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Telecom Italia 1Q 2013 Results - Operations - Marco Patuano

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Slides Telecom Italia 1Q 2013 Results - Operations - Marco Patuano

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  • 1. TELECOM ITALIA GROUP 1Q 2013 Results Milan, May 9th, 2013 Telecom Italia 1Q 2013 Results MARCO PATUANO
  • 2. 1MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Safe Harbour These presentations contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company and the Group. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected or implied in the forward looking statements as a result of various factors. Consequently, Telecom Italia S.p.A. makes no representation, whether expressed or implied, as to the conformity of the actual results with those projected in the forward looking statement. Forward-looking information is based on certain key assumptions which we believe to be reasonable as of the date hereof, but forward looking information by its nature involves risks and uncertainties, which are outside our control, and could significantly affect expected results. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telecom Italia S.p.A. undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telecom Italia S.p.A. business or acquisition strategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged to consult the Company's Annual Report on Form 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securities and Exchange Commission. Some data for the first quarter 2012, used in comparisons, included into this presentation have been restated as a result of the early adoption, starting from the first half 2012, of the revised version of IAS 19 (Employee Benefits) and the reclassification of Matrix (company that was disposed of on October 31, 2012) from the Business Unit Domestic–Core Domestic to the Business Unit Other Activities.
  • 3. 2MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Agenda  Domestic 1Q13 Progress Report Mobile Business Fixed Business Appendix
  • 4. 3MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Structurally Evolving in a Changing Environment CurrentSituation Economy Regulation Highlights 1 2 3 Actions Operating PerformanceRegulated Prices Focus on «Willingness to Pay» Areas New Labour Contract Agreement BoD to assess for final kick-off decision on our Structural Separation Plan by May 23rd Proceed thereafter to enact our Structural Separation Plan, targeting a new Regulatory framework for our Fixed Access Network Company and TI‟s Retail Operations Defend Market Share Confirm Value and Quality approaches Distinctive deployment of Next Generation Networks Confidence Indexes 100,8 96,3 85,3 97,2 82,1 73,7 Mar-2011 Mar-2012 Mar-2013 Consumer Confidence Corporate Confidence* * Services Sector TraditionalInnovative Fixed Mobile Fixed Internet Business Data & ICT Mobile InternetULLBitstreamMTR AGCOM proposal AGCOM decision AGCOM decision
  • 5. 4MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Domestic 1Q13 Top Line Euro mln, Organic data, % Domestic Revenues Core Domestic Revenues 1Q13 vs 1Q12 Bridge Highlights Core Domestic Revenues Trend – D% YoY 4.244 3.832 347 283 1Q12 1Q13 -18.4% -9.7% Sparkle Core -453 M€ -10.1%4,477 4,024 -3,2% -4,6% -7,9% -8,9% -9,7% -4,2% -3,9% -6,4% -7,5% -6,7% 1Q12 2Q12 3Q12 4Q12 1Q13 Core Core Normalized Operating +8,8% +9,0% -9,5% -10,9% -18,4% SparkleCore -3.0pp-6.7pp Dual Speed in Domestic Revenues Trends: Improving Core Domestic Revenues on a Normalized basis Double-digit drop in Sparkle Trend as per the new rationalization process on low-margin contracts, supporting however EBITDA contribution Significant Regulatory & Other exceptional elements impacts on 1Q13 Results -3,6pp -9,7pp -3,1pp -2,2pp -0,8pp Mobile Fixed Regulatory Calendar & Other Total Core Domestic
