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

Ladies and gentlemen, good morning, and welcome to the TIM Third Quarter 9 Months 2026 Results Presentation. Paolo Lesbo, Head of Investor Relations, will introduce the event.

Good afternoon, ladies and gentlemen, and thank you for joining TIM's Third Quarter 2026 Results Presentation. I am pleased to be here with the CEO, Pietro Labriola, the CFO, Piergiorgio Peluso; and the rest of the management team. Today, we will walk you through the key highlights of the quarter and review the main operating and financial results. As usual, the presentation will be followed by a Q&A session. Before we begin, please refer to the safe harbor statement included in the annex, which provides details on the reporting perimeter. Consistent with our Q1 and Q2 earnings calls, today's session is supported by AI, leveraging the digital twins of our CEO and CFO. With that, let me hand over to Pietro for the presentation. Pietro, the floor is yours.

Thank you, Paolo, and good afternoon, everyone. Let's move to Slide 3 and start with the 3 key messages from today's presentation. The first message is about execution. Q3 results were in line with our expectations, confirming that team continues to deliver against the plan. Beyond the numbers, this consistent execution confirms the resilience of our business. On the back of this performance, we are confirming our full year guidance. The second message is about strategic direction. We have entered a new strategic chapter for TIM. Effective September 30 Poste Italiane, formally assumed direction and coordination of the group. Importantly, this is not a change in direction for TIM, but rather an acceleration of the industrial path we have already built. Poste brings customer reach, distribution strength, technology, capabilities and the long-term industrial perspective, complementing TIM's connectivity, digital platforms and enterprise capabilities. Joint integration activities are now fully underway with a clear focus on capturing the commercial, industrial and network synergies of the combination. Ultimately, the value of this combination will come from execution and these initiatives will support value creation in both the short and medium term. The third message is about financial strength. Our investment-grade status has been restored by both Moody's and S&P. This important milestone reflects TIM's new position as a strategic subsidiary of Poste Italiane and will translate into significant efficiencies in our cost of funding. At the same time, it marks the culmination of a long journey started 5 years ago, during which we have transformed the business, materially strengthen our balance sheet and reduce leverage. Poste is now an important accelerator, but the foundations for this new phase have been built by TIM over the past few years. In conclusion, the message of this slide is simple. We are delivering against the plan, entering a new phase with stronger industrial banking and doing so from a significantly stronger financial position. This slide provides an overview of our results for the first 9 months of 2026. To give a clear view of the underlying industrial performance, we continue to report group and domestic revenues and EBITDA after lease, both including and excluding the MVNO impact. Over the first 9 months, the MVNO transition had an EUR 84 million impact on revenues, but as expected, this impact is progressively fading and was materially lower in Q3. Starting with the group. Total revenues increased by 2.8% year-on-year to EUR 10.4 billion. Excluding the MVNO impact, growth was 3.7%, supported by continued momentum across the businesses. EBITDA after lease increased by 2.3% year-on-year to EUR 2.8 billion. Excluding the MVNO impact, EBITDA after this grew by a solid 6.0%, reflecting operating leverage and continued cost discipline. CapEx remained fully under control at EUR 1.3 billion, representing 12.4% of revenues and consistent with our investment framework. Equity free cash flow after lease was positive at EUR 0.8 billion, with Q3 contributing approximately EUR 170 million. Piergiorgio will take you through the cash flow dynamics in more detail later in the presentation. Net debt after lease stood at EUR 7.2 billion with leverage below 1.9x. Looking at our geographical performance, both domestic and Brazil continued to deliver strongly. At domestic, despite a market environment that remains competitive, the underlying performance is improving. Total revenues reached EUR 7.0 billion, up 1.4% year-on-year with underlying growth of 2.7%, excluding the MVNO impact. EBITDA after lease stood at EUR 1.5 billion, down 1.2% year-on-year. Excluding the MVNO impact, however, EBITDA after lease grew by 5.6%, which provides a clear indication of the underlying industrial trajectory of the business. CapEx stood at EUR 0.8 billion, equivalent to 10.8% of revenues, confirming continued discipline in capital allocation. Finally, Brazil continued to deliver excellent results with revenues growing by almost 6%, EBITDA is up 6.2% and strong cash generation. To sum up, the first 9 months confirm the resilience of our business continued financial discipline and