 million euros (1,835 million euros at
12.31.2019), subject to taxation in the event of distribution, on which deferred taxes had not been allocated as
their distribution is not foreseen. The increase of 12,446 million euros meets the condition laid down by Decree
Law 104/2020, Art. 110, subsection 8, in connection with the tax recognition of the higher booked values. The
total restriction on tax suspension for an amount of 22,359 million euros is set as follows:
■ share capital for 9,913 million euros;
■ designated reserves for 12,446 million euros (as identified previously).
The table below shows the restrictions, pursuant to Article 109, paragraph 4, letter b) of TUIR, relating to off-
book deductions effected for income tax purposes in past years:
Separate Financial Statements of
TIM S.p.A.
Note 14
Equity
351
(million euros)
Off-book deductions at December 31, 2019
Reversal for taxation during the year
Off-book deductions at 12.31.2020
Deferred taxes (IRES and IRAP)
Restriction on equity at 12.31.2020
22
(3)
19
(4)
15
This regime imposes a restriction on all equity reserves, without distinction, for an amount equal to the off-book
deductions net of the relative deferred taxes provided. This restriction remains until such time as the excess tax
deductions and consequent taxation are recovered in the books.
More specifically, compared with the situation at December 31, 2019, the deductions decreased by 3 million euros
as a result of taxation during the year.
Therefore, taking into account the residual deductions effected in prior years and not covered by the fiscal
realignment carried out in accordance with Italian Law 244 dated December 24, 2007, the total restriction on
equity in the separate financial statements amounts to 15 million euros.
Future potential changes in share capital
The table below shows future potential changes in share capital, based on the issuance of the convertible bond
by TIM S.p.A. in March 2015, in the 2020 Broad-Based Share Ownership Plan and plans for long-term share
incentives, still outstanding at December 31, 2020:
Number of
maximum shares
issuable
Share capital
(thousands of
euros)
Additional
paid-in capital
(thousands of
euros)
Subscription
price per share
(euros)
Capital increases already approved (ordinary shares)
2020 Broad-based Share Ownership Plan (free issue) (*)
2020-2022 Long Term Incentive Plan (free issue)
Stock Options
2015 Convertible Bond (ordinary shares) (**)
Bonds
Total
42,114,637
180,000,000
222,114,637
1,112,718,371
1,112,718,371
1,334,833,008
2,000,000
2,000,000
2,000,000
N.A.
N.A.
(*) The maximum number of free issues that can be issued is obtained by applying the assignment ratio of one third of the 126,343,913 new ordinary
shares issued in exchange for payment on November 27, 2020 (equal to 99.09% of the 127,500,000 offered).
(**) The number of shares potentially issuable shown may be subject to adjustments.
Further information is provided in the Notes "Non-current and current financial liabilities" and “Equity
compensation plans”.
Separate Financial Statements of
TIM S.p.A.
Note 14
Equity
352
NOTE 15
NON-CURRENT AND CURRENT FINANCIAL
LIABILITIES
Non-current and current financial liabilities (gross financial debt) are broken down as follows:
12.31.2020
(million euros)
12.31.2019
Non-current financial liabilities
Non-current financial payables
Bonds
Convertible bonds
Payables to banks
Payables to other lenders
Payables due to subsidiaries
Non-current financial liabilities for lease contracts
Payables to subsidiaries
Payables to associates
Payables to others
Other non-current financial liabilities
Hedging derivatives relating to hedged items classified as non-current
assets/liabilities of a financial nature
Non-hedging derivatives
Deferred income
Total non-current financial liabilities
(a)
Current financial liabilities
Current financial payables
Bonds
Convertible bonds
Payables to banks
Payables to other lenders
Payables due to subsidiaries
Payables to associates
Current financial liabilities for lease contracts
Payables to subsidiaries
Payables to associates
Payables to others
Other current financial liabilities
Hedging derivatives relating to hedged items classified as current
assets/liabilities of a financial nature
Non-hedging derivatives
Deferred income
Total Current financial liabilities
Total financial liabilities (Gross Financial Debt)
(b)
(a+b)
12,548
1,958
2,649
29
4,204
21,388
497
313
2,696
3,506
1,813
1,239
—
3,052
27,946
858
6
2,013
116
247
—
3,240
14
50
399
463
53
49
—
102
3,805
31,751
13,193
1,925
3,832
16
4,285
23,251
997
—
3,005
4,002
1,659
1,272
—
2,931
30,184
1,597
6
687
110
1,281
—
3,681
270
—
396
666
53
53
—
106
4,453
34,637
Further details on Financial Instruments are provided in the Note "Supplementary disclosures on financial
instruments".
Separate Financial Statements of
TIM S.p.A.
Note 15
Non-current and current financial liabilities
353
Gross financial debt according to the original currency of the transaction is as follows:
12.31.2020
(millions of foreign currency)
12.31.2020
(million euros)
12.31.2019
(millions of foreign currency)
12.31.2019
(million euros)
USD
GBP
YEN
EURO
2,507
389
20,000
2,043
433
158
29,117
31,751
2,506
389
20,031
2,231
457
165
31,784
34,637
The breakdown of gross financial debt by effective interest-rate bands applicable to the original transaction is
provided below, excluding the effect of any derivative hedging instruments:
(million euros)
12.31.2020
12.31.2019
Up to 2.5%
From 2.5% to 5%
From 5% to 7.5%
From 7.5% to 10%
Over 10%
Accruals/deferrals, MTM and derivatives
7,862
14,282
4,111
1,730
4
3,762
31,751
9,445
14,654
5,005
1,829
77
3,627
34,637
Following the use of hedging derivative instruments, on the other hand, gross financial debt by nominal interest
rate level is:
(million euros)
12.31.2020
12.31.2019
Up to 2.5%
From 2.5% to 5%
From 5% to 7.5%
From 7.5% to 10%
Over 10%
Accruals/deferrals, MTM and derivatives
13,232
8,515
4,508
1,730
4
3,762
31,751
13,462
11,183
4,459
1,829
77
3,627
34,637
The maturities of financial liabilities according to the expected nominal repayment amount, as defined by
contract, are the following:
Details of the maturities of financial liabilities – at nominal repayment amount:
(million euros)
2021
maturing by Dec. 31 of the year:
2022
2024
2023
2025
After
2025
Total
Convertible bonds
Loans and other financial liabilities
Finance lease liabilities
Total
Current financial liabilities
Total
2,417
3,101
564
1,244
1,368
1,201
396
393
437
2,161 4,906 4,054
1,127
—
—
3,288 4,906 4,054
3,222
174
391
3,787
—
3,787
3,670
2,000
3,863
573
374
1,911
2,947 9,444
—
2,947 9,444
—
14,974
8,423
3,902
27,299
1,127
28,426
The main components of financial liabilities are commented below.
Separate Financial Statements of
TIM S.p.A.
Note 15
Non-current and current financial liabilities
354
Bonds are broken down as follows:
(million euros)
Non-current portion
Current portion
Total carrying amount
Fair value adjustment for effect of fair-value hedge transactions and measurement at
amortized cost
Total nominal repayment amount
12.31.2020
12.31.2019
12,548
858
13,406
(432)
12,974
13,193
1,597
14,790
(424)
14,366
The convertible bonds include the unsecured equity-linked bond for 2,000 million euros, with a coupon of 1.125%,
issued by TIM S.p.A., convertible into newly-issued ordinary shares maturing in 2022.
This item was broken down as follows:
(million euros)
Non-current portion
Current portion
Total carrying amount
Fair value adjustment and measurements at amortized cost
Total nominal repayment amount
12.31.2020
1,958
6
1,964
36
2,000
12.31.2019
1,925
6
1,931
69
2,000
The nominal repayment amount of bonds and convertible bonds totaled 16,366 million euros, up by 517 million
euros compared to December 31, 2019 (15,849 million euros) as a result of new issues and repayments in 2019.
The following table lists the bonds issued by TIM S.p.A., expressed at the nominal repayment amount, net of
bond repurchases, and also at market value:
Currency
Amount
(millions)
Bonds issued
Euro
Euro
Euro
Euro
Euro
GBP
Euro
Euro
Euro
USD
Euro
Euro
Euro
Euro
Euro
Euro
Total
(b) 2,000
564
(a) 217
884
1,000
375
1,000
750
1,250
1,500
1,000
1,000
750
1,000
1,250
670
Nominal
repayment
amount
(million
euros)
564
217
884
2,000
1,000
417
1,000
750
1,250
1,222
1,000
1,000
750
1,000
1,250
670
14,974
Coupon
Issue date
Maturity
date
Issue price
(%)
Market price
at 12/31/20
(%)
4.500 % 1/23/2014 1/25/2021
6-month Euribor (base 365) 1/01/2002 1/01/2022
5.250 % 2/10/2010 2/10/2022
1.125 % 3/26/2015 3/26/2022
3.250 % 1/16/2015 1/16/2023
5.875 % 5/19/2006 5/19/2023
2.500 % 1/19/2017 7/19/2023
3.625 % 1/20/2016 1/19/2024
4.000 % 1/11/2019 4/11/2024
5.303 % 5/30/2014 5/30/2024
2.750 % 4/15/2019 4/15/2025
3.000 % 9/30/2016 9/30/2025
2.875 % 6/28/2018 1/28/2026
3.625 % 5/25/2016 5/25/2026
2.375 % 10/12/2017 10/12/2027
5.250 % 3/17/2005 3/17/2055
99.447
100.000
99.295
100.000
99.446
99.622
99.288
99.632
99.436
100.000
99.320
99.806
100.000
100.000
99.185
99.667
100.527
100.000
106.072
99.757
105.512
109.783
104.845
107.340
108.418
109.065
104.932
106.935
106.152
110.396
104.428
127.584
Market
value at
12/31/20
(million
euros)
567
217
938
1,995
1,055
458
1,049
805
1,355
1,333
1,049
1,069
796
1,104
1,305
855
15,950
(a) Reserved for employees.
(c) Bond convertible into newly-issued TIM S.p.A. ordinary treasury shares.
Separate Financial Statements of
TIM S.p.A.
Note 15
Non-current and current financial liabilities
355
The regulations and/or Offering Circulars relating to the bonds described above are available on the corporate
website at the address: www.telecomitalia.com.
The change in bonds during 2020 was as follows:
Repayments
(millions of original currency)
Telecom Italia S.p.A. 719 million euros 4.000% (1)
Telecom Italia S.p.A. 547 million euros 4.875% (2)
(1) Net of buy-backs totaling 281 million euros made by the company in 2015.
(2) Net of buy-backs totaling 453 million euros made by the company in 2015.
Currency Amount Repayment date
Euros
Euro
719
547
21-Jan-20
25-Sep-20
Non-current payables to banks totaled 2,649 million euros (3,832 million euros at December 31, 2019). Current
payables to banks totaled 2,013 million euros, up by 1,326 million euros (687 million euros at December 31, 2019)
and included 1,204 million euros of the current portion of non-current amounts due to banks.
Non-current payables to other lenders totaled 29 million euros (16 million euros at December 31, 2019) while
current payables totaled 116 million euros (110 million euros at December 31, 2019) and included 5 million euros
representing the current portion of non-current payables to other lenders.
Non-current payables to subsidiaries amounted to 4,204 million euros (4,285 million euros at December 31,
2019) and consisted of loans obtained from Telecom Italia Capital S.A. (3,046 million euros) and from Telecom
Italia Finance S.A. (1,158 million euros), following the issues of bonds placed by the financial companies of the
Group on the United States and Luxembourg markets.
Current payables to subsidiaries amounted to 247 million euros and decreased by 1,034 million euros compared
to December 31, 2019 (1,281 million euros). They include:
■
the current portion of non-current loans to Telecom Italia Finance S.A. (35 million euros) and Telecom Italia
Capital S.A. (10 million euros);
■ current accounts as part of the treasury services regulated at market rates for a total of 202 million euros,
particularly with Telecom Italia Sparkle (111 million euros), Telecontact (44 million euros), Olivetti S.p.A. (23
million euros), Telecom Italia Trust Technology (13 million euros).
Non-current financial liabilities for lease contracts come to 3,506 million euros (4,002 million euros at December
31, 2019). Current finance lease liabilities amounted to 463 million euros (666 million euros at December 31, 2019)
and referred for 456 million euros to the current portion of non-current finance lease liabilities.
With reference to the financial lease liabilities recognized in 2020 and 2019, the following is noted:
(million euros)
Principal reimbursements
Cash out interest portion
Total
12.31.2020
575
119
694
12.31.2019
699
143
842
Hedging derivatives relating to items classified as non-current financial liabilities amount to 1,813 million euros
(1,659 million euros at December 31, 2019). Hedging derivatives relating to hedged items classified as current
financial liabilities amounted to 53 million euros (53 million euros at December 31, 2019).
Non-current non-hedging derivatives amounted to 1,239 million euros (1,272 million euros at December 31,
2019). Current non-hedging derivatives amounted to 49 million euros (53 million euros at December 31, 2019).
These line items include the measurement in the liabilities of transactions which TIM S.p.A. carries out with
banking counterparties to service the companies of the Group in its exclusive role as the centralized treasury
function (cash pooling), and are offset in full by the corresponding items classified as financial assets.
Further details are provided in the Note "Derivatives".
Separate Financial Statements of
TIM S.p.A.
Note 15
Non-current and current financial liabilities
356
Covenants, negative pledges and other contract clauses in
effect at December 31, 2020
Bonds issued by the TIM Group do not contain financial covenants (e.g. ratios such as Debt/EBITDA,
EBITDA/Interest, etc.) or clauses that result in the automatic early redemption of the bonds in relation to events
other than the insolvency of the TIM Group(1); furthermore, the repayment of the bonds and the payment of
interest are not covered by specific guarantees nor are there commitments provided relative to the assumption
of future guarantees, except for the full and unconditional guarantees provided by TIM S.p.A. for the bonds issued
by Telecom Italia Finance S.A. and Telecom Italia Capital S.A..
Since these bonds have been placed principally with institutional investors in the main world's capital markets
(Euromarket and U.S.), the terms which regulate the bonds are in line with the market practice for similar
transactions effected on these same markets; consequently, for example, there are commitments not to use the
company’s assets as collateral for loans (negative pledges).
Regarding loans taken out by TIM S.p.A. from the European Investment Bank (EIB), at December 31, 2020 the
nominal total of outstanding loans was 850 million euros, none of it backed by a bank guarantee.
The two EIB loans signed on December 14, 2015 and November 25, 2019 contain the following covenants:
■
in the event the company becomes the target of a merger, demerger or contribution of a business segment
outside the Group, or sells, disposes of or transfers assets or business segments (except in certain cases,
expressly provided for), it shall immediately inform the EIB which shall have the right to ask for guarantees
to be provided or changes to be made to the loan contract, or, only for certain loan contracts, the EIB shall
have the option to demand the immediate repayment of the loan (should the merger, demerger or
contribution of a business segment outside the Group compromise the Project execution or cause a prejudice
to EIB in its capacity as creditor);
■ TIM undertook to ensure that, for the entire duration of the loan, the total financial debt of the Group
companies other than TIM S.p.A. – except for the cases when that debt is fully and irrevocably secured by
TIM S.p.A. – is lower than 35% (thirty-five percent) of the Group's total financial debt;
■
■
"Inclusion clause", under which, in the event TIM commits to uphold financial covenants in other loan
contracts (and even more restrictive clauses for the 2015 direct risk loan, including, for instance, cross default
clauses and commitments restricting the sale of goods) that are not provided or are stricter than those
granted to the EIB, the EIB will have the right – if, in its reasonable opinion, it considers that such changes
may have a negative impact on TIM's financial capacity – to request the provision of guarantees or an
amendment of the loan contract in order to establish an equivalent provision in favor of the EIB;
"Network Event", under which, in the event of the disposal of the entire fixed network or of a substantial part
of it (in any case, more than half in quantitative terms) to third parties not controlled by the Company, or in
the event of disposal of the controlling interest in the company in which the network or a substantial part of
it has previously been transferred, TIM must immediately inform the EIB, which may then opt to demand
collateral or an amendment of the loan contract or choose an alternative solution.
The loan agreements of TIM S.p.A. do not contain financial covenants (e.g. ratios such as Debt/EBITDA,
EBITDA/Interests, etc.) which would oblige the Company to repay the outstanding loan if the covenants are not
observed.
The loan agreements contain the usual other types of covenants, including the commitment not to pledge the
Company’s assets as collateral for loans (negative pledge) and the commitment not to change the business
purpose or sell the assets of the Company unless specific conditions exist (e.g. the sale takes place at fair market
value). Covenants with basically the same content can be found in the export credit loan agreement.
In the Loan Agreements and the Bonds, TIM is required to provide notification of change of control. Identification
of the occurrence of a change of control and the applicable consequences – including, at the discretion of the
investors, the establishment of guarantees or the early repayment of the amount paid in cash or as shares and
the cancellation of the commitment in the absence of agreements to the contrary – are specifically covered in
the individual agreements.
In addition, the outstanding loans generally contain a generic commitment by TIM, the breach of which is an
Event of Default, not to implement mergers, demergers or transfers of company branches outside the Group.
1A change of control event can result in the early repayment of the convertible bond of TIM S.p.A., as further detailed below.
Separate Financial Statements of
TIM S.p.A.
Note 15
Non-current and current financial liabilities
357
Such an Event of Default may entail, upon request of the Lender, the early redemption of the drawn amounts
and/or the annulment of the undrawn commitment.
Finally, as at December 31, 2020, no covenant, negative pledge or other clause relating to the debt position had
in any way been breached or violated.
Revolving Credit Facility
The following table shows committed credit lines available at December 31, 2020.
(billion euros)
Revolving Credit Facility – maturing January 2023
Bridge to Bond Facility – maturing May 2021
Total
12.31.2020
Agreed
5.0
1.7
6.7
Drawn down
—
—
—
12.31.2019
Agreed
5.0
—
5.0
Drawn down
—
—
—
At December 31, 2020, TIM had bilateral Term Loans for 1,500 million euros with various banking counterparties
and overdraft facilities for 490 million euros, drawn down for the full amount.
On May 18, 2020 TIM created a new credit line, structured as a bridge to bond, for later issuing on the bond
market, for 1.7 billion euros and initially maturing after 12 months, with the option of extension for another 12
months.
On January 18, 2021, TIM issued its first 8-year Sustainability Bond for an amount of 1 billion euros, coupon
1.625%.
On January 19, 2021, TIM decided to totally cancel the unused 1.7 billion euro Bridge to Bond line.
TIM's rating at December 31, 2020
At December 31, 2020, the three rating agencies – Standard & Poor's, Moody's and Fitch Ratings – rated TIM as
follows:
STANDARD & POOR'S
MOODY'S
FITCH RATINGS
Rating
BB+
Ba2
BB+
Outlook
Negative
Negative
Stable
Separate Financial Statements of
TIM S.p.A.
Note 15
Non-current and current financial liabilities
358
NOTE 16
NET FINANCIAL DEBT
The following table shows the net financial debt at December 31, 2020 and December 31, 2019, calculated in
accordance with the criteria indicated in the “Recommendations for the Consistent Implementation of the
European Commission Regulation on Prospectuses”, issued on February 10, 2005 by the European Securities &
Markets Authority (ESMA) and adopted by Consob.
For the purpose of determining such figure, the amount of financial liabilities has been adjusted by the effect of
the relative hedging derivatives recorded in assets and the receivables arising from financial subleasing.
This table also shows the reconciliation of the net financial debt determined according to the criteria indicated
by the ESMA and net financial debt calculated according to the criteria of the TIM Group.
(million euros)
Non-current financial liabilities
Current financial liabilities
Total gross financial debt
Non-current financial assets (°)
Non-current financial receivables arising from lease contracts
Non-current hedging derivatives
Current financial assets
Securities other than investments
Current financial receivables arising from lease contracts
Financial receivables and other financial assets
Cash and cash equivalents
Net financial debt as per Consob communication DEM/6064293/2006 (ESMA)
Non-current financial assets (°)
Other financial receivables and other non-current financial assets
Net financial debt (*)
Reversal of fair value measurement of derivatives and related financial
liabilities/assets
Adjusted net financial debt
12.31.2020
12.31.2019
27,946
3,805
31,751
(17)
(500)
(517)
—
(44)
(110)
(1,766)
(1,920)
29,314
(1,990)
27,324
(1,541)
25,783
30,184
4,453
34,637
(16)
(530)
(546)
—
(54)
(122)
(829)
(1,005)
33,086
(1,803)
31,283
(1,543)
29,740
(a)
(b)
(c)
(d=a+b+c)
(e)
(f=d+e)
(g)
(f+g)
(º) At December 31, 2020 and at December 31, 2019, Non-current financial assets (b + e) amounted to 2,507 million euros and 2,349 million euros,
respectively.
(*) As regards the effects of related party transactions on net financial debt, reference should be made to the specific table included in the Note
"Related party transactions ".
Separate Financial Statements of
TIM S.p.A.
Note 16
Net financial debt
359
The following additional disclosures are provided in accordance with IAS 7:
Additional cash flow information required by IAS 7
(thousands of euros)
Non-current financial
payables:
Bonds
Convertible bonds
Amounts due to banks
Other financial payables
of which current portion
Non-current financial
liabilities for lease contracts:
of which current portion
Other non-current financial
liabilities:
Hedging derivative liabilities
relating to hedged items
classified as non-current
assets/liabilities of a financial
nature
Non-hedging derivatives
Other liabilities
of which current portion
Non-current financial
payables:
Amounts due to banks
Other financial payables
Hedging derivative liabilities
relating to hedged items
classified as current
assets/liabilities of a financial
nature
Total Financial liabilities
(Gross financial debt)
Hedging derivative receivables
relating to hedged items
classified as current and non-
current financial
assets/liabilities
Non-hedging derivative
receivables
Total
12.31.2019
Cash movements Non-cash movements
Receipts
and/or
issues
Payments
and/or
reimbursements
Exchange
rate
differences
Fair value
changes
Other changes
and
reclassifications
12.31.2020
14,790
1,931
4,128
4,804
25,653
2,402
4,668
4,668
666
1,712
1,325
—
3,037
106
391
888
—
1,279
(a)
(b)
(c)
(d)
(1,267)
(512)
(455)
(2,234)
(575)
(575)
(136)
27
(81)
(217)
27
—
—
271
4
275
747
747
(8) 13,406
1,964
33
3,853
(34)
4,283
11
2 23,506
2,118
(878)
(878)
3,962
3,962
456
—
—
99
(234)
(135)
56
200
256
(1)
(3)
(4)
1,866
1,288
—
3,154
102
2
(2)
418
(568)
809
320
—
—
2
(2)
(150)
—
1,129
(e=a+b+c+d)
34,637
1,022
(2,809)
(350)
281
(1,030)
31,751
(f)
578
(g)
(h=e-f-g)
1,325
32,734
(119)
85
2
546
1,022
(2,809)
—
(2)
−
(1,028) 29,917
Separate Financial Statements of
TIM S.p.A.
Note 16
Net financial debt
360
Additional Cash Flow Information
The value of the paid and collected interest expense recognized in the Report on Operations takes into account
the movements relating to transactions in CCIRS derivatives to hedge foreign currency underlying instruments
in both the asset component (collections) and liability component (payments) without netting the positions.
(million euros)
Interest expense paid
Interest income received
Net total
2020
(1,389)
465
(924)
To consider the components of CCIRS derivatives as a single transaction, a representation is given with interest
flows in and out shown net. This approach gives the following results:
(million euros)
Interest expense paid
Interest income received
Net total
2020
(1,308)
384
(924)
2019
(1,689)
654
(1,035)
2019
(1,526)
491
(1,035)
Separate Financial Statements of
TIM S.p.A.
Note 16
Net financial debt
361
NOTE 17
FINANCIAL RISK MANAGEMENT
Financial risk management objectives and policies of TIM S.p.A.
As reported in the Note "Financial Risk Management" of the consolidated financial statements of the TIM Group,
TIM S.p.A. adheres to the Guidelines on "Management and control of financial risk" established for the Group.
The risk management policies of TIM S.p.A. observe the policies for the diversification of risks identified for the
Group.
An optimum fixed-rate and variable-rate debt composition is defined for the entire Group and is not established
for the individual companies.
As for the exchange rate risk on financial payables contracted by TIM S.p.A. denominated in currencies other
than euro, such risk is hedged in full.
Derivative financial instruments are designated as fair value hedges for managing exchange rate and interest
rate risk on instruments denominated in currencies other than euro and for managing interest rate risk on fixed-
rate loans in euros. Derivative financial instruments are designated as cash flow hedges when the objective is to
pre-set the exchange rate of future transactions and the interest rate.
All derivative financial instruments are entered into with leading banking and financial counterparts whose credit
ratings are constantly monitored to reduce the credit risk.
TIM S.p.A. has current account transactions with subsidiaries, as part of its treasury services which are conducted
at market rates, and multi-year loan agreements with them which are also at market rates.
Interest rate risk: sensitivity analysis
The change in interest rates on the variable component of payables and liquidity may lead to higher or lower
finance income and expenses, while the changes in the level of the expected interest rate affect the fair value
measurement of TIM S.p.A. derivatives. In particular:
■ with regard to derivatives that convert the liabilities contracted by TIM S.p.A. to fixed rates (cash flow
hedging), in line with international accounting standards that regulate hedge accounting, the fair value
(mark-to-market) measurement of such instruments is set aside in a specific unavailable Equity reserve. The
combined change of the numerous market variables to which the mark-to-market calculation is subject
between the transaction inception date and the measurement date renders any assumption about the trend
of the variables of little significance. As the contract expiration date approaches, the accounting effects
described will gradually be absorbed until they cease to exist;
■
if, at December 31, 2020, the interest rates in the various markets in which TIM S.p.A. operates had been 100
basis points higher/lower compared to the actual rates, then higher/lower finance expenses, before the tax
effect, would have been recognized in the income statement for 68 million euros (86 million euros at
December 31, 2019).
Refer to Note 2 "Accounting Policies" for the potential risk generated by the reform of benchmark interest rates.
Allocation of the financial structure between fixed rate and
variable rate
As for the allocation of the financial structure between the fixed-rate component and the variable-rate
component, for both financial assets and liabilities, reference should be made to the following tables. In the
tables below we took into account the nominal repayment/investment amount (because that amount expresses
the effective interest rate exposure of the Group) and, as far as financial assets are concerned, the intrinsic nature
(financial characteristics and duration) of the transactions under consideration rather than just the stated
contractual terms alone. Bearing that in mind, a transaction whose characteristics (short or very short time
frame and frequent renewal) are such that the interest rate is periodically reset on the basis of market
parameters, even though the contract does not call for re-fixing the interest rate (such as in the case of bank
Separate Financial Statements of
TIM S.p.A.
Note 17
Financial risk management
362
deposits, Euro Commercial Papers and receivables on sales of securities), has been considered in the category of
variable rate.
Total Financial liabilities (at the nominal repayment amount)
(million euros)
Fixed rate
12.31.2020
Variable
rate
Total
Fixed rate
12.31.2019
Variable
rate
Total
Bonds
Loans and other financial
liabilities (*)
Total
(*) At 12.31.2020, current liabilities totaled 1,127 million euros, of which 521 million euros at variable rates (1,276 million euros at 12.31.2019, of which
14,974
13,452
28,426
4,539
5,513
10,052
10,423
8,854
19,277
11,827
9,714
21,541
4,551
4,598
9,149
16,366
15,227
31,593
784 million euros at variable rates).
Total Financial assets (at the nominal investment amount)
(million euros)
Cash & cash equivalents
Securities
Other receivables
Total
Fixed rate
12.31.2020
Variable
rate
Total
Fixed rate
12.31.2019
Variable
rate
Total
—
—
598
598
1,765
—
626
2,391
1,765
—
1,224
2,989
—
—
691
691
829
—
589
1,418
829
—
1,280
2,109
With regard to variable-rate financial instruments, the contracts provide for revisions of the relative parameters
to take place within the subsequent 12 months.
Effective interest rate
As to the effective interest rate, for the categories where that parameter can be determined, such parameter
refers to the original transaction net of the effect of any derivative hedging instruments. The disclosure, which is
provided by class of financial asset and liability, has been determined, for purposes of calculating the weighted
average, using the carrying amount adjusted by accruals, prepayments, deferrals and fair value adjustments:
this is therefore the amortized cost, net of accruals and any changes in fair value, as a consequence of hedge
accounting.
Total financial liabilities
(million euros)
Bonds
Loans and other financial liabilities
Total
Total Financial assets
(million euros)
Cash & cash equivalents
Securities
Other receivables
Total
12.31.2020
12.31.2019
Adjusted carrying
amount
Effective interest
rate (%)
Adjusted carrying
amount
Effective interest
rate (%)
14,877
13,112
27,989
3.70
2.91
3.33
16,220
14,789
31,009
3.79
2.73
3.28
12.31.2020
12.31.2019
Adjusted carrying
amount
Effective interest
rate (%)
Adjusted carrying
amount
Effective interest
rate (%)
1,765
—
802
2,567
—
—
0.98
0.31
829.00
—
619.00
1,448.00
0.01
—
1.33
0.57
Separate Financial Statements of
TIM S.p.A.
Note 17
Financial risk management
363
As for financial assets, the weighted average effective interest rate is not essentially influenced by the existence
of derivatives.
As for market risk management using derivatives, reference should be made to the Note "Derivatives".
Credit risk
Credit risk represents TIM’s exposure to possible losses arising from the failure of commercial or financial
counterparties to fulfill their obligations. To measure this risk over time for impairment of financial assets (trade
receivables due from customers included), the introduction of IFRS 9 required switching from the incurred loss
model pursuant to IAS 39 to the expected credit loss model.
Such risk stems principally from economic and financial factors, or from the possibility that a default situation of
a counterparty could arise, or from more strictly technical, commercial or administrative factors.
TIM’s maximum theoretical exposure to credit risk is represented by the carrying amount of the financial assets
and trade receivables recorded in the financial statements, excluding guarantees received, described in the Note
"Contingent liabilities, other information, commitments and guarantees".
Risk related to trade receivables is managed using customer scoring and analysis systems. For specific categories
of trade receivables, the Group also makes use of factoring, mainly on a "non-recourse" basis.
In referring to the details indicated in the Note "Trade and miscellaneous receivables and other current assets",
it should be pointed out that the provision for bad debts is raised on specific credit positions that present peculiar
risk elements. On credit positions that do not have such characteristics, provision are raised by customer segment
according to the average uncollectibility estimated on the basis of statistical indicators.
Financial assets other than trade receivables are written down for impairment on the basis of a general model
which recognizes expected credit losses over the following 12 months, or over the residual life of the asset in the
event of a substantial increase in its credit risk. The expected credit loss is calculated based on the default
probability and the percentage of credit that cannot be recovered in the event of a default (the loss given default).
The model adopted to calculate the expected credit loss is based on the Bloomberg Credit Risk Model, a model
developed by Bloomberg which, starting from Merton's distance-to-default (“DD”) concept, estimates the
probability of default together with the recovery rate. At the same time, the loss given default is defined as the
non-recoverable component of the post-default financial asset.
In particular, the DD - based on balance sheet data - is enriched with a series of additional information by country
(macroeconomic, risk), business sector and individual company, as well as accounting adjustments aimed at
ensuring uniformity of the model's outputs; finally, through a non-linear function of the DD, the default
probability is obtained.
As regards the current COVID-19 pandemic, use of the Bloomberg Credit Risk Model, which, as mentioned, also
takes into account the political and economic situation of the various Countries in the short and medium/long-
term (from 3 months to 5 years), ensures that all risk components are adequately reflected in the measurement
of the credit risk.
In order to improve credit risk and reduce pressure on working capital, in February 2020, the corporate joint
venture TIM-SCB JV S.p.A. was established, with an investment of 51% by Santander Consumer Bank (SCB) and
49% by TIM. The partnership with SCB aims to develop and distribute financial products to finance the purchase
by TIM customers of products relative to the world of telecommunications and the transfer without recourse of
trade receivables .
On November 3, 2020, the new corporate entity received authorization from the Bank of Italy to grant loans to
the public in accordance with Article 106 et seq. of the Consolidated Banking Act (TUB). In the last few months
of 2020 and early 2021, various corporate steps were completed, including the change in the company name
from TIM-SCB JV S.p.A. to TIMFin S.p.A.
Moreover, again for the credit risk relating to the asset components which contribute to the determination of Net
financial debt, it should be noted that, as per Group policy, the management of the liquidity of TIM S.p.A. is guided
by conservative criteria and is principally based on money market management. As part of this management,
investments are made during the year with temporary excess cash resources, which are expected to turn around
within the subsequent 12-month period.
Separate Financial Statements of
TIM S.p.A.
Note 17
Financial risk management
364
In order to limit the risk of non-fulfillment of the obligations undertaken by the counterparty, deposits were made
with banking and financial institutions with a rating no lower than the investment grade and non-negative
outlook. Moreover, deposits are made generally for periods of less than three months.
As concerns the credit risk relating to the current asset components and with particular reference to trade
receivables, the risk is managed on two levels:
■ operational management along the entire process chain, starting from the checks during acquisition and
continuing to the internal management checks of still active customers and the subsequent service
interruption stages, contractual termination and assignment to specific institutions specialized in credit
collection;
■ management of specific securitization programs rather than of non-recurring disposals, most of which non-
recourse in nature.
Liquidity risk
TIM S.p.A. pursues the Group’s objective of achieving an adequate level of financial flexibility.
Current financial assets at December 31, 2020, together with unused committed bank lines, ensure complete
coverage of debt repayment obligations for the next 24 months.
As at December 31, 2020, the liquidity margin available for TIM S.p.A. is 8,466 million euros, with an increase of
2,637 million euros with respect to end 2019 (5,829 million euros). The impact of the COVID-19 pandemic has
not, therefore, entailed any liquidity risk. Furthermore, on January 18, 2021, TIM S.p.A. issued its first 8-year
Sustainability Bond for an amount of 1 billion euros, coupon 1.625%.
12% of gross financial debt at December 31, 2020 (nominal repayment amount) will become due in the next 12
months.
The following tables report the undiscounted contractual cash flows of gross financial debt at nominal
repayment amounts and the interest flows, determined by using conditions and interest/exchange rates at
December 31, 2020. The portions of principal and interest of the hedged liabilities included both the
disbursements and the receipts of the relative hedging derivatives.
Financial liabilities – Maturities of contractually expected disbursements
(million euros)
Convertible bonds
Loans and other financial liabilities
(*)
Liabilities for lease contracts
Non-current financial liabilities (*)
Current financial liabilities (**)
Total Financial Liabilities
maturing by 12/31 of the year:
2022
2024
2023
2025
2021
Principal
Interest portion
Principal
Interest portion
Principal
Interest portion
Principal
Interest portion
Principal
Interest portion
Principal
Interest portion
564 3,101 2,417 3,222 2,000
180
404
462
499
573
1,201 1,368 1,244
254
231
236
245
374
393
437
396
86
116
130
145
2,161 4,906 4,054 3,787 2,947
889
520
751
828
—
—
1,127 —
—
—
— —
3,288 4,906 4,054 3,787 2,947
520
751
828
889
290
174
242
391
101
633
—
—
633
After
2025
Total
3,670 14,974
3,007
1,172
8,273
3,713
3,846
2,638
3,902
1,911
856
278
9,294 27,149
4,088
7,709
1,127
—
—
—
9,294 28,276
7,709
4,088
(*) These include hedging derivatives, but exclude non-hedging derivatives.
(**) These exclude non-hedging derivatives.
Separate Financial Statements of
TIM S.p.A.
Note 17
Financial risk management
365
Derivatives on financial liabilities – Contractually expected interest flows
(million euros)
Disbursements
Receipts
Hedging derivatives – net
disbursements (receipts)
Disbursements
Receipts
Non-Hedging derivatives – net
disbursements (receipts)
Total net receipts
(disbursements)
2021
215
(159)
56
253
(253)
—
56
maturing by 12/31 of the year:
2022
2023
2024
215
(158)
57
252
(252)
—
57
209
(149)
60
253
(253)
—
60
160
(81)
79
254
(254)
—
79
2025
136
(44)
92
252
(252)
—
92
After
2025
Total
1,185
(142)
1,043
2,568
(2,568)
—
1,043
2,120
(733)
1,387
3,832
(3,832)
—
1,387
In order to name the Parent as the sole counterparty of the banking system, all the derivatives of the Group,
except for those relating to two banking counterparties, have been centralized under TIM S.p.A. In the TIM S.p.A.
separate financial statements, this centralization has resulted in the presence of two non-hedging derivatives
for each centralized transaction (one with the bank and the other for the same amount and opposite sign with
the company of the Group), while the hedging relationship remains with the subsidiary and the Group.
The flows relating to the non-hedging derivatives that were placed under centralized management have
therefore been excluded both from the analysis by maturity of contractually expected disbursements for
financial liabilities and from the analysis by maturity of contractually expected interest flows for derivatives,
because the positions are fully netted with one another and, consequently, are not significant for the analysis of
liquidity risk.
Market value of derivative instruments
In order to determine the fair value of derivatives, the TIM Group uses various valuation models. The mark-to-
market calculation is determined by discounting future interest and notional contractual flows at current market
interest and exchange rates.
The notional value of IRS does not represent the amount exchanged between the parties and therefore does not
constitute a measurement of credit risk exposure which, instead, is limited to the amount of the differential
between the interest rates paid/received. The market value of CCIRSs, instead, also depends on the differential
between the reference exchange rate at the date of signing the contract and the exchange rate at the date of
measurement, since CCIRSs imply the exchange of the reference interest and principal, in the respective
currencies of denomination.
The options are measured according to the Black & Scholes or Binomial models and involve the use of various
measurements factors, such as: time horizon of the life of the option, risk-free rate of return, current price,
volatility and any cash flows (e.g. dividends) of the underlying instrument, and exercise price.
Separate Financial Statements of
TIM S.p.A.
Note 17
Financial risk management
366
NOTE 18
DERIVATIVES
Derivative financial instruments are used by TIM S.p.A. to hedge its exposure to foreign exchange rate and
interest rate risks and also to diversify the parameters of debt so that costs and volatility can be reduced to within
predetermined operational limits.
Derivative financial instruments at December 31, 2020 are principally used to manage debt positions. They
include interest rate swaps (IRS) to reduce interest rate exposure on fixed-rate and variable-rate bank loans and
bonds, as well as cross currency and interest rate swaps (CCIRS), and currency forwards to convert the
loans/receivables secured in different foreign currencies to the functional currency.
IRS transactions, at specified maturity dates, provide for the exchange of flows of interest with the
counterparties, calculated on the notional amount, at the agreed fixed or variable rates.
The same also applies to CCIRS, which may predict, in addition to the settlement of periodic interest flows, the
exchange of reference principal in the respective denomination currencies, at maturity and possibly spot.
In carrying out its role as the Treasury function of the Group and with the aim of centralizing all exposures with
banking counterparties in just one entity (i.e. TIM S.p.A.), TIM has derivative contracts signed with banks and
analogous intercompany derivative contracts with Telecom Italia Capital S.A. and Telecom Italia Finance S.A., for
a notional amount of 4,116 million euros. The balance of asset and liability measurements of these contracts is
equal to zero.
Hedging: economic relationship between underlying
instrument and derivatives
The hedge relationships documented in hedge accounting at TIM S.p.A. belong to four categories: i) hedging of
the fair value of bond issues denominated in euro and ii) hedging of the cash flows coming from the income flow
of bond issues denominated in currencies other than euro, iii) hedging of the cash flows coming from the flow
of floating interest on intercompany loans denominated in euro, iv) hedging of the cash flows coming from the
flow of floating interest on intercompany loans denominated in foreign currency.
In the first case, the hedged risk is the fair value of the bond attributable to the interest rates and the hedging
derivatives are IRSs, which allow all or part of the bond's income flow to be received against a floating interest
flow.
The current value of both the underlying and derivative instruments, depends on the structure of the Euro market
interest rates at the basis of the calculation of discount factors and floating interest flows of the derivative. In
particular, interest rate fluctuations translate as changes in the discount factors of the fixed-interest expense
flow on the underlying instrument; on the derivative, changes in the discount factor of interest income will occur,
as well as changes in the nominal flow of variable interest (only partially corrected by the discounting effect).
The effects induced on the derivative are opposite, in accounting terms, to the effects on the underlying
instrument.
In the second case, the hedged risk is represented by the variability in cash flows (and the repayment of the
nominal amount) generated by exchange rates; hedging comprises combinations of IRS and CCIRS that
synthetically transform fixed rate foreign currency income flows into fixed rate euro flows. In this case, exchange
rate fluctuations will usually produce contrary effects on the underlying asset and on the derivative, as the asset
leg of the latter faithfully reflects the underlying asset, while the liability leg is denominated in euro and is
therefore insensitive to the exchange rate.
In the third case, the hedged risk is the variability of the cash flow against the performance of Euro market
interest rates. The hedging is done with IRSs, which allow a variable flow of interest to be collected against the
payment of a fixed rate interest flow. The current value of the underlying asset and derivatives depends on the
structure of the Euro market interest rates. The fluctuations of rates generate an impact on the nominal amount
of the flow of floating rate interest of the loan (only partially corrected by the discounting effect); on the
derivative, there are changes in the discount factors of the flow of fixed interest expense and changes in the
nominal flow of floating interest income (only partially corrected by the discounting effect). The effects induced
on the derivative are of a single and contrary nature with respect to those on the underlying asset.
Separate Financial Statements of
TIM S.p.A.
Note 18
Derivatives
367
In the fourth case, the hedged risk is the variability of cash flows (including the nominal amount to be repaid)
induced by the exchange rate in addition to the market interest rates in foreign currency; the hedging consists
of IRS and CCIRS derivatives which turn the floating rate in foreign currency into a Euro fixed rate. In this case,
exchange rate fluctuations (in addition to fluctuations in the interest rates in foreign currency) will produce
physiologically opposite effects on the underlying asset and on the derivative, because the asset leg of the latter
faithfully reflects the underlying asset, while the liability leg is denominated in euros and is therefore insensitive
to the exchange rate (and to the interest rates in foreign currency). The impacts caused, on the other hand, by
the Euro interest rates on the liability leg of the derivative are restricted to just discounting.
HEDGING: DETERMINATION OF THE HEDGE RATIO
The types of hedging adopted by the Group require a hedge ratio equal to 1:1, as the types of risk hedged (interest
rate and exchange risks) are such as to generate economic effects on the underlying instruments that can only
be offset by the same notional quantities of derivative instruments.
HEDGING: POTENTIAL SOURCES OF INEFFECTIVENESS
The contractualization of derivatives to hedge financial risks takes place at arm's length and aims to completely
neutralize the effects produced by such instruments.
However, in practice, both fair value hedges and cash flows hedges, although financially perfect, may not
guarantee an absolute accounting effectiveness due to the many counterparty banks involved, to the peculiar
nature of certain derivatives in terms, for example, of fixing and/or indexing of variable parameters, and to the
possible imperfect coincidence between critical terms.
The following table indicates total financial derivatives of TIM S.p.A. at December 31, 2020 and 2019; in
compliance with standard IFRS 7, notional amounts are shown with reference to all the derivative instruments
involved in the hedges.