  • 6. 5MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results D Capex 1Q12 1Q13 Euro mln, Organic Data Outstanding Ebitda Margin Confirmed (489) D EBITDA DWC -218M€ -9.8% % on Total Revenues 49.7%+0.2 p.p.49.5% 2,218 2,000 Ebitda Capex Highlights Domestic OpFCF 1Q12 1Q13 1,167 678 (242) +8 (255) 1 2 3 1 2 3 Euro mln, Reported Data 1Q12 1Q13 586 578 -8M€ -1.4% Confirm investments rirght-sizing increasing YoY Innovative Capex share Reversal effect of suppliers payment deferral related to 134/2012 Law EBITDA performance held back by key actions enacted only from April onwards (such as Solidarity Contract, Fixed Price Simplification)
  • 7. 6MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Consumer Segment Trend – YoY% change Revenues Trend by Segment: Consumer & Business Business Segment Trend – YoY% change * Source: ISTAT for 2012 – Prometeia for forecasts ** Data Normalized for bad weather and calendar discontinuities; Excluding Regulatory Impact (D MTR and EU Roaming price cap) Lower Italian 2013 GDP Forecasts* -1,6% -2,6% -2,6% -2,8% -2,1% -1,8% -1,7% -0,5%-1,7% -0,9% -0,4% +0,4% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 New GDP Outlook 2013 Trend - as of April Old GDP Outlook 2013 Trend - as of February FY12 -2.4% Impacts on Business 1Q13 Revenues Trend Regulatory Economic Context Competition More than 2/3 of Revenues Drop -1,1% -1,8% -6,9% -4,5% -8,9% -2,5% -1,2% -5,3% -2,7% -4,8% 1Q12 2Q12 3Q12 4Q12 1Q13 -6,5% -9,6% -11,7% -15,3% -13,1% -7,5% -8,7% -9,7% -13,7% -10,5% 1Q12 2Q12 3Q12 4Q12 1Q13 Reported Trend Normalized Trend -4.0% -2.8% -6.3% -4.4% -5.3% -5.5% -6.5% --7.5% -9.9% -10.3% Service Revenues Trend Normalized Service Revenues Trend Normalized ~1/3 ~1/3
  • 8. 7MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Agenda  Domestic 1Q13 Progress Report Mobile Business Fixed Business Appendix
  • 9. 8MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results 1.335 1,175 176 56 62 62 77 87 1Q12 1Q13 Euro mln, Organic Data Mobile Revenues: 1Q13 Results at a Glance Total Mobile Revenues Business Generated Business Received Handsets Retail Services Total Service Revenues Wholesale & others Total Mobile Revenues -12.0% -68.2% 1,511 1,231 1,573 1,292 1,650 1,379 -18.6% +0.2% -17.9% +12.2% -16.4% % YoY -11.0% Excluding UE Roaming impacts Service Revenues Trend – D YoY Total Revenues Trend – D YoY -3,7% -7,5% -13,0% -11,7% -17,9% -5.7% -6.2% -8.5% -6.8% -9.4% 1Q12 2Q12 3Q12 4Q12 1Q13 Reported Normalized -1,7% -5,0% -11,5% -9,4% -16,4% -3,6% -3,8% -7,1% -5,0% -8.4% 1Q12 2Q12 3Q12 4Q12 1Q13 Data Normalized for bad weather and calendar discontinuities; Excluding Regulatory Impact (D MTR and EU Roaming price cap)
