TELECOM ITALIA GROUPTelecom Italia GroupInvestor Meetings - June 2012ALEX BOLIS – Head of TI Group Investor Relations     ...
TELECOM ITALIA GROUPSafe HarbourThese presentations contain statements that constitute forward-looking statements within t...
TELECOM ITALIA GROUPAgenda                  Telecom Italia Group Overview                  1Q12 Results                  F...
TELECOM ITALIA GROUP     2011 Results: Group Key Figures       Weight in TI         Group                                 ...
TELECOM ITALIA GROUP  Market Leaders Across Our Footprint                                     (March 2012)                ...
TELECOM ITALIA GROUPTopline Breakdown Across Core Markets                                                        Domestic ...
TELECOM ITALIA GROUPTI’s Domestic Market: the Growing Importance of Innovation               Domestic Retail Revenues     ...
TELECOM ITALIA GROUPLongtime Leadership in Investments        2000                             2009                2010   ...
TELECOM ITALIA GROUP2012-14 – TI Strategic Priorities                       Italy – Proactively Manage                    ...
TELECOM ITALIA GROUPTelecom Italia Group – FY 2012 and 2012-14 Plan Key Guidance                       Organic Data*      ...
TELECOM ITALIA GROUPAgenda                  Telecom Italia Group Overview                  1Q12 Results                  F...
TELECOM ITALIA GROUPTI Group Key ResultsEuro mln, Organic data, %                                Revenues                 ...
TELECOM ITALIA GROUPDomestic Results: Trend still improvingEuro mln, Organic data, %                    Total Domestic Rev...
TELECOM ITALIA GROUPItaly: Continued Resilience in a Weak Macro Context                        Real GDP trend             ...
TELECOM ITALIA GROUP   LatAm: Revenues and EBITDA 1Q12 YoY Trend            Euro mln, Organic Data                        ...
TELECOM ITALIA GROUPAgenda                  Telecom Italia Group Overview                  1Q12 Results                  F...
TELECOM ITALIA GROUPDomestic Fixed: Resilient Revenue DynamicsEuro mln, Organic Data, %                                   ...
TELECOM ITALIA GROUPDomestic Fixed: Value-driven Focus on Broadband                         Broadband Retail ARPU         ...
TELECOM ITALIA GROUPSuperInternet Growth                       SuperInternet is a bolt-on option enabling speed increase (...
TELECOM ITALIA GROUPDomestic Fixed: Focus on Pay TV                                           Cubovision Ecosystem     TI’...
TELECOM ITALIA GROUPMobile Revenues: 1Q12 Results at a GlanceEuro mln, Organic Data                         Total Mobile R...
TELECOM ITALIA GROUPConsumer Mobile - The Value of the Options                                                            ...
TELECOM ITALIA GROUPDomestic Mobile – Surfing the Data Wave          Increasing Smartphone Penetration in All Segments    ...
TELECOM ITALIA GROUPAgenda                  Telecom Italia Group Overview                  1Q12 Results                  F...
TELECOM ITALIA GROUP                                                    2012-2014 PlanStrengthen the Network for a Technol...
TELECOM ITALIA GROUP                                                                                         2012-2014 Pla...
TELECOM ITALIA GROUPUltra Broadband in Motion                       Fixed                    Mobile                       ...
TELECOM ITALIA GROUP     The Context       European Digital Agenda Main Objectives:                                       ...
TELECOM ITALIA GROUP   Specific advantages for TI from FTTC                                                               ...
TELECOM ITALIA GROUP   FTTC is frequently preferred by EU incumbentsBest incumbent’s choice                               ...
TELECOM ITALIA GROUP                                               New Light TI’s 2-step strategy on NGAN                 ...
TELECOM ITALIA GROUP     TI Fixed UBB Plan: 2012-2014 and beyond                2012 - 1H13                               ...
TELECOM ITALIA GROUPAgenda                  Telecom Italia Group Overview                  1Q12 Results                  F...
TELECOM ITALIA GROUPRobust Liquidity Margin and Well-Distributed Debt Maturities  Euro mln                              Bo...
TELECOM ITALIA GROUP  Focus on new FSF maturing 2017 Facility DescriptionFacility Amount          € 4,000,000,000Purpose  ...