The following tables break down financial derivatives by type of risk for each kind of hedging, separating financial
assets and liabilities. For CCIRS, the notional amount refers to the contractual value in euros; for IRS in a currency
other than the euro, the value is indicated at the market exchange rate.
Type
Hedged risk
Notional
amount at
12/31/2020
Notional
amount at
12/31/2019
(million euros)
(million euros)
Spot Mark-to-
Market (*) (Clean
Price) at
12/31/2020
(million euros)
Spot Mark-to-
Market(*) (Clean
Price) at
12/31/2019
(million euros)
Interest rate risk
Interest rate risk and
currency exchange rate risk
Interest rate swaps
Cross Currency and
Interest Rate Swaps
(CCIRS)
Total Fair Value Hedge Derivatives
Interest rate swaps
Cross Currency and
Interest Rate Swaps
(CCIRS)
Total Cash Flow Hedge Derivatives
Total Non-Hedge Accounting Derivatives
Total TIM derivatives
(*) Spot Mark-to-market above represents the market measurement of the derivative net of the accrued portion of the flow in progress.
192
—
192
(935)
(614)
(1,549)
—
(1,357)
4,334
—
4,334
2,177
2,673
4,850
—
9,184
4,334
—
4,334
2,200
2,673
4,873
—
9,207
Interest rate risk and
currency exchange rate risk
Interest rate risk
152
—
152
(876)
(444)
(1,320)
—
(1,168)
Separate Financial Statements of
TIM S.p.A.
Note 18
Derivatives
368
Fair value hedges
(million euros)
Interest rate swaps
Assets
Liabilities
Cross Currency and Interest Rate
Swaps (CCIRS)
Accounting item
Hedging derivatives relating to
hedged items classified as current
assets/liabilities of a financial nature -
Current/non-current assets.
Hedging derivatives relating to
hedged items classified as current
assets/liabilities of a financial nature -
Current/non-current assets.
Assets
Liabilities
Derivative instruments (spot value)
Accruals
Derivative instruments (gross value)
Underlying instruments (1)
Bonds - Current/non-current liabilities
of which the fair value adjustment Fair value adjustment and
measurements at amortized cost
Ineffectiveness
Fair value adjustment for hedging
settled in advance (2)
Notional
value
Carrying
amount
Change in
fair value
for the
year
a)
b)
4,334
—
a)+b)
4,334
41
—
41
192
192
—
—
—
—
192
24
216
c)
a)+b)+c)
4,334
(4,504)
(38)
3
(186)
(116)
(1)
(2)
Includes the amortized cost value of bonds currently hedged plus the fair value adjustment.
Referred to bonds no longer hedged, which are therefore not presented in the table.
Separate Financial Statements of
TIM S.p.A.
Note 18
Derivatives
369
Cash flow hedges
(million euros)
Accounting item
Notional
value
Carrying
amount
Change in
fair value
Cumulative
fair value
change
Interest rate swaps
Assets
Liabilities
Cross Currency and Interest
Rate Swaps (CCIRS)
Hedging derivatives relating to
hedged items classified as current
assets/liabilities of a financial
nature - Current/non-current
assets.
Hedging derivatives relating to
hedged items classified as current
assets/liabilities of a financial
nature - Current/non-current
assets.
Assets
Liabilities
Derivative instruments (spot
value)
Accruals
Derivative instruments (gross
value)
of which equity reserve gains
and losses
Determination of ineffectiveness
Change in derivatives
Underlying instruments (3)
Ineffectiveness (4)
Positive fair value adjustment of
financial derivatives - non-hedging
Equity reserve
Equity reserve balance
of which due to the fair value
of hedging closed earlier
Reclassification to P&L
Negative reversal of the reserve
for the fair value adjustment of
hedging derivatives (cash flow
hedges)
a)
b)
2,177
2,673
a)+b)
4,850
(935)
48
(983)
(614)
216
(830)
(1,549)
14
(1,535)
(59)
(11)
(48)
(170)
(64)
(106)
(229)
5
c)
d)
c)+d)
(1,098)
1,099
(21)
(1,597)
26
1
(3) Hypothetical derivatives used in measuring the effectiveness of cash flow hedges.
(4) The ineffectiveness, due to its nature and calculation, does not necessarily coincide with the difference in cumulative changes in the fair value of
derivatives and the underlying instrument; the effect due to the adoption of CVA/DVA is not considered.
The transactions hedged by cash flow hedges will generate cash flows and produce economic effects in the
income statement in the periods indicated in the following table:
Denomination
currency
Notional amount
in denomination
currency
(millions)
GBP
YEN
USD
USD
EURO
EURO
(*) Financial asset.
375
20,000
1,000
1,500
794
791
Start of
period
End of
period
Rate applied
Interest
period
5.875%
Jan-21 May-23
Annually
Jan-21 Oct-29 6-month JPY Libor + 0.94625% Semiannually
Jan-21 Nov-33
Quarterly
Jan-21 May-24
5.303% Semiannually
6-month Euribor + 0.8787% Semiannually
Jan-21 Sept-34
6-month Euribor + 1.45969% Semiannually
July-36
Jan-21
3-month USD Libor + 0,756%
Separate Financial Statements of
TIM S.p.A.
Hedging of
rate in euro
Hedging
of
notional
amount in
euro
(millions)
552
174
849
1,099
794
791
5.535%
5.940%
5.994%
4.226%
4.332%
5.884%
Note 18
Derivatives
370
The method selected to test the effectiveness retrospectively and, whenever the principal terms do not fully
coincide, prospectively, for Cash Flow Hedge derivatives, is the Volatility Risk Reduction (VRR) Test. This test
assesses the ratio between the portfolio risk (meaning the derivative and the item hedged) and the risk of the
hedged item taken individually. In essence, the portfolio risk must be significantly lower than the risk of the
hedged item.
Separate Financial Statements of
TIM S.p.A.
Note 18
Derivatives
371
NOTE 19
SUPPLEMENTARY DISCLOSURES ON FINANCIAL
INSTRUMENTS
Measurement at fair value
For the purposes of the comparative information between the carrying amounts and fair value of financial
instruments, required by IFRS 7, the majority of the non-current financial liabilities of TIM consist of bonds, whose
fair value is directly observable in the financial markets, as they are financial instruments that due to their size
and diffusion among investors, are commonly traded on the relevant markets (see the Note "Financial Liabilities
(non-current and current)"). For other types of financing, however, the following assumptions have been made
in determining fair value:
for variable-rate loans, the nominal repayment amount has been assumed;
for fixed-rate loans: fair value has been assumed to be the present value of future cash flows using market
interest rates at December 31, 2020.
Lastly, for the majority of financial assets, their carrying amount is a reasonable approximation of their fair value,
since these are short-term investments that are readily convertible into cash.
The fair value measurement of the financial instruments of TIM is classified according to the three levels set out
in IFRS 7. In particular, the fair value hierarchy introduces the following levels of input:
■ Level 1: prices quoted in active markets;
■ Level 2: prices calculated using observable market inputs;
■ Level 3: prices calculated using inputs that are not based on observable market data.
The following tables contain, for assets and liabilities at December 31, 2020 and December 31, 2019 and in
accordance with the categories established by IFRS 9, the supplementary information on financial instruments
required by IFRS 7 and the schedules of gains and losses.
Key for IFRS 9 categories
Financial assets measured at:
Amortized cost
Fair value through other comprehensive income
Fair value through profit or loss
Financial liabilities measured at:
Amortized cost
Fair value through profit or loss
Hedging Derivatives
Not applicable
Amortized cost
Fair value through other comprehensive
income
Fair value through profit or loss
Amortized cost
Fair value through profit or loss
Hedging Derivatives
Not applicable
Acronym
AC
FVTOCI
FVTPL
AC
FVTPL
HD
n.a.
Separate Financial Statements of
TIM S.p.A.
Note 19
Supplementary disclosures on financial instruments
372
Carrying amount and fair value hierarchy for each category/class of financial asset/liability and comparison
with their fair value at 12/31/2020
(million euros)
IFRS 9
categories
Notes
Carrying
amount at
12/31/2020
Amortized
cost
Fair value
through other
comprehensive
income
Fair value
through
separate
income
statement
fair value
Level 1 Level 2 Level 3 Carrying
amount
under
IFRS 16
Fair Value
at
12/31/2020
Amounts recognized in financial statements Levels of hierarchy or of
ASSETS
Financial assets measured at
amortized cost
Non-current assets
Receivables from
employees
Other financial
receivables
Miscellaneous
receivables from others
(non-current)
Current assets
Receivables from
employees
Other short-term
financial receivables
Cash and cash
equivalents
Trade receivables
Miscellaneous
receivables from others
(current)
Contract assets
Financial assets measured at
fair value through other
comprehensive income
Non-current assets
Other investments
Securities other than
investments
Current assets
Trade receivables:
Securities other than
investments
Financial assets measured at
fair value through profit or
loss
Non-current assets
Non-hedging derivatives
Current assets
Securities other than
investments
Non-hedging derivatives
Hedging Derivatives
Non-current assets
Hedging Derivatives
Current assets
Hedging Derivatives
Financial receivables for
lease contracts
Non-current assets
Current assets
Total
AC
4,954
4,954
—
—
4,954
8)
8)
9)
8)
8)
8)
12)
12)
12)
7)
8)
12)
8)
38
713
16
12
3
38
713
16
12
3
1,766
2,305
1,766
2,305
78
23
—
78
23
30
30
—
—
FVTOCI
30
30
—
—
—
30
16
14
—
FVTPL
1,288
—
—
1,288
1,288
8)
8)
8)
8)
8)
8)
8)
1,239
49
546
500
46
61
17
44
6,879
HD
n.a.
1,239
1,239
49
215
192
23
—
331
308
23
—
—
—
49
500
46
4,954
361
1,503
16 1,834
14
546
61
17
44
61
61
6,879
Separate Financial Statements of
TIM S.p.A.
Note 19
Supplementary disclosures on financial instruments
373
The financial instruments belonging to hierarchy level 3 of fair value are represented by the following Other
investments recognized as Non-current assets, for which directly or indirectly observable prices on the market
are not available:
Banca UBAE
Istituto Europeo di Oncologia
Other minor companies.
Banca UBAE, Istituto Europeo di Oncologia and the other minor companies were measured on the basis of an
analysis, deemed reliable, of their main assets and liabilities.
In 2020, there were no effects on the income statement deriving from the measurement of financial instruments
at fair-value hierarchy level 3.
The profit/(loss) recognized in Other components of the Statements of Comprehensive Income were recognized
within the scope of the Reserve for financial assets measured at fair value through other comprehensive income.
(million euros)
IFRS 9
categories
Notes
Carrying
amount at
12/31/2020
Amounts recognized in financial statements
Fair value
Amortized
cost
Fair value
through other
comprehensive
income
through
separate
income
statement
Levels of hierarchy
or of fair value
Level 1 Level 2 Carrying
amount
under
IFRS 16
Fair Value
at
12/31/2020
LIABILITIES
Financial liabilities
measured at amortized cost
Non-current liabilities
Non-current financial
payables
Current liabilities
Current financial
payables
Trade and
miscellaneous payables
and other current
liabilities
Contract liabilities
Financial liabilities
measured at fair value
through profit or loss
Non-current liabilities
Non-hedging derivatives
Current liabilities
Non-hedging derivatives
Hedging Derivatives
Non-current liabilities
Hedging Derivatives
Current liabilities
Hedging Derivatives
Liabilities for lease contracts
Non-current liabilities
Current liabilities
Total
FLAC/HD
28,386
28,386
25,569
15)
21,388
21,388
15)
3,240
3,240
FLHfT
HD
n.a.
23)
23)
15)
15)
15)
15)
15)
15)
3,641
117
1,288
1,239
49
1,866
1,813
53
3,969
3,506
463
35,509
3,641
117
1,866
1,813
53
28,386
1,866
1,288
1,288
1,239
1,239
49
—
49
1,813
53
1,866
4,240
3,969
3,506
463
1,288 — 3,154 3,969 32,963
Separate Financial Statements of
TIM S.p.A.
Note 19
Supplementary disclosures on financial instruments
374
Carrying amount and fair value hierarchy for each category/class of financial asset/liability and comparison
with their fair value at 12/31/2019
Amounts recognized in financial statements
(million euros)
IFRS 9
Categories
Notes
Carrying
amount at
12/31/2019
Amortized
cost
Fair value
through other
comprehensive
income
Fair value
through
separate
income
statement
Levels of hierarchy or of
fair value
Level 1 Level 2
Level 3 Carrying
amount
under
IFRS 16
Fair Value
at
12/31/2019
ASSETS
Financial assets measured
at amortized cost
Non-current assets
Receivables from
employees
Other financial
receivables
Miscellaneous
receivables from others
(non-current)
Current assets
Receivables from
employees
Other short-term
financial receivables
Cash and cash
equivalents
Trade receivables
Miscellaneous
receivables from others
(current)
Contract assets
Financial assets measured
at fair value through other
comprehensive income
Non-current assets
Other investments
Securities other than
investments
Current assets
Trade receivables:
Securities other than
investments
Financial assets measured
at fair value through profit
or loss
Non-current assets
Non-hedging
derivatives
Current assets
Securities other than
investments
Non-hedging
derivatives
Hedging Derivatives
Non-current assets
Hedging derivatives
Current assets
Hedging derivatives
Financial receivables for
lease contracts
Non-current assets
Current assets
Total
AC
4,010
4,010
—
—
4,010
40
491
2
12
9
829
2,484
112
31
—
8)
8)
9)
8)
8)
8)
12)
12)
12)
7)
8)
12)
8)
40
491
2
12
9
829
2,484
112
31
33
33
—
—
FVTOCI
33
33
—
—
—
33
—
21
12
—
FVTPL
1,325
—
—
1,325
1,325
8)
8)
8)
8)
8)
8)
8)
1,272
53
578
530
48
70
16
54
6,016
HD
n.a.
1,272
1,272
53
174
152
22
—
404
378
26
—
53
530
48
—
—
4,010
437
1,499 — 1,924
12
578
70
16
54
70
70
6,016
Separate Financial Statements of
TIM S.p.A.
Note 19
Supplementary disclosures on financial instruments
375
Amounts recognized in financial statements
(million euros)
IFRS 9
categories
Notes
Carrying
amount at
12/31/2019
Amortized
cost
Fair value
through other
comprehensive
income
Fair value
through
separate
income
statement
Levels of
hierarchy
or of fair value
Level 1 Level 2 Carrying
amount
under
IFRS 16
Fair Value
at
12/31/2019
LIABILITIES
Financial liabilities measured
at amortized cost
Non-current liabilities
Non-current financial
payables
Current liabilities
Current financial
payables
Trade and miscellaneous
payables and other
current liabilities
Contract liabilities
Financial liabilities measured
at fair value through profit or
loss
Non-current liabilities
Non-hedging derivatives
Current liabilities
Non-hedging derivatives
Hedging Derivatives
Non-current liabilities
Hedging derivatives
Current liabilities
Hedging derivatives
Liabilities for lease contracts
Non-current liabilities
Current liabilities
Total
FLAC/HD
30,493
30,493
28,041
15)
15)
23)
23)
15)
15)
15)
15)
15)
15)
FLHfT
HD
n.a.
23,251
23,251
3,681
3,413
148
1,325
1,272
53
1,712
1,659
53
4,668
4,002
666
38,198
3,681
3,413
148
1,325
1,272
53
—
1,272
53
1,659
53
4,668
4,002
666
1,325 — 3,037 4,668
1,325
1,712
5,152
36,230
1,712
1,659
53
30,493
1,712
Gains and losses by IFRS 9 categories - Year 2020
(million euros)
IFRS 9 categories
Net gains/(losses)
2020
of which
interest
Assets measured at amortized cost
Assets and liabilities measured at fair value through profit or
loss
Assets and liabilities measured at fair value recognized in
the statements of comprehensive income
Financial Liabilities at Amortized Cost
Total
AC
FVTPL
FVTOCI
AC
(354)
88
—
(766)
(1,032)
12
—
—
729
741
Gains and losses by IFRS 9 categories - Year 2019
(million euros)
IFRS 9 categories
Net gains/(losses)
2019 (1)
of which
interest
Assets measured at amortized cost
Assets and liabilities measured at fair value through profit or
loss
Assets and liabilities measured at fair value recognized in the
statements of comprehensive income
Financial Liabilities at Amortized Cost
Total
AC
FVTPL
FVTOCI
AC
(423)
(40)
6
(958)
(1,415)
10
(893)
(883)
(1) of which 2 million euros relates to fees and expenses not included in the effective interest rate calculation on financial assets/liabilities other than
those at fair value through profit or loss.
Separate Financial Statements of
TIM S.p.A.
Note 19
Supplementary disclosures on financial instruments
376
NOTE 20
PROVISIONS FOR EMPLOYEE BENEFITS
The item decreased by 631 million euros compared to December 31, 2019. The breakdown and movements are
as follows.
(million euros)
12.31.2018
Increase/
Present value
Decrease
12.31.2019
Provision for employee severance indemnities
Provision for termination benefit incentives and
corporate restructuring
Total
of which:
non-current portion
current portion (*)
847
706
—
1,553
1,502
51
42
236
278
(84)
(401)
(485)
805
541
1,346
1,106
240
(*) The current portion refers to the Provision for termination benefit incentives and corporate restructuring.
(million euros)
12.31.2019
Increase/
Present value
Decrease
12.31.2020
Provision for employee severance indemnities
Provision for termination benefit incentives and
corporate restructuring
Total
of which:
non-current portion
current portion (*)
805
541
1,346
1,106
240
(1)
30
29
(128)
(532)
(660)
676
39
715
676
39
(*) The current portion refers to the Provision for termination benefit incentives and corporate restructuring.
The Provision for employee severance indemnities is down 129 million on December 31, 2019.
"Increases/ Present value" totaled -1 million euros and break down as follows
(million euros)
2020
2019
(Positive)/negative effect of curtailment
Finance expenses
Net actuarial (gains) losses recognized during the year
Total expenses (income)
Effective return on plan assets
(1)
6
(6)
(1)
(8)
10
40
42
there are no assets servicing the
plan
The positive impact of the curtailment, amounting to 1 million euros, was linked to advances made in respect of
the previous actuarial processing.
The net actuarial gains recognized at December 31, 2020 amounted to 6 million euros (net actuarial losses of 40
million euros in 2019), are essentially connected with the inflation rate forecast, which went from 1.2% at
December 31, 2019 to 0.8% at December 31, 2020; the discount rate also changed, going from the 0.77% used at
December 31, 2019 to 0.34% at December 31, 2020.
According to Italian law, the amount to which each employee is entitled depends on the period of service and
must be paid when the employee leaves the company. The amount of severance indemnity due upon
Separate Financial Statements of
TIM S.p.A.
Note 20
Provisions for employee benefits
377
termination of employment is calculated on the basis of the period of employment and the taxable
compensation of each employee. This liability is adjusted annually based on the official cost-of-living index and
legally-set interest. The liability is not associated with any vesting condition or period or any funding obligation;
accordingly, there are no assets servicing the provision. The liability is recognized net of the partial prepayments
of the provision and payments of the amounts obtained by employees for the reasons permitted by the
applicable regulations.
In accordance with IAS 19, this provision has been recognized as a “Defined benefit plan”, for the amounts due
up to December 31, 2020.
Under the regulations introduced by Italian Legislative Decree 252/2005 and Law 296/2006 (the State Budget
Law 2007), the severance indemnities accruing from 2008 are assigned to either the INPS Treasury Fund or to
supplementary pension funds and take the form of a "Defined contribution plan". However, revaluations of the
provision for the employee severance indemnities at December 31, 2006, made on the basis of the official cost-
of-living index and legally-prescribed interest, are retained in the provision for employee severance indemnities.
In application of IAS 19, the employee severance indemnities have been calculated using the "Projected Unit
Credit Method" according to which:
■
the future possible benefits which could be paid to each employee registered in the program in the event of
retirement, death, disability, resignation etc. have been projected on the basis of a series of financial
assumptions (cost-of-living increases, interest rate, increase in compensation etc.);
■
■
the average present value of future benefits has been calculated, at the measurement date, on the basis of
the annual interest rate adopted and of the probability that each benefit actually has to be paid;
the liability has been calculated as the average present value of future benefits that will be generated by the
existing provision at the measurement date, without considering any future accruals.
The following assumptions have been made:
FINANCIAL ASSUMPTIONS
Executives
Non-executives
Inflation rate
Discount rate
Employee severance indemnities annual increase rate
0.80% per annum
0.34% per annum
2.10% per annum
0.80% per annum
0.34% per annum
2.10% per annum
Annual real wage growth:
equal to or less than 40 years of age
over 40 but equal to or less than 55 years of age
over 55 years of age
1.0% per annum
0.5% per annum
0.0% per annum
1.0% per annum
0.5% per annum
0.0% per annum
DEMOGRAPHIC ASSUMPTIONS
Probability of death
Probability of disability
Probability of resignation:
up to 40 years of age
From 41 to 50 years of age
From 51 to 59 years of age
From 60 to 64 years of age
Over 65 years of age
Probability of retirement
Probability of receiving at the beginning of the year an advance
from the provision for severance indemnities accrued equal to 70%
Executives
Non-executives
RG mortality tables
48 published
by Ragioneria
Generale dello Stato
INPS tables divided by age
and sex
RG mortality tables
48 published
by Ragioneria
Generale dello Stato
INPS tables divided by age
and sex
2.00%
2.00%
1.00%
None
None
1.00%
0.50%
0.50%
0.50%
None
100% om achievement of the AGO requirements aligned
with D.L. 4/2019
1.5%
per annum
1.5%
per annum
The application of the above assumptions resulted in a liability for employee severance indemnities of 676 million
euros at December 31, 2020 (805 million euros at December 31, 2019).
Separate Financial Statements of
TIM S.p.A.
Note 20
Provisions for employee benefits
378
Reported below is a sensitivity analysis for each significant actuarial assumption adopted to calculate the liability
as at year end, showing how the liability would have been affected by changes in the relevant actuarial
assumptions that were reasonably possible at that date, stated in amounts.
The weighted average duration of the obligation is 10.2 years.
CHANGES IN ASSUMPTIONS
Turnover rate:
+ 0.25 p.p.
0.25 p.p.
Annual inflation rate:
+ 0.25 p.p.
0.25 p.p.
Annual discount rate:
+ 0.25 p.p.
0.25 p.p.
Amounts
(million euros)
(2)
2
12
(12)
16
(16)
The Provision for termination benefit incentives and corporate restructuring decreased in total by 502 million
euros, mainly as a result of redundancies and the reclassification to payables of amounts not yet paid, relating
to plans already set aside in previous years (532 million euros). The increases, amounting to 30 million euros,
were connected to the review of the estimate and effective date of the of the Company envisaged for 2020
(including through application of Article 4 of Italian Law 92 of June 28, 2012, as defined by the latest Trade Union
Agreement of February 26, 2019).
Separate Financial Statements of
TIM S.p.A.
Note 20
Provisions for employee benefits
379
NOTE 21
PROVISIONS FOR RISKS AND CHARGES
These decreased by 104 million euros compared to December 31, 2019. The breakdown and movements are as
follows:
(million euros)
12.31.2019
Increase
Taken to
income
Used
directly
Reclassifications
/ other changes
12.31.2020
Provision for taxation and tax
risks
Provision for restoration costs
Provision for legal disputes
Provision for commercial risks
Provision for risks and charges
on investments and corporate-
related transactions
Other provisions
Total
of which:
non-current portion
current portion
7
250
756
24
34
23
1,094
528
566
18
29
1
48
(1)
(1)
(6)
(123)
(5)
(23)
(158)
(1)
(3)
6
4
6
(6)
7
2
268
666
25
28
1
990
618
372
The non-current portion of provisions for risks and charges mainly relates to the provision for restoration costs
and some of the provision for legal disputes. More specifically, in accordance with accounting standards, the total
amount of the provision for restoration costs is calculated by re-measuring the amounts for which a probable
outlay is envisaged, based on the estimated inflation rates for the individual due dates, and subsequently
discounted to the reporting date based on the average cost of debt, taking into account cash outflow forecasts.
The provision for taxation and tax risks decreased by 5 million euros compared to December 31, 2019.
The provision for restoration costs related to the provision for restoration of leased real estate and sites used
for mobile telephony and the dismantling of tangible assets (batteries, wooden poles). This provision increased
by 18 million euros compared to December 31, 2019.
The provision for legal disputes decreased by 90 million euros compared to December 31, 2019; the figure
includes provisions for disputes with employees (56 million euros) and third parties (610 million euros).
The Provision for commercial risks increased by 1 million euros compared to December 31, 2019.
The Provision for risks and charges on investments and corporate-related transactions decreased by 6 million
euros compared to December 31, 2019.
Other provisions for risks and charges decreased by 22 million euros compared to December 31, 2019.
Separate Financial Statements of
TIM S.p.A.
Note 21
Provisions for risks and charges
380
NOTE 22
MISCELLANEOUS PAYABLES AND OTHER NON-
CURRENT LIABILITIES
Miscellaneous payables and other non-current liabilities consisted of the following at December 31, 2020:
(million euros)
Miscellaneous payables (non-current)
Payables to social security agencies
Payables due to subsidiaries
Other payables to third parties
Other non-current liabilities
Deferred revenues from customer contracts (Contract liabilities)
Other deferred revenue and income
Capital grants
Total
Miscellaneous non-current payables
12.31.2020
12.31.2019
480
4
2,202
2,686
104
392
295
791
3,477
363
11
1,814
2,188
92
374
319
785
2,973
(a)
(b)
(a+b)
This item rose by 498 million euros compared to December 31, 2019 and mainly includes:
■ Payables to social security agencies amounted to 480 million euros (363 million euros at December 31,
2019): related to the remaining amount due to the INPS for the application of the 2015 arrangements and
those subsequently signed in 2018 and 2019, relating to Article 4 paragraphs 1-7ter, of Italian Law 92 of June
28, 2012 (see the Note “Employee benefits expenses” for more details).
Details are as follows:
(million euros)
Non-current payables
Due from 2 to 5 years after the end of the reporting period
Due beyond 5 years after the end of the reporting period
12.31.2020
12.31.2019
473
7
480
290
770
354
9
363
209
572
Current payables
Total
■ Payables to subsidiaries amounted to 4 million euros (11 million euros at December 31, 2019): this item
relates to the payables due for the adoption of the consolidated tax return in Italy;
■ Other payables to third parties totaling 2,202 million euros (1,814 million euros at December 31, 2019). The
item refers to the non-current portion, equal to 1,738 million euros (55 million euros recognized as current
payables) for the purchase - which took place in 2018 - of the rights-of-use for the frequencies in the 694-
790 MHz, 3600-3800 MHz and 26.5-27.5 GHz bands, to be allocated on 5G mobile communication services. It
also includes 461 million euros relative to two installments of substitute tax to be paid in accordance with
Decree Law 104/2020, Art. 110, paragraphs 8 and 8bis.
Separate Financial Statements of
TIM S.p.A.
Note 22
Miscellaneous payables and other non-current liabilities
381
Other non-current liabilities
The item amounted to 791 million euros and rose by 6 million euros compared to December 31, 2019; it included:
■ Deferred revenues from contracts with customers (contract liabilities) of 104 million euros (92 million
euros at December 31, 2019): the item is reversed to the income statement according to the duration of the
contractual obligations between the parties, averaging 24 months; therefore, the balance as at December
31, 2020 will be reversed to the income statement generally by 2022. The item mainly includes:
▪ deferred revenues on activation and installation of new contracts with customers of 8 million euros (8
million euros at December 31, 2019): in this regard, it is noted that under IFRS 15 activation/installment
revenues are allocated to other contract obligations and recognized throughout the period of
performance of the contract, as they do not relate to separate performance obligations.
▪ deferred revenues for subscription charges of access to the network of 28 million euros;
▪ deferred revenues for subscription charges and rent and maintenance fees of 64 million euros.
■ Other deferred revenues and income, amounting to 392 million euros (374 million euros at December 31,
2019): these refer to contract liabilities deriving from contracts for the sale of transmission capacity
(operating asset leases);
■ Capital grants, amounting to 295 million euros (319 million euros at December 31, 2019): the item represents
the component still to be recognized to the income statement based on the remaining useful life (estimated
at around 18 years) of the assets that the grants refer to and is mainly connected to the development of the
infrastructures on the Ultra-Broadband-UBB and Broadband-BB projects.
Separate Financial Statements of
TIM S.p.A.
Note 22
Miscellaneous payables and other non-current liabilities
382
NOTE 23
TRADE AND MISCELLANEOUS PAYABLES AND
OTHER CURRENT LIABILITIES
Trade and miscellaneous payables and other current liabilities at December 31, 2020 consisted of the following:
(million euros)
12.31.2020 of which Financial
Instruments
12.31.2019 of which Financial
Instruments
Trade payables
Payables due to suppliers
Payables to other telecommunication
operators
Payables to subsidiaries
Payables to associates and joint
ventures
Payables to other related parties
Miscellaneous payables
Payables to subsidiaries
Payables to associates and joint
ventures
Payables to other related parties
Tax payables
Payables to social security agencies
Payables for employee compensation
Other
Employee benefits (except for
employee severance indemnities) for
the current portion expected to be
settled within 1 year
Provisions for risks and charges for the
current portion expected to be settled
within 1 year
Other current liabilities
Liabilities from customer contracts
(Contract liabilities)
Other deferred revenue and income
Other
Total
(a)
(b)
(c)
(a+b+c)
2,687
374
280
102
35
3,478
42
—
61
109
341
118
260
39
372
1,342
711
58
21
790
5,610
2,687
374
280
102
35
3,478
—
163
163
117
117
3,758
2,678
302
250
3
30
3,263
—
49
21
97
285
142
304
240
566
1,703
20
789
68
877
5,843
2,678
302
250
3
30
3,263
—
150
150
148
148
3,561
Further details on Financial Instruments are provided in the Note "Supplementary disclosures on financial
instruments".
Trade payables
This item increased by 215 million euros compared to December 31, 2019, mainly as a result of the change in bills
payable. In particular, we report:
■
trade payables to subsidiaries that amounted to 280 million euros: these relate to amounts due to Telecom
Italia Sparkle (82 million euros) for telecommunications services, Telenergia (68 million euros), Flash Fiber
(42 million euros), Olivetti (37 million euros), TIM Retail (20 million euros), Telecontact (13 million euros),
Telecom Italia Trust Technologies (9 million euros) and Telsy (7 million euros) for supply contracts;
Separate Financial Statements of
TIM S.p.A.
Note 23
Trade and miscellaneous payables and other current liabilities
383
■
■
trade payables to associates that amounted to 102 million euros: relate to debt positions mainly due from
INWIT S.p.A. (99 million euros), which has become an associate.
trade payables to related parties that amounted to 35 million euros: relate mainly to amounts due to the
Havas group.
Miscellaneous payables
Amounted to 1,342 million euros and increased by 361 million euros compared to December 31, 2019. They
mainly include:
■
tax payables, amounting to 109 million euros: these mainly refer to VAT payable (24 million euros),
withholding tax payable to the tax authorities as withholding agent (72 million euros) and government
concession tax payable (7 million euros).
■ payables to social security agencies: include the short-term portion of the amount due to INPS for the
application of the 2015 and subsequent agreements signed in 2018, in 2019 and in 2020, relating to article 4,
paragraphs 1-7ter, of Italian Law 92 of June 28, 2012, as described in the Note “Miscellaneous payables and
other non-current liabilities”;
■ payables to subsidiaries include 10 million euros for tax consolidation (mainly due to Olivetti, Telecom Italia
Sparkle and Flash Fiber);
■
the other payables include payables for government and European Union grants;
■ provisions for employee benefits and provisions for risks and charges.
Other current liabilities
The item, amounting to 790 million euros, fell by 87 million euros compared to December 31, 2019 and consisted
of:
■ The liability arising from contracts with customers (contract liabilities), amounting to 711 million euros
(789 million euros at December 31, 2019): The item shows the liabilities from customers linked to the
Company’s obligations to transfer goods and services for which received a price. Liabilities with customers,
generally with a maturity of up to 12 months, are shown below; therefore, the figure at December 31, 2020
will be substantially reversed by December 31, 2021. In particular:
• Contract Liabilities amounting to 17 million euros (53 million euros at December 31, 2019): the item
includes bundle contracts (good and services packages) with performance obligations with different
timing for the recognition of revenues and consequent deferral of the fees originally recognized. The
decrease recognized in 2020 (-36 million euros) was mainly linked to the launch of commercial offers
that no longer require a fixed duration and the reversal to the income statement of the balance
previously accumulated;
• Customer-related items of 351 million euros (356 million euros at December 31, 2019): the item includes
trade payables following contractual relationships, such as the payable for prepaid traffic and the
subscription charges charged in advance;
• Advance receipts and payments amounting to 80 million euros (100 million euros at December 31,
2019): the item includes trade payables following prepayments, such as deposits made by subscribers
for phone calls;
• Deferred revenues from contracts with customers of 263 million euros (280 million euros at December
31, 2019): the item refers to the deferral of revenues from customers contracts and mainly includes:
– deferred revenues on activation and installation of new contracts with customers (10 million euros);
– deferred revenues for interconnection charges (119 million euros);
– deferred revenues for rent and maintenance (109 million euros).
■ Other deferred revenues and proceeds amounted to 58 million euros (68 million euros at December 31, 2019):
related for 48 million euros to deferred revenues from transmission capacity transfer contracts and for 10
million euros to deferred revenues from real estate lease contracts (income from operating leases).
Separate Financial Statements of
TIM S.p.A.
Note 23
Trade and miscellaneous payables and other current liabilities
384
NOTE 24
DISPUTES AND PENDING LEGAL ACTIONS,
OTHER INFORMATION, COMMITMENTS AND
GUARANTEES
A description is provided below of the most significant judicial, arbitration and tax disputes in which TIM S.p.A.
was involved at December 31, 2020, as well as those that came to an end during the year.
TIM S.p.A. has posted liabilities totaling 511 million euros for those disputes described below where the risk of
losing the case has been considered probable.
It should be noted that for some disputes described below, on the basis of the information available at the closing
date of the present document and with particular reference to the complexity of the proceedings, to their
progress, and to elements of uncertainty of a technical-trial nature, it was not possible to make a reliable
estimate of the size and/or times of possible payments, if any. Moreover, in those cases in which disclosure of
information on a dispute could seriously jeopardize the position of TIM or its subsidiaries, only the general nature
of the dispute is described.
Lastly, as regards proceedings with the Antitrust Authority, please note that based on Article 15, paragraph 1 of
Law 287/1990 (“Antitrust regulations”), the Authority has the right to impose an administrative sanction
calculated on the turnover of the Group in cases of breaches considered serious.
a) Significant disputes and pending legal actions
Administrative offence charge pursuant to Legislative Decree 231/2001
for the TIM Security Affair
In December 2008 TIM received notification of the application for its committal for trial for the administrative
offence specified in articles 21 and 25, subsections 2 and 4, of legislative decree no. 231/2001 in relation to the
affairs that involved several former employees of the Security function and former collaborators of the Company
charged – among other things – with offences involving corruption of public officials, with the object of acquiring
information from confidential files. In May 2010 TIM definitively ceased to be a defendant in the criminal trial,
the Judge for the Preliminary Hearing having approved the motion for settlement of the proceedings (plea
bargaining) presented by the Company. In the hearing before Section One of the Milan Court of Assizes, TIM acted
in the dual role of civil party and civilly liable party. In fact, on the one hand it was admitted as civil party against
all the defendants for all charges, and on the other it was also cited as the party with civil liability pursuant to
article 2049 of the Italian Civil Code for the actions of the defendants in relation to 32 civil parties. Telecom Italia
Latam and Telecom Italia Audit and Compliance Services (now incorporated into TIM) also participated in the
hearing as civil parties, having filed appearances since the Preliminary Hearing and brought charges against the
defendants for hacking. After the lengthy evidence hearings, 22 civil parties filed claims for compensation, also
against TIM as civilly liable party, for over 60 million euros (over 42 million euros of which requested by a single
civil party). The Company itself, as civil party, also summarized its conclusions against the defendants, requesting
that they be found liable for all the damages suffered as a result of the facts of the case. In February 2013, Section
1 of the Milan Court of Assizes issued the first instance judgement, sentencing the defendants to terms of
imprisonment of between 7 years and 6 months and one year. The Court also recognized that there had been
non-pecuniary damage to some of the civil parties as a consequence of the alleged facts, and sentenced the
defendants, jointly and severally with civilly liable party TIM, to compensate said damages, totaling 270,000
euros (in part jointly and severally with Pirelli) plus legal fees; at the same time the Court also sentenced the
defendants to pay compensation for pecuniary and non-pecuniary damages incurred by the Company, granting
it a provisional sum of 10 million euros. The judgement also recognized the existence of non-pecuniary damage
to the companies Telecom Italia Latam and Telecom Italia Audit & Compliance Services, sentencing the
defendants to pay compensation for damages on an equitable basis of 20,000 euros for each company. In
November 2013 the grounds for the judgment in the first instance were published (which, for its part, the
Company decided not to contest). At the end of the appeal, which was brought by the convicted defendants,
the judgement in the first instance was partly reversed. The appeal judge acknowledged that the time-limit had
expired on the majority of the charges and made an order not to proceed against the defendants who had been
convicted in the lower court, with the exception of two former private investigators, who were found guilty of
the offense of revealing information which was subject to a prohibition on disclosure. As for the civil judgements,
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
385
the Court revoked those made by the judge of first instance and ruled in favor of three ministries, AGCM and the
Revenues Agency. The Court also decided to revoke the provisional sum of 10 million euros awarded to the
Company as civil party at the end of the proceedings in the court of first instance, making a generic ruling that
the defendants should pay compensatory civil damages. Finally, the appeal judge also rejected all the demands
for compensation advanced in the appeals by certain civil parties for a total of about 60 million euros, in respect
of which the Company has the role of party liable for damages. At the end of the appeal, therefore, the civil
rulings settled in the first instance were confirmed which TIM, as the party liable for damages, had already paid
to the damaged requesting parties. The three defendants brought an appeal to the Court of Cassation against
the judgement of the second instance issued by the Milan Appeal Court of Assizes. In April 2018 the Supreme
Court confirmed the convictions of the defendants and canceled the civil rulings, referring the issue generically
to the civil court, for a more careful assessment of the claims made, above all concerning the quantum of
evidence. It also canceled and referred the confiscation in favor of the State, which will have to be reassessed by
a different section of the Milan Crown Court of Appeal under the scope of proceedings not involving the Company.
Golden Power Case
In August 2017 the Prime Minister's office brought proceedings against TIM (as well as Vivendi) in order to verify
the fact that TIM has an obligation to notify, pursuant to the Golden Power law, Vivendi’s acquisition of corporate
control of TIM and the strategic assets it holds. In September 2017, the proceedings in question concluded by
affirming that this obligation did exist for TIM with effect from May 4, 2017 (the date of the Shareholders’ Meeting
that renewed TIM’s corporate bodies).
As a result of this decision by the Presidency of the Council of Ministers, new and separate administrative
proceedings started for the imposition on TIM of a financial penalty laid down by the Golden Power law for non-
compliance with the aforementioned obligation to notify. These proceedings ended on May 8, 2018 with the
imposition of a financial penalty of 74.3 million euros.
The Company, is convinced that it has the legal arguments to demonstrate that it was under no obligation to
notify the control exercised over it by Vivendi, filed separate extraordinary appeals to the President of the
Republic to request the abrogation of the order of September 2017 and before the Lazio Regional Administrative
Court (TAR) against the aforementioned order of May 8, 2018, which imposed a financial penalty, requesting its
precautionary suspension. In relation to the appeal to the Lazio TAR against the aforementioned provision of May
8, 2018, which imposed the financial penalty, the Court, after granting, in July 2018, the application of the
Company and thereby suspending payment of the fine, subsequently rejected, with the provisional ruling of May
2019, the exception of inadmissibility of the appeal on the sanction of 74.3 million euros; suspended the ruling
preliminarily with respect to the extraordinary appeal concerning the obligation of notification pursuant to the
Golden Power rules, and further suspended the execution of the challenged measure.
It should also be noted that in May 2018 a guarantee bond for 74.3 million euros was issued in favor of the
Presidency of the Council, requested for the submission by TIM before the Lazio TAR of the request for a
precautionary suspension of the collection of the fine imposed for alleged breach of Article 2 of Decree Law no.
21 of March 15, 2012 (the "Golden Power" law).
Furthermore, TIM appealed before the Lazio TAR and then appealed before the Council of State against the
provision with which Consob, on September 13, 2017, affirmed Vivendi's control over TIM.
In December 2020, the Council of State issued a final judgment upholding TIM’s appeal and canceling the
provision by Consob, a significant premise to the entire subsequent proceedings of the Presidency of the Council
in relation to the obligation to Golden Power notification as described above.
On the other hand, the President of the Council of Ministers exercised the special powers prescribed in the Golden
Power law through two specific measures in October and November 2017, with which it imposed specific
prescriptions and conditions on TIM S.p.A. and on the companies of the Telecom Italia Sparkle group and Telsy
Elettronica e Telecomunicazioni (now Telsy S.p.A.).
The prescriptions, according to the Administrative Authority, are essentially connected to the circumstance that
these companies, in part, perform activities that are relevant for national security and as far as TIM is concerned
to the circumstance that it also owns the infrastructure and the systems used to provide access to end-users of
services covered by the universal service obligation.
Any failure on the part of the recipients of the measures to execute said conditions and prescriptions is penalized
in the same way as failure to notify significant deeds for the purpose of the application of the so-called Golden
Power.
The companies subject to the prescriptions are required to send periodic reports to a special Monitoring
Committee established at the office of the Prime Minister in order to verify compliance with the aforementioned
prescriptions.
In December 2017 the Group sent to the Presidency of the Council of Ministers the first compliance report
outlining all the proposals and activities put in place to carry out the prescriptions. This report is then followed
by interim reports, as required by the applicable legislation.
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
386
Nevertheless, also for this case TIM has already filed two extraordinary appeals to the President of the Republic
to request the cancellation (i) of the imposition of the measures pursuant to Art. 1 of Law Decree no 21/2012 and
(i) the imposition of measures pursuant to Art. 1 of Law Decree no. 21/2012.
As stated, the assumption for exercising special powers was (erroneously, according to the Company) referred
to the de facto control resulting from the outcome of the Shareholders’ Meeting of May 4, 2017 and to the
direction and coordination of TIM by Vivendi. Both these circumstances no longer apply, since: at the
Shareholders' Meeting of May 4, 2018, the slate presented by the shareholders Elliott International LP, Elliott
Associates LP and The Liverpool Limited Partnership received the majority vote; the Board of Directors was re-
appointed with 13 independent directors out of a total of 15, with only 5 from the slate presented by Vivendi;
thus, Vivendi no longer has direction and coordination, nor is there de facto control.
In consequence, the Company has asked the Presidency of the Council of Ministers to repeal the two Decrees,
while, in the alternative, expressing its willingness to collaborate in the redrafting of the prescriptions applied to
TIM, to take account of the changed situation.