  • 10. 9MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Mobile Domestic Market Developments and TIM’s Response While the Market is overheating in MNP… …TIM‟s answer is twofold: 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 +30% +50% Strong increase in MNP Market Volumes Short term tactical response Shift and Structural change towards a more convergent positioning 1 2 Defend Market Share 1 Reinforce best-in-class CB Value & Churn 2 • Super Local offers • Increased push on low-end cluster, leveraging on prices where they matter most (geography/demography) to customers • Strengthen Lock-in Action • Reward value customer base with handset substitution (24 months lock-in) and data penetration. • Stimulate loyalty with top-up discounts • “2-Play” convergent offers • Progress on “n-Play” offers Pure price Pure mobile Full Convergence Op4 Op2 Op3 SUBITO IL 20% IN PIÙ AD OGNI RICARICA E UNO SMARTPHONE GRATIS 1 2
  • 11. 10MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results mln Total SIM cards Annualized Market Churn Domestic Mobile: Customer Base Trend -0.3 32,3 32,2 31,9 1Q12 4Q12 1Q13 26% 29% 32% 30% 36% 36% TIM VOD WIND 2013 2012 A tough 1Q for TIM‟s MNP – Better Outlook for 2Q OUT/IN Avg 2012 MNP Balance Trend January February March April Increased Competition 1,2 x 1,2 x 1,6 x 1,2 x 1,5 x 1Q12 2Q12 3Q12 4Q12 1Q13
  • 12. 11MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Domestic Mobile Consumer: Focus on VAS 1Q YoY VAS Performance Browsing 1Q12 1Q13 Messaging Browsing Small ScreenMarket Share Large Screen 6,3 1Q12 1Q13 Total Users: Large + Small Screen Mln users Double Digit Growth Double digit growth both in Revenues and Users *% on gross adds 1Q12 1Q13 1Q12=100  Content 55,9% 62,4% 38,1% 40,3% 1Q12 1Q13 value volume M/S on dongle Users Revenues
  • 13. 12MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Agenda  Domestic 1Q13 Progress Report Mobile Business Fixed Business Appendix
  • 14. 13MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results 2.875 2.693 347 283 62 52 1Q12 1Q13 Euro mln, Organic Data, % Domestic Fixed: Focus on core Service Revenue Performance 3,223 -7.7% Total Fixed Revenues Domestic Service Revenues Trend – YoY % change 2,976 Sparkle Core Service -18.4% -6.3% Sparkle*CoreService *net of elim. & adj Consumer & Business Trend - YoY % change Elim. Equipment -17.3% Core Service Revenues Trend – YoY % change RetailDomestic Wholesale +8,8% +9,0% -9,5% -10,9% -18,4% 1Q12 2Q12 3Q12 4Q12 1Q13 -3,9% -3,6% -5,9% -7,1% -6,2% 1Q12 2Q12 3Q12 4Q12 1Q13 -0,9% -1,2% -2,3% -3,8% -6,6% -1,5% -1,0% -4,0% -3,5% -4,4% -2,4% -0,8% -4,0% -3,5% -3,6% 1Q12 2Q12 3Q12 4Q12 1Q13 -5,9% -6,6% -8,1% -9,2% -8,7% -6,2% -6,2% -8,1% -9,6% -8,4% Reported Normalized ConsumerBusiness  -3,1% -2,9% -4,9% -6,2% -6,3% -3,5% -2,7% -4,9% -6,3% -5,9% Reported Normalized
  • 15. 14MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Internet Business Data & ICT Consumer SegmentTotal Fixed Internet o/w Internet Services o/w BroadBand Services Total Internet 405 mln € +1.8% o/w Internet Services o/w BroadBand Services Total Internet 401 mln € +1.7% 395 mln € +1.5% 268 mln € +3.7% 265 mln € +3.6% 260 mln € +3.2% D YoY D YoY D YoY ICTBusiness Data Domestic Fixed: Focus on Internet & Business Data Euro mln, Organic Data, % -9,6% -9,9% -13,2% -17,3% -4,6% -5,9% -4,3% -7,0% -5,6% -1,9% 1Q12 2Q12 3Q12 4Q12 1Q13 Business Data o/w Service -9,9% -8,8% -16,8% -21,2% +0,4%-5,0% +3,1% -3,6% +1,1% +9,4% 1Q12 2Q12 3Q12 4Q12 1Q13 ICT o/w Service
  • 16. 15MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results 14.457 14.277 14.133 13.978 13.777 7.105 7.106 7.063 7.175 7.238 1Q12 2Q12 3Q12 4Q12 1Q13 Domestic Fixed: TI Access Performance Fixed Access Line Losses Trend -137k 21,562 21,195 21,016 TIRetailWholesale TIRetailWholesale Outgoing Voice KPIs OLO Access Growth 64.0%65.5%65.8% M/S on total Mrk 21,153 64.6% -195 -180 -144 -155 -201 +45 +1 -43 +112 +63 1Q12 2Q12 3Q12 4Q12 1Q13 21,382 65.3% -3,7% -7,0% -9,1% -8,2% -12,4% -2,0% -1,1% -0,7% -0,8% +2,6% 1Q12 2Q12 3Q12 4Q12 1Q13 Volumes Price +77 +62 +27 +79 +86 -7 +0 -24 +58 +7 -24 -61 -46 -25 -30 1Q12 2Q12 3Q12 4Q12 1Q13 ULL Naked WLR
