Telecom Italia – TI Group FY 2011 Preliminary Results and 2012-14 Plan Outline (Bernabè)

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineFebruary 24th, 2012 Telecom Italia – TI Group Full-Year 2011 Preliminary Results and 2012-14 Plan Outline FRANCO BERNABE’

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineSafe 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.It should also be noted that starting from the year 2010, Telecom Italia reclassified some taxes paid in Brazil ofnon-material amount, previously included in “Other operating expenses”, in reduction of “Revenues” and “Otherincome” in order to ensure a better comparability and intelligibility of the financial information. 1

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineAgenda  TI Group 2011 Preliminary Results  Telecom Italia Plan Outline  Italy  Brazil  Argentina  Focus on Ebitda-Capex Generation  Targets  Appendix 2

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineTI Group Full Year 2011 Progress Report: Targets MetOrganic Figures Guidance FY 2011 Revenues Broadly Stable YoY +2.7% YoY (29,958 mln €) Reached Ebitda Broadly Stable YoY Flat (12,339 mln €) Reached Capex  4.8 bln € 4,872 mln € (6,095 mln €, LTE included) Reached NFP Adj.  29.5 bln € (LTE excluded) 29,191 mln € (30,414 mln € LTE included) Reached 3

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineTI Group 2011 Revenues and Ebitda by QuartersEuro mln, % Organic Revenues Organic EBITDA 29,172 +786 29,958 +2.7% +4 7,899 12,335 +0.0% 12,339 IVQ 7,520 +5.0% IVQ 3,006 +3.3% 3,105 IIIQ 7,246 7,516 +3.7% IIIQ 3,186 +0.8% 3,213 IIQ 7,318 7,470 -0.4% +2.1% IIQ 3,066 3,055 7,088 7,073 -3.6% IQ -0.2% IQ 3,077 2,966 FY 2010 FY 2011 FY 2010 FY 2011 Contribution to YoY Change Contribution to YoY Change Domestic Domestic Brazil Brazil 2.7% 0.0% Argentina Argentina Other B.U. Other B.U. 4

TELECOM ITALIA Full-Year 2011 Preliminary Results and 2012-14 Plan Outline Combining a Sound Cash Generation with a Solid Growth Euro mln, Organic Data Weight in TI TI Group Domestic Brazil Argentina Group FY 11 % yoy FY 11 % yoy FY 11 % yoy FY 11 % yoy 35% Revenues 29,958 +2.7% 19,033 -4.8% 7,343 +18.2% 3,220 +26.5% EBITDA 12,339 Flat 9,351 -3.9% 1,998 +10.7% 1,035 +24.1% 25% EBITDA-CAPEX 7,467 -0.4% 6,374 -3.7% 708 +20.7% 479 +23.3 % 85% Cash Generation Engine of Growth for the Group for the Group* Revenues based on net contributions 5

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineGroup Business Performance and Financial Discipline Normalized Operating Free Cash Flow Deleverage - Net Financial Position AdjustedEuro mln, Reported Data Euro Bln 35.9 -1.3 -0.6 34.5 -2.5 +388 6,990 33.9 6,602 -1.05 1 2 31.5 Adj. 389 1,223 30.4 LTE 5.5 € bln Net Debt reduction -446 6,213 5,767 29.2 FY 2010 FY 2011 2007 2008 2009 2010 2011Normalized data:(1) TIS settlement - July 2010 -(2) LTE - October 2011- 6

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan Outline2012-14 – TI Strategic Priorities are Confirmed Italy – Proactively Manage for Cash Complete the Generation Deleverage Program Fully Exploit TI Enhance Brazil – Continue the Free Cash Flow Multi -Country Business Expansion Generation Businesses Sustainable Shareholders’ Argentina – Managing Remuneration Growth and Profitability 8