The Presidency of the Council of Ministers, in a decree issued on July 6, 2018, deemed that it could not further
exercise its special powers, reaffirming the validity of the two Decrees it had previously issued, and rejected the
application for their repeal.
The justification for this refusal is the purported circumstance that the new governance arrangements of the
Company are alleged to be currently characterized by extreme variability; this, it is argued, means that the
measures through which the special powers have been exercised cannot be surmounted, given the need to
protect the public interest in the security and operation of the networks.
Consequently, the Company lodged an appeal with additional reasons as part of the appeals already lodged
against the Prime Minister's decrees of October 16 and November 2, 2017 and against the Prime Minister's
resolution of July 6, 2018, rejecting the appeal for revocation presented by the Company on the outcome of the
changed situation in corporate governance. With a non-final ruling published in May 2019, the Lazio TAR: (i)
accepted TIM's request for provisional measures to suspend the fine conditional on the offer of the guarantee;
(ii) granted the suspension of the procedure in order to wait for the final judgment in the (injurious) case pending
before the President of the Republic regarding the notification obligation, pursuant to the Golden Power
provisions; (iii) rejected the request to close the case.
Italian Competition Authority Case A428
At the conclusion of case A428, in May 2013, Italian Competition Authority AGCM imposed two administrative
sanctions of 88,182,000 euros and 15,612,000 euros on TIM for abuse of its dominant position. The Company
allegedly (i) hindered or delayed activation of access services requested by OLOs through unjustified and
spurious refusals; (ii) offered its access services to final customers at economic and technical conditions that
allegedly could not be matched by competitors purchasing wholesale access services from TIM itself, only in
those geographic areas of the Country where disaggregated access services to the local network are available,
and hence where other operators can compete more effectively with the Company.
TIM appealed against the decision before the Regional Administrative Court (TAR) for Lazio, applying for payment
of the fine to be suspended. In particular, it alleged: infringement of its rights to defend itself in the proceedings,
the circumstance that the organizational choices challenged by AGCM and allegedly at the base of the abuse of
the OLO provisioning processes had been the subject of specific rulings made by the industry regulator (AGCom),
the circumstance that the comparative examination of the internal/external provisioning processes had in fact
shown better results for the OLOs than for the TIM retail department (hence the lack of any form of inequality
of treatment and/or opportunistic behavior by TIM), and (regarding the second abuse) the fact that the conduct
was structurally unsuitable to reduce the margins of the OLOs.
In May 2014, the judgement of the Lazio TAR was published, rejecting TIM's appeal and confirming the fines
imposed in the original order challenged. In September 2014 the Company appealed against this decision.
In May 2015, with the judgement no. 2497/15, the Council of State found the decision of the court of first instance
did not present the deficiencies alleged by TIM and confirmed the AGCM ruling. The company had already
proceeded to pay the fines and the accrued interest.
In a decision notified in July 2015, AGCM started proceedings for non-compliance against TIM, to ascertain if the
Company had respected the notice to comply requiring it to refrain from undertaking behaviors analogous to
those that were the object of the breach ascertained with the concluding decision in case A428 dated May 2013.
On January 13, 2017, TIM was served notice of AGCM’s final assessment, which recognized that TIM had complied
in full with the A428 decision and, as such, the conditions for the imposition of a fine for non-compliance were
not present.
AGCM recognizes, furthermore, that TIM's behavior subsequently to the 2013 proceedings has been directed
towards continuous improvement of its performance in the supply of wholesale access services concerning not
only the services which were the subject of the investigation, but also the new super-fast broadband access
services. In assessing compliance, AGCM recognized the positive impact of the implementation, albeit not yet
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
387
completed, of TIM's New Equivalence Model (NME). The AGCM decision orders TIM to: (i) proceed with the
implementation of the NME until its completion which is expected to be by April 30, 2017; (ii) to inform the
Authority about the performance levels of the systems for providing wholesale access services and about the
completion of the corresponding internal reorganization plan by the end of May 2017. The Company quickly
complied with both orders, and AGCOM communicated its satisfaction on August 9, 2017.
Vodafone lodged an appeal with the Lazio Regional Administrative Court against the final decision in the
proceedings for non-compliance taken by AGCM. TIM filed an appearance, as in the other lawsuits filed in March
2017 by the operators CloudItalia, KPNQWest Italia and Digitel.
Vodafone (A428)
In August 2013, Vodafone, as incorporating company of operator Teletu, submitted to the Milan Court a huge
claim for damages for presumed abusive and anticompetitive behavior (founded principally on ICA case A428)
which TIM allegedly implemented in the period 2008 - 2013. The pecuniary claim was quantified by Vodafone as
an estimated sum of between 876 million euros and 1,029 million euros.
In particular, Vodafone alleged technical boycotting activities, with refusal to activate lines requested for Teletu
customers (in the period from 2008 to the month of June 2013), together with the adoption of allegedly abusive
price policies for wholesale network access services (period from 2008 to the month of June 2013). Furthermore,
the other party complained of the presumed application of discounts to business customers greater than those
envisaged ("margin squeezing") and the carrying out of presumed illegal and anticompetitive winback practices
(in the period from the second half of 2012 to the month of June 2013).
TIM filed an appearance, challenging the claims made by the other party regarding the merits and the amount
and making a counterclaim. Following the August 2016 decision by the Court of Cassation which confirmed that
the Milan Court had jurisdiction to decide the dispute, the merits of the case will be decided at the hearing in
December 2016.
With writ of summons before the Milan Court served in May 28, 2015, Vodafone filed additional damages claims,
all based on the same AGCM A428 decision and referring to alleged damages suffered between July 2013 and
December 2014 (and hence over a period subsequent to that of the damages claim reported above), for a total
amount of around 568.5 million euros.
The case also contains a reservation of further damages to be quantified, during the proceedings, for the
following periods, the claimant alleging that the presumed abusive conduct of TIM continued. TIM filed an
appearance, challenging the claims made by the other party regarding the merits and the amount and making
a counterclaim.
By order of October 6, 2016, the judge received Vodafone’s application for the two A428 lawsuits brought by it to
be joined. At the end of the reinstatement proceedings of 21 December, the terms were established for the
preliminary briefs and a hearing was fixed for July 11, 2017 for the admission of evidence. When the first
preliminary brief was filed, following the favorable outcome for TIM of proceedings A428-C (which confirmed the
absence of improper conduct by the Company under A428 after 2011), Vodafone decided nonetheless to file
further claims for 2015-2016, thus restating its total claim to be 1,812 million euros, which was also disputed and
rebutted by TIM.
Colt Technology Services
With writ of summons before the Milan Court served in August 2015, the operator Colt Technology Services filed
a damages claim based on the A428 decision, requesting compensation for alleged damages suffered from 2009
to 2011 as a result of purportedly inefficient and discriminatory conduct by TIM in the wholesale service supply
process. The damage claimed was quantified as 27 million euros in loss of profits for the alleged non-acquisition
of new customers, or for the alleged impossibility of supplying new services to the customers it had already
acquired; the other party also formulated a request for compensation for the damages to its image and
commercial reputation. This case follows the extrajudicial claim for approximately 23 million euros, previously
advanced by Colt in June 2015, which the Company rejected in its entirety. TIM filed an appearance, contesting
all of the plaintiff’s allegations.
COMM 3000 S.p.A. (formerly KPNQWest Italia S.p.A.)
With writ of summons before the Rome Court, COMM 3000 S.p.A. (formerly KPNQWest Italia S.p.A.) filed a
damages claim for a total of 37 million euros in compensation for alleged anticompetitive and abusive conduct
over the period 2009–2011, in the form of technical boycotting (refusals to activate wholesale services – KOs).
The claim was based on the contents of the decision of the Italian Antitrust Authority that settled the A428
case. TIM filed an appearance, contesting all of the plaintiff’s allegations. In the judgment with ruling in April
2019, the Court of Rome partially received the petitions of COMM 3000 S.p.A. (formerly KPNQWest Italia S.p.A.),
sentencing TIM to pay an amount significantly lower than the amount in the counterparty's damages claim. In
June 2019, TIM filed an appeal against the ruling, requesting full rejection of the claims presented by COMM 3000
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
388
S.p.A. (formerly KPNQWest Italia S.p.A.) in the ruling of first instance and, in July, obtained the suspension of
payment of a significant portion of the amount defined in the ruling.
TELEUNIT
With a writ of summons before the Rome Court, Teleunit has claimed 35.4 million euros in compensation from
TIM, based on the known decision of the Italian Competition Authority that settled the A428 case. Specifically,
the other party complained that in the period 2009/2010 it had suffered abusive conduct on TIM's part in the
form of technical boycotting (refusals to activate network access services – KOs), and anticompetitive practices
in the form of margin squeezing (excessive squeezing of discount margins, considered abusive inasmuch as they
cannot be replicated by competitors). TIM filed an appearance, contesting all of the plaintiff’s allegations. In
October 2020, the dispute was settled by the parties at no extra cost to the company on the income statement.
With a writ of summons issued in October 2009 before the Milan Appeal Court, Teleunit asked that TIM's alleged
acts of abuse of its dominant position in the premium services market be ascertained. The plaintiff quantified its
damages at a total of approximately 362 million euros. TIM filed an appearance, contesting the claims of the
other party.
After the ruling of January 2014 with which the Court of Appeal declared that it was not competent in this matter
and referred the case to the Court, Teleunit reinstated the case before the Milan Court the following April. TIM
filed an appearance in the reinstated proceedings challenging the plaintiff’s claims.
In its judgement of May 2017, the Milan Court rejected Teleunit's claim in its entirety, and ordered the company
to pay the legal costs of the case. This judgement was appealed by Teleunit, in June 2017, before the Milan Court
of Appeal. TIM filed an appeal challenging the arguments presented by the other party and asking that the
judgement in the first instance be fully confirmed. With an order in March 2018 the Milan Court of Appeal
declared Teleunit's appeal pursuant to art. 348-bis of the Italian Code of Civil Procedure to be manifestly without
foundation, and hence inadmissible. In May 2018 Teleunit appealed the judgement of the Court of Appeal to the
Court of Cassation. TIM lodged a counter-appeal seeking confirmation in full of the order being appealed (and
thus of the judgment at first instance).
SIPORTAL
Siportal has filed a lawsuit against TIM with the Court of Rome, by which Siportal has sued for approximately
48.4 million euros of compensation for alleged damages from abusive conduct in the form of technical
boycotting over the period 2009–2011 and from the knock-on effects of the abuse until 2015, with the loss of
commercial partners and the non-acquisition of new customers (the latter quantified for 25 million euros of
damages). The claims are based on the decision of the Italian Antitrust Authority that settled the A428 case. TIM
filed an appearance, contesting all of the plaintiff’s allegations. The Court of Rome decided in favor of Siportal
on the an of the alleged plaintiff; the case will continue with the Court Appointed Expert. TIM reserves every right
to protect its own interests. In October 2020, the dispute was settled by the parties at no extra cost to the
Company on the income statement.
MC-Link
With writ of summons before the Rome Court, MC-Link filed a damages claim for a total of 51 million euros in
compensation for alleged anticompetitive and abusive conduct over the period 2009–2012, in the form of
technical boycotting (refusals to activate wholesale services – KOs). The claim was based on the contents of the
decision of the Italian Antitrust Authority that settled the A428 case. TIM filed an appearance, contesting all of
the plaintiff’s allegations.
Eutelia and Clouditalia Telecomunicazioni
With a writ of summons dated May 2020, Eutelia
in Extraordinary Administration and Clouditalia
Telecomunicazioni S.p.A., purchaser of Eutelia's TLC branch, brought an action against TIM before the Court of
Rome, making claims for damages, of around 40 million euros, for damages allegedly suffered, in the period
2009-2012, following the technical boycott and margin squeeze conduct, subject of the AGCM A428 procedure.
TIM filed an appearance contesting the claims of the other party and formulating a counterclaim reserving the
right to quantify the damages suffered in the course of the proceedings.
Antitrust Case I761
With a ruling issued on July 10, 2013, AGCM (the Italian Competition Authority) extended to TIM the investigation
started in March of the same year into some firms active in the fixed network maintenance sector. The
investigation aims to establish if an agreement exists that is prohibited under article 101 of the Treaty on the
Functioning of the European Union. The proceedings were initiated after Wind filed two complaints in which the
ICA was informed that, based on an invitation to bid for the assignment of network corrective maintenance
services, it had encountered substantial uniformity of prices offered by the aforementioned enterprises and a
significant difference from the offers submitted subsequently by other and different companies.
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
389
The ICA alleged that TIM carried out a role of coordinating the other parts of the procedure, both during the
formulation of the offers requested by Wind and in relation to the positions represented to communications
regulator AGCom.
TIM challenged these proceedings before the Administrative Court (TAR), sustaining that the ICA does not have
competence in this matter.
On July 7, 2014, the ICA notified the objective extension of the proceedings to check if the Company, abusing its
dominant position, put in place initiatives that might influence the conditions of the offer of accessory technical
services when the offers of the maintenance businesses to Wind and Fastweb were being formulated. With the
extension provision, the ICA has also extended the deadline for closing the proceedings from the original date of
July 31, 2014 to July 31, 2015. This extension was also challenged before the Lazio Administrative Court (TAR)
sustaining that the Italian Competition Authority does not have competence in this matter.
In November 2014, for reasons of procedural economy and also convinced that it was acting legitimately, TIM
presented to the Authority a proposal of undertakings in order to resolve the competition concerns subject of
the investigation. In its resolution of December 19, 2014, the ICA considered that these undertakings were not
manifestly groundless and later ordered their publication for the purposes of market testing.
On March 25, 2015, the ICA definitively rejected the aforesaid undertakings, considering them not suitable for
removing the anticompetitive aspects investigated.
On July 21, 2015 the Communication of the Results of the Investigation was served on the parties to the
proceedings, in which the Offices of ICA expressed their position in the sense of (i) archiving the complaints
regarding the abuse of dominant position and (ii) confirming, instead, that there exists between TIM and the
maintenance firms an agreement to coordinate the economic offers drawn up for Wind and Fastweb, and to
prevent the unbundled supply of the ancillary technical services.
On December 16, 2015, the final order was issued, confirming the conclusions of the Communication of the
Results of the Investigation, sustaining that, between 2012 and 2013, there existed an agreement that restricted
competition, and as a result imposed a fine of 21.5 million euros on the Company, paid in March 2016. The
relevant market is the corrective maintenance (assurance) market and, more precisely, the market for
troubleshooting the TIM LLU lines. The purpose of the conduct maintained by the Company and the network
firms would have been to limit competition and prevent the evolution of forms of unbundled supply of ancillary
technical services.
TIM appealed the order before the Lazio Regional Administrative Court. In judgement no. 09554/2016 issued in
September 2016, the appeal was dismissed, and the Company appealed this decision to the Council of State. On
the outcome of the proceedings, with the ruling of December 2019, the Council of State, deciding in favor of TIM,
annulled the AGCM I761 provision and referred the task of conducting a new investigation to AGCM, within the
limits that decided by the Council of State itself.
In 2020, TIM obtained the return of amounts paid by way of sanction.
Wind (I761)
With a writ of summons before the Court of Milan, Wind claimed compensation from TIM of 57 million euros,
recently increased during the proceedings to around 58 million euros, for damages arising from alleged anti-
competitive conduct censured in the ICA case I-761 (on corrective maintenance). According to the plaintiff, this
conduct delayed and hindered its ability to obtain more favorable conditions in the unbundled purchase of
service to repair faults on the LLU access lines, and their effects, initially stated to have been lasted until
December 2015 and subsequently alleged by Wind to be ongoing. TIM has filed an appearance challenging the
claims made by the other party. In December 2020, the case was settled as part of a global settlement with
Wind Tre.
Vodafone (I761)
With a writ of summons before the Milan Court, Vodafone has sued TIM and some network companies, bringing
claims for compensation from the Company for around 193 million euros for damages arising from alleged anti-
competitive conduct censured in the known ICA case I-761 (on corrective maintenance) referring to the period
from 2011 to 2017.
Vodafone contests the alleged breach of the competition rules carried out by TIM, in the wholesale markets
giving access to its fixed network (LLU lines; Bitstream; WLR), through the abuse of a dominant market position
and an unlawful agreement with the maintenance companies to maintain the monopoly on the offer of
corrective maintenance services on its network. Specifically, the restrictive agreement allegedly concerned the
coordination, by the Company, of the economic terms and conditions contained in the bids for maintenance
services prepared by the aforementioned companies for OAOs, with artificially high prices with respect to the
cost of the maintenance included in the regulated access fee, with a view to discouraging the disaggregation of
the service itself. The Company filed an appearance, contesting all of the other party’s requests.
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
390
Italian Competition Authority Case A514
In June 2017 the Italian Competition Authority (AGCM) started proceedings A514 against TIM, to ascertain a
possible abuse of its dominant market position in breach of article 102 of the “Treaty on the Functioning of the
European Union”. The proceedings were started based on some complaints filed in May and June 2017, by
Infratel, Enel, Open Fiber, Vodafone and Wind Tre, and concerns a presumed abuse of TIM's dominant position
in the market for wholesale access services and for retail services using the broadband and ultra-broadband
fixed network. In particular, the ICA hypothesized that TIM had adopted conduct aimed at: i) slowing and
hindering the course of the Infratel tender processes so as to delay, or render less remunerative the entry of
another operator in the wholesale market; ii) pre-emptively securing customers on the retail market for
ultrabroadband services by means of commercial policies designed to restrict the space of customer
contendibility remaining for the competitor operators.
After the start of the proceedings, the Authority's officials carried out an inspection at some of TIM’s offices in
the month of July 2017. On November 2, 2017, TIM filed a defense brief in which, in support of the correctness of
its actions, it challenged all the arguments that the conduct it had allegedly engaged in, and which was the
subject of the case, was unlawful.
On February 14, 2018, AGCM resolved to extend the scope of the case to investigate further behavior concerning
TIM's wholesale pricing strategy on the market for wholesale access to broadband and ultrabroadband, and the
use of the confidential information of customers of the alternative operators.
On July 5, 2018 TIM filed proposed undertakings which, if accepted by the Authority, would close the investigation
without any offense being established or sanction being administered. The undertakings were considered as
admissible by the Authority, that market tested them in August and September.
On October 30, 2018, TIM replied to observations made by third parties and modified its proposed undertakings.
With its decision notified on December 4, 2018, the Italian Antitrust Authority once and for all rejected the
proposed series of undertakings as it considered them unsuitable in light of the objections raised.
On March 4, 2019, TIM requested AGCM for an extension of the deadline for closing the proceedings (initially set
for May 31, 2019).
On April 10, 2019, AGCM resolved to extend the deadline for conclusion of the proceedings until September 30,
2019. On May 17, 2019, AGCM notified TIM of the results of the investigation (CRI). In the CRI, AGCM essentially
confirmed the case for the prosecution outlined in the start-up and extension of the proceedings orders.
On June 12, 2019 AGCM extended the deadline for deposit of TIM's final defense to September 20, 2019 and set
the final hearing for September 25, 2019.
On September 18, 2019, AGCM resolved to extend the deadline for conclusion of the proceedings until February
28, 2020.
On March 6, 2020, TIM was notified of the decision to close the investigation: AGCM ruled that TIM had abused
its dominant position, finding that TIM had put in place an anti-competitive strategy designed to hinder the
competitive development of investment in UltraBroadBand network infrastructure.
The fine imposed on TIM for the anti-competitive offense is 116,099,937.60 euros. TIM appealed the
aforementioned fine before the Lazio TAR, contesting both the merits of the accusations and the amount of the
imposed fine.
On June 25, 2020 TIM sent the so-called compliance report as ordered in the final provision. The Lazio TAR has
scheduled a hearing for oral discussion for November 3, 2021.
Open Fiber
In March 2020, Open Fiber (OF) sued TIM before the Court of Milan, claiming damages of 1.5 billion euros for
alleged abuse of an exclusive and dominant position in relation to OF. The alleged actions consist of: (i) pre-
emptive investments in FTTC networks in white areas; (ii) initiating specious legal action to obstruct Infratel
tenders; (iii) spurious repricing of certain wholesale services; (iv) commercial lock-in offers on the retail market;
(v) false disclosure to AGCom in connection with the approval of a wholesale offer and spreading rumors about
TIM being interested in acquiring OF; (vi) discriminatory access conditions to TIM passive infrastructure. TIM filed
an appearance, contesting the arguments of.
Enel S.p.A. intervened in the proceedings, asking that TIM be ordered to compensate all damages suffered and
being suffered by Enel and OF.
TIM challenged the A514 fine measure before the Lazio TAR, which was widely referred to by the counterparty in
the writ of summons.
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
391
Vodafone
In January 2021, Vodafone Italia S.p.A. summonsed TIM to the Court of Milan, making a claim for damages of
approximately 100 million euros for damages allegedly suffered as a consequence of the unlawful conduct of
TIM, as sanctioned by the AGCM, with the provision that concluded case A514.
The conduct of TIM sanctioned by the Authority allegedly resulted in a slowing of the penetration of UBB
infrastructures on the market of white areas and, consequently, the delayed or failed acquisition of new
customers by Vodafone, as well as a hindrance to acquiring additional customers as a result of the alleged
binding practices over the whole of national territory. TIM will file an appearance with a series of solid legal
arguments for its own protection.
Fastweb
In February 2021, Fastweb S.p.A. summonsed TIM to the Court of Milan, making a claim for damages of
approximately 996 mln euros for damages allegedly suffered as a consequence of the unlawful conduct of TIM,
as sanctioned by the AGCM, with the provision that concluded case A514, as well as allegedly opportunistic
suspensions of activation orders sent by Fastweb.
Fastweb complains that TIM allegedly delayed the wholesale offer of ultrabroadband services by Open Fiber in
the white areas, consequently slowing the offer of said services by Fastweb to its end customers in these areas;
binding practices were implemented in relations with the end customer, hindering access to the market by
alternative operators (including Fastweb). In addition, TIM allegedly instrumentally managed the supply process
of wholesale access services to its fixed broadband and ultrabroadband network, opportunistically suspending
the activation orders submitted by Fastweb and thereby hindering its activation of new customers. TIM will file
an appearance laying out solid arguments refuting Fastweb’s claims.
Antitrust Case I799
At its meeting on February 1, 2017, AGCM initiated an investigation for possible breach of Article 101 of the TFEU
(prohibition of agreements that restrict competition) against TIM S.p.A. and Fastweb S.p.A., following the signing
of an agreement aimed at setting up a cooperative joint venture called Flash Fiber S.r.l.. TIM, in agreement with
Fastweb, submitted some amendments to the agreements signed, in the form of proposed undertakings, aimed
at closing the investigation without any breach being ascertained and, therefore, without any fine.
On March 28, 2018, AGCM resolved to approve the undertakings, making them binding on the Parties, and closed
the case without imposing any fine.
On January 30, 2019, TIM sent the planned annual report on the provided coverage to AGCM, supplemented by
a subsequent communication dated March 29, 2019. TIM transmitted further details to AGCM in July and AGCM
acknowledged it on October 15, 2019. On January 31, 2020 TIM sent AGCM the third report on the implementation
of the commitments made.
On June 11, 2018 Open Fiber S.p.A. and Wind Tre S.p.A. filed separate appeals to the Lazio Regional
Administrative Court (TAR) against the order closing case I799 with the acceptance of the undertakings. They
allege that this order has a series of procedural and substantial defects.
Open Fiber S.p.A. also asked for the precautionary suspension of the order.
In a ruling of March 2020, the Regional Administrative Court rejected in full the appeal by Open Fiber S.p.A. A
hearing on the merits has not yet been scheduled for Wind Tre's appeal.
Vodafone
In June 2015 Vodafone issued proceedings for damages in the Milan Court for alleged abuse of a dominant
position by TIM in the bitstream “NGA” and “VULA” fiber access services market, initially claiming around 4.4
million euros, increased to a figure ranging from 30 to 48.9 million euros.
The plaintiff complained that TIM allegedly had engaged in abusive conduct by way of aggressive price offers to
win customers and by hindering Vodafone’s access to the fiber network to make it more difficult for the party to
provide ultra-broadband services to its customers.
TIM has filed an appearance, challenging the claims of the plaintiff in full and, subsequently, the revised estimate
of damages made in 2016 during the case.
Eutelia and Voiceplus
In June 2009, Eutelia and Voiceplus asked that alleged acts of abuse by TIM of its dominant position in the
premium services market (based on the public offer of services provided through so-called Non Geographic
Numbers) be investigated. The complainants quantified their damages at a total of approximately 730 million
euros.
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
392
The case follows a precautionary procedure in which the Milan Appeal Court prohibited certain behaviors of the
Company relating to the management of some financial relations with Eutelia and Voiceplus concerning the Non
Geographic Numbers, for which TIM managed the payments from the end customers, on behalf of such OLOs
and in the light of regulatory requirements. After the ruling with which the Milan Court of Appeal accepted TIM's
objections, declaring that it was not competent in this matter and referring the case to the Civil Court, Eutelia in
extraordinary administration and Voiceplus in liquidation resubmitted the matter to the Milan Court. The first
hearing took place in the month of March 2014. TIM filed an appearance challenging the claims of the other
parties. After the collapse of Voiceplus, the Milan Court declared the case suspended, in an order in September
2015. The case was later resumed by Voiceplus.
With a judgment issued in February 2018, the Milan Court accepted TIM's defense and rejected the plaintiffs’
claim for compensation, ordering them, jointly and severally, to pay the legal costs. In March 2018 Eutalia and
Voiceplus proposed an appeal against the judgement in the first instance.
TIM appealed against the claim, requesting confirmation in full of the judgment in the first instance. The appeal
of Eutelia and Voiceplus was fully rejected with the judgment of August 5, 2019. In December 2019 Eutelia and
Voiceplus appealed to the Court of Cassation over the judgment of the Court of Appeal. TIM notified a
counterclaim asking confirmation of the ruling appealed against.
28 day billing
Resolution 121/17/CONS introduced instructions on billing intervals for telephony, prescribing, for fixed telephony,
that the interval should be monthly, or multiples thereof, and, for mobile telephony, that it should be at least
four-weekly. TIM appealed Resolution 121/17/CONS to the Regional Administrative Court. The judgment rejecting
the appeal was published in February 2018. TIM appealed this judgment to the Council of State in June 2018. On
September 23, 2020, the non-definitive ruling was published whereby the Council of State joined the appeals
submitted by TIM, Vodafone, Fastweb and Wind Tre and ordered the prejudicial deferral to the European Union
Court of Justice (EUCJ) on whether or not the Authority had the power to regulate the frequency of renewal of
the commercial offers and invoicing periods, at the same time rejecting the other grounds of appeal submitted
by the operators and suspending proceedings. In February 2021, TIM filed its written observations on the requests
for prejudicial judgment with the EUCJ.
With its Resolution 499/17/CONS, having confirmed the breach of Resolution 121/17/CONS, AGCom fined TIM
1,160,000 euros, ordering it to make provision – when the billing cycle was restored to monthly intervals or
multiples thereof – to return the amounts corresponding to the fee for the number of days that, from June 23,
2017, had not been used by the users in terms of the supply of service due to the misalignment of the four-weekly
and monthly billing cycles. TIM also appealed this second resolution to the Regional Administrative Court of Lazio,
asking for its precautionary suspension which, on February 22, 2018, was accepted by the Regional Administrative
Court of Lazio limited to the part relating to the reimbursement orders.
Subsequently, Law no 172 of December 4, 2017 decreed that contracts for the supply of electronic
communications services should obligatorily prescribe that the renewal of offers and the billing of services be
based on a month, or multiples thereof. TIM adapted to this order within the period of time prescribed by law,
namely within 120 days of the date it came into force (April 5, 2018).
In March 2018, with Decision 112/2018/CONS AGCom (i) cautioned TIM, with regard to fixed-line voice services
only, against postponing the starting date of invoices issued after the return to monthly invoicing by the same
number of days as those presumably deducted starting from June 23, 2017 with the four-weekly invoicing cycle;
and (ii) revoked the preceding resolution 499/17/CONS in the part in which TIM was ordered to repay the amounts
presumably lost from June 23, 2017 onwards, with the four-weekly billing cycle. This resolution was also
challenged by with an additional submission triggered as part of the appeal against resolution 499/17/CONS, with
a request for single precautionary measures, which was provisionally granted until the hearing before the Council
on April 11, 2018 with a Presidential Decree published on March 26, 2017.
Under Presidential Decree 9/18/PRES, AGCom amended the provisions of Decision 112/18/CONS requiring the
deferment of billing once the billing cycle was restored to monthly intervals, or multiples thereof, while also
ordering that the timescales for complying with the order would be identified after hearings with the operators
and the main consumer protection associations. TIM and the other operators affected by the presidential decree
waived the precautionary petition against Resolution 112/18/CONS. In May 2018, TIM therefore appealed AGCom
Presidential Decree 9/18/PRES and Resolution 187/18/CONS which ratified this decree.
In July 2018, AGCom issued resolution 269/18/CONS, with which it set December 31, 2018 as the date by which
the operators must return to their fixed network customers a number of days of service equal to those eroded
as an effect of 28-day billing, or propose to the affected customers any alternative compensatory measures,
after having notified them to AGCom. TIM, in keeping with actions taken and arguments made, intends to appeal
this resolution.
In September 2018, TIM appealed Resolution 297/18/CONS in which AGCom imposed a fine of 696,000 euros for
having continued to adopt – in violation of AGCom resolution 121/17/CONS – four-weekly billing and renewal of
consumer offers as from February 16, 2018 (and until March 31, 2018).
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
393
With the judgment published in November 2018, the TAR canceled the pecuniary administrative sanction of 1.16
million euros imposed with Resolution 499/17/CONS, and confirmed the obligation of restitutio in integrum to
the fixed-line customers by December 31, 2018. TIM submitted its preventive appeal before the Council of State
to interrupt execution of said decision and, with its ruling of December 20, 2018, the Council of State, in upholding
TIM's appeal, interrupted the effectiveness of the aforesaid decision for the reversal order only, until March 31,
2019.
In November, 2018, AGCom published resolution 521/18/CONS with which it imposed a sanction of 1,044,000
euros on TIM. The sanction was imposed for breach of the transparency rules and rights to withdraw in amending
the contractual terms and conditions of the mobile offers applied to customers starting from April 8, 2018
following restoration of monthly billing. TIM appealed this resolution as well to the Regional Administrative Court
in January 2019. Following a new application submitted by TIM, the Council of State, with its ruling published on
March 20, 2019, extended the precautionary measure to suspend the effectiveness of the decision until May 21,
2019 while awaiting publication of the grounds for the judgment.
Having acknowledged the publication of the grounds of the ruling handed down on May 10, 2019, the Council on
May 21, 2019 ordered postponement of discussion of the application for precautionary measures to the Council
meeting of July 4, 2019 in order to allow TIM to finalize its additional grounds with a new application for
precautionary measures. Following this hearing, the Council of State rejected TIM's application to suspend
execution of the ruling of the Regional Administrative Court with its ruling published on July 5, 2019, so it is
operational starting from May 21, 2019. The hearing to discuss the introductory appeal and additional grounds
submitted by TIM in the meantime is still, as of writing, to be set. On July 12, 2019 the ruling mechanisms with
which the Council of State rejected the similar appeals made by Vodafone, Wind Tre and Fastweb were published
and in February 2020 the judgments containing the grounds were published.
In September 2019, TIM also challenged resolution 221/19/CONS, before the Regional Administrative Court (TAR),
with which the sanction pursuant to Resolution 499/17/CONS, canceled by the Regional Administrative Court of
Lazio, was recalculated to the amount of 580,000.00 euros, with the maximum fine provided for by Art. 98,
paragraph 16 of the CCE in force at the time of the events applied.
In August 2019, AGCom initiated new proceedings (CONT 12/19/DTC) for failure to comply with the order to
refund the days eroded by billing every 28 days for fixed network and convergent customers, according to the
procedures established with resolutions nos. 112/18/CONS and 269/18/CONS. On conclusion of these
proceedings, by means of Resolution 75/20/CONS, the Authority found that TIM did not comply with the above
resolutions, imposing a fine of 3 million euros. The measure was challenged by TIM before the TAR in July 2020.
In June 2019, TIM had in any case decided to offer its fixed network customers, active prior to the March 31, 2018
and subjected to billing every 28 days, the possibility of accepting a compensatory solution, an alternative to
refunding the eroded days pursuant to AGCom resolution no. 269/18/CONS. Subsequently, from September 2019,
TIM decided to also accept requests for the refund of the eroded days. In both cases, TIM informed customers
with several messages in the bill, on the web in the main newspapers. The initiatives just described were
communicated to AGCom as part of the aforementioned penalty proceedings.
Antitrust Case I820
On February 19, 2018, AGCM initiated a I820 preliminary proceeding against the companies TIM, Vodafone,
Fastweb and Wind Tre and the industry association ASSTEL to investigate the alleged existence of an agreement
among the major fixed-line and mobile telephone operators to restrict competition by coordinating their
respective commercial strategies, in breach of Article 101 of the TFEU.
The presumed coordination, according to the opening provision of the proceedings by AGCM, would take the
form of implementation of the obligation introduced by Article 19-quinquiesdecies of Legislative Decree 148/2017
(converted by Law 172/2017) which requires operators of electronic communication services to send out monthly
(or monthly multiples) bills and renewed offers for fixed and mobile services.
On March 21, 2018, AGCM issued a provisional precautionary measure against all the operators involved in the
proceedings with which it ordered the suspension, pending the proceedings, of the implementation of the
agreement concerning the determination of repricing communicated to users at the time of reformulating the
billing cycle in compliance with Law 172/17 and to independently redetermine its commercial strategy. With its
decision no. 27112 of April 11, 2018, AGCM confirmed the precautionary measure.
On June 12, 2018, TIM filed an appeal with the TAR for the quashing of said measure.
In its session on June 27, 2018, AGCM took note of the brief submitted by TIM regarding compliance with the
precautionary measure.
On July 17, 2019, AGCM resolved to extend the deadline for conclusion of the proceedings until January 31, 2020.
In the findings of the preliminary inquiry (CRI) communicated by AGCM to TIM, the Offices confirm the existence
of a unique, complex and continuous agreement restricting competition between Telecom, Vodafone, Fastweb
and Wind Tre, with the facilitation of the Asstel category association.
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
394
On October 10, TIM filed its final brief, and the final hearing was held on October 15 at AGCM.
On January 31, 2020, TIM was notified of the decision to close the investigation, in which AGCM confirmed the
existence of the agreement between Telecom, Vodafone, Fastweb and WindTre, but excluding Asstel from
participation in the agreement. The fine imposed on TIM for participation in the anti-competitive agreement was
114,398,325 euros. In April 2020, TIM also challenged the sanction order and following the motion, the public
hearing was scheduled for May 26, 2021.
Antitrust Case I850
By decision given on December 15, 2020, the Italian Competition Authority (AGCM) started an investigation in
regard to the company Telecom Italia S.p.A., Fastweb S.p.A., Teemo Bidco S.r.l., FiberCop S.p.A., Tiscali Italia S.p.A.
and KKR & Co. Inc., to ascertain the existence of any breaches of article 101 of the TFEU.
More specifically, the investigation regards the contracts governing the establishment and operation of FiberCop
and the supply agreements with Fastweb and Tiscali.
AGCM intends to verify that such agreements do not hinder competition between operators in the medium and
long-term and assure the rapid modernization of the country’s fixed telecommunications infrastructures.
The case should be concluded by December 31, 2021.
Vodafone Dispute – Universal Service
In a decision published in July 2015, the Council of State rejected the appeal lodged by AGCom and TIM against
the judgment of the Lazio Administrative Court (TAR) on the financing of the universal service obligations for the
period 1999–2003. With this judgement the judge had granted the appeals by Vodafone, annulling AGCom
decisions 106, 107, 109/11/CONS on the renewal of the related proceedings, which included Vodafone among the
subjects required to contribute, for a sum of approximately 38 million euros. Essentially, the judgement confirms
that the Authority has not demonstrated the particular degree of "replaceability" between fixed and mobile
telephony for mobile operators to be included among the subjects required to repay the cost of the universal
service, which means that AGCom needs to issue a new ruling.
TIM has filed an application with AGCom to renew the proceedings, and an appeal against the judgement of the
Court of Appeal to the Court of Cassation (which subsequently ruled that the appeal was inadmissible).
In April 2016 Vodafone appealed against the Ministry of Economic Development (MISE) and TIM to the Council
of State, for non-compliance with the judgement of the Council of State. This appeal referred to AGCom decision
109/11/CONS (2003 yearly payment, on the basis of which Vodafone had paid the sum of approximately 9 million
euros as contribution, restitution of which was requested).
In its judgment of November 2016, the Council of State rejected the appeal, referring to the Regional
Administrative Court (TAR) the decision on the methods of compliance. In February 2017, Vodafone presented
the Lazio Regional Administrative Court with four new appeals against the Ministry of Economic Development
and TIM regarding observance of the ruling, upheld on appeal, countermanding the resolutions for the years
1999–2003 and repayment of the aforesaid amounts of around 38 million euros already paid to the Ministry of
Economic Development as a contribution.
With a judgment issued in June 2018, the TAR rejected all of Vodafone's appeals for observance, and, as
requested by TIM, expressly affirmed that AGCom must renew the proceedings, particularly with regard to the
determination of the degree of replaceability between fixed and mobile telephony. Vodafone challenged the four
judgments before the Council of State, which, with a decision of October 2019, upheld Vodafone's appeal and
confirmed the restitutory obligation of the sums in question applicable to TIM.
Dispute relative to "Adjustments on license fees" for the years 1994-
1998
With regard to the judgements sought in previous years concerning the Ministry of Communications' request for
payment of the balance of the amounts paid in concession charges for the years 1994-1998 (for a total of 113
million euros), the Administrative Court (TAR) for Lazio rejected the Company’s appeal against the request for
adjustment of the license fee for 1994 in the amount of approximately 11 million euros, 9 million euros of which
against turnover not received due to bad debts. TIM lodged an appeal. On the outcome of proceedings, with the
ruling of December 2019, the Council of State partially accepted TIM's position, establishing the principle,
according to which, the receivables referring to 1994 not collected for reasons not attributable to the operator,
could have been deducted from the tax base for calculating the concession fee.
With two further judgements the Administrative Court (TAR) for Lazio, reiterating the reasons expressed
previously, also rejected the appeals in which the Company challenged the requests for payment of outstanding
balances of license fees for the years 1995 and 1996-1997-1998, in the amount of approximately 46 million euros.
TIM has appealed before the Council of State also against these judgements.
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
395
With reference to the 1998 fee adjustment (equal to about 41 million), the Lazio TAR, by TAR order of December
2018, suspended the judgment, raising preliminary questions with the EU Court of Justice on the correct scope
of EC Directive no. 97/13 (in the matter of general authorizations and individual licenses in the field of
telecommunications services on the basis of the currently pending litigation on the 1998 license fee, currently
pending before the Rome Court of Appeal and illustrated in a subsequent paragraph).
The referred questions were based, inter alia, on the question posed to the Court of Justice on the possible
conflict between the aforementioned EC Directive 97/13 and national law, which extended the obligation for
telecommunications license-holders to pay the license fee for 1998 (commensurate with a portion of turnover),
despite the liberalization process underway. In its judgment of March 2020, the EU Court of Justice held that the
EU regulatory system must be interpreted as not allowing national legislation to extend to 1998 the obligation
imposed on a telecommunications undertaking that was previously the concession holder (such as TIM) to pay
a fee calculated on the basis of turnover and not only the administrative costs connected with the granting,
management, control and implementation of the general authorizations and individual licenses scheme. The
Court held, inter alia, that the Council of State – having held in its judgment 7506/2009 that the fee imposed for
1998 on TIM, the holder of an authorization existing on the date of entry into force of Directive 97/13, was due –
interpreted national law in a way that was incompatible with EU law, as interpreted by the Court in its judgment
of February 21, 2008. Following the judgment of the EU Court of Justice, the opinion on the final calculation of
the 1998 charges was summarized before the Lazio Regional Administrative Court, which, in a judgment given
last February, declared TIM’s appeal as unacceptable for procedural reasons, namely due to the prevalence of
the formal ruling consisting of judgment no. 7506/09; in substantive terms, on the other hand, the judgment of
the EU Court of Justice once again ascertained the European Community unlawful nature of the credit claim by
the PA to obtain payment of the 1998 charges and, consequently, the final balance. The company will challenge
the judgment of the Lazio Regional Administrative Court in the required manner.
Wind Tre
With writ of summons before the Milan Court, served in April 2019, Wind Tre S.p.A. filed a damages claim against
TIM for approximately 255 million euros in compensation for damages arising from alleged anticompetitive
conduct in the years 2014-2018. More specifically, according to Wind Tre, TIM allegedly illegally used information
gained when supplying provisioning and wholesale services assurance through its sales division to convince
customers to return to TIM or to activate the new user with TIM; carried out commercial promotion activity for
TIM through its technical personnel when repairing failures or activating Wind Tre users; behaved unfairly in order
to get Wind Tre customers to switch over to TIM. To support its arguments, Wind Tre also pleads some elements
that emerged during the investigation for the AGCM A514 case. TIM has filed an appearance, fully contesting the
claims of the other party and making a counterclaim, based on facts similar to those put forward by the plaintiff,
reserving the right to quantify the damages suffered. In its initial pleadings, Wind Tre extended its claims to June
2019 and quantified the damages claimed at approximately 346 million euros. TIM has made its counterclaim
for around 20 million euros for damage to its commercial image, as well as damage due to loss of customers, to
be quantified in the course of the proceedings, possibly on an "ex aequo et bono" basis. In December 2020, the
case was settled as part of a global settlement with Wind Tre.
Poste
There are some pending actions brought, at the end of the 1990s, by Ing. C. Olivetti & C. S.p.A. (now TIM) against
Poste, the Italian postal service, concerning non-payment of services rendered under a series of contracts to
supply IT goods and services. The judgements issued in the lower courts established an outcome that was
partially favorable to the ex-Olivetti, and have been appealed against by Poste in individual rehearings.
In this respect, while a 2009 judgement of the Rome Appeal Court confirmed one of the outstanding payables
to TIM, another judgement by the same Court declared void one of the disputed contracts. After this judgement,
Poste had issued a writ for the return of approximately 58 million euros, opposed by TIM given that the judgement
of the Supreme Court for amendment of the above judgement is still pending.
After the 2012 judgement of the Supreme Court that quashed and remanded the decision of the Appeal Court
on which the order was based, the Rome Court declared that the matter of issue in the enforcement proceedings
was discontinued, since the claim made by Poste had been rejected. The judgement was resubmitted to another
section of the Rome Appeal Court. In ruling no. 563 of January 25, 2019, the Rome Court of Appeal at the time of
proceedings, reversing the Company's previous unfavorable appeal, confirmed the contract's validity and, with
it, the legitimacy of TIM's view of the amount already collected, of which Poste had requested reimbursement.
This ruling was challenged by Poste with appeal filed with the Court of Cassation, notified on July 31, 2019, which
TIM challenged with relevant counter appeal.
