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MarketScreener Homepage  >  Equities  >  Italian Stock Exchange  >  Inwit S.p.A.    INW   IT0005090300

INWIT S.P.A.

(INW)
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Inwit S p A : Nine months 2020 Interim Report

11/20/2020 | 01:17pm EST

Infrastrutture Wireless Italiane S.p.A.

Interim Report at September 30, 2020

Contents

INTERIM MANAGEMENT REPORT AT SEPTEMBER 30, 2020

Name, Share Capital and registered office of the Company __________________________________4

The Board of Directors in office from September 30, 2020 (1) ________________________________4

Board of Statutory Auditors_____________________________________________________________4

INWIT activities ______________________________________________________________________5

Highlights at SEPTEMBER 30, 2020 _____________________________________________________7

Business environment ______________________________________________________________ 10

Income, balance sheet and financial performance at September 30, 2020 ___________________ 12

Merger by incorporation with Vodafone Towers S.r.l. ______________________________________ 13

Operating performance in the period___________________________________________________ 14

Financial Position and Cash Flows Performance _________________________________________ 18

Detailed tables_____________________________________________________________________ 26

Events Subsequent to September 30, 2020 ____________________________________________ 32

Positions or transactions resulting from atypical and/or unusual operations. __________________ 32

Significant non-recurring events and transactions ________________________________________ 32

Business Outlook for the Year 2020 () __________________________________________________ 33

Main risks and uncertainties _________________________________________________________ 35

Corporate Boards at September 30, 2020 ______________________________________________ 39

Information for Investors_____________________________________________________________ 41

Related Party Transactions ___________________________________________________________ 43

Alternative Performance Measures ____________________________________________________ 44

INTERIM FINANCIAL STATEMENTS AT SEPTEMBER 30, 2020

Contents __________________________________________________________________________ 47

Statements of Financial Position ______________________________________________________ 48

Separate Income Statement _________________________________________________________ 50

Statement of Comprehensive Income _________________________________________________ 51

Changes in net equity _______________________________________________________________ 52

Cash flow statement ________________________________________________________________ 53

Notes to the Individual Financial Statements at September 30, 2020 _______________________ 54

Declaration by the Manager Responsible for Preparing the Company's Financial

Reports ______________________ _____________________________________________________88

Interim Management Report

NAME, SHARE CAPITAL AND REGISTERED OFFICE OF THE COMPANY

Name

Infrastrutture Wireless Italiane S.p.A.

Share capital

600,000,000 euros

Registered office

Via G. Negri 1, 20121 Milan

Tax code, VAT no. and registration no. in the

Register of Companies of Milan

08936640963

Website

www.inwit.it

As of March 31, 2020, the Company is no longer subject to management and coordination by TIM S.p.A. following the changes in the ownership structure, following the merger of Vodafone Towers into INWIT.

THE BOARD OF DIRECTORS IN OFFICE FROM SEPTEMBER 30, 2020 (1)

Chairman

Emanuele Tournon

CEO

Giovanni Ferigo

Directors

Laura Cavatorta (independent)

Antonio Corda

Angela Maria Cossellu (independent) (2)

Sabrina Di Bartolomeo

Sonia Hernandez

Carlo Nardello

Agostino Nuzzolo

Filomena Passeggio (independent)

Secondina Giulia Ravera (independent)

Fabrizio Rocchio

Francesco Valsecchi (independent)

Secretary to the Board

Salvatore Lo Giudice

  1. On October 2, 2020, the Board of Directors co-opted Giovanna Bellezza and Rosario Mazza to replace Carlo Nardello and Filomena Passeggio, who resigned.
  2. Director Cossellu, appointed by co-optation on April 23, 2020, was confirmed by the Shareholders' Meeting on July 28, 2020.

BOARD OF STATUTORY AUDITORS

Chairman

Stefano Sarubbi

Acting Auditors

Umberto La Commara

Michela Zeme

Alternate Auditors

Roberto Cassader

Elisa Menicucci

Interim Management Report

Name, Share Capital and registered office of the Company

4

at September 30, 2020

Corporate bodies

INWIT ACTIVITIES

Infrastrutture Wireless Italiane S.p.A. (hereinafter"INWIT" for short, or the "Company") operates in Italy in the field of electronic communications infrastructure, and specifically infrastructure devoted to hosting equipment for radio broadcasting, telecommunications, and television and radio signals broadcasting.

INWIT operates in the sector as a result of the transfer from TIM in March 2015 (effective April 1, 2015) of a business unit focused mainly on activities related to the construction and management of the sites' passive infrastructures, generally consisting of civil structures (such as towers, pylons, and poles) and technological systems, necessary to host the transceiver equipment owned by mobile operators and other radio service operators.

The closing of the integration in INWIT transaction between INWIT S.p.A. and Vodafone Towers S.r.l. took place on March 25, 2020 for the purchase by the latter of 43.4% of the share capital of Vodafone Towers. On March 31, 2020, the merger between the two companies was finalized through the attribution to Vodafone Europe B.V. of no. 360,200,000 ordinary shares of INWIT, without a share capital increase and with the cancellation of the 43.4% stake previously acquired. On finalization of the merger, INWIT is therefore jointly controlled by TIM S.p.A. and Vodafone Europe B.V. each holding a 37.5% stake in the Issuer's share capital.

On April 23, 2020 TIM and Vodafone concluded an Accelerated Book Building transaction which resulted in the two shareholders each holding 33.173% of the share capital.

Subsequently, on October 5, 2020, TIM and Ardian finalized an agreement (Daphne3) according to which TIM S.p.A. controls 51% of the holding company, which in turn holds 30.2% of INWIT, while the consortium led by Ardian holds the remaining 49%. Of the other 3% of TIM's stake, 1.2% was sold to Canson Capital Partners with the option to buy the remaining 1.8%.

On March 31, 2020 the largest operator in Italy was established in the sector, with the mission of supporting TIM and Vodafone Italia S.p.A. in building the new network for the development of 5G, also guaranteeing access to its infrastructures to the entire market, also thanks to the space freed up from the joint TIM and Vodafone Italia S.p.A. project

The INWIT fleet, resulting from the merger, includes approximately 22,469 sites (of which 22,050 operational sites at 09.30.2020) distributed throughout the national territory and a number of tenants equal to 41,151. The technical and operational know-how of the Company is assured by the use of staff with strong specific experience, gained over many years working within TIM and Vodafone Towers.

Key factors of INWIT competitive positioning

As well as the widespread distribution and quality of the infrastructure, the key factors of INWIT's competitive positioning mainly concern:

  • established relationships with the main radio-mobile operators that recognize the importance of the services offered by INWIT within their own value chain;
  • visibility of revenues and significant generation of cash flow, guaranteed by long-term contracts that are renewable upon expiration, historically characterized by a high renewal rate, also considering the high quality of the sites made available;
  • contracts safeguarded against inflation;
  • technical and managerial know-how, ensured by the use of personnel with consolidated experience gained over years within TIM and, starting from March 31, 2020, the Vodafone company.

Interim Management Report

INWIT activities

5

at September 30, 2020

Integrated hosting services

At September 30, 2020, the Company's total revenue derived from its integrated hosting services, consisting in providing (Tower Rental) customers with:

  • physical spaces on its vertical structures, which can host the radiating systems receiving and transmitting radio signals;
  • indoor physical spaces suitable for the installation of customer equipment and the connection of their radiating systems;
  • access to the electricity networks and technological systems consisting of power supply systems (including energy backup systems) and air conditioning and/or ventilation systems that ensure the correct operation of customer equipment;
  • DAS &Small Cells connectivity services to improve the value proposition of Mobile Operators by optimizing radio coverage and increasing network capacity in high-traffic areas;
  • access to the core network with full- backhauling to ensure high throughput for MNOs.

Integrated hosting services also include the provision of maintenance, monitoring and security management services of the premises and the technological systems.

With regard to infrastructure sites, (1) which account for approximately 16% of the all sites, INWIT owns the civil structures only, not the technological systems (2). The latter, as a matter of fact, were not contributed and are still owned by TIM and Vodafone, as they are shared across fixed and mobile networks. Accordingly, the hosting services offered by INWIT at these sites consist only in providing physical space on the vertical support structures.

INWIT's customers are the leading national mobile network operators (MNOs) - Tim, Vodafone and Wind Tre and Iliad - with which it has entered into long-termcontracts to provide hosting services and other radio service operators.

The customers' high profile, their concentration, the multi-yearmedium-long term duration of the commercial agreements signed with them, and the large volume of the services offered by the Company within the MNO's value chain, are the key aspects of the Company's business.

  1. The infrastructural sites are positioned in properties owned by or leased from VOD or TIM, in/on which TIM's or VOD's fixed telephone devices are located.

(2)That is, all equipment owned by the Company consisting of: (i) power system including panels and integrated power substation, complete with backup batteries; (ii) earthing system; (iii) lightning protection system; (iv) air conditioning and/or ventilation system; (v) flight obstacle signaling system, built and/or installed at the sites.

Interim Management Report

INWIT activities

6

at September 30, 2020

HIGHLIGHTS AT SEPTEMBER 30, 2020

In the first nine months of 2020, the main economic and financial indicators all showed an upward trend, including - obviously - after the merger with Vodafone Towers S.r.l. on March 31, 2020.

  • Revenues amounted to 473,478 thousand euros, up 62.1% compared to the same period of 2019 (292,163 thousand euros). It should be noted that one-off revenues were reported in the first nine months of both 2019 and 2020. In particular, for September 2020, they amounted to 6,765 thousand euros (recognition of prepayments relating to active contracts expired early) while in September 2019 they were 4,830 thousand (indemnification 2015/2018). Net of these items, the comparison with the same period of 2019 shows an increase of 62.4%;
  • EBITDA amounted to 432,430 thousand euros, up 69.1% compared to the first nine months of 2019. This percentage increases to 70.7% excluding both the aforementioned one-off revenues and, for the one-off costs at September 2020 relating to the Daphne project - merger with Vodafone Towers - equal to 6,750 thousand euros and the one-off costs of 2,434 thousand euros at September 2019.
  • EBIT amounted to 206,817 thousand euros, an increase of 31.0% compared to the same period of 2019; Excluding the aforementioned one-off revenues/costs, the comparison with the same period of 2019, shows an increase of 33.0% instead;

the profit for the period amounted to 111,927 thousand euros, up 13.2% compared to the same period in 2019 (16.0% excluding the aforementioned one-off revenues/costs);

the data for the third quarter of 2020 alone show the impact of the merger with Vodafone Tower S.r.l. through the comparison with the corresponding period of 2019, with the following increases in the main income indicators: revenues + 93.3%, Ebitda +106.1% and Ebit +59.1%;

in comparison with the second quarter of 2020, figures are also up: revenues +0.9%, Ebitda +0.7% and Ebit +7.15%;

capital expenditures in the period amounted to 77,618 thousand euros, up by 42,539 thousand euros compared to the first nine months of 2019 (+121.3%).

  • Net Financial Debt was equal to 3,765,546 thousand euros. Compared to December 2019 (equal to 712,144 thousand euros), the increase is mainly due to the opening of a loan agreement with a pool of national and international banks, used for 2,150,500 thousand euros for the purchase of the investment in Vodafone Towers (value including fees due), of which an initial portion of 866,251 thousand euros was repaid in July 2020, and the contribution of Vodafone Towers S.r.l. in relation to IFRS 16 financial liabilities related to lease contracts (equal to 439,347 thousand euros). On July 1, 2020, 2020, INWIT successfully completed its first bond issue for a total amount of 1 billion euros. The fixed-rate bond, with a 6-year maturity, is listed on the regulated market of the Luxembourg Stock Exchange.
  • The last table shows the value of EBITDAL, i.e. EBITDA after lease costs. For the sake of consistency, the figures for the last two quarters and the situation as at September 30, 2020 have been reported.

Interim Management Report

Highlights at September 30, 2020

7

at September 30, 2020

Financial Highlights

( t hou s an ds of eu ros )

1 .1 - 09 .30

1 .1 - 09 .30

Change

2020

2019

in absolute

%

values

(a)

(b)

c=(a-b)

(c/b)

Revenues

473,478

292,163

181,315

62.1

EBITDA(1)

432,430

255,676

176,754

69.1

EBITDA Margin

91.3%

87.5%

3.8pp

3.8pp

EBIT(1)

206,817

157,930

48,887

31.0

EBIT Margin

43.7%

54.1%

(10.4pp)

(10.4pp)

Profit for the period

111,927

98,868

13,059

13.2

Operating Free Cash Flow

385,981

232,511

153,470

66.0

Capital expenditures (CAPEX)

77,618

35,079

42,539

121.3

(2)

09.30.2020

12.31.2019

Change

in absolute values

ESMA net financial debt

3,767,115

712,379

3,054,736

INWIT net financial debt

3,765,546

712,144

3,053,402

( t hou s an ds of eu ros )

3r d Quar ter

3r d Quar ter

2th Quar ter

Change

2020

2019

2020

in absolute

%

values

(a)

(b)

c=(a-b)

(c/b)

Revenues

186,098

96,286

184,423

89,812

93.3

EBITDA(1)

172,845

83,846

171,563

88,999

106.1

EBITDA Margin

92.9%

87.1%

93.0%

5.8pp

5.8pp

EBIT(1)

77,633

48,804

72,450

28,829

59.1

EBIT Margin

41.7%

50.7%

39.3%

(9.0pp)

(9.0pp)

Profit for the period

40,271

29,631

38,130

10,640

35.9

Operating Free Cash Flow

199,945

92,930

130,621

107,015

115.2

Capital expenditures (CAPEX)

43,944

15,430

25,585

28,514

184.8

(2)

  1. Details are provided under "Alternative Performance Measures".
  2. (*) Net of consideration received for transfer of fixed assets.

Interim Management Report

Highlights at September 30, 2020

8

at September 30, 2020

(thousands of euros)

1.1 - 09.30

2020

EBITDA

432,430

Rental Costs

(135,400)

EBITDAL

297,030

3rd Quarter

2th Quarter

20202020

172,845171,563

(51,800)(52,600)

(121,045)118,963

Interim Management Report

Highlights at September 30, 2020

9

at September 30, 2020

BUSINESS ENVIRONMENT

The infrastructure market for radio networks and those for mobile radio networks in particular, is affected by a deep transformation, characterized by:

  • growth in mobile broadband connections and volumes of data traffic, due to the increasingly widespread use of images and video in communications and in personal and professional applications;
  • expansion of 4G coverage which represents a fundamental technological discontinuity. Indeed, 4G is the first mobile radio network architecture specifically conceived and designed for data traffic; following closely behind, the rollout of the 5G, will involve the request for new hosting and the complete migration of the full IP Backhaul;

evolution of mobile radio network architectures which, in order to deliver high speeds and low latencies require a high number of micro-cells that interoperate with macro-cell coverages;

strategies to reallocate invested capital by operators who tend to outsource and share infrastructure assets and activities when they need to invest to acquire frequencies and develop the networks to cope with competitive changes.

In this context, TIM and Vodafone decided to join their network infrastructure throughout Italy and thereby also speed up 5G development. As known, INWIT consolidated the 10,989 Vodafone towers thereby becoming the second largest independent operator in Europe, with a fleet of over 22,000 towers. Italy's largest tower operator has the aim of supporting the development of innovative solutions across Italy, from smart cities, industry 4.0, to indoor coverage in large centers. For more information on this, please refer to the appropriate section of this document.

Over the nine months, INWIT:

  • become more efficient by pursuing its plan to renegotiate leases and the land acquisition plan;
  • met the demand for new sites by launching the construction of about 78 new sites;
  • launched a multi-operator microcell cover plan in areas with the highest user and traffic concentration, installing over 900 remote units;
  • modernized its sites, connecting 250 through fiber backhauling.

Interim Management Report

Business environment

10

at September 30, 2020

The impact of these strategies in the period ended September 30, 2020 is detailed below.

Increased co-tenancy

The table below shows the effects of new hosting agreements at September 30, 2020:

(amounts stated in thousands)

09.30.2020

Number of sites (*)

(a)

22.1

Number of hostings in place with Tenants (**)

(b)

41.2

Number of hostings in place with Tenants,

(c)

9.0

excluding TIM and Vodafone Anchor Tenants

(***)

Average number of Tenants per Site (Tenancy

(b)/(a)

1.85

ratio)

  1. Operating sites net of sites being decommissioned and under construction.
  1. Excluding Sites in which the hosting service ceased during the period. Including IoT contracts.

(**)* Number of hostings on the same Site. Please note that each Tenant refers to one hosting per Site only.

As shown in the above table, at September 30, 2020, the average number of operators per site in the new Company perimeter after the merger, was 1.85x.

Interim Management Report

Business environment

11

at September 30, 2020

INCOME, BALANCE SHEET AND FINANCIAL PERFORMANCE AT SEPTEMBER 30, 2020

INWIT voluntarily prepares and publishes the Interim Financial Reports for the first and third quarters of each financial year.

The Interim Report at September 30, 2020 includes the Interim Management Report and Financial Statements at September 30, 2020 prepared in compliance with the IFRS accounting standards issued by the IASB and endorsed by the EU and, in particular, with IAS 34 Interim financial statements. The interim Financial Statements at September 30, 2020 are not subject to audit.

Lastly, the section entitled "Business Outlook for the year 2020" 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 press release are cautioned not to place undue reliance on these forward-looking statements as the actual results may differ materially from those contained in those forward-looking statements as a result of a number of factors, most of which are not within the Group's control.

Interim Management Report

Income, balance sheet, and financial performance

12

at September 30, 2020

MERGER BY INCORPORATION WITH VODAFONE TOWERS S.R.L.

On December 19, 2019, the INWIT Shareholders' Meeting approved the merger by incorporation of VOD Towers.

On March 25, 2020, the transaction between INWIT and VOD Towers was closed with the signing of the purchase deed from Vodafone Europe BV of 43.4% of the share capital of VOD Towers equal to 2,140,000 thousand euros and of the subsequent merger deed of the latter into INWIT.

