PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
Milan, March 7th 2014
Telecom Italia Group
FY 2013 Results
1
TELECOM ITALIA GROUP
FY 2013 Results
PIERGIORGIO PELUSO
Safe Harbour
These presentations contain statements that constit...
2PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
 YE13 Debt Position and Cost Reduction
 2014: A year for Capita...
3PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
FY13 Net Debt Evolution
Euro mln, Reported Data
(2,140)
EBITDA
CA...
4PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
Progress on Domestic Efficiency
11,273
+297
12,143 (497) (670)
20...
5PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
(1) € 32,737 mln is the nominal amount of outstanding medium-long...
6PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
 YE13 Debt Position and Cost Reduction
 2014: A year for Capita...
7PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
Capital and Financial Strengthening Plan on-track
Financial Contr...
8PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
2014 Dividend Payment
DecisionTaken in line with recent Capital S...
9PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
 YE13 Debt Position and Cost Reduction
 2014: A year for Capita...
10PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
Improving Capital Markets Conditions…
..set a Constructive Stage...
11PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
TI’s Active 2014 Liability Management
Our 750 mln € Hybrid Bond ...
12PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
 YE13 Debt Position and Cost Reduction
 2014: A year for Capit...
13PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
N.B.The figures are net of the adjustment due to the fair value ...
14PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
**Includes Other Operating costs/Income and Capitalized Costs* C...
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Telecom Italia Group FY 2013 Results - Piergiorgio Peluso

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Telecom Italia Group FY 2013 Results - Piergiorgio Peluso