Elinet S.p.A. Bankruptcy
In 2014, the trustees in the bankruptcy of Elinet S.p.A., and subsequently the trustees of Elitel S.r.l. and Elitel
Telecom S.p.A. (the parent, at the time, of the Elitel group) appealed the judgment by which the Court of Rome
dismissed the damages claim brought by the trustees of the Elinet-Elitel group, filing a new damages claim for
a total of 282 million euros. The Company is alleged to have exercised management and control powers over the
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
396
plaintiff, and, with it, over the Elitel group (an OLO in which TIM has never held any equity interest) through the
management of trade receivables. TIM filed an appearance, challenging the claims made by the other party. The
judgment on the appeal was handed down with ruling in July 2019, which with reference to TIM confirmed full
legality of its conduct and total non-existence of any element of management and coordination. The receivers
of Elinet S.p.A. and Elitel Telecom S.p.A. appealed to the Court of Cassation in January 2020 to obtain the
annulment of the judgment in the second instance. The receiver of Elitel S.r.l. has not filed an appeal with the
Court of Cassation and, consequently, the total claim for damages has been reduced to 244 million euros. TIM
notified a counterclaim asking confirmation of the ruling appealed against.
Antitrust proceedings PS11532 – “TIM in Nave”
Launched on December 4, 2019 prompted by complaints filed by several consumers, the proceedings, for the
“TIM in Nave” service with the challenge of Deceptiveness on customer information profiles and aggressiveness
profiles. “TIM in Nave” is not an ancillary service, but, in full compliance with the sector regulations, a type of
roaming tariff which is activated when the customer is under the maritime coverage network. Significant
commitments were made to improve information, making the consumer fully aware of how “TIM in Nave” works.
Proceedings ended on July 28, 2020 with the imposition of a fine equal to 1.8 million euros. Similar proceedings
also ended against the other major operators. TIM appealed the measure to the Regional Administrative Court
of Lazio, asking for its cancellation and alternatively the reduction of the fine.
Antitrust Case IP 327 - IBAN discrimination
Officially started on December 23, 2019 by the Authority, the proceedings concern the alleged non-compliance
with the provisions of PV4 on IBAN Discrimination, dated April 2019. In particular, AGCM disputed that the direct
debit process on the web channel is not yet automated and therefore the customer is not autonomous in
managing this activity. TIM eliminated all forms of discrimination between Italian banks and SEPA area banks
with the complete automation of the web domiciliation process. Proceedings ended on July 3, 2020 with the
imposition of a fine of 500,000 euros. Similar proceedings also ended against the other major operators.
Brazil - Opportunity Arbitration
In May 2012, TIM and Telecom Italia International N.V. (now merged in Telecom Italia Finance) were served with
a notice of arbitration proceedings brought by the Opportunity group, claiming compensation for damages
allegedly suffered for presumed breach of a settlement agreement signed in 2005. Based on the claimant’s
allegations, the damages relate to circumstances that emerged in the criminal proceedings pending before the
Milan Court regarding, inter alia, unlawful activities engaged in by former employees of TIM.
The investigatory phase having been completed, the hearing for oral discussion took place in November 2014,
after which the parties filed their concluding arguments in preparation for the decision on the case. In September
2015, the Board of Arbitration declared the proceedings closed, as the award was going to be filed. Subsequently,
the Board of Arbitration allowed the parties to exchange short arguments and the ICC Court extended the term
for the filing of the award.
In September 2016 the ICC Court notified the parties of its judgment, based on which the Court of Arbitration
rejected all the claims made by the Opportunity group and decided that the legal costs, administrative costs and
costs for expert witnesses should be split between the parties (the “2016 Arbitration Award”).
In April 2017 the Opportunity group filed an appeal against the 2016 Arbitration Award before the Paris Court of
Appeal.
In November 2017, TIM and Telecom Italia Finance received from the Secretariat of the ICC’s International Court
of Arbitration notice of a Request for Revision of the 2016 Arbitration Award, filed by the Opportunity group,
asking for a new award. A Board of Arbitration was subsequently established.
In October 2018, TIM and Telecom Italia Finance requested proceedings with the Paris Court of Appeal to be
suspended, in the light of proceedings pending with the Court of Arbitration of the International Chamber of
Commerce to review the same 2016 Arbitration Award. In November 2018, the Paris Court of Appeal suspended
the proceedings until the decision is taken by the Court of Arbitration in the review proceedings.
As regards the proceedings to review the 2016 Arbitration Award, in October 2019 the ICC held the discussion
hearing in Paris. In August 2020, the Arbitration Court issued the award rejecting the Request for Revision
presented by the Opportunity Group (the “2020 Arbitration Award”). In December 2020, the Opportunity group
filed an appeal against the 2020 Arbitration Award before the Paris Court of Appeal.
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
397
Iliad
By summons served during the first quarter of 2020, Iliad Italia S.p.A. sued TIM before the Court of Milan for
alleged anti-competitive conduct, including through the Kena Mobile brand, which was allegedly aimed at
hindering its entry to and consolidation in the mobile phone market in Italy, seeking damages of at least 71.4
million euros.
TIM filed an appearance, fully disputing the requests of Iliad Italia S.p.A.; and, in turn, submitting a counterclaim
in accordance with Art. 2598 of the Italian Civil Code, with reference to the denigration implemented by Iliad
Italia S.p.A. in regard to TIM and formulating a symmetrical claim for compensation for damages. In the first
preliminary brief, Iliad updated its claim for damages, taking it to 242.8 million euros. The next hearing is
scheduled for April 13, 2021.
b) Additional information
Mobile telephony - criminal proceedings
In March 2012 TIM was served notice of the conclusion of the preliminary enquiries, which showed that the
Company was being investigated by the Public Prosecutor of Milan pursuant to the Legislative Decree n. 231/2001,
for the offences of handling stolen goods and counterfeiting committed, according to the alleged allegations, by
fourteen employees of the so-called “ethnic channel”, with the participation of a number of dealers, for the
purpose of obtaining undeserved commissions from TIM.
The Company, as the injured party damaged by such conduct, had brought two legal actions in 2008 and 2009
and had proceeded to suspend the employees involved in the criminal proceedings (suspension later followed
by dismissal). It has also filed an initial statement of defense, together with a technical report by its own expert,
requesting that the proceedings against it be suspended, and that charges of aggravated fraud against the
Company be brought against the other defendants. In December 2012, the Public Prosecutor's Office filed a
request for 89 defendants and the Company itself to be committed for trial.
During the preliminary hearing, the Company was admitted as civil party to the trial and, in November 2013, the
conclusions in the interest of the civil party were filed, reaffirming TIM's total lack of involvement in the offences
claimed.
At the end of the preliminary hearing, which took place in March 2014, the Judge for the Preliminary Hearing
committed for trial all the defendants (including TIM) who had not asked for their situation to be settled with
alternative procedures, on the grounds that “examination in a trial” was needed. In April 2016, at the end of the
first part of the trial, the Public Prosecutor asked for TIM to be sentenced to pay an administrative fine of 900
thousand euros, but decided not to ask for confiscation of any of the presumed profits of the offences (quantified
in the committal proceedings as totaling several million euros), based on the assumption that TIM had in any
event remedied the presumed organizational
inadequacies. While acknowledging the considerable
redimensioning of the accusations, the Company has reiterated its total non-involvement in the facts at issue.
In November 2016 the Court gave a verdict acquitting the Company on the grounds that there was no case to
answer. All the individuals charged were also acquitted on various grounds.
The Public Prosecutor appealed the acquittal and appealed to the Court of Cassation "per saltum”. In January
2019, the Italian Supreme Court of Cassation agreed to the appeal and therefore ordered that the documents of
the proceedings be sent to the Milan Court of Appeal.
The proceedings were assigned to Chambers IV of the Milan Court of Appeal and are awaiting scheduling of the
hearing.
Dispute concerning the license fees for 1998
TIM has issued civil proceedings against the office of the Prime Minister for compensation of the damage caused
by the Italian State through appeal judgement no.7506/09 by the Council of State that, in the view of the
Company, violates the principles of current European community law.
The main claim which the proceedings are founded on is based on community jurisprudence that recognizes the
right to assert the responsibility of the State in relation to violation of rights recognized in community law and
injured by a judgement that has become definitive, in respect of which no other remedy may be applied. The
judgement of the Council of State definitively denied TIM the right to obtain restitution of the concession charge
for 1998 (totaling 386 million euros for Telecom Italia and 143 million euros for the former TIM Company, plus
interest), already denied by the Lazio regional administrative court despite the favorable and binding opinion of
the European Court of Justice in February 2008. This judgement concerned the conflict between EC Directive
97/13 on general authorizations and individual licenses in the telecommunications services industry, and the
national regulations that had deferred, for 1998, the obligation to pay the fee payable by telecommunications
concession holders, despite the intervening deregulation process. The Company then proposed an alternative
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
398
compensation claim, within the sphere of the same proceedings, for tort pursuant to art. 2043 of the Italian Civil
Code. The compensation claimed has been quantified as approximately 529 million euros, plus legal interest and
revaluation. The Avvocatura di Stato filed an appearance and submitted a counterclaim for the same sum. The
case is subject to eligibility analysis by the Court, which declared the inadmissibility of TIM's main claim (case for
damages for manifest breach of community law pursuant to law 117/88). However, this decision was amended
in favor of the Company on appeal. In March 2015 the Rome Court issued its judgment in the first instance,
declaring the Company's application inadmissible. In 2015, TIM appealed this decision and the judgment is
pending in the closing arguments. The Court of Appeal has scheduled the hearing for the closing arguments for
April 2, 2019. Thereafter, without any new procedural activities having taken place, the Court of Appeal
incontrovertibly deferred the hearing for closing arguments first to 2020 and then to 2021 (from when the terms
for conclusion and replies shall run, which will be followed shortly thereafter by the issue of the judgment). These
deferrals were followed by the latest, of January 15, 2021, scheduling the new hearing for January 25, 2022.
On the matters underlying the case, the following must be noted:
■ on the considered lack of jurisdiction of the Court of Rome (concerned by the judgment of the Court of Rome
appealed by TIM) to judge the liability of the Italian government for the work of senior magistrates (in the
case in point, the Council of State), which would have led to the declared inadmissibility of the claim in
accordance with Art. 5, law no. 117/1978 (old text) - the United Chambers of the Court of Cassation ruled with
judgment no. 14842 on June 7, 2018, confirming the jurisdiction of the Court of Rome and, therefore, the
correctness of TIM’s choice to base its lawsuit in the Court of Rome;
■
on the unlawful nature of the conduct of the Italian government - and, therefore, on the liability of the State-
Court in accordance with Law no. 117/1998 - once again, the EU Court of Justice has ruled, deciding on the
prejudicial matter raised by the Lazio TAR in other, connected proceedings, in its judgment given on March
4, 2020 in C-34/19, stressing that TIM was not required to pay the charges demanded by the State for 1998
and, therefore, confirming the clear violation by the Council of State of European Community law (also
because in clear conflict with the decision already given by the EU Court of Justice on February 21, 2008 in
C-296/06, as, moreover, already ruled by the Court of Appeal of Rome, Chambers I, in Decree of January 31,
2012, which sanctioned the procedural admissibility of TIM’s lawsuit);
■ on the matter of the right to repeat the charges paid for 1998 - the Court of Cassation ruled in its judgment
no. 18603 given on September 7, 2020, rejecting the appeal brought by the Presidency of the Council against
the judgment whereby the Court of Appeal of Rome had upheld the claim for compensation made by
Vodafone (payment of charges for 1998) for the same title in separate proceedings.
In short, the Company paid the charges disputed in 1998; it promptly challenged the administrative provision
that had unfairly required said payment, before the administrative court; the administrative proceedings before
the Council of State concluded negatively in 2009 (despite the recalled opposite judgment of the European Court
of Justice); the civil proceedings of first instance concluded in March 2015 with a judgment of rejection for
grounds of admissibility (then solved in the sense indicated by the company with the referenced judgment of
Cassation in United Chambers no. 14842/18) and more than 6 years after the first instance judgment - going
from deferral to deferral - the appeal judgment (that could only uphold the mentioned judgments of the Court
of Justice and the Court of Cassation) has not yet been issued (nor, on the basis of these repeated deferrals, can
the company forecast when it will be given).
The Company is examining the various scenarios and legal claims (national, European Community, etc.) that
may contribute towards defining the appeal dispute. It is considered, in fact, that the principles of the reasonable
duration of the trial, in accordance with subsection 2 of article 111 of the Constitution and in accordance with
article 6 of the European Convention on Human Rights, are violated by these events, considering: (i) the year in
which payment was made of the undue charges is 1998; (ii) the value of these charges is approximately 529
million euros plus interest from that date; (iii) the extremely long procedural process has not even led to an
appeal judgment (started in 2015 and with an unpredictable conclusion, given the continuous deferrals); (iv) the
circumstance that the legal matter appears to be readily able to be settled, as not one but two judgments have
already been given by the EU Court of Justice declaring payment of the charges to be incompatible with
European Community legislation (judgments that have currently been ignored by the national court).
In these analyses aimed at settling the appeal judgment, it must be noted that on January 25, 2021, the Company
filed a request to bring the hearing forward with the Rome Court of Appeal (it had been postponed, as mentioned,
to January 25, 2022); the idea of this was to prevent yet another deferral of the case, which - as we know - regards
breach of not one but two decisions given inter partes on the same matter, by the European Union Court of
Justice, due to clear violation of European law by the State-Court. By order given on February 8, 2021, the Court
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
399
of Appeal of Rome (second chambers specialized in business matters) considered the petition for an earlier trial
to be admissible, scheduling the hearing for November 30, 2021. The company trusts that by bringing forward
the hearing date, the dispute may be settled on appeal within a reasonable time-frame.
Vodafone (formerly TELETU)
By writ of summons of February 2012, TIM summonsed the operator TeleTu (today incorporated into Vodafone)
to the Court of Rome for having unduly impeded customers intending to return to TIM. The damages claim has
been quantified for approximately 93 million euros. By judgment of December 2020, the Court ascertained that
from July 2008 to October 2011, TeleTu pursued illegal competition pursuant to art. 2598 of the Italian Civil Code
in connection with requests for migration to TIM, ordering it to compensate TIM for the amount of 1,378,000
euros plus interest and revaluation.
c) Commitments and guarantees
Personal guarantees provided, totaling 5,005 million euros, refer mainly to guarantee financing provided by TIM
on behalf of Subsidiaries (including 3,260 million euros for Telecom Italia Capital, 1,424 million euros for Telecom
Italia Finance, 72 million euros for Flash Fiber, 61 million euros for Telecom Italia Sparkle, 86 million euros for
Olivetti and 57 million euros for Telenergia).
Significant purchase commitments outstanding at December 31, 2020 for long-term contracts forming part of
TIM S.p.A.’s business operations, totaling around 2.5 billion euros, mainly related to the commitments
undertaken by the Company for supplies related to the operation of the telecommunications network.
The guarantees provided by third parties to Group companies, amounting to 4,157 million euros, refer for 3,401
million euros to the related to guarantees provided by banks and other financial institutions as a guarantee of
the proper performance of contractual obligations and for 756 million euros to insurance guarantees. In
particular, the following should be noted:
■ The Company issued six guarantees to the Ministry of Economic Development for a total of 1,922 million
euros for the deferment of the payment of the amount due for the acquisition of the user rights to
frequencies in the 694-790 MHz, 3600-3800 MHz and 26.5-27.5 GHz bands, which will be reserved for 5G
mobile telecommunications services. At December 31, 2020, the remaining guarantee was 1,794 million
euros;
■ The insurance guarantees, which totaled 756 million euros, mainly refer to guarantee financing by TIM in
applying legal provisions for contracts of Public Administrations and similar bodies;
■ TIM has given guarantees to INPS to support the application by some Group companies of Article 4,
paragraph 1, of Law 92 of June 28, 2012, to incentivize the departure of workers meeting the necessary
requirements; the total amount of guarantees is 72 million euros (of which 29 million euros for Telecom Italia
Sparkle and 19 million euros for Olivetti).
Finally, in May 2018, TIM issued a surety to the Prime Minister’s Office for 74.3 million euros to secure an appeal
to the Lazio Administration Court for a provisional stay of the administrative fine levied on TIM following the
preliminary investigation connected with the penalty proceeding initiated under Article 2 of Decree Law 21 of
3/15/2012 (the "Golden Power" law).
Separate Financial Statements of
TIM S.p.A.
Note 24
Pending disputes and legal actions, additional information,
commitments and guarantees
400
NOTE 25
REVENUES
These decreased by 1,087 million euros compared to 2019. The breakdown is as follows:
(million euros)
Equipment sales
Services
Total
2020
2019
1,271
10,759
12,030
1,440
11,697
13,137
Revenues from services are mainly represented by voice and data services on fixed and mobile networks for retail
customers (8,141 million euros) and for other wholesale operators (2,045 million euros).
Revenues are presented gross of amounts due to other TLC operators (591 million euros), which are included in
"Costs of services".
In 2020, adjustments were booked of non-recurring revenues for 38 million euros, connected with the
commercial initiatives of TIM S.p.A. to support customers in dealing with the COVID-19 emergencies. Further
details are provided in the Note “Significant non-recurring events and transactions” of the Separate Financial
Statements at December 31, 2020 of TIM S.p.A.
NOTE 26
OTHER OPERATING INCOME
This fell by 9 million euros and the figure breaks down as follows:
(million euros)
Late payment fees charged for telephone services
Recovery of employee benefits expenses, purchases and services rendered
Capital and operating grants
Damages, penalties and recoveries connected with litigation
Estimate revisions and other adjustments
Other
Total
2020
40
16
31
17
59
26
189
2019
48
37
27
17
36
33
198
Separate Financial Statements of
TIM S.p.A.
Note 27
Acquisition of goods and services
401
NOTE 27
PURCHASE OF RAW MATERIALS AND SERVICES
These increased by 15 million euros compared to 2019. The figure breaks down as follows:
(million euros)
Acquisition of raw materials and merchandise
Costs of services
Revenues due to other TLC operators
Costs for telecommunications network access services
Commissions, sales commissions and other selling expenses
Advertising and promotion expenses
Professional and consulting services
Utilities
Maintenance
Outsourcing costs for other services
Mailing and delivery expenses for telephone bills, directories and other
materials to customers
Distribution and logistics
Travel and lodging costs
Insurance
Other service expenses
Lease and rental costs
Rent and leases
Other lease and rental costs
Total
(a)
(b)
(c)
(a+b+c)
2020
926
591
101
827
130
114
353
277
388
33
7
6
33
519
3,379
5
301
306
4,611
2019
1,076
593
100
792
134
86
381
251
428
38
6
13
30
410
3,262
4
254
258
4,596
In application of IFRS 16, leased asset costs mainly included lease fees for contracts relating to intangible assets
(301 million euros, mainly for software licenses and royalties).
In 2020, non-recurring operating costs were incurred in reference to procurement and various costs for
approximately 15 million euros, which became necessary for the management of the COVID-19 health
emergency, mainly due to the acquisition of personal protection equipment and thermoscanners, and costs for
environmental hygiene services. Further details are provided in the Note “Significant non-recurring events and
transactions” of the Separate Financial Statements at December 31, 2020 of TIM S.p.A.
Separate Financial Statements of
TIM S.p.A.
Note 27
Acquisition of goods and services
402
NOTE 28
EMPLOYEE BENEFITS EXPENSES
Employee benefits expenses decreased by 299 million euros compared to 2019. The figure breaks down as
follows:
(million euros)
Ordinary employee expenses
Wages and salaries
Social security expenses
Employee severance indemnities
Other employee benefits
Costs and provisions for temp work
Miscellaneous expenses for personnel and other labor-related services
rendered
Charges for termination benefit incentives
Corporate restructuring expenses
Other
Total
2020
2019
1,496
556
(1)
106
2,157
—
—
35
1
36
2,193
1,576
590
(7)
87
2,246
—
7
236
3
246
2,492
(a)
(b)
(c)
(a+b+c)
"Ordinary employee expenses" decreased by 89 million euros, mainly due to the decrease in the average
salaried workforce equal to a total of -2,191 employees on average. Following the mergers of TN Fiber and HR
Services in TIM S.p.A., which took place respectively on September 30, 2020 and December 31, 2020, an average
total of 340 employees were acquired.
“Corporate restructuring expenses" amounted to 35 million euros (236 million euros in 2019) and are mainly
connected with the effective exits recorded in TIM S.p.A. in 2020 (also through application of Article 4 of Law no.
92 of June 28, 2012, as defined by the Trade Union Agreement of February 26, 2019 and the Trade Union
Agreement signed on June 4, 2020). Expenses totaling 236 million euros were recognized in 2019.
In 2020, non-recurring costs were incurred for approximately 7 million euros, made necessary to address the
COVID-19 health emergency. Further details are provided in the Note “Significant non-recurring events and
transactions” of the Separate Financial Statements at December 31, 2020 of TIM S.p.A.
The average salaried workforce stood at 36,621 employees at December 31, 2020 (38,473 at December 31, 2019).
A breakdown by category is as follows:
(number of units)
2020
2019
Executives
Middle Management
White collars
Blue collars
Employees on payroll
Employees with temp work contracts
Total headcount
458
3,320
32,843
-
36,621
-
36,621
426
3,374
34,673
-
38,473
-
38,473
The headcount at December 31, 2020 amounted to 38,516 employees, a decrease of 1,721 compared to
December 31, 2019 (40,237).
Separate Financial Statements of
TIM S.p.A.
Note 28
Personnel cost
403
NOTE 29
OTHER OPERATING EXPENSES
These decreased by 456 million euros compared to 2019. The figure breaks down as follows:
(million euros)
Write-downs and expenses in connection with credit management
Provision charges
TLC operating fees and charges
Indirect duties and taxes
Penalties, settlement compensation and administrative fines
Subscription dues and fees, donations, scholarships and traineeships
Other
Total
of which, included in the supplementary disclosure on financial instruments
2020
328
1
42
53
120
10
51
605
328
2019
402
414
43
63
64
10
65
1,061
402
Further details on Financial Instruments are provided in the Note "Supplementary disclosures on financial
instruments".
In 2020, non-recurring operating costs were incurred for a total of 46 million euros, mainly referring to provisions
and expenses connected with credit management deriving from the deterioration of the macroeconomic
context as a consequence of the COVID-19 pandemic (41 million euros). Further details are provided in the Note
“Significant non-recurring events and transactions” of the Separate Financial Statements at December 31, 2020
of TIM S.p.A.
NOTE 30
CHANGE IN INVENTORIES
This item was negative by 11 million euros (negative at 107 million euros as at December 31, 2019), mainly due
to the significant decrease in the year of both purchases as well as consumption, with reference to equipment
and accessories for mobile telephony, in application of a more targeted commercial and procurement policy.
NOTE 31
INTERNALLY GENERATED ASSETS
Internally generated assets amounted to 381 million euros, down by 22 million euros on 2019.
This performance was attributable to lower capitalization relating to both tangible assets for the installation of
access and carrier networks (-17 million euros) and to intangible assets for the development of software and
innovative services and network solutions (-5 million euros). The lower capitalizations mainly follow a reduction
in the number of hours worked (-7% on last year), with an impact of -25 million euros, only very slightly offset by
the average increase in the hourly cost (+ 1% on 2019), with an impact of +3 million euros. The increase in the
average hourly cost is due to an increase in the cost of labor (+4 million euros) partially offset by the zeroing of
overhead costs (- 1 million euros), which have no longer been capitalized starting 2020.
Internally generated assets in 2020 consisted of:
■ cost of labor of 376 million euros;
■ other external costs of 5 million euros.
They refer for 201 million euros to the item “tangible assets”, relating to the design, construction and testing of
network installations, and for 180 million euros to the item “intangible assets with a finite useful life”, mainly
concerning assets of software development and development of network solutions, applications and innovative
services.
Separate Financial Statements of
TIM S.p.A.
Note 29
Other operating expenses
404
NOTE 32
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased by 137 million euros compared to 2019 and was broken down as
follows:
(million euros)
Amortization of intangible assets with a finite useful life
Industrial patents and intellectual property rights
Concessions, licenses, trademarks and similar rights
Other intangible assets
Depreciation of tangible assets owned
Buildings (civil and industrial)
Plant and equipment
Manufacturing and distribution equipment
Other
Depreciation of rights of use assets
Property
Plant and equipment
Other
Total
2020
910
379
1
1,290
33
1,623
11
83
1,750
402
111
29
542
3,582
2019
842
380
—
1,222
36
1,689
12
81
1,818
567
80
32
679
3,719
(a)
(b)
(c)
(a+b+c)
For further details refer to the Notes "Tangible and intangible assets with finite useful lives", "Tangible assets"
and "Right-of-use assets".
Separate Financial Statements of
TIM S.p.A.
Note 32
Depreciation and amortization
405
NOTE 33
GAINS/(LOSSES) ON DISPOSALS OF NON-
CURRENT ASSETS
This item is broken down below:
(million euros)
Gains on disposals of non-current assets
Gains on the retirement/disposal of intangible, tangible and user rights on
rental
Losses on disposals of non-current assets
Losses on the retirement/disposal of intangible, tangible and user rights on
rental
Total
NOTE 34
2020
30
30
44
44
(14)
2019
2
2
43
43
(41)
(a)
(b)
(a-b)
IMPAIRMENT REVERSALS (LOSSES) ON NON-
CURRENT ASSETS
The item shows losses of 8 million euros (none in 2019), mainly following the provisions made for inventory
differences for plant warehouse materials held at external company sites.
Separate Financial Statements of
TIM S.p.A.
Note 33
Gains/(losses) on disposals of non-current assets
406
NOTE 35
INCOME/(EXPENSES) FROM INVESTMENTS
Details are as follows:
(million euros)
2020
Dividends
Net gains on disposals of investments
Losses on disposals of investments
Impairment losses on financial assets
Sundry expenses from investments
Total
of which, included in the supplementary disclosure on financial instruments
331
227
—
(7)
—
551
—
2019
141
35
(26)
(28)
(5)
117
1
Further details on Financial Instruments are provided in the Note "Supplementary disclosures on financial
instruments".
In particular, we report:
■ dividends mainly referred to the subsidiary TI Finance (75 million euros) and the associate INWIT S.p.A. (256
million euros). In 2019, dividends mainly referred to the then subsidiary INWIT S.p.A. (76 million euros) and
the subsidiaries TI Finance (53 million euros) and Persidera (10 million euros);
■ net capital gains - of 227 million euros - are mainly related to the 2020 sales of INWIT shares; more
specifically, they refer:
•
•
•
•
51 million euros to the transfer made on April 23, 2020, of a package of shares equal to 4.3% of the share
capital of INWIT, through an accelerated book-building procedure reserved for institutional investors;
144 million euros to the sale made on October 02, 2020 to Daphne 3 S.p.A. of 142,090,396 INWIT shares,
representing 14.80% of INWIT’s share capital;
13 million euros to the transfer by TIM to an SPV managed and assisted by Canson Capital Partners
(Guernsey) Limited of an investment in INWIT equal to approximately 1.2% of the related share capital
(corresponding to 11,522,400 INWIT shares), again on October 2, 2020;
19 million euros to the transfer by TIM to the same SPV of an additional share in INWIT equal to 1.8% of
its share capital (corresponding to 17,030,535 shares) following the December 2020 exercise of the
relevant purchase option.
■
impairment losses referred to the impairment of investment in the subsidiary Olivetti. In 2019, impairment
losses mainly referred to the write-down of the investments held in the subsidiary Olivetti (18 million euros),
Tim Tank (3 million euros), Timvision (2 million euros), Tn Fiber (1 million euros), as well as in the associate
Tiglio I (4 million euros).
Separate Financial Statements of
TIM S.p.A.
Note 35
Income/(expense) from investments
407
NOTE 36
FINANCE INCOME AND EXPENSES
Finance income (expenses) show a net expense of 961 million euros, which breaks down as follows:
(million euros)
Finance income
Finance expenses
Total net financial income (expenses)
The items break down as follows:
(million euros)
Interest expenses and miscellaneous finance expenses
Interest expenses and other costs relating to bonds
Interest expenses relating to subsidiaries
Interest expenses relating to associates
Interest expenses to banks
Finance expenses on liabilities for finance leasing
Interest expenses to others
Commissions
Miscellaneous finance expenses (*)
Interest income and other finance income:
Interest income
Interest income from subsidiaries
Interest income from associates
Income from financial receivables, recorded in Non-current assets
Income from financial receivables from subsidiaries, recorded in Non-current
assets
Income from financial receivables from associates, recorded in Non-current
assets
Income from securities other than investments, recorded in Non-current
assets
Income from securities other than investments, recorded in Current assets (*)
Miscellaneous finance income
Total net finance interest/(expenses)
(a)
Other components of financial income and expense:
Net exchange gains and losses
Net result from derivatives
Net fair value adjustments to fair value hedge derivatives and underlyings
Net fair value adjustments to non-hedging derivatives
Total other components of financial income and expense
Total net financial income (expenses)
of which, included in the supplementary disclosure on financial instruments
(b)
(c)=(a+b)
2020
1,012
1,973
(961)
2019
1,195
2,462
(1,267)
2020
2019
(563)
(166)
—
(47)
(145)
(1)
(922)
(54)
(74)
−
30
3
—
2
8
—
—
4
7
54
(996)
(2)
(48)
2
83
35
(961)
(704)
(608)
(269)
—
(54)
(163)
—
(1,094)
(50)
(135)
(185)
39
1
—
—
7
—
—
13
17
77
(1,202)
(1)
(30)
10
(44)
(65)
(1,267)
(1,015)
Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial
instruments".
Separate Financial Statements of
TIM S.p.A.
Note 36
Finance income and expenses
408
(*) of which IFRS 9 impact:
(million euros)
Income from negative adjustment of IFRS 9 impairment reserve on financial assets
through FVTOCI
Expenses from positive adjustment of IFRS 9 impairment reserve on financial assets
through FVTOCI
Reversal of IFRS 9 impairment reserve on financial assets through FVTOCI
Impairment losses on financial assets other than investments
2020
2019
—
—
—
—
7
—
—
—
For greater clarity of presentation, the net effects relating to derivative financial instruments are summarized in
the following table:
(million euros)
Exchange gains
Exchange losses
Net exchange gains and losses
Income from fair value hedge derivatives
Charges from fair value hedge derivatives
Net result from fair value hedge derivatives
Positive effect of the reversal of the Reserve of cash flow hedge derivatives
to the income statement (interest rate component)
Negative effect of the reversal of the Reserve of cash flow hedge
derivatives to the income statement (interest rate component)
Net effect of the Reversal of the Reserve of cash flow hedge derivatives
to the income statement (interest rate component)
Income from non-hedging derivatives
Charges from non-hedging derivatives
Net result from non-hedging derivatives
Net result from derivatives
Positive fair value adjustments relating to fair value hedge derivatives
Negative fair value adjustments to Underlying financial assets and liabilities
of fair value hedge derivatives
Net fair value adjustments
Positive fair value adjustments to Underlying financial assets and liabilities
of fair value hedge derivatives
Negative fair value adjustments relating to fair value hedge derivatives
Net fair value adjustments
Net fair value adjustments to fair value hedge derivatives and
underlyings
Positive fair value to non-hedging derivatives
Negative fair value adjustments to non-hedging derivatives
Net fair value adjustments to non-hedging derivatives
(a)
(b)
(c)
(a+b+c)
(d)
(e)
(d+e)
(f)
(g)
(f+g)
2020
8
(10)
(2)
47
—
47
118
(213)
(95)
285
(285)
—
(48)
45
(44)
1
6
(5)
1
2
449
(366)
83
2019
31
(32)
(1)
43
—
43
180
(253)
(73)
364
(364)
—
(30)
100
(91)
9
1
—
1
10
399
(443)
(44)
Separate Financial Statements of
TIM S.p.A.
Note 36
Finance income and expenses
409
NOTE 37
RELATED-PARTY TRANSACTIONS
The following tables show the balances relating to transactions with related parties and the impact of those
amounts on the separate income statement, statement of financial position and statement of cash flows of
TIM S.p.A..
Related-party transactions, when not dictated by specific laws, were conducted at arm's length. They were
performed in compliance with the internal procedure, which sets forth rules designed to ensure the transparency
and fairness of the transactions in accordance with Consob Regulation 17221/2010. The current procedure is
available on the website gruppotim.it, under the Group section/Governance System channel.
For an analysis of transactions with subsidiaries and associates of TIM S.p.A. please refer to the Note
“Investments”.
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
410
The effects of related party transactions on the line items of the separate income statements for 2020 and 2019
are as follows:
SEPARATE INCOME STATEMENT LINE ITEMS 2020
(million euros)
Total
Subsidiaries
Associates,
subsidiaries of
associates and
joint ventures
Related Parties
Pension
funds
Other
related
parties (*)
Key managers
Total
related
parties
% of
financial
statement
item
Revenues
Other income
Acquisition of goods and
services
Employee benefits expenses
Other operating expenses
Depreciation and
amortization
(a)
12,030
189
4,611
2,193
605
3,582
248
7
688
—
—
103
60
1
249
—
2
39
3
—
78
—
—
—
—
—
—
64
—
—
(b)
311
8
1,015
78
2
142
—
—
—
14
—
—
3
(14)
Gains/losses on disposals of
non-current assets
Income (expenses) from
investments
Finance income
Finance expenses
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
551
1,012
1,973
331
320
574
75
320
559
256
—
15
—
—
—
—
—
—
—
—
—
—
—
—
—
3
(b/a)
2.6
4.2
22.0
3.6
0.3
4.0
(21.4)
60.1
31.6
29.1
SEPARATE INCOME STATEMENT LINE ITEMS 2019
(million euros)
Total
Subsidiaries
Associates,
subsidiaries of
associates and
joint ventures
Related Parties
Pension
funds
Other
related
parties (*)
Key managers
Total
related
parties
% of
financial
statement
item
Revenues
Other income
Acquisition of goods and
services
Employee benefits expenses
Other operating expenses
Depreciation and
amortization
Gains/losses on disposals of
non-current assets
Income (expenses) from
investments
Finance income
Finance expenses
(a)
13,137
198
4,596
2,492
1,061
3,719
330
11
828
—
6
274
(41)
—
117
1,195
2,462
139
171
1,005
2
—
5
—
—
—
—
—
—
—
2
—
80
—
—
—
—
—
—
—
—
—
—
66
—
—
—
—
—
—
(b)
334
11
913
84
6
274
—
139
171
1,005
—
—
—
18
—
—
—
—
—
—
(b/a)
2.5
5.6
19.9
3.4
0.6
7.4
14.3
40.8
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
411
The effects of related party transactions on the line items of the statements of financial position as at
December 31, 2020 and December 31, 2019 are as follows:
STATEMENT OF FINANCIAL POSITION LINE ITEMS AT December 31, 2020
Total
(million euros)
Subsidiaries
Associates,
subsidiaries of
associates and joint
ventures
Related Parties
Other
related
parties (*)
Pension
funds
Total related
parties
% of financial
statement item
(b)
(b/a)
(a)
2,507
—
154
1,766
1,920
27,946
3,506
3,805
463
658
—
13
92
105
6,162
497
307
14
27,324
5,706
4,096
1,733
3,464
3,477
541
131
239
159
NET FINANCIAL DEBT
Non-current financial assets
Securities other than investments
(current assets)
Financial receivables and other
current financial assets
Cash and cash equivalents
Current financial assets
Non-current financial liabilities
of which: Non-current financial
liabilities for lease contracts
Current financial liabilities
of which: Current financial
liabilities for lease contracts
Total net financial debt
OTHER STATEMENT OF
FINANCIAL POSITION LINE
ITEMS
Rights of use assets
Miscellaneous receivables and
other non-current assets
Trade and miscellaneous
receivables and other current
assets
Miscellaneous payables and other
non-current liabilities
Trade and miscellaneous
payables and other current
liabilities
—
—
—
—
—
313
313
50
50
363
347
—
39
2
—
—
—
—
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
658
—
13
92
105
6,475
810
357
64
6,069
888
131
281
161
26.2
—
8.4
5.2
5.5
23.2
23.1
9.4
13.8
22.2
21.7
7.6
8.1
4.6
8.9
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key managers.
5,610
498
341
101
20
36
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
412
STATEMENT OF FINANCIAL POSITION LINE ITEMS AT December 31, 2019
(million euros)
Total
Subsidiaries
Associates,
subsidiaries of
associates and joint
ventures
Related Parties
Other
related
parties (*)
Pension
funds
—
—
—
—
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
1
1
—
—
1
1
—
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
related
parties
(b)
641
—
17
1
18
6,754
998
1,600
270
7,695
1,294
139
331
141
% of financial
statement item
(b/a)
27.3
9.7
0.1
1.8
22.4
24.9
35.9
40.5
24.6
26.4
8.0
8.9
4.7
(a)
2,349
—
176
829
1,005
30,184
4,002
4,453
666
641
—
17
1
18
6,753
997
1,600
270
31,283
7,694
4,906
1,293
1,746
139
3,731
2,973
327
141
NET FINANCIAL DEBT
Non-current financial assets
Securities other than investments
(current assets)
Financial receivables and other
current financial assets
Cash and cash equivalents
Current financial assets
Non-current financial liabilities
of which: Non-current financial
liabilities for lease contracts
Current financial liabilities
of which: Current financial
liabilities for lease contracts
Total net financial debt
OTHER STATEMENT OF
FINANCIAL POSITION LINE
ITEMS
Rights of use assets
Miscellaneous receivables and
other non-current assets
Trade and miscellaneous
receivables and other current
assets
Miscellaneous payables and other
non-current liabilities
Trade and miscellaneous
payables and other current
liabilities
6.5
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key managers.
5,843
382
326
31
21
4
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
413
The effects of related party transactions on the significant line items of the statements of cash flows for 2020
and 2019 are as follows:
STATEMENT OF CASH FLOWS LINE ITEMS 2020
(million euros)
Total
Subsidiaries
(a)
Related Parties
Other
related
parties (*)
Pension
funds
Associates,
subsidiaries of
associates
and joint
ventures
Total
related
parties
(b)
% of
financial
statement
item
(b/a)
Purchase of intangible assets,
tangible assets and right of use
assets on an accrual basis
Dividends paid
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
3,374
317
566
37
188
1
—
36
16.8
11.8
378
—
STATEMENT OF CASH FLOWS LINE ITEMS 2019
(million euros)
Total
Subsidiaries
(a)
Related Parties
Other
related
parties (*)
Pension
funds
Associates,
subsidiaries of
associates
and joint
ventures
Total
related
parties
(b)
% of
financial
statement
item
(b/a)
Purchase of intangible assets,
tangible assets and right of use
assets on an accrual basis
(*) Vivendi group and Companies belonging to the group that it belongs to; other related parties through directors, statutory auditors and key
managers.
3,398
313
315
—
—
2
9.3
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
414
Transactions with subsidiaries
The most significant amounts are summarized as follows:
SEPARATE INCOME STATEMENT LINE ITEMS
(million euros)
Revenues
TIM Retail
Flash Fiber S.r.l.
TIM S.A.
INWIT S.p.A.
Olivetti S.p.A.
Telecom Italia S.Marino S.p.A.
Telecom Italia Sparkle S.p.A.
Telecom Italia Trust Technologies
S.r.l.
Telecontact S.p.A.
Telefonia Mobile Sammarinese
S.p.A.
Telenergia S.p.A.
Other minor items
Total revenues
2020
2019
Type of contract
60
104
24
12
(9)
2
47
2
3
1
1
1
75
Supply of products for sale to the public, voice and data
transmission services and ICT services for company use,
property leasing
118 Construction of the horizontal secondary network in FTTH
mode following the joint investment arrangement of July 28,
2016 between TIM and Fastweb, voice services, data
transmission equipment and
services, administrative
outsourcing
29 Roaming services, license support and provision as part of
network operations, information technology, marketing &
sales, Royalties Trademark License Agreement and TIM Brand
39 Voice and data transmission services for company use, IRU
transfer of Dark Optic Fiber and Local Infrastructure, Easy IP
ADSL service, small cell design and construction services,
property leasing, sales of mobile network TLC products,
product rental, administrative outsourcing (for the portion
relative to the first three months of 2020)
6 Telephone services, MPLS and fiber services for the national
data network, product sales, property
leasing, project
development, administrative outsourcing and margins for the
end-to-end solutions offered by Olivetti on Jasper platform
and intermediated by TIM, under the scope of the contract for
the development, management and marketing of machine-
to-machine and Internet of Things services
2 Connection and telecommunications services, in particular for
the sale of data (bitstream) services, dark fiber contract, local
loop unbundling
47 Voice and data transmission services, services relating to the
interconnection between Telecom Italia Sparkle and TIM
communications networks with particular reference to
accesses and international traffic, sale of IRU dark fiber,
property leasing, administrative outsourcing
2 Voice outsourced
services,
fixed network products,
administrative outsourcing
fixed and mobile network and
4 Lease of properties and facility management services, supply
of
IP connectivity
telecommunications products and services, administrative
outsourcing
1
Mobile telephone and telecommunications product sales
1 Outsourcing
outsourcing
for
company
business,
administrative
6 The amount shown in 2019 included, in addition to the minor
companies, HR Services, which in 2020 was merged into TIM
S.p.A., as well as Persidera, which was sold late 2019
248
330
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
415
(million euros)
Other income
Acquisition of goods and
services
TIM Retail
Flash Fiber S.r.l.
INWIT S.p.A.
Telecom Italia Trust Technologies
S.r.l.
Olivetti S.p.A.
Telecom Italia Sparkle S.p.A.
Telecontact S.p.A.
Telenergia S.p.A.
Telsy S.p.A.
Other minor companies
Total acquisition of materials
and services
2020
2019
Type of contract
7
92
1
11
20
70
146
87
255
5
1
688
11 Recovery of seconded Employee benefits expenses, refunds of
costs for services, compensation for board positions, other
income
113 Supply of services for acquisition of new customers,
for TIM
information activities and post-sales support
customers, activities for the promotion of TIM's image and
distinctive brands through point-of-sale windows
- Use of the network in GPON mode for the supply of the FTTH
service
64 Supply of services for BTS sites, monitoring and security
services, management and maintenance services (for the
portion relative to the first three months of 2020)
17 Certification Authority service for TIM and within the TIM
customer offering, archiving service according to certified
email rules for the TIM S.p.A.’s Certified Electronic Mail box,
provision of digital identity services
IT services,
43 Provision of Cloud Printing service for software, maintenance
and supply of customized services as part of TIM offerings to
end customers, purchase of
ICT product
installation costs, after-sales support, as part of TIM offerings
to end customers, processing services, processing services,
support, dispatching of information flows related to debt
recovery and archiving of documentation according to the
law, Prepaid and Subscription contract management services
for fixed-line and mobile consumer customers for electronic
and paper
respectively, consumer contract
management services in support of the TIM CDA line, back
office services as part of the “Postino Intelligente” (smart
postman) project aimed at marketing the mobile offering
remotely, evolutionary developments of projects and
platforms, purchase of software platform licenses, software
developments, award of cloud enabling services and cloud
computing services, security, the development of on-line
services and portals and applicative cooperation for the Public
Administrations
storage
156 Portion to be paid for telecommunications services and
interconnection costs, telephone services, data transmission
and international line lease
83 Customer Care services for TIM customers and for the Public
Administration under the Consip Agreement, back-office
services relating to the billing services for customers of the
paid service provided by TIM technicians, call center and back-
office services for the management of the information of the
technical and commercial front end of public telephony
304 Power services
3 Provision of equipment and licenses, as part of TIM offerings
to end customers, and ICT solutions security services for TIM,
maintenance services and licenses
45 The amount shown in 2019 included, in addition to the minor
companies, HR Services and Tim Vision, which in 2020 were
merged into TIM S.p.A., as well as Persidera, which was sold
late 2019
828
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
416
2020
2019
Type of contract
(million euros)
Employee benefits expenses
Other operating expenses
Amortization of right-of-use
assets
Flash Fiber S.r.l.