The deed of merger took effect on March 31, 2020 and no. 360,200,000 ordinary shares of INWIT were attributed to Vodafone Europe BV for the exchange service (without share capital increase and with the cancellation of the minority stake held by INWIT in VOD Towers), which will be listed on the MTA organized and managed by Borsa Italiana.

The transaction is in keeping with the strategy of the continual improvement in profitability and market leadership that INWIT is pursuing in Italy.

Following the merger, the fair value of the customer contracts migrated from Vodafone Towers S.r.l. was analyzed and subsequently recognized in the financial statements.

As required by IFRS 3, the price adjustment mechanism was used, which resulted in a negative balance in favor of INWIT, leading to the recognition of a receivable from Vodafone set mainly against goodwill.

The accounting effects of the business combination, defined in accordance with the requirements of IFRS 3, are described in note 4 of the Interim Financial Report at September 30, 2020.

Interim Management Report

Operating performance in the period

13

at September 30, 2020

OPERATING PERFORMANCE IN THE PERIOD

(thousands of euros)

1.1 - 9.30

1.1 -9.30

Change

2020

2019

In absolute

%

values

(a)

(b)

(a-b)

(a-b)/b

Revenues

473,478

292,163

181,315

62.1

Costs for lease of premises

(2,368)

(7,608)

5,240

(68.9)

Employee benefits expenses - Ordinary

(11,824)

(7,749)

(4,075)

52.6

expenses

Employee benefits expenses -

Restructuring and rationalization

-

(574)

574

(100.0)

expenses

Maintenance and other operating and

(26,856)

(20,556)

(6,300)

30.6

service expenses

Operating profit (loss) before

depreciation and amortization, capital

gains (losses) and impairment

432,430

255,676

176,754

69.1

reversals (losses) on non-current

assets (EBITDA)

Amortization, gains/losses on disposals

and impairment losses on non-current

(225,613)

(97,746)

(127,867)

130.8

assets

Operating profit (loss) (EBIT)

206,817

157,930

48,887

31.0

Finance income/(expenses)

(47,508)

(18,471)

(29,037)

157.2

Profit (loss) before tax

159,309

139,459

19,850

14.2

Income taxes

(47,382)

(40,591)

(6,791)

16.7

Profit for the period

111,927

98,868

13,059

13.2

The structure of revenues and costs of the Company is largely made up of medium-term and long-term contracts, entered into as client or provider, under established financial terms and conditions. The main income statement items for the first nine months of 2020 are analyzed below:

Revenues

For the first nine months of 2020, these totaled 473,478 thousand euros (292,163 thousand euros in the corresponding period of 2019, +62.1%) and include revenues deriving from the service contract with Tim S.p.A. and Vodafone Italia S.p.A. (Master Service Agreement), from third-party customers on the transferred towers and the revenues from hosting on new sites and of new services.

Items which by their nature are non-linear or non-recurring("one-off") are reported, relating to prepayments relating to active contracts expired early, totaling 6,765 thousand euros.

Net of those one-off revenues, the comparison with the first nine months of 2019 showed a 62.4% growth.

Interim Management Report

Operating performance in the period

14

at September 30, 2020

In detail:

(thousands of euros)

1.1 - 09.30

1.1 - 09.30

Change

2020

2019

in absolute

%

values

Revenues relating to the Master Service Agreement with TIM

228,354

197,826

30,528

15.4

S.p.A.

Revenues relating to the Master Service Agreement with

162,552

-

162,552

-

Vodafone Italia S.p.A.

One-off revenues

6,765

4,830

1,935

40.1

Revenues from third-party customers on the transferred

66,152

73,358

(7,206)

(9.8)

towers and other revenues

Revenues from hosting on new sites and of new services

9,654

16,149

(6,495)

(40.2)

Total

473,478

292,163

181,315

62.1 (*)

(*): Net of one-off revenues, the percentage is 62.4%.

EBITDA

EBITDA amounted to 432,430 thousand euros, with an EBITDA margin of 91.3% on revenues for the period (87.5% in the corresponding period of 2019). Compared to the first nine months of 2019, the increase was 69.1%, which rises to 70.7% when excluding the aforementioned one-off revenues/costs from the comparison.

EBITDA was particularly impacted by the change in the line items analyzed below:

  • Costs for lease of premises
    These amount to 2,368 thousand euros, down 5,240 thousand euros compared to the same period in 2019 (-68.9%). They represent 5.7% of the cost items with an impact on EBITDA (in 2019 they amounted to 20.9%). They consist of the residual lease payment liabilities excluded from the application of the accounting standard IFRS 16 (in force from 1.1.2019).
  • Employee benefits expenses - Ordinary expenses
    The item amounted to 11,824 thousand euros and reflects the organizational structure, which includes 198 employees.
  • Maintenance and other operating and service expenses
    The item amounted to 26,856 thousand euros (20,556 thousand euros in the first nine months of 2019).
    Maintenance costs are mainly governed by the Maintenance Agreement signed with TIM S.p.A., in place since 2015, and with Vodafone Italia S.p.A., in place since the merger. There were also one-off costs relating to the Daphne project - integration with Vodafone Towers - equal to 6,756 thousand euros.

Interim Management Report

Operating performance in the period

15

at September 30, 2020

Depreciation and amortization, losses on disposals and impairment losses on non-current assets

Details are as follows:

(thousands of euros)

1.1 - 9.30.

1.1 - 9.30

Changes

2020

2019

amount

%

Amortization of intangible assets with a

finite useful life

52,552

632

51,920

n.r.

Depreciation of owned tangible assets

40,049

10,444

29,605

283%

Amortization of rights of use on third-

party assets

132,453

86,455

45,998

53.2%

(Gains)/losses on disposals and

impairment losses on non-current

559

215

344

160.0%

assets

Total

225,613

97,746

127,867

131.0%

Within intangible assets, the amortization charge relating to the allocation of 811,200 thousand euros due to the Customer Contract amounted to 52,030 thousand euros.

In tangible assets and rights of use on third-party assets, the increase in depreciation was attributable to the contribution of the assets relating to Vodafone Towers S.r.l. as of March 31, 2020.

EBIT

EBIT amounted to 206,817 thousand euros, with an EBIT ratio of 43.7% on revenues (compared to 54.1% in the same period 2019).

Net financial income/(expense)

This amounted to an expense of 47,508 thousand euros.

Income is equal to 2 thousand euros and mainly refers to interest income on bank and postal deposits and financial receivables.

Financial expenses amounted to 47,510 thousand euros and break down as follows:

(thousands of euros)

1.1 - 09.30.2020

1.1 - 09.30. 2019

Interest expenses and other financial expenses

Interest to banks

15,234

815

Interest expense for finance leases

17,679

15,551

Interest expenses and other costs relating to bonds

4,516

-

Discounting charges (ARO fund and severance indemnity fund)

3,221

1,597

Financial fees

6,612

-

Other financial expenses

248

735

Total

47,510

18,698

Interim Management Report

Operating performance in the period

16

at September 30, 2020

Interest to banks refers to the financial charges paid during the period for the syndicated loan agreement and the interest incurred on short- and medium/long-term financial payables (Bridge and Term Loan) described in Note 14 - Financial liabilities (non-current and current).

Interest expenses on finance leases refer to leases accounted for pursuant to IFRS 16, in force from January 1, 2019.

Interest expense on bonds refers to the financial expenses relating to the bond issue. On July 1, 2020, 2020, INWIT successfully completed its first bond issue for a total amount of 1 billion euros. The fixed- rate bond, with a 6-year maturity, is listed on the regulated market of the Luxembourg Stock Exchange. Its characteristics are as follows:

  • Maturity: July 8, 2026
  • Coupon: 1.875%
  • Issue price: 99.809%
  • Effective yield: 1.909%, corresponding to a yield of 220 basis points above the benchmark rate (mid swap).
    Financial fees mainly refer to the fees paid for agreeing and using the 3-billion-euro loan agreement to finance the Company's acquisition of the minority interest in VOD Towers and distribution of the extraordinary dividend net of accruals and deferrals for the period.
    Other financial expenses refer to other expenses on financing transactions.

Income taxes

This item amounted to 47,382 thousand euros. The estimated tax charge on the basis of theoretical rates of 24.0% for IRES and 4.48% for IRAP resulted in gross tax of 60,143 thousand euros. After releasing deferred tax assets (3,875 thousand euros) and deferred tax liabilities (16,444 thousand euros) and netting off the lower income taxes relating to previous years (181 thousand euros), this resulted in tax of 47,382 thousand euros expensed to the income statement.

Profit for the period

The profit for the period was positive for 111,927 thousand euros, or 23.6% of revenues.

Interim Management Report

Operating performance in the period

17

at September 30, 2020

FINANCIAL POSITION AND CASH FLOWS PERFORMANCE

NON-CURRENT ASSETS

Goodwill: the item amounted to 6,112,784 thousand euros (compared to 1,411,770 thousand euros at December 31, 2019):

Pursuant to IFRS 3 (Business combinations), goodwill was recognized in the separate financial statements on the acquisition date of Vodafone Towers (March 31, 2020). It was determined as the difference between the consideration paid for 43.4% of the incorporated company added to the fair value assessment of the remaining 56.6% stake and the fair value at the acquisition date of the identifiable assets acquired net of the identifiable liabilities assumed.

Following the merger, the fair value of the customer contracts was recognized in intangible assets for 811,200 thousand euros. This resulted in a reduction in goodwill of 580,008 thousand euros and an increase in deferred tax liabilities of 231,192 thousand euros.

The price adjustment mechanism resulted in a negative balance of 20,800 thousand euros in favor of INWIT, which led to the recognition in the balance sheet of a receivable from Vodafone of the same amount, offset against goodwill (19,484 thousand euros) and an allowance for doubtful accounts (1,316 thousand euros) relating to invoices to issue to TIM for past Vodafone Tower receivables.

Following the analysis carried out by Vodafone and discussion with INWIT, an agreement was reached between the parties. In particular, INWIT:

  • collected 18,700 thousand euros from Vodafone on October 9, 2020;
  • will continue the collection process for 1,316 thousand euros in receivables from TIM;
  • will avail of the IRAP tax benefit of 800 thousand euros provided by "Relaunch Decree" (Decree
    Law 34/2020).

(thousands of euros)

Goodwill

Pre-merger value

1,411,770

Consideration for the purchase of 43.4% of Vodafone Towers Srl

2,140,000

Fair value measurement remainder share of Vodafone Towers Srl

3,558,776

Reversal Vodafone Towers Srl equity

(198,316)

Fair value measurement of Vodafone Towers Srl assets and

(199,954)

liabilities

Post-merger value

6,712,276

Customer Contract

(580,008)

Price Adjustment (receivables from Vodafone)

(19,484)

Value at 09.30.2020

6,112,784

Intangible assets: these amounted to 786,395 thousand euros (11,045 thousand euros at the end of 2019).

Industrial investments for the period came to 7,688 thousand euros.

The movements during the period, following the merger, included both the fair value of lease contracts, amounting to 811,200 thousand euros, and the prior year fees (before 2020) for the renegotiation of lease contracts, amounting to 9,624 thousand euros.

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(thousands of euros)

Value at 12.31.2019

Additions

Amortization and depreciation

Other changes during the period

Vodafone Towers Srl transfer

Value at 09.30.2020

Intangible assets

11,045

7,688

(52,552)

819,972

242

786,395

Tangible assets: amounting to 798,495 euros (compared to 288,735 euros at December 31, 2019): Industrial investments for the period came to 57,110 thousand euros.

(thousands of euros)

Tangible assets

Value at 12.31.2019

288,735

Additions

57,110

Amortization and depreciation

(40,049)

Other changes during the period

(77)

Vodafone Towers S.r.l transfer

492,776

Value at 09.30.2020

798,495

Rights of use on third-party assets: amounting to 1,148,690 euros (compared to 706,969 euros at 12.31.2019):

Capital expenditures in the period amounted to 3,196 thousand euros, relating to the acquisition of land usage righs.

(thousands of euros)

Right of use on

third-party assets

Value at 12.31.2019

706,969

Lease increases

114,243

Additions

3,196

Amortization and depreciation

(132,453)

Disposals

(13,023)

Vodafone Towers Srl transfer

459,481

Other changes during the period

10,277

Value at 09.30.2020

1,148,690

For a more detailed analysis, please refer to Notes 5, 6, 7 and 8 of the Interim Financial Statements at September 30, 2020.

CAPITAL EXPENDITURES

Capital expenditures made in the first nine months of 2020 totaled 77,618 thousand euros, of which 67,994 thousand euros refer to the purchase of land, land use rights, extraordinary maintenance, development of small cells, implementation of backhauling and construction of new infrastructures,

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at September 30, 2020

intellectual works, equipment and for capitalization of fees for the renegotiation of lease agreements during 2020.

The remaining 9,624 thousand euros relates to the capitalization of prior year fees (before 2020) for the renegotiation of lease contracts.

EQUITY

At September 30, 2020, equity amounted to 4,535,635 thousand euros, the breakdown of which is as follows:

(thousands of euros)

09.30.2020

12.31.2019

Share capital issued

600,000

600,000

Minus treasury shares

-

(222)

Share capital

600,000

599,778

Share premium reserve

3,691,703

660,000

Other reserves

119,433

119,196

Legal reserve

120,000

120,000

Provision for instruments representing net equity

533

34

Treasury share reserve in excess of nominal value

-

(1,215)

Other reserves

(601)

(122)

Retained earnings (losses) including earnings (losses) for the

period

124,499

182,219

Total

1,561,193

4,535,635

The increase in the share premium reserve is related to the reclassification of the merger reserve of 3,558,776 thousand euros arising from the merger agreements with Vodafone Towers. Under these agreements, the shareholders' equity of Vodt (198,316 thousand euros) was canceled, goodwill was recorded (5,500,460 thousand euros), the investment in Vodt was canceled (2,140,000 thousand euros) and the aforesaid merger reserve was created.

On 2 April, the remaining 83,399 treasury shares - that remained after management had been assigned 138,719 shares having achieved the objectives set out in the 2018-2020 Long Term Incentive Plan - were sold on the stock market. These transactions were carried out against the treasury share reserve in excess of nominal value, created for this purpose in 2018.

FINANCIAL RESOURCES AND CASH FLOWS

Net financial debt

The table below shows a summary of the net financial debt at September 30, 2020, calculated in accordance with paragraph 127 of the recommendations contained in ESMA document No. 319 of 2013, implementing Regulation (EC) 809/2004. The table also separately shows the transfer of Vodafone Towers S.r.l.

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09.30.2020

12.31.2019

Change

Vodafone Tower

(thousands of euros)

S.r.l transfer

(a)

(b)

(a-b)

A Cash

-

-

-

-

B Other cash equivalents

117,465

66,569

50,896

6,989

C Securities held for trading

-

-

-

-

D Liquidity (A + B + C)

117,465

66,569

50,896

6,989

E Current financial receivables

214

15,117

(14,903)

F Current financial payables

-

-

-

-

G Current portion of financial payables (medium/long-

(928,811)

(123,661)

(805,150)

(65,626)

term)

of which:

- Financial payables within 12 months

(787,861)

(14,061)

(773,800)

-

- Financial lease liabilities within 12 months

(140,950)

(109,600)

(31,350)

(65,626)

H Other current financial payables

-

-

-

-

I Current financial debt (F+G+H)

(928,811)

(123,661)

(805,150)

(65,626)

J Net current financial debt (I+D+E)

(811,132)

(41,975)

(769,157)

(58,637)

K Medium/long term financial payables

(2,955,983)

(670,404)

(2,285,579)

(373,721)

of which:

- Financial payables over 12 months

(2,023,345)

(139,943)

(1,883,402)

-

- Financial lease liabilities over 12 months

(932,638)

(530,461)

(402,177)

(373,721)

L Bonds issued

-

-

-

-

M Other non-current financial payables

-

-

-

-

N Non-Current financial debt (K+L+M)

(2,955,983)

(670,404)

(2,285,579)

(373,721)

O Net financial debt as recommended by ESMA

(3,767,115)

(712,379)

(3,054,736)

(432,358)

(J+N)

Other financial receivables and non-current financial

1,569

235

1,334

8,594

assets (*)

INWIT Net Financial Debt

(3,765,546)

(712,144)

(3,053,402)

(423,764)

Finance lease liabilities expiring within 12 months

(140,950)

(109,600)

(31,350)

(65,626)

Finance lease liabilities expiring over 12 months

(932,638)

(530,461)

(402,177)

(373,721)

INWIT adjusted net financial debt

(2,691,958)

(72,083)

(2,619,875)

15,583

The main items of ESMA net financial debt are described below:

Other cash and cash equivalents

As of September 30, 2020, this item amounted to 117,465 thousand euros.

Cash is held in bank and postal current accounts and bank deposit accounts with the following characteristics:

  • maturities: investments can be converted into cash within three months in the case of bank and intercompany deposit accounts, and at any time in the case of cash held in current accounts;
  • counterparty risk: loans were made with leading investment grade banking institutions (117,462 thousand euros). There are also 3 thousand euros in checks and cash in hand;
  • Country risk: investments were made in Italy, in Luxembourg and in the UK.

Financial debt (current and non-current)

Non-current and current financial liabilities (gross financial debt) were broken down as follows:

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at September 30, 2020

Other

(thousands of euros)

12.31.2019

Merger

changes

09.30.2020

during the

period

Financial payables (medium/long-term):

Amounts due to banks

69,943

-

959,762

1,029,705

Bond issue m/l term portion

-

-

993,640

993,640

Leasing liabilities

530,461

373,722

28,455

932,638

Other financial payables

70,000

-

(70,000)

-

Total non-current financial liabilities

(a)

670,404

373,722

1,911,857

2,955,983

Financial payables (short-term):

Amounts due to banks

13,927

-

769,568

783,495

Short-term bond loan

-

-

4,655

4,366

Leasing liabilities

109,600

65,625

(34,275)

140,950

Other financial payables

134

-

(134)

-

Total current financial liabilities

(b)

123,661

65,625

739,525

928,811

Total Financial liabilities (Gross

financial debt)

(a+b)

794,065

439,347

2,651,382

3,884,794

Financial payables (medium/long-term):

  • Amounts due to banks mainly refer to loan agreements, net of the related issue discounts and accrued income and prepayments, subscribed respectively to:
    • November 2018 with Banca Popolare di Sondrio for 40,000 thousand euros with bullet repayment at maturity in December 2023;
  • December 2019 with a pool of national and international banks for a total amount of 3,000,000 thousand euros relating to the 5-year Term Loan of 1,000,000 thousand euros with bullet repayment at expiry;
  • Bonds refers to the bond issued in July 2020 with a nominal value of 1,000 thousand euros maturing in 2026 (further details in the section "Operating performance in the period - net financial income/expense", page 21).
  • Other financial payables referred mainly to loan agreements with TI Finance repaid in the first half of 2020.
  • Finance lease liabilities refer to leases accounted for pursuant to IFRS 16, which has come into force on January 1, 2019.