TELECOM ITALIA GROUP New 1.5 bln € dual tranche bond  On June 11, TI issued a two tranche Euro fixed rate bond, tenor 3 ye...
TELECOM ITALIA GROUP2011-2013 Deleverage Targets Confirmed   Cash Flow Generation (EBITDA- Capex)                         ...
TELECOM ITALIA GROUPAgenda                  Telecom Italia Group Overview                  1Q12 Results                  F...
TELECOM ITALIA GROUPTelecom Italia Group: Shareholder Structure                   30.58%       11.62%            11.62%   ...
TELECOM ITALIA GROUPTIM Brasil Shareholder Structure                                   39
TELECOM ITALIA GROUPTelecom Argentina Shareholder Structure                      Los W                                 TI ...
TELECOM ITALIA GROUP                                 .                                                                    ...
TELECOM ITALIA GROUPWell Diversified and Hedged Debt       Total Gross Debt Net of Adjustment: Euro 37,513 mln            ...
TELECOM ITALIA GROUPMobile Termination Rates Italy & Brazil                       Italy                                   ...
TELECOM ITALIA GROUPTIM Brasil Market Share                          44
TELECOM ITALIA GROUP Brazil Spectrum Auction – TIM Brasil assignment                                                      ...
TELECOM ITALIA GROUPTA Market Share                       46
TELECOM ITALIA GROUPItaly: Mobile Market Share (March 2012)                                          Source: Agcom        ...
TELECOM ITALIA GROUPItaly: Fixed Access Market Share (March 2012)                                                Source: A...
TELECOM ITALIA GROUPItaly: Fixed Broadband Market Share (March 2012)                                                   Sou...
TELECOM ITALIA GROUPThe New Modem: The Core of TI’s Nuvola Domestica       The New Modem it’s a gate for a very evolutive ...
TELECOM ITALIA GROUP                                                          2012-2014 PlanEfficiency Processes Re-engine...
TELECOM ITALIA GROUPTI Domestic Main 2012 Trends                                                                          ...
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Investor Meetings - Hong Kong and Singapore - Alex Bolis presentation (June 2012)

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Investor Meetings - Hong Kong and Singapore - Alex Bolis presentation (June 2012)

  1. 1. TELECOM ITALIA GROUPTelecom Italia GroupInvestor Meetings - June 2012ALEX BOLIS – Head of TI Group Investor Relations 0
  2. 2. TELECOM ITALIA GROUPSafe 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 inthis presentation and include statements regarding the intent, belief or current expectations of thecustomer 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 Companyand the Group.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. 1
  3. 3. TELECOM ITALIA GROUPAgenda Telecom Italia Group Overview 1Q12 Results Focus on Domestic Market Focus on UBB Financial Position and Group Targets Back-up 2
  4. 4. TELECOM ITALIA GROUP 2011 Results: Group Key Figures Weight in TI Group Euro mln, Organic Data TI Group Domestic Brazil Argentina FY 11 Δ% yoy FY 11 Δ% yoy FY 11 Δ% yoy FY 11 Δ% 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 3
  5. 5. TELECOM ITALIA GROUP Market Leaders Across Our Footprint (March 2012) Domestic Brazil Argentina #1 position - 32.3 mln lines #2 position - 57.6 mln lines #2 position - 18.5 mln lines 34.9% 26.8% 33.6%Mobile #1 position - 14.46 mln accesses #2 position - 4.14 mln accesses Tim Brasil acquired Fixed relevant fiber infrastructure 66.2% 47% through the Intelig and AES purchases, to further profitably develop its mobile business. #1 position - 7.1 mln accesses AES now offers the opportunity #2 position - 1.56 mln accesses to enter the Fixed BB businessBroadband 52.7% 35% A Competitive and still Healthy Successful «Challenger « Customer base expansion Market where TI remains the strategy and leadership in across all segments, driven by Leading Operator growth . TIM re-gained the mobile rebranding of Personal second position during 2011. and the successful proposition of Arnet on broadband TV 4