our confidence in delivering our full year targets. Let's now focus on our domestic trajectory, where performance remains on track and the underlying trends support the acceleration we expect in Q4. Starting with the top line. As shown in the upper chart, revenue growth has progressively strengthened throughout the year, moving from minus 0.9% in Q1 to plus 1.2% in Q2 and plus 3.8% in Q3. Excluding the MVNO impact, the progression is even clear from plus 1.5% in Q1 to plus 2.4% in Q2 and plus 4% in Q3. Against this backdrop, the growth required in Q4 to meet our full year target is just above 1.8% year-on-year, a level we are comfortable with, especially given the ongoing stabilization of MVNO revenues. Turning to EBITDA after lease. On the lower chart, it is important to put the Q3 performance into context. The year-on-year comparison is particularly tough as Q3 last year recorded the highest quarterly EBITDA after lease of the year in absolute values, mainly reflecting the phasing of domestic OpEx. The key point, however, is Q4 and the significant acceleration we expect. Our full year guidance implies approximately EUR 615 million EBITDA after lease in the fourth quarter. We recognize that this implies a significant step up, but our confidence in achieving this level is supported by 3 well-defined drivers. First, more favorable OpEx. Q4 last year was affected by higher seasonal operating costs, providing a better comparison base this year; second, the expected year-end acceleration in TIM enterprise. TIM Enterprise has a natural Q4 seasonality, and we expect a strong sequential uplift consistent with the trends we have seen in previous years. This should translate into a meaningful EBITDA contribution even allowing for some margin dilution from the expected revenue mix and the typical year-end concentration of certain one-off components. Third, the increasing contribution from our cost transformation program. These are initiatives already underway, which will increasingly contribute more as we move towards year-end. To conclude, the message is clear. Domestic execution remains solid. The underlying trend is improving, and we are confident in delivering the acceleration required in Q4 to achieve our full year EBITDA after lease target. Turning now to cash flow dynamics and balance sheet evolution. The message is, again, straightforward. Equity free cash flow after lease generation remains on track, and we reiterate our full year guidance. In Q3, cash generation reached EUR 168 million, significantly above EUR 55 million in Q3 last year, mainly reflecting lower working capital absorption. Looking ahead, seasonally the strongest quarter for cash generation. In Q4 2025, we generated EUR 802 million of equity free cash flow after lease, and we expect another strong performance in the final quarter of 2026. This will be supported by 2 main drivers: first, higher group EBITDA AL, reflecting the domestic acceleration we just discussed jointly with continued strong performance in Brazil; second, favorable seasonality of net working capital with the typical year-end release expected to reverse the temporary absorption recorded in the first 3 quarters. Taken together, these dynamics support our confidence in achieving our full year equity free cash flow AL guidance of approximately EUR 1.8 billion. On net debt after lease, we expect a material reduction by year-end driven by strong Q4 cash generation and the closing of the Sparkle disposal. As already communicated, the Board has convened a shareholders' meeting to propose the cancellation of the buyback authorization approved last April. Since then, our shareholder base has changed significantly following post standard offer. And the Board believes it is appropriate to reassess capital allocation priorities in light of the new ownership structure and reduced free float. As a result, year-end net debt after lease will also reflect the lower cash outflow associated with the buyback. To conclude on this point, our operating cash generation is on track. The Q4 working capital dynamics provide strong visibility on our full year equity free cash flow after lease target, and we remain firmly committed to further deleveraging by year-end. Let us take a closer look at TIM Consumer. The key message here is one of resilience, but also of discipline. Top line trends are strengthening. As the drag from the MVNO contract transition fees, while our commercial discipline is translating into higher ARPU, stable churn and the recovery in net additions. We're not managing this business for short-term market share. We are managing it for customer value, ARPU, retention and sustainable long-term economics. Starting with the top line. TIM Consumer generated EUR 4.4 billion of total revenues in the first 9 months, down 1.5% year-on-year. Importantly, however, the trend improved materially during the year, with Q3 returning to growth at plus 0.9%. Excluding the MVNO impact, total revenues were up 0.4% over the first 9 months. Service revenues were down 2.7% over the 9 months, improving to minus 2.4% in Q3. Excluding the MVNO impact, service revenues were broadly stable at minus 0.7%. The drag from the MVNO contract