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Telecom Italia 3Q 2011 Results (Patuano)

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  • 1. TELECOM ITALIA GROUP9M 2011 ResultsMilan, November 11, 2011 Telecom Italia 9M 2011 Results MARCO PATUANO
  • 2. TELECOM ITALIA GROUP9M 2011 ResultsSafe HarbourThese presentations contain statements that constitute forward-looking statements within the meaning of thePrivate 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 customer base,estimates regarding future growth in the different business lines and the global business, market share, financialresults 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 aresult of various factors.Forward-looking information is based on certain key assumptions which we believe to be reasonable as of the datehereof, 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 ofthe date of this presentation. Telecom Italia S.p.A. undertakes no obligation to release publicly the results of anyrevisions to these forward looking statements which may be made to reflect events and circumstances after thedate of this presentation, including, without limitation, changes in Telecom Italia S.p.A. business or acquisitionstrategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts andinvestors are encouraged to consult the Companys Annual Report on Form 20-F as well as periodic filings made onForm 6-K, which are on file with the United States Securities and Exchange Commission. MARCO PATUANO 1
  • 3. TELECOM ITALIA GROUP9M 2011 ResultsAgenda Domestic 3Q11 Progress Report Mobile Fixed EBITDA trend Appendix MARCO PATUANO 2
  • 4. TELECOM ITALIA GROUP9M 2011 ResultsDomestic 3Q11 Progress Report Improving trend in Domestic Mobile revenues delivered -6.5% YoY in Q3 vs -7.6% YoY in Q2, despite MTR reduction. Solid Customer Base growth in Q3: +419K QoQ; +1,047K YoY, with a focus on quality acquisition (MNP, bundles and options). Mobile YoY still positive trend on outgoing voice volume (+8% YoY). Consumer outgoing prices stabilization since beginning of 2011 confirmed. Mobile Retail Browsing Revenues accelerated growth (+19.3% YoY) driven by Focus on Small Screen Revenues growth (+39% YoY) on Consumer segment. Core Markets Improvement in Core Domestic Wireline Service revenues (-2.1% YoY in Q3 vs -3.5% YoY in Q1 and Q2). Improving trend in line losses reduction (-135K in Q3 vs. -183K in 2Q & -206k in 1Q) in a slower market. Wireline Stabilization in BB Market Share. BB ARPU QoQ increase and YoY stabilization. ICT services revenues were up 9.8% YoY offsetting Traditional Data decline. - 9M 11 Domestic Operating FCF: € 3,956 mln, +15% YoY, +3% net of Financial Discipline €389 TIS Settlement paid out in 3Q10. - EBITDA-CAPEX on Revenues reaching 35.8% (+0.5pp YoY). MARCO PATUANO 3
  • 5. TELECOM ITALIA GROUP9M 2011 ResultsDomestic: Organic ResultsEuro mln, Organic data, % Revenues by Technology EBITDA -185 M€ % on 51.6% +0.6 p.p. 52.2% 4,927 -3.8% 4,742 Revenues -64 M€ -6.5% Mobile -2.5% Retail Revenues -5.9% Wireline -2.8%Total Service Rev YoY -7.5% Cash Cost reduction Highlights % on 61.9% 61.6% Revenues - 0.3 p.p. Further improvement in Revenues trend, in both Fixed and Mobile -130 M€ -4.3% On Fixed, performance was sustained by July tariff simplification 3,051 2,921 and by a successful value-driven approach in a slowing market CAPEX -1.4% -9 On Mobile, voice price stabilization and data growth delivered further trend improvement, despite MTR reduction in July OPEX -5.1% -121 Year-on-Year trend on Int’l Wholesale close to stabilization Continued focus on cash cost delivered a 0.6pp growth on EBITDA Margin, now at 52.2% (EBITDA-CAPEX) Ebitda-Capex on Revenues reached 38.4% in Q3 Revenues 38.1% 38.4% MARCO PATUANO 4