Financial payables (short-term):

  • Amounts due to banks mainly refer to loan agreements, net of the related issue discounts and accrued income and prepayments, subscribed in December 2019 with a pool of Italian and international banks for a total of 3,000,000 thousand euros and relating to:
    • a Bridge Loan of 633,749 thousand euros with a duration, of due to the reclassification, to short-term of the portion, to be repaid in October 2020;
    • a revolving credit facility ("RCF") drawn down for 152,000 thousand euros
  • Bonds refer to the accrued interest maturing in July 2021.
  • Finance lease liabilities: refer to financial leasing contracts accounted for according to IFRS 16 in force since January 1, 2019. The contribution of the transfer of Vodafone Tower was equal to 65,625 thousand euros;

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at September 30, 2020

CASH FLOWS

The table below summarizes the main transactions that had an impact on the change in net financial debt during the period:

(thousands of euros)

1.1 - 9.30

1.1 - 9.30

Change

2020

2019

(a)

(b)

(a-b)

EBITDA

431,980

255,676

176,304

Write-off of capital contributions in

-

(38)

38

income statement

Purchases of tangible and intangible assets

and rights of use on third-party assets for the

(67,994)

(35,079)

(32,915)

period (*)

EBITDA - Capex

363,986

220,559

143,427

Change in net operating working capital:

22,388

11,937

10,451

Change in trade receivables

52,267

(26,055)

78,322

Change in trade payables (**)(**)

(9,377)

21,014

(30,391)

Capital grants received

(29)

-

(29)

Other changes in operating

(20,473)

16,978

(37,451)

receivables/payables

Change in provisions for employee benefits

(39)

340

(379)

Change in operating provisions and Other

(354)

(325)

(29)

changes

Operating free cash flow

385,981

232,511

153,470

% of EBITDA

89.4%

90.9%

(1.5 pp)

Flow from financial income and charges

(47,508)

(18,471)

(29,037)

Capex in other non-current assets

(2,140,000)

-

(2,140,000)

income taxes paid

(24,181)

(24,596)

415

Impact of Vodafone Towers S.r.l. merger

(423,764)

-

(423,764)

dividend payments

(696,720)

(126,553)

(570,167)

Leasing liabilities

5,820

(737,696)

743,516

Change in other non-current liabilities

-

6,107

(6,107)

Other non-monetary changes

4,256

(13,888)

18,144

Other changes in NFP

(118,620)

-

(118,620)

Reduction/(Increase) in ESMA net financial

(3,054,736)

(682,586)

(2,732,150)

debt

(*) Net of considerations received for transfer of assets.

(**) Includes the change in trade payables for amounts due to fixed asset suppliers.

In addition to what has already been detailed with reference to EBITDA, financial debt relating to the first nine months of 2020 was affected by the following items:

Capital expenditure

Investments considered in cash flows refer to capex and related to the purchase of software, land and surface usage rights, the development of new Sites, and the extraordinary maintenance and development of smart cells and backhauling, totalling 67,994 thousand euros.

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at September 30, 2020

For further details, please refer to the Note "Tangible assets (owned and under finance leasing)" in the interim financial statements at 09.30.2020.

Change in net operating working capital

The change in working capital was positive at 22,388 thousand euros.

Financial income and expenses

The net flow of finance income and expenses accounted for during the year is equal to (47,508) thousand euros, determined by the balance between income (2 thousand euros) and expense (47,510 thousand euros). Financial expense on finance lease liabilities (IFRS16) of 17,679 thousand euros and interest paid to banks for medium/long-term loans of 15,234 thousand euros should be noted.

Recurring Free Cash Flow

The recurring free cash flow in the first nine months of 2020 - calculated net of one-off revenues and costs (at EBITDA level) - amounted to 227,200 thousand euros, up by 67.1% compared to the same period of 2019.

The following table shows the details of the items concerned:

(thousands of euros)

1.1 -9. 30

1.1 - 9.30

Change

2020

2019

in absolute

%

EBITDA

values

431,980

253,280

178,700

70.6

Recurring investments

(3,809)

(4,121)

312

(7.6)

payment of income taxes

(24,181)

(24,596)

415

(1.7)

payment of financial expenses

(16,300)

(1,550)

(14,750)

n.r.

Change in Trade Working Capital:

32,665

2,167

30,498

n.r.

Change in trade receivables

68,517

(26,055)

94,572

n.r.

Change in trade payables (*)

(35,852)

28,222

64,074

n.r.

Non-recurring changes in Trade Working

n.r.

Capital

(57,800)

-

(57,800)

Change in operating receivables/payables

(2,076)

16,653

(18,729)

n.r.

Change in provisions for employee benefits

(39)

340

(379)

n.r.

Lease Payment

(133,240)

(106,240)

(27,000)

25.4

Recurring Free Cash Flow

227,200

135,933

91,267

67.1

(*): excluding the change in payables for assets

Changes in trade receivables do not include changes in receivables and prepayments for the indemnification.

The changes in trade payables do not include the changes related to the Daphne project payables (integration with Vodafone).

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at September 30, 2020

Changes in operating receivables/payables do not include changes related to the migration of Vodafone Towers' VAT results.

Non-recurring changes in Trade Working Capital include the collections of 57,800 thousand euros in trade receivables from TIM S.p.A., inherited from Vodafone Tower S.r.l. as a result of the merger. These collections are non-recurring and, therefore, not to be included in 'recurring cash flow'.

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at September 30, 2020

DETAILED TABLES

INWIT's Interim Report at September 30, 2020 was drafted in accordance with Section 154-ter (Financial Reports) of Italian Legislative Decree no. 58/1998 (Consolidated Finance Act) and subsequent amendments and additions, and prepared in accordance with the international accounting principles issued by the International Accounting Standards Board and approved by the European Union (defined as the "IFRS") and with the measures adopted in implementation of Section 9 of Italian Legislative Decree no. 38/2005.

The Interim Report at September 30, 2020 includes:

  • the Interim Management Report;
  • Interim financial statements of Infrastrutture Wireless Italiane S.p.A. at September 30, 2020

In addition to the conventional financial performance measures established by IFRS, INWIT uses certain alternative performance measures are presented for the purpose of a better understanding of the trend of operations and of the Company's financial situation. Specifically, these alternative performance measures refer to: EBITDA, EBIT, net financial debt, INWIT's net financial debt, and Operating Free Cash Flow.

The chapter "Business outlook for the year 2020" contains forward-looking statements related to the management's intentions, beliefs, or current expectations regarding the financial performance and other aspects of the Company's operations and strategies.

Readers of this Report are reminded not to place undue reliance on forward-looking statements, in that actual results may differ significantly from forecasts owing to numerous factors, the majority of which are beyond the Company's control.

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Detailed tables

26

at September 30, 2020

Separate Income Statement

(thousands of euros)

3rd Quarter

3rd Quarter

1.1 - 9.30

1.1 -9.30

2020

2019

2020

2019

Revenues

186,098

96,286

473,478

292,163

Acquisition of goods and services - Ordinary

charges

(9,225)

(6,880)

(21,605)

(24,067)

Acquisition of goods and services - Charges

associated with extraordinary transactions

(6)

(2,434)

(6,756)

(2,434)

Employee benefits expenses - Ordinary

expenses

(4,240)

(2,480)

(11,824)

(7,749)

Employee benefits expenses - Restructuring

and rationalization expenses

-

(157)

-

(574)

Other operating expenses

(170)

(489)

(863)

(1,663)

Operating profit (loss) before depreciation

and amortization, capital gains (losses)

and impairment reversals (losses) on non-

current assets (EBITDA)

172,845

83,846

432,430

255,676

Of which: Impact of Non-recurring Items

(6)

(2,591)

(6,756)

(3,008)

Amortization, gains/losses on disposals

and impairment losses on non-current

assets

(95,212)

(35,442)

(225,613)

(97,746)

Operating profit (loss) (EBIT)

77,633

48,404

206,817

157,930

Of which: Impact of Non-recurring Items

(6)

(2,591)

(6,756)

(3,008)

Finance income

-

22

2

227

Financial expenses

(20,629)

(6,707)

(47,510)

(18,698)

Profit (loss) before tax

57,004

41,719

159,309

139,459

Of which: Impact of Non-recurring Items

(6)

(2,591)

(6,756)

(3,008)

Income taxes

(16,733)

(12,088)

(47,382)

(40,591)

Profit for the period

40,271

29,631

111,927

98,868

Of which: Impact of Non-recurring Items

(4)

(1,853)

(4,830)

(2,151)

Basic and Diluted Earnings Per Share

-

-

0.187

0.165

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Statement of Comprehensive Income

3rd Quarter

3rd Quarter

2020

2019

(thousands of euro)

1.1 - 9.30

1.1 - 9.30

2020

2019

Profit for the period

(a)

40,271

29,631

111,927

98,868

Other Comprehensive Income

Other items that will not subsequently

be reclassified in the Separate Income

Statement

-

-

-

-

Remeasurements of employee

defined benefit plans (IAS 19):

Actuarial gains (losses)

-

-

(341)

(182)

Net fiscal impact

-

-

82

44

Total other items that will not

subsequently be reclassified in the

Separate Income Statement

(b)

-

-

(259)

(138)

Other items that will subsequently be

reclassified in the Separate Income

Statement

-

-

-

-

Total other items that will

subsequently be reclassified in the

separate income statement

(c)

-

-

-

-

Total other items of the Statement of

Comprehensive Income

(d=b+c)

-

-

-

(138)

Total Comprehensive income for the

period

(e=a+d)

40,271

29,631

111,668

98,730

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at September 30, 2020

Consolidated statement of financial position

Assets

(thousands of euros)

09.30.2020

12.31.2019

Assets

Non-current assets

Intangible assets

Goodwill

6,112,784

1,411,770

Intangible assets with a finite useful life

786,395

11,045

Tangible assets

Property, plant and equipment

798,495

288,735

Rights of use on third-party assets

1,148,690

706,969

Other non-current assets

Non-current financial assets

1,569

235

Miscellaneous receivables and other non-current assets

186

6,932

Deferred tax assets

-

1,939

Total Non-current assets

8,848,119

2,427,625

Current assets

Trade and miscellaneous receivables and other current assets

177,418

83,111

Financial receivables and other current financial assets

214

15,117

Current securities and equity investments

-

-

Income tax receivables

22,144

1

Cash and cash equivalents

117,465

66,570

Total Current assets

317,241

164,799

Total Assets

9,165,360

2,592,424

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at September 30, 2020

Equity and Liabilities

(thousands of euros)

09.30.2020

12.31.2019

Equity

Share capital issued

600,000

600,000

Minus: treasury shares

-

(222)

Share capital

600,000

599,778

Share premium reserve

3,691,703

660,000

Legal reserve

120,000

120,000

Other reserves

(567)

(804)

Retained earnings (losses) including earnings (losses) for the period

124,499

182,219

Total Equity

4,535,635

1,561,193

Liabilities

Non-current liabilities

Employee benefits

3,173

1,791

Deferred tax liabilities

346,217

-

Provisions for Risks and Charges

220,314

101,656

Non-current financial liabilities

2,955,983

670,404

Miscellaneous payables and other non-current liabilities

5,722

9,616

Total Non-current liabilities

3,531,409

783,467

Current liabilities

Current financial liabilities

928,811

123,661

Trade and miscellaneous payables and other current liabilities

150,940

122,852

Provisions for Risks and Charges

450

450

Current income tax payables

18,115

801

Total current Liabilities

1,098,316

247,764

Total liabilities

4,629,725

1,031,231

Total Equity and Liabilities

9,165,360

2,592,424

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at September 30, 2020

Cash flow statement

(thousands of euros)

1.1 - 9.30

1.1 9.30

2020

2019

Cash flows from operating activities:

Profit for the period

111,927

98,868

Adjustments for:

Amortization, gains/losses on disposals and impairment losses

on non-current assets

225,613

97,594

Net change in deferred tax assets and liabilities

47,622

40,643

Change in provisions for employee benefits

(39)

340

Change in trade receivables

52,267

(26,055)

Change in trade payables

(29,118)

30,656

Net change in miscellaneous receivables/payables and other

assets/liabilities

(46,081)

(8,091)

Other non-monetary changes

12,243

(13,683)

Cash flows from operating activities

(a)

374,434

220,272

Cash flows from investing activities:

Total purchases of tangible and intangible assets and rights of

use on third-party assets for the period (*)

(182,237)

(110,719)

Change in amounts due to fixed asset suppliers

19,291

(9,642)

Change in financial payables for increases in rights of use

114,243

75,640

Total purchases of tangible and intangible assets and rights of

use on third-party assets on a cash basis

(48,703)

(44,721)

Change in financial receivables and other financial assets

22,163

(1,114)

Purchase of investments

(2,140,000)

-

Other changes in non-current assets

(29)

6,107

Cash flows used in investing activities

(b)

(2,166,569)

(39,728)

Cash flows from financing activities:

Change in current and non-current financial liabilities

2,539,751

(69,530)

Dividends paid (*)

(696,720)

(126,553)

Cash flows used in financing activities

(c)

1,843,031

(196,083)

Aggregate cash flows

(d=a+b+c)

50,896

(15,539)

Net cash and cash equivalents at beginning of the period

(e)

66,569

104,125

Net cash and cash equivalents at end of the period

(f=d+e)

117,465

88,586

(*) of which related parties:

(thousands of euros)

1.1 - 9.30.2020

1.1 - 9.30.2019

Total purchase of intangible, tangible assets and rights of use on an accrual

basis

35,039

7,936

Dividends paid TIM

255,859

68,438

Dividends paid Vodafone Italia

255,859

-

On November 6, 2017, Regulation EU no. 2017/1990 was issued which implemented at the EU level certain amendments to IAS 7 (Cash Flow Statement). For this purpose please note that the liabilities arising from financing activities solely concern monetary movements. No change of this type was recorded at September 30, 2020.

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at September 30, 2020

EVENTS SUBSEQUENT TO SEPTEMBER 30, 2020

See the specific Note "Events subsequent to September 30, 2020" to the Interim Financial Statements at 09.30.2020.

POSITIONS OR TRANSACTIONS RESULTING FROM ATYPICAL AND/OR UNUSUAL OPERATIONS.

In accordance with Consob Communication DEM/6064293 of July 28, 2006, during the first nine months of the financial year 2020, no atypical and/or unusual transactions occurred as defined by the Communication.

SIGNIFICANT NON-RECURRING EVENTS AND TRANSACTIONS

Pursuant to Consob Communication no. DEM/6064293 of July 28, 2006, below is the information on the impact on INWIT's economic, financial and equity results of non-recurring events and operations at September 30, 2020. The non-recurring effects on Equity and Profit (Loss) for the period are expressed net of tax impacts:

The impact on the individual item of the separate income statement of non-recurring items is as follows:

(thousands of euros)

1.1 - 9.30

2020

Charges associated with extraordinary transactions

(6,756)

Charges related to restructuring and rationalization processes

-

Impact on Operating profit (loss) before depreciation and

amortization, capital gains (losses) and impairment reversals

(losses) on non-current assets (EBITDA)

(6,756)

Impact on Operating profit (loss) (EBIT)

(6,756)

Impact on Profit (loss) before tax

(6,756)

Income taxes on non-recurring items

1,926

Impact on the Profit (Loss) of the Period

(4,830)

1.1 - 9.30 2019

(2,434)

(574)

(3,008)

(3,008)

(3,008)

857

(2,151)

Interim Management Report

Subsequent events, atypical or unusual transactions, significant non-recurring transactions

32

at September 30, 2020

BUSINESS OUTLOOK FOR THE YEAR 2020 (3)

With the merger of Vodafone Towers S.r.l., INWIT has become the largest operator in Italy in the sector, with the mission of supporting TIM and Vodafone Italia S.p.A. in building the new network for the development of 5G, also guaranteeing access to its infrastructures to the entire market, also thanks to the space freed up from the joint TIM and Vodafone Italia S.p.A. project

The wireless infrastructure market is continuing its profound transformation and demand for services from mobile operators and other radio network operators is growing. Mobile Operators need to increase their Service Access Points to expand their 4G coverage and prepare for the transition from 4G to 5G. Wireless Fixed Access providers are also expanding their networks to increase coverage and improve the quality of service offered to customers.

Other radio network operators such as IoT and "Public Safety" providers are already on the market and new entrants are expected to specialize in specific product/market relationships through the innovative use models enabled by 5G. These market dynamics, together with the growing willingness of operators to share network infrastructure elements, lead INWIT to expect further growth in traditional business and a strong acceleration in new business.

The COVID-19 health emergency has led to a contraction of the economy, with potentially negative effects on the Company's economic, equity and financial situation. The rapid spread of COVID-19 from March 2020, and the consequent health emergency have led to economic uncertainty, not only in Italy, but globally.

The Company sees this situation as a medium risk since, despite the economic downturn, the activity carried out by INWIT is essential for the provision of telephone operators' services.

The Company has mapped the risks associated with Covid-19 and considers the occurrence of the events subject to these risks to be unlikely to occur given the industrial sector to which the Company belongs, characterized by low volatility, cyclicality of existing hosting, long-term contracts and high barriers to entry.