migration is therefore progressively fading, giving us a clearer view of the underlying business performance. Turning to our operational KPIs. The picture is encouraging in fixed ARPU by 0.9% year-on-year in Q3 and by 2.7% over the first 9 months. This reflects our customer value management strategy and our disciplined approach to pricing. Fixed line losses were broadly stable at minus 64,000 lines compared with minus 67,000 in the prior year period. During the quarter, we added 42,000 FTTH lines and 38,000 5G FWA lines. FTTH net additions were affected by delivery and assurance issues on the access infrastructure, which we are addressing through a structural improvement plan with the infrastructure provider. At the same time, TIM Vision continues to be an important loyalty and monetization engine with service revenues growing by 9.4% year-on-year in Q3. In mobile, human ARPU increased by 0.2% in Q3 and by 0.4% over the first 9 months. More importantly, we saw a clear sequential improvement in mobile net adds. Net losses narrowed from 107,000 in Q1 to 63,000 in Q2 and just 23,000 in Q3. Mobile number portability also turned positive at plus 4,000 lines in Q3. Finally, churn remained stable and at healthy levels despite continued competitive intensity of the Italian market. Overall, TIM Consumer is showing progressive improvement. The MVNO headwind is fading. The revenue trajectory is strengthening, and our commercial KPIs are moving in the right direction. Let us now turn to Slide 8 for an update on TIM enterprise, which remains one of the strongest pillars of TIM's industrial strategy and continues to strengthen its position as a leading digital transformation partner for Italian corporates and public administrations. In the first 9 months, TIM Enterprise generated EUR 2.5 billion of total revenues, up 6.8% year-on-year with growth accelerating to 9.3% in Q3. Service revenues increased by 5.4% over the first 9 months and by 4.8% in the third quarter. The most important point, however, is the quality of this growth as the revenue mix continues to shift structurally towards higher-growth digital services. Cloud remains the main growth engine with revenues up 20% year-on-year. It now represents 46% of service revenues compared with 41% in the first 9 months of 2025, highlighting the continued evolution of our business mix. Connectivity revenues declined by 3% and now account for 32% of service revenues. This trend is consistent with our strategy. We are moving beyond stand-alone connectivity towards integrated ICT solutions combining connectivity with cloud, security and other digital services. Other IT revenues declined by 6%, representing 22% of service revenues. Within this category, however, security and IoT continued to perform strongly, supported by high double-digit growth in IoT and partly offsetting the planned phaseout of low-margin legacy IT resale activities. Turning to our strategic KPIs on the right-hand side. Our business with the public administration continues to scale rapidly. Revenues from the National Strategic Hub were 1.5x the level recorded in the first 9 months of 2025, reflecting continued progress in the migration of public administration workloads to secure cloud infrastructure. Finally, our contract backlog provides strong visibility on future revenues from EUR 4.0 billion at the end of 2025, we expect the backlog to exceed EUR 4.5 billion by year-end 2026, providing multiyear visibility on future performance. This is why TIM Enterprise is strategically important for the group. It combines growth, recurring revenues, critical infrastructure capabilities and the strong positioning in cloud cybersecurity, AI and data solvability. It is not only a growth business for TIM, but also a key platform supporting the digital transformation of the country. Moving now to Brazil. Once again, TIM Brazil confirmed the strength and consistency of its performance. Market conditions remain healthy and rational allowing the company to continue delivering profitable growth and strong cash generation. Top line growth remained in the mid-single-digit range, driven by mobile service revenues and supported by an increasing contribution from the wireline business. A key priority remains the monetization of the customer base. TIM Brazil continued to drive the migration from prepaid to postpaid supporting customer value and enabling the company to maintain the highest ARPU in the market. This solid commercial performance translated into mid-single-digit EBITDA after lease growth, once again, above inflation, confirming the resilience of the business model and the effectiveness of our value-oriented approach. At the same time, disciplined CapEx management allowed the business to convert EBITDA growth into strong cash generation, which increased at a high single-digit rate. Overall, TIM Brazil continues to deliver a strong combination of growth, profitability and cash generation. It remains a strategic asset for the group and a clear example of what consistent execution, customer value management and market discipline can deliver over time. With that, I will now hand over to Piergiorgio for a more detailed review of our financial performance.