  • 6. TELECOM ITALIA GROUP9M 2011 ResultsAgenda Domestic 3Q11 Progress Report Mobile Fixed EBITDA trend Appendix MARCO PATUANO 5
  • 7. TELECOM ITALIA GROUP9M 2011 ResultsMobile Revenues: 3Q11 Results BreakdownEuro mln, Organic Data Total Mobile Revenues Mobile Handset Revenues Trend – YoY % change 1,914 -124 Total Mobile -6.5% 1,790 Wholesale 1,844 -109 Total Retail -5.9% Handset 1,735 +34.0% Mobile Retail Service Revenues Trend – YoY % change Service -6.9% - 4.3% Excluding MTR reduction on Q3 MARCO PATUANO 6
  • 8. TELECOM ITALIA GROUP9M 2011 ResultsDomestic Mobile: Customer Base Trend Gross Adds Churn Rate % Monthly YTD Annualized low twenties +20% Total SIM cards Highlights‘000 CB Change YoY +1,047K Gross Adds combined with a controlled churn generates a sound Customer Base growth: Focus on acquisition delivered a double-digit growth in Gross Adds (+20% YoY) Churn rate still improving, driven by CRM focus and increasing lock-in offerings on Customer Base MARCO PATUANO 7
  • 9. TELECOM ITALIA GROUP9M 2011 ResultsDomestic Mobile Consumer: A Quality Growth Healthy growth Smartphone Market ShareMNP Recipient lines and Gross Adds with bundles Volume Share - Sell Out +42% +69% * Source GFK survey Defending Voice & Boosting VAS Highlights Outgoing Price Outgoing Traffic Volumes stable +12% Focus on quality acquisition with an important growth on: • MNP acquisitions both as rate on total acquisition and as absolute terms • Bundle options sales on new customers Consolidated leadership on smartphone marketYoY VAS Defending Voice, stabilizing price since the beginning of ARPU 2011 and continuing growth in traffic volume YoY Trend MARCO PATUANO 8
  • 10. TELECOM ITALIA GROUP9M 2011 ResultsDomestic Mobile – Focus on Mobile BB Consumer Highlights KPIs Large Screen users Internet pack uptake TIM market share mln mln leadership confirmed Large Screen (>36% 3Q11) Retail Browsing Revenues Successful pricing approach TIM users continued to +22% on yearly basis3Q YoY growth Weight on Retail increase (+22% YoY vs. 2.56 Business Generated +20% YoY in previous 2.10 Revenues: +33% From 13% in 3Q10 to quarter) sustained by ~0.66 17% in 3Q11 internet pack +19.3% ~0.5 YoY double-digit growth of +23.7% Internet Pack uptake 3Q10 3Q11 3Q10 3Q11 % Smartphone Small Screen users 3Q11 Leadership among on Handsets sold operators: mln mln Smartphones TIMX Smartphone Small Screen Confirming a sound +127% YoY gross adds +38% YoY Total Retail Of which growth in Smarthphone Consumer sales Total H/S* ~0.7 +28% 1.86 iPhone market share 1.45 leadership confirmed ~50% Small screen revenues +39% YoY combining users (+28% 3Q11 3Q10 3Q11 YoY) and solid Arpu growth * Source GFK survey MARCO PATUANO 9
  • 11. TELECOM ITALIA GROUP9M 2011 ResultsDomestic Mobile RevenuesEuro mln, Organic Data, % 2Q11 vs 10 3Q10 3Q11 Δ % YoY Δ % YoY Total 1,914 1,790 (6.5) (7.6) Wholesale 70 55 (21.4) (32.5) Retail 1,844 1,736 (5.9) (6.6) o/w Services 1,796 1,672 (6.9) (7.7) Excluding MTR reduction on Q3 -4.3% YoY o/w Business Generated (*) 1,578 1,496 (5.2) (6.6) o/w Outgoing Voice (**) 1,065 973 (8.6) (9.0) o/w VAS 513 524 2.1 (1.8) o/w Incoming 218 176 (19.3) (13.9) MTR price reduction of 19.7% YoY Handsets 47 63 34.0 26.2(*) Total Retail Services Revenues net of Incoming(**) Including Roaming & Visitors MARCO PATUANO 10
  • 12. TELECOM ITALIA GROUP9M 2011 ResultsAgenda Domestic 3Q11 Progress Report Mobile Fixed EBITDA trend Appendix MARCO PATUANO 11
