Telecom Italia 1H 2012 Results - Marco Patuano

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Telecom Italia 1H 2012 Results - Marco Patuano

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Telecom Italia 1H 2012 Results - Marco Patuano

  1. 1. TELECOM ITALIA GROUP1H 2012 ResultsMilan, August 2nd, 2012 Telecom Italia 1H 2012 Results MARCO PATUANO
  2. 2. TELECOM ITALIA GROUP1H 2012 ResultsSafe HarbourThese presentations contain statements that constitute forward-looking statements within the meaning ofthe Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in thispresentation and include statements regarding the intent, belief or current expectations of the customerbase, estimates regarding future growth in the different business lines and the global business, marketshare, financial results and other aspects of the activities and situation relating to the Company and theGroup.Such forward looking statements are not guarantees of future performance and involve risks anduncertainties, and actual results may differ materially from those projected or implied in the forwardlooking statements as a result of various factors. Consequently, Telecom Italia S.p.A. makes norepresentation, whether expressed or implied, as to the conformity of the actual results with thoseprojected in the forward looking statement.Forward-looking information is based on certain key assumptions which we believe to be reasonable as ofthe date hereof, but forward looking information by its nature involves risks and uncertainties, which areoutside our control, and could significantly affect expected results.Analysts are cautioned not to place undue reliance on those forward looking statements, which speak onlyas of the date of this presentation. Telecom Italia S.p.A. undertakes no obligation to release publicly theresults of any revisions to these forward looking statements which may be made to reflect events andcircumstances after the date of this presentation, including, without limitation, changes in Telecom ItaliaS.p.A. business or acquisition strategy or planned capital expenditures or to reflect the occurrence ofunanticipated events. Analysts and investors are encouraged to consult the Companys Annual Report onForm 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securitiesand Exchange Commission.Some data for the 2011 financial year used in comparisons included into this presentation are restated asa result of the early adoption of the revised IAS 19 (Employee Benefits) version and the reclassification ofMatrix from the Business Unit Domestic–Core Domestic to the Business Unit Other Activities MARCO PATUANO 2
  3. 3. TELECOM ITALIA GROUP1H 2012 ResultsAgenda  Domestic 2Q12 Progress Report  Fixed Business  Mobile Business  Cash Cost Rationalization & Operating Model  Appendix MARCO PATUANO 3
  4. 4. TELECOM ITALIA GROUP1H 2012 ResultsDomestic Results: On-Track and ResilientEuro mln, Organic data, % Total Domestic Revenues Domestic Service Revenues -282 M€ -3.0% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 9,339 9,057 2Q 4.753 -3.6% 4.580 -2,3% -2.9% -3,1% -3.3% -3,7% -3,6% 1Q -2.4% -6,3% -7,6% Reported Trend Normalized Trend* 1H11 2011 1H12 2012 OFCF (Ebitda-Capex –ΔWC) EBITDA EBITDA-Capex +118 % on 49.0% -0.2 p.p. 48.8% +4.9% 2,538 Revenues -131 M€ 2,420 -4.1% -150 M€ 3,222 4,574 -3.3% 4,424 3,091 1H11 1H12 % on 2Q 2.291 -3.7% 2.206 % on Rev. 25.9% 28.1% 34.5% -0.4 p.p. 34.1% Revenues 1Q -2.8% 1H11 2011 1H12 2012 1H11 1H12 * Normalized data for bad weather and calendar discontinuity MARCO PATUANO 4