Thank you, Pietro, and good afternoon, everyone. Let me start with a few comments on group OpEx and CapEx. In Q3, group OpEx increased by 4.5% year-on-year or approximately EUR 100 million. Around 80% of this increase was attributable to Italy, mainly reflecting higher revenue-related costs, including equipment and other cost of goods sold as well as higher labor cost partly offset by lower industrial costs. In Brazil, OpEx growth was more contained and remained below inflation, mainly reflecting higher revenue-related costs, labor and G&A. while industrial costs declined. Turning to CapEx. Group investments amounted to EUR 0.4 billion in the quarter, equivalent to 12.0% of revenues. Domestic CapEx remained fully consistent with our full year investment framework with spending focused on selected strategic infrastructures, including mobile networks, the IP backbone and data centers. In Brazil, CapEx increased slightly year-on-year, supporting the continued development and growth of the business. Cash flow and debt. In the third quarter, net debt after lease decreased by approximately EUR 0.1 billion, bringing leverage to below 1.9x. This reduction was supported by solid equity free cash flow after lease generation. reflecting a sound operating performance and a limited net working capital absorption during the quarter. Financial charges amounted to EUR 131 million, broadly in line with the previous quarters while cash taxes were almost neutral, consistent with the same period last year. As a result, equity free cash flow after lease was positive as approximately EUR 0.2 billion in Q3. Below equity free cash flow, we recorded, among other items, approximately EUR 60 million of cash outflows to TIM Brazil minorities related to dividends and the share buyback as well as the cash outflow for the acquisition of Voice Smart in Italy. Overall, Q3 confirms our solid cash generation and continued financial discipline and provides a strong foundation for the expected acceleration in cash generation in the fourth quarter and the achievement of our full year 2026 targets as Pietro discussed earlier. With that, I will now hand back to Pietro.