The potential risks identified by the company can be summarized as follows:

  • Negative impacts, possibly significant, on the prospects for the growth of revenues and profit margins;
  • The possible emergence of delays in the provision of services by the Company's suppliers (e.g. maintenance or construction of new Sites), permits from the various public administrations, orders from Customers;
  • Increased data consumption on mobile networks may mean that mobile operators (INWIT customers) incur higher interconnection costs and investments in capacity and coverage. It may not be possible to pass on these higher costs to end consumers or they may end up in default, with negative impacts on the operators' economic and financial position;
  • Fluctuations in inflation, which may be significant, cannot be excluded and could have a negative impact, possibly material, on the Issuer's income, balance sheet and cash flows.

(3) The chapter "Business outlook for the year 2020" contains forward-looking statements related to the Company's intentions, beliefs, or current expectations regarding the financial performance and other aspects of the Company's operations and strategies. Readers of this Report are reminded not to place undue reliance on such forward-looking statements, in that actual results may differ significantly from forecasts owing to numerous factors, the majority of which are beyond the Company's control.

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at September 30, 2020

At present, there are no significant negative impacts on the company's results that could generate losses in income/financial performance or delays in its strategic planning.

The information and conclusions regarding potential risks contained in this report are in line with the Prospectus.

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Business outlook

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at September 30, 2020

MAIN RISKS AND UNCERTAINTIES

The business outlook for 2020 could be affected by risks and uncertainties caused by a multitude of factors, the majority of which are beyond INWIT's control.

The main risks concerning the business activities of the Company, which may impact, even significantly, on the ability to achieve the objectives set by the management, are presented below.

The risk factors concerning the Company

Risks related to potential conflicts of interest by some of the Directors

This risk is related to potential conflicts of interest arising from the fact that some members of the Board of Directors hold positions in companies that are part of the chain of control of the Company.

Risks related to key personnel

Any interruption in the employment relationship between the Company and its key personnel could have an adverse effect on the Company's income, balance sheet, and financial situation.

The results achieved by the Company also depend on the contribution of certain individuals who hold significant positions within the Company and have significant experience in the industry in which the Company is engaged (including, specifically, the CEO, the Head of "Administration, Finance and Control and Business Support", the Head of "Marketing & Sales" and the Head of "Technology Governance & MSA").

Risks related to the Company losing the authorization to conduct its activity

The activity carried out by the Company is subject to the issuance of special authorizations pursuant to the applicable regulations in effect.

In the event the general authorization is not renewed upon expiration or is revoked by the Ministry or the Authority should the Company fail to comply with the conditions and specific obligations provided for in the Electronic Communications Code, the Company would no longer be able to continue operating as a network operator for the installation and provision of Passive Infrastructure, which would result in significant adverse effects on its income, balance sheet, and financial situation.

Risks related to ownership of the rights to use the frequencies assigned to mobile network operators The Company's activity is not linked to authorizations concerning the rights to use frequencies, which are held by mobile telephone operators on the basis of tender, awarding, and renewal procedures independently of the Company.

The Company's business depends on the ability of its mobile telephone operator customers to preserve their rights to use the frequencies and to renew the related authorizations. There is no certainty that in the long term, telephone operator customers will be able to retain ownership of the frequencies in relation to which the Company provides its services or that the frequencies currently held by such customers will be again allocated to them in the future.

Risks related to the contractual and administrative structure of the Sites

Given the importance of the Company's network infrastructure in the conduct of its business, any adverse events for such infrastructure could have negative effects on the income, balance sheet, and financial situation of the Company.

With regard to the Sites there is a risk that the lease, sublease and/or concession for use agreements are not renewed, the Company being thus obliged to restore the land to its original condition, or the risk that any renewals are not obtained on terms at least comparable to those in place, with negative impact on the profitability of Site operations and consequently on the financial position, earnings and cash flows of the Company.

Risks related to the Company's inability to implement its development strategy

In the event the Company is unable to successfully implement one or more of its development strategies, there may be negative effects on its activities and on its income, balance sheet, and financial situation.

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Main risks and uncertainties

35

at September 30, 2020

The Company's ability to increase its revenues and improve profitability also depends on the successful implementation of its strategy. The Company's strategy is based, among other things, on the following elements:

  • leveraging the assets of existing Sites by maximizing the co-tenancy ratio;
  • rationalization of operating costs;
  • development of new services consistent with its core business;
  • expansion of the number of Sites in line with developments in demand.

In addition, any future amendments to the legislation applicable to the industry in which the Company and/or the Company's customers operate, including specifically any imposition of stricter limits to EMC emissions, could have adverse effects on the activities and on the income, balance sheet, and financial situation of the Company.

Risks related to the Loan Agreement

The Loan Agreements signed by the company to finance business activity provide for a series of general and covenant commitments for the Company, both positive and negative, which, although in line with market practice for loans and similar natures, could limit its operation. For additional information see the Note 14 "Financial liabilities (current and non-current)" to the interim Financial Statements at September 30, 2020.

Risks related to costs for restoring the Sites and potentially inadequate provision for restoration costs As part of its activity following decommissioning of the site, the Company must dismantle the infrastructure and restore the site to its original condition if this is envisaged by any legal or constructive obligation in the lease relating to the areas/buildings where the infrastructure is located. In this regard it should be noted that, as a rule, the leases provide for the Company's obligation to dismantle and restore the site to its original condition. The valuation of the provision for restoration costs is affected both by the expected unit restoration costs and by the inflation/discount rates, which are beyond the Company's control and whose changes may adversely affect the income and balance sheet situation of the Company.

Without prejudice to the above, the provisions recognized in the Financial Statements at September 30, 2020 were considered adequate by the Company at the date of completion of this document.

Risks related to court and administrative proceedings and to potentially inadequate provisions.

Any adverse outcome in the principal legal proceedings in which the Company is involved, for amounts significantly higher than those for which provision has been made, could have negative effects on the Company's activities and on its income, balance sheet, and financial situation.

Without prejudice to the above, the provisions recognized in the Financial Statements at September 30, 2020 were considered adequate by the Company at the date of completion of this document.

Risk factors related to the industry in which the Company operates

Risks associated with the operation of existing sites, the identification of new sites suitable for the development of the Company's projects, and the issuance and/or revocation of administrative authorizations.

Any failure or delay in obtaining authorizations and permits for the Company, as well as their subsequent withdrawal, could lead to negative effects on the Company's operations and, consequently, on its income, balance sheet, and financial situation.

Risks related to the effects on infrastructure of natural disasters or other force majeure events

The proper operation of the infrastructure is essential for the Company's activity and to provide services to its customers. Although the Company believes that it has adequate insurance coverage in place to compensate any damage caused by natural disasters or other force majeure events, and has developed operating procedures to be followed should such events occur, any damage to part or all of the towers of the Company or, more generally, to its Sites, resulting from natural disasters or other force majeure events, could hamper or, in some cases, prevent the Company's normal operations and its ability to continue to provide services to its customers.

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Main risks and uncertainties

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at September 30, 2020

Risks related to the discontinuation of Site activities

The Company relies on infrastructure to provide its services and, more generally, to conduct its business; by its very nature, this infrastructure is subject to interruptions or other malfunctions caused, among other things, by prolonged power outages, security issues, or suppliers' defaults. Any network outage, access by unauthorized persons, and security breach or other failures of the Company's technical infrastructure or any actions taken in order to deal with or prevent them, could lead to significant additional costs for the Company, or prevent its operation, with possible negative effects on the Company's activities and on its income, balance sheet, and financial situation.

Risks related to technical and technological developments

The Company's inability to identify technical solutions capable of addressing market changes and future needs could have a negative impact on the income, balance sheet, and financial situation of the Company.

Risks related to environmental and health protection

The Company is subject to comprehensive regulation on the protection of the environment and human health at the national and EU level. Although the Company is committed to be constantly in compliance with the applicable legislation, any violations of applicable environmental laws may result in adverse effects on the income, balance sheet, and financial situation of the Company.

Risks associated with the reference regulatory framework in relation to the activities carried out by the Company's customers

The activities of Company's customers are subject to complex regulations at national and EU level, especially with regard to environmental and administrative matters; in this context, the numerous regulatory requirements imposed by the relevant authorities are very important due to the indirect impact that customers' non-compliances could have on the Company's activities. Specifically, mobile phone operators hosted at the Company's sites are subject to regulations aimed at protecting people and the environment from exposure to electromagnetic fields.

Any infringement of the legal and regulatory framework applicable to the Company's customers could have a negative impact on the income, balance sheet, and financial situation of the customers and, indirectly, of the Company.

Risks associated with the possible contraction of customer demand for the Company's services

The Company offers integrated hosting services to its customers, with the aim of covering the entire value chain of the hosting business, in accordance with the business model adopted: from pure leasing of the equipment all the way to the services supporting the operation and maintenance of such equipment. Any contraction of customer demand for the services provided by the Company, even when due to contingent reasons, could have a negative impact on the Company's income, balance sheet, and financial situation.

Risks related to global economic conditions

The COVID-19 health emergency has led to a contraction of the economy, with potentially negative effects on the Company's economic, equity and financial situation. The rapid spread of COVID-19 from March 2020, and the consequent health emergency have led to economic uncertainty, not only in Italy, but globally.

The Company assesses the risk referred to in this Paragraph as medium. Although the COVID-19 health emergency is likely to lead to a contraction in the economy, with potentially negative effects on the economic, equity and financial situation of the Issuer, the activity carried out by INWIT is essential for the provision of the services of the telephone operators.

The Company has also mapped the risks associated with Covid and considers the occurrence of the events subject to these risks to be unlikely to occur given the industrial sector to which the Company belongs - telecommunications, which is among the least affected by the pandemic - and the Company'sbusiness model, which is characterized by low volatility, cyclicality of existing hosting, and long-term contracts. The potential risks identified and analyzed by the company were indicated in the previous chapter.

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Main risks and uncertainties

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at September 30, 2020

At present, there are no significant negative impacts on the company's results that could generate losses in income/financial performance or delays in its strategic planning.

The information and conclusions regarding potential risks contained in this report are in line with the Prospectus.

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Main risks and uncertainties

38

at September 30, 2020

CORPORATE BOARDS AT SEPTEMBER 30, 2020

BOARD OF DIRECTORS

The Board of Directors, appointed by the Shareholders' Meeting of April 13 (as subsequently amended), remained in office until March 31, 2020, the effective date of the merger by incorporation of Vodafone Towers into INWIT (the "Merger"). By virtue of the Agreement signed by TIM S.p.A. Vodafone Europe B.V., Vodafone Italia S.p.A., INWIT S.p.A. and Vodafone Towers Srl, the Shareholders' Meeting, on March 20, 2020, appointed the Board of Directors, made up of 13 members, who will remain in office until the approval of the financial statements for the year ending December 31, 2022.

The Board of Directors took office on March 31, 2020, the effective date of the merger by incorporation of Vodafone Towers into INWIT.

The composition of the current Company's Board of Directors is shown below:

Chairman

Emanuele Tournon

Chief Executive Officer and

Giovanni Ferigo

General Manager

Directors

Laura Cavatorta (independent)

Antonio Corda

Angela Maria Cossellu (independent)

Sabrina Di Bartolomeo

Sonia Hernandez

Carlo Nardello

Agostino Nuzzolo

Filomena Passeggio (independent)

Secondina Giulia Ravera (independent)

Fabrizio Rocchio

Francesco Valsecchi (independent)

All board members are domiciled for the positions they hold in INWIT at the registered office of the Company in 1 Via Gaetano Negri, Milan.

On October 2, 2020, the Board of Directors took note of the resignation of independent director Filomena Passeggio and non-executive director Carlo Nardello and appointed Rosario Mazza (independent) and Giovanna Bellezza (non-executive) as directors by co-optation pursuant to Article 2386, paragraph 1, of the Italian Civil Code.

The new directors will remain in office until the next Shareholders' Meeting, in accordance with the law.

On April 23, 2020 the Board of Directors established internal committees, made up at September 30,

2020 of:

  • Nomination and remuneration committee: Filomena Passeggio (Chairman), Laura Cavatorta and Antonio Corda
  • Control and risks committee: Angela Maria Cossellu (Chairman), Antonio Corda, Agostino Nuzzolo, Secondina Giulia Ravera and Francesco Valsecchi
  • Related parties committee: Secondina Giulia Ravera (Chairman), Angela Maria Cossellu and Filomena Passeggio
  • Sustainability Committee: Laura Cavatorta (Chairman), Sabrina Di Bartolomeo, Carlo Nardello, Fabrizio Rocchio and Francesco Valsecchi.

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Information for Investors

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at September 30, 2020

Also on April 23, 2020, the Board of Directors appointed - with effect from May 5, 2020 and until the expiration of the Board of Directors and therefore until the approval of the Financial Statements at December 31, 2022 - a Supervisory Board composed of Francesco Monastero (Chairman), Giuliano Foglia, Umberto La Commara and Laura Trucco, to carry out the functions set out in Legislative Decree 231/2001.

Until May 5, 2020, the functions of the Supervisory Body were performed by the Board of Statutory Auditors.

Finally, also on April 23, 2020, the Board of Directors appointed the Director Secondina Giulia Ravera as Lead Independent Director

Following the resignation on October 2, 2020 of the directors Passeggio and Nardello and the appointment by co-optation of the directors Mazza and Bellezza, the updated composition of the following board committees is shown below:

  • Nomination and remuneration committee: Rosario Mazza (Chairman), Laura Cavatorta and Antonio Corda
  • Related parties committee: Secondina Giulia Ravera (Chairman), Angela Maria Cossellu and Rosario Mazza
  • Sustainability Committee: Laura Cavatorta (Chairman), Giovanna Bellezza, Sabrina Di Bartolomeo, Fabrizio Rocchio and Francesco Valsecchi.

BOARD OF STATUTORY AUDITORS

The April 13, 2018 Shareholders' Meeting appointed the Board of Statutory Auditors, which will remain in office until the Shareholders' Meeting called to approve the financial statements at December 31, 2020.

The Board of Statutory Auditors of the Company is now composed as follows:

Chairman

Stefano Sarubbi

Acting Auditors

Umberto La Commara

Michela Zeme

Alternate Auditors

Roberto Cassader

Elisa Menicucci

INDEPENDENT AUDITORS

The Shareholders' Meeting held on February 27, 2015 appointed the audit firm PricewaterhouseCoopers S.p.A. to audit the Company's financial statements for the nine-year period 2015-2023.

MANAGER RESPONSIBLE FOR PREPARING THE CORPORATE FINANCIAL REPORTS

At the meeting held on March 31, 2020, the Board of Directors assigned Diego Galli, Head of the Administration, Finance and Control & Business Support function, as Manager responsible for preparing the corporate financial reports.

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Information for Investors

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at September 30, 2020

INFORMATION FOR INVESTORS

Following completion of the Global Offering, on June 22, 2015, INWIT shares were listed on the MTA of Borsa Italiana at a price of 3.65 euros per share.

The following chart shows the performance of the stock in the period comprised between the start of trading and September 30, 2020.

INWIT SHARE CAPITAL AT SEPTEMBER 30, 2020

Share capital

600,000,000 euros

Number of ordinary shares (without nominal value)

960,200,000

Market capitalization (based on average prices between 1.1.2020 and

8,619 million euros

09.30.2020)

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Information for Investors

41

at September 30, 2020

SHAREHOLDERS

Shareholders' structure at September 30, 2020

On April 23, TIM and Vodafone concluded an Accelerated Book Building transaction which resulted in the two shareholders each holding 33.173% of the share capital.

Subsequently, on October 5, TIM and Ardian finalized an agreement (Daphne3) according to which TIM controls 51% of the holding company, which in turn holds 30.2% of INWIT, while the consortium led by Ardian holds the remaining 49%.

Of the other 3% of TIM's stake, 1.2% was sold to Canson Capital Partners with the option to buy the remaining 1.8% (9.47 euros per share).

WAIVER OF THE OBLIGATION TO PUBLISH DISCLOSURE DOCUMENTS FOR EXTRAORDINARY OPERATIONS

On February 27, 2015 the Board of Directors of INWIT resolved to adopt the opt-out regime provided by article 70 paragraph 8 and article 71, paragraph 1-bis of Issuers' Regulation and exercised the option to waive the obligations to publish disclosure documents required under Annex 3B of the aforementioned Regulation in the event of significant transactions.

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Information for Investors

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at September 30, 2020

RELATED PARTY TRANSACTIONS

Pursuant to Article 5, paragraph 8, of Consob Regulation no. 17221/2010 concerning "transactions with related parties" and to the subsequent Consob Resolution no. 17389/2010, in 2020 there were no transactions of major significance, as defined by Article 4, paragraph 1(a) of the aforementioned regulation, or any other transactions with related parties, that had any significant impact on the Company's financial position or results for the first nine months of 2020.

Related party transactions, when not dictated by specific laws, were usually conducted at arm's length; the transactions were subject to an internal procedure (available for consultation on the Company's website at the following address: www.inwit.it, Governance section) which establishes procedures and time scales for verification and monitoring.

The information on related parties required by Consob Communication DEM/6064293 of July 28, 2006 is presented in the financial statements and in the Note "Related Parties" to the interim Financial Statements at September 30, 2020.

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at September 30, 2020

ALTERNATIVE PERFORMANCE MEASURES

In this Interim Management Report at September 30, 2020 of the INWIT Company, in addition to the conventional financial performance measures established by IFRS, certain alternative performance measures are presented for purposes of a better understanding of the Company's trend of operations and financial condition. Such measures, which are also presented in other periodical financial reports (annual and interim) should, however, not be construed as a substitute for those required by IFRS.