  5. 5. TELECOM ITALIA GROUP1H 2012 ResultsService Revenues Trend by Segment: Consumer & Corporate Consumer Segment Trend – YoY% change Highlights 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12  Continued uptrend on Overall Consumer -2,6% Service Revenues proves our strategy on -2,8% Service and Value is winning -4,0% -3,4%  Corporate Segment: -4,6% -4.2%  while SME/SOHO holds on KPIs (even improving on winbacks), adverse macro is -7.5% causing lower flow of business  on Top Corporate and Public Segment, -9,2% the attitude is still cautious Reported Trend Normalized Trend * Corporate Segment Trend – YoY% change Highlights 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Italian GDP – Δ YoY% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12e 1,3% 1,0% 0,4% -0,5% -1,4% -4,5% -2,6% Corporate Confidence -4,4% Dec 11 Mar 12 Jun 12 -5.1% -5,0% -5,5% -6,5% -43 -35 -45 -7,1% -43 -38 -7,5% -53 Reported Trend Normalized Trend* 1-49 employees 50-249 employees Source: ISTAT and Prometeia * Normalized data for bad weather and calendar discontinuity MARCO PATUANO 5
  6. 6. TELECOM ITALIA GROUP1H 2012 ResultsAgenda   Domestic 2Q12 Progress Report  Fixed Business  Mobile Business  Cash Cost Rationalization & Operating Model  Appendix MARCO PATUANO 6
  7. 7. TELECOM ITALIA GROUP1H 2012 ResultsDomestic Fixed: Revenue DynamicsEuro mln, Organic Data, % Total Fixed Revenues Fixed Revenues Trend – YoY % change -2.8% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3,349 Equipment 3,254 Equipment -37.0% +9.6% -11,3% -19,2% -15,4% -38,4% -37,0% Service -1.4% Service -2,1% -1,7% -1,8% -1,4% -4,9% -4,9% 2Q11 2Q12 1st step – July ‘11: 2nd step –Jan. ‘12: Consumer Business tariff simplification tariff simplification Wholesale Revenues Trend – YoY % change Retail Service Revenues Trend – YoY % change 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Domestic +5.1% +4.0% +2.9% -1,0% -1,1% -1,8% Sparkle Group* -3,4% -3,8% -3,8% -3,8% +5.5% +8.8% +9.0% 3rd step – July ‘12: -4,9% -6,1% Consumer -18,5% -16,5% -6,3% tariff simplification *net of elim. & adj MARCO PATUANO 7
  8. 8. TELECOM ITALIA GROUP1H 2012 ResultsDomestic Fixed: TI Access Performance Telecom Italia Access TI Line Losses -180k Reduction 21,965 21,562 21,382 1H’11 1H’12 Wholesale Wholesale +232k +46k 7.003 7.105 7.106 181 51 45 1 1Q11 2Q11 1Q12 2Q12 TI Retail TI Retail -206 -183 -195 -180 2Q11 1Q12 2Q12 1H’11 1H’12 -389k -375k M/S 67.2% 66.2% 65.9%on total Mrk Stable More Value from CB – YoY % change HighlightsConsumer Segment +0.9%  Overall Italian Access Market erosion increased as a Voice Arpu Increase result of worsened economic environment affecting both building sector (new lines) and disconnections CB -3.0%  Increased intra-OLO churn and improved TI-OLO Contraction balance  Positive effect on Consumer Segment ARPU due to concentration of line losses in low-end segment 2Q11 2Q12 MARCO PATUANO 8
  9. 9. TELECOM ITALIA GROUP1H 2012 ResultsDomestic Fixed: Focus on Broadband TI Retail Broadband Accesses BB Service Revenues‘000 € mln, % YoYTotal 13,313 13,487 13,527Markets -0.3% +1.4% 781TI retail 7,169 7,092 7,037accesses 772 770 Flat (%) 87% 88% 88% 2Q11 1Q12 2Q12 M/S 53.9% 52.6% 52.0% 1H10 1H11 1H12 Broadband Retail ARPU Highlights Euro/month/line  OLOs aggressiveness still in place   TI’s Value Strategy is paying-out: +1.2%  Constant Growth in BB Service Revenues trend  ARPU increase on quarterly and yearly basis, while 18.3 Flat 18.3 18.5 CB contraction involves essentially low-end clients  Successful evidence from SuperInternet proposition (~500K active clients), with a sound growth in acquisition trend and a high level of renewal rate 2Q11 1Q12 2Q12 MARCO PATUANO 9