Thank you, Piergiorgio. Moving to Slide 13. Let's now turn to the strategic section and look at how we are reshaping our retail strategy to build the next-generation telco. Our ambition is clear: We want to move beyond a traditional model focused primarily on price and market share towards a customer platform designed to maximize lifetime relationship value. Importantly, this is not a change in direction, it is a strategy we had already embarked on as a stand-alone company. With Poste, we can now accelerate its execution and significantly broaden its goal. The opportunity is not simply to add more distribution, but to combine teams connectivity, customer base, technology and commercial capabilities with Poste's unique reach, digital ecosystem and physical presence. At the core of this model, connectivity remains our economic engine. But around connectivity, we want to deepen the relationship with customers increase the frequency of interaction and expand the range of services we can offer while maintaining strict discipline on customer value and long-term economics. We have identified key value creation levers to deliver this strategy. First, priority connectivity. We want to move beyond traditional best effort connectivity towards greater service differentiation and measurable quality. The priority is an important step in this direction with [indiscernible] service levels and dedicated support designed to strengthen customer value, support premium positioning and improve retention. Second, the customer platform. Our ambition is to develop a broader and more integrated household proposition. Combining connectivity with services that are increasingly relevant in customers' EBITDA lives, including premium content, energy, insurance and financial products. This will allow us to increase engagement cross-selling and ultimately the value of each customer relationship. Third, unified customer intelligence, AI-enabled customer value management will be a key engine of profitable growth. We will increasingly optimize propositions and bundles based on contribution margin, churn risk, propensity buy and cost to serve, ensuring that commercial decisions remain firmly focused on value creation. This is critical because growth without discipline does not necessarily translate into value creation. Fourth, the combination of digital and physical reach. By integrating Poste's digital ecosystem, my team and the physical networks of both companies, we aim to create a seamless digital customer experience with more customer touch points and greater opportunities to increase frequency, relevance and engagement. Fifth, brand architecture. TIM and Poste bring together 2 highly recognized and trusted brands. Our objective is not to dilute either brand, but to leverage both in a disciplined way, preserving their equity while strengthening customer trust differentiation and willingness to pay. All of this will be supported by a clear focus on customer experience, operational accountability, sustainable economics and streamlined governance. In short, our ambition is to evolve beyond connectivity into a broader customer platform while keeping connectivity at the center of the economics. By doing so, we can increase the value and duration of each customer relationship and create new opportunities for sustainable and profitable growth. Now let's turn to TIM Enterprise and our intent to further scale our integrated digital platform. The opportunity here is clear. The market increasingly requires secure connectivity, cloud, cybersecurity and IoT through an integrated proposition with clear and trend accountability. TIM Enterprise is already strongly positioned to address this opportunity. The economic rationale is clear. premium connectivity provides a solid foundation for margins and cash generation, while cloud AI, cybersecurity and IoT are key engines of revenue growth, recurring business and long-term value creation. With Poste, we can further strengthen our go-to-market and broaden the opportunity. At the same time, the industrial core remains team enterprise with its infrastructure, data centers, cloud and cybersecurity capabilities, customer relationships and execution expertise to capture this opportunity, we are focusing on 4 key value creation levers. First, a distinctive product portfolio. We're building increasingly integrated secure and sovereign solutions across defense, security and IoT, sovereign cloud and AI as well as premium and quantum safe connectivity. Our ambition is to further strengthen our role as a trusted technology partner for Italy's most critical digital infrastructures. Second, industrialized product factories. [indiscernible] Drive already provide distinctive capabilities. By combining this expertise with the complementary capabilities of Poste, we can further industrialize our solutions, scale faster and deliver more integrated and repeatable offerings with stronger economics. Third, a disciplined make by our partner approach. We will focus our internal resources on the capabilities that truly differentiate us, source more standardized components from the market and partner where external capabilities can accelerate time to market and strengthen our proposition. The objective is not to do everything internally but to retain control of the capabilities that truly differentiate us. Fourth, a segment-led go-to-market model. There is no one-size-fits-all approach. We will tailor our proposition to the specific requirements of each customer segment. Building on our strong positioning in public administration developing a simpler and more modular proposition for SMEs and delivering sophisticated, integrated multi-cloud solutions for large enterprises. Ultimately, our objective is simple: To consolidate, industrialize and scale our capabilities while continuing to improve the quality of our revenue mix by moving away from purely sales towards management, recurring and higher-value services. This is how TIM Enterprise can reinforce its role as a key digital enabler for the country while supporting structurally stronger margins, cash generation and long-term value creation. Let's now move to the final slide for our closing remarks. Let me close with 3 key messages. First, our 9-month results are fully in line with our expectations. As we enter the final quarter of the year, several growth drivers are already visible, supporting the expected acceleration in Q4, and we confirm our full year targets. Second, the successful completion of Poste Italiane's offer marks the beginning of a new strategic chapter 14. But I want to be clear, Poste is not a substitute for TIM strategy. Poste is an accelerator of the strategy we have already built. The industrial rationale is strong because the assets and capabilities are highly complementary. TIM brings connectivity, technology, enterprise capabilities and digital infrastructure, while Poste brings customer reach, trust, distribution and additional technology capabilities. Together, we can build a stronger platform for Italy's digital transformation. Third, the next phase is all about execution. This is the key point I want to leave with you today. Over the past few years, we have transformed TIM, strengthened our financial profile, reduce leverage and restored investment grade. We have always delivered our targets and we now have a shareholder structure that can support the group's long-term industrial development. But our discipline does not change. Our priorities remain clear: sustainable growth, stronger cash generation further deleveraging and long-term value creation for all our shareholders. The opportunity ahead is significant, but ultimately, value will come from execution and our ability to deliver results consistently. Thank you for your time today. I will now turn the call over to the operator, and we will be happy to take your questions.