The alternative performance measures used are described below:

  • EBITDA: this financial indicator is used by the Company as a financial target in internal presentations (business plans) and in external presentations (to analysts and investors). It represents a useful unit of measurement to assess the Company's operating performance in addition to EBIT. These measures are calculated as follows:

Profit (loss) before tax from continuing operations

  • Financial expenses - Finance income
    EBIT - Operating profit (loss)
  • Impairment losses (reversals) on non-current assets
    /-
  • Losses (gains) on disposals of non-current assets

/-

  • Amortization and depreciation

EBITDA - Operating profit (loss) before depreciation and amortization, Capital gains (losses) and Impairment reversals (losses) on non-current assets

  • Net Financial Debt ESMA and Net Financial Debt INWIT: the Net Financial Debt ESMA of the Company is calculated in accordance with the provisions of paragraph 127 of the recommendations contained in ESMA document No. 319 of 2013, implementing Regulation (EC) 809/2004, as shown below:
  1. Cash
  2. Other cash equivalents
  3. Securities held for trading
  4. Liquidity (A + B + C)
  5. Current financial receivables
  6. Current financial payables
  7. Current portion of financial payables (medium/long-term)
  8. Other current financial payables
  9. Current financial debt (F+G+H)
  10. Net current financial debt (I+D+E)
  11. Medium/long term financial payables
  12. Bonds issued
  13. Other non-current financial payables
  14. Non-Currentfinancial debt (K+L+M)
  15. Net financial debt (J+N)

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at September 30, 2020

To monitor the performance of its financial position, INWIT also uses "INWIT net financial debt" as a financial indicator; it is defined as the ESMA net financial debt less receivables and non-current financial assets, where applicable.

ESMA net financial debt

Other financial receivables and non-current financial assets (*)

INWIT Net Financial Debt

(*) This accounting item refers to loans granted to certain employees of the company.

  • Operating Free Cash Flow: calculated as follows:

EBITDA

Capital expenditure

EBITDA - Capex

Change in trade receivables

Change in trade payables (*)

Other changes in operating receivables/payables

Change in provisions for employee benefits

Change in operating provisions and Other changes

Change in net operating working capital:

Operating free cash flow

(*) Except trade payables for investment activities.

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at September 30, 2020

Interim Financial Statements of

Infrastrutture Wireless Italiane

S.p.A.

at September 30, 2020

This document has been translated into English for the convenience of the readers.

In the event of discrepancy, the Italian language version prevails

Contents

INTERIM FINANCIAL STATEMENTS OF INFRASTRUTTURE WIRELESS ITALIANE S.P.A. AT SEPTEMBER 30, 2020

STATEMENT OF FINANCIAL POSITION _____________________________________________ 48

SEPARATE INCOME STATEMENT __________________________________________________ 50

STATEMENT OF COMPREHENSIVE INCOME _________________________________________ 51

CHANGES IN NET EQUITY ________________________________________________________ 52

CASH FLOW STATEMENT ________________________________________________________ 53

NOTE 1 - FORM, CONTENT, AND OTHER GENERAL INFORMATION_____________ 54

NOTE 2 - ACCOUNTING POLICES _________________________________________ 57

NOTE 3 - FINANCIAL RISK MANAGEMENT _________________________________ 60

NOTE 4 - BUSINESS COMBINATIONS______________________________________ 63

NOTE 5 - GOODWILL ___________________________________________________ 67

NOTE 6 - INTANGIBLE ASSETS WITH A FINITE USEFUL LIFE _________________ 67

NOTE 7 - TANGIBLE ASSETS _____________________________________________ 68

NOTE 8 - RIGHTS OF USE ON THIRD-PARTY ASSETS _________________________ 69

NOTE 9 - FINANCIAL RECEIVABLES (NON-CURRENT AND CURRENT) __________ 69

NOTE 10 - TRADE AND MISCELLANEOUS RECEIVABLES AND OTHER ASSETS (NON CURRENT AND CURRENT)_______________________________________________ 70

NOTE 11 - EQUITY _____________________________________________________ 71

NOTE 12 - EMPLOYEE BENEFITS _________________________________________ 72

NOTE 13 - PROVISIONS FOR RISKS AND CHARGES __________________________ 72

NOTE 14 - FINANCIAL LIABILITIES (NON-CURRENT AND CURRENT) __________ 73

NOTE 15 - NET FINANCIAL DEBT_________________________________________ 74

NOTE 16 - TRADE AND MISCELLANEOUS PAYABLES AND OTHER (NON-CURRENT AND CURRENT) LIABILITIES_____________________________________________ 75

NOTE 17 - REVENUES___________________________________________________ 76

NOTE 18 - ACQUISITION OF GOODS AND SERVICES _________________________ 76

NOTE 19 - AMORTIZATION, DEPRECIATION, GAINS/LOSSES ON DISPOSALS AND IMPAIRMENT LOSSES ON NON-CURRENT ASSETS___________________________ 77

NOTE 20 - FINANCIAL INCOME AND EXPENSES ____________________________ 78

NOTE 21 - CONTINGENT LIABILITIES, COMMITMENTS AND GUARANTEES _____ 79

NOTE 22 - RELATED PARTIES____________________________________________ 79

NOTE 24 - SIGNIFICANT NON-RECURRING EVENTS AND TRANSACTIONS ______ 86

NOTE 25 - POSITIONS OR TRANSACTIONS RESULTING FROM ATYPICAL AND/OR UNUSUAL OPERATIONS. ________________________________________________ 86

NOTE 26 - EVENTS SUBSEQUENT TO SEPTEMBER 30, 2020 __________________ 87

STATEMENT OF FINANCIAL POSITION

Assets

(thousands of euros)

Notes

09.30.2020

12.31.2019

Assets

Non-current assets

Intangible assets

Goodwill

5)

6,112,784

1,411,770

Intangible assets with a finite useful life

6)

786,395

11,045

Tangible assets

Property, plant and equipment

7)

798,495

288,735

Rights of use on third-party assets

8)

1,148,690

706,969

Other non-current assets

Non-current financial assets

9)

1,569

235

Miscellaneous receivables and other non-current assets

10)

186

6,932

Deferred tax assets

-

1,939

Total Non-current assets

8,848,119

2,427,625

Current assets

Trade and miscellaneous receivables and other current assets

10)

177,418

83,111

Financial receivables and other current financial assets

9)

214

15,117

Current securities and equity investments

-

-

Income tax receivables

22,144

1

Cash and cash equivalents

117,465

66,570

Total Current assets

317,241

164,799

Total Assets

9,165,360

2,592,424

Interim financial statements of Infrastrutture Wireless Italiane

S.p.A. at September 30, 2020

Separate Income Statement

48

Equity and Liabilities

(thousands of euros)

Notes

09.30.2020

12.31.2019

Equity

11)

Share capital issued

600,000

600,000

Minus: treasury shares

-

(222)

Share capital

600,000

599,778

Share premium reserve

3,691,703

660,000

Legal reserve

120,000

120,000

Other reserves

(567)

(804)

Retained earnings (losses) including earnings (losses) for the period

124,499

182,219

Total Equity

4,535,635

1,561,193

Liabilities

Non-current liabilities

Employee benefits

12)

3,173

1,791

Deferred tax liabilities

346,217

-

Provisions for Risks and Charges

13)

220,314

101,656

Non-current financial liabilities

14)

2,955,983

670,404

Miscellaneous payables and other non-current liabilities

16)

5,722

9,616

Total Non-current liabilities

3,531,409

783,467

Current liabilities

Current financial liabilities

14)

928,811

123,661

Trade and miscellaneous payables and other current liabilities

16)

150,940

122,852

Provisions for Risks and Charges

13)

450

450

Current income tax payables

18,115

801

Total current Liabilities

1,098,316

247,764

Total liabilities

4,629,725

1,031,231

Total Equity and Liabilities

9,165,360

2,592,424

Interim financial statements of Infrastrutture Wireless Italiane

S.p.A. at September 30, 2020

Separate Income Statement

49

SEPARATE INCOME STATEMENT

(thousands of euro)

Notes

3rd Quarter

3rd Quarter

1.1 - 9.30.

1.1 - 9.30.

2020

2019

2020

2019

Revenues

17)

186,098

96,286

473,478

292,163

Acquisition of goods and services - Ordinary

18)

charges

(9,225)

(6,880)

(21,605)

(24,067)

Acquisition of goods and services - Charges

24)

associated with extraordinary transactions

(6)

(2,434)

(6,756)

(2,434)

Employee benefits expenses - Ordinary

expenses

(4,240)

(2,480)

(11,824)

(7,749)

Employee benefits expenses - Restructuring

and rationalization expenses

-

(157)

-

(574)

Other operating expenses

(170)

(489)

(863)

(1,663)

Operating profit (loss) before depreciation

and amortization, capital gains (losses)

and impairment reversals (losses) on non-

current assets (EBITDA)

172,845

83,846

432,430

255,676

Of which: Impact of Non-recurring Items

(6)

(2,591)

(6,756)

(3,008)

Amortization, gains/losses on disposals and

impairment losses on non-current assets

19)

(95,212)

(35,442)

(225,613)

(97,746)

Operating profit (loss) (EBIT)

77,633

48,404

206,817

157,930

Of which: Impact of Non-recurring Items

(6)

(2,591)

(6,756)

(3,008)

Finance income

20)

-

22

2

227

Financial expenses

20)

(20,629)

(6,707)

(47,510)

(18,698)

Profit (loss) before tax

57,004

41,719

159,309

139,459

Of which: Impact of Non-recurring Items

(6)

(2,591)

(6,756)

(3,008)

Income taxes

(16,733)

(12,088)

(47,382)

(40,591)

Profit for the period

40,271

29,631

111,927

98,868

Of which: Impact of Non-recurring Items

(4)

(1,853)

(4,830)

(2,151)

Basic and Diluted Earnings Per Share

-

-

0.187

0.165

Interim financial statements of Infrastrutture Wireless Italiane

S.p.A. at September 30, 2020

Separate Income Statement

50

STATEMENT OF COMPREHENSIVE INCOME

3rd Quarter 2020

(thousands of euro)

3rd Quarter

1.1 - 9.30.

1.1 - 9.30.

2019

2020

2019

Profit for the period

(a)

40,271

29,631

111,927

98,868

Other Comprehensive Income

Other items that will not subsequently be

reclassified in the Separate Income

Statement

-

-

-

-

Remeasurements of employee defined

benefit plans (IAS 19):

Actuarial gains (losses)

-

-

(341)

(182)

Net fiscal impact

-

-

82

44

Total other items that will not

subsequently be reclassified in the

Separate Income Statement

(b)

-

-

(259)

(138)

Other items that will subsequently be

reclassified in the Separate Income

Statement

-

-

-

-

Total other items that will subsequently be

reclassified in the separate income

statement

(c)

-

-

-

-

Total other items of the Statement of

Comprehensive Income

(d=b+c)

-

-

-

(138)

Total Comprehensive income for the period

(e=a+d)

40,271

29,631

111,668

98,730

Interim financial statements of Infrastrutture Wireless Italiane

S.p.A. at September 30, 2020

Statement of Comprehensive Income

51

CHANGES IN NET EQUITY

Changes in Equity from January 1, 2019 to September 30, 2019

Other reserves and

Treasury share

Share premium

earnings (losses)

(thousands of euros)

Share capital

reserve in excess

carried forward,

Total Equity

reserve

of nominal value

including the result

for the period

Amounts at January 1, 2019

599,778

(1,215)

660,000

289,742

1,548,305

Total Comprehensive income for

the period

-

-

98,730

98,730

Dividends approved

-

-

-

(126,553)

(126,553)

Other changes

-

-

-

380

380

Amounts at September 30,

2019

599,778

(1,215)

660,000

262,299

1,520,862

Changes in Equity from January 1, 2020 to September 30, 2020

Other reserves and

Treasury share

Share premium

earnings (losses)

(thousands of euros)

Share capital

reserve in excess of

carried forward,

Total Equity

reserve

nominal value

including the result

for the period

Amounts at January 1, 2020

599,778

(1,215)

660,000

302,630

1,561,193

Total Comprehensive income for

the period

-

-

-

111,668

111,668

Dividends approved

-

-

(527,073)

(169,647)

(696,720)

Merger

-

-

3,558,776

(94)

3,558,682

Other changes

222

1,215

-

(625)

812

Amounts at September 30,

2020

600,000

-

3,691,703

243,932

4,535,635

Interim financial statements of Infrastrutture Wireless Italiane

S.p.A. at September 30, 2020

Changes in net equity

52

CASH FLOW STATEMENT

(thousands of euros)

1.1 - 9.30. 2020

1.1 - 9.30. 2019

Cash flows from operating activities:

Profit for the period

111,927

98,868

Adjustments for:

Amortization, gains/losses on disposals and impairment losses on non-

current assets

225,613

97,594

Net change in deferred tax assets and liabilities

47,622

40,643

Change in provisions for employee benefits

(39)

340

Change in trade receivables

52,267

(26,055)

Change in trade payables

(29,118)

30,656

Net change in miscellaneous receivables/payables and other

assets/liabilities

(46,081)

(8,091)

Other non-monetary changes

12,243

(13,683)

Cash flows from operating activities

(a)

374,434

220,272

Cash flows from investing activities:

Total purchases of tangible and intangible assets and rights of use on

third-party assets for the period (*)

(182,237)

(110,719)

Change in amounts due to fixed asset suppliers

19,291

(9,642)

Change in financial payables for increases in rights of use

114,243

75,640

Total purchases of tangible and intangible assets and rights of use on

third-party assets on a cash basis

(48,703)

(44,721)

Change in financial receivables and other financial assets

22,163

(1,114)

Purchase of investments

(2,140,000)

-

Other changes in non-current assets

(29)

6,107

Cash flows used in investing activities

(b)

(2,166,569)

(39,728)

Cash flows from financing activities:

Change in current and non-current financial liabilities

2,539,751

(69,530)

Dividends paid (*)

(696,720)

(126,553)

Cash flows used in financing activities

(c)

1,843,031

(196,083)

Aggregate cash flows

(d=a+b+c)

50,896

(15,539)

Net cash and cash equivalents at beginning of the period

(e)

66,569

104,125

Net cash and cash equivalents at end of the period

(f=d+e)

117,465

88,586

(*) of which related parties:

(thousands of euros)

1.1 - 9.30. 2020

1.1 - 9.30. 2019

Total purchase of intangible, tangible assets and rights of use on an accrual basis

35,039

7,936

Dividends paid TIM

255,859

68,438

Dividends paid Vodafone Italia

255,859

-

On November 6, 2017, Regulation EU no. 2017/1990 was issued which implemented at the EU level certain amendments to IAS 7 (Cash Flow Statement). For this purpose please note that the liabilities arising from financing activities solely concern monetary movements. No change of this type was recorded at September 30, 2020.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Cash flow statement

53

NOTE 1 - FORM, CONTENT, AND OTHER GENERAL INFORMATION

FORM AND CONTENT

These interim financial statements of Infrastrutture Wireless Italiane S.p.A. (hereinafter"INWIT", or the "Company") for the period from January 1, 2020 to September 30, 2020 (hereinafter the"Interim Financial Statements at September 30, 2020") were drawn up on the going concern assumption (for further details, see Note 2 "Accounting Standards"), in accordance with the International Financial Reporting Standards issued by the International Accounting Standards Board and approved by the European Union (defined as the "IFRS") and with the legal and regulatory provisions in force in Italy (in particular, the measures adopted in implementation of Section 9 of Italian Legislative Decree no. 38 of February 28, 2005).

INWIT was established on January 14, 2015 and following the merger by incorporation of Vodafone Towers srl (hereinafter also "VOD Towers") is jointly controlled by TIM S.p.A. (hereinafter also "TIM") which holds, directly or indirectly, a stake of 32.0% in the Company, and Vodafone Europe BV, which holds a 33.2% stake in the Company. INWIT is domiciled in Italy, with registered office in via Gaetano Negri 1, Milan, and operates in accordance with the laws of the Italian Republic.

The figures at September 30, 2020 are compared with the figures from the statement of financial position at December 31, 2019; The figures from the separate income statement and from the statement of comprehensive income are compared with the figures for the corresponding periods of the previous financial year. The financial reports and the reports on changes in net equity are compared with those for the corresponding periods of the previous financial year.

The Company's financial year-end is December 31.

The interim Financial Statements at September 30, 2020 were prepared in accordance with the general cost principle, except for the initial entering of financial assets and liabilities for which the application of the fair value principle is compulsory; also, they were prepared in Euros. The values expressed in the notes to these financial statements are expressed in thousands of euros, unless otherwise indicated.

Publication of the interim Financial Statements at September 30, 2020 was approved by the Board of Directors' meeting on November 5, 2020.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

54

FINANCIAL STATEMENT STRUCTURE

The structure of the Financial Statements is in keeping with that provided for by IAS 1; Specifically:

  • the statement of financial position has been prepared by classifying assets and liabilities according to the "current and non-current" principle;
  • the separate Income Statement has been prepared by classifying operating costs according to their nature, in that this method of reporting is deemed better capable of representing the Company's specific business, complies with internal reporting methods, and is in line with practices in the industrial sector in question.
    The Income Statement includes, in addition to EBIT (Operating Earnings), the alternative performance indicator called EBITDA (operating earnings before amortization, depreciation, gains/(losses), and Impairment reversals (losses) on non-current assets).
    Specifically, the Company utilizes EBITDA, in addition to EBIT, as a financial target in internal presentations (business plans) and external presentations (to analysts and investors); the indicator represents a useful unit of measurement for the evaluation of INWIT's operating performance.
    EBIT and EBITDA are calculated as follows:

Profit (loss) before tax from continuing operations

+

Financial expenses

-

Finance income

+/-

Expenses (income) from investments

EBIT - Operating profit (loss)

+/-

Impairment losses (reversals) on non-current assets

+/-

Losses (gains) on disposals of non-current assets

+

Amortization and depreciation

EBITDA - Operating profit (loss) before depreciation and amortization, Capital gains (losses) and Impairment reversals (losses) on non-current assets

  • the Statement of Comprehensive Income includes, besides the earnings (losses) for the period, as per the separate income statement, the other changes in Net Equity other than those connected to transactions with Shareholders;
  • the statement of Cash Flows was prepared by showing the cash flows deriving from operating activities in accordance with the "indirect method", as allowed by the IAS 7 (Statement of financial position).