  1. 1. PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results Milan, March 7th 2014 Telecom Italia Group FY 2013 Results
  2. 2. 1 TELECOM ITALIA GROUP FY 2013 Results PIERGIORGIO PELUSO 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 developments and changes in 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 statements. 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 and investors 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 inTelecom Italia S.p.A. business or acquisition strategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and investors should 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 which may identify factors that affect the forward looking statements included herein. The accounting policies adopted in the preparation of the Separate and Consolidated Financial Statements as of, and for the full year ended, 31 December 2013 have been applied on a basis consistent with those adopted in the Annual Separate and Consolidated Financial Statements at 31 December 2012, to which reference can be made, except for the new standards and interpretations adopted byTelecom Italia, which, other than for the prospective adoption of IFRS 13 (Fair Value measurement), didn’t impact on the Separate and Consolidated Financial Statements as of, and for the full year ended, 31 December 2013. Please note that the audit of theTelecom Italia Separate and Consolidated Financial Statements at 31 December 2013 has not yet been completed. Some data for the first quarter 2012, used in comparisons, included in 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. Furthermore, on November 13, 2013, theTelecom Italia Group accepted an offer to sell its entire controlling stake in Sofora Group –Telecom Argentina (Business Unit Argentina). Consequently, the latter was accounted for as Discontinued Operations (Assets held for sale) starting from the current Annual Report as of December 31, 2013.
  3. 3. 2PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results  YE13 Debt Position and Cost Reduction  2014: A year for Capital & Financial Strengthening  Capital Markets Outlook and Related Liability Management  Backup Agenda
  4. 4. 3PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results FY13 Net Debt Evolution Euro mln, Reported Data (2,140) EBITDA CAPEX ∆ WC & Others Operating FCF (9,540) +4,400 +337 (4,803) ∆ vs. 12 2011 YE 30,414 28,274 2012YE Adjusted +85 (138) (53) Disposals/ Financial Investments (75) +1,809 +1,734 Cash Financial Expenses/ Financial Accruals (223) +1,408 +1,185 Cash Taxes/Other Impacts 2012 YE 28,274 26,807 2013YE Adjusted +1,233 (6,036) (4,803) Operating FCF +964 (427) +537 Dividends (67) Net CF from Disc. Ops. (147) +80 (*) 2013 Net Cash Flow was affected by One-offs: ~0.3 €bln from 4Q12 suppliers payment deferral and ~0.2 €bln due to Brazilian Frequencies payment in 2Q13 (1,467)*
  5. 5. 4PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results Progress on Domestic Efficiency 11,273 +297 12,143 (497) (670) 2012YE 2013YEInterconnection EfficiencyVolume Driven 111% of FY13Target >60% Opex Cash Costs Euro mln, Organic Data (870)
  6. 6. 5PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results (1) € 32,737 mln is the nominal amount of outstanding medium-long term debt. Including Mandatory Convertible Bond (€ 1,300 mln), discontinued operations (€ 26 mln), IAS adjustments (€ 748 mln) and current financial liabilities (€ 469 mln), the gross debt figure of € 35,280 mln is reached. N.B. Debt maturities are net of € 1,830 mln (face value) of repurchased (€ 1,206 mln in 2013) own bonds (of which € 1,615 mln related to bonds due within 2015). Loans (of which long-term rent, financial and operating lease payable € 1,276) Drawn bank facilityBonds 13.59 6.50 7.09 Liquidity Margin Debt Maturities Undrawn Portion of Facility/Committed Group Liquidity Position (Ex. Disc. Ops) Euro bln Euro mln (1) Robust Liquidity Margin and Well-Distributed Debt Maturities 1,408 1,323 854 968 897 2,203 7,653 1,789 2,025 2,250 2,900 2,975 11,646 23,585 1,500 1,500 4,697 3,347 3,104 3,868 3,872 13,849 32,737 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Beyond 2018 Total M/L Term Debt Covered Until 2017
  7. 7. 6PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results  YE13 Debt Position and Cost Reduction  2014: A year for Capital & Financial Strengthening  Capital Markets Outlook and Related Liability Management  Backup Agenda
  8. 8. 7PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results Capital and Financial Strengthening Plan on-track Financial Contribution  Mandatory Convertible Bond  Telecom Argentina Disposal  Towers Italy &TI Media Broadcasting  Towers Brazil 1.3 € bln >2 € bln in aggregate* Overall increase of financial flexibility above 4 € bln * Estimated Cash proceeds. The overall treatment of the transactions will be subject to IFRS rules. 960 US$ mln Of which US$ 109mln cashed-in Dec. 2013, rest expected within 1H14 Cash-in According to Timetable Done Underlying Capital Increase approved by EGM on Dec 20, 2013 Work-in-Progress, Aimed to Financing Brazilian LTE auction and Roll-Out Asset Valorization Process Ongoing
  9. 9. 8PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results 2014 Dividend Payment DecisionTaken in line with recent Capital Strengthening Measures OurYE2016 ~2.1x Net Debt/EBITDA target ratio is consistent with Investment Grade Ratings Priority for 2014 is to ConcentrateTI Financial Resources to support UBB Investments TI is committed to a new course in SustainableTotal Shareholder Return, based on future Net Cash Flow Generation. We expect to Pay Dividend on Both Classes of Shares Next Year (2015) • Dividend Suspension for this year on Ordinary Shares • 166 Million Euro Minimum Mandatory Payment on Savings Shares
  10. 10. 9PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results  YE13 Debt Position and Cost Reduction  2014: A year for Capital & Financial Strengthening  Capital Markets Outlook and Related Liability Management  Backup Agenda
  11. 11. 10PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results Improving Capital Markets Conditions… ..set a Constructive Stage for Refinancing, as shown by our January Bond Issue • Recent Debt issuance shows that TI can roll/extend maturities in very cost-efficient terms even as a High Yield borrower • Book statistics showed the participation of ~600 institutional investors • Market’s positive attitude towards Telecom Italia’s credit confirmed • The yield of the bond, equal to 4.594%, is largely below the average cost of debt (5.5% at the end of December 2013) 150bps 200bps 250bps 300bps 350bps 400bps Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 150bps 200bps 250bps 300bps 350bps 400bps Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Nominal Amount 1,000,000,000 Settlement date 23-jan-14 Maturity date 25-jan-21 Coupon 4.5% Issue Price 99.447% Yield 4.594% Redemption price 100% Telecom Italia’s 5 -Year CDSGovernment BondYield Spread: 10Y Italian BTP vs German BUND Telecom Italia SpA Notes due Sept 2021
  12. 12. 11PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results TI’s Active 2014 Liability Management Our 750 mln € Hybrid Bond issued last year was redeemed on March 3 TodayTelecom Italia is launching a new 0.5 bln € Buy-Back on four EuroBond Issues expiring between 2014 and 2016, as indicated below Such exercises allow us to utilize the Company’s very significant liquidity position to manage the overall cost of debt and to reduce the cost of carry Telecom Italia SpA Notes due May 2014 Purchase Price 100.70% Telecom Italia SpA Notes due Jan 2016 Purchase Spread 105 bps Telecom Italia SpA Notes due June 2015 Purchase Spread 65 bps Telecom Italia SpA Notes due March 2016 Purchase spread to be determined pursuant to a Modified Dutch Auction Max Purchase Spread 130 bps
  13. 13. 12PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results  YE13 Debt Position and Cost Reduction  2014: A year for Capital & Financial Strengthening  Capital Markets Outlook and Related Liability Management  Backup Agenda
  14. 14. 13PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results N.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 1,950 €mln (of which 652 €mln on bonds) - the impact on Financial Assets is equal to 815 €mln Therefore, the Net Financial Indebtedness is adjusted by 1,135 €mln Well Diversified and Hedged Debt Total Gross Debt net of Adjustment: Euro 35,280 mln 3.7% Op. Leases and long rent 1,293 4.8% Other 1,708 15.4% Banks & EIB 5,424 4.1% Bank Facilities 1,453 71.9% Bonds 25,375  Gross debt (of which 27 mln disc. Operations) 35,280  Financial assets (7,816) of which Cash & CE and marketable securities (7,087)  Cash & Cash Equivalent (5,744)  Marketable securities (1,344)  Italian Government Securities (1,044)  Other (300)  Discontinued operations (657) Net Financial Position 26,807 Maturities and Risk Management Cost of debt: 5.5%  Average debt maturity: 7.00 years (bond only 7.82 years)  Fixed rate portion on gross debt approximately 67.1%  Around 36% of outstanding bonds (nominal amount) is denominated in USD, GBP and YEN and is fully hedged 0.1% Discontinued operations 27 Euro mln
  15. 15. 14PIERGIORGIO PELUSO TELECOM ITALIA GROUP FY 2013 Results **Includes Other Operating costs/Income and Capitalized Costs* Costs related to credit management are reclassified from G&A & Other to Mktg & Sales Progress on Domestic Efficiency FullYear ‘13 - Breakdown Euro mln, Organic Data, % - -125 -56 -185 -40 -406 D Efficiency D Abs ’13 vs ‘12 Total Cash Cost FY‘13 -497 3.027Total Capex - 45 2.599 1.068 -175 2.653 +8 -188 +27 8.246Total Opex* - 825 1.451 -497 - -497 - - - - -497 D ITX +297 +219 - - 50 +64 - 3 +67 +78 D Vol. Driven Industrial Personnel Mktg & Sales ITX G&A & Other ** -870 475 11.273 Delta Cash Cost FY’13 vs FY ‘12 110% of FY13 Target 115% of FY13 Target 111 % of FY13 Target -264 -670

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