[Operator Instructions] The first question is from Giorgio Tavolini at Intermonte.

I was wondering if you can update us on the buyback of litigation and the potential risk of the dispute escalating to arbitration, and the second question is on -- is about INWIT story. I was wondering how realistic is the prospect of a settlement in November also facilitated by [indiscernible].

Thank you, Giorgio, for both questions. Let's start from the second INWIT. We formally engaged with INWIT on last Friday, to try to find a solution. And then we note that we were called by Adcom for this kind of couple therapy, but I think that we can find a solution on our own with INWIT. Talking about FiberCop. It's important to realize that we had a meeting with the new Chief Executive Officer after some meetings also with Massimo [indiscernible] and we agreed to try to find the solution by the end of this year on some operational matters that are important to be solved for the operational activity of both companies. I hope that was clear.

Next question comes from Mathieu Robilliard at Barclays.

My first question was about the reacceleration that you expect in Q4. Notably, I was looking at the B2B division and the trends in connectivity. Now I understand this is under structural pressure and it's not one of your growth areas, but that's the one with the highest margin. And in Q3, the top line was really below the trends we've seen before. So are you expecting that division or line of business to recover a bit and go closer to the minus 2%? Or is that something that we should consider. And basically the reacceleration in B2B is due to other factors. The second one was on the B2C on the broadband ARPU, as you said, the broadband [indiscernible] is growing, but we can note that the growth rate in broadband ARPU has been reducing quarter after quarter. Is that a reflection of more competition? Or is it because you're done most of the upsell. And really, I wanted to understand if we could see acceleration there. And then my last question was about the frequency renewal. Maybe if you could give us some color in terms of -- where is the process? What are the potential outcomes? I think the antitrust raised some concerns, but maybe you can comment also on that.

Thank you, Mathieu. Let's start from the last 1 about frequency renewal. We continue to be optimistic that the discussion in place could give some results. While when you talk about antitrust, the position of the antitrust is a consultative one. It's not a mandatory one. So I think that in a democracy, as we are, it's important that all the different institutions can express their point of view. But the position of the national watchdog, Agecom, is in a different direction, but we continue to be optimistic. I think that the month of December will be very important because during the month of December, the Italian state will have to release the state budget. And from what they will put there, it will be an indication about the final result of this matter. About the fourth quarter result, as you remember, last year, we grew on the enterprise segment of something close to EUR 300 million fourth quarter towards this quarter, then I can leave you to choose which is the best marginality that we can have, 20, 15, 12. But if you do an easy calculation, you can see that the group needed to increase the third quarter EBITDA in absolute value to reach our target are -- is something close to EUR 60 million. If you do and you try to calculate 15% or 20% on EUR 300 million, we are talking about something between EUR 45 million to EUR 60 million. I have to tell you that also at the end of the third quarter, we signed a contract that will enter in the fourth quarter if we'll be able to deliver all the operational activity that has a value of more or less EUR 20 million. Now I don't want to go in the detail because then the [indiscernible] file is something a reality is a different thing. But we are confident with some minus and some plus in the different areas, we are confident to reach our target. Then about the B2C, I leave to Andrea to give some more color.

Thank you, Pietro. Thank you, Mathieu, for the question. That allow us to comment on the B2C. So we don't see revamping of competition in Q3 regarding specifically broadband, I would say the market has been broadly in line with the previous quarter. The upside in ARPU that you noticed is, let me say, not as good as the 9 months is due to phasing of repricing activity, which we already commented in previous calls. So this year, we front-loaded a bit more the plan over price up, and therefore, the accumulated result in the first couple of quarters was better due to year-over-year comparison. But I will say that the trend in ARPU is not due to the revamping in competition. We continue to increase the penetration of TIM Vision. And as you can see from the growth is quite healthy. The improvement on the customer base, which contributes also to the fixed ARPU. Mobile ARPU, just to close is also positive year-over-year. And notably, I think this is 1 of the best quarters in terms of mobile number portability balance.

Did we answer to your question, Mathieu?

You did. Thank you very much.

Next question is from Joshua Mills at Exane BNPP.

A couple of questions. from my side as well, please. The first would just be talking about your network strategy and technology strategy going forward. Obviously, you're in a unique situation having separated from the fixed network in Italy. So my question is are you looking more actively now about marketing FWA products, maybe even some satellite products going forward in a technology-agnostic manner? And has there been any change to your sales approach on that in recent quarters? It would be the first question. And then secondly, Pietro, I think during the call, you referred to TIM Brazil as a strategic asset. I just want to understand, given that a lot of the emphasis on the TIM and Poste Italiane deal that's been about synergies within Italy. Are there any areas at all where the Brazilian business brings a benefit to possibly where where that can actually help to drive more value? Or is this now quite a separate business to the domestic telecom entire operations? And if that's the case, why would this be strategic longer term?