  • 17. 16MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results 7.092 7.037 7.030 7.020 6.984 6.458 6.579 6.630 6.738 6.804 1Q12 2Q12 3Q12 4Q12 1Q13 ‘000 TI retail accesses M/S 52.3% 51.5% 50.7% Broadband Accesses* BB Lines Evolution Domestic Fixed: Broadband Figures Retail Broadband ARPU Growth Highlights Total Market 13,550 13,757 13,788 Monetizing from our Value Strategy: Positive trend in Broadband ARPU quarter by quarter Further increase of flat vs free BB clients Broadly Stable Broadband Market Share above 50% Euro/month/line BB OLO 13,617 51.7% TIRetailBBOLO ‘000 13,660 +240 +121 +51 +108 +66 -33 -55 -7 -10 -36 1Q12 2Q12 3Q12 4Q12 1Q13  51.0% 18,3 18,5 18,6 18,9 18,9 1Q12 2Q12 3Q12 4Q12 1Q13 +3.5% * AGCOM figures
  • 18. 17MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results First Quarter 2013 Take-Aways Balance to FY2013 Domestic Take-Aways The Italian economic environment is not improving yet Regulatory effects from MTR and EU Price Cap affecting Year-on-Year comparison Challenging Competitive Mobile Market behavior Adjusted Total Revenues 1Q13 better than 4Q12 Domestic Top Line Trend did show:  High-single digit decline in adjusted Mobile Revenues Resilient performance in the Fixed Business supported by signs of recovery in the Business Segment Leading position in EBITDA Margin among EU peers confirmed Italian Economic Indicators point to recovery signs towards the end of the year Better YoY comparison in Mobile performance, due to milder MTR drag and data roaming price cap in 2H Positive effects on Mobile KPIs starting from 2Q, with a progressive positive contribution to financials in 2H13 Monthly fee increase, new price simplification, BB performance and ICT further support Fixed Results Strict, Continuous focus on Cash Costs
  • 19. 18MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Cash Cost Efficiency Plan -1.3 -0.4 -0.3 -0.6 -0.5 -0.2 2013 2014 2015 Cum'12-'15 Opex Capex € Bln Target -0.6 Focus on Cash Cost Domestic Efficiency Plan FY„13-‟15PlanHightlights Labour Cost Industrial , Energy & Other Capex Acceleration of Labour Cost Efficiency starting from April, due to «New Solidarity Contract» signed at the end of March Headcount reductions Strong reduction of variable labor costs (Performance-related pay, etc…)  Increased Productivity Ratio Efficiency in Energy costs through rational management program Efficiency in maintenance and caring Positive effect in G&A due to optimization of Real Estate Sale of prime location buildings Less outsourcing costs Important Capex efficiency in IT due to reduction of costs driven by Architectural & Market Driven Developments
  • 20. 19MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Agenda  Domestic 1Q13 Progress Report Mobile Business Fixed Business Appendix
  • 21. 20MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Domestic Fixed Revenues Euro mln, Organic Data, % 62 2,875 1,386 394 278 759 58 1Q12 3,223 347 (61) Products Domestic Core Services Voice & Access Internet Business Data National Wholesale Other & Subs Total Sparkle Group Elimination 52 2,693 1,259 401 273 709 51 1Q13 2,976 283 (52) YoY % (17.3) (6.3) (9.1) 1.7 (1.9) (6.6) n.m. (7.7) (18.4) n.m. 4Q12vs11 YoY % (36.6) (6.2) (8.6) 1.9 (5.6) (3.8) n.m. (8.4) (10.9) n.m.