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan Outline2012-14 – Key Drivers Revenues Defence  Protect the Value of Traditional Services  Improve Performance of Fixed Broadband Portfolio Flexible Capex Allocation  Profitable Mobile Data Growth Italy Opex Efficiency  Continuous Focus on Efficiency Improvement Selective Network Deployment  Market-driven Approach to Exploit UBB Demand Exploit Growth as a Strong Mobile and Fixed BB Challenger  Capturing further Voice Increase and Opportunities from FMS Brazil  Continuous boost from Mobile Data  Deployment of TIM Fiber Consolidate Mobile and Pursue Convergence Argentina  Score results from MNP introduction  Gradual Expansion of Integrated Network 9

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineFlexible Capex Allocation VDSL2 FTTH/B FTTH FTTCab FTTC  Limited Market at Present  Potential Mass Demand  Be «FTTH-Ready»  Begin Deployment 2012-14 Milan and selected 2014 Target: 100 towns, ITALY areas with possible 25% of Housing Units Partnerships 2012 Greenfield 2012: start in São Paulo & Rio BRAZIL 2013-14 São Paulo & Rio 2013-14 in other Selected Areas 2012 Greenfield 2011 begin Roll-Out ARGENTINA 2013 in Selected Areas 2014 50% of Cabinets 10

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineItaly: Performing also in Times of Crisis Profitability Capex Optimization  Caring & Sales Force  Selective deployment of Model Rationalization; NGAN and LTE;  Additional efficiencies in  Efficiency on maintenance industrial costs; to support UBB  Personnel right-sizing development Domestic Cash Generation ~80% of Group (cum. 12-14)* Financial discipline Innovation  Allows to devote all needed resources to  Customer-driven Network Development to innovation confirm Technological  Offer based on Customer Leadership Value • EBITDA-Capex. Organic: same perimeter, 2011 FX rates, excluding Latam spectrum acquisitions. 12

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineBrazil: Ensure a Self-Sustained and Efficient GrowthMacroeconomic context: a sound growth Tim Brasil is the Fastest GDP growth TLC Market (CAGR 11-14) Growing TLC Player in CAGR 11-14 its Country CAGR 2011-14 Voice BB Tot 4.5% 2.9% Mobile +2% 47% 9% Fixed -8% 16% -3% Proven Track record in TLC spend -3% 28% integrating and 2011 2014 extracting Value from Acquisitions: Intelig paved the way for AESExploiting Market Opportunities 3 Development Waves FCF on sales Continuing Top Line 2x growth, doubling FCF/sales ratio Mobile CB FMS Internet expansion (voice) for all 2011 2014 14

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineArgentina: Carefully Manage Opportunities Macroeconomic context is continously monitored GDP growth % Unemployment Rate % Consumer Spending Delta% 9.3 10.9 7.8 4.9 5,1 7.7 5.5 5.0 4.0 7.5 4.8 7.2 Strong Financial Position and Cash 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014 Generation of the Source: Global Insight Feb. 2012 Company to fund necessary network Mobile for growth, Fixed for value investments Top Line  Promote Mobile Data and Social The Company is set to Networking increase Mobile and Fixed Customer Base, 59%  Upgrade bandwidth to deliver Revenues and capability Profitability 41%  Upselling services to boost ARPU 2011 2014  Develop ICT market Voice Non-Voice 16

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineGroup Operations focused on Cash Generation Domestic Ebitda Stabilization Latam Ebitda Growth Cum. Ebitda ‘12-’14 ~38 Bln €* 2012 2013 2014 2012 2013 2014 Strengthen Our Core Assets Cum. Capex ‘12-’14 Enlarge Invest to Perform in Italy >15 Bln €* Stable/Slightly Growing Operations and Profitability in Latam >22Bln €* cum. ‘12-’14 Cash Generation • Organic: same perimeter, 2011 FX rates, excluding Latam spectrum acquisitions. 18

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan Outline2011-2013 Deleverage Targets Confirmed Cash Flow Generation (EBITDA- Capex) Net Financial Position Adjusted** Organic Data* Euro Bln 2012 and 2013 >22 Bln € 35.9 targets confirmed 30.4 27.5 25 Latam ~20% Financial -5.5 Bln € Net Debt Discipline Domestic ~80% 2007 2011 2012 2013 2014 Cum. ‘12-’14 New Dividend Policy *Organic: same perimeter, 2011 FX rates, excluding spectrum licences acquisitions. 19 ** Excluding Latam spectrum licences acquisitions.