INWIT S.p.A.
Other minor items
Total amortization of rights of
use assets
Gains/(losses) on disposals of
non-current assets
Income (expenses) from
investments
Telecom Italia Finance S.A.
Other minor items
Total income (expenses)
from investments
Finance income
Flash Fiber S.r.l.
Olivetti S.p.A.
Telecom Italia Capital S.A.
Telecom Italia Finance S.A.
Telenergia S.p.A.
Total finance income
Finance expenses
Flash Fiber S.r.l.
INWIT S.p.A.
Telecom Italia Capital S.A.
Telecom Italia Finance S.A.
Total finance expenses
—
—
39
64
—
103
3
75
—
75
10
—
273
36
1
320
—
4
429
126
559
—
6 Contractual penalties, other expenses
18 Amortization of rights of use related to the recognition of
greater non-current assets amortized over the residual
contractual term
255 Amortization of rights of use related to the recognition of
greater non-current assets amortized over the residual
contractual term (for the portion relative to the first three
months of 2020)
1 The amount shown in 2019 included RN Fiber, which in 2020
was merged into TIM S.p.A.
274
— Capital gains from the disposal of rights of use over third
party assets following the derecognition of such rights as a
result of the new March 2020 Master Service Agreement
53 Dividends
86 The amount indicated in 2019 includes the company
Persidera, sold late 2019, and INWIT S.p.A., which since
2020 has been considered an associate
139
7 Income from receivables and financial commissions
1 Interest
financial
financial
receivables,
receivable
income on
commissions receivable
124 Income from securities, income from derivatives, financial
commissions receivable, other financial income
38 Income from securities, income from derivatives, and
1 Interest
financial commissions receivable
income on
financial
commissions receivable
receivables,
financial
171
4 Finance expenses for interest due to the recognition of
higher financial liabilities connected to the rights of use
assets
17 Finance expenses for interest connected with rights of use
consequent to the recognition of higher financial liabilities
(for the portion relative to the first three months of 2020)
845 Interest on financial payables, charges on derivatives,
miscellaneous finance expenses
139 Interest on financial payables, charges on derivatives,
financial commissions payable, other finance expenses
1,005
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
417
STATEMENT OF FINANCIAL POSITION LINE ITEMS
12.31.2020
12.31.2019
Type of contract
(million euros)
Net financial debt
Non-current financial assets
Flash Fiber S.r.l.
Telecom Italia Finance S.A.
Telecom Italia Capital S.A.
Total non-current financial
assets
Securities other than
investments (current assets)
Financial receivables and
other current financial assets
Flash Fiber S.r.l.
Telecom Italia Capital S.A.
Telecom Italia Finance S.A.
Telecom Italia Sparkle S.p.A.
Other minor items
Total financial receivables
and other current financial
assets
Cash and cash equivalents
Flash Fiber S.r.l.
Telenergia S.p.A.
Total Cash and cash
equivalents
Non-current financial
liabilities
Flash Fiber S.r.l.
Telecom Italia Capital S.A.
Telecom Italia Finance S.A.
Other minor companies
500
142
16
658
—
1
7
2
3
—
13
73
19
92
495
4,217
1,448
2
491 Loan
150 Derivative assets
— Derivative assets
641
—
1 Short-term financial receivables
7 Derivative assets
3 Derivative assets
— Financial receivables for the sale of network infrastructure in
IRU
6 The amount shown in 2019 included, in addition to the minor
companies, TIM Vision, which in 2020 was merged into TIM
S.p.A..
17
Treasury current accounts
—
1
1
388 Non-current financial liabilities related to the recognition of
rights of use for lease liabilities
4,335 Hedging derivatives and financial payables
1,422 Hedging derivatives and financial payables
608 Non-current financial liabilities related to the recognition of
rights of use for lease liabilities with INWIT S.p.A., considered
an associate since 2020
Total Non-current financial
liabilities
6,162
6,753
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
418
(million euros)
Current financial liabilities
Telecom Italia Trust Technologies
S.r.l.
Olivetti S.p.A.
Flash Fiber S.r.l.
Telecom Italia Capital S.A.
Telecom Italia Finance S.A.
Telecom Italia Sparkle S.p.A.
Telecontact S.p.A.
Telsy S.p.A.
Other minor items
12.31.2020
12.31.2019
Type of contract
13
23
6
51
42
118
45
6
3
10 Payables for current accounts
1 Payables for current accounts
18 Current financial liabilities related to the recognition of rights
of use arising from lease agreement liabilities, payables for
current accounts
56 Financial payables, derivatives
991 Financial payables, payables for current accounts, derivatives
177 Payables for current accounts
34 Payables for current accounts
3 Payables for current accounts
310 The amount indicated in 2019 also includes, in addition to
minor companies, HR Services, TIM Vision and TN Fiber, which
merged into TIM S.p.A. in 2020, as well as non-current financial
liabilities related to the recognition of rights of use for lease
liabilities with INWIT S.p.A., considered an associate since 2020
Total Current financial liabilities
307
1,600
12.31.2020
12.31.2019
Type of contract
(million euros)
Other statement of financial
position line items
Right of use on leased assets
Flash Fiber S.r.l.
Telecom Italia Sparkle S.p.A.
Other Minor
Total right of use on leased
assets
Miscellaneous receivables and
other non-current assets
532
7
2
541
131
422 Rights of use related to the recognition of greater non-current
assets amortized over the residual contractual term
— Rights of use for the supply of a pairing of dark fiber on the
undersea cable system Bluemed and related research and
design activities
871 The amount indicated in 2019 also includes, in addition to
minor companies, HR Services, TIM Vision and TN Fiber,
merged into TIM S.p.A. in 2020, as well as rights of use for lease
liabilities with INWIT S.p.A., considered an associate since 2020
1,293
139 Deferred contractual and other deferred costs for transactions
with Telecontact (customer care services) and TIM Retail (new
activations), receivables for tax consolidation
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
419
(million euros)
Trade and miscellaneous
receivables and other current
assets
TIM Retail
Flash Fiber S.r.l.
TIM S.A.
Olivetti S.p.A.
Telecom Italia Trust Technologies
S.r.l.
Telecom Italia S.Marino S.p.A.
Telecom Italia Sparkle S.p.A.
Telecontact S.p.A.
Telenergia S.p.A.
Telsy S.p.A.
Other minor companies
12.31.2020
12.31.2019
Type of contract
49
102
13
8
3
1
18
33
8
2
2
58 Supply of products for sale to the public, voice and data
transmission services and ICT services for company use,
property leasing, receivables for tax consolidation
121 Construction of the horizontal secondary network in FTTH
mode following the joint investment arrangement of July 28,
2016 between TIM and Fastweb, voice services, data
transmission equipment and
services, administrative
outsourcing
18 Roaming services, license support and provision as part of
network operations, information technology, marketing &
sales, Royalties Trademark License Agreement and TIM Brand
14 Telephone services, MPLS and fiber services for the national
leasing, project
data network, product sales, property
development, administrative outsourcing
2 Outsourced
voice
services,
fixed network products,
administrative outsourcing, receivables for tax consolidation
1 Connection and telecommunications services, in particular for
the sale of data (bitstream) services, dark fiber contract, local
loop unbundling
24 Voice and data transmission services, services relating to the
interconnection between Telecom Italia Sparkle and TIM
communications networks with particular reference to
accesses and international traffic, sale of IRU dark fiber,
property leasing, administrative outsourcing
fixed and mobile network and
30 Lease of properties and facility management services, supply
of
IP connectivity
telecommunications products and services, administrative
outsourcing, deferred contract costs, receivables for tax
consolidation
7 Outsourcing
business,
outsourcing, receivables for tax consolidation
administrative
company
for
1 Deferred costs for the provision of equipment and licenses, as
part of TIM offerings to end customers, and ICT solutions
security services for TIM, maintenance services and licenses
51 The amount indicated in 2019 also includes, in addition to
minor companies, HR Services, TIM Vision and TN Fiber, which
merged into TIM S.p.A. in 2020 and INWIT S.p.A., considered
an associate since 2020
Total trade and miscellaneous
receivables and other current
assets
239
327
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
420
(million euros)
Miscellaneous payables and
other non-current liabilities
Flash Fiber S.r.l.
Olivetti S.p.A.
Telecom Italia S.Marino S.p.A.
Telecom Italia Sparkle S.p.A.
Telenergia S.P.A.
Other minor items
Total miscellaneous payables
and other non-current liabilities
Trade and miscellaneous
payables and other current
liabilities
TIM Retail
Flash Fiber S.r.l.
Telecom Italia Trust Technologies
S.r.l.
Olivetti S.p.A.
Telecom Italia Sparkle S.p.A.
Telecontact S.p.A.
12.31.2020
12.31.2019
Type of contract
149
1
1
7
1
—
159
22
62
11
46
97
13
120 Payables for tax consolidation, deferred revenues deriving
from contracts for the sale of transmission capacity
3 Payables for tax consolidation
1 Deferred revenues for connection and telecommunications
services contracts
14 Deferred revenues from interconnection contracts, payables
for tax consolidation
— Payables for tax consolidation
3 The amount shown in 2019 included, in addition to the minor
companies, TN Fiber, which in 2020 was merged into TIM
S.p.A., as well as INWIT S.p.A., considered an associate since
2020
141
27 Supply of services
for acquisition of new customers,
for TIM
information activities and post-sales support
customers, activities for the promotion of
image and
distinctive brands TIM through point-of-sale windows,
payables for tax consolidation
64 Use of network in GPON mode for the supply of the FTTH
service, deferred revenues, payables for tax consolidation
10 Certification Authority service for TIM and within the TIM
customer offering, archiving service according to certified
email rules for the TIM S.p.A.’s Certified Electronic Mail box,
provision of digital identity services
37 Provision of Cloud Printing service for software, maintenance
and supply of customized services as part of TIM offerings to
end customers, purchase of IT services, ICT product installation
costs, after-sales support, as part of TIM offerings to end
customers, processing services, processing services, support,
dispatching of information flows related to debt recovery and
archiving of documentation according to the law, Prepaid and
Subscription contract management services for fixed-line and
mobile consumer customers for electronic and paper storage
respectively, consumer contract management services in
support of the TIM CDA line, back office services as part of the
“Postino Intelligente” (smart postman) project aimed at
marketing
remotely, evolutionary
developments of projects and platforms, purchase of software
platform licenses, software developments, award of cloud
enabling services and cloud computing services, security, the
development of on-line services and portals and applicative
cooperation for the Public Administrations, payables for tax
consolidation
the mobile offering
57 Portion to be paid for telecommunications services and
interconnection costs, telephone services, data transmission
and international line lease, payables for tax consolidation
19 Customer Care services for TIM customers and for the Public
Administration under the Consip Agreement, back-office
services relating to the billing services for customers of the paid
service provided by TIM technicians, call center and back office
services for the management of the information of technical
and commercial front end of the public telephony, payables for
tax consolidation
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
421
(million euros)
Telenergia S.p.A.
Telsy S.p.A.
Other minor companies
12.31.2020
12.31.2019
Type of contract
78
9
3
51 Power services
5 Provision of equipment, as part of TIM offerings to end
customers, and ICT solutions security services for TIM,
maintenance services and licenses
56 The amount indicated in 2019 also includes, in addition to
minor companies, HR Services, TIM Vision and TN Fiber,
which merged into TIM S.p.A. in 2020 and INWIT S.p.A.,
considered an associate since 2020
Total trade and miscellaneous
payables and other current
liabilities
341
326
STATEMENT OF CASH FLOWS LINE ITEMS
STATEMENT OF CASH FLOWS
LINE ITEMS
(million euros)
Purchase of intangible assets,
tangible assets and right of use
assets on an accrual basis
Flash Fiber S.r.l.
Olivetti S.p.A.
Telecom Italia Sparkle S.p.A.
Telecom Italia Trust Technologies
S.r.l.
Telenergia S.p.A.
Telsy S.p.A.
Other minor items
Total purchases of intangible,
tangible and right of use assets
on an accrual basis
Dividends paid
2020
2019
Type of contract
149
11
7
3
1
11
6
188
1
231 Higher value of rights of use recognized as a result of new
contracts or changes in existing lease contracts
7 Purchase of products for resale and lease as part of offerings
for end customers, development and implementation on
platforms
— Rights of use for the supply of a pairing of dark fiber on the
undersea cable system Bluemed and related research and
design activities
2 Digital Identity and Certification Authority
1 Connections for power supply of local NGAN cabinets
3 Purchase of equipment, as part of TIM offerings to end
customers, and ICT solutions security services for TIM
69 The amount shown in 2019 included TN Fiber, which in 2020
was merged into TIM S.p.A., as well as INWIT S.p.A.,
considered an associate since 2020
313
Dividends paid to Telecom Italia Finance S.A.
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
422
Transactions with associates, subsidiaries of associates and
joint ventures
The most significant amounts are summarized as follows:
SEPARATE INCOME STATEMENT LINE ITEMS
(million euros)
Revenues
INWIT S.p.A.
Nordcom S.p.A.
Other minor items
Total revenues
Other proceeds
Acquisition of goods and
services
INWIT S.p.A.
W.A.Y. S.r.l.
Other minor items
Total Acquisition of goods and
services
Other operating expenses
Amortization of right-of-use
assets
Income/(expenses) from
investments
Finance income
Finance expenses
2020
2019
Type of contract
59
1
—
60
1
242
6
1
249
2
39
256
—
15
— Voice and data transmission services for company use,
Desktop Management ICT services, IRU transfer of Dark Optic
Fiber and Local Infrastructure, Easy IP ADSL service, small
cell design and construction services, property leasing, site
maintenance and administrative outsourcing (for the period
April-December 2020)
connections and outsourcing
1 Fixed and mobile voice services, equipment, data network
1 The amount shown in 2019 included, in addition to the minor
companies, Asscom, which was sold in June 2020
2
—
security
services
— Supply of services for BTS sites, such as the provision of
passive infrastructure and power supply systems, monitoring
and
(alarms), management and
maintenance services (MSA) (for the period April-December
2020)
4 Supply,
installation and technical support services for
geolocation equipment provided as part of offers to TIM
customers, software developments
1
5
— Penalties
for breach of contract on maintenance
management services to INWIT S.p.A. (for the period April-
December 2020)
— Amortization of rights of use related to the recognition of
greater non-current assets amortized over the residual
contractual term, towards INWIT S.p.A. (for the period April-
December 2020)
— Dividends to INWIT S.p.A.
—
— Finance expenses for interest related to financial liabilities
for rights of use granted to INWIT S.p.A. (for the period April-
December 2020)
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
423
STATEMENT OF FINANCIAL POSITION LINE ITEMS
12.31.2020
12.31.2019
Type of contract
(million euros)
Net financial debt
Non-current financial liabilities
Current financial liabilities
(million euros)
Other statement of financial
position line items
Right of use on leased assets
Trade and miscellaneous
receivables and other current
assets
INWIT S.p.A.
W.A.Y. S.r.l.
Other minor items
Total trade and miscellaneous
receivables and other current
assets
Miscellaneous payables and
other non-current liabilities
Trade and miscellaneous
payables and other current
liabilities
INWIT S.p.A.
Movenda S.p.A.
W.A.Y. S.r.l.
Other minor items
Total trade and miscellaneous
payables and other current
liabilities
313
50
— Non-current financial liabilities related to the recognition of
rights of use for lease liabilities with INWIT S.p.A.
— Current financial liabilities related to the recognition of
rights of use for lease liabilities with INWIT S.p.A.
12.31.2020
12.31.2019
Type of contract
347
36
2
1
39
2
98
1
2
—
101
— Rights of use related to the recognition of greater non-
current assets amortized over the residual contractual
term, towards INWIT S.p.A.
— Voice and data transmission services for company use, IRU
assignments of dark optic fiber and local infrastructure, Easy
IP ADSL service, small cell design and production services,
property leasing, sales of mobile network TLC products,
product rental, receivables for tax consolidation
2 Deferred costs for the provision of customized platforms,
application offers, fixed and mobile voice services
—
2
— Deferred contractual revenues from INWIT S.p.A.
— Supply of services for BTS sites, monitoring and security
services, management and maintenance services
1 Supply and certification of SIM CARDS, software systems
2 Supply,
installation and technical support services for
geolocation equipment provided as part of offers to TIM
customers, software developments
1
4
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
424
STATEMENT OF CASH FLOWS LINE ITEMS
(million euros)
Purchase of intangible assets,
tangible assets and right of use
assets on an accrual basis
INWIT S.p.A.
Movenda S.p.A.
Other minor items
Total purchases of intangible,
tangible and right of use assets
on an accrual basis
2020
2019
Type of contract
376
1
1
378
— Higher value of rights of use as a result of new contracts or
changes in existing lease contracts (for the period April-
December 2020)
1 Supply and development of system software
1
2
TIM S.p.A. has issued guarantees on behalf of subsidiaries, associates and joint ventures for a total of 5,001
million euros, net of back-to-back guarantees received (5,288 million euros at December 31, 2019).
In particular, the following is noted: 3,260 million euros relating to Telecom Italia Capital S.A. (3,561 million euros
at December 31, 2011); 1,424 million euros relating to Telecom Italia Finance S.A. (1,382 million euros at December
31, 2019); 61 million euros for the Sparkle group (68 million euros at December 31, 2019); 86 million euros relating
to Olivetti S.p.A. (106 million euros at December 31, 2019); 57 million euros in the favor of Telenergia S.p.A. (50
million euros at December 31, 2019).
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
425
Transactions with other related parties (both through directors,
statutory auditors and key managers with strategic
responsibilities within the company and as participants in
shareholder agreements pursuant to Article 122 of the
Consolidated Law on Finance)
Details are provided below of the transactions with:
■ Vivendi Group and the companies of the group that it belongs to (as a result of the resolutions of the Board
of Directors of TIM S.p.A. of May 3 and June 1, 2017);
■ Related companies through Directors appointed on May 4, 2018;
■ Related companies through Directors whose term of office ended on May 4, 2018.
SEPARATE INCOME STATEMENT LINE ITEMS
(million euros)
Revenues
Other Directors or through
Havas Group
Total revenues
Acquisition of goods and
services
Havas Group
Vivendi group
Total Acquisition of goods and
services
2020
2019
Type of contract
3
—
3
74
4
78
1 Fixed-line and mobile voice services and systems
1 Fixed-line and mobile voice services
2
76 Purchase of media space on behalf of TIM and, to a lesser
extent, development and delivery of advertising campaigns
4 Purchase of musical and television digital content (TIMmusic,
TIMvision) and supply of D&P cloud-based games (TIMgames)
80
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
426
STATEMENT OF FINANCIAL POSITION LINE ITEMS
12.31.2020
12.31.2019
Type of contract
(million euros)
Net financial debt
Non-current financial liabilities
—
1 Non-current financial liabilities related to the recognition of
rights of use for lease liabilities with Other Directors
12.31.2020
12.31.2019
Type of contract
(million euros)
Other statement of financial
position line items
Right of use on leased assets
Other Directors or through
Total right of use on leased
assets
Trade and miscellaneous
receivables and other current
assets
Other Directors or through
Other minor companies
Total trade and miscellaneous
receivables and other current
assets
Trade and miscellaneous
payables and other current
liabilities
Havas Group
Vivendi group
Other minor companies
Total trade and miscellaneous
payables and other current
liabilities
—
—
3
—
3
33
2
1
36
1 Rights of use resulting from the recognition of greater non-
current assets amortized over the residual contractual term
1
1 Fixed-line and mobile voice services and systems
1
2
30 Purchase of media space on behalf of TIM and, to a lesser
extent, development and delivery of advertising campaigns
1 Purchase of musical and television digital content (TIMmusic,
TIMvision) and supply of D&P cloud-based games
(TIMgames).
-
31
STATEMENT OF CASH FLOWS LINE ITEMS
2020
(million euros)
2019
Type of contract
Dividends paid
36
— Dividends paid to Vivendi Group
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
427
Transactions with pension funds
The most significant amounts are summarized as follows:
SEPARATE INCOME STATEMENT LINE ITEMS
(million euros)
Employee benefits expenses
Fontedir
Telemaco
Total Employee benefits
expenses
2020
2019
Type of contract
8
56
64
Contributions to pension funds
6
60
66
STATEMENT OF FINANCIAL POSITION LINE ITEMS
12.31.2020
12.31.2019
Type of contract
(million euros)
Trade and miscellaneous
payables and other current
liabilities
Fontedir
Telemaco
Total trade and miscellaneous
payables and other current
liabilities
Payables for contributions to pension funds
2
18
20
2
19
21
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
428
Remuneration to Key Managers
In 2020, the total remuneration recorded on an accrual basis by TIM S.p.A. in respect of key managers amounted
to 14 million euros (18 million euros at December 31, 2019). The figure breaks down as follows:
(million euros)
2020
2019
Short-term remuneration
Long-term remuneration
Employment termination benefit incentives
Share-based payments (*)
Total
(*) These refer to the fair value, accrued to December 31, 2020, of rights under the share-based incentive plans of TIM S.p.A. (Long Term Incentive and
Plans of Subsidiaries).
10
—
2
2
14
11
—
5
2
18
Short-term remuneration is paid during the reference year, and, at the latest, within the six months following
the end of that period. As at December 31, 2020, they do not include the effects of the reversal of the accruals
related to the 2019 costs amounting to approximately 600 thousand euros.
Long-term remuneration, at December 31, 2020, does not include the effects of the reversal of the accruals
related to the 2019 costs of 500 thousand euros.
The indemnities for early termination of employment, as at December 31, 2020, do not include the effects of the
reversal of the accruals relating to 2019 costs amounting to approximately 200 thousand euros.
The share-based payments at December 31, 2020, do not include the effects of the reversal of the accruals
related to the 2019 costs of the LTI 2018/2020 of 400 thousand euros.
In 2020, the contributions paid in to defined contribution plans (Assida and Fontedir) by TIM S.p.A. or by
subsidiaries of the Group on behalf of key managers, amounted to 135 thousand euros (141 thousand euros at
December 31, 2019).
With regard to the remuneration of directors and statutory auditors due for the year 2020, pursuant to Article
2427, no. 16 of the Italian Civil Code, reference should be made to the Compensation Report, available at the
Company’s headquarters and on the Company’s website at the following address:
www.telecomitalia.com/Assemblea.
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
429
In 2020, “Key managers”, i.e. those who, directly or indirectly, have the power and responsibility for the
planning, management and control of TIM Group operations, including directors, were the following:
Directors:
Luigi Gubitosi
Executives:
Pietro Labriola
Lorenzo Forina
Federico Rigoni
Michele Gamberini
Stefano Grassi
Luciano Sale
Giovanni Gionata Massimiliano Moglia
Carlo Nardello
Agostino Nuzzolo
Giovanni Ronca
Elisabetta Romano
Federico Rigoni
Nicola Grassi
Stefano Siragusa
Managing Director and Chief Executive Officer of TIM S.p.A.
General Manager of TIM S.p.A.
Diretor Presidente Tim S.A.
Chief Revenue Office
(1)
(2)
Chief Technology & Information Office
Head of Security
Head of Human Resources, Organization & Real Estate
Chief Regulatory Affairs & Wholesale Market Office
Chief Strategy, Customer Experience & Transformation Office
Head of Legal and Tax
Chief Financial Office
(4) Chief Innovation & Partnership Office
(1)
Head of Procurement
(3)
Chief Operations Office
(1) to February 4, 2020;
(2) from February 5, 2020
(3) to March 16, 2020;
(4) to August 5, 2020.
Separate Financial Statements of
TIM S.p.A.
Note 37
Related party transactions
430
NOTE 38
EQUITY COMPENSATION PLANS
Equity compensation plans in place at December 31, 2020 are used for retention purposes and to offer long-term
incentives to Group managers and personnel.
A summary is provided below of the plans in place at December 31, 2020. For more information on the plans in
place at December 31, 2019, see the Separate Financial Statements of TIM S.p.A. at December 31, 2019.
Description of stock option plans
With regard to the 2014-2016 Stock Option Plan of TIM S.p.A., already in place at December 31, 2019, the exercise
period ended on March 24, 2020 and all assigned, but not exercised, options lapsed.
Description of other equity compensation plans
TIM S.p.A. - Special Award 2016 – 2019
As required by the Regulations, following the approval of the Financial Statements for 2019, the premiums
accrued under the Plan were liquidated. Therefore, in April 2020, a cash bonus of a total of 486,000 euros (20%
of the accrued bonus) was paid to the recipients and a total of 2,492,305 ordinary shares (80% of the accrued
premium) was assigned.
TIM S.p.A. - Long Term Incentive Plan 2018-2020
The Plan, approved by the Shareholders' Meeting of Telecom Italia S.p.A. of April 24, 2018, provides for a three-
year vesting period (2018-2020) and the bonus allocation of Telecom Italia S.p.A. ordinary shares subject to the
achievement of two performance conditions, as assessed by the Board of Directors when approving the TIM
Group's consolidated financial statements at December 31, 2020:
•
•
average performance of TIM ordinary shares versus the average market performance of a peer basket in the
quarters preceding the start and the end of the period (70% weighting). The peer basket consists of the
following Companies: Deutsche Telekom AG, Vodafone Group PLC, Telefonica SA, Orange SA, BT Group PLC,
Telenor ASA, Swisscom AG, Telia Co AB, Koninklijke KPN NV, Proximus SADP, Elisa OYJ;
cumulative equity free cash flow over the period 2018-2020 (30% weighting). This parameter is linked to the
generation of cash flow, understood as net cash flow before dividends and investments in frequencies.
Represents the Free Cash Flow available for the payment of dividends, the repayment of the debt, the impact
of IAS 17 (finance leases) and the investment in frequencies, and do not include the financial impact of any
acquisition and/or disposal of equity investments (M&A).
The Plan had two grants: a first grant reserved to the Chief Executive Officer, serviced by a maximum of
30,000,000 shares; and the second grant for a select number of Group management (serviced by a maximum
of 55,000,000 shares).
Following final calculation of the results of the three-year vesting period 2018-2020, the levels will be determined
for achieving the two parameters indicated, thereby quantifying any maturity of quota of the premium in shares.
TIM S.p.A. - Long Term Incentive Plan 2020-2022
The Shareholders' Meeting of April 23, 2020 approved the launch of the new rolling and equity based long-term
incentive plan called LTI 2020-2022. On May 18, 2020, the Board of Directors subsequently launched the first
cycle of the new Plan, for the three-year period 2020-2022, simultaneously assigning it to the CEO.
The first cycle is aimed at around 147 TIM Group staff: the CEO, Top Management and a selected segment of TIM
Group management.
Each cycle of the plan is divided into two parties:
•
Performance Share: free allocation of Company ordinary shares, the maturity of which is subject to an access
gate linked to the value of the share and to two share and industrial performance conditions, given below.
Separate Financial Statements of
TIM S.p.A.
Note 38
Equity compensation plans
431
• Attraction/Retention Share: free allocation of Company ordinary shares, the maturity of which is subject to
the continuity of the employment relationship with TIM or TIM Group companies.
In relation to the Performance Share component, the performance conditions are as follows:
• Access gate, represented by the value of the security, which at the end of each cycle must be equal to or
greater than the value of the security at the start of the same cycle (refer to the normal value of the share
equal to the average of the official closing prices of the Stock Exchange 30 days prior to the start and end of
the Plan cycle)
• NFP/EBITDA ratio, with relative weighting equal to 40%
• Relative performance (TSR) of the ordinary share compared to a basket of Peers, with a relative weighting of
60%
A payout bonus/malus mechanism equal to 4% will be applied to both components (Performance Share and
Attraction/Retention Share), linked, in equal measure, to the percentage growth of use of renewable energy out
of total energy and to the reduction of indirect CO2 emissions.
For the CEO, 100% of the pay opportunity is linked to the Performance Share component. For the remaining
recipient managers, 70% of the Pay Opportunity is linked to the Performance Share and the remaining 30% to
the Attraction/Retention Shares.
TIM S.p.A. – Broad-Based Share Ownership Plan 2020
In implementation of the resolutions passed on April 23, 2020 by the Extraordinary Shareholders' Meeting, on
May 18, 2020 by the Board of Directors of Telecom Italia S.p.A, the campaign for the Broad-Based Share
Ownership Plan was commenced on June 16, 2020.
The purpose of the 2020 Broad-Based Share Ownership Plan was to give Group employees the option to invest
in Company shares, to increase their motivation to achieve corporate objectives and to strengthen their feeling
of being part of the business.
The Plan consisted of an offer to subscribe to ordinary shares of the Company, for cash, at a discounted price
compared to the market price, reserved for employees of the Company or its Italy-based subsidiaries, excluding
"Top Managers".
Employees who hold the subscribed shares for a period of one year following assignment, subject to their
retaining the status of employees, shall receive ordinary shares of the Company free of charge allotted to them
at a ratio of 1 free share (the “Bonus Share”) for every 3 shares subscribed for cash.
There were two alternative and supplementary payment methods envisaged by which to subscribe the shares:
payment in cash by bank transfer and/or advance on Employee Severance Indemnity.
To service the initiative, a maximum of 127,500,000 new shares were to be issued, to be offered for paid
subscription and, subsequently, a maximum 42,500,000 new shares, without capital increase, for the free
allocation of 1 Bonus Share for every 3 subscribed shares.
The shares were offered from June 16 to October 30; the shares were subscribed at the unit price of 0.31 euros,
corresponding to the mathematical average of the official prices recorded from May 17, 2020 to June 15, 2020,
with a 10% discount.
On November 27, 2020, 126,343,913 Telecom Italia ordinary shares were issued to subscribers. In compliance with
said shareholders’ meeting resolution, the issue of the new shares did not result in a share capital increase and
the related equivalent value of subscription was allocated to the share premium reserve.
Separate Financial Statements of
TIM S.p.A.
Note 38
Equity compensation plans
432
NOTE 39
SIGNIFICANT NON-RECURRING EVENTS AND
TRANSACTIONS
The impact of non-recurring events and transactions on equity, profit, net financial debt and cash flows is set
out below in accordance with Consob Communication DEM/6064293 dated July 28, 2006:
(million euros)
Equity Profit (loss) for
the year
Net financial
debt
Cash flows
(*)
(a)
25,008
7,161
27,324
1,200
Carrying amount
Revenues - Revenue adjustments
Other income - Reimbursement of fine I761
Acquisition of goods and services - Expenses
related to agreements and the development of
non-recurring projects
Employee benefits expenses - Charges related to
corporate reorganization/restructuring and other
charges
Other operating expenses - Expenses related to
disputes and regulatory sanctions and potential
liabilities related to them, and expenses related to
disputes with former employees and liabilities with
customers and/or suppliers
Other operating expenses - Sundry expenses
Net gains on disposals of other investments
Miscellaneous finance expenses
Tax realignment pursuant to Decree Law 104/2020
Art. 110
Total non-recurring effects
Figurative amount
(b)
(a-b)
(28)
—
(42)
(49)
(5)
(103)
186
(5)
5,877
5,831
19,177
(28)
—
(42)
(49)
(5)
(103)
186
(5)
5,877
5,831
1,330
—
(22)
42
—
22
(42)
350
(350)
241
3
(1,816)
—
—
(1,202)
28,526
(241)
(3)
1,816
—
—
1,202
(2)
(*) Cash flows refer to the increase (decrease) in Cash and cash equivalents during the year.
Separate Financial Statements of
TIM S.p.A.
Note 39
Significant non-recurring events and transactions
433
The impact of non-recurring items on the separate income statement line items is as follows:
(million euros)
Operating revenues and other income
Revenue adjustments
Other income
Acquisition of goods and services, Change in inventories
Professional expenses, consulting services and other costs
Employee benefits expenses
Charges connected to corporate reorganization/restructuring and other processes
Other operating expenses
Charges resulting from disputes and regulatory sanctions and potential liabilities related to
them, and expenses related to disputes with former employees and liabilities with
customers and/or suppliers
Sundry expenses
Impact on EBITDA
Impairment reversals/(losses) on non-current assets
Goodwill impairment loss
Impairment of intangible fixed assets
Impact on EBIT
Other income (expenses) from investments
Other finance income (expenses)
Impact on profit (loss) before tax
Tax realignment pursuant to Decree Law 104/2020 Art. 110
Income taxes on non-recurring items
Impact on profit (loss) for the year
2020
(39)
(39)
—
(58)
(58)
(69)
(69)
(145)
(5)
(140)
(311)
—
—
—
(311)
227
(7)
(91)
5,877
45
5,831
2019
6
(15)
21
(14)
(14)
(248)
(248)
(412)
(396)
(16)
(668)
—
—
—
(668)
5
(10)
(673)
—
158
(515)
The COVID-19 emergency, following the spread of the SARS-CoV-2 virus and pronounced a pandemic by the
World Health Organization (WHO) on March 11, 2020, resulted in TIM S.p.A. incurring non-recurring expenses,
gross of tax effects, for a total of 106 million euros. Adjustments booked of non-recurring revenues in 2020 (38
million euros) were connected with the commercial initiatives of TIM S.p.A. to support customers in dealing with
the COVID-19 emergencies. In addition to the impacts of TIM S.p.A.’s commercial initiatives to support customers,
operating costs have been incurred mainly in relation to provisions and expenses connected with the
management of credits deriving from the worsening of the macroeconomic context (46 million euros), payroll
costs (7 million euros), as well as miscellaneous costs and procurement for approximately 15 million euros, as
have become necessary to handle the health emergency, primarily for the purchase of Personal Protective
Equipment, thermoscanners and environmental hygiene services.
For more details on the tax realignment, see the Note on “Income tax (current and deferred)” of these Financial
Statements.
Separate Financial Statements of
TIM S.p.A.
Note 39
Significant non-recurring events and transactions
434
NOTE 40
POSITIONS OR TRANSACTIONS RESULTING
FROM ATYPICAL AND/OR UNUSUAL
OPERATIONS
In accordance with Consob Communication DEM/6064293 of July 28, 2006, a statement is made to the effect
that in 2020 no atypical and/or unusual transactions, as defined by that Communication, were pursued.
NOTE 41
OTHER INFORMATION
Research and Development
Expenditures for research and development activities are represented by external costs, labor costs of dedicated
staff and depreciation and amortization. Details are as follows:
(million euros)
Research and development costs expensed during the year
Capitalized development costs
Total research and development costs (expensed and capitalized)
2020
2019
79
991
1,070
55
1,058
1,113
The decrease recognized in 2020 is mainly due to the completion of the engineering and deployment and
development activities conducted on the LTE and NGAN networks, which have now reached maturity, partially
offset by greater implementation activities related to the new generation 5G network.
In the 2020 separate income statement, amortization charges totaling 870 million euros were recorded for
development costs capitalized during the year and in prior years.
Research and development activities conducted by TIM S.p.A. are detailed in the Report on Operations
("Research and Development" section).
Lease income
TIM has entered into lease agreements for land and buildings for office use and industrial use, infrastructure
sites for the mobile network and network infrastructures; at December 31, 2020, the lease installments at
nominal value still to be collected totaled:
(million euros)
12.31.2020
12.31.2019
Within 1 year
From 1 to 2 years after the end of the reporting period
From 2 to 3 years after the end of the reporting period
From 3 to 4 years after the end of the reporting period
From 4 to 5 years after the end of the reporting period
Beyond 5 years after the end of the reporting period
Total
129
65
63
61
60
60
438
59
52
45
43
41
42
282
Separate Financial Statements of
TIM S.p.A.
Note 40
Positions or transactions resulting from atypical and/or unusual
operations
435
Public Funds
Italian Law 124/2017 requires that information on subsidies, contributions, paid assignments and economic
benefits of any kind received from public administrations be provided. In relation to this, funds received are shown
in the following table:
Distributing entity
Fondimpresa/Fondirigenti
Infratel
MUR (formerly MIUR)
Sundry income (*)
Total
Area of intervention Received in 2020
(million euros)
Received in 2019
(million euros)
training
construction of Broadband and Ultra-Broadband
infrastructure
research projects
innovation and Digital Divide
1
24
3
1
29
4
28
2
—
34
(*) 2020 - MED; Region of Lombardy, Region of Apulia
2019 - Ministry of Economic Development (MISE); Ministry of Economy and Finance (MEF); Lazio, Piedmont and Veneto Region; Autonomous
Province of Trento.
Summary schedule of fees due to the audit firm and other
firms in its network
The following schedule reports the fees due to EY S.p.A. for the audit of the 2020 financial statements, and the
fees referring to the year 2020 for other audit and review services, and for other services besides audit rendered
to TIM by EY and other firms in the EY network. This also includes the out-of-pocket expenses incurred in 2020
in relation to said services.
(in euros)
Audit services:
TIM S.p.A.
Other firms
of the EY
network
EY S.p.A.
969,067
167,000
Total EY
network
969,067
167,000
audit of the separate financial statements
audit of the consolidated financial statements
audit of the internal control system that supervises the process of
preparation of the consolidated financial statements and statutory audit
limited to the financial disclosure as at March 31 and September 30
limited audit of the half-year condensed consolidated financial statements
other
963,000
195,000
633,807
40,000
72,000
110,000
3,149,874
30,158
3,180,032
963,000
195,000
633,807
40,000
72,000
110,000
—
3,149,874
30,158
— 3,180,032
Auditing services with the issue of certification
Certification of compliance of the Consolidated Non-Financial Statement
Other services
Total 2020 fees due for auditing and other services to the EY network
Out-of-pocket expenses
Total
Please also note that in FY 2020, additional auditing costs were booked for FY 2019 in the amount of 550,000
euros for EY S.p.A. due to exceptional events that could not have been foreseen when drafting the original
contractual offer (of which 127,539 euros for the statutory auditing of the 2019 separate financial statements
and 422,461 euros for the auditing of the internal control system that oversees the process of drafting the 2019
consolidated financial statements). A disclosure was given about these additional costs in the Shareholders'
Meeting of TIM for the 2019 financial statements, held on April 23, 2020.
Separate Financial Statements of
TIM S.p.A.
Note 41
Additional information
436
NOTE 42
EVENTS SUBSEQUENT TO DECEMBER 31, 2020
TIM: first Sustainability Bond placed with a maturity of 8 years
On January 11, 2021, TIM successfully completed the issue of its inaugural 1 billion euros Sustainability Bond, with
an 8-year maturity, set to increase the Group’s energy efficiency and finance Green and Social projects. Demand
was above €4 billion demonstrating TIM’s strong positioning on the international markets also in light of the
presentation to the financial community, in December 2020, of the Sustainability Financing Framework which
involved over 40 institutional investors.
TIM priced its bond well below the secondary market of reference, setting the annual coupon at 1.625%, the
lowest ever. This transaction also sees TIM extend the average debt maturity and raise new funds for the amount
exceeding the 2021 deadlines.
The proceeds of the new issue will be used to transform the copper network into fiber, which is expected to
deliver significant energy efficiency. Moreover, for the first time in Italy a corporation will invest part of the funds
collected into projects with social value, as envisaged in the Sustainability Financing Framework.
Issuer: TIM S.p.A.
Amount: 1 billion euros
Settlement date: 1/18/2021
Maturity: 1/18/2029
Annual coupon: 1.625%
Issue price: 99.074%
Redemption price: 100.000%.
Noovle S.p.A., the biggest cloud project for Italy
On January 25, 2021 TIM announced the birth of Noovle S.p.A., the new company wholly owned by the TIM Group
intended to become an Italian center of excellence for Cloud and edge computing, boosting the offer of TIM's
innovative public, private and hybrid cloud services to businesses - from SMEs to large industry - and public
administration, accelerating the digital transformation of the country.
The cloud company, which is the result of the experience and digital skills of the TIM Group, its associated Data
Centers and the specialized professionalism of Noovle S.r.l., a company acquired by TIM in May 2020 and one of
the main Google Cloud partners in the Italian market, will focus on the supply of innovative and bespoke
Multicloud services and solutions to TIM customers, ranging from the management of network infrastructure in
its Data Centers, to design and support services, migration to the cloud and support for the related management
activities, using the most advanced technologies based on artificial intelligence and the Internet of Things. The
services offered will allow customers to face the challenges of the digital transformation and improve the user
experience. Noovle wants to support companies in their cloud transformation projects and therefore bring
innovation to the world of work and the digital experience. All these services will have security at their core.
Thanks to a proprietary network of 17 state-of-the-art Data Centers distributed across the country - built
according to the most advanced technological and safety standards and the most recent environmental
sustainability best practices, in compliance with the Group's ESG objectives - the company will offer innovative
resources and services to manage servers, data and information in a secure cloud environment located in Italy.
In particular, TIM will entrust Noovle with the task of building six new Data Centers specialized in the provision of
public and hybrid cloud services, with TIER IV certification, and managing seven Core Data Centers and four
service centers, already in operation, for the widest range of IT solutions, located across the country, from which
TIM's Cloud, hybrid Cloud and Multicloud services are provided. A cutting-edge infrastructure that will cover a
total area of over 50,000 square meters nationally by 2022, with a capacity of up to 100 MW of usable IT power,
closely integrated with TIM's primary fiber optic network to ensure a structural reduction of interconnection
latency between services.
Noovle starts with around 1,000 professionals and estimates that it will achieve a turnover of 1 billion euros in
2024 with an average annual growth rate of around 20% and an expected EBITDA of around 400 million euros.
The strategic decision to concentrate TIM's cloud services in Noovle is part of a bigger program of major
technological investments the TIM Group is making to develop the latest generation network infrastructure, key
Information Technology and cloud services to support the digitization of the country's production and
administrative fabric.
Noovle will strengthen the alliance already launched between the TIM Group and Google Cloud and will also
make use of important strategic partnerships with the main industry leaders including Atos, Cisco, Citrix,
Microsoft, Salesforce, SAP and VMware
Separate Financial Statements of
TIM S.p.A.
Note 42
Events subsequent to December 31, 2020
437
Agreement with Trade Unions
On March 8, 2021, an agreement was stipulated with the Trade Unions governing the early redundancy of 1,300
people - in accordance with Article 4, subsections 1 to 7ter of Italian Law no. 92/2012.
All employees accruing pension entitlement by December 31, 2026 and who choose to terminate their contract
of employment by end November 2021, can adhere voluntarily.