  • 13. TELECOM ITALIA GROUP9M 2011 ResultsDomestic Fixed: Revenues DynamicsEuro mln, Organic Data, % Total Fixed Revenues Highlights Material improvement in Core Domestic 3,444 -2.8% Service Revenues: -2.1% YoY in Q3 vs -3.5% Total Fixed 3,349 in Q2 & Q1, as a result of: Products 126 102 Service Rev. 3,318 -2.1% • Positive impact of Monthly fee revision 3,247 and tariff simplification • Successful value-oriented approach on Broadband Core Domestic 3,010 -2.1% 2,946 • Confirmed Positive trend on ICT Service Revenues growth Sparkle Revenues trend stabilization Sparkle Group 388 369 Eliminations 3Q10 3Q11 MARCO PATUANO 12
  • 14. TELECOM ITALIA GROUP9M 2011 ResultsDomestic Fixed: TI Access Performance Telecom Italia Retail Access Evolution & Line Losses Highlights‘000TI Access Stable Market Share For the first time negative growth of OLO access Stable Market Share ~ 67%‘000 OLO aggressive promotions deriveLine losses from a tough market, leading to a higher intra-OLO flow Improvement in TI line losses trend OLO Access Growth – Quarter Trend despite market contraction‘000 +125 +190 +181 +51 -41 38 60 33 12 9 154 83 109 2 ‐2 50 ‐1 18 TI’s winning value oriented ‐17 ‐42 strategy 3Q10 4Q10 1Q11 2Q11 3Q11 ULL Naked WLR MARCO PATUANO 13
  • 15. TELECOM ITALIA GROUP9M 2011 ResultsDomestic Fixed: Focus on Broadband TI Retail Broadband Accesses BB Net Adds ‘000 ‘000TI retailaccesses 7,194 7,169 7,141 Free BB Market Flat (%) 87% 87% 87% TI % Premium Offers on Consumer Segment 3.6% 4.3% 5.5% Market Share 54.1% 53.7% 53.6% BB Service Revenues Highlights€ Mln Stable Defending Broadband Market Share at 53.6% Stabilizing BB reduction trend vs Market contraction BB ARPU increase proving an healthy BB StrategyARPU€/month 18.7 18.4 18.7 18.3 18.6 18.6 Confirming the stable BB Service Revenues since 2010 Stable Growing MARCO PATUANO 14
  • 16. TELECOM ITALIA GROUP9M 2011 ResultsDomestic Wireline RevenuesEuro mln, Organic Data, % 2Q11 vs 10 3Q10 3Q11 YoY % Δ % YoY Total 3,444 3,349 (2.8) (5.1) Sparkle Group 388 369 (4.9) (16.5) Domestic Core Services 3,010 2,946 (2.1) (3.5) Voice & Access 1,471 1,383 (6.0) (8.0) Internet 413 411 (0.5) (3.3) Business Data 297 302 1.7 0.7 National Wholesale 766 789 3.0 4.0 Other 63 60 n.m. n.m. Products 126 102 (19.0) (11.3) Elimination (80) (68) (15.0) (9.0) MARCO PATUANO 15
  • 17. TELECOM ITALIA GROUP9M 2011 ResultsAgenda Domestic 3Q11 Progress Report Mobile Fixed EBITDA trend Appendix MARCO PATUANO 16
  • 18. TELECOM ITALIA GROUP9M 2011 ResultsFocus on 9M11 Domestic EBITDAEuro mln, Organic Data, % 1 2 3 4 (43) (515) (423) In 1H11 (92) in 3Q11 49.7% 50.1%Change YoY 2,542 (9) (17) (176) +84 +24 +30 2,478 3Q10 -64M€, -2.5% 3Q11 1 3 Commercial effort increase on Mobile acquisitions Increased focus on Smartphones to support data growth balanced by efficiencies on customers operations and content costs reduction 2 Significant First Margin recovery in 3Q11 driven by price 4 Acceleration on Opex efficiency confirmed stabilization and data revenues growth (>100% of FY Target already achieved in 9M11)* Costs and operating income related to credit management are reclassified from Fixed Opex to Marketing & Commercial Opex MARCO PATUANO 17
  • 19. TELECOM ITALIA GROUP9M 2011 ResultsAgenda Domestic 3Q11 Progress Report Mobile Fixed EBITDA Trend Appendix MARCO PATUANO 18
  • 20. TELECOM ITALIA GROUP9M 2011 ResultsFocus on FCF GenerationEuro mln, Reported Data Domestic Operating Free Cash Flow Revenues 15,032 -934 14,098 Opex (7,822) +717 (7,105) Capex (2,153) +138 (2,015) Δ Working Capital (1,617) +595* (1,022) OFCF 3,440 +516* 3,956 9M10 9M11* o/w 389 € mln TI Sparkle settlement MARCO PATUANO 19