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan Outline . Worsening in Italy’s 13 Jan 2012 13 Feb 2012 27 Jan 2012 Economy and Ratings prioritizes the De-Risking of TI Previous 15% yearly New Dividend Policy growth guidance a) Ensure Delivery of Debt Reduction: 1.2 2012: 27.5 € bln 0.9 2013: 25.0 € bln Floor b) Dividend Progression after meeting Debt 2011 2012 2013 2014 Targets Dividend Cashout (€bln) 20

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineTelecom Italia Group – FY 2012 and 2012-14 Plan Key Guidance Organic Data* TI Group – FY 2012 Key Guidance Revenues Stable Ebitda Broadly Stable NFP Adj.**  27.5 € bln Organic Data* TI Group – 2012-14 Plan Key Guidance ** Ebitda-Capex cum ’12-’14 >22 € bln Capex cum ’12-’14 >15 € bln FY 2012:  27.5 € bln NFP Adj. 2012-’14 FY 2013:  25 € bln From FY 2014: < 2x Net Debt/Ebitda*** *exchange rates 2011 (R$/€ 2.33; ARS/€5.74), excluding impact from non-organic items ** excluding Latam spectrum licences *** reported figure 22

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineTI Group – Main Results by BU – Reported FiguresEuro mln 9M Reported IV Quarter Reported Full Year Reported Actual Actual Actual Actual Actual Actual 2011 2010  Abs  2011 2010  Abs  2011 2010  Abs REVENUESDomestic 14,098 15,032 -934 (6.2) 4,935 5,036 -101 (2.0) 19,033 20,068 -1,035 (5.2) Wireline Domestic 10,040 10,516 -476 (4.5) 3,502 3,600 -98 (2.7) 13,542 14,116 -574 (4.1) Tim Domestic 5,286 5,822 -536 (9.2) 1,828 1,870 -42 (2.2) 7,114 7,692 -578 (7.5)Brazil 5,395 4,498 897 19.9 1,948 1,701 247 14.5 7,343 6,199 1,144 18.5Argentina 2,324 0 2,324 - 896 798 98 12.3 3,220 798 2,422 303.5Media 170 177 -7 (4.0) 68 81 -13 (16.0) 238 258 -20 (7.8)Olivetti 226 259 -33 (12.7) 117 132 -15 (11.4) 343 391 -48 (12.3)Other Activities 2 64 -62 (96.9) 0 0 0 - 2 64 -62 (96.9)Elim. -156 -131 -25 -65 -76 11 -221 -207 -14TI Group 22,059 19,899 2,160 10.9 7,899 7,672 227 3.0 29,958 27,571 2,387 8.7 9M Reported IV Quarter Reported Full Year Reported Actual Actual Actual Actual Actual Actual 2011 2010  Abs  2011 2010  Abs  2011 2010  Abs EBITDADomestic 6,993 7,210 -217 (3.0) 2,250 2,183 67 3.1 9,243 9,393 -150 (1.6)Brazil 1,444 1,281 163 12.7 546 520 26 5.0 1,990 1,801 189 10.5Argentina 759 0 759 - 276 245 31 12.7 1,035 245 790 322.4Media 27 10 17 170.0 1 3 -2 (66.7) 28 13 15 115.4Olivetti -36 -24 -12 (50.0) 1 5 -4 (80.0) -35 -19 -16 (84.2)Other Activities -11 -3 -8 (266.7) -4 -18 14 77.8 -15 -21 6 28.6Elim. -1 1 -2 1 -1 2 0 0 0TI Group 9,175 8,475 700 8.3 3,071 2,937 134 4.6 12,246 11,412 834 7.3EBITDA MARGIN 41.6% 42.6% -1,0 pp 38.9% 38.3% 0.6 pp 40.9% 41.4% -0.5 pp 24