The agreement is part of the more comprehensive generational remix and professional renewal process
launched by the company in line with the digital transformation in progress.
.
Separate Financial Statements of
TIM S.p.A.
Note 42
Events subsequent to December 31, 2020
438
NOTE 43
LIST OF INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES
(thousands of
euros)
Reg. office
Rome Euro
Milan Euro
Milan Euro
Milan Euro
Milan Euro
Milan Euro
Ivrea (TO) Euro
Luxembourg Euro
Investments in subsidiaries
CD FIBER
DAPHE 3
FIBERCOP
FLASH FIBER
NOOVLE S.p.A.
NOOVLE S.r.l.
OLIVETTI
TELECOM ITALIA
CAPITAL
TELECOM ITALIA
FINANCE
TELECOM ITALIA
LATAM PARTIC. E
GESTÃO ADMIN.
Share
capital
(1)
50
100
50
30
50
300
10,000
2,336
Luxembourg Euro 1,818,692
SanPaolo (Brazil)
R$
Euro
San Marino Euro
118,926
18,650
1,808
Rome Euro
200,000
Pomezia (RM) Euro
7,000
Milan Euro
10
Naples Euro
Rome Euro
Turin Euro
3,000
50
5,390
Equity
(1) (2)
Profit/
(Loss) (1)
% Ownership Share of equity
(A) (3)
Carrying
amount
Difference
(B-A)
(B) (4)
43
2,745,604
25
290,728
50
(1,012)
10,556
(10,301)
6,474,749
(38,175)
(5,987)
8,298
658,915
14,991
1,846
37,683
15,824
23,582
(1)
(30)
(25)
(336)
(1,067)
(6,283)
(8,485)
92,413
(7,527)
(1,180)
1,458
(13)
937
(336)
5,518
(19,031)
(3,762)
100.00 %
51.00 %
100.00 %
80.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
43
1,400,258
25
232,582
50
(1,012)
10,556
(10,301)
43
—
340,161 (1,060,097)
25
17,853
—
13,755
273
12,689
50
250,435
50
12,743
10,829
2,388
6,423,149
(3) 5,914,971
(508,178)
(5)
(5,987)
8,298
—
7,565
5,987
(733)
741,337
(6)
586,886
(154,451)
14,991
1,846
37,683
15,824
23,582
8,506
1,846
12,544
50
19,519
(6,485)
—
(25,139)
(15,774)
(4,063)
Rio de Janeiro (Brazil)
R$
Euro
1,500
235
1,643
258
(185)
(29)
69.9996%
180
181
1
Rio de Janeiro (Brazil)
R$ 7,169,030
Euro 1,124,236
10
2,402
18,600
Rome Euro
Milan Euro
Milan Euro
11,090,043
1,739,124
97
76,571
26,990
642,289
100,723
87
4,297
2,150
0.00000001 %
100.00 %
100.00 %
100.00 %
—
97
76,571
26,990
—
10
15,116
24,839
—
(87)
(61,455)
(2,151)
7,208,732 (1,788,030)
TELECOM ITALIA
SAN MARINO
TELECOM ITALIA
SPARKLE
TELECOM ITALIA
TRUST
TECHNOLOGY
TELECOM ITALIA
VENTURES
TELECONTACT
CENTER
TELENERGIA
TELSY
TIAUDIT
COMPLIANCE
LATAM
(in liquidation)
TIM BRASIL
SERVIÇOS E
PARTICIPAÇÕES
TIM MY BROKER
TIM RETAIL
TIM TANK
Separate Financial Statements of
TIM S.p.A.
Note 43
List of investments in subsidiaries, associates and joint ventures
439
(thousands of
euros)
Reg. office
Investments in associates and joint ventures
AREE URBANE (in
Milan Euro
liquidation)
Milan Euro
NORDCOM
Milan Euro
TIGLIO I
TIGLIO II (in
liquidation)
TIMFIN
Milan Euro
Turin Euro
Share
capital
(1)
100
5,000
1,000
10
6,000
Equity
(1) (2)
Profit/
(losses)
(1)
%
Ownership
Share of equity
(A) (3)
(92,175)
13,413
2,738
178
3,964
(1,185)
841
132
(37)
(2,036)
32.62 %
42.00 %
47.80 %
49.47 %
49.00 %
(30,067)
5,633
1,309
88
1,942
Carrying
amount
Difference
(B-A)
(B) (4)
—
2,143
1,189
88
2,940
6,360
30,067
(3,490)
(120)
—
998
27,455
(1) Figures taken from the latest approved financial statements. For subsidiaries, the data used are taken from the IFRS-prepared financial statements.
(2) Includes profit (loss).
(3) Net of dividends to be paid.
(4) Includes investment account payments.
(5) Covered by the provision for losses of subsidiaries and associates.
(6) Figures taken from the consolidated financial statements.
Separate Financial Statements of
TIM S.p.A.
Note 43
List of investments in subsidiaries, associates and joint ventures
440
CERTIFICATION OF THE SEPARATE FINANCIAL
STATEMENTS PURSUANT TO ARTICLE 81-TER OF
THE CONSOB REGULATION 11971 DATED MAY 14,
1999, WITH AMENDMENTS AND ADDITIONS
1. We, the undersigned, Luigi Gubitosi, as Chief Executive Officer, and Giovanni Ronca, as Manager responsible
for preparing TIM S.p.A. financial reports, certify, having also considered the provisions of Article 154-bis,
paragraphs 3 and 4, of Italian Legislative Decree 58 of February 24, 1998:
–
–
the adequacy in relation to the characteristics of the company and
the effective application of the administrative and accounting procedures used in the preparation of the
financial statements for the 2020 fiscal year.
2. TIM has adopted the Internal Control – Integrated Framework Model (2013), issued by the Committee of
Sponsoring Organizations of the Treadway Commission, as its framework for the establishment and
assessment of its internal control system, with particular reference to the internal controls for the
preparation of the financial statements.
3. The undersigned also certify that:
3.1 The separate financial statements at December 31, 2020:
a)
b)
c)
are prepared in conformity with international accounting standards endorsed by the European Union
pursuant to EC Regulation 1606/2002 of the European Parliament and of the Council of July 19, 2002
(International Financial Reporting Standards – IFRS) as well as the legislation and regulations in force
in Italy with particular reference to Article 154-ter of Legislative Decree 58 of February 24, 1998 and
the measures enacted for the implementation of Article 9 of Legislative Decree 38 of February 28,
2005;
agree with the results of the accounting records and entries;
provide a true and fair view of the financial position, financial performance and cash flows of the
Company;
3.2 the report on operations contains a reliable operating and financial review of the Company, as well as
the description of its exposure to the main risks and uncertainties. The Report on Operations also
contains a reliable analysis of information concerning significant related party transactions.
Milan, February 23, 2021
Chief Executive Officer
Manager Responsible for
Preparing the Corporate
Financial Reports
/ signed /
/ signed /
_________________________
_______________________
Luigi Gubitosi
Giovanni Ronca
Separate Financial Statements of
TIM S.p.A.
Certification of the Separate Financial Statements 441
INDEPENDENT AUDITORS’ REPORT
Separate Financial Statements of
TIM S.p.A.
Independent Auditors’ Report 442
EY S.p.A.
Via Meucci, 5
10121 Torino
Tel: +39 011 5161611
Fax: +39 011 5612554
ey.com
Independent auditor’s report pursuant to article 14 of Legislative
Decree n. 39, dated 27 January 2010 and article 10 of EU Regulation
n. 537/2014
(Translation from the original Italian text)
To the Shareholders of
TIM S.p.A.
Report on the Audit of the Separate Financial Statements
Opinion
We have audited the separate financial statements of TIM S.p.A. (the Company), which comprise the
statement of financial position as at December 31 ,2020, and the separate income statement, the
statement of comprehensive income, statement of changes in equity and statement of cash flows for
the year then ended, and notes to the separate financial statements, including a summary of
significant accounting policies.
In our opinion, the separate financial statements give a true and fair view of the financial position of
the Company as at December 31, 2020, and of its financial performance and its cash flows for the
year then ended in accordance with International Financial Reporting Standards as adopted by the
European Union and with the regulations issued for implementing art. 9 of Legislative Decree n.
38/2005.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Separate Financial Statements section of our report. We are independent of the Company
in accordance with the regulations and standards on ethics and independence applicable to audits of
separate financial statements under Italian Laws. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the separate financial statements of the current period. These matters were addressed in
the context of our audit of the separate financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
We identified the following key audit matters:
Key Audit Matter
Impairment test of goodwill
Audit Response
As of December 31, 2020 goodwill amounts
Our audit procedures in response to the key
EY S.p.A.
Sede Legale: Via Lombardia, 31 - 00187 Roma
Capitale Sociale Euro 2.525.000,00 i.v.
Iscritta alla S.O. del Registro delle Imprese presso la C.C.I.A.A. di Roma
Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. 250904
P.IVA 00891231003
Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998
Iscritta all’Albo Speciale delle società di revisione
Consob al progressivo n. 2 delibera n.10831 del 16/7/1997
A member firm of Ernst & Young Global Limited
to Euro 23.051 million and refers to the
Domestic cash generating unit ("CGU").
The processes and methodologies used by
the Company to evaluate and determine the
recoverable amount of each CGU, in terms of
value in use, are based on assumptions that
are in some cases complex and that, due to
their nature, imply the use of judgement by
Management, in particular with reference to
the forecast of future cash flows and to the
estimate of the long-term growth and
discount rates applied to the future cash flow
forecasts.
Considering the level of judgment required
and the complexity of the assumptions
applied in estimating the recoverable amount
of goodwill, we considered that this area
represents a key audit matter.
Disclosure related to the assessment of
goodwill are reported in note 3 "Goodwill"
and in note 2 "Accounting policies" in the
paragraphs "Impairment of intangible and
tangible assets" and "Use of estimates".
audit matter included, among others:
► the assessment of the processes
implemented by the Company with
reference to the criteria and methodology
of the impairment test;
► the validation of the CGUs perimeter and
test of the allocation of the carrying value
of the Company’s assets to each CGU;
► the assessment of the future cash flow
forecasts, including comparisons with
sector data and forecasts;
► the assessment of the consistency of the
future cash flow forecasts of the Domestic
CGU with the business plan;
► the assessment of forecasts in light of
their historical accuracy;
► the assessment of the reasonableness of
long-term growth rates and discount rates.
The procedures referred to in the previous
points also concerned the analysis of the
assessments performed by the independent
experts appointed by the Company.
In performing our analysis, we involved our
experts in valuation techniques, who
performed an independent recalculation and
carried out sensitivity analyses on the key
assumptions in order to determine which
changes in the assumptions could materially
affect the recoverable amount.
Lastly, we reviewed the adequacy of the
disclosure provided in the notes to the
separate financial statements with regards to
the valuation of goodwill.
Revenue recognition
TIM’s revenues amounted to € 12.030 million
as of December 31, 2020 and refer almost
entirely to the telecommunications services
rendered to retail and wholesale customers
(other telecommunications operators).
Procedures over the accounting of revenues
required significant focus in the context of
our audit procedures due to i) a highly
complex accounting process due to the
number of commercial offers, the number of
underlying application systems and the
related reconciliation processes and ii) the
presence of certain manual phases in the
revenue recognition process, in particular for
services provided to large customers.
The Company provides the relative disclosure
in Note 25 "Revenues" of the separate
Our audit procedures in response to the key
audit matter included, among others:
► an understanding of the processes
underlying the revenue recognition;
► the understanding and verification of the
design and operation of the relevant
controls over the revenue recognition
process;
► the analysis of the application systems
supporting the revenue recognition
process;
► the assessment that the accounting policy
adopted for the main commercial offers is
consistent with the provisions of the
reference accounting standard;
► the analysis, on a sample basis, of some
significant transactions relating to invoices
issued and invoices to be issued, in order
to verify that the contractual data and the
evidence supporting the actual service
rendered and / or goods transferred were
consistent with the accounting policy
adopted;
► the reconciliation of the management
account with the accounting records in
connection with the main balance sheet
items related to customer relations;
► the analysis of the manual journal entries.
We also required external confirmations for a
sample of customers and transactions.
Lastly, we reviewed the adequacy of the
disclosure provided in the notes to the
separate financial statements with regard to
the revenue recognition process.
Our audit procedures in response to the key
audit matter included, among others:
► an understanding of the process put in
place by Management for assessing
disputes, accompanied by test of the
effectiveness of the internal controls
relevant for this process;
► inquiries with Management regarding the
main assumptions made in connection
with disputes;
► the analysis of the legal opinions prepared
by external consultants, based on which
Management has based its assessments;
► the analysis of the letters received from
external lawyers following our external
confirmations procedures.
Lastly, we reviewed the adequacy of the
disclosure provided in the notes to the
separate financial statements with regard to
the disputes in which the Company is
involved, based on their compliance with the
international accounting standards and their
consistency with the results of our audit
procedures.
financial statements.
Regulatory disputes
As of December 31, 2020, TIM is involved in
several regulatory disputes in progress, many
of which are characterized by significant
counterparty requests.
The main disputes concern (i) the so-called
'follow-on' A428 proceedings, which arose
following claims for compensation made by
other Italian telco operators after certain
fines had been imposed by the AGCM to TIM
for market abuse of a dominant position, (ii)
the 28-day billing proceeding, in which
AGCOM ordered TIM to reimburse customers
for unused service days, (iii) the I820
proceeding, started by AGCM against TIM and
other telco operators, to ascertain a possible
conduct restricting market competition and
(iv) the A514, and the related “follow-on”
proposed by some other telco operators,
procedure in which the AGCM charged TIM
with conduct aimed at hindering the entry on
the market of a new operator.
The assessment of the disputes was carried
out by Management, as of 31 December
2020, based on the opinion of the external
lawyers, as well as considering the latest
information available.
The estimation of the risks connected to the
disputes in which the Company is involved,
requires a high degree of judgment by the
Management and, also considering the
complexity of the regulatory framework, we
considered that this area represents a key
audit matter.
Our audit procedures in response to the key
audit matter included, among others:
► the assessment of the assumptions
underlying the estimation of future
taxable income and the reconciliation with
the figures included in the Company's
business plan for the period 2021-2023;
► the assessment of the accuracy of the
forecasts compared to prior periods;
► the assessment of the Management
calculations.
Lastly, we reviewed the adequacy of the
disclosure provided in the notes to the
separate financial statements with regards to
the recoverability of deferred tax assets.
Disclosure related to the assessment of the
risks relating to the regulatory disputes in
which the Company is involved is reported in
note 24 "Disputes and pending legal actions,
other information, commitments and
guarantees".
Recoverability of deferred tax assets
As of December 31, 2020, deferred tax
assets amount to Euro 7,337 million in the
separate financial statements.
Deferred tax assets refer to the temporary
deductible differences between the book and
tax values of assets and liabilities in the
financial statements.
The recoverability of the carrying amount of
deferred tax assets is subject to
Management’s evaluation and is based on the
estimations of the future taxable income
expected in the years in which them will be
reversed.
The processes and methodologies used to
evaluate and determine the recoverable
amount of these assets, are based on
assumptions that are in some cases complex
and that, due to their nature, imply the use of
judgement by Management, in particular with
reference to the consistency of the forecasts
of future taxable income expected by the
Company with those included in the business
plan.
Considering the level of judgment required
and the complexity of the assumptions
applied in estimating future taxable amount
used to determine the recoverability of
deferred tax assets, we considered that this
area represents a key audit matter.
Disclosure related to the assessment of
recoverability of deferred tax assets are
reported in note 2 "Accounting policies" in
the paragraphs “Income tax expense (current
and deferred)" and "Use of estimates" and in
note 10 “Income tax expense (current and
deferred)".
Responsibilities of Directors and Those Charged with Governance for the Separate
Financial Statements
The Directors are responsible for the preparation of the separate financial statements that give a true
and fair view in accordance with International Financial Reporting Standards as adopted by the
European Union and with the regulations issued for implementing art. 9 of Legislative Decree n.
38/2005, and, within the terms provided by the law, for such internal control as they determine is
necessary to enable the preparation of separate financial statements that are free from material
misstatement, whether due to fraud or error.
The Directors are responsible for assessing the Company’s ability to continue as a going concern and,
when preparing the separate financial statements, for the appropriateness of the going concern
assumption, and for appropriate disclosure thereof. The Directors prepare the separate financial
statements on a going concern basis unless they either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
The statutory audit committee (“Collegio Sindacale”) is responsible, within the terms provided by the
law, for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the separate financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia)
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these separate financial statements.
As part of an audit in accordance with International Standards on Auditing (ISA Italia), we have
exercised professional judgment and maintained professional skepticism throughout the audit. In
addition:
we have identified and assessed the risks of material misstatement of the separate financial
statements, whether due to fraud or error, designed and performed audit procedures
responsive to those risks, and obtained audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control;
we have obtained an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control;
we have evaluated the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Directors;
we have concluded on the appropriateness of Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the separate financial
statements or, if such disclosures are inadequate, to consider this matter in forming our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company to cease to
continue as a going concern;
we have evaluated the overall presentation, structure and content of the separate financial
statements, including the disclosures, and whether the separate financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
We have communicated with those charged with governance, identified at an appropriate level as
required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We have provided those charged with governance with a statement that we have complied with the
ethical and independence requirements applicable in Italy, and we have communicated with them all
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we have determined those
matters that were of most significance in the audit of the separate financial statements of the current
period and are therefore the key audit matters. We have described these matters in our auditor’s
report.
Additional information pursuant to article 10 of EU Regulation n. 537/14
The shareholders of TIM S.p.A., in the general meeting held on March 29, 2019, engaged us to
perform the audits of the separate and consolidated financial statements for each of the years ending
December 31, 2019 to December 31, 2027.
We declare that we have not provided prohibited non-audit services, referred to article 5, par. 1, of EU
Regulation n. 537/2014, and that we have remained independent of the Company in conducting the
audit.
We confirm that the opinion on the separate financial statements included in this report is consistent
with the content of the additional report to the audit committee (Collegio Sindacale) in their capacity
as audit committee, prepared pursuant to article 11 of the EU Regulation n. 537/2014.
Report on compliance with other legal and regulatory requirements
Opinion pursuant to article 14, paragraph 2, subparagraph e), of Legislative
Decree n. 39 dated 27 January 2010 and of article 123-bis, paragraph 4, of
Legislative Decree n. 58, dated 24 February 1998
The Directors of TIM S.p.A. are responsible for the preparation of the Report on Operations and of the
Report on Corporate Governance and Ownership Structure of TIM S.p.A. as at December 31, 2020,
including their consistency with the related separate financial statements and their compliance with
the applicable laws and regulations.
We have performed the procedures required under audit standard SA Italia n. 720B, in order to
express an opinion on the consistency of the Report on Operations and of specific information
included in the Report on Corporate Governance and Ownership Structure as provided for by article
123-bis, paragraph 4, of Legislative Decree n. 58, dated 24 February 1998, with the separate
financial statements of TIM S.p.A. as at December 31, 2020, and on their compliance with the
applicable laws and regulations, and in order to assess whether they contain material misstatements.
In our opinion, the Report on Operations and the above mentioned specific information included in
the Report on Corporate Governance and Ownership Structure are consistent with the separate
financial statements of TIM S.p.A. as at December 31, 2020, and comply with the applicable laws and
regulations.
With reference to the statement required by art. 14, paragraph 2, subparagraph e), of Legislative
Decree n. 39, dated 27 January 2010, based on our knowledge and understanding of the entity and
its environment obtained through our audit, we have no matters to report.
Statement pursuant to article 4 of Consob Regulation implementing Legislative
Decree n. 254, dated 30 December 2016
The Directors of TIM S.p.A. are responsible for the preparation of the non-financial information
pursuant to Legislative Decree n. 254, dated 30 December 2016. We have verified that non-financial
information has been approved by Directors.
Pursuant to article 3, paragraph 10, of Legislative Decree n. 254, dated 30 December 2016, such
non-financial information is subject to a separate compliance report signed by us.
Rome, March 10, 2021
EY S.p.A.
Signed by: Ettore Abate, Auditor
This report has been translated into the English language solely for the convenience of
international readers.
Report of the Board of Statutory Auditors to the
Shareholders' Meeting pursuant to article 153 of
Italian Legislative Decree No. 58/1998
Dear Shareholders,
This report (hereinafter the “Report”) provides information about the supervisory activities carried out by the
Company’s Board of Statutory Auditors in FY 2020 and to date, as prescribed by the law, the standards of conduct
of the Board of Statutory Auditors recommended by CNDCEC (the Italian board of chartered accountants and
accounting consultants), Consob notices on company controls and the indications given in the Corporate
Governance Code.
The Board of Statutory Auditors has acquired the information necessary for the performance of the tasks of
general supervision assigned to it by attending meetings of the Board of Directors and the board committees,
meetings with the Company management, meetings with the external auditor, with the Supervisory Body and
with the corresponding control bodies of the TIM Group companies, analysis of information flows from the
competent company departments, as well as further control activities (1).
This Report is prepared as required by Consob Notice no. DEM/1025564 of 6 April 2001 and subsequent
amendments and supplements.
(1) At the same time as revising the 231 Organisational Model, and with a view to strengthening oversight of 231 topics, in seeking to pursue continuous
improvement, also taking into account the results of a benchmark analysis of the main market players, starting 1 April 2020, the Board of Directors
resolved - after having obtained the consent of the Board of Statutory Auditors to waive holding said role - to assign the duties of Supervisory Body
pursuant to Italian Legislative Decree no. 231/2001 to a specific body comprising a Statutory Auditor, the Head of the Audit Department and two
external professionals (of whom one would act as Chairman).
1. Considerations on transactions of major impact on its revenues, finances and assets undertaken by the
company, and their compliance with the laws and the company articles of association
On the basis of the information received and as a result of the analyses conducted, it emerged that the
transactions carried out by the Company in FY 2020 which have major impact on revenues, finances and assets,
including transactions performed through companies in which the Company has a direct or indirect stake, are
essentially made up as follows:
▪ merger by incorporation of Vodafone Towers S.r.l. into INWIT S.p.A., which was followed by: (i) the sale of a
package of 4.3% of the share capital of INWIT S.p.A. to institutional investors, (ii) the conferral of 30.2% of
INWIT shares to the SPV Daphne 3 S.p.A., a newly-established holding company controlled by TIM, which
has taken over from TIM in the shareholders' agreements reached with Vodafone Europe BV, through which
TIM and Vodafone exercise joint control of INWIT S.p.A. and (iii) sale of the remaining 3% held by TIM in
INWIT S.p.A. to an SPV managed and assisted by Canson Capital Partners Limited;
▪ merger by incorporation of TIM Vision S.r.l., TN Fiber S.r.l. and HR Services S.r.l. in TIM;
▪ partial demerger, in TIM’s favour, of the Olivetti S.p.A.“Scuola Digitale” (Digital School) BU;
▪ acquisition of control over Noovle S.r.l., an Italian ICT consulting and system integration company, specialised
in supplying cloud solutions and projects and one of Google Cloud's leading partners on the Italian market;
▪ effect of the merger by incorporation of TIM Participações in its subsidiary TIM S.A.; and
▪ stipulation of the agreements with KKR Infrastructure and Fastweb S.p.A. concerning the establishment of
FiberCop, the newco to which TIM’s secondary network and the fibre network developed by Flash Fiber, the
joint venture established with Fastweb, will be conferred. In parallel, a letter of intent has been signed with
CDP Equity (CDPE) with a view to pursuing the project for the creation of a single national network (AccessCo)
by means of the merger of FiberCop and Open Fiber and through a shared governance mechanism with
CDPE.
The transactions indicated above are listed in the notes to the consolidated financial statements of the TIM
Group and the notes to the separate balance sheet of TIM S.p.A., as well as in the report on operations for the
year 2020.
The Board of Statutory Auditors has verified that the above transactions comply with the law, the Company
bylaws and the principles of correct administration, and has made sure that they were not manifestly imprudent
or hazardous, in conflict with the resolutions adopted by the Shareholders’ Meeting or likely to compromise the
integrity of the corporate assets.
Other Information
Report of the Board of Statutory Auditors 451
It is also pointed out that following year end, the following significant events took place:
1.
2.
on 11 January 2021, TIM successfully completed the issue of its inaugural 1 billion euros Sustainability Bond,
with 8 year maturity, set to increase the Group’s energy efficiency and finance Green and Social projects.
TIM priced its loan well below the secondary market of reference setting the annual coupon at 1.625%. This
transaction also saw TIM extend the average debt maturity and receive new funds for the amount
exceeding the 2021 deadlines. The proceeds will be used to transform the copper network into fibre which
is expected to deliver significant energy efficiency. Moreover, for the first time in Italy, a corporation will
invest part of the funds collected into projects with social value, as envisaged in the Sustainability Financing
Framework; and
on 25 January 2021, TIM announced the birth of Noovle S.p.A., the company wholly owned by the TIM Group
intended to become a centre of excellence for Cloud and edge computing, boosting TIM's innovative public,
private and hybrid cloud services to businesses - from SMEs to industry - and public administration,
accelerating the digital transformation of the country. In particular, TIM has entrusted Noovle S.p.A. with
the task of building six new Data Centres and managing seven Data Centres that are already operative,
spread throughout the country.
Finally, please note that as at 31 December 2020, TIM has benefited from the possibility of realigning the tax
values to the greater value of the assets booked, specifically the value of goodwill, as envisaged by Decree Law
104/2020, Art. 110, subsections 8 and 8 bis. This will make it possible, starting 2021 and upon payment of
substitute tax of 3% of the realigned value, deduct this amount over 18 financial years. This has led to the
recording of deferred tax assets as at 31 December 2020 of 6.6 billion euros against the benefits enjoyed in terms
of IRES and IRAP.
2.
Report of any atypical and/or unusual transactions, including intra-group or related party transactions
During the course of 2020 the Board of Statutory Auditors did not encounter atypical and/or unusual corporate
transactions with third parties or related parties (including the companies within the Group).
The transactions with Directors' interests or with other related parties, were subjected to the transparency
procedure set out in the applicable regulations.
The information relating to the principal intra-group transactions and with other related parties executed in the
financial year 2020, and the description of their characteristics and related economic effects is contained in the
notes to the separate financial statements of TIM S.p.A. and to the consolidated financial statements of the TIM
Group.
3.
Assessment of the adequacy of the information provided in the Directors’ Report on operations concerning
atypical and/or unusual transactions, including intra-group and related party transactions
The Board of Statutory Auditors believes that the report on the Company’s transactions with related and intra-
group parties, given in the notes to the separate financial statements of TIM S.p.A. and in the notes to the
consolidated financial statements of the TIM Group, should be considered adequate.
4.
Remarks and proposals on the reporting references and notes contained in the report of the independent
auditor
On 10 March 2021, the independent auditor EY S.p.A. (hereinafter also referred to as “EY”), issued the reports
pursuant to art. 14 of Legislative Decree no. 39/2010 and art. 10 of Regulation EU no. 537/2014, attesting that the
separate financial statements of TIM S.p.A. and the consolidated financial statements of the TIM Group as at 31
December 2020 provide a truthful and correct representation of the equity and financial position, the economic
results and cash flows for the year ended as at that date, in compliance with the International Financial Reporting
Standards adopted by the European Union, as well as with the provisions issued in implementation of Article 9
of Legislative Decree no. 38 of 28 February 2005.
On 10 March 2021, EY also issued the additional Report for the Committee for Internal Control and Audit on the
results of the external audit of the accounts, which also includes the declaration on the independence of the
external auditor.
This report effectively revealed that “During the audit of the Company’s financial statements and of the Group’s
consolidated financial statements closed as at 31 December 2020, no significant issues were identified in respect
of cases of effective or alleged non-conformity with laws and regulations or statutory provisions.”
The Board of Statutory Auditors will inform the Company's Board of Directors of the results of the external audit,
to this end sending across the additional report complete with any observations.
Other Information
Report of the Board of Statutory Auditors 452
The independent auditor also considers that the report on operations and the information in the Report on
corporate governance and share ownership indicated in art. 123-bis, subsection 4 of the CLF are consistent with
the TIM S.p.A.’s financial statements for the period and the consolidated financial statements for the TIM Group
at 31 December 2020.
The Board of Statutory Auditors and the Independent Audit firm exchanged information continuously, despite
the objective operative difficulties that ensued following the COVID-19 health emergency.
Reports on the presence of any complaints pursuant to Article 2408 of the Italian Civil Code regarding
initiatives undertaken and their outcomes
5.
From the date of the previous report (31 March 2020) until the date of this Report (10 March 2021), two reports
were received from Company shareholders, made in accordance with art. 2408, subsection 3 of the Civil Code.
The first report relates to a dispute between the Company and the reporting shareholder, concerning findings
regarding the failure to settle said dispute. The Board of Statutory Auditors conducted suitable investigations
with the help of the Legal & Tax Department, on which basis it believes that the report is unfounded and has,
therefore, resolved not to follow up any further.
The second report made has been classified not as a report pursuant to Art. 2408, as indicated by the reporting
party, but rather as a commercial complaint. The Board in any case monitored the resolution process by the
competent corporate department, verifying that it was closed with customer satisfaction.
6.
Report on the presence of any complaints regarding initiatives undertaken and their outcomes
A procedure is in place regulating the methods by which reports can be made to the control body. There are
instructions on the About Us section of the Company’s website (Company Bodies – Board of Statutory Auditors
– Role, tasks and responsibilities), for sending such reports - in paper or electronic format - to the Board of
Statutory Auditors of the Company.
The Company has also equipped itself with a new Whistleblowing Procedure, updated also following the
assignment of the role of Supervisory Body to a separate body from the Board, which envisages the institution
of information channels able to guarantee the receipt, analysis and processing of reports made relating to
internal control problems, corporate information, administrative liability of the Company, fraud or in any case
behavioural anomalies in reference to TIM staff or third parties, in violation of laws and regulations and/or non-
conformity with the Code of Ethics and the Organisational Model 231, as well as with the system of rules and
procedures in force in the TIM Group, submitted by employees, members of company bodies or third parties,
even anonymously.
From the date of the previous Report (31 March 2020) and until the date of this Report (10 March 2021), the Board
of Statutory Auditors received 24 reports, complaining, for the most part, of technical service issues and failures
of a commercial, accounting and administrative nature, as well as one report relating to the tender for the
purchase of technological devices on a global level.
The Board of Statutory Auditors investigated all these reports appropriately, with the support of the Audit
Department and the competent Company departments, but no irregularities to be reported to the Shareholders’
Meeting have emerged. Please note that a specific investigation has been carried out in respect of the specified
tender, first by the Compliance Department and then by the Audit Department, of both the Group companies
involved. These investigations revealed aspects for improvement in reference to how the Group handles global
tenders.
For 4 reports, at the date of this Report, investigations are still in progress.
7.
Report on any appointments conferred on the independent auditor and the corresponding costs
During the 2020 financial year TIM S.p.A. appointed EY S.p.A. to undertake various tasks other than audits of
financial statements, the fees for which, before VAT and out-of pocket expenses, are summarised below:
Other Information
Report of the Board of Statutory Auditors 453
EY S.p.A.
Audit procedure carried out pursuant to the International Standards on Auditing (ISA 805 - Revised):
•
•
on the turnover of FY 2019 recorded by the company shop of TIM S.p.A. at Rome “Leonardo da Vinci”
airport;
on the Consolidated Statements of Cash Flows of TIM S.p.A. at 30.06.2020
Issue of the comfort letter connected with the renewal of the Euro Medium Term Notes Programme for an
amount of up to 20 billion euros
Review delle carte di lavoro di altra Società di Revisione inerenti INWIT S.p.A. sulla Relazione Finanziaria
Consolidata al 30.06.2020 e sul Bilancio Consolidato al 31.12.2020
Auditing/control services (certification of conformity with UNI ISO 26000) connected with the obtaining of
specific contribution reductions (INAIL)
Voluntary appointments related to the assessment of Segregation of Duties (SOD) matters):
■ Assessment i) of the technical matrix with respect to the reference leading practice and business
processes, ii) following the switch to the SAP S/4 HANA system and the set-up of the SAP GRC Access
control monitoring tool;
■ Assessment and findings on i) completeness of the SOD risks with respect to the SAP S/4 HANA tool
ii) assessment of the alignment of the functional matrix with the leading practices of the reference
TMT segment
Voluntary appointments for Assurance activities on the migration processes
■ Assessment i) of the technical matrix with respect to the reference leading practice and business
processes, ii) following the switch to the SAP S/4 HANA system and the set-up of the SAP GRC Access
control monitoring tool;
• Assurance activities of the migration process of certain TIM infrastructures and applications deriving
from the changes made by the computer systems impacting financial reporting
Overall total
(in euro)
8,500.00
15,000.00
40,000.00
70.000,00
15,000.00
184,307.00
40,000.00
180,000.00
420,000.00
125,000.00
In addition, during the period between 1 January 2021 and the date of this Report, TIM S.p.A. conferred upon EY
S.p.A. the following additional appointments, other than audits of financial statements, the fees for which, before
VAT and out-of pocket expenses, are summarised below:
EY S.p.A.
Auditing/control services (carried out in accordance with ISA 805 - Revised) connected with the use of
specific tax treatments (tax credit for research and development activities and technological innovation)
Issue of comfort letters in relation to the issue of bonds (Sustainability Bond)
•Voluntary appointment relative to the assurance and assessment of the Non-Financial Statement (carried
out according to ISAE 3000 and ISAE 3410)
Voluntary appointment for the issue of a report on the complete examination of the European Single
Electronic Format (“ESEF”) disclosure in reference to the consolidated financial statements of TIM S.p.A.
as at 31 December 2020 (activity carried out in accordance with standard ISAE 3000 Revised)
Total
(in euro)
90,000.00
40,000.00
76,000.00
20,000.00
226,000.00
In accordance with the current “Guidelines for the Conferral of Appointments on Independent Auditors”, the
conferral of the above appointments had been approved in advance by the Board of Statutory Auditors.
8.
Report on any appointments conferred on parties connected by continuing relationships with the
independent auditor and the corresponding costs
During FY 2020 and in the period running between 1 January 2021 and the date of this Report, TIM S.p.A. did not
confer any appointment on subjects bound by continuous relationships with EY S.p.A. and/or companies
belonging to the latter’s network.
9.
Report on the existence of opinions issued pursuant to law during the financial year
Pursuant to article 2389, subsection 3, of the Italian Civil Code, the Board of Statutory Auditors issued its
favourable opinion on:
▪
▪
the variable remuneration objectives (MBO 2020) scorecard of the Chief Executive Officer; and
the remodulation of the fixed component of remuneration recognised to the Chief Executive Officer,
consisting of the restructuring of the comprehensive gross fixed annual amount of 1.4 million euros as (i)
1,300,000 euros by way of Gross Annual Remuneration for the contract of employment and (ii) 100,000 euros
as compensation for the office of Chief Executive Officer pursuant to Art. 2389, subsection 3, of the Italian
Civil Code.
Other Information
Report of the Board of Statutory Auditors 454
The Board of Statutory Auditors has also stated, in accordance with the Company’s Corporate Governance
Principles:
▪
favourable opinion on the objective scorecards for the short term incentive scheme (2020 MBO) for the Heads
of the control departments (Audit Department, Compliance Department and IT & Security Compliance
Function);
▪ opinion on the appointment of the Director Salvatore Rossi as Chairman of the Board of Directors with the
sole attributions resulting from the Bylaws, the law and the Company’s corporate governance documents,
on the confirmation and ascertainment of him as independent director and on the confirmation of the
economic treatment already assigned; and
▪ opinion on the appointment of the director Frank Cadoret as member of the Sustainability and Strategies
Committee with the economic treatment already assigned.
Finally, in accordance with the Corporate Governance Code, the Board of Statutory Auditors formally expressed
its favourable opinion on the 2021 preliminary Audit Plan, examined by the Board of Directors in the meeting on
3 February 2021, and which will be consolidated during a subsequent meeting of the Board.
10. Report on the frequency and number of meetings of the BoD, Executive Committee and Board of Statutory
Auditors
In 2020, the Company’s Board of Directors held 14 meetings, at which the Board of Statutory Auditors was always
present.
The Control and Risk Committee met 11 times, the Nomination and Remuneration Committee met 10 times, the
Related Parties Committee met 6 times and the Sustainability and Strategies Committee (formerly the Strategy
Committee) met 4 times. The Board of Statutory Auditors attended the meetings of all board committees, with
the attendance of its Chairman and/or another Auditor, supervising the relevant activities.
The Board of Statutory Auditors held 24 meetings in 2020, of which 2 in the exercise of the role of Supervisory
Body pursuant to Italian Legislative Decree 231/2001 (see below). In 2021 and up to the date of approval of the
Report 7 meetings have been held.
The majority of the members of the Board of Statutory Auditors attended (by audioconferencing connection)
the Shareholders' Meeting held on 23 April 2020 in the manner permitted by the exceptional regulations set out
in Decree Law no. 18 of 17 March 2020.
11. Remarks on compliance with the principles of correct administration
The Board of Statutory Auditors supervised compliance with the principles of correct administration, by
attendance at the meetings of the Board of Directors and board committees, holding meetings with the
executive responsible for preparing the corporate accounting documents, the Head of the Audit Department,
the Group Compliance Officer, the Head of the IT & Security Compliance function and by means of interviews
with the Company management and the acquisition of information. In particular, the Board acquired information
about the TIM anti-bribery management system for the purposes of standard UNI ISO 37001, which reveals
substantive compliance with the requirements indicated by the standard and that the Company’s Anti-Bribery
Management System has been implemented in compliance with the requirements laid down in reference
documentation, albeit in view of certain recommendations and points for improvement on non-critical aspects.
The Board of Statutory Auditors believes that the governance arrangements and tools adopted by the Company
overall constitute an appropriate supervisory framework to ensure that the principles of correct administration
are respected in operational practice. The Board of Statutory Auditors has supervised on proceedings followed
in the deliberations of the Board of Directors and has ascertained that the management choices complied to the
applicable rules (substantial lawfulness), adopted in the interests of the Company, compatible with the resources
and the company's assets and adequately supported by information, analysis and audit processes, including
with recourse, when deemed necessary, to advice from committees and external professionals.
12. Remarks on the adequacy of the organisational structure
The Board of Statutory Auditors has monitored the evolution of the TIM Group’s organisational structure (also in
accordance with golden power regulations, as per the provisions of the Decrees of the President of the Council
of Ministers of 16 October 2017 and 2 November 2017), defined in accordance with, on the one hand, the
organisational and managerial autonomy of the Parent Company and its subsidiaries and, on the other, the
exercising of direction and coordination by TIM with regard to the direct or indirect subsidiaries.
More specifically, the Board of Statutory Auditors has monitored the principal changes in the organisational
structure of the TIM Group through meetings held with the Head of the Human Resources & Organisational
Development Department, the Heads of the main corporate structures and by acquiring the organisational
communications which had produced an impact on the first and second tiers that report directly to TIM's
executive directors or on the macro-organisation of the Group's companies.
Other Information
Report of the Board of Statutory Auditors 455
13. Remarks on the adequacy of the internal control system, in particular on the activity of the internal control
managers, and highlighting of any corrective actions undertaken and/or to be undertaken
The Board of Statutory Auditors has acknowledged the overall assessment of the internal control and risk
management system by the Head of the Audit Department, the conclusions of which are set forth below: “in
view of the activities carried out by the Audit Department during the reference period on specific operative
contexts, which revealed control topics and improvements to be made; of the report on the implementation of
corrective action deriving from the audits; of the assessments provided by the Compliance Department and IT &
Security Compliance Department of TIM S.p.A. and the Head of Audit of TIM S.A. as at 31.12.2020; of the specific
initiatives taken and/or started in the reference period by the management with a view to strengthening the
ICRMS; of the report by the independent auditor presented to the CRC on 3 December 2020; as at 31 December
2020, no situations or critical issues have emerged such as to consider the TIM Internal Control and Risk
Management System inadequate as a whole.
The Board of Statutory Auditors shared the assessment of overall adequacy of the internal control and risk
management system as formulated by the Head of the Audit Department, also taking into account the fact that
in 2020, the Audit Department carried out checks mainly focussed on the analysis of the most critical areas in
terms of supporting the TIM Group in its strengthening of processes and improvement of operative efficiency.
Please note that the commitment level on the implementation of the remediation and strengthening
programmes of the ICRMS has had a positive impact on respect for the due dates envisaged for carrying out the
corrective action and on rescheduling requests. The Board points out that the strengthening of the internal
control system is a process that is still in progress and which may, therefore as yet evolve in various areas.
In order to express its opinion on the overall strength of the internal control system, the Board of Statutory
Auditors has also monitored the work carried out by the main players in the internal control and risk
management system, also with reference to specific aspects, such as special powers (“golden power”). In
particular, insofar as coming under its purview, the Board of Statutory Auditors also monitored the improvements
made and action taken to mitigate risks, in some cases requesting specific, additional strengthening of the
control measures. The Board of Statutory Auditors acknowledged the results of the first and second level
controls, by virtue of the powers and auditing functions attributed by Prime Ministerial Decree no. 5 of 06/11/2015,
coordinated with the Prime Ministerial Decree no. 3 of 02/10/2017, to the TIM Security Officer. The latter declared
that in 2020, with reference to the three sectors of activity of the department (Industrial Security, Communication
and Information System Security and Security of Classified Communications and Encryption Service Procedures),
complete compliance was seen: (i) in the conservation and management of the classified documentation; (ii) in
the protection of classified materials; and (iii) in the carrying out of confidential activities.
It is also noted that TIM has voluntarily adhered to the Collaborative Compliance regime and that the Board has
acquired the Report prepared by the Head of the Reporting and Fiscal Monitoring Department, in accordance
with art. 4, subsection 2 of Italian Legislative Decree no. 128/2015, aiming to explain to the Board of Directors,
under the scope of the System for the Management and Control of the Tax Risk (the “Tax Control Framework”)
adopted by the Company, the audits carried out in 2020, the results recorded and the remediation measures
implemented, as well as the activities planned for 2021.
The Board of Statutory Auditors has exchanged information with the corresponding control bodies of the
principal domestic subsidiary companies, taking note of the assessments that the related internal control
systems are adequate overall. It also met with the Comitê de Auditoria Estatutário of TIM S.A. and with the Audit
Committee of Telecom Italia Capital S.A. and Telecom Italia Finance S.A., acknowledging the assessment of
overall adequacy of the internal control system of the Brazilian company and the Luxembourgian companies.
The internal control and risk management system also includes the Organisational Model 231, the organisation
and management model designed to prevent the commission of offences that could result in liability for the
Company, pursuant to Legislative Decree No. 231/2001. The Organisational Model 231 has been adopted by
domestic subsidiaries of the Group as well as by TIM.
During the period running between 1 January 2020 and 31 March 2020, the Board of Statutory Auditors, in the
role of Supervisory Body, met twice, taking into account the fact that starting 1 April 2020, the duties of
Supervisory Body have been assigned to a specific body, separate from the Board of Statutory Auditors.
The Board of Statutory Auditors has subsequently acquired information from the Supervisory Body during
specific meetings, as well as through the examination of the six-monthly reports it prepares.