Furthermore, as required by CONSOB resolution no. 15519 of July 27, 2006, in the case of the separate income statement, income and expenses deriving from transactions which by their very nature do not regularly occur during normal business transactions (non-recurring transactions), are specifically identified and the corresponding effects on the main interim results are reported separately when of a significant entity. Specifically, non-recurrent expenses/income include, for example: income/expenses deriving from the sale of properties, plants and machinery, business units and shareholdings; expenses deriving from corporate reorganization and rationalization processes/projects, including those connected to corporate transactions (mergers, demergers, etc.); expenses resulting from litigation and regulatory penalties, and to related liabilities; other provisions for risks and charges, and the corresponding write-offs; expenses for the settlement of disputes; impairment losses on goodwill and/or other intangible and tangible assets.

In regard, once again, to the aforementioned CONSOB resolution, the amounts of positions or transactions with related parties have been reported separately.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

55

SEGMENT REPORTING

An operating segment is a component of an entity:

  • that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity);
  • whose operating results are reviewed periodically by the top operating level of the entity (the Board of Directors for INWIT) in order to adopt decisions concerning the resources to be allocated and to assess the results; and
  • for which discrete financial information is available.

The Company has identified only one operating segment (which also represents the level at which the goodwill is monitored by management and will be tested for impairment). Specifically, the management information note prepared and made available to the Board of Directors for the aforementioned purposes considers the business activity carried out by INWIT as a distinct entity; therefore, no information by segment is presented in the financial statements. The geographical area coincides almost entirely with the territory of Italy.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

56

NOTE 2 - ACCOUNTING POLICES

The main accounting policies and the most significant valuation criteria utilized to write these financial statements are described briefly hereafter.

GOING CONCERN

The interim Financial Statements at September 30, 2020 have been prepared on a going concern basis as there is the reasonable expectation that the Group will continue its operational activities in the foreseeable future (and in any event with a time horizon of more than twelve months).

ACCOUNTING CRITERIA

The accounting criteria adopted to prepare the interim financial statements at September 30, 2020 are consistent with those utilized for the yearly financial statements to December 31, 2019, to which reference is made, with the exception of the adjustments required by the nature of the interim measurements.

Furthermore, in the interim financial statements at September 30, 2020, income taxes for the period are calculated according to the best possible estimate based on available information and on a reasonable forecast of performance up to the end of the tax period. Conventionally, the income tax liabilities (current and deferred) on the profit for the interim period are recorded, net of advances and tax receivables (excluding receivables for which refunds have been requested) as well as deferred tax assets, and classified as an adjustment to "Deferred tax liabilities"; if the balance between deferred tax assets and deferred tax liabilities is an asset it is conventionally recorded in "Deferred tax assets".

USE OF ACCOUNTING ESTIMATES

The preparation of the interim financial statements at September 30, 2020 and related disclosure requires management to make estimates and assumptions based also on subjective judgments, past experience and hypotheses 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 the amount of revenues and costs during the period. Actual results could thus differ, even significantly, from such 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 use of subjective assumptions and judgments are reported in the Annual Financial Report at December 31, 2019 to which reference is made.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

57

NEW STANDARDS AND INTERPRETATIONS INCORPORATED BY THE EU AND IN EFFECT SINCE JANUARY 1, 2020

Pursuant to IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), the IFRS in effect since January 1, 2020 are indicated and briefly described hereafter.

Amendments to IFRS 9, Financial instruments, IAS 39, Financial instruments: recognition and measurement

and IFRS 7, Financial instruments: additional information - Reform of the reference indices for the determination of interest rates

On January 15, 2020, Regulation (EU) 2020/34 was issued implementing some amendments at EU level to IFRS 9 - Financial instruments, IAS 39 - Financial instruments: recognition and measurement and IFRS 7 - Financial instruments: additional information.

The changes relate to some specific hedge accounting requirements and are aimed at providing an advantage in relation to the potential effects of the uncertainty caused by the reform of the Interbank offered rates (IBOR). In addition, the changes require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties.

These changes must be applied from January 1, 2020.

Amendments to the references to the "Conceptual Framework" in the IFRS

On November 29, 2019, Regulation (EU) 2019/2075 was issued which implemented the revised version of the Conceptual Framework for Financial Reporting at EU level. The main changes compared to the 2010 version relate to:

  • a new chapter on measurement;
  • better definitions and guidance, in particular with reference to defining 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. These changes must be applied from January 1, 2020.

Amendments to IAS 1 and IAS 8 (Definition of Materiality)

On November 29, 2019, Regulation (EU) 2019/2104 was issued which incorporated some amendments to IAS 1 (Presentation of the financial statements) and to IAS 8 (Accounting standards, changes in accounting estimates and errors).

These amendments clarify the definition of "materiality" and align the definition used in the "Conceptual Framework" with that used in the individual IFRSs. The definition of "materiality" as revised by the changes in question is as follows: "Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of a specific reporting entity's general purpose financial statements make on the basis of those financial statements."

The amendments in question come into force on January 1, 2020.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

58

Amendments to IFRS 3 (Business combinations)

In October 2018, the IASB published some amendments to IFRS 3 (Business combinations). These amendments concern the definition of "business" and help entities determine whether an acquisition made is a "business" or a group of activities.

According to 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 a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants." The amendments also clarify that, to be considered a business, an acquisition must include an input and a substantive process that together significantly contribute to the ability to create output".

The amendments in question come into force on January 1, 2020.

The adoption of these amendments/interpretations, with the exception of the accounting standard IFRS 16, did not have any effect on the Financial Statements at September 30, 2020.

Amendments to IFRS 16 - Leases Covid-19-Related Rent Concessions

In May 2020, the IASB published some amendments to IFRS 16 through Covid-19-RelatedRent Concessions. The amendment permits lessee not to assess whether particular rent concessions occurring as a direct consequence of the Covid-19 pandemic are lease modifications and instead to account for those rent concessions as if they are not lease modifications. The amendment has no impact on landlords.

The amendments in question come into force on June 1, 2020.

Any impacts on the Company's financial statements are currently being assessed.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

59

NEW STANDARDS AND INTERPRETATIONS ISSUED BY THE IASB BUT NOT YET APPLICABLE

At the date of these interim financial statements, the following Standards/Interpretations have been issued by the IASB but are still not applicable.

Amendments to IAS 1 Presentation of the financial statements: classification of liabilities as current or non- current

In January 2020, the IASB issued some limited amendments to IAS 1 to clarify that liabilities are classified as current or non-current, depending on the rights existing at the end of the year. The amendment clarifies that:

  • the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period and align the wording in all affected paragraphs to refer to the "right" to defer settlement by at least twelve months and make explicit that only rights in place "at the end of the reporting period" should affect the classification of a liability. In other words, liabilities are classified as non-current if the entity has a substantial right to defer payment for at least 12 months at the end of the year;
  • the classification is not influenced by expectations on whether an entity will exercise its right to defer the payment of a liability, in other words, management expectations do not affect the classification; and
  • the payment/settlement refers to the transfer of liquidity, equity instruments, other assets or services to the

counterparty.

These amendments must initially be applied retrospectively in accordance with IAS 8 for financial years starting from January 1, 2022. In light of the Covid-19 pandemic, the IASB issued an Exposure Draft proposing to postpone the effective date by one year to January 1, 2023.

Early application is allowed. If an entity applies these changes from a previous period, it must disclose that fact. Any impacts on the Company's financial statements are currently being assessed.

Amendments to IFRS 3 (Business Combinations), IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, Annual Improvements (2018-2020)

The set of amendments includes limited changes to three standards, as well as the Annual Improvements, in particular:

  • The amendments to IFRS 3 - Business Combinations update an IFRS 3 reference to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations;
  • The amendments to IAS 16 - Property, Plant and Equipment prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while preparing the asset for the intended use; The company will recognize the proceeds from selling such items, and the cost of producing those items, in profit or loss;
  • The amendments to IAS 37 - Provisions, Liabilities and Contingent Assets specify which costs should be included when assessing whether a contract is onerous;
  • The Annual Improvements make minor amendments to IFRS 1 - First-time Adoption of International Financial Reporting Standards, IFRS 9 - Financial Instruments, IAS 41 - Agriculture, and the illustrative examples accompanying IFRS 16 - Leases.

The amendments in question come into force on January 1, 2022.

NOTE 3 - FINANCIAL RISK MANAGEMENT

During its everyday operations, the Company may be exposed to the following financial risks:

  • market risk: deriving from exposure to the fluctuation of rates, linked to the financial assets generated and to the financial liabilities assumed;

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

60

credit risk: representing the risk of non-fulfillment of obligations undertaken by the counterparty with regard to the Company's liquidity investments;

liquidity risk: connected with the need to meet short-term financial commitments.

MARKET RISK

The market risk consists in the possibility that changes of the interest and exchange rates or of the rating of the counterparts with which liquidity is utilized, could impact negatively on the value of the assets, liabilities, or expected cash flows.

Interest rate risk

At September 30, 2020, the Company's financial payables that accrue interest at a fixed rate correspond to the nominal 1 billion euros bond issued in July and the 40 million euros bank debt from the loan agreement with Banca Popolare di Sondrio.

The floating rate component, indexed to EURIBOR, derives instead from the loan taken out in December 2019 with a syndicate of banks for the purchase of the stake in Vodafone Towers. This component amounted to approximately 1,786 million euros nominal at 30 September.

In view of the new fixed-rate bond issue in October for a nominal 750 million euros, the Company did not consider it necessary to conclude derivative contracts aimed at mitigating the risk deriving from interest rate fluctuations. After the second bond issue, the ratio between fixed-rate and variable-rate debt is approximately 65/35.

Exchange rate risk

The Company operates exclusively in euros; therefore, it is not exposed to exchange rate risk.

CREDIT RISK

The Company's exposure to credit risk consists of the potential losses that could derive from the failure of the counterparts, both commercial and financial, to fulfil the obligations undertaken. 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. The maximum theoretical exposure of the Company to credit risk is the book value of the financial assets and trade receivables recorded in the financial statements.

The Company's main customers are TIM and Vodafone, which, during the reference period of these Financial Statements, generated revenues of 411,211 thousand euros (equal to 86.8% of total revenues at September 30, 2020). The other customers of the Company are the leading national mobile operators with which the Company has entered into multi-year contracts to provide hosting services.

Therefore, the Company is exposed to the risk of concentration of revenues and to credit risk arising from the possibility that its commercial counterparts are not capable or able to meet their obligations. The possible default by one of its commercial counterparts could involve negative effects on the income, balance sheet, and financial situation of the Company. With regard to counterparty risk, formalized procedures to valuate and assess the reliability of commercial partners are adopted to manage the credit.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

61

LIQUIDITY RISK

To meet its liquidity needs, the Company has a 500 million euros revolving credit facility (RCF) available, granted in December 2019 with a pool of national and international banks available until April 2025, to be used to support working capital and general cash needs. As of September 30, 2020, 152 million euros of this line was used and therefore the remainder was available for drawdown.

Using the proceeds from the issue of the new bond in October, the RCF was fully repaid and therefore its entire amount of 500 million euros is once again available for drawdown.

OTHER RISKS

Risks related to global economic conditions

The COVID-19 health emergency has led to a contraction of the economy, with potentially negative effects on the Company's economic, equity and financial situation. The rapid spread of COVID-19 from March 2020, and the consequent health emergency have led to economic uncertainty, not only in Italy, but globally.

The Company assesses the risk referred to in this Paragraph as medium. Although the COVID-19 health emergency is likely to lead to a contraction in the economy, with potentially negative effects on the economic, equity and financial situation of the Issuer, the activity carried out by INWIT is essential for the provision of the services of the telephone operators.

The Company has also mapped the risks associated with Covid and considers the occurrence of the events subject to these risks to be unlikely to occur given the industrial sector to which the Company belongs - telecommunications, which is among the least affected by the pandemic - and the Company's business model, which is characterized by low volatility, cyclicality of existing hosting, and long-term contracts. The potential risks identified and analyzed by the company were indicated in the previous chapter.

At present, there are no significant negative impacts on the company's results that could generate losses in income/financial performance or delays in its strategic planning.

ASSETS AND LIABILITIES BY CATEGORY

For the purpose of providing information to allow a comparison between the book value and fair value of the financial instruments (required by IFRS 7), it is pointed out that the following assumptions were made to determine the fair value:

  • for variable-rate loans: the nominal repayment amount has been assumed;
  • for trade payables and receivables and for current financial assets and liabilities, it is believed that their book value is a reasonable approximation of their fair value.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

62

The table below shows the assets and liabilities at September 30, 2020 on the basis of the categories contained in IFRS 9.

Carrying amount for each IFRS 9 class of financial asset/liability at September 30, 2020

(thousands of euros)

Amounts recorded in the financial statements

09.30.2020

pursuant to IFRS 9

Amortized

Cost

Fair value

Fair value

cost

recognized

recognized

in equity

in the

income

statement

ASSETS

Non-current assets

Non-current financial assets

of which loans and receivables

1,569

1,569

(a)

1,569

1,569

Current assets

Trade and miscellaneous receivables and other

current assets

of which loans and receivables

150,372

150,372

Financial receivables and other current financial

assets

of which loans and receivables

214

214

Cash and cash equivalents

117,465

117,465

(b)

268,051

268,051

Total

(a+b)

269,620

269,620

LIABILITIES

Non-current liabilities

Non-current financial liabilities

of which liabilities at amortized cost

2,955,983

2,955,983

(c)

2,955,983

2,955,983

Current liabilities

Current financial liabilities

of which liabilities at amortized cost

928,811

928,811

Trade and miscellaneous payables and other

current liabilities

of which liabilities at amortized cost

129,036

129,036

(d)

1,057,847

1,057,847

Total

(c+d)

4,013,830

4,013,830

NOTE 4 - BUSINESS COMBINATIONS

MERGER BY INCORPORATION OF VODAFONE TOWERS SRL

On March 31, 2020, the acquisition, by merger by incorporation, of VOD Towers Srl, the company that holds the Italian tower and passive infrastructure branch of the Vodafone group, was completed for a total consideration

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

63

of 5,698,682 thousand euros, of which 2,140,000 thousand euros paid in cash for the purchase of 43.4% of the share capital of VOD Towers and 3,558,682 thousand euros through the issue of 360,200,000 new INWIT ordinary shares, valued at the market price on the date of the exchange, March 31, 2020 (hereinafter the "Acquisition Date"). The new shares are listed on the MTA organized and managed by Borsa Italiana.

The transaction is part of the strategy that INWIT is pursuing in Italy: continuously improving its earning profile and strengthening its market leadership.

The purchase of the minority shareholding and the subsequent merger by incorporation of VOD Towers into INWIT were treated in the accounts as a single business combination transaction, whose accounting method is governed by IFRS 3.

As required by IFRS 3, the Company determined the fair value on the Acquisition Date:

  • of the consideration for the acquisition, including the equity instruments issued (hereinafter the "Acquisition Consideration");
  • of the identifiable assets acquired, the liabilities and potential liabilities assumed are entered at their current value, with the exception of deferred tax assets and liabilities, the assets and liabilities relating to employee benefits.

With particular reference to the Acquisition Consideration, it should be noted that as part of the contractual agreements for the acquisition of VOD Towers, a price adjustment procedure is envisaged based on the difference between the net financial debt values and the net working capital of INWIT and VOD Towers provided for in the contract and the actual value on the Acquisition Date (hereinafter the "Price Adjustment"). The process of defining the final Price Adjustment is still in progress. This Half-Year Report includes the best estimate of the Price Adjustment, equal to 19 million euros in favor of INWIT.

The following table shows the comparison of the book value of the net assets acquired of VOD Towers on the Acquisition Date (as resulting from the quarterly situation relating to the period ended March 31, 2020 of VOD Towers, prepared in accordance with the provisions of the Italian Civil Code governing the preparation of financial statements, as interpreted by the accounting standards issued by the Italian Accounting Body) with the relative fair value at that date, determined provisionally in accordance with the provisions of paragraph 45 of IFRS 3.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

64

VOD Towers

(in millions of euros)

book values at

Fair value

Interim fair

the date of

adjustment

value

acquisition

Non-current assets

144

1,632

1,776

Of which Intangible assets

-

811

811

Of which Tangible assets

115

378

493

Of which Rights of use on third-party assets

-

460

460

Of which non-current Financial receivables

-

9

9

Of which Other non-current assets

29

(26)

3

Current assets

145

-

145

Of which Trade receivables

131

-

131

Of which Current miscellaneous receivables

7

-

7

Of which Cash and cash equivalents

7

-

7

Total assets

(a)

289

1,632

1,921

Total non-current liabilities

(b)

(13)

(781)

(794)

Of which Non-current financial liabilities

-

(374)

(374)

Of which Provisions

(13)

(407)

(420)

Total current liabilities

(c)

(77)

(72)

(149)

Of which Current financial liabilities

-

(66)

(66)

Of which Trade payables

(35)

1

(34)

Of which Other current liabilities

(42)

(7)

(49)

Net assets acquired

(a+b+c)

199

779

978

The following table shows the provisional determination of the goodwill recognized in the financial statements following the acquisition of VOD Towers, obtained by comparing the Acquisition Consideration with the fair value of the net assets acquired on the Acquisition Date.

(in millions of euros, unless otherwise indicated)

Number of New Ordinary shares

360,200,000

Fair value of an INWIT share on March 31, 2020 (in euros)

9.88

Fair value of New Ordinary shares

3,559

Acquisition consideration for Minority Shareholding

2,140

Consideration of the business combination

5,699

Provisional price adjustment

(19)

Interim fair value of net assets acquired

(978)

Interim Goodwill

4,702

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

65

As previously indicated, given the timing of the transaction, the procedures for determining the fair value of the acquired identifiable assets, the liabilities and the potential liabilities assumed, and in particular the intangible assets, are still in progress and will be incorporated in the financial statements as soon as available and in any event within 12 months from the Acquisition Date. In particular, the goodwill estimate may change with respect to that shown in the previous table due to (i) the determination of the Price Adjustment on the basis of the reference values updated on the Acquisition Date and (ii) the definition of the fair value of the identifiable assets acquired and identifiable liabilities assumed, again on the Acquisition Date, net of the related tax effect, where applicable. The change in the value of the net assets acquired following the valuation of the same at the relative fair value and the determination, where applicable, of the related residual useful lives of the assets acquired, would entail, among other things, the restatement of amortization and depreciation, costs and of revenues that will be recognized in the periods subsequent to the Acquisition Date.