  6. 6. TELECOM ITALIA GROUPTopline Breakdown Across Core Markets Domestic € Bn Retail Revenues by Technology € Bn Retail Revenues by Customer Segment 16.7 15.8 Mobile Consumer Fixed Business Top Clients Brazil Argentina R$ Bn Total Revenues by Technology AR$ Bn Total Revenues by Technology 17.1 18.5 16.5 0.2% TIM Fiber 14.6 5.5% Intelig Historical Mobile «pure mobile» positioning TIM Mobile Fixed 5
  7. 7. TELECOM ITALIA GROUPTI’s Domestic Market: the Growing Importance of Innovation Domestic Retail Revenues Fixed€bn €bn 16.7 • Broadband 15.8 Innovative • Web Contents • ICT (products Innovative and services) Traditional Mobile Traditional €bn • Mobile browsing (Large 7.4 & Small Screen) Innovative • Contents (premium services, donwloads, Traditional games, ringtones, Infotainment) 6
  8. 8. TELECOM ITALIA GROUPLongtime Leadership in Investments 2000 2009 2010 2011 2012 2013-14 3G Spectrum 4G Spectrum Ultra-Broadband Auction Auction Deployment both on (TI cashout (TI cashout Fixed (FTTC) and Mobile ~ 2.4€bn) ~1,22€bn) (LTE + HSDPA+) Sustained Traditional VAS growth (SMS and MMS) Further large-scale support of mobile data via Smartphones, Fostered the uptake of Mobile Data, especially on Tablets and Dongles. Large Screen (dongles). Turnaround strategy on handsets fueled double-digit growth on Short LL distance enabled successful «Alice» ADSL Small- Screen Browsing strategy Value-oriented innovative approach on FBB sustains market share Moved to all-IP fixed network and ARPU Fixed and Mobile UBB Investment Plan has taken off AES Atimus Intelig 4G Spectrum Acquisition Acquisition Auction TIM Fiber (~ 700€m (~ 400€m (TIM cashout integration and equivalent, equivalent, ~147€m LTE deployment by cash) and TIM by paper) equivalent) Fiber launch TI acquired control of TEO’s holding, Sofora Successfull Upgrade 3G network (no cash-out for TI), Mobile and deploy FTTC and full Rebranding and content delivery consolidation of TEO network in TI accounts In 11 years TI spent ~65€bn Capex at Group Level Over 15€bn Group capex and ~47€bn in Domestic Market planned in 2012-14 7
  9. 9. TELECOM ITALIA GROUP2012-14 – TI Strategic Priorities Italy – Proactively Manage for Cash Generation Complete the 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
  10. 10. TELECOM ITALIA GROUPTelecom 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 >22 € bln cum ’12-’14 Capex >15 € bln cum ’12-’14 FY 2012: ∼ 27.5 € bln NFP Adj. FY 2013: ∼ 25 € bln 2012-’14 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 9
  11. 11. TELECOM ITALIA GROUPAgenda Telecom Italia Group Overview 1Q12 Results Focus on Domestic Market Focus on UBB Financial Position and Group Targets Back-up 10
  12. 12. TELECOM ITALIA GROUPTI Group Key ResultsEuro mln, Organic data, % Revenues EBITDA % on 42.0% 40.1% Revenues -1.9 p.p. +373 M€ 7,392 2,951 +15 M€ 2,966 7,019 +5.3% +0.5% 1Q11 1Q12 1Q11 1Q12 Revenues Trend YoY EBITDA-CAPEX % on 29.3% -2.1 p.p. Revenues 27.2% 5.3% 5.0% -43 M€ 3.7% 2,055 -2.1% 2,012 2.1% -0,2% 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 1Q12 11
  13. 13. TELECOM ITALIA GROUPDomestic Results: Trend still improvingEuro mln, Organic data, % Total Domestic Revenues Domestic Service Revenues -109 M€ 4,595 -2.4% 4,486 Mobile -1.7% Wireline -2.9% EBITDA EBITDA-Capex % on 49.5% -0.5 p.p. 49.0% -4 M€ Revenues 1,611 -0.2% 1,607 2,274 -78 M€ -3.4% 2,196 % on 35.1% +0.7 p.p. 35.8% Revenues 12
