Telecom Italia Begins the Journey for a Poor 2022; Aggressive Discounting Continues in Italy

Telecom Italia's first-quarter results were in line with new guidance set by management a few weeks ago, with service revenue and EBITDA down 2.5% and 16.6% respectively (guidance aims for a low-single-digit decline and a low-teens decline in 2022, respectively). High growth in the Brazilian business is compensating for a worrying performance in Italy, where service revenue and EBITDA declined by 5% and 20% respectively, with poor performance in both mobile and fixed. Our short- and medium-term forecasts remain more bearish than management guidance, as we have little confidence in their ability to set targets after four profit warnings in 12 months. We maintain our EUR 0.25 fair value estimate and highlight our very high uncertainty rating for the company.