“Is it time for co-creation?”

Mobile World Congress, Barcelona - February 28, 2023

Good morning ladies and gentlemen,

I am used to using extreme concepts to explain my thinking, either black or white, even if the reality of our lives and business is indeed much more often in grayscale.

What I am about to say fits well and is very true for the European market, but?does not necessarily represent the reality of other world regions.

My presentation isn’t going to be full of “fireworks” or futuristic technologies but it is rather a pragmatic way to deal with the present in order to secure a better future.

When I was asked to talk about Co-Creation I thought that I wouldn’t talk about technology but rather of how to co-create our future. However, in order to do so, we first need to comprehend the context in which we move that is fundamental to understand the role and the responsibilities of both regulatory and institutional bodies as well as our role as telco operators.

So let’s start from the context. I am convinced that in order to be able to make the right choices and to solve the complex scenario the European telco industry now faces we need to begin by describing the situation as it really is: The perfect storm.

A perfect storm on the horizon that comes from the combination of both macroeconomic and sector-specific challenges.

The macroeconomic scenario is worsening because of:

• Rising costs of raw materials and energy;
• Slowing economic growth with an unprecedented (at least in Europe) level of inflation;
• Rising interest rates after more than a decade ?of “easy money”

The European Telcos market faces unsustainable trends such as:

• Shrinking retail prices which over the last ten years have dropped by 16% in Europe and by 32% (double) in Italy;
• Increasing data consumption with per subscriber monthly data usages that almost doubled during the pandemic.

Telecommunications operators face mounting CAPEX driven by:

• 5G frequency fees and network roll-outs;
• Fiber network roll-outs;
• Upscaling of “beyond core” infrastructures such as data center, edge cloud…

Telecommunications still remain (at least in Europe) a hyper-regulated sector whose regulatory context struggles to keep up with a market that changes at relentless pace.

What I have described so far is complex, but what we are living today is a fact so let me be clear on one principle: Inaction is not an option.

If we don’t address this complex scenario, we risk falling into a relentless decline. Let’s not forget that we opened the 2023 GSMA talking about VELOCITY.

Basically we are still dealing with a regulatory framework that dates back to the early ages of liberalization, at a time when incumbents and NRAs played a game of “Cops-and-Robbers”.

We must Co-create the rules for a sustainable future.

Let’s start by looking at the needed changes of the regulatory and institutional framework:

• More Market consolidation;
• Incentives to speed up the switch-off of older technologies;
• Urgent intervention to get to a fairer redistribution of the costs related to the ever-increasing data traffic and market unbalances (so called Fair Share regulation);

And last but not least we need a balanced and equal playing field for all players in terms of compliance and equal enforcement to European data security and privacy laws.

The renewal of the policy framework is a fundamental piece of the puzzle to achieve a healthier digital ecosystem.

Coming to what rests on our shoulders, we need to move towards a delayered business model, which will bring about a new industrial vision for our industry.

The vertically integrated Telco model is outdated since it no longer fits with the current challenges and I’ll try to guide you through our Italian way of coping with this challenge.

The Telco business is not a single indivisible rock.

The Infrastructure business, the consumer business, the enterprise business as well as the overseas business (TIM Brazil) MUST all be managed separately as different entities.

The reason why:

• Delayering allows a greater focus on the respective challenges.
• Secondly it leads to a better allocation of capital. Infrastructures and services have different business models and very different capital requirements and risk profiles:
• Infrastructure is a capital-intensive business with lower risk but long term returns and high margins. This profile is very attractive for infrastructure funds and not for traditional investors more focused on the medium/short term.?
• Retail services have thinner EBITDA margins, but they also have lower Capex requirements and their higher risk profile attracts investors willing to take on more risk. However retail services are themselves ?made of two quite different businesses: the consumer market and the enterprise market: the Consumer business is a mass-market; the Enterprise business is instead a more diversified market where customized product and services are provided.

The One-size-fits-all approach no longer represents the best industrial option at least for us in Italy. Each business has to focus and evolve according to its own strengths, growth potential and financial market drivers.

Sharing our network infrastructures as well as other major assets such as a vast customers base, widespread sales channels, strong brand recognition, flexible billing and caring systems leads to win-win partnerships with players that perfectly match and complement our strengths.

In Brazil we launched a program called “consumer platform” that was purportedly conceived to spur partnerships.

Given the success experienced in Brazil we have now designed a similar program for TIM in Italy which will be launched next week.

We believe that TIM can play a key role in helping to select promising digital companies to grow bigger.

To summarize critical situations must be tackled sooner rather than later.

Companies, as any other complex organization, tend to procrastinate important and disruptive decisions.

Unfortunately (or perhaps fortunately enough) the severity of the challenges we are now facing calls instead for an immediate and energetic intervention.

Procrastination is the art of keeping up with the past which is exactly what we have to avoid.

We don’t need reassuring answers that look to the past. We need brave and bold solutions that look to the future.

I say it again Inaction is not an option.

It is time for more than words, we need facts and bold decisions.

It is time to be brave.

Thank you.