  14. 14. TELECOM ITALIA GROUPItaly: Continued Resilience in a Weak Macro Context Real GDP trend Consumer Spending 0.0% 0.0% -2.5% -2.5% -5.0% -5.0% 4Q11A 1Q12A 2Q12E 3Q12E 4Q12E 4Q11A 1Q12A 2Q12E 3Q12E 4Q12E Source: Research Dep. Intesa Sanpaolo Source: Research Dep. Intesa Sanpaolo Wireless Wireline 96.5% 71.1% 34.0% 0.5% 0.5% 0.8% 26.2% 0.3% -1.0% -3.7% -1.9% -1.7% -2.1% -7.1% -7.5% -8.7%-11.7% -22.4% -4.9% -4.9% 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 Service Revenues (YoY) Handset Revenues (YoY ) Service Revenues (YoY) Broadband Service Revenues (YoY)Continuous recovery also supported by a more rational Broadband service revenues are showing growth, with acompetition and strong improvement in main KPIs. slight sequential improvement (+0.8% YoY).Mobile data momentum sustained by high smartphones TI market share on fixed accesses remains almost stable.sales. 13
  15. 15. TELECOM ITALIA GROUP LatAm: Revenues and EBITDA 1Q12 YoY Trend Euro mln, Organic Data Revenues EBITDA % on 27.5% -1.3p.p. 26.2% Revenues +309 M€ +19.1% 1,928 +60 M€ +13.5% 1,619 505 445 Brazil 1Q11 1Q12 1Q11 1Q12 34.1% -2.0 p.p. 32.1% +174 M€ +24.0% 901 +41 M€ +16.6% 727 289Argentina 248 1Q11 1Q12 1Q11 1Q12 14
  16. 16. TELECOM ITALIA GROUPAgenda Telecom Italia Group Overview 1Q12 Results Focus on Domestic Market Focus on UBB Financial Position and Group Targets Back-up 15
  17. 17. TELECOM ITALIA GROUPDomestic Fixed: Resilient Revenue DynamicsEuro mln, Organic Data, % Fixed Revenues Trend – YoY % change Total Equipment Services Wholesale Revenues Trend – YoY % change Retail Service Revenues Trend – YoY % change Domestic Sparkle Group* Tariff simplification process begins *Gross of Elim. & Adj. 16
  18. 18. TELECOM ITALIA GROUPDomestic Fixed: Value-driven Focus on Broadband Broadband Retail ARPU Highlights Euro/month/line +0.3% Results confirm TI’s Value Strategy is -0.6% working: QoQ ARPU increased BB Service Revenues are up TI Retail - Flat Customers (%) BB Service Revenues 87% 87% 88% % YoY TI Retail – Premium CB Growth +20% 4Q11 1Q12 17
  19. 19. TELECOM ITALIA GROUPSuperInternet Growth SuperInternet is a bolt-on option enabling speed increase (up to 1Mb/s in upload, 10 or 20 Mb/s in download) against a monthly fee increase starting from € 4/month. ► Usage confirms that the product has intercepted a real need of higher bandwidth and speed ► SuperInternet allows TI to meet the growing demand of bandwidth by increasing ARPU and customer satisfaction ► In 1Q, customers with a “Gold Offer” (SuperInternet or 20 Mega) more than doubled Y-o-Y. SuperInternet customers alone reached around 400k. ► Proactive customer care approach: the offer is sold only to clients who can fully benefit of advertised high speeds. Consistent net adds growth +20% Consumer BB ARPU is increasing 4Q11 1Q12 18
  20. 20. TELECOM ITALIA GROUPDomestic Fixed: Focus on Pay TV Cubovision Ecosystem TI’s OTT TV offer based on proprietary and Consumer Electronics “off-the-shelf” devices ( e.g. Smart TV) Affordable and valuable video offer (€9.99/m, 6-month promo €4.42/m – sold in bundle with SuperInternet: 1month free + €8.42/m for 1 year) through a new PC Smartphone & Tablet approach based on: subscription VOD experience with more than 25 thematic channels unique Customer Experience among devices distinctive services (on -demand feature and “Anycast” Proprietary Connected TV & fixed & mobile entertainment ) box Blu-ray Smart TV CB 420K Smart TV Customers, of whom at least 170K on Cubovision platform ( including Cubovision proprietary box and Cubovision widget on Connected TV & Blu-Ray) Advanced negotiations for expanding Cubovision enabled devices into games console and other Connected TVs 19