It's clear that there is no -- I cannot say that there is a strategy that fits with everything. So I can confirm that if I had a time machine, I should be back 5 years, I will continue to talk to everybody that Brazil is strategic. But because at that time, as we explained to everybody, Brazil was strategic for several reasons, derisking of the activity because we are on 2 different continents, different level of maturity of the 2 business and the cash generation of TIM Brazil. I have to remember that if TIM Brazil today is TIM Brazil is because in the past, when TIM Italy was reached, we financed the growth of Tim Brazil. So it's a matter of portfolio of activity. Now inside the Poste group, the consideration about how much is strategic in Brazil is something that you have to ask to our main shareholder because in an environment that is much larger with different businesses because I have to remember that Poste works on the insurance business finance business, parts business, logistics business. So how much is strategic Brazil inside the new Poste group is something that is right to be asked to Poste. When we talk about network strategy, I have to remember to everybody that as we told when we sold the network, what we did is to sell the last mile. So the access while we kept for us, all the backbone. And as you can see, backbone is becoming a strategic asset, not only for the traditional connectivity but also for everything matter with AI, cloud, so on and so forth. It's clear that this condition put us in a situation where we can do sometimes arbitrage between different model of access. We can use fixed [indiscernible] access, but fixed [indiscernible] access will be never a complete substitute of the fixed access. In some area it can be a complement. So it's wrong to say that it is something that can change. For sure, we could be interested also in some talk with some satellite player because in some area, satellite is the most efficient access. But when we have to talk and we have to take a look to the Italian territorial morphology, it's clear that satellite is something useful for remote area where quite often we don't have nor FWA, neither fiber. We did also, and there is also an instant book that they posted on liked where we show on the fixed, the real situation and what's happened, where we have fiber, fixed [indiscernible] assets and satellite usually, the customer goes with fiber. When you have fixed [indiscernible] assets and satellite, go with fixed [indiscernible] access. And when there's none of the two, people goes on satellite. On a general basis, then there can be [indiscernible] changes. So what I mean yes, on the access, we will try to understand which is the kind of access that fit the most with our quality of service that we have to deliver to the customer, but at the same time, also the most efficient one for our profit and loss.

The next question is from David Wright at Bank of America.

One question. Just trying to understand some of the inflationary pressures within the CapEx line, please. Obviously, there is quite a lot of component inflation right now. I suspect that's in the CapEx line, perhaps also in the CPE, the customer premise equipment. Could you just talk about the pressures you're observing and how you're trying to manage those CapEx pressures within your current CapEx boundary.

David, I will try to give the answer, not only on the CapEx but also on the OpEx. On the OpEx side, the main line that is subject to the inflation is the cost -- the labor cost and -- do you hear me? And I have to remember that we renewed already for the next 3 years with a specific definition of the increase of the salary for all our people. Then if I have to answer your question, I'm less worried about inflation and more worried about the increase of the memory. So when we talk of the -- to date, the increase of the cost is much more related to the increase of the cost of memory than on the inflation. This is the same also on the cloud side and on the server side to try to partially offset these challenges. This year, we started with our procurement and activity to buy in advance and create some stock of equipment to reduce the level of risk. It doesn't mean that we are in a 0 risk condition, but -- there's an echo, but what is important that we try to contain that. So again, I'm less worried about inflation. The threat is much more based on the increase of the cost of the memory that will be reflected on the devices on the server router and on the CPE of the customer interesting.

Next question is from Nick Lyall at Berenberg.

I wonder if I could just ask a question on your slide 13 please. Just on the TIM priority products post the -- after the Poste deal. So what do you expect to accomplish here, please? Is it a premium ARPU to the rest of the sector and to extend your premium? Or is it a cut churn? And could you give us some examples of how you'll measure that and over what period, please? It's always been a tough high-churn market. So it's just interesting to see you trying to make a big difference with the priority plans. And secondly, on agent, have you seen any impact at all from anything yet? And how are you planning to offset that? Is this part of those plans? And do you expect that to help by spanning things over more products, please?