  10. 10. TELECOM ITALIA GROUP1H 2012 ResultsAgenda   Domestic 2Q12 Progress Report  Fixed Business  Mobile Business  Cash Cost Rationalization & Operating Model  Appendix MARCO PATUANO 10
  11. 11. TELECOM ITALIA GROUP1H 2012 ResultsMobile Revenues: 2Q12 Results at a GlanceEuro mln, Organic Data Total Mobile Revenues Consumer: Business Generated Revenues Trend% YoY % YoY 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Total Mobile Revenues 1,817 -5.0% Handsets 1,726 81 +47.8% Total Service 120 Revenues 1,736 -7.5% Wholesale & 1,606 others 88 -16.1% 74 Retail Normalized trend* Reported trend Services 1,648 -7.0% 1,533 Business 223 Received -18.1% Positive Normalized Trend of previous quarters confirmed 182 Corporate: Business Generated Revenues Trend % YoY Large Corporate 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12  Stable CB and M/S (~70%) despite aggressive Business competition Generated  Contracts renewal drives -5.2% lower prices Soho & SME  Slight CB erosion due to economy  Price slightly down especially 2Q11 2Q12 Normalized trend* Reported trend in SOHO * Normalized data for bad weather and calendar discontinuity MARCO PATUANO 11
  12. 12. TELECOM ITALIA GROUP1H 2012 ResultsDomestic Mobile: Customer Base TrendEuro mln, Organic Data Total SIM cards Net Adds‘000 ‘000 32.227 32.328 32.225 31.679 New Lines 31.260 ~ +50 548 ~ -150 419 Completion of MTV 222 Mobile CB 101 migration program* +1mln -103 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 MNP 1H12 Trend Highlights Jan   Feb   Mar   Apr   May   Jun    In June, competitive pressure is increasing again, after a period of rational pricing behaviour Balance  Competitive dynamics shifted again versus MNP  TIM’s rational pricing attitude kept tariffs for MNP acquisitions stable since February 2012 TIM   Operator  1   Operator  2   *following the termination of the MVNO agreement with MTV Mobile MARCO PATUANO 12
  13. 13. TELECOM ITALIA GROUP1H 2012 ResultsDomestic Mobile ConsumerTraditional Services: Replacing Price-per-Minute with Bundles Our Bundle/Community CB is constantly growing * Focus on TIM Young >10x Growth Sound CB Growth July 11 Dec 11 Jun 12 TIM Young Renewal Rate Loyalty Lock-in 2H11 +6p.p. 1H12 the Value >1 mln ARPU Gross Adds/MNP 1.2x Value The Right Offer 2Q11 3Q11 4Q11 1Q12 2Q12 for the Market* TIMx, TCR & TIM Young TIM Young Avg other TIM Prepaid offer Usage – Δ YoY% SMS Revenues - Δ YoY% % YoY Voice Mid-single 1Q12 vs 1Q11 2Q12 vs 2Q11 digit -0.1% 1H11 1H12 -2,5% Messaging ~25% Bundle Offers include the right SMS space, avoiding cannibalization risk from Data increase, driven by the use of Smartphones 1H11 1H12 MARCO PATUANO 13
  14. 14. TELECOM ITALIA GROUP1H 2012 ResultsDomestic Mobile Consumer – Mobile BroadBand Keeping the Growth Smartphones on TIM’s CB % of Small Screen Users with BB Options ~70% The Mobile BB # handsets,% Context in Italy* +1.3 mln ~3.0 mln ~50% 2Q11 2Q12 ~1.7 mln 11.9 mln # of Data Connections Mln, % +30% ~2.0 Small Screen Users ~9% Almost Doubling the ~17% Penetration on CB ~1.5 85% on Smartphone 7.4 mln both 2Q11 2Q12 dic-­‐11   gen-­‐12   feb-­‐12   mar-­‐12   apr-­‐12   mag-­‐12   giu-­‐12   Small & Large Screens Users Consolidating the Leadership Large Screens 11.9 mln +10% Large Screen Users BB Users – Large Screen  TIM Leadership is confirmed on dongles: ~40% M/S (+2 p.p. vs 1Q12) Flat Flat  Huge Potential Value from Tablets:  x4 YoY growth @ more than 200K devices 1Q11 2Q11 1Q12 2Q12  ARPU Tablet vs Avg Large Screen: ~1.5x Steady Double Digit Growth*Source: Report Between, as of 1Q12 MARCO PATUANO 14