  21. 21. TELECOM ITALIA GROUPMobile Revenues: 1Q12 Results at a GlanceEuro mln, Organic Data Total Mobile Revenues Mobile Handsets Revenues Trend – YoY % change Normalized (*) ~-2.5% -29 Total Mobile 1,679 -1.7% 1,650 Handset revenues +71.1% Mobile Service Revenues Trend – YoY % change Service -3.7% revenues Normalized (*) ~-4.5%(*) Leap year 20
  22. 22. TELECOM ITALIA GROUPConsumer Mobile - The Value of the Options +1.4 mln Community 5.5 mln Users (*) 4.6 mln 4.4 mln Growth 4.1 mln Continues 1Q11 2Q11 3Q11 Apr-12 Churn rate -8p.p. Increasing Loyalty ∆ Outgoing ARPU exAnte/exPost activation Avg €/month Neutralizing CB Cannibalization 21* TIMx, TIM Young and Tutto Compreso Ricaricabile
  23. 23. TELECOM ITALIA GROUPDomestic Mobile – Surfing the Data Wave Increasing Smartphone Penetration in All Segments Operating Systems on TIM ‘s Network - The Android Growth Innovation to the Smartphones increasingly Service-Driven Mass Market Bringing Data Bundle users and Renewal Rate +1,9X 87%penetration on Smartphone Penetration on Customer Base Renewal rate 79% smartphone Doubling CB Number of Data connections by Device (*) +~20% May 2012 Dealer Convention 2.2mln Further room for Of which >75% 1.9mln ~1,3 mln Smartphones growth Dec’11 Jan’12 Feb’12 Mar’12 Apr’12 * Peak of traffic on the average day of the second week of each month 22
  24. 24. TELECOM ITALIA GROUPAgenda Telecom Italia Group Overview 1Q12 Results Focus on Domestic Market Focus on UBB Financial Position and Group Targets Back-up 23
  25. 25. TELECOM ITALIA GROUP 2012-2014 PlanStrengthen the Network for a Technological Leadership Capex Allocation UltraBB Roadmap Network Capex NGAN Roll-out 2014 Customer 100 Cities (including all Service Optimization & Traffic main ones) covered through Driven FTTH&Cab Technology ~¼ of Housing units Network Development Acceleration passed with >30 Mb/s Speed Network Decrease Mobile Coverage Maintainance 2014 Optimize Network Investment to maintain More than 40% of excellent quality in TLC services population covered by LTE Increase the effort in Network Development and Innovation to confirm Technological Leadership HSPDA and grant the Best Experience on the Net 42 Mbps LTE 24
  26. 26. TELECOM ITALIA GROUP 2012-2014 PlanMobile Technological Evolution while Protecting Profitability Strengthening Roadmap 42MB coverage HSDPA and LTE Increasing speed introduction 100 84 availability 42 3,6 7,2 14,4 Maximum speed 2009 2010 2011 2012 January June (kbps) 2013 2014 2012 2012 With PREMIUM offers Customers have The advantages Network Fiber Backhauling Dual Carrier an effective perception of Higher of 42MB Priority Speed Network Speed Priority Quality Up to (everywhere/every Offer based on Mass Market HSDPA 14,4 NO time) Mbps the Value for the Pricing Customer Up to 42 Speed Premium HSDPA/LTE Mbps YES Quality Customers Priority 100 Mbps 25
  27. 27. TELECOM ITALIA GROUPUltra Broadband in Motion Fixed Mobile 42 Mbps coverage 100- cities FTTCab Plan begins, in progress in 50 with 30 of them to be connected cities by 1H2013. Retail commercial launch expected in 4Q Reference Offer for wholesale Ongoing trials NGAN Access Services submitted extended to Turin, to Agcom in March. Final approval Milan, Rome and expected by September Naples Maintaining a fixed & mobile coordinated approach 26
  28. 28. TELECOM ITALIA GROUP The Context European Digital Agenda Main Objectives: 0% 50% 100% Basic BB 2013 >2 Mb/s > 30 Mb/s Ultra BB 2020 100 Mb/s Demand status in Italy: Low ICT culture Low e-Government level Low Broadband PenetrationPercentage of users that have never used a PC Global Rank E-Government Index Broadband penetration (as % of tot. accesses) #38 #15 #10 #9 #4 Source: Eurostat 2010 Source: ONU «E-Government Survey» 2010 Source: Eurostat 2011 27