No discrepancies were noted between that represented in the documents produced by the management, the
Supervisory Body pursuant to Italian Legislative Decree no. 231/2001 and the company in charge of performing
the external audit of the accounts.
The latest version of the Model 231 was approved on 10 November 2020 and incorporates the new legislation
introduced by Italian Legislative Decree no. 75 of 14 July 2020 (incorporating the PIF Directive), which has
expanded the list of predicate offences.
Other Information
Report of the Board of Statutory Auditors 456
The TIM Group has adopted an Enterprise Risk Management Model (ERM) which enables risks to be identified
and managed in a homogenous way within the Group companies, highlighting potential synergies between the
players involved in the assessment of the internal control and risk management system. The process is managed
by the Risk Management Steering Committee, which provides governance of the Group's risk management,
aimed at containing the level of exposure within acceptable limits and guaranteeing the operational continuity
of the business by monitoring the effectiveness of the countermeasures adopted. The Board of Statutory
Auditors has acknowledged that, on 23 February 2021, the Board of Directors defined the risk that was
acceptable for the Group (Risk Appetite) and the acceptable levels of deviation from the principle company
objectives (Risk Tolerance) under the scope of the Industrial Plan. It is noted that starting July 2020, the Company
has launched work on the new ERM process with the aim of identifying and quantifying the strategic risks that
may compromise the achievement of the Business Plan targets and significantly impact the expected results.
The main developments that have been finalised are related to the extension of the Market Model and
Consolidated Model and the analysis and integration of the credit, regulatory and technological risk.
The Board of Statutory Auditors has monitored compliance with the provisions of law and regulations of the
Procedure for the execution of transactions with related parties, its effective implementation and its actual
functioning.
The Board of Statutory Auditors has been constantly informed of transactions with related parties and verified
compliance by the Company with applicable regulations.
In compliance with Italian Legislative Decree no. 254/2016 (hereinafter the “Decree”), TIM has been required to
disclose non-financial information since FY 2018.
The TIM Group NFS contains a description of topics regarding: the corporate management model, corporate
governance, stakeholder engagement, the materiality matrix and risk management, the results achieved by the
Company on topics relevant to the environment, the value chain and human rights.
On 10 March 2021, the independent audit firm issued a specific report containing the certification of the
conformity of the information provided in the NFS with that required by the Decree and reporting standards
used, which reads “attention has not been drawn to any elements that would suggest that the TIM Group NFS
relative to the year ended 31 December 2020 has not been prepared, in all significant aspects, in compliance
with that required by Articles 3 and 4 of the Decree and the GRI Standards”.
The Board of Statutory Auditors has obtained regular updates on the conduct of activities prior to preparing the
NFS and has monitored observance of the provisions pursuant to the above Decree under the scope of the duties
assigned it by the system and, in particular, on the adequacy of the procedures, processes and departments
overseeing the production, reporting, measuring and representation of the results and of information of this
nature.
Reference is made to TIM’s 2020 Report on the Corporate Governance and Share ownership for more information
about the Company’s internal control and risk management system.
14. Remarks on the adequacy of the administrative and accounting system and its ability to fairly represent
operations
In order to guarantee compliance with Italian laws, TIM operates a structured and documented model of
detection and monitoring of risks connected to financial reporting, which refers to the 2013 CoSo framework.
This model, managed with the help of a specific piece of software, regards the internal controls associated with
the risks identified on the financial reporting and the consequent assessment activities, with precise attributions
of responsibility, in compliance with the principle of accountability.
The Board of Statutory Auditors supervised the adequacy of the administrative and accounting system of the
Company and its reliability to fairly represent operations, also by collecting information from Company
management, examining company documents and analysing the results of the activities undertaken by the
External Auditor.
The Board of Statutory Auditors also monitored the financial reporting process.
The Board of Statutory Auditors acknowledged the statements issued by the Chief Executive Officer and the
Executive responsible for preparing the corporate accounting documents of TIM S.p.A. concerning the adequacy
in relation to the characteristics of the company and the actual application during 2020 of the administrative
and accounting procedures for the preparation of the financial statements and the consolidated financial
statements.
At TIM the goodwill impairment test was applied in a consolidated and structured way, coordinated by the Chief
Financial Officer, with the intervention of independent external experts of acknowledged professional expertise.
The impairment procedure is revised once a year and the process for impairment testing is analysed and
Other Information
Report of the Board of Statutory Auditors 457
discussed in special meetings involving the Control and Risk Committee and Board of Statutory Auditors, that
precede the Board of Directors meetings to approve the financial reports to which the impairment test must be
applied.
The Board of Statutory Auditors has checked that the impairment test procedure applied to the 2020 financial
statements was conducted in terms coherent with the procedure approved by the Board of Directors on 16
December 2020 and with the applicable IFRS standards.
Reference is made to the explanations given in the "Goodwill" Note to the consolidated financial statements as
of 31 December 2020 of the TIM Group.
Regarding the provisions of article 15, subsection 1, letter c, ii) of the Market Regulations (Conditions for the listing
of shares of controlling companies and of companies registered in and regulated by the laws of States that are
not members of the European Union), the Board of Statutory Auditors has not ascertained facts and
circumstances that would indicate that the administrative-accounting system of the controlled companies is not
adequate to ensure that the data on the revenues, finances and assets of the companies needed for the
preparation of the consolidated financial statements regularly reaches the management and auditor of the
controlling company.
15. Remarks on the adequacy of the instructions imparted by the Company to its subsidiaries pursuant to article
114, subsection 2 of Legislative Decree no. 58/1998
The Board of Statutory Auditors believes that the instructions imparted by TIM to its subsidiaries, pursuant to
art. 114, subsection 2 of the CLF, are adequate to comply with the disclosure obligations established by the law.
In this respect it should be noted that the Company regulates the flow of information it receives from its
subsidiary companies on transactions of particular impact, with specific procedures.
16. Remarks about any relevant aspects that emerged during the meetings held with the auditors pursuant to
article 150, subsection 2 of Legislative Decree no. 58/1998
In 2020, the Board of Statutory Auditors held regular meetings with the external auditor (EY) during which data
and significant information was exchanged for the performance of their respective duties.
The Board of Statutory Auditors has analysed the work carried out by the independent auditor, with specific
reference to the approach and auditing strategy for FY 2020 and the definition of the audit plan. The key audit
matters were shared and the related corporate risks, thereby allowing for the appreciation of the adequacy of
the response planned by the independent auditor.
The Board of Statutory Auditors has ascertained, from information obtained from Independent Auditor EY and
from the management of the Company, that the IAS/IFRS principles, and the other legal and regulatory
provisions that apply to the preparation and presentation of the separate financial statements, the consolidated
financial statements and the accompanying report on operations, are complied with.
In particular, the Board of Statutory Auditors has verified that the Company has taken the necessary steps to
prepare the consolidated financial statements in electronic format (using XHTML and iXBRL technologies), as
prescribed by the ESEF Regulation.
No significant shortcomings were seen in 2020.
In compliance with that prescribed by Art. 19 of Italian Legislative Decree no. 39/2010, the Board of Statutory
Auditors has verified and monitored the independence of the external auditor, particularly as regards the
provision of services supplied to the Company, other than auditing.
Taking into account the EY declaration of independence (contained in the Additional Report for the Committee
for Internal Control and Audit) and the additional appointments conferred by TIM and the Group companies on
EY and the companies belonging to its network, the Board of Statutory Auditors believes that conditions are met
for attesting to the independence of the independent audit firm EY.
17.
Indication of the adherence or otherwise of the company to the Corporate Governance Code of the
Committee for the Corporate Governance of listed companies
The Company complies with the Corporate Governance Code and adhered to the previous Corporate Governance
Code.
The Board of Statutory Auditors has supervised the arrangements for the concrete implementation of the rules
of corporate governance it contains.
In particular, TIM has adopted the criteria of the Corporate Governance Code for the classification of Directors as
independent. Based on the elements provided by the concerned parties pursuant to Borsa Italiana Code and as
per the Consob Issuers’ Regulations, or in any case in the Company's availability, the requirements were assessed
Other Information
Report of the Board of Statutory Auditors 458
at the first Board meeting following the appointment, thereafter renewed on 20 February 2019, 29 January 2020
and 3 February 2021. Out of the current 13 Directors in office (following the February 2021 resignation of Directors
Ferrari and Morselli), 10 meet the independence requirements: the Directors Altavilla, Bonomo, Capaldo,
Cappello, Giannotti de Ponti, Moretti, Roscini, Sabelli and Valensise and the Chairman of the Board of Directors,
Rossi. With respect to the latter, the Board of Directors has expressly ruled out that the role of “prominent
representative” of the Issuer, given the governance structure adopted, affected his independence of judgement,
thereby undermining his independence as director.
On 17 February 2021, the Board of Statutory Auditors checked that the criteria and ascertainment procedures
adopted by the Board of Directors to assess the independence of its members were correctly applied, ruling that
this was indeed the case.
The point of reference and coordination for the issues and contributions of the independent Directors and the
non-executive Directors in general is the Lead Independent Director, a role held by Dante Roscini.
The Lead Independent Director is granted the right to use corporate structures to perform the tasks entrusted
to him and to convene special meetings of the Independent Directors to discuss issues regarding the functioning
of the Board of Directors or the management of the business.
On 17 February 2021, the Board of Statutory Auditors also checked that the requirements of integrity,
professionalism and independence were met by each Auditor, in accordance with art. 148, subsection 3 of the
CLF and the Corporate Governance Code.
See TIM’s 2020 Report on the corporate governance and share ownership for further information on the corporate
governance of the Company, which the Board of Statutory Auditors evaluates positively.
18. Conclusive assessments of the supervisory activity carried out and of any omissions, misconduct or
irregularities noted during the course of this activity
No significant facts that should be mentioned in its Report to the Shareholders’ Meeting have emerged from the
supervision and control activities carried out by the Board of Statutory Auditors, as described above.
19. Report of any proposals to be brought to the attention of the shareholders’ meeting pursuant to article 153,
subsection 2 of Legislative Decree no. 58/98
Having acknowledged the 2020 financial statements of TIM, the Board of Statutory Auditors had no objections
to formulate on the proposed resolution presented by the Board of Directors, as reported in the Report on
Operations
https://www.gruppotim.it/content/dam/gt/investitori/doc---avvisi/anno-
2121/inglese/Shareholders-Meeting-31-03-2021-Fascicolo-Relazioni-e-proposte-CdA-ENG.pdf.-
available
and
at
The Board of Statutory Auditors has acknowledged that the Shareholders' Meeting has been convened, in
connection with the COVID-19 epidemiological emergency, with procedures consistent with the exceptional rules
contained in Decree Law no. 18 of 17 March 2020.
The mandates conferred on the Board of Statutory Auditors and the Board of Directors end with the
Shareholders’ Meeting called to approve the financial statements as at 31 December 2020.
At the end of its mandate, the Board of Statutory Auditors thanked the Shareholders for the trust placed in them
and asked that they pass all related and consequent resolutions.
Milan, 10 March 2021
For the Board of Statutory Auditors
The Chairman
Other Information
Report of the Board of Statutory Auditors 459
MOTIONS FOR RESOLUTIONS
SHAREHOLDERS’ MEETING OF TIM S.p.A.
March, 31 2021: shareholders’ meeting of TIM S.p.A. – single call
Medium
■
Financial statements as at 31 December 2020 – Approval of the documentation on the financial statements
- Allocation of profits and losses for the year
■ Report on the remuneration policy and compensation paid - Approval of the first section (remuneration
policy) - Non-binding vote on the second section (year 2020)
■ Appointment of the Board of Directors - Determination of number of members of the Board of Directors -
Determination of term of office of the Board of Directors – Appointment of Directors - Determination of
remuneration of the Board of Directors
■ Appointment of the Board of Statutory Auditors - appointment of the standing and alternate auditors -
appointment of the Chairman of the Board of Statutory Auditors - determination of fees
Financial statements as at 31 December 2020 – Approval of the
documentation on the financial statements - Allocation of
profits and losses for the year
Dear Shareholders,
the draft financial statements for the year ending 31 December 2020 confirm the sustainability and robustness
of TIM S.p.A.’s business plan, which has been capable of positive net results despite the extraordinary investment
effort needed to deploy new network technologies amid a pandemic that has resulted in global economic crisis,
weighing on the industry, albeit to a lesser extent than in other sectors. The Parent Company’s consolidated
profit is accompanied by a further reduction in Adjusted Net Debt, outperforming the targets of the 2020-2022
planning cycle.
With a total profit for the year of 7,161,469,044.90 euros (resulting from the various components set out
analytically in the financial report), the distribution of dividends to both categories of shareholders has been
confirmed in line with last year’s distribution. Therefore, following the allocation of 22,422,995.42 euros to the
legal reserve, the proposal is to proceed with a dividend distribution of 0.01 euros per ordinary share and 0.0275
per savings share, as per the category’s rights under Article 6 of the Company Bylaws. The amount of the total
dividend distributed – without prejudice to the unit amounts indicated above – will vary depending on the
number of shares existing at the time, taking into account the capital increases in progress and the number of
treasury shares held by the Company (35,179,709 ordinary shares as of today).
The dividend amounts will be payable as of 23 June 2021 to the persons entitled based on the evidence of the
share deposit accounts at the end of the record date of 22 June 2021, while the coupon date will be 21 June 2021.
In the draft financial statements, the value of goodwill is realigned for tax purposes pursuant to Decree-Law No.
104/2020, Article 110(8) by placing a tax suspension restriction on a portion of net equity equal to the realigned
amount, after deducting the substitute tax due for the realignment, and then proceeding with the resulting
accounting records or disclosures.
In light of the above, the Board of Directors submits the following proposals for your approval:
Proposal 1: Approval of the documentation on the financial statements
The Shareholders’ Meeting of TIM S.p.A.,
■ having examined the annual financial report of TIM S.p.A.;
■ having taken note of the reports by the Board of Statutory Auditors and the independent auditors EY S.p.A.;
■
to approve the 2020 financial statements of TIM S.p.A.
Proposal 2: Allocation of profits and losses for the year
resolves
Other Information
Motions For Resolutions 460
The Shareholders’ Meeting of TIM S.p.A.,
■ having examined the 2020 financial statements of TIM S.p.A.;
■
■
■
■
■
taking into account the outstanding amount of the legal reserve;
resolves
to allocate to the legal reserve the amount of 22,422,995.42 euros as needed to bring the total amount of
the reserve up to 2,335,400,571.02 euros (equivalent to one fifth of the share capital);
to allocate part of the profit for 2020 to pay the Shareholders a total dividend calculated based on the
following amounts, which will be applied to the number of ordinary and savings shares that they own on the
record date (excluding the treasury shares held by the Company):
• 0.0100 euros (gross of withholding taxes) for each ordinary share,
• 0.0275 euros (gross of withholding taxes) for each savings share,
to make the dividend payable starting on 23 June 2021, with a coupon date of 21 June 2021 (record date 22
June 2021);
to carry forward the residual profit and confer powers to the Board of Directors to proceed with any necessary
accounting record or disclosure associated with the tax realignment of the goodwill carrying amount
pursuant to Legislative Decree No. 104/2020, Article 110(8).
Report on the remuneration policy and compensation paid -
Approval of the first section (remuneration policy) - Non-
binding vote on the second section (year 2020)
Dear Shareholders,
in view of the Shareholders' Meeting of 31 March 2020, on the basis of the regulatory framework recently updated
in accordance with the transposition into national law of Directive 2007/36/EC (known as the Shareholders' Rights
II Directive), the report on the remuneration policy and compensation paid has been prepared.
This document is divided into two sections:
■
■
the first illustrates the Company's policy on the remuneration of Directors, Statutory Auditors and Key
Managers with Strategic Responsibilities, and is subject to a binding resolution of the Shareholders' Meeting,
with the possibility of derogation in the event of exceptional circumstances, within the limits and under the
procedural conditions specified in the same document;
the second provides a representation of the items that make up the remuneration of the people mentioned
above, with an analytical illustration of the fees paid to them in 2020, shows how the Company has taken
into account the shareholders’ vote and is subject to a non-binding resolution of the Shareholders' Meeting
for or against.
In the light of the above, you are asked to vote separately on the first and second sections of the report, in the
terms described above, and for this purpose the Board of Directors submits the following proposals for your
approval:
Proposal 1: approval of the first section of the report on the remuneration policy and compensation paid
The Shareholders' Meeting of TIM S.p.A., having regard to the provisions applicable to the report on the
remuneration policy and compensation paid,
resolves
the approval of the first section of the report on the remuneration policy and compensation paid by the Company.
Proposal 2: non-binding vote on the second section of the report on the remuneration policy and
compensation paid
Other Information
Motions For Resolutions 461
The Shareholders' Meeting of TIM S.p.A., having regard to the provisions applicable to the report on the
remuneration policy and compensation paid,
resolves
in favour of the second section of the report on the remuneration policy and compensation paid by the Company.
Appointment of the Board of Directors - Determination of
number of members of the Board of Directors - Determination
of term of office of the Board of Directors – Appointment of
Directors - Determination of remuneration of the Board of
Directors
Dear Shareholders,
the term of office of the Board of Directors appointed by the Shareholders’ Meeting of 4 May 2018 expires with
approval of the financial statements for the year ending 31 December 2020. In order to renew the administrative
body, the Shareholders’ Meeting is called on:
■
■
■
■
to establish the number of members of the Board, within the limits set by the Bylaws (from 7 to 19 members),
to appoint them following the procedure laid down in the Bylaws (slate voting);
to establish the term of office of the Board, up to a maximum of three financial years;
to establish the remuneration.
In view of the formulation of the various proposals, a specific document has been published (available at
www.gruppotim.it/en/investors/shares/agm.html), containing a summary of the applicable regulations and a
series of considerations made by the outgoing Board of Directors on the optimal quali-quantitative composition
of the Board, which you are invited to take into account. Moreover, as announced to the public, in view of the
renewal, the outgoing Board of Directors has decided to make its own proposals and formulate its own slate, in
compliance with the procedure that can be consulted at www.gruppotim.it/en/investors/shares/agm.html. Along
with the slate and the additional proposals, the Board will file a specific report on the preliminary process
completed; similarly, it is recommended that shareholders submit their slates and proposals together with
adequate information on the reasons for the choices made.
The slate submitted by the Board will compete against those submitted by shareholders. Where it is necessary
to supplement the board with the majorities required by law (absolute majority of the capital present at the
meeting) the proposal to appoint the unelected candidates included in the properly submitted slates will be put
to the vote, starting with the slate that obtains the most votes, following the order in which they are listed, in
the number necessary to complete the composition of the board in compliance with the gender balance
requirements. It is understood that, once the composition of the board is complete, further proposals to appoint
unelected candidates from any other slates shall not be considered.
As for the additional proposals (relating to the number, term of office and remuneration of the Directors), the
proposals made by the Board will be voted on first, and only if they are not approved by the Shareholders'
Meeting will any proposals made by shareholders be considered, starting with the proposal submitted by
shareholders who represent the highest percentage of the capital. It is understood that, once a proposal has
been approved, there shall be no more voting on any alternative proposals.
All that said, the outgoing Board of Directors of TIM S.p.A., in view of the Shareholders Meeting of 31 March 2021,
pending disclosure of its own slate and the necessary additional proposals (as above),
■
recommends that shareholders:
•
•
exercise in timely fashion their rights to submit slates of candidates for the office of Director of the
Company assigned to them by the law and the Company Bylaws;
submit, with their slates, where deemed appropriate, reasoned proposals for the number of members of
the Board and the duration of its term of office and its remuneration.
Candidates should also provide a photograph and a copy of a personal identification document, and authorise
publication of their curriculum vitae on the Company website, ensuring that details they do not wish to be
disseminated are not included; invites shareholders to vote at due time on the additional proposals published
and to make their choice from the slates submitted in compliance with the provisions of the Bylaws.
Other Information
Motions For Resolutions 462
Appointment of the Board of Statutory Auditors - appointment
of the standing and alternate auditors - appointment of the
Chairman of the Board of Statutory Auditors - determination of
fees
Dear Shareholders,
the term of office of the Board of Statutory Auditors appointed by the Shareholders’ Meeting of 24 April 2018
expires with approval of the financial statements for the year ending 31 December 2020.
In order to renew the control body, the Shareholders’ Meeting is called on:
■
■
■
to appoint five Standing Auditors and four Alternate Auditors,
to appoint one of the Standing Auditors elected from minority slates as Chairman of the Board of Statutory
Auditors and
to determine the Statutory Auditors’ annual remuneration.
The above proposals are devolved to the Shareholders, since the Board of Directors shall only call the meeting
and provide the following elements of information and recommendations. You are reminded that duration of
the Auditors’ mandate is established by law as three financial years, and thus until the Shareholders’ Meeting
called to approve the financial statements at 31 December 2023.
Appointment of the Standing and Alternate Auditors
The Company Bylaws prescribe that five Standing Auditors (two of whom of the less represented gender) and
four Alternative Auditors (two of each gender) be appointed. At least two Standing Auditors and one Alternate
Auditor must be chosen from among those registered in the register of chartered accountants who have acted
as external auditors for a period of no less than three years. The remaining (Standing and Alternate) Auditors
must have accrued at least three years’ experience of:
■ administration and control activity, or have held executive roles in limited liability companies with share
capital of no less than two million euros, or
■ professional activity or permanent university teaching of legal, economic, financial or technical-scientific
subjects closely connected to the activity of the enterprise, or, further,
■ senior management roles in public or government bodies operating in the banking, finance or insurance
sectors or sectors otherwise closely connected to the sector in which the enterprise conducts its activity.
According to the Company Bylaws, the following sectors of activity and subjects are considered to be closely
linked to that of the Company: activities and subjects related to telecommunications, information technology,
telematics, electronics and multimedia technology, as well as matters related to private and administrative law,
economics and business administration. Still on the subject of requirements, the applicable legislative framework
should be considered as supplemented, with reference to independence, by the criteria laid down in the
Corporate Governance Code of companies with shares listed on the Electronic Share Market managed by Borsa
Italiana, to which TIM adheres. Finally, in light of the company's business, it is advisable for the members of the
control body to individually possess the requisites to sign contracts with government bodies and to undertake
activities subject to authorisation.
Renewal takes place on the basis of slates divided into two sections respectively for Standing Auditors and for
Alternate Auditors. The first candidate in each section is selected from among chartered accountants entered
in the appropriate register who have worked on external audits for at least three years. In each section, if there
are three or more candidates, the presence of both genders must be ensured, in such a way that candidates of
the less represented gender are at least one third of the total, rounding any fractions up to the next whole
number.
Slates may be submitted by 06 March 2021 by shareholders who, alone or jointly with others, hold a total number
of shares that represents at least 0.5% of the capital with voting rights in the Ordinary Shareholders' Meeting. If
only one (or no) slate has been validly submitted by 6 March, or the only slates submitted are from shareholders
with an affiliate relationship, the submission deadline shall be extended to 9 March 2021 and the entitlement
threshold halved to 0.25%. In any event, the Company must obtain the communications of entitlement to vote
from the intermediaries by 10 March 2021.
Each shareholder may only submit a single slate, alone or jointly with others, providing information on its identity
and the percentage of the total shareholding it holds, and shall also declare any connecting relationships,
including indirect relationships, with the relative majority shareholder. Together with the slate, for each
candidate an acceptance of the candidacy and a statement that they possess the requirements (including
compliance with the limit on the number of offices held, as per the Consob regulation) and a curriculum vitae
must be filed.
Other Information
Motions For Resolutions 463
In the shareholders’ meeting,
■
■
three Standing Auditors and two Alternate Auditors will be appointed from the slate that obtains the most
votes (the “majority slate”), in the order in which they are listed on the slate;
two Standing Auditors and Two Alternate Auditors will be appointed from the remaining slates (the “minority
slates”), after the assignment of a quotient obtained by dividing the number of votes for the slate by one
and by two to the candidates, in the order they are listed in their slate, and selecting the candidates with the
highest quotients, for the Standing Auditor and the Alternative Auditor roles, separately.
If this method does not produce gender balance, the last candidates elected from the majority slate of the more
represented gender shall be replaced by the top unelected candidates of the less represented gender on the
same slate. In the absence of candidates of the less represented gender on the majority slate, the Shareholders’
Meeting shall supplement the Board of Statutory Auditors by a vote decided by absolute majority of the share
capital represented at the meeting, thus ensuring that the requirement is met. To this end, and each time it is
necessary to resolve with the legal majorities to complete the composition of the board of statutory auditors,
the proposal to appoint the unelected candidates included in the properly submitted slates will be put to the
vote, starting with the slate that obtains the most votes, following the order in which they are listed, in the
number necessary to complete the composition of the board in compliance with the gender balance
requirements.
Appointment of the Chairman of the Board of Statutory Auditors
The slate voting mechanism is intended, by law, to ensure that some Auditors are elected by the “minority
shareholders not directly or indirectly associated with shareholders who submitted or voted for the slate that
came first in terms of number of votes” (in accordance with article 148 of Legislative Decree No. 58/1998). The
law also prescribes that the Chairman of the Board of Statutory Auditors is to be appointed by the Shareholders'
Meeting from amongst the Standing Auditors “elected by the minority”, and the Company Bylaws interprets this
to refer to the Standing Auditors appointed from the minority slates.
To this end, shareholders are invited to indicate expressly their candidate for the office of Chairman of the board
should the slate prove to be a “minority slate”.
The Shareholders' Meeting shall resolve on this matter by an absolute majority of share capital represented at
the meeting. If there is more than one useful proposal, the proposal made by shareholders who submitted the
minority slate that received the most votes will be voted on first. It is understood that, once a proposal has been
approved, there shall be no more voting on any alternative proposals.
Determination of the remuneration
The annual remuneration of the Statutory Auditors is determined by the Shareholders’ Meeting for the full
duration of their term of office, with the absolute majority of share capital represented at the meeting. If there
is more than one useful proposal, the one made by shareholders who hold the most shares will be voted on first.
It is understood that, once a proposal has been approved, there shall be no more voting on any alternative
proposals.
Together with the slate, shareholders are invited to submit a remuneration proposal, which by practice sets apart
the remuneration of the Chairman from the remuneration of the remaining Standing Auditors. In this regard,
attention is drawn to the fact that – as per the organisational model adopted by TIM pursuant to Legislative
Decree 231/2001 effective as of 1 April 2020 – a Standing Auditor will be called on to serve on the Supervisory
Body of the Company. When formulating the remuneration proposal, it is therefore recommended to set, in
addition to the “basic” remuneration to be paid to the Chairman of the board and all other Standing Auditors,
an additional fee for the Standing Auditor chosen to perform this role.
For information purposes only, note that the remuneration of the outgoing Board of Statutory Auditors was
established by the Shareholders' Meeting of 24 April 2018 (in keeping with the previous mandate) at 95,000 euros
gross per year for each Standing Auditor and 135,000 euros gross per year for the Chairman of the Board of
Statutory Auditors. At the time, the participation of a Statutory Auditor in a separate Supervisory Body was not
provided for, in that the relative duties were performed directly by the Board of Statutory Auditors.
In view of all this, the Board of Directors of TIM S.p.A., in view of the Shareholders' Meeting to renew the Board
of Statutory Auditors,
■
recommends that shareholders:
•
•
exercise their rights to submit slates of candidates for the office of Statutory Auditors of the Company
in a timely fashion, as per the law and the Company Bylaws;
submit, with the slates, additional proposals regarding the person to act as Chairman, and regarding the
remuneration of the Board of Statutory Auditors members.
Candidates should also provide a photograph and a copy of a personal identification document, and authorise
publication of their curriculum vitae on the Company website, ensuring that details they do not wish to be
disseminated are not included; invites shareholders to make their choice from the slates submitted in
compliance with the provisions of the Bylaws and to vote on the add.
Other Information
Motions For Resolutions 464
GLOSSARY
The following explanations are not intended as strict definitions, but to assist readers to understand certain
terms as used in this Annual Report.
2G (second-generation Mobile System)
Second-generation mobile systems using digital encoding and including GSM, D-AMPS (TDMA) and CDMA. 2G
networks are in current use all over Europe and other parts of the world. These systems support voice and limited
data communications, as well as auxiliary services such as fax and SMS.
3G (third-generation Mobile System)
Third-generation wireless system, designed to provide high data speeds, always-on data access, and greater
voice capacity. 3G networks allow the transfer of both traditional communication services (telephony, messaging)
and data (such as downloading Internet information, exchanging email, and instant messaging). The high data
speeds, measured in Mbps, are significantly higher than 2G. 3G networks technology enable mobile video, high-
speed Internet access. The standards of the 3G technology include UMTS, based on WCDMA technology (quite
often the two terms are often used interchangeably) and CDMA2000.
4G (fourth-generation Mobile System)
Fourth-generation systems are designed to provide, in addition to legacy services, mobile broadband Internet
access to several kinds of devices such as laptops with wireless modems, smartphones, tablets, and other mobile
devices. Current and future applications include mobile web access, IP telephony, gaming services, high-
definition mobile video, video conferencing, Internet of Things and cloud computing applications. 4G standards
include LTE e LTE-A (LTE-Advanced). LTE offers a higher spectral efficiency in bits per Hertz and download
bandwidth up to 150 Mbit/s per cell reducing the latency time. LTE enables services that require high interactivity
(e.g. gaming, video conferencing). A further development of LTE, called “LTE Advanced,” is being implemented
and will allow reaching even higher bitrates in download.
5G (fifth-generation Mobile System)
5G indicates the fifth-generation wireless systems that will be introduced on market soon. International standard
fora like 3GPP (3rd Generation Partnership Project) and ITU (International Telecommunication Union) are defining
characteristics and standards of 5G future connectivity and the first field trials have already been carried out.The
main elements of the 5G network will be:
▪
bit-rate significantly higher than 4G in larger spectrum bandwidth (up to tens of Gbit/s over hundreds of
MHz) to ensure greater quality of service, for innovative services such as video download and live streaming;
▪ ultra-low latency in the order of milliseconds;
▪
possibility of connecting simultaneously hundreds of thousands of objects (Internet of Things): wearable
technologies, automatic systems for traffic control, assisted driving for vehicles, home automation;
▪
ability to connect moving vehicles at higher speeds.
Amount charged by national operators for the use of their network by other operators’ customers. It is also
known as an “interconnection charge”.
5G NR
5G New Radio. It is the new 5G Radio Access Technology (RAT). See 5G SA and NSA.
5G NSA
The non-standalone (NSA) mode refers to a 5G deployment option where NR works in cooperation with an LTE
access.
5G SA
The standalone (SA) mode refers to a 5G deployment option based only on one 5G RAT (i.e. NR or LTE) without
cooperation with another RAT), connected to a 5G Core Network.
Other Information
Glossary 465
ADS (American Depositary Shares)/ ADR (American Depositary Receipt)
Instruments used for the listing on the NYSE (The New York Stock Exchange).
ADSL (Asymmetric Digital Subscriber Line)
Technology that transforms through a modem the traditional copper fixed line into a high-speed digital
connection for the transfer of multimedia data. ADSL is an asymmetrical technology used to achieve broadband
transmission.
Agile
In software engineering, the expression Agile (or agile software development) refers to a set of software
development methods that are opposed to traditional models such as cascade models (e.g. waterfall model);
Agile methods propose a less structured approach focused on the objective of delivering to the customer quickly
and frequently software that is functional and with best quality. Among the practices promoted by agile
methods, today in general referred to the Project Management of products (not exclusively software), there are:
the setup of small, poly-functional and self-organized development teams, iterative and incremental
development, adaptive planning, and the direct and continuous involvement of the customer in the product
development process.
AI (Artificial Intelligence)
Ability of a technological system to solve problems and carry out tasks and activities typical of the mind and
human behavior. In the computer science field, it is the discipline that deals with creating machines (hardware
and software) able to "act" autonomously (solve problems, perform actions, etc.).
API (Application Programming Interface)
An API is a set of procedures used to interact with other programs and expand their functionalities. APIs are
software libraries available for a given programming language that extend some functionality of the platforms
making them interoperable and open to different implementations.
ATM (Asynchronous Transfer Mode)
A network protocol through which the transfer of data is achieved using the encapsulation of fixed length (53
bytes) data units, called cells, instead of variable-length packets as is the case in packet-switched networks.
Automation
This term identifies technologies for automated equipment, systems and processes automation, reducing the
need for human intervention and simplifying network setup and maintenance activities.
Backbone
Portion of the telecommunication network that supports long-distance connections and aggregates large
amount of traffic and from which the connections for serving specific local areas depart.
Backhauling
It refers to the interface between the radio access node and the core network.
Big Data
Big data is a term used to describe the set of technologies and methods for massive data analysis. The term
indicates the ability to extrapolate, analyze and relate a huge amount of heterogeneous, structured and
unstructured data, to discover the links between different phenomena and predict the future ones.
Bit-stream access
Wholesale interconnection services which consist in the supply by a dominant telecommunications operator
(incumbent) of access transmission capacity between an end customer and an interconnection point of another
operator (OLO).
Blockchain
The Blockchain represents an innovative technology for structuring data and information with sharing on the
network; a blockchain system is like a distributed database or virtual register, structured as a chain of blocks
(hence the term blockchain) containing the transactions, and whose validation is entrusted to a consensus
mechanism distributed on all the nodes of the network participating to the chain. The main characteristics of
blockchain are the immutability of the registry, the traceability of transactions and the security based on
advanced cryptographic techniques. Blockchain technologies are currently used to support global supply chains,
financial transactions (e.g. BitCoin), accounting assets and distributed social networks.
Other Information
Glossary 466
BRAS (Broadband Access Server)
Also named BNG, it is an equipment that handles the access sessions of fixed broadband users. It authenticates
the users, terminates the logical links originated at users’ premises, produces user accounting data, may apply
policies and QoS techniques.
Broadcast
Simultaneous transmission of the same information to all nodes and terminal equipment of a network.
BSC (Base Station Controller)
Control node of the 2G radio access network and interface with the MSC switching node. It has the task of
supervising and controlling radio resources, for both call or data setup and maintenance.
BSS (Business Support System)
The system used by network operators to manage business operations such as billing, sales management,
customer-service management and customer databases.
BTS (Base Transceiver Station)
Radio base station transmitting and receiving the GSM radio signal to cover an area , split in one or more cells)
by using one or more radio transceivers (TRX). BTS performs also GSM communications ciphering/deciphering.
Bundle
Commercial offer including multiple telecommunications services (voice, broadband internet, IPTV, other) by an
operator under the same commercial brand. Dual Play bundle includes fixed telecommunication services and
broadband Internet; Triple Play bundle is the “dual play bundle” integrated with IPTV; Quadruple Play bundle is
the “bundle triple play” integrated with mobile telecommunication services.
Bypass
Opposite of COLT; these are Central Offices that don’t contain active equipments for NGA customers; in long
term plans will be released, not before migrating all legacy services.
Caching
Web contents caching (videos, HTML pages, images, etc.) is a technology that allows to reduce bandwidth usage
and content access time. A cache stores copies of documents requested by users in location closer to the users
than the originating sites, so that subsequent requests can be satisfied by the cache itself, under appropriate
conditions.
Carrier
Telecommunication services operator, providing a transport of communication services by means of its physical
telecommunication network.
Carrier Aggregation
Technology used to aggregate more radio carriers to increase the transmission speed over a wireless network.
CCA (Current Cost Accounting)
A method of accounting that values assets at their current replacement cost rather than their original cost.
CDMA (Code Division Multiple Access)
CDMA is a channel multiple access method used in radio communication. First radio systems based on CDMA
were developed by Qualcomm, and commercially introduced in 1995. It enables the simultaneous transmission
on the same channel of multiple signals, each of which is uniquely coded to distinguish it from the other
messages.
CDN (Content Delivery Network)
Content Delivery Networks), are content distribution systems (especially large multimedia contents, such as
IPTV) managed by a Service Provider for the provision of audio streaming services and video, with better quality
towards customers.
CDP (Carbon Disclosure Project)
International initiative that encourages companies to focus on the management of the risks and opportunities
emerging from climate change.
Other Information
Glossary 467
Cell
Geographical portion of territory illuminated by a radio base station.
Central Office
A building where the copper wires or optical fibers that make up the access network, reaching the customers,
originate from. It hosts equipment for telephony services (‘Stadio di Linea’ in TIM terms), broadband services
(DSLAM) and possibly ultrabroadband services (OLT). Some COs also host equipment of higher hierarchical rank
(SGU for telephony, router for data services), and those COs also collect traffic from the other COs which are not
so equipped.
Central Unit (CU)
It is a logical node hosting PDCP, RRC and SDAP protocol layers and other control functions based on a higher
layer functional split.
Channel
The portion of a communications system that connects a source to one or more destinations by means of
transmission media and optical, electric, electromagnetic signals.
Closed User Group
Group of customers who can make and receive calls or messages within the group at special conditions
(restricted access, dedicated pricing).
Cloud
The term Cloud is used as an abbreviation of the concept of "Cloud Computing, i.e. a model of consumption of
processing resources (for example networks, servers, memory, applications and services) through the network;
with the Cloud, the end customer, otherwise defined as cloud consumer, is allowed to access, widespread, easy
and on-demand to a shared and configurable set of resources that can be quickly acquired and released with
minimal management or interactions with the service provider. The Cloud model is made up of five essential
features: 1) Self Service on customer request, 2) broad-network access, 3) resource sharing, 4)
elasticity/automation in resource demand, 5) certified SLAs, three service models (see also SaaS, PaaS and IaaS)
and four distribution/deployment models (private, public, hybrid and communities).
Cloud native
Cloud native refers to an approach to build applications in a way that allows the full exploitation of the cloud
paradigm (see Cloud).
Cogeneration
Cogeneration is the combined production of electrical (or mechanical) energy and useful heat from the same
primary source. By using the same fuel for two different purposes, cogeneration aims at a more efficient use of
primary energy, with associated cost savings especially in production processes where there is a strong overlap
between the use of electricity and heating.
Cognitive Computing
Advanced artificial intelligence system in which the machines have part of the typical functions of a human
brain. Cognitive computing technologies are able to process enormous amounts of information, learn
autonomously, interact in human language and reproduce human thought models.
COLT (Central Office Long Term)
It refers to Central Offices that remain also for long term plans, connecting NGA customers with Fiber Optic.
Community
A group of people who have some interests in common and communicate via Internet (i.e. via social network).
Connected Cars
A connected car is a vehicle with an internet access and sensors for sending and receiving signals, perceiving the
surrounding environment and to get in touch with other vehicles and services.
Co-siting
Agreements to share technological sites (for Telecommunications, specifically, sites of access to the network and
passive infrastructure) by several operators in order to achieve a more efficient use of network infrastructure in
urban and rural areas.
Other Information
Glossary 468
CO2 - Carbon Dioxide
Carbon dioxide is one of the major greenhouse gases. It is linked to industrial processes and is the product of
combustion especially as the result of the use of fossil fuels.
CPE (Customer Premise Equipment)
The Customer Premise Equipment is an electronic device (terminal, telephone, modem) for telecommunications
used on the user's side that is able to connect directly to the geographic transmission network through
appropriate interfaces. The connection between the CPE and the network can be realized on physical carrier
(optical fiber, telephone twisted pair) or on radio (wireless) carrier.
CPS (Carrier Pre-selection)
Within the framework of the Equal Access policy guaranteed to all operators, the CPS (Carrier Pre-Selection) is a
feature of the telephone network that allows to permanently specify the call routing to the chosen operator. This
function must be implemented by the access operators in their own plants.
C-RAN
It refers to a Centralized Cloud RAN, a paradigm addressing centralized processing, collaborative radio, real-time
cloud computing, and power efficient infrastructure. It is an architecture that aggregates Base Stations
computational resources into a central pool by enabling improved radio coordination. C-RAN exploits software-
defined networking (SDN) and Network Functions Virtualization (NFV) techniques as well as data center
processing capabilities to enable the separation of the control and data planes and to achieve high flexibility by
allowing network resource sharing in a dynamic way.
Cybersecurity
It deals with the analysis of threats, vulnerabilities and the risk associated to internet-connected systems,
including hardware, software and data, to protect them from the attempt to expose, alter, disable, destroy, steal
or gain unauthorized access or make unauthorized use of an asset.
DAS (Distributed Antenna System)
It is a network of distributed antennas connected to a signal source in order to provide wireless services in a
geographical area or indoor. The Radiofrequency signal is combined and distributed through an antenna system.
Data Center
The Data Center is the department of a company that hosts and manages back-end IT systems and data
repositories: so, its mainframes, servers, databases, etc. In the past, this type of management and control was
in a single physical place, hence the name of data center. The development of new distributed computing
technologies has inaugurated new management criteria that see more data centers located/distributed at both
a physical and virtual level.
DCC (Digital Contact Center)
It is a set of platforms used to connect customers to most appropriate human and virtual Customer Care agents,
via different channels (voice, web, apps, mail, chat, sms) and to support agents in the interaction with customers
(e.g. Verbal Ordering, Back Office).
DDoS (Distributed Denial of Service)
A distributed denial-of-service (DDoS) is an attack to a target, such as a server, website or other network
resource, and cause a denial of service for users of the targeted resource. A flood of incoming messages,
connection requests or malformed packets to the target system forces it to slow down or even crash and shut
down, thereby denying service to users or systems.
Decommissioning
The term decommissioning means the disposal of the oldest technological solutions (legacy or obsolete) in order
to rationalize and simplify the current Telecommunication networks with the aim of optimizing investments and
improving the quality and time-to-market of services.
DevOps
In computer science, with DevOps (from the English contraction of Development and Operations) we mean an
agile method of software development that aims at communication, collaboration and integration between
developers and operations operators. DevOps is therefore an approach to the development and implementation
of applications in a company, that has as its objective the release of the product, the testing of the software, the
evolution and maintenance (correction of bugs and minor releases) to increase reliability and security and speed
up development and release cycles.
Other Information
Glossary 469
Digital divide
The gap between people with effective access to digital and information technology and those with very limited
or no access at all. The term encompasses among other things: gaps in ownership of or regular access to a
computer, or internet access due to being located in geographical areas with no broadband connectivity.
Distributed Unit (DU)
It is a logical node hosting RLC/MAC/High-PHY protocol layers based on a lower layer functional split.
DLA (Data Layered Architecture)
It is an architecture for real-time management of user data in telecoms networks (such as user profiles, etc.). It
introduces a separation between a logically centralized data storage layer, taking care of data consistency and
availability, and a front-end layer which handles requests coming from network elements.
DNS
The register containing the numeric IP addresses (for example 123.456.789.0) associated with the alphanumeric
addresses (name.surname@dominio.com) commonly used to identify a website or e-mail address.
DPI (Deep Packet Inspection)
It is a technology for analysis of live traffic packets which looks ‘deeply’ into packets payload, i.e. up to application
level, rather than just at IP/TCP/UDP headers level. It enables advanced traffic management.
Dsl Network (Digital Subscriber Line Network)
It is a network technology family that provides wide bandwidth digital transmission at short distances, through
the traditional twisted copper pairs from the first switching office to the end user.
DSLAM (Digital Subscriber Line Access Multiplexer)
DSLAM denotes equipment multiplier of digital access lines able to process digital signals of various clients with
xDSL lines and multipliy them in a high rate data link to the nodes of the Internet.