  • 22. 21MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Domestic Mobile Revenues Euro mln, Organic Data, % (*) Including Visitors (**) Total Retail Service Revenues net of Incoming Total o/w Services Wholesale (*) Retail o/w VAS o/w Incoming o/w Business Generated (**) o/w Outgoing Voice 1Q12 1,650 1,511 62 1,588 510 176 77 1,335 825 1Q13 1,379 1,231 62 1,317 470 56 87 1,175 705 D % YoY (16.4) (18.6) 0.2 (17.1) (7.9) (68.2) 12.2 (12.0) (14.5) Handsets 4Q12vs11 YoY % (9.4) (12.6) 11.1 (10.2) (4.3) (48.5) 12.5 (8.1) (10.4)
  • 23. 22MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results Progress on Domestic Efficiency PlanEuro mln, Organic Data, % -130 -59 - -36 -10 -16 -9 -71 D Efficiency D Abs ‟13 vs „12 Total Cash Cost Ytd „13 -207 578Total Capex - 8 581 254 -27 709 +6 -32 +25 2,024Total Opex* -235 336 -207 - -207 - - - - -207 D ITX +94 +51 - +9 +16 -16 +34 +43 D Vol. Driven Delta Cash Cost Ytd 13 vs Ytd 12 Industrial Personnel Mktg & Sales ITX G&A & Other ** - 243 144 Cash Cost EfficiencyVolume Driven -2072,845 -243 -130 Intercon- nection Target FY : - 601 Ytd 12 Ytd 13 2,602 Handsets: -1 + 94 Cash Cost on Revenues % Ytd‟12 Ytd‟13 2,602 19% of FY13 Target 25% of FY13 Target 22 % of FY13 Target 63.5% 64.7% + 1.2 p.p. **Includes Other Operating Cost/Income and Capitalized Costs* Costs related to credit management are reclassified from G&A & Other to Mktg & Sales
  • 24. 23MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results TIS Wholesale Voice Revenues– Improve Profitability 247 194 1Q12 1Q13  Wholesale Voice Business mainly driven by bilateral agreements  Bilateral agreements review to improve profitability  Elimination of Low margin relationships  Focus on Itz routes with higher marginality % on Gross Revenues 13.8% 17.0% Euro mln, Organic data, % Euro mln, Organic data, % Minutes mln Net Revenues - Voice gen feb mar 2012 Actual 2013 Actual Change -6.7% -15.3 % -5.5% (YoY) Total Traffic - Voice 24 26 1Q12 1Q13 +10% 48 48 1Q12 1Q13 Voice Gross Revenues -22% Euro mln Ebitda TIS Group +3.2 p.p.
  • 25. 24MARCO PATUANO TELECOM ITALIA GROUP 1Q 2013 Results  Insourcing and capacity development  Stamping on system  Shift Revision  Job conversion  IT Access time reduction  TI/TCC Synergies (Telecontact)  Site reduction (-88 in 2 years)  Quality levels in line with 4Q12  Commercial performance on track  Higher In-House productivity with less staff (-390 FTE average)  Start of new Solidarity Contract (April)  Lower cost of external staff  Lower labour cost Caring Services – Progress in 1Q13 FrontEndBackOffice Engagement Front End Back Office Performance Operators Calls Received -5% Costs In-House IncidenceIn-House Growth In-House answers In-House processing mln Internal Actions started to increase production capacity Market Dynamics  Downwards trend of operators‟ busy time marzo 2012 marzo 2013 Staff External Costs -5% -14% Organic CS (# resources) 12,800 12,000-800 March 2012 March 2013 ~35% of FY Target