  15. 15. TELECOM ITALIA GROUP1H 2012 ResultsAgenda   Domestic 2Q11 Progress Report  Fixed Business  Mobile Business  Cash Cost Rationalization & Operating Model   Appendix MARCO PATUANO 15
  16. 16. TELECOM ITALIA GROUP1H 2012 ResultsFocus on 2Q12 Domestic EBITDAEuro mln, Organic Data, % 1 2 3 4 (173) +27 +2 +31 +28 -85M€, -3,7% 1Q11 2Q11 Revenues Interconn. Costs Handsets Mktg&Comm. Fixed Opex* 1Q12 2Q12 costs Opex 1 • Wholesale: -38M€ mainly due to gross 3 • Robust growth on Mobile Gross Adds managed Voice revenues increase in Int’l Wholesale through Acquisition Costs Control segment • Efficiency program on Fixed Commercial Costs • Retail: +65M€ reflecting MTR cut impact turned into yoy positive contribution to margins 2 4 Personnel Cost reduction from lay-off program Push on Mobile Smartphone with limited offsets the negative impact from market prices impact on SAC/Subsidy increase in energy and real estate*** Industrial + Personnel + G&A = Fixed Opex ** Energy unitary price (including taxation) and inflation adj (ISTAT), IMU on Real Estate MARCO PATUANO 16
  17. 17. TELECOM ITALIA GROUP1H 2012 ResultsAgenda   Domestic 2Q12 Progress Report  Fixed Business  Mobile Business  Cash Cost Rationalization & Operating Model  Appendix MARCO PATUANO 17
  18. 18. TELECOM ITALIA GROUP1H 2012 ResultsDomestic Wireline RevenuesEuro mln, Organic Data, % 1H12vs11 2Q11 2Q12 YoY % YoY % Total 3,349 3,254 (2.8) (2.9) Sparkle Group 332 362 9.0 8.9 Domestic Core Services 2,955 2,869 (2.9) (3.0) Voice & Access 1,410 1,327 (5.9) (5.2) Internet 389 398 2.3 1.4 Business Data 300 288 (4.3) (5.1) National Wholesale 801 787 (1.8) (1.4) Other 51 64 n.m. n.m. Products 133 84 (37.0) (37.6) Elimination (71) (61) n.m. n.m. MARCO PATUANO 18
  19. 19. TELECOM ITALIA GROUP1H 2012 ResultsDomestic Mobile RevenuesEuro mln, Organic Data, % 1H12vs11 2Q11 2Q12 Δ % YoY YoY % Total 1,817 1,726 (5.0) (3.4 Wholesale (*) 88 74 (16.1) (16.7) ) Retail 1,729 1,652 (4.4) (2.8) (5.1 o/w Services 1,648 1,533 (7.0) (**) ) o/w Business Generated 1,425 1,351 (5.2) (3.2) o/w Outgoing Voice 923 837 (9.3) (7.6) o/w VAS 502 514 2.3 4.9 o/w Incoming 223 182 (18.1) (17.0) o/w Handsets 81 119 46.8 54.9(*) Including Visitors(**) Total Retail Services Revenues net of Incoming MARCO PATUANO 19
  20. 20. TELECOM ITALIA GROUP 1H 2012 Results Progress on Domestic Efficiency Plan Euro mln, Organic Data, % Cash Cost Delta Cash Cost 1H12 vs 1H11 FY12 Trend Target FY : -0,5 Bn Euro Bln, Organic Data Δ Abs +153 1H12 ’12 vs ‘11 v  ITX 6.117 -50 -254 2,3 -0,3 5.966 Total Opex * 4.633 -132 FY11 FY12 E% on - 151 ITX 1.095 -50Revenues 65.5% 65.9% v  Handset + 0.4 p.p. Handset 405 +4 1,0 Stable Mktg & 1H11 Intercon- Volume Efficiency 1H12 Comm. 913 - 71 nection Driven FY11 FY12 E Industrial 507 +49 v  Other 3,4 Stable Efficiency Fixed External Cost* G&A & Opex 254 Other 241 -2 -15 Personnel 1.472 -62 FY11 FY12 E v  Personnel Cost 3,0 -0,1 1H12 Opex Capex Total Capex 1.333 -19 % on FY ~52% ~48% ~61% Target Total 5.966 -151 FY11 FY12 E Cash Cost * Mktg&Comm.+Industrial+G&A & others MARCO PATUANO 20

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