  29. 29. TELECOM ITALIA GROUP Specific advantages for TI from FTTC Last mile length benchmark %Improved Performances 100 90 Lower Average Length of Local Loop has been a 80 70 Italydistinctive advantage for ADSL. Now, short Sub-Loop 60 United Kingdom 50Distance (in avg. below 400mt) guarantees highest 40 Japan Francespeed for a FTTC solution. 30 Germany 20 U.S.A. No impact on legacy services (no switch-off) 10 0 0 2 4 6 8 10 12 14 kmCapex Optimization -50% / -75% Utilization of a relevant portion of existing TI’sAccess Network Fix and Mobile UBB Synergy per line/capex Leveraging on past investments Ducts/Passages already existing in large part oftargeted cities FTTH FTTC 28
  30. 30. TELECOM ITALIA GROUP FTTC is frequently preferred by EU incumbentsBest incumbent’s choice European incumbents with a FTTC strategy(where network structure allows) Vectoring technology enhances FTTC speed up to 100Mbps in downstream and up to 15 Mbps in upstream(considerably above current market demand and existing services) xDSL still evolving (accelerated DSL includes also: Bonding,Phanthom, G.Fast) Advantages in Implementation: • Rapid Deployment • More Coverage • Lower InvasivenessMore value for money Exploiting and maximizing value of existing accessinfrastructure (copper) The cost for a FTTC solution is a fraction of FTTH’s Adequate match for expected demand «FTTH ready» on a selective basis approach (market-driven) Capex Deployment Speed per line timing FTTH FTTC 29
  31. 31. TELECOM ITALIA GROUP New Light TI’s 2-step strategy on NGAN Cabinet Step 1: FTTCab 30 - 100 Mbps Use of existing network elements: • Cable ducts • Cabinets • Copper SLL (Possible) Step 2: FTTH 100 Mbps – 1 Gbps Deployment costs > 3x FTTCab Use of FTTCab primary Network New elements •Fiber secondary network •Fiber deployment in the customer’s building •New modem in the customer’s house 30
  32. 32. TELECOM ITALIA GROUP TI Fixed UBB Plan: 2012-2014 and beyond 2012 - 1H13 2014 within 2020 30 cities 100 cities About 60% cities target in Driver for NGAN Plan: the North (i.e. Milan, Turin, Genoa); NewCo Density of population; Trentino NGN for Trento region Moving Leverage on existing towards DAE About 20% cities infrastructure (i.e. ducts Targets located in the Central already in place in most part of the country of 100 targeted cities) (i.e. Rome, Florence)About 20% citieslocated in the South(i.e. Naples, Bari,Palermo) 31
  33. 33. TELECOM ITALIA GROUPAgenda Telecom Italia Group Overview 1Q12 Results Focus on Domestic Market Focus on UBB Financial Position and Group Targets Back-up 32
  34. 34. TELECOM ITALIA GROUPRobust Liquidity Margin and Well-Distributed Debt Maturities Euro mln Bonds Loans (of which long-term rent, financial and operating lease payable € 1,497) Drawn bank facility € 6.16 bln 13,323 35,884 (*)Group Liquidity Position 2,249 + € 7.00 bln Undrawn Portion of 11,357 Facility/Committed = € 13.16 blnGroup Liquidity Margin 2,765 1,966 2,981 1,900 25,257 2,250 865 3,032 1,768 731 6,067 1,999 1,264 2,857 5,237 250 1,211 3,335 2,479 8,378 1,790 1,652 689 Within 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Beyond 2017 Total M/L Term Debt (*) € 35,884 mln is the nominal amount of oustanding medium-long term debt by adding IAS adjustments (€ 805 mln) and current liabilities (€ 824 mln), the gross debt figure of € 37,513 mln is reached. N.B. Debt maturities are net of € 646 mln (face value) of repurchased own bonds (of which € 354 mln related to bonds due in the next 24 months). 33