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineTI Group – Main Results by BU – Reported FiguresEuro mln 9M Organic IV Quarter Organic Full Year Organic Actual Actual Actual Actual Actual 2011 2010  Abs  2011 2010  Abs  Actual 2011 2010  Abs REVENUESDomestic 14,098 14,956 -858 (5.7) 4,935 5,038 -103 (2.0) 19,033 19,994 -961 (4.8) Wireline Domestic 10,040 10,475 -435 (4.2) 3,502 3,602 -100 (2.8) 13,542 14,077 -535 (3.8) Tim Domestic 5,286 5,787 -501 (8.7) 1,828 1,870 -42 (2.2) 7,114 7,657 -543 (7.1)Brazil 5,395 4,591 804 17.5 1,948 1,623 325 20.0 7,343 6,214 1,129 18.2Argentina 2,324 1,824 500 27.4 896 722 174 24.1 3,220 2,546 674 26.5Media 170 177 -7 (4.0) 68 81 -13 (16.0) 238 258 -20 (7.8)Olivetti 226 259 -33 (12.7) 117 132 -15 (11.4) 343 391 -48 (12.3)Other Activities 2 2 0 0.0 0 0 0 - 2 2 0 0.0Elim. -156 -157 1 -65 -76 11 -221 -233 12TI Group 22,059 21,652 407 1.9 7,899 7,520 379 5.0 29,958 29,172 786 2.7 9M Organic IV Quarter Organic Full Year Organic Actual Actual Actual Actual Actual 2011 2010  Abs  2011 2010  Abs  Actual 2011 2010  Abs EBITDADomestic 7,069 7,437 -368 (4.9) 2,282 2,290 -8 (0.3) 9,351 9,727 -376 (3.9)Brazil 1,447 1,308 139 10.7 551 498 53 10.5 1,998 1,806 192 10.7Argentina 759 613 146 23.8 276 221 55 24.8 1,035 834 201 24.1Media 6 10 -4 (40.0) 1 3 -2 (66.7) 7 13 -6 (46.2)Olivetti -36 -24 -12 (50.0) 2 9 -7 (77.8) -34 -15 -19 (126.7)Other Activities -11 -14 3 21.4 -4 -15 11 73.3 -15 -29 14 48.3Elim. 0 -1 1 -3 0 -3 -3 -1 -2TI Group 9,234 9,329 -95 (1.0) 3,105 3,006 99 3.3 12,339 12,335 4 0.0EBITDA MARGIN 41.9% 43.1% -1.2 pp 39.3% 40.0% -0.7 pp 41.2% 42.3% -1.1 pp 25

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineEvenly distributed and Back-Loaded MaturitiesEuro mln Bonds Loans (of which long-term rents, financia land operating leases, payable € 1,534) Drawn bank facility € 7.71 bln Group Liquidity Position + € 7.00 bln Undrawn Portion of Facility/Committed = € 14.71 bln Group Liquidity Margin 26

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan OutlineWell Diversified and Hedged Debt Total Gross Debt, Net of Adjustment: Euro 39,382 Maturities and Risk Management Euro mln Bank & EIB Op. Leases and long rent 5,626 1,549 Bank Facility Average debt maturity: 7.26 years Other mln 3.9% 14.3% 2,252 (bond only 8.22 years) 2,320 5.9% 5.7% Fixed rate portion of gross debt approximately 70% Bonds 70.2% Around 45% of outstanding bonds 27,635 (nominal amount) is denominated in Gross debt 39,382 USD, GBP and YEN and is fully hedged Financial assets (8,968) of which C & CE and marketable securities (7,713) - C & CE - Marketable securities (6,714) (999) Cost of debt: 5.6% - Italian Government Securities (856) - Other (143)Net Financial Position 30,414N.B. The figures are net of the adjustment due to the fair value measurement of derivatives and related financial liabilities/assets, as follows: - the impact on Gross Financial Debt is equal to 2,569 €/mln (of which 738 €/mln on bonds); - the impact on Financial Assets is equal to 2,164 €/mln.Therefore, the Net Financial Indebtedness is adjusted by 405 €/mln. 27

Telecom Italia – TI Group FY 2011 Preliminary Results and 2012-14 Plan Outline (Bernabè)

by Telecom Italia on Feb 27, 2012

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Telecom Italia – TI Group FY 2011 Preliminary Results and 2012-14 Plan Outline (Bernabè) Presentation Transcript