DTT (Digital Terrestrial TV)
Digital Terrestrial Television Broadcasting is a type of broadcasting technology that provides a more effective
way of transmitting television services (in terms of number of channels and images quality) using a digital
system.
DVB-H (Digital Video Broadcasting-Handheld)
DVB-H was a standard for the transmission of digital video optimized for mobile networks and handheld devices
such as smartphones and cellular phones.
DWDM (Dense Wavelength Division Multiplexing)
It is a technology for multiplying and transmitting at the same time optical signals with different wavelengths in
a single optical fiber in order to increase the available amount of bandwidth.
EDGE (Enhanced Data for GSM Evolution)
It is a technology that increases the speed of data transmission of the GPRS the standard from 30-40 Kbit /s to
400 Kbit / s in the best radio transmission condition.
Edge (Network Edge)
It is a segment of the network lying between access and core, wherein service functions are located (such as,
e.g. those performed by BRAS). Depending on the context, it may be quite distributed e.g. to the level of mobile
Base Station, or less distributed e.g. at the edge of the backbone.
Edge cloud.
It refers to a cloud infrastructure deployed at the network edge. An Edge Cloud architecture is used to
decentralize (processing) power to the edges (clients/devices) of the network.
EEB (Energy Efficiency in Buildings)
International initiative promoted by the WBCSD (World Business Council for Sustainable Development) for
research in energy efficiency in buildings in order to reduce the environmental impact and the energy costs.
EFFC (Extraction Full Free Cooling)
A cooling system for the reduction of consumption without the use of greenhouse gases. The EFFC is based on
the principle of free cooling (forced ventilation without the use of air-conditioning), combined with a system to
extract the hot air produced by the apparatus and further cooling (adiabatic) of incoming air obtained by
exploiting a zone with a high concentration of nebulized water.
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EMF limits (ElectroMagnetic Field limits)
Electromagnetic fields are present everywhere and are generated both by natural sources (thunderstorms, earth
magnetism) and human-made ones such as power lines, TV antennas, mobile base stations, microwave ovens.
They are known to affect human body in ways that depend on their frequency. For radiofrequency fields, such
as those produced by mobile base stations and mobile handsets, the major biological effect is heating of the
body tissues. The current view of scientific community, as outlined by World Health Organization, is that while
exposure to high levels of EMF are harmful to health, there is no evidence that prolonged exposure to low levels
of EMF might be harmful. The definition of what is meant to be a level low enough to be harmless is left to
individual Countries, however guidelines have been defined by the International Commission on Non-Ionizing
Radiation Protection (ICNIRP).
Regarding Italy, the exposure limit is 20 V/m. Moreover, in homes, schools, playgrounds and places where people
may stay for longer than 4 hours per day, an 'attention value' of 6 V/m is applied and averaged over any 24 hour
period.
EMS (Environmental Management Systems)
Environmental management systems contribute to the sustainable management of production and support
processes and are a stimulus to the continual improvement of environmental performance as they are tools to
ensure effective management, prevention and the continuous reduction of the environmental impact in work
processes.
eNB (Evolved Node B)
It is the Radio Base Station in 4G technology, which implements LTE radio interface and manages its radio
resources.
EPC (Evolved Packet Core)
It is the core segment of a 4G network. It performs management of user mobility, routing of traffic (which in 4G
is only packet traffic), policy enforcement, production of accounting data, interconnection with IP networks.
EPS (External Power Supplies)
External power supplies of equipment.
eSIM (embedded SIM)
It represents the evolution of the SIM: it is an integrated circuit embedded directly inside a device and
consequently not extractable and not replaceable, but remotely managed through the functionality of the device
itself.
Ethernet
Family of computer networking technologies for local area networks (LANs) and metropolitan area networks
(MANs).
EuP (Energy-using Products)
The Eco-Design Directive for Energy-using Products (2005/32/EC) establishes a regulatory framework that
manufacturers of energy-using products (EuPs) must follow, from the design phase onward, to increase energy
efficiency and reduce the negative environmental impact of products.
Feeder
Carrier class IP routers that perform the function of collecting and concentrating fixed and mobile network traffic
as well as commercial one, originating from a basin of Central Office Areas. The traffic collected by the Feeders
is delivered in double homing to the Metro nodes on physically diversified routes.
FFC – Full Free Cooling
Cooling system based on the use of forced ventilation to reduce energy consumption.
Fronthaul
In the functional split of a Base Station, it refers to the interface between the Remote Unit (RU) and the
Distributed Unit (DU).
FSC (Forest Stewardship Council)
The Forest Stewardship Council is an international non-profit NGO. The FSC represents an internationally
recognized forest certification system. The purpose of certification is correct forest management and traceability
of forestry products. The FSC logo guarantees that a product has been made with raw materials deriving from
forests correctly managed according to the principles of the two main standards: forest management and chain
of custody. FSC certification is an independent, third-party scheme.
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FTTx (Fiber To The x)
It is the term used to indicate any network architecture that uses fiber optic cabling in telecommunications
access networks to replace, partially or totally, traditional copper cables. The various technological solutions
differ in the point of the distribution network where the fiber connection is made, with respect to the end-user’s
location. In the case of FTTC (Fiber to the Cabinet) the fiber connection reaches the equipment (distribution
cabinet) located on the sidewalk, from where copper connections are run to the customer; in the case of FTTB
(Fiber to the Building) the fiber arrives at the base of the building to a distribution box from where the vertical
copper connection starts; in the case of FTTH (Fiber to the Home), the fiber connection terminates inside the
customer premises.
FWA (Fixed Wireless Access)
Fixed Wireless Access refers to a set of transmission systems developed to exploit specific frequencies of the
radio spectrum in order to provide fixed broadband connectivity services (with nominal connection speeds equal
to 1 Gbps).
Gateway
An interconnection node between networks. A Gateway node may be used to separate networks belonging to
different Domains or make functionally different networks interwork through protocol interworking.
G-FAST
G.FAST (Fast Access to Subscriber Terminal, group "G" of the ITU-T recommendations) is a DSL standard, fourth
generation on copper, adopted by ITU-T starting from 2014 that allows to reach aggregate Downstream speeds
+ Up Stream of about 500 Mbit / s up to 100m and about 800-900 Mbit / s up to 50m.
It is therefore a technology with a speed higher than VDSL2 and eVDSL but, being optimized for very short
distances, it requires the network devices to be positioned even closer to the customer than the cabinets line, or
rather in distribution boxes at or at the base of buildings.
GPRS (General Packet Radio System)
Packet switched system to efficiently transmit data over 2G cellular networks.
GPON (Gigabit capable Passive Optical Network)
A passive optical network (PON) is a network architecture that brings fiber cabling and signals to the home using
a point-to-multipoint scheme that, by unpowered fiber optic splitters, enables a single optical fiber to serve
multiple premises.
GRX (GPRS Roaming eXchange for Mobile Operators)
The GRX service allows Mobile Operators to globally interconnect GPRS networks around the world enabling
global GPRS roaming coverage.
GRI (Global Reporting Initiative)
The Global Reporting Initiative (GRI) is a leading organization in the field of sustainability. GRI promotes
sustainability reporting as a way for organizations to become more sustainable and contribute to sustainable
development.
GSM (Global System for Mobile Communication)
A worldwide standard for digital cellular telephony working on the 900MHz and 1800MHz bands. It belongs to
the Second Generation (2G) of mobile systems.
HCFC (Hydrochlorofluorocarbons)
Chemical compounds used mainly in cooling systems to replace chlorofluorocarbons (CFCs) which were banned
by the Montreal Protocol. They have a more limited effect in depleting the ozone layer (approximately 10% of
the ozone-depleting potential of CFCs).
HFC (Hydrofluorocarbons)
Compounds used in cooling systems. They belong to the family of greenhouse gases. They do not harm the
ozone layer.
HDSL (High-bit-rate Digital Subscriber Line)
Technology of xDSL family, standardized in 1994. It provides up to 8 Mb/s symmetrical over copper.
HLR (Home Location Register)
Database where customer data are recorded. It is part of 2G and 3G systems.
Home Access Gateway – Access Gateway – Home Gateway – Residential Gateway
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Home networking device that is used to concentrate voice/data/video traffic of customers for private TLC
networks and to connect devices in the home to the Internet or other WAN.
Housing
Leasing of physical space to customers, which is managed within a data center for the installation of their own
equipment or servers.
HSPA (High Speed Packet Access)
Evolution of UMTS, which enables broadband mobile data both in Downstream (HSDPA) and Uplink (HSUPA), up
to 42 Mb/s and 5.76 Mb/s, respectively.
IaaS (Infrastructure as a Service)
Through a Cloud IaaS offer (Infrastructure as a Service, see also Cloud models), a consumer acquires from a
Cloud Provider in a flexible and dynamic way computing, memory, network resources and other fundamental
calculation resources, through which the customer can develop and run arbitrary software, including operating
systems and applications. The consumer does not manage or control the underlying Cloud infrastructure, but
controls operating systems, memory, applications and possibly, in a limited way, some network components (e.g.
firewalls).
ICT (Information and communication(s) technology)
Broad area concerned with information technology, telecommunications networks and services and other
aspects of managing and processing information, especially in large organizations.
IEEE (Institute of Electrical and Electronics Engineers)
An organization of professional scientists aiming at promoting technology science and research in the field of
electrical and electronics engineering and related fields. IEEE also works as a publishing house and
standardization body.
IMS (IP Multimedia Subystem)
It is the architecture for providing IP Multimedia services, i.e. voice/video/text/etc communications over IP
networks. It comprises all the network elements related to signaling and media flow handling.
IMSI (International Mobile Subscriber Identity)
The International Mobile Subscriber Identity is a unique identifier associated with a SIM card in cellular networks.
Interconnection
Interconnection refers to the physical and logical connection among public telecommunication networks
belonging to different operators, in order to enable users of an operator to communicate with users of the same
or a different operator, or to access services provided by another operator.
Internet
Global network for networks interconnection based on a common protocol suite, i.e. TCP/IP, which is the
language by which connected equipment (hots) are able to communicate.
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Internet of Things
The Internet of Things refers to the extension of Internet to the world of objects (devices, equipment, systems,..),
which become recognizable and acquire intelligence thanks to the fact that they can communicate data about
themselves and access aggregate information from part of others. There are many fields of applicability: from
industrial applications (production processes), logistics and infomobility, to energy efficiency, remote assistance
and environmental protection.
IP (Internet Protocol)
A connectionless data routing protocol, used for data transmission on both public and private networks, in
particular over the Internet.
IPCC (IP Contact Center)
See DCC.
IP/MPLS (Internet Protocol/Multi Protocol Label Switching)
A packet switching protocol to optimize network behaviors of mapping Layer3 (IP) end-to-end data flow to Layer2
traffic between adjacent network nodes.
IPTV (Internet Protocol Television)
A system that utilizes the Internet Protocol infrastructure to transmit digital television content over a network
and deliver it via a broadband Internet connection.
ISDN (Integrated Services Digital Network)
A narrowband system in which several services (e.g., voice and data) may be simultaneously transmitted end to
end in digital form.
ISPs (Internet Service Provider)
A vendor who provides access to the Internet and World Wide Web.
ITU (International Telecommunication Union)
An international organization that aims to set telecommunications standards and in the use of radio waves.
Founded in 1865 in Paris, it is one of the specialized agencies of the United Nations and its head office is in
Geneva.
Jitter
In electronics and telecommunications jitter indicates the variation of one or more characteristics of a signal
such as, amplitude, frequency, phase, transmission delay. The causes leading to jitter must be kept at the center
of the design of electronic systems and components in which signal integrity is a strict constraint.
KVAR (kilovolt–amperes reactive)
Measurement system, expressed in kilovolt, of electric current lost in an AC electrical system.
LAN (Local Area Network)
A private network that covers a local geographic area and provides telecommunications services as well as
interconnection between personal computers.
Lambda
Represents the single optical channel on which a signal is transmitted in fiber-optic networks.
Latency
The latency of a system can be defined as the time interval between the time the input arrives to the system
and the time when its output is available. In other words, latency is nothing more than a measure of the speed
of response of a system.
LCA (Life Cycle Analysis)
Analysis methodology for the evaluation and quantification of environmental impacts associated with a
product/process/activity along the entire life cycle from the extraction and acquisition of raw materials to the
end of its life.
LLU (Local Loop Unbundling)
Service by which operators other than TIM can lease the local loop, i.e., the wire connection between the TIM
local exchange and the customer’s premises.
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Local Loop (Twisted Pair)
Twisted pair of copper wires through which the telephone connection reaches users; it is the foundation of
traditional telephone lines and it is often called the “last mile”.
LTE (Long Term Evolution)
See 4G.
Machine Learning
It is the ability of computers to learn without having been explicitly and preventively programmed.
mMTC (Massive machine type communication)
mMTC, also known as massive machine communication (MMC) or massive Machine to Machine communication,
is a type of communication between huge number of machines over wireless networks where data generation,
information exchange and actuation takes place with minimal or no intervention from humans.
MEMS (Micro-Electro-Mechanical Systems)
MEMS are miniaturized devices ranging in size from a few micrometers to a few millimeters, which execute one
or more monitoring, processing or actuation functions by deploying a combination of electronic, mechanical,
optical, chemical or biological components integrated on a usually silicon hybrid circuit.
MGCP (Media Gateway Control Protocol)
An Internet Engineering Task Force (IETF) signaling protocol allowing a bridge between classic telephone
networks and Internet (i.e., IP-based) infrastructures.
MGW (Media GateWay)
Equipment that processes voice and video traffic adapting codings between different technologies (e.g. from
circuit to packet).
Microservices
In the development of modern software applications, when the term micro-services is used, a specific
architectural model for the development of a single application as a suite of small services is indicated; each
micro-service is identified as a specialized processing process (e.g. a web server, a storage application, etc.) and
is able to communicate with fast and lean mechanisms, often based on API interfaces for the description of
HTTP resources. These services provide capabilities for the development of a company's business and are
particularly suitable for the creation of software products according to agile methodologies; each micro-service
can be implemented and managed independently using fully automated implementation algorithms, thus
ensuring maximum flexibility in the development and maintenance of applications.
Midhauling
In the functional split of a Base Station, it refers to the interface between the Distributed Unit (DU) and the
Central Unit (CU).
MIMO (Multiple Input Multiple Output)
It is a set of techniques aimed to increase the overall bitrate of radio access through simultaneous transmission
of two (or more) different data signals on two (or more) colocated antennas, using the same frequency resources.
The receiving side, also equipped with two or more antennas, is able to discriminate the different data signals by
exploiting the differences in time and direction of arrival of the simultaneous signals that are caused by multipath
propagation. Actually, multipath propagation i.e. the fact that a signal from A reaches a point B via multiple
paths due to reflection and scattering from objects (such as buildings, trees) is a natural phenomenon affecting
radio communications, which used to be seen as an impairment. Conversely, MIMO techniques exploit (using
suitable signal coding) this multiplicity of paths to increase capacity.
MSC (Mobile Switching Center)
Executes functions such as controlling calls, switching traffic, billing, controlling and authentication and acts as
an interface with other networks.
Multimedia
A service involving two or more communications media (e.g., voice, video, text, etc.) and hybrid services created
through their interaction.
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Multicast ABR (Multicast Adaptive Bit Rate)
Technology that encodes the video multicast traffic in different streams at different bitrates, used according to
the channel conditions, allowing to optimize the use experience the use of network resources.
MVNO (Mobile Virtual Network Operator)
MVNO is a mobile communications service provider that does not own the radio spectrum or wireless network
infrastructure over which the MVNO provides services to its customers.
NaaS (Network as a Service)
The term NaaS (Network as a Service) refers to the provision of virtual network services by a Network Provider to
a third party, such as a Service Provider not equipped with geographically networked resources, or a
medium/large customer that requires basic or advanced connectivity resources on a public or shared network
infrastructure. Some examples of services that refer to the NaaS model are VPNs (Virtual Private Networks,
Dynamic Bandwidth Services (BoD, Bandwidth on Demand) and Mobile Network Virtualization. Today, the spread
of NaaS offers is increasingly supported by flexible network virtualization models and the use of network
programming and automation technologies, such as Software Defined Networking (SDN).
Naked
A digital subscriber line without an analog or ISDN telephony service. It is a line dedicated to data services.
NB IoT (NarrowBand Internet of Things)
It is a 3GPP specification enabling the Internet of Things, based on the optimization of narrowband radio access
aimed at the application of LTE technology to sensor networks: few and small messages per day, high coverage
range (e.g. to reach the counters in the basements), very high battery life (target 10 years), high number of
connections per cell (tens of thousands) and very low cost of the modules.
Net Neutrality
Net neutrality is the principle that Internet service providers should treat all data equally and not discriminate or
charge differently based on user, content, website, platform, application, type of equipment, or method of
communication.
Network
An interconnected system of elements. In a telephone network, these consist of switches connected to each
other and to customer equipment. The transmission equipment may be based on fiber optic or metallic cables
or radio connections.
Network cap
See Price cap.
Network Slicing
Network Slicing referred to 5G. Creation of multiple ad hoc logical networks segregated from each other on the
same physical network infrastructure. Each network slice is an isolated end-to-end network tailored to fulfil
different requirements requested by a particular application.
NFV (Network Function Virtualization)
The NFV paradigm allows both fixed and mobile network functions to become software applications, called VNF
(Virtual Network Function), which the operator can instantiate on commercial servers, exploiting virtualization
technologies, separating the link between hardware and software present in the current network devices.
NGAN (New Generation Access Network)
It can be realized with different technological solutions, typically fiber optic and VDSL pairs.
NGCN (Next Generation Core Network)
TIM’s own name for the IP backbone.
NGDC (Next Generation Data Center)
A major rethink of the IT and Data Center architecture through the physical concentration and virtualization of
servers to reduce the costs of maintenance/management and energy consumption, and to improve efficiency.
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NGN (Next Generation Network)
New generation network created by TIM to meet the demands of corporations, public administrations and
citizens. The new network architecture guarantees an infrastructure designed to cover multiple offers by
increasing customization levels and bandwidth availability, removing bandwidth limits and providing a huge
capacity along with a wide selection of access systems.
NGNs (Non-Geographic Numbers)
Non-geographic numbers are unique as they are by definition not associated with any particular geographic
location (e.g. premium rate services, toll free, directory assistance services).
Node
Topological network junction, commonly a switching center or station.
Node B (similar to BTS in GSM)
This is the Radio Base Station in UMTS technology which, via an antenna, sends the UMTS radio signal that
creates cell coverage (typically 3 cells for Node B). It also performs functions that are strictly linked to managing
the radio connection.
N-play offering
Offerings to customers which bundle two or more of the following mobile and fixed services: voice, broadband
and ultrabroadband data, video and TV, mobile.
NYSE
The New York Stock Exchange.
OAO (Other Authorised Operator)
Operators other than the incumbent one that provide services to their customers exploiting the fixed access
network of the incumbent.
OHSAS (Occupational Health and Safety Assessment Series)
International Standard that sets the requirements that a management system for the protection of workers’
health and safety must meet.
OLOs (Other Licensed Operators)
Companies other than the incumbent operator that operate telecommunications systems in a national market.
OLT (Optical Line Termination)
Optical element of the PON network (Passive Optical Network) that acts as an interface between the PON itself
and the Backbone network. OLT is located in the central office.
ONU (Optical Network Unit)
Optical element of the PON network (Passive Optical Network) which acts as an interface with the user access
device or the distribution network to users. ONU is located in the distribution cabinet.
OPB (Optical Packet Backbone)
It is the multiservice IP backbone for national transport. It is made up of interconnected nodes which are called
OPB nodes, and of the very high capacity connections existing between them.
OPM (Optical Packet Metro)
It is a metro-regional network that provides Ethernet and IP connectivity for fixed and mobile network traffic, as
well as for Retail or Wholesale customers. It consists of IP routers distributed on three hierarchical aggregation
levels: Remote Feeder, Feeder and Metro, interconnected in double homing by physically diversified (where
possible) double-way links.
Open Source
Open Source is a computer software in which source code is released under a license in which the copyright
holder grants users the rights to study, change, and distribute the software to anyone and for any purpose. Open-
source software may be developed in a collaborative public manner.
Optical fiber
Thin glass, silica or plastic wires, building the base infrastructure for data transmission. An optical fiber cable
contains several individual fibers, and each of them is capable of delivering a signal (light impulse) at almost
unlimited bandwidth. Optical fibers are usually employed for long-distance communication: they can transfer
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“heavy” data loads protected from possible disturbances along the way. The driving capacity of optical fibers is
higher than the traditional cable and copper twister-pair lines.
ORAN
It refers to Open RAN, an architecture for building the virtualized RAN on open hardware, with embedded AI-
powered radio control. Such an architecture is based on well-defined, standardized interfaces to enable an open,
interoperable supply chain ecosystem in full support of and complimentary to standards promoted by 3GPP and
other industry standards organizations.
OSS (Operations Support System)
Methods and procedures (whether automatized or not) that directly support the daily operation of the
telecommunications infrastructure.
OTN (Optical Transport Network)
It is a technology designed to enable multiplexing of digital signals for transport over WDM links, and to achieve
OAM capabilities for these signals similar to those available in SDH.
This allows a better utilization of WDM links, since it allows to fill lambdas with high rate signals (e.g. 100 Gb/s),
which may contain several lower rate signals (e.g. 10 Gb/s), rather than devoting a lambda for each lower rate
signal.
OTT (Over the Top) players
Operators offering contents and services on the Internet without owning the proprietary TLC network
infrastructure.
Outsourcing
Entrusting an external party carrying out services and business operations. For example, it can be outsourced
the planning, construction and hosting services of a telecommunications management system and, ultimately,
the management of the entire telecommunications system.
PaaS (Platform as a Service)
The PaaS (Platform as a Service) represents one of the three Cloud offer service models; through a PaaS offer of
a Cloud Provider, the consumer is given the opportunity to distribute applications created on their own, or
acquired by third parties on the cloud infrastructure, using programming languages, libraries, services and tools
supported by the supplier. The consumer does not manage or control the underlying cloud infrastructure,
including network, servers, operating systems, memory, but has control over the applications and possibly the
configurations of the environment that hosts them.
Packet-Switched Services
Telecommunications services provided by telcos and long-distance carriers that route packets of data between
local area networks (LANs) in different geographical locations to form a wide area network (WAN). Packet-
switching services are used to connect multiple LANs into a point-to-multipoint configuration, usually called a
multipoint WAN.
Pay-Per-View or PPV
A system by which the viewer pays to see a single program (such as a sporting event, film or concert) at the
moment at which it is transmitted or broadcast.
Pay TV
Subscription TV channels. To receive Pay TV or Pay-Per-View programs, a decoder must be connected to the
television set, and a conditional access system is needed.
PCS (Personal Communications Services)
Set of wireless communications functionalities, voice and/or data, which provide similar services such as mobile
ones.
Peering
Peering is the voluntary interconnection of Internet networks, that refer to different Internet Service Providers,
which allows users to exchange traffic between different networks.
Penetration (market penetration)
It represents the number of people (or subscriber) who acquires goods / services of a particular brand or a
particular category, divided by the population where the service is available.
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Platform
It’s an execution environment that includes hardware, software, application servers and other supporting tools,
for the execution of programs.
PON
PON stands for "passive optical network" referring to the optical network composed by non-active components
in all stages between the origin (local exchange) and the external sides (subscriber or clients).
POP (Point Of Presence)
The POP is a point of access to the network (router), provided by an Internet Service Provider (ISP), able to route
traffic to end users connected to POP.
POTS (Plain Old Telephone Service)
Refers to the basic telephony service, (single-line telephones, fixed-line services and access to public voice
telephony network).
Price-cap
Identifies the maximum price limit set by a regulator at which a service /product can be sold.
PSTN (Public Switched Telephone Network)
PSTN, also known as the Public Switched Telephone Network, is the first-generation telephone network and
provides basic telephone service.
PTN (Packet Transport Network)
It is a class of equipment that implement natively both SDH and Ethernet technologies, i.e. it is able to transport
and switch separately both kinds of traffic. It is used to connect smaller, peripheral Central Offices to larger ones,
that is a use case where aside packet traffic (e.g. backhauling of broadband access and mobile sites) also legacy
circuit traffic (e.g. voice, 2G backhauling) may be found.
RAN (Radio Access Network)
It is the part of mobile network that implements the radio technologies, comprising data transport functions over
air interface and control functions.
RAN Sharing
Is the most comprehensive form of access network sharing. It involves the sharing of all access network
equipment, including the antenna, tower and backhaul equipment. Each of the RAN access networks is
incorporated into a single network, which is then split into separate networks at the point of connection to the
core.
Refarming
Reassignment of frequency band of an operator of mobile networks from one technology to another for
optimization reasons (examples: UMTS900 instead of GSM900 or LTE1800 instead of GSM1800).
Remote Feeder
Carrier class IP router that perform the function of collecting and concentrating fixed and mobile network traffic
as well as commercial one, for a single Central Office Area. The traffic collected by the Remote Feeders is
delivered in double homing to the Feeder nodes, possibly on physically diversified routes.
Remote Unit (RU)
It is a logical node hosting Low-PHY protocol layer and RF processing based on a lower layer functional split.
RNC (Radio Network Controller—counterpart of BSC in GSM)
RNC is the equipment (or node) for the control and aggregation of 3G network.
ROADM
A ROADM (Reconfigurable Optical Add-Drop Multiplexer) is a remotely reconfigurable optical multiplexer capable
of switching traffic in a WDM (Wavelength-Division Multiplexing) system. Its use in a transmission network
increases the efficiency of the transport allowing to transmit up to over 90 high bitrate channels (today up to
200Gbit/s) on a single pair of fibers.
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Roaming
Agreement among two or more Mobile Operators from different Countries, under which Users can use the mobile
network of other Operators participating in the agreement.
The roaming service is activated for example when the terminal is used overseas and enables a mobile user to
access a different network from the one to which he subscribes.
RoHS (Restriction of Hazardous Substances)
European Directive No. 95/2002 that regulates the use of hazardous substances in electrical and electronic
equipment, in order to contribute to the protection of human health and environment.
RTG (Rete Telefonica Generale)
RTG, also known as the Public Switched Telephone Network, is the first-generation telephone network and
provides basic telephone service.
SaaS (Software as a Service)
As part of the Cloud offer service models (see also Cloud entry), the SaaS (Software as a Service) model expresses
the faculty provided to the consumer to use a supplier's applications and services, operating on a cloud
infrastructure. The applications are accessible from different devices through a light interface (e.g. a thin client),
such as an email application on a browser, or from programs with a specific interface. The consumer does not
manage or control the underlying cloud infrastructure, including network, servers, operating systems, memory,
and even the capabilities of individual applications, except for limited configurations intended for him.
SAR (Specific Absorption Rate)
SAR is a measure of the percentage of electromagnetic energy absorbed by the human body when it is exposed
to the action of an electromagnetic field at radio frequency (RF). See also EMF limits.
SDH Standard (Synchronous Digital Hierarchy)
The European standard for high-speed digital transmission.
It’s a protocol of the physical layer used for multiplexing in time division and the subsequent digital transmission
of telephony and data, in geographic networks on optical fiber, electric cable or radio link.
SDN (Software Defined Networking)
Software Defined Networking is a paradigm based on network virtualization whose aim is to transform traditional
networks into flexible and intelligent platforms to satisfy in real time the bandwidth requirements and the
dynamic nature of digital applications.
SD WAN (Software Defined WAN)
In Networking topic, the SD-WAN (Software Defined WAN) solutions are an innovation of the traditional Wide
Area Network solutions and of the Edges IP Networking, developed to offer advanced connectivity services
addressed to Business customers. SD-WAN solutions work agnostically with respect to the access technology,
the WAN transport network, they use dynamic routing of data on an application basis and in strong integration
with Multi-Cloud solutions, to link connectivity to some added-value services such as WAN optimization,
application monitoring and advanced security.
Service Exposure
The Service Exposure is an infrastructure to expose functionalities, called API (Application Programming
Interface), both to Third Parties (eg Business Partner), both for internal use.
Service Orchestration
Service orchestration means a single centralized business process that can be performed by an orchestrator (e.g.
a SW platform) that coordinates the interaction between various services and is responsible for their invocation
and composition, as well as the management of transactions between the individual services. Service
orchestration is often compared to Service Choreography, which instead makes a decentralized approach to the
composition of services, where each of the services participating in the choreography implements a self-
consistent process / workflow.
Service Provider
The Service Provider offers to the Users (Residential or Business) that subscribe his offer, a range of contents and
services.
Other Information
Glossary 480
SGU (Local exchange interconnection level for telephone traffic)
Local Exchange for telephone traffic carriage, routing and transmission. See also Central Office.
SIP Trunking
Session Initiation Protocol (SIP) Trunking is a service offered by a communications service provider that uses the
protocol to provision voice over IP (VoIP) connectivity between an on-premises phone system and the public
switched telephone network (PSTN). SIP is used for call establishment, management and teardown.
SL (Distribution Frame level for telephone traffic)
See Central Office.
Shared Access
Shared access to the user’s twisted pair with another TLC service provider by using separately voice and non-
voice band frequency spectrum. This mode allows keeping voice telephony with an Operator (TIM or others) and
ADSL service on the proprietary network of the shared access operator (i.e. not passing over the TIM network but
directly through the DSLAM of the operator).
SLA (Service Level Agreement)
Service Level Agreements are contractual instruments through which service metrics are defined (eg quality of
service) that must be respected by a service provider (provider) towards their customers / users.
SLU (Sub Loop Unbundling)
It consists in providing access to the local sub-section of the Operator copper network, in particular the section
of the network between the user site and the distribution cabinet or an intermediate concentration point.
Small Cells
Small cells are low energy consumption access nodes to the radio spectrum. . Smaller than the antennas, Small
Cells are usually used in mobile telephony, both for the coverage of outdoor areas (squares, pedestrian streets,
etc.) and for the coverage of indoor hot spots (airports, stadiums, shopping centers, stations, hospitals, university
campuses, etc.).
SME (Small Medium Enterprise)
Market segment of small- and medium-size enterprises (from 3 to 50 employees).
SMART CITY
The term Smart City refers to an urban area that uses integrated ICT technologies to optimize resources in key
areas: mobility, communication, economy, work, environment, administration and construction. From an
infrastructural point of view, the use of available resources on the web improves economic and political efficiency
and can allow social, cultural and urban development.
Smartphone
Electronic device that combines the functions of a mobile phone and a handheld computer equipped with a
complete operating system.
SMART TV
The term Smart TV identifies the new generation of televisions which allows us to enjoy multimedia audio-video
content (movies, TV series, music videos, gaming,..) through an internet connection.
SMS (Short Message Service)
Short text messages that can be received and sent through GSM-network connected cellular phones. The
maximum text length is 160 alpha-numerical characters.
SOHO (Small Office / Home Office)
Market segment consisting of businesses that use telephone lines to connect to the Internet, as opposed to
dedicated lines, and is made up of small businesses, generally with one or two employees, and businesses
conducted out of the home.
SON (Self-Organizing Network)
It is a set of technologies and architectures that allows Operators to introduce, in the context of radio-mobile
networks, the technological enablers for the automation of network configuration, optimization and assurance
processes.
Other Information
Glossary 481
Switch
▪
▪
(Telephone switch) Synonymous of Telephone Exchange, i.e. network equipment used to set up and
route telephone calls to the number called possibly through other switches. They may also record
information for billing and control purposes;
(Network switch) Data networking equipment able to receive and forward packets using information at
layer 2 of OSI (Open Systems Interconnection) model (i.e. hardware addresses of other equipment).
Synchronous
Type of data transmission in which there is permanent synchronization between the transmitter and receiver.
STB (Set-Top Box)
It
is a customer device able to receive TV signals from a communication network (such as
broadband/ultrabroadband access network, terrestrial broadcast, satellite broadcast, etc) and output them to
TVs and other display devices (monitors, projectors, etc.). It may include Conditional Access functions to handle
paid content.
Tablet
Portable computer with compact dimensions whose screen can be used to write or give commands with the
touch of your fingers or using a specially designed stylus.
TAL (Tele Alimentation for Remote Power Feeding)
Technique for power feeding roadside network equipment (such as ultrabroadband equipment located in street
cabinets in Fiber to the Cabinet architecture) from the local exchange.
TCO (Total Cost of Ownership)
The TCO represents the global cost of an asset (eg an IT equipment) during its life cycle. The TCO takes into
account both direct costs (hardware costs, network infrastructure, licenses) and indirect costs (management,
maintenance, energy consumption).
TDMA (Time Division Multiple Access)
A technology for digital transmission of radio signals between, for example, a mobile phone and a radio base
station. TDMA breaks signals into sequential pieces of defined length, places each piece into an information
channel at specific intervals and then reconstructs the pieces at the end of the channel.
ToIP (Telephony over IP)
The term is often used as synonymous of VoIP, however it has a wider meaning since it includes advanced
telephony services (such as video, messaging, possibly some call handling, etc) beyond the basic voice
communication.
TRX
Radio transceivers located in BTS.
UltraBroadBand
Includes all network technologies that offer connectivity from 30Mbit/s to over 1Gbit/s, referring in particular to
the peak rate and not to the average available. The definition is related to the characteristics of the fixed and
mobile access network. By increasing the capacity and the speed, Ultra Broadband technologies allow quicker
access from multiple users to the content available on the net, also on the move, and to take advantage of high
quality video up to Ultra HD and interactive gaming.
URLLC (Ultra-Reliable Low-Latency Communication)
URLLC is a set of features that provide low latency and ultra-high reliability for mission critical applications such
as industrial internet, smart grids, remote surgery and intelligent transportation systems.
UMTS (Universal Mobile Telecommunications System)
See 3G.
Unbundling
It is the service offered by the incumbent to the alternative operator which consists of the rental of the local loop
i.e. the wire connection between the local exchange and the customer’s premises, so that the alternative
operator is able to connect the twisted pair from the customer to its own equipment.
Other Information
Glossary 482
Universal Service
The obligation to supply basic service at an affordable price, or at special rates solely for subsidized users.
UPS (Uninterruptible Power Supply)
Electrical equipment that provides continuous powering to users in case of power outage.
VAS (Value-Added Services)
Value Added Services provide a higher level of functionality than the basic transmission services offered by a
telecommunications network. In PSTN and first generation mobile networks the basic service was telephony
(switched voice calls, initially analog and later digital ones) while VAS could include data and fax transmission
services, as well as call handling features such as call waiting, call forwarding, etc..
As time passed VAS based on call handling grew with further features such as toll free calling, voice virtual private
networks, etc. A new class of VAS also developed in mobile networks, including message handling services such
as SMS and MMS. In parallel, development of data networks turned data transmission services (initially X25, then
Frame Relay, ATM, Ethernet, IP) into basic services of those networks, on top of which there may be VAS such as
address translation, data virtual lines and virtual networks, traffic priority, encryption, etc..
A further category of VAS is those based on contents of Service Providers linked to the network, beginning with
contents provided on telephony network, going on with contents delivered via SMS (news, meteo, etc) and
contents provided via browsing from mobile and fixed terminals, and arriving to video streaming contents.
VDSL (Very - high – data – rate Digital Subscriber Line)
Access technology that allows providers to give clients, by means of an apparatus installed in their homes, access
to voice and TV services on the traditional telephone line with speeds of up to 50 Mbps in downstream.
VDSL2 (Very - high – data – rate Digital Subscriber Line 2)
“2nd generation” VDSL, able to achieve downstream speed in the range of hundreds of Mbps. Actual data rate
however is largely dependent upon the distance between customer equipment and network equipment, e.g. for
distances of some hundred meters the achievable rate is about 100 Mbps. For this reason, network equipment is
typically located in street cabinets, so to be closer to customers. A VDSL2 evolution named eVDSL (enhanced
VDSL) yields achievable rates around 200 Mbps; it has been recently deployed in TIM network.
Vectoring
Transmission technology that removes mutual interference (crosstalk) between copper lines bundled in the
same cable. Of particular interest is the use on VDSL / VDSL2 / eVDSL lines in view of the growing penetration of
ultrabroadband services, which would make interference more perceptible. In this perspective, the use of
vectoring allows to maintain the typical performances of the aforementioned technologies. The technology is
placed in the ONU apparatus where to be effective it is applied on all the lines of a cable; this means that in case
of SLU (Sub Loop Unbundling), that is the presence of ONUs of several operators serving the lines of the same
cable, a more complex implementation is required, the MOV (Multi-Operator Vectoring) that coordinates the
vectoring of the different ONUs.
Virtualization
An approach to implementation of functionality resorting only to software running on general purpose hardware
generally not dedicated, as opposed to approaches resorting also to special purpose and/or dedicated hardware.
VOD (Video On Demand)
TV-program offering on user’s request, with payment of a fee for each purchased program (a movie, a soccer
match, etc.). Broadcast specifically for cable and satellite TV.
VoIP (Voice Over IP)
A technology that allows transmission of voice communication over an Internet connection or another dedicated
network using the Internet Protocol (IP) data networks (such as IP-based LANs, Intranets or the Internet) instead
of a conventional phone line.
VoLTE/ViLTE (Voice over LTE / Video over LTE)
A service providing voice and video calls over IP via LTE radio access, controlled by standard ToIP architecture
named IMS (IP Multimedia Subsystem). The mated naming VoLTE/ViLTE is used since the service is essentially
the same for voice and video, differing only in the type of media streams that are set up. Since it is standard
based, it achieves interoperability among user terminals and between terminals and networks.
Other Information
Glossary 483
VPN (Virtual Private Network)
A network designed for a business customer or government agency, using the infrastructures of a carrier and
providing customized services, and which operates in such a manner as to appear dedicated to the user thereof.
VRAN (Virtual Radio Access Network)
It is an architecture applied in 4G/5G networks which implies a split of the Base Station between a Centralized
Unit and a Remote or Distributed Unit. The CU is typically placed in a more centralized site than antennas and
deals with baseband signal processing, so also the terminology BBU (BaseBand Unit) is used, while the Remote
Unit is left at antenna sites to provide radio coverage and is also termed RRU (Remote Radio Unit). Given this
split the CUs may be implemented as Virtual Network Functions on a suitable hardware infrastructure, from
which the ‘virtual’ title.
For the viability of the architecture a key issue is the choice of the partition of Base Station functions between
CUs and DUs, which affects the requirements on communication links CU-DU (referred to as midhaul). In the 5G
development efforts this issue has been addressed by identifying split options that are candidate for
standardization.
VULA (Virtual Unbundling Local Access)
A wholesale service provided by incumbent providers to alternative operators, where the incumbent provides –
over its broadband access network – the transport of data traffic (a ‘bitstream’) between the end customer and
an interconnection point where the alternative operator receives said traffic. In TIM’s case, the interconnection
point is located at local exchange level, aside the OLT (Optical Line Termination) i.e. the head end of optical
access network.
WAN (Wide Area Network)
A private network that covers a wide geographic area using public telecommunications services.
WEEE (Waste Electrical and Electronic Equipment)
Waste from electrical and electronic equipment which the holder intends to dispose of as it is faulty, unused or
obsolete.
White, gray and black areas
The distinction between white, gray and black areas is relevant for the assessment of state aid to support the
development of ultrabroadband networks, in terms of the compatibility of the aid with respect to Community
legislation. This classification is contained in the European Union Guidelines:
▪ white areas are areas without ultrabroadband (UBB) networks (connectivity), where private investors do not
intend to invest in the next three years;
▪ gray areas are areas in which an ultrabroadband (UBB) network (connectivity) is present or will be developed
in the next three years by a single private operator;
▪ black areas are areas in which at least two ultrabroadband (UBB) networks (connectivity) of different
operators are present or will be developed over the next three years.
Wi-Fi
Wireless technology enabling data links in a limited area, generally in some hundred meters range, with speed
up to tens of Mbps. Typical applications are in homes and offices as alternative to wired LAN, as well as in public
services for Internet access, and also to create link between devices (e.g. between a laptop and a smartphone
linked to Internet).
Wi – Max (Worldwide Interoperability for Microwave Access)
A technology that allows wireless access to broadband telecommunications networks, initially defined in order
to work on ranges up to tens of kilometers and speed in the tens of Mbps.. It was defined by the Wi—MAX
Forum, a global consortium formed in 2001 that brings together major companies in the field of fixed and mobile
telecommunications and whose purpose is to develop, test and promote the interoperability of systems based
on IEEE standards.
WDM (Wavelenght Division Multiplexing)
Technology by means of which it is possible to transport on a single optical fiber different flows of information
which correspond to distinct and separable wavelengths.
WLL (Wireless Local Loop)
The means of providing a local loop equivalent (e.g. connection from customer premises to local exchange)
without the use of wiring, resorting instead to wireless technologies.
WLR (Wholesale Line Rental)
Other Information
Glossary 484
It is a telephony only wholesale service provided by the incumbent to alternative operators, whereby the
alternative operator gets an ULL-like service without the need to physically deploy equipment at local exchange
sites. It is technically similar to Carrier PreSelection (CPS),and differs from CPS on the commercial side since the
end customer is not subscribed to the incumbent’s access service, nor billed for it; in this way alternative
operators are able to provide to customers both access and traffic services and to produce a single bill covering
both services.
WTTX (Wireless To The X)
WTTx is a 4G and 4.5G-based broadband access solution, which uses wireless to provide fiber-like broadband
access for household.
xDSL (Digital Subscriber Line)
It is a technology that makes use of standard telephone lines and it includes different categories including ADSL
(Asymmetric DSL), HDSL (High-data-rate DSL), VDSL (Very high bit rate DSL) and eVDSL (enhanced Very high
bit rate DSL). This technology uses a digital signal at very high frequencies in order to achieve high data transfer
rates.
XGS-PON
XGS-PON is an updated standard for Passive Optical Networks (PON) that can support higher speed 10 Gbps
symmetrical data transfer and is part of the family of standards known as Gigabit-capable PON, or G-PON.
Other Information
Glossary 485
USEFUL INFORMATION
The 2020 Annual Financial Report can be consulted by accessing the gruppotim.it/report website.
The Annual Corporate Governance Report and the Remuneration Report can be viewed by accessing the
gruppotim.it/governance/the-system/annual-report
and
gruppotim.it/governance/remuneration/remuneration-report website.
It is also possible to receive information on TIM at gruppotim.it and information on products and services at
www.tim.it.
Finally, the following numbers are available:
Free Number 800.020.220 (for calls from Italy) or +39 011 2293603 (for calls from abroad) available for
information and assistance to shareholders.
+39 36881 (switchboard) or investor_relations@telecomitalia.it
https://www.gruppotim.it/en/group/governance/the-system/annual-report.html
TIM S.p.A.
Registered Office Via G. Negri n. 1 - Milan
Headquarters and Secondary Office in Corso d’Italia 41 - Rome
PEC (Certified Electronic Mail) box: telecomitalia@pec.telecomitalia.it
Share Capital 11,677,002,855.10 euros, fully paid up
Tax Code/VAT no. and Milan Companies Register file no. 00488410010
Other Information
Useful Information 486