  35. 35. TELECOM ITALIA GROUP Focus on new FSF maturing 2017 Facility DescriptionFacility Amount € 4,000,000,000Purpose General Corporate PurposesSigning Date 24-5-2012Forward Start Date 1-8-2014 (i.e. current 8 bln RCF maturity date)FSF Maturity Date May 2017 Parties & EconomicsBorrower Telecom Italia S.p.A.Co-ordinators Banca IMI, Barclays Capital Banca IMI, Barclays, BBVA, Banco Santander, Bank of Tokyo Mits, BNP Paribas, Citi,Bookrunners Credit Agricole, Deutsche Bank, ING, JPMorgan, Natixis, RBS, Société Générale, UniCreditMargin 250 bps over Euribor for BBB ratingCommitment Fee 40% of the margin, equal to 100 bps for BBB ratingUtilisation fee nil for utilisation < 25%; 25 bps for utilisation >25% < 50%; 50 bps for utilisation >50% < 75%; 75 bps for utilisation >75% 34
  36. 36. TELECOM ITALIA GROUP New 1.5 bln € dual tranche bond On June 11, TI issued a two tranche Euro fixed rate bond, tenor 3 year and 6 and a half year, for a total of Euro 1.5 billion offered to institutional investors. The average yield of the issue stands at 5.462%, in line with the Group’s average cost of debt.3 year TrancheAmount: Euro 750 millionSettlement date: 15 June 2012Maturity: 15 June 2015Coupon: 4.625%The actual yield to maturity is 4.74%, yield of 378 basis points above the reference rate (mid swap).6 and 1/2 year TrancheAmount: Euro 750 millionSettlement date: 15 June 2012Maturity: 14 December 2018Coupon: 6.125%The actual yield to maturity is 6.184%, yield of 473 basis points above the reference rate (mid swap). 35
  37. 37. TELECOM ITALIA GROUP2011-2013 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. ** Excluding Latam spectrum licences acquisitions. 36
  38. 38. TELECOM ITALIA GROUPAgenda Telecom Italia Group Overview 1Q12 Results Focus on Domestic Market Focus on UBB Financial Position and Group Targets Back-up 37
  39. 39. TELECOM ITALIA GROUPTelecom Italia Group: Shareholder Structure 30.58% 11.62% 11.62% 46.18% Telco S.p.A. 22.39% 77.71% 66.68% 22.7% 38
  40. 40. TELECOM ITALIA GROUPTIM Brasil Shareholder Structure 39
  41. 41. TELECOM ITALIA GROUPTelecom Argentina Shareholder Structure Los W TI TI Int. 100,0%  32,0%  32.5%  35.5%  68.0%  TI Economic  Interest: 22,7% Pfd A  Pfd B 8.0%  Sofora shares(1) shares 51.04% econ. 0.00% econ. 48.96% econ. 92.99% voting 7.01% voting 0.00% voting 90.0% Employees  Tierra  10.0% Nortel Public Argentea (PPP Class C) 54.74% econ. 43.21% econ. 0.47% econ. 1.58% econ. 54.74% voting 43.21% voting 0.47% voting 1.58% voting TEO (1) Considering the payment of the dividends due for the previous years , Nortel’s Preferred A Shares will lose their voting rights.. 40
  42. 42. TELECOM ITALIA GROUP . 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: 2012: 27.5 € bln 2013: 25.0 € bln b) Dividend Progression after meeting Debt Targets 41
  43. 43. TELECOM ITALIA GROUPWell Diversified and Hedged Debt Total Gross Debt Net of Adjustment: Euro 37,513 mln Maturities and Risk Management Euro mln Op. Leases and long rent Bank & EIB 1,512 5,734 Bank Facility Average debt maturity: 7.32 years (bond Other 4.0% 15.3% only 8.38 years) 2,248 2,498 6.7% 6.0% Fixed rate portion on gross debt Bonds approximately 72.4% 25,521 Around 47% of outstanding bonds (nominal 68.0% amount) is denominated in USD, GBP and YEN and is fully hedged Gross debt 37,513 Financial assets (7,201) of which C & CE and marketable securities Cost of debt: ∼5.5% (6,158) - C & CE (5,492) - Marketable securities (666) - Italian Government Securities (527) - Other (159) Net Financial Position 30,312N.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 2.545 €/mln (of which 789 €/mln on bonds); - the impact on Financial Assets is equal to 1.878 €/mln. Therefore, the Net Financial Indebtedness is adjusted by 667 €/mln. 42
