Telecom Italia's 1H 2025 Results: A Blueprint for Resilience and Strategic Renewal

Telecom Italia S.p.A. (TIM) has delivered a performance in the first half of 2025 that underscores its operational resilience and strategic agility in a challenging macroeconomic environment. Despite a 0.9% year-over-year decline in total revenue to €6.6 billion, the company's organic EBITDA surged by 5.5% to €2.06 billion, driven by disciplined cost management and a shift toward high-margin services. This divergence between revenue and EBITDA highlights TIM's ability to optimize its cost structure while maintaining profitability—a critical trait for investors seeking long-term value in a sector marked by intense price competition and regulatory pressures.

Navigating Macroeconomic Pressures with Structural Efficiency

TIM's 1H 2025 results reflect a company that has internalized the lessons of past volatility. The 48% year-over-year drop in EBITDA to €529 million—a metric skewed by non-core items—was offset by a 5% rise in core earnings, which excludes one-time charges. This improvement was fueled by TIM Brasil, where EBITDA after leases grew 6.1% to €800 million, and by the domestic enterprise segment, where cloud services revenue jumped 24% year-on-year. These figures suggest TIM is successfully pivoting toward higher-margin offerings, a strategy that insulates it from the commoditization risks plaguing traditional telecom services.

Capital expenditures (CAPEX) in Q1 2025 fell 49.9% to €457 million, with the domestic segment reducing spending by 9.4% to €240 million. This reduction, while significant, was strategic: TIM redirected investments toward mobile and IT infrastructure, ensuring its network remains competitive in Italy's 5G rollout race. The company's EBITDA after leases minus CAPEX rose 24.3% to €358 million, signaling improved cash flow generation. For investors, this metric is a bellwether of TIM's ability to fund growth without overleveraging—a critical consideration as it navigates a high-interest-rate environment.

Strategic Rebalancing: Brazil as a Growth Engine

TIM's Brazilian operations have emerged as a cornerstone of its long-term value proposition. The segment's 6.5% EBITDA growth in Q1 2025, coupled with a 4.9% revenue increase, underscores its role as a profit driver. Mobile ARPU in Brazil rose to 31.9 reais (€5.4), a 5% year-on-year gain, while post-paid customers now account for 49.6% of the base. This shift toward higher-value subscribers is a strategic win, as it aligns with global trends toward monetizing digital services over commoditized connectivity.

Meanwhile, TIM's domestic market shows signs of stabilization. Mobile churn in Italy fell to 4.7% in Q1 2025, a dramatic improvement from 19.4% at year-end 2024. While subscriber additions were modest (8,000 in Q1), the neutral mobile number portability (MNP) balance—a first in years—signals a matured competitive landscape. TIM's focus on enterprise services, particularly cloud solutions, is paying dividends: the segment now generates 24% of enterprise revenue, a doubling since 2023. This diversification reduces reliance on consumer markets, where price wars with Iliad and Vodafone have historically eroded margins.

Debt Management and Governance: A New Era of Prudence

TIM's adjusted net debt after leases rose 2.9% to €10.42 billion, but the company's liquidity position remains robust. A €1.0 billion monetization of the '98 Concession Fee and a R$5.0 billion bond issuance in Brazil have strengthened its balance sheet. The return of Piergiorgio Peluso as CFO in November 2025—a veteran of TIM's 2019 restructuring—signals a commitment to prudent capital allocation. Investors should also note the reduction of the revolving credit facility from €4 billion to €3 billion, with maturity extended to 2030, which provides flexibility without overexposing the company to short-term refinancing risks.

Investment Case: Re-evaluating Exposure to TIM

For investors, TIM's 1H 2025 results present a compelling case for re-evaluating exposure. The company's ability to grow core earnings while reducing CAPEX and managing debt demonstrates a mature, value-conscious approach. Its strategic pivot to cloud services and Brazil's profitability insulate it from the headwinds facing traditional telecoms. Moreover, the partial state-backed ownership via Poste Italiane's 24.8% stake adds a layer of stability, reducing the risk of governance-driven volatility.

TIM's guidance for 2025—returning to cash generation and 7% core profit growth—appears achievable, particularly given its structural efficiency gains. While the Italian market remains competitive, TIM's focus on enterprise services and 5G infrastructure positions it to capture long-term value. For those seeking exposure to a telecom operator with a balanced mix of resilience and growth, TIM offers a compelling proposition.

In conclusion, Telecom Italia's 1H 2025 results affirm its operational resilience and strategic confidence. By leveraging its Brazilian growth engine, optimizing capital efficiency, and rebalancing its business mix, TIM is well-positioned to navigate macroeconomic pressures and deliver sustainable returns. For investors, this is a stock worth watching—and potentially adding to a diversified portfolio.