If the acquisition had taken place on January 1, 2020, the total revenues and the EBIT for the first nine months of 2020 would have been equal to approximately 561 million euros and approximately 260 million euros, respectively.

The overall costs relating to the acquisition amount to 12,007 thousand euros and were expensed in the income statement for the year 2019 for 5,252 thousand euros and, for the remainder, in the income statement at September 30, 2020.

.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

66

NOTE 5 - GOODWILL

As of September 30, 2020, goodwill amounted to 6,112,784 thousand euros, and shows the following change:

(thousands of euros)

12.31.2019

Merger

Other changes

09.30.2020

Goodwill

1,411,770

5,300,506

(599,492)

6,112,784

Total

1,411,770

5,300,506

(599,492)

6,112,784

The increase recorded in the period corresponds to the goodwill deriving from the business combination following the acquisition of VOD Towers, (5,300,506 thousand euros).

The decrease in the period relates to the recognition in the financial statements of the fair value of customer contracts of 811,200 thousand euros, net of the tax effect for deferred taxes of 580,008 thousand euros, and to the recognition in the financial statements of the price adjustment with regard to Vodafone equal to 19,484 thousand euros.

In accordance with IAS 36, goodwill is not subject to amortization, but is tested for impairment at least annually or more frequently if specific events or circumstances arise leading to the presumption of such impairment.

In particular, as of September 30, 2020, no external or internal events were identified that would make it necessary to carry out a new impairment test, which will be carried out at the end of the year.

NOTE 6 - INTANGIBLE ASSETS WITH A FINITE USEFUL LIFE

Compared to December 31, 2019, these have increased in value by 775,350 thousand euros, and show the following composition and changes:

(thousands of euros)

12.31.2019

Merger

Additions

Amortization

Other

09.30.2020

changes

Patent rights and utilization

of intellectual property

848

194

-

(522)

80

600

Other intangible assets

-

-

1,961

(52,030)

820,824

770,755

Intangible assets under

development and advances

10,197

48

5,727

-

(932)

15,040

Total

11,045

242

7,688

(52,552)

819,972

786,395

Capital expenditures for the period came to 7,688 thousand euros. The increase in other intangible assets relates to the recognition in the financial statements of the value of contracts deriving from the allocation of goodwill through the Purchase Price Allocation ("PPA") process (811,200 thousand euros) as well as the capitalization of agency fee costs (9,624 thousand euros).

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

67

NOTE 7 - TANGIBLE ASSETS

PROPERTY, PLANT AND EQUIPMENT, OWNED

Compared to December 31, 2019, these have increased in value by 509,760 thousand euros, and show the following composition and changes:

(thousands of euros)

12.31.2019

Merger

Additions

Disposals

Depreciation

Other changes

09.30.2020

Land

30,057

-

1,395

-

-

143

31,595

Plant and equipment

209,484

486,403

12,370

-

(39,990)

11,370

679,637

Manufacturing and

distribution equipment

11

-

-

-

(4)

-

7

Other goods

97

60

1

-

(55)

7

110

Construction in progress

and advance payments

49,086

6,313

43,344

-

-

(11,597)

87,146

Total

288,735

492,776

57,110

-

(40,049)

(77)

798,495

Investments made in the reporting period, amounting to 57,110 thousand euros, mainly refer to the purchase of land for 1,905 thousand euros, to the development of new sites for 26,519 thousand euros, to the development of Small Cells for 1,725 thousand euros, and to the execution of Backhauling for 8,367 thousand euros.

The gross carrying amounts and accumulated depreciation at September 30, 2020 are detailed as follows:

Gross Value at

Accumulated

Accumulated

Net Value at

(thousands of euros)

impairment

09.30.2020

depreciation

09.30.2020

losses

Land

31,595

-

-

31,595

Plant and equipment

1,574,661

(562)

(894,462)

679,637

Manufacturing and distribution equipment

24

-

(17)

7

Other goods

295

-

(185)

110

Construction in progress and advance

payments

87,146

-

-

87,146

Total

1,693,721

(562)

(894,664)

798,495

The property, plant, and equipment are not subject to liens, mortgages, or other charges.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

68

NOTE 8 - RIGHTS OF USE ON THIRD-PARTY ASSETS

Compared to December 31, 2019, these have increased in value by 441,721 thousand euros, and show the following composition and changes:

(thousands of euros)

12.31.2019

Merger

Additions

Lease

Disposals

Depreciation

Other

09.30.2020

increases

changes

Land use rights

277,335

192,556

-

18,946

(7,323)

(44,660)

(435,085)

1,769

Rights of use on

civil and industrial

buildings

424,119

266,925

3,196

58,903

(5,685)

(70,673)

(641,528)

35,257

Rights of use on

plant and

equipment

5,210

-

-

36,056

-

(16,984)

1,086,890

1,111,172

Rights of use on

other assets

305

-

-

338

(15)

(136)

-

492

Total

706,969

459,481

3,196

114,243

(13,023)

(132,453)

10,277

1,148,690

The investments of 3,196 thousand euros related to land use rights.

NOTE 9 - FINANCIAL RECEIVABLES (NON-CURRENT AND CURRENT)

Non-current and current financial receivables at September 30, 2020 were made up as follows:

Other

(thousands of euros)

12.31.2019

Merger

changes

09.30.2020

during the

period

Financial receivables (medium/long-term):

Loans to staff

235

-

278

513

Prepaid expenses from finance expenses

-

8,594

(7,538)

1,056

Total non-current financial receivables

(a)

235

8,594

(7,260)

1,569

Financial receivables (short-term):

Loans to staff

90

-

106

196

Other financial receivables

15,009

-

(15,009)

-

Prepaid expenses from finance expenses

18

-

-

18

Total current financial receivables

(b)

15,117

-

(14,903)

214

Total financial receivables

(a+b)

15,352

8,594

(22,163)

1,783

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

69

NOTE 10 - TRADE AND MISCELLANEOUS RECEIVABLES AND OTHER ASSETS (NON CURRENT AND CURRENT)

The item "Trade and miscellaneous receivables and other current and non-current assets" is detailed in the following table:

of which

Other

of which

IFRS 9

changes

financial

(thousands of euros)

12.31.2019

Merger

09.30.2020

Financial

during the

instruments

Instruments

period

IFRS 9

Miscellaneous receivables and other non-current assets

Other non-current assets

6,932

-

-

(6,746)

186

-

Total Miscellaneous receivables

and other non-current assets

(a)

6,932

-

-

(6,746)

186

-

Total trade receivables

(b)

72,532

72,532

131,423

(53,583)

150,372

150,372

Miscellaneous receivables and

other current assets

Other current assets

3,985

-

-

(2,547)

1,438

-

Miscellaneous fixed assets

receivables - short term share

1,430

-

-

10

1,440

-

Miscellaneous operating

receivables

3,775

-

6,921

13,472

24,168

-

Miscellaneous non-operating

receivables

1,390

-

-

(1,390)

-

-

Total miscellaneous receivables

and other current assets

(c)

10,580

-

6,921

9,545

27,046

-

Total Current income tax

receivables

(d)

1

-

-

22,143

22,144

-

Total trade and miscellaneous

receivables and other current

138,344

(21,895)

199,562

assets

(b+c+d)

83,113

72,532

150,372

Total

(a+b+c+d)

90,045

49,484

138,344

(28,641)

199,748

150,372

Miscellaneous receivables and other non-current assets relate to prepaid expenses towards suppliers.

Receivables from Parent Company mainly refer to hosting services and the recovery of costs for services provided.

Miscellaneous receivables and other current assets mainly refer to guarantee deposits (1,440 thousand euros), advances to suppliers (2,265 thousand euros), tax receivables for taxes and fees (1,642 thousand euros) and the Price Adjustment with Vodafone Italia (20,800 thousand euros).

The book value of trade and miscellaneous receivables and other current and non-current assets is considered a reasonable approximation of their respective fair value.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

70

NOTE 11 - EQUITY

At September 30, 2020, equity amounted to 4,535,635 thousand euros, the breakdown of which is as follows:

(thousands of euros)

09.30.2020

12.31.2019

Share capital issued

600,000

600,000

Minus treasury shares

-

(222)

Share capital

599,778

600,000

Share premium reserve

660,000

3,691,703

Other reserves

119,196

119,433

Legal reserve

120,000

120,000

Provision for instruments representing net equity

533

34

Treasury share reserve in excess of nominal value

-

(1,215)

Other reserves

(122)

(601)

Retained earnings (losses) including earnings (losses) for the period

182,219

124,499

Total

1,561,193

4,535,635

Additional paid-in capital, amounting to 3,691,703 thousand see euros - see Note 4 - "Business combinations".

BENEFIT PLANS IN THE FORM OF EMPLOYEE STOCK OPTIONS

The Provision for instruments representing net equity of 34 thousand euros refers to:

  • the general stock option plan (19 thousand euros) in existence within the TIM Group and subscribed to by a number of employees who transferred to INWIT;
  • the 2014-2016 stock option plan (15 thousand euros) launched by the TIM Group and subscribed to by a number of employees who transferred to INWIT;

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

71

NOTE 12 - EMPLOYEE BENEFITS

The item has the following breakdown and movements:

(thousands of euros)

12.31.2019

Merger

Increase/

Decrease

09.30.2020

Present value

Provision for employee severance

indemnities

1,791

1,414

275

(307)

3,173

1,414

Total

1,791

275

(307)

3,173

Of which:

Non-current amount

1,791

3,173

Current amount

-

-

Compared to December 31, 2019, the Provision for employee severance indemnities increased by 1,382 thousand euros mainly following the merger by incorporation of VOD Towers (1,414 thousand euros).

NOTE 13 - PROVISIONS FOR RISKS AND CHARGES

Compared to December 31, 2019, these have increased in value by 464,875 thousand euros, and show the following composition and changes:

12.31.2019

Merger

Increase

Decrease

Other

09.30.2020

(thousands of euros)

changes

Provision for restoration

costs

101,506

114,823

4,189

(354)

-

220,164

Deferred tax liabilities

-

72,803

47,564

-

225,850

346,217

Provision for legal

disputes and other risks

600

-

-

-

-

600

Total

102,106

187,626

51,753

(354)

225,850

566,981

Of which:

Non-current amount

101,656

566,531

Current amount

450

450

The Provision for restoration costs increased mainly due to both the allocation of costs for the dismantling of sites connected with the passage of time (4,189 thousand euros) and the merger by incorporation VOD TOWERS (114,823 thousand euros).

The decrease in provision for restoration costs relates to the coverage of costs incurred in the period (354 thousand euros).

Deferred tax liabilities moved mainly due to taxes for the period (47,564 thousand euros), the merger by incorporation of VOD TOWERS (72,803 thousand euros) and the recognition in the financial statements of the value of the contracts deriving from the allocation of the goodwill through the Purchase Price Allocation ("PPA) (231,192 thousand euros).

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

72

NOTE 14 - FINANCIAL LIABILITIES (NON-CURRENT AND CURRENT)

Non-current and current financial liabilities (gross financial debt) were broken down as follows:

Other

(thousands of euros)

12.31.2019

Merger

changes

09.30.2020

during the

period

Financial payables (medium/long-term):

Amounts due to banks

69,943

-

959,762

1,029,705

Bonds

-

-

993,640

993,640

Leasing liabilities

530,461

373,722

28,455

932,638

Other financial payables

70,000

-

(70,000)

-

Total non-current financial liabilities

(a)

670,404

373,722

1,911,857

2,955,983

Financial payables (short-term):

Amounts due to banks

13,927

-

769,568

783,495

Bonds

-

-

4,366

4,366

Leasing liabilities

109,600

65,625

(34,275)

140,950

Other financial payables

134

-

(134)

-

Total current financial liabilities

(b)

123,661

65,625

739,525

928,811

Total Financial liabilities (Gross financial

debt)

(a+b)

794,065

439,347

2,651,382

3,884,794

Financial payables (medium/long-term):

  • Amounts due to banks mainly refer to loan agreements, net of the related issue discounts and accrued income and prepayments, subscribed respectively to:
    • November 2018 with Banca Popolare di Sondrio for 40,000 thousand euros with bullet repayment at maturity in December 2023;
    • December 2019 with a pool of national and international banks for a total amount of 3,000,000 thousand euros relating to the 5-year Term Loan of 1,000,000 thousand euros with bullet repayment at expiry.
  • Bonds refers to the bond issued in July 2020 with a nominal value of 1,000,000 thousand euros with a 6- year maturity of July 8, 2026, coupon 1.875%, issue price 99.809% and effective yield 1.909%, (corresponding to a yield of 220 basis points above the benchmark).
  • Other financial payables referred mainly to loan agreements with TI Finance repaid in the first half of 2020.
  • Finance lease liabilities refer to leases accounted for pursuant to IFRS 16, which has come into force on January 1, 2019.

Financial payables (short-term):

  • Amounts due to banks mainly refer to loan agreements, net of the related issue discounts and accrued income and prepayments, subscribed in December 2019 with a pool of Italian and international banks relating to:
    • a Bridge Loan of 633,749 thousand euros with a duration of @@ due to the reclassification to short- term of the portion repaid in October 2020;
    • a revolving credit facility ("RCF") drawn down for 152,000 thousand euros.
  • Bonds refer to the accrued interest maturing in July 2021.
  • Finance lease liabilities refer to leases accounted for pursuant to IFRS 16, which came into force on January 1, 2019;
  • Other financial payables referred mainly to loan agreements with TI Finance repaid in the first half of 2020.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

73

"COVENANTS", "NEGATIVE PLEDGES" AND OTHER CONTRACT CLAUSES IN EFFECT AT SEPTEMBER 30, 2020

The banking loan agreements include some general pledges and covenants, both positive and negative, in line with market practice for loans of similar amounts and nature.

The loan agreement signed in December 2019, for an amount of 3,000,000 thousand euros, contains some general and covenant commitments in line with market practice and legal standards prepared by the Loan Market Association which grant lending Banks the faculty to cancel the commitments undertaken and/or request early repayment of the sums used by the Company.

NOTE 15 - NET FINANCIAL DEBT

The table below shows the Company's net financial debt at September 30, 2020, calculated in accordance with paragraph 127 of the recommendations contained in ESMA document No. 319 of 2013, implementing Regulation (EC) 809/2004.

The table also includes the reconciliation of net financial debt calculated according to the criteria established by ESMA and those used by INWIT to monitor its own financial position.

(thousands of euros)

09.30.2020 (*)

12.31.2019

A Cash

-

-

B Cash and cash equivalents

117,465

66,569

C Securities held for trading

-

-

D Liquidity (A + B + C)

117,465

66,569

E Current financial receivables

214

15,117

F Current financial payables

-

-

G Current portion of financial payables (medium/long-term)

(928,811)

(123,661)

H Other current financial payables

-

-

I Current financial debt (F+G+H)

(928,811)

(123,661)

J Net current financial debt (I+D+E)

(811,132)

(41,975)

K Medium/long term financial payables

(1,962,343)

(670,404)

L Bonds issued

(993,640)

-

M Other non-current financial payables

-

-

N Non-Current financial debt (K+L+M)

(2,955,983)

(670,404)

O Net financial debt as recommended by ESMA (J+N)

(3,767,115)

(712,379)

Other financial receivables and non-current financial assets

1,569

235

INWIT Net Financial Debt

(3,765,546)

(712,144)

  1. 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 Parties".

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

74

NOTE 16 - TRADE AND MISCELLANEOUS PAYABLES AND OTHER (NON-CURRENT AND CURRENT) LIABILITIES

The item had the following composition as at September 30, 2020:

of which

Other

of which

IFRS 9

changes

IFRS 9

(thousands of euros)

12.31.2019

Financial

Merger

during the

09.30.2020

Financial

Instruments

period

Instruments

Miscellaneous payables

and other non-current

liabilities

Other non-current

-

liabilities

5,099

-

(4,073)

1,026

-

Miscellaneous non-current

operating payables

428

-

-

(148)

280

-

Miscellaneous non-current

non-operating payables

4,089

-

-

327

4,416

-

Total miscellaneous

payables and other non-

-

current liabilities

(a)

9,616

-

(3,894)

5,722

-

Total trade payables

(b)

104,436

104,436

34,427

(9,827)

129,036

129,036

Miscellaneous payables

and other current

liabilities

Other current liabilities

9,167

-

2,150

(1,828)

9,489

-

Miscellaneous current

operating payables

5,229

-

28,632

(21,450)

12,411

-

Miscellaneous current

non-operating payables

4,021

-

-

(4,017)

4

-

Total miscellaneous

payables and other

(c)

30,782

current liabilities

18,417

-

(27,295)

21,904

-

Total trade and

miscellaneous payables

and other current

(b+c)

65,209

liabilities

122,853

104,436

(37,122)

150,940

129,036

Total Current income tax

payables

(d)

801

-

18,115

(801)

18,115

-

Total

(a+b+c+d)

133,270

104,436

83,324

(41,817)

174,777

129,036

Miscellaneous payables and other non-current liabilities mainly refer to prepayments on active contracts with customers (475 thousand euros), payables to social security agencies (280 thousand euros) and tax consolidation payables to TIM (4,416 thousand euros).

Trade payables refer mainly to the supply of electrical power and rents due.

Miscellaneous payables and other current liabilities mainly refer to prepayments on contracts with customers (9,130 thousand euros), tax payables (4,139 thousand euros) and payables to employees (2,405 euros).

The book value of trade and miscellaneous payables and other current liabilities is considered a reasonable approximation of their respective fair value.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

75

NOTE 17 - REVENUES

Revenues amounted to 473,478 thousand euros, broken down as follows:

(thousands of euros)

1.1 - 9.30.2020

1.1 - 9.30.2019

Revenues

Revenues from TIM

246,605

217,437

Revenues from Vodafone Italia

164,606

-

Revenues from third parties

62,267

66,440

Total

473,478

283,877

The item includes the revenues attributable to the period and relate to services provided in the course of ordinary business.