  44. 44. TELECOM ITALIA GROUPMobile Termination Rates Italy & Brazil Italy Brazil New MTR glide path defined, starting from July The MTR glide path in Brazil started from March 1st , 2012 1st €cent/min R$/min AGCOM Decision 621/11/CONS challenged before Administrative Court by both Vod/Win/H3G and fixed alternative operators. TI appealed only against asymmetry for H3G 43
  45. 45. TELECOM ITALIA GROUPTIM Brasil Market Share 44
  46. 46. TELECOM ITALIA GROUP Brazil Spectrum Auction – TIM Brasil assignment Minimum Price Type Coverage Band Bid Price (R$) Premium (%) (R$) 450 MHz + V1 Type B National 315,096,000.00 340,000,000 7.9 (10MHz+10MHz) AR 92 Type D P (10MHz+10MHz) 1,200,000.00 1,200,000 0 (complement) AR 31 Type D P (10MHz+10MHz) 10,633,000.00 10,633,000 0 (complement) AR 91 Type D P (10MHz+10MHz) 5,109,000.00 5,109,000 0 (complement) AR 21 Type D P (10MHz+10MHz) 17,025,000.00 17,877,000 5 (complement) AR 61 Type D P(10MHz+10MHz) 3,171,000.00 3,366,000 6.15 (complement) AR 41 Type D P(10MHz+10MHz) 4,053,000.00 4,053,000 0 (complement) 356,287,000.00 382,238,000 7.28 Equal to ~147 mln €*Coverage  Obligations 450 MHz: Coverage Obligations 2.5 GHz:30% municipalities by June14 all cities where Confederation Cup will be played by 60% municipalities by Dec14 April13 100% by Dec. 2015 all cities where World Cup soccer matches  will be played  by December13  cities >=500k pops by May14  cities >=200k pops by Dec15  cities >=100k pops by Dec16  cities 30k‐100k pops by Dec17  *FX Rate Eur/BRL 2.6 as of 13/06/12 45
  47. 47. TELECOM ITALIA GROUPTA Market Share 46
  48. 48. TELECOM ITALIA GROUPItaly: Mobile Market Share (March 2012) Source: Agcom 47
  49. 49. TELECOM ITALIA GROUPItaly: Fixed Access Market Share (March 2012) Source: Agcom 48
  50. 50. TELECOM ITALIA GROUPItaly: Fixed Broadband Market Share (March 2012) Source: Agcom 49
  51. 51. TELECOM ITALIA GROUPThe New Modem: The Core of TI’s Nuvola Domestica The New Modem it’s a gate for a very evolutive performances both on ADSL and FIBER/VDSL technologies and it’s the enabler for all the new services of Nuvola Domestica GAMING TV & MUSIC COMPUTER SMARTPHONE TABLET TELEFONI HARD DISK & PRINTER 50
  52. 52. TELECOM ITALIA GROUP 2012-2014 PlanEfficiency Processes Re-engineering Commercial Costs Industrial Costs Personnel Caring & Sales Force Unitary Cost reduction Right-sizing & Model Rationalization vs Volumes increase Total Cost Control Slighly Reduction Stable Reduction * * TFR IAS adjustment excluded Domestic Opex Efficiency on Opex Bln € 0.1 0.2 0.3 2012 2013 2014 New Plan: -0.5 Bln € in 2012-2013 > -1 Bln € Old Plan: -0.2 Bln € in 2012-2013 Total Efficiency on Cash Cost ‘12-’14 1.0 Bln € 51
  53. 53. TELECOM ITALIA GROUPTI Domestic Main 2012 Trends Euro bln, Organic data Macro-economic pressure, traditional services commoditization and MTR new glide path suggest a challenging scenario on consumer and Negative corporate spending and revenues trend, partially offset by browsing and mid- single Revenues innovative services increase. 19.03 digit yoy trend For 2012, we expect a mid-single digit decrease on Top Line yoy trend. 2011 2012 Cost control: efficiency measures and operational business model Negative optimization on caring and go to market will counter margin erosion. mid-single EBITDA 9.35 digit yoy For 2012, we expect an EBITDA trend similar to Revenues one, with a trend broadly stable EBITDA margin. 2011 2012 Strengthen the Network infrastructure with a strong focus on new technologies and services, to support data wave of growth, mantaining Almost 3.0 Stable vs Capex quality and performance excellence as distinctive asset. 2011 Domestic 2012 Capex: Almost Stable vs 2011. 2011 2012 52 52

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