Revenues from TIM amount to 246,605 thousand euros and mainly refer to the Master Service Agreement. The total includes 6,765 thousand euros relating to the deferral of deferred revenues for contributions to activate new sites, invoiced to TIM in previous years and deferred over the residual life of the original contract. Following the early termination of the contract, the balance of deferred revenues was released to the income statement in the first quarter of 2020.

Revenues from Vodafone Italia amount to 164,606 thousand euros and refer to the new Master Service Agreement

The item Revenues from third parties, amounting to 62,267 thousand euros, refers essentially to hosting services offered by the Company to Italian mobile operators. Relationships with these operators are regulated by long-term commercial agreements.

NOTE 18 - ACQUISITION OF GOODS AND SERVICES

The item amounted to 28,361 euros and breaks down as follows:

(thousands of euros)

1.1 - 9.30.2020

1.1 - 9.30.2019

Purchases of materials and goods for resale

(a)

599

451

Costs for services

Maintenance

7,781

4,349

Professional services

4,642

5,598

Other service expenses

12,858

7,426

(b)

25,281

17,373

Lease and rental costs

Rent and leases

2,055

7,736

Other lease and rental costs

426

941

(c)

2,481

8,677

Total

(a+b+c)

28,361

26,501

The item "Other service expenses" increased mainly due to the recognition of extraordinary charges for corporate transactions of 6,348 thousand euros.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

76

NOTE 19 - AMORTIZATION, DEPRECIATION, GAINS/LOSSES ON DISPOSALS AND IMPAIRMENT LOSSES ON NON-CURRENT ASSETS

Amortization, (gains)/losses on disposals and impairment losses on non-current assets amounted to

225,613 thousand euros, and are composed as follows:

(thousands of euros)

1.1 - 9.30.2020

1.1 - 9.30. 2019

Amortization of intangible assets with a

finite useful life

(a)

52,552

632

Depreciation of owned tangible assets

(b)

40,049

10,444

Amortization of rights of use on third-party

assets

(c)

132,453

86,455

(Gains)/losses on disposals and impairment

losses on non-current assets

(d)

559

215

Total

(a+b+c+d)

225,613

97,746

For further details, see the Notes "Intangible assets with a finite useful life", "Tangible assets" and "Rights of use on third-party assets".

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

77

NOTE 20 - FINANCIAL INCOME AND EXPENSES

FINANCE INCOME

Income is equal to 2 thousand euros and mainly refers to interest income on financial receivables and bank deposits.

FINANCIAL EXPENSES

Financial expenses amounted to 47,510 thousand euros and break down as follows:

(thousands of euros)

1.1 - 9.30.2020

1.1 - 9.30.2019

Interest expenses and other financial expenses

Interest to banks

15,234

815

Interest expense on bond issues

4,516

-

Interest expense for finance leases

17,679

15,551

Financial fees

6,612

181

Other financial expenses

3,469

2,151

Total

47,510

18,698

Interest to banks refers to the financial charges paid during the period for the syndicated loan agreement and the interest incurred on medium/long-term financial payables (Bridge and Term Loan) described in Note 14 - Financial liabilities (non-current and current).

Interest expense on bonds refers to the financial expenses relating to the bond issue.

Interest expenses on finance leases refer to leases accounted for pursuant to IFRS 16, in force from January 1, 2019.

Financial fees mainly refer to the fees paid for agreeing and using the 3-billion-euro loan agreement to finance the Company's acquisition of the minority interest in VOD Towers and distribution of the extraordinary dividend net of accruals and deferrals for the period.

The Other financial expenses chiefly refer to the adjustment of the provision for restoration charges (3,214 thousand euros) and to the intercompany loan (255 thousand euros).

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

78

NOTE 21 - CONTINGENT LIABILITIES,

COMMITMENTS AND GUARANTEES

MAIN DISPUTES AND PENDING LEGAL ACTIONS

As of September 30, 2020, the Company is involved in about sixty disputes, four of which indicated as having a "probable" risk of being lost by defence lawyers.

In relation to the progress of the aforementioned cases and based on the information available at the time of closing these Financial Statements, a total amount of 150 thousand euros has been allocated to the risk provision.

COMMITMENTS AND GUARANTEES

With regard to guarantees issued by banks or insurance companies to owners of the land where the infrastructure is located, INWIT has undertaken to reimburse all sums that for any reason whatsoever the bank or the insurance company were to bear due to failure to comply with contractual obligations, the Company waiving any objection or opposition, including any legal action.

NOTE 22 - RELATED PARTIES

The tables summarizing the balances of related party transactions in absolute amounts and as a percentage of the corresponding values of the separate income statement, of financial position and cash flow statement are shown below. Related party transactions, when not dictated by specific laws, were conducted at arm's length. The transactions were subject to an internal procedure (available for consultation on the website www.inwit.it), which establishes procedures and time scales for verification and monitoring.

Although said agreements were settled at normal market conditions, there is no guarantee that, if they had been entered into by or with third parties, the latter would have negotiated and concluded them at the same conditions and by the same methods.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

79

Items of the consolidated statement of financial position

The effects of the transactions with related parties on the items of the statement of financial position at December 31, 2019 and September 30, 2020 are shown below:

STATEMENT OF FINANCIAL POSITION LINE ITEMS AT 12.31.2019

Total

Related Parties

As a % of

Senior

Total related

the

Other related

parties

financial

(thousands of euros)

TIM

managemen

(a)

parties

statement

t

(b)

s item

(b)/(a)

NET FINANCIAL DEBT

Cash and cash equivalents

66,569

1,401

-

-

1,401

2.1%

Financial receivables (short-

term)

15,117

-

-

15,009

15,009

99.3%

Non-current financial liabilities

(670,404)

(47,913)

-

(70,009)

(117,922)

17.6%

Current financial liabilities

(123,661)

(20,814)

(135)

(20,949)

16.9%

Total net financial debt

(712,144)

(67,326)

-

(55,135)

(122,461)

17.2%

OTHER STATEMENT OF

FINANCIAL POSITION LINE

ITEMS

Miscellaneous trade

receivables

83,111

42,169

-

-

42,169

50.7%

Miscellaneous payables and

other non-current liabilities

(9,616)

(8,206)

-

-

(8,206)

85.3%

Miscellaneous trade payables

and other current liabilities

(123,302)

(37,158)

(924)

(41,954)

(80,036)

64.9%

STATEMENT OF FINANCIAL POSITION LINE ITEMS AT 09.30.2020

Total

Related Parties

As a % of

Senior

Total related

the

Vodafone Italia

Other related

parties

financial

(thousands of euros)

TIM

managemen

(a)

parties

statement

t

(b)

s item

(b)/(a)

NET FINANCIAL DEBT

Non-current financial liabilities

(2,955,983)

(130,715)

-

(10,403)

(9)

(141,127)

4.8%

Current financial liabilities

(928,811)

(18,195)

-

(1,446)

(1)

(19,642)

2.1%

Total net financial debt

(3,765,546)

(148,910)

-

(11,849)

(10)

(160,769)

4.3%

OTHER STATEMENT OF

FINANCIAL POSITION LINE

ITEMS

Miscellaneous trade

receivables

177,418

37,288

-

21,356

2O

58,664

33.1%

Miscellaneous payables and

other non-current liabilities

(5,722)

(4,543)

-

-

-

(4,543)

79.4%

Miscellaneous trade payables

and other current liabilities

(150,940)

(37,998)

(749)

2,113

(31,427)

(68,061)

45.1%

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

80

The medium/long-term and short-term financial payables to TIM and Vodafone Italia relate to the introduction of the IFRS 16 standard.

Trade and miscellaneous receivables and other current assets with TIM (37,288 thousand euros) mainly include the measurements relating to the recovery of electricity expenses and prepaid expenses.

Trade and miscellaneous receivables and other current assets with Vodafone Italia (21,356 thousand euros) mainly include the Price Adjustment (20,800 thousand euros) and measurements relating to the recovery of electricity expenses.

Miscellaneous payables and other non-current liabilities to TIM (4,543 thousand euros) mainly consist of tax consolidation payables (4,416 thousand euros).

Miscellaneous trade payables and other current liabilities to TIM mainly refer to service contracts, site restoration activities, ordinary and extraordinary maintenance carried out on sites and other services, various non-current and current payables for tax consolidation.

Miscellaneous trade payables and other current liabilities to Vodafone Italia mainly refer to ordinary maintenance carried out on sites and other services.

Payables to Senior Management (amounting to 749 thousand euros) refer to amounts payable to key management personnel of the Company.

Payables to other related parties (31,427 thousand euros) mainly consist of trade payables to Telenergia S.r.l. for electricity (31,270 thousand euros).

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

81

Items of the income statement

The effects of the transactions with related parties on the items of the income statement at September 30, 2020, and for the corresponding period of the previous financial year, are the following:

ITEMS OF THE INCOME STATEMENT AT 09.30.2019

Total

(thousands of euros)

(a)

Revenues

292,163

Acquisition of goods and

services - Ordinary charges (24,067)

Employee benefits

expenses - Ordinary(7,749) expenses

Other operating expenses

(1,663)

Finance income

227

Financial expenses

(18,698)

Total related

% of

financial

Parent

Senior

Other related

parties

statement

Company

management

parties

item

(b)/(a)

(b)

222,787

-

677

223,464

76.5%

(5,872)

-

(63)

(5,935)

24.7%

(48)

(954)

-

(1,002)

12.9%

4

-

-

4

-0.2%

-

-

12

12

5.3%

(1,086)

-

(451)

(1,537)

8.2%

ITEMS OF THE INCOME STATEMENT AT 09.30.2020

(thousands of euros)

Total

% of

Senior

financial

TIM

Vodafone Italia

Other related

Total related

statement

management

item

parties

parties

(b)/(a)

(a)

Revenues

473,478

Acquisition of goods and

services - Ordinary charges

(21,605)

Employee benefits

expenses - Ordinary

(11,824)

Other operating expenses

(863)

Financial expenses

(47,510)

(b)

246,605

-

164,606

-

411,211

86.8%

(5,738)

-

(2,953)

(93)

(8,784)

40.7%

(63)

(1,302)

-

-

(1,365)

11.5%

(4)

-

-

-

(4)

0.5%

(1,379)

-

(26)

(149)

(1,554)

3.3%

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

82

Revenues from the Parent Company (246,605 thousand euros) refer mainly to rental revenues ensuing from the Master Service Agreement.

Revenues from Vodafone Italia (164,606 thousand euros) refer mainly to rental revenues ensuing from the Master Service Agreement.

Purchases of materials and services from TIM (5,738 thousand euros) mainly refer to maintenance services (3,900 thousand euros), costs of outsourced services (432 thousand euros), telephone costs (79 thousand euros) and other service costs (1,080 thousand euros).

Purchases of materials and services from Vodafone Italia (2,953 thousand euros) mainly refer to maintenance services.

Purchases of materials and services from other related parties (93 thousand euros) mainly refer to outsourced services from H.R. Services.

Employee benefits expense for senior management (1,302 thousand euros) refer to compensation due to Company key managers.

Financial expenses to TIM (1,379 thousand euros) refer to interest expense on finance leases.

Financial expenses related to other related parties (149 thousand euros) refers to interest expense on financial payables to TI Finance SA.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

83

Items of the Statement of financial position

The effects of the transactions with related parties on the items of the statement of financial position at September 30, 2020, and for the corresponding period of the previous financial year, are the following:

ITEMS OF THE STATEMENT OF FINANCIAL POSITION AT 09.30.2019

Total

(thousands of euros)

(a)

Operating activities:

Change in trade receivables

(17,841)

Change in trade payables

12,530

Net change in miscellaneous

receivables/payables and other

assets/liabilities

(24,252)

Related Parties

% of

Parent

Senior

Other

Total related

financial

related

statement

Company

management

parties

parties

item

(b)/(a)

(b)

(14,944)

-

(17)

(14,961)

83.9%

(2,488)

-

13,999

11,511

91.9%

(18,014)

10

250

(17,754)

73.2%

ITEMS OF THE STATEMENT OF FINANCIAL POSITION AT 09.30.2020

Total

(thousands of euros)

(a)

Operating activities:

Change in trade receivables

52,267

Change in trade payables

(29,118)

Net change in miscellaneous

receivables/payables and other

assets/liabilities

(46,081)

Change in current and non-current

financial liabilities

2,539,751

Related Parties

% of

Senior

Vodafone

Other

Total related

financial

TIM

related

statement

management

Italia

parties

parties

item

(b)/(a)

(b)

54,156

-

7,365

(20)

61,501

117.7%

(10,194)

-

1,256

(10,527)

(19,465)

66.8%

1,495

(175)

(4,564)

-

(3,244)

7.0%

80,183

-

174

(70,134)

10,223

0.4%

For the first 9 months of 2020, the table shows 2 significant changes. The first relates to the decrease in trade receivables from TIM (54,156 thousand euros). The second relates to settlement of the loan with TI Finance SA (70,134 thousand euros).

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

84

REMUNERATION OF KEY MANAGERS

The remuneration recorded on an accrual basis in respect of key managers amounted to 1,302 thousand euros.

The short-term compensation is paid during the financial year to which it refers and, in any case, within the six months following the end of the financial year (the entitlements related to the 2020 MBO will be paid during the second quarter of 2021).

The contributions paid in to defined contribution plans (Assida, Fontedir) on behalf of key managers, amounted to 26 thousand euros.

The Company's "key managers", that is, those who have the power and responsibility to plan, manage, and control, directly or indirectly, the Company's activities, including the directors, are identified as follows:

INWIT SPA

Directors:

Giovanni Ferigo

CEO

Managers:

Andrea Balzarini

Head of Administration, Finance and Control & Business Support until 03.30.2020

Head of Administration, Finance and Control & Business Support appointed key manager by the

Diego Galli

BoD of 03.31.2020

Elisa Patrizi

Head of Operations & Maintenance

Gabriele Abbagnara

Head of Marketing & Sales

Massimo Scapini

Head of Technology Governance & MSA, appointed key manager by the BoD of 03.31.2020

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

85

NOTE 24 - SIGNIFICANT NON-RECURRING EVENTS AND TRANSACTIONS

Pursuant to Consob Communication no. DEM/6064293 of July 28, 2006, the impact of non-recurring items on the individual separate income statement items is as follows:

(thousands of euros)

1.1 - 9.30.2020

Charges associated with extraordinary transactions

(6,756)

Charges related to restructuring and rationalization processes

-

Impact on Operating profit (loss) before depreciation and

amortization, capital gains (losses) and impairment reversals

(losses) on non-current assets (EBITDA)

(6,756)

Impact on Operating profit (loss) (EBIT)

(6,756)

Impact on Profit (loss) before tax

(6,756)

Income taxes on non-recurring items

1,926

Impact on the Profit (Loss) of the Period

(4,830)

1.1 - 9.30.2019

(2,434)

(574)

(3,008)

(3,008)

(3,008)

857

(2,151)

NOTE 25 - POSITIONS OR TRANSACTIONS RESULTING FROM ATYPICAL AND/OR UNUSUAL OPERATIONS.

In accordance with Consob Communication DEM/6064293 of July 28, 2006, during the first quarter, no atypical and/or unusual transactions occurred as defined by the Communication.

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

86

NOTE 26 - EVENTS SUBSEQUENT TO SEPTEMBER 30, 2020

On October 13, 2020, INWIT successfully completed its second bond issue for a total amount of 750 million euros.

The fixed-rate bond with a coupon of 1.625% and a maturity of 8 years is issued as part of INWIT's Euro Medium Term Notes (EMTN) Program and is intended for institutional investors.

The placement is part of the refinancing of part of the bank debt and was supported by a pool of leading banks, comprising BNP Paribas, Crédit Agricole CIB, HSBC, Mediobanca and Unicredit as Joint Bookrunners and Banca Akros, Banca IMI, BBVA, BofA Securities and SMBC Nikko as other Bookrunners.

The securities will be listed on the regulated market of the Luxembourg Stock Exchange, with the following characteristics:

  • Issuer: Infrastrutture Wireless Italiane Spa
  • Amount: 750 million euros
  • Settlement date: October 21, 2020
  • Maturity: October 21, 2028
  • Coupon: 1.625%
  • Issue price: 99.755%
  • Effective yield: 1.658%, corresponding to a yield of 200 basis points above the benchmark rate (mid swap).

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

87

DECLARATION BY THE MANAGER RESPONSIBLE FOR PREPARING THE COMPANY'S FINANCIAL REPORTS

The manager responsible for preparing the corporate financial reports declares, pursuant to paragraph 2, art. 154-bis of the Consolidated Law on Finance, that the accounting disclosure contained in the Interim Report at September 30, 2020 of the INWIT Group corresponds to the Company's documents, accounting records and entries.

The Manager Responsible for Preparing the Company's Financial Reports

Diego Galli

Interim financial statements of Infrastrutture Wireless

Italiane S.p.A. at September 30, 2020

Explanatory notes

88

Disclaimer

INWIT - Infrastrutture Wireless Italiane S.p.A. published this content on 20 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 November 2020 18:16:00 UTC


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Financials
Sales 2020 676 M 816 M 816 M
Net income 2020 163 M 197 M 197 M
Net Debt 2020 3 638 M 4 392 M 4 392 M
P/E ratio 2020 53,2x
Yield 2020 3,27%
Capitalization 8 896 M 10 756 M 10 739 M
EV / Sales 2020 18,5x
EV / Sales 2021 16,1x
Nbr of Employees 198
Free-Float 33,7%
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Technical analysis trends INWIT S.P.A.
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Mean consensus BUY
Number of Analysts 19
Average target price 11,98 €
Last Close Price 9,27 €
Spread / Highest target 46,8%
Spread / Average Target 29,3%
Spread / Lowest Target 9,01%
EPS Revisions
Managers and Directors
NameTitle
Giovanni Ferigo Chief Executive Officer, GM & Director
Emanuele Tournon Chairman
Elisa Patrizi Head-Maintenance, Technology & Operations
Emanuela Martinelli Head-Finance & Investor Relations
Filomena Passeggio Independent Director
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