TELECOM ITALIA GROUP
9M 2012 Results
Milan, November 9th, 2012
Telecom Italia
9M 2012 Results
MARCO PATUANO
1MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Safe Harbour
These presentations contain statements that constitute fo...
2MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Agenda
Domestic 3Q12 Progress Report
Fixed Business
Mobile Business
Ap...
3MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Domestic Results: 3Q12 vs 1H12 Evolution
Euro mln, Organic data, %
Dom...
4MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Euro mln, Reported Data
1 32
Domestic Operating Free Cash Flow Evoluti...
5MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Source: ISTAT and Prometeia
Consumer Segment Trend – YoY% change
Servi...
6MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Delivering Domestic Targets during an Economic Slowdown
Delivering our...
7MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Agenda
Domestic 3Q12 Progress Report
Fixed Business
Mobile Business
Ap...
8MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Euro mln, Organic Data, %
Domestic Fixed: Focus on core Service Revenu...
9MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Domestic Fixed: TI Access Performance
Fixed Access Line Losses Trend
-...
10MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
‘000
TI retail
accesses
M/S 53.9% 52.0% 51.9%
Broadband Accesses BB L...
11MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Agenda
Domestic 3Q12 Progress Report
Fixed Business
Mobile Business
A...
12MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Euro mln, Organic Data
Mobile Revenues: 3Q12 Results at a Glance
Tota...
13MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
‘000
TIM’s MNP 9M12
Total SIM cards Annualized Market Churn
+0.4 mln
...
14MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Domestic Mobile Retail: Focus on VAS
Retail VAS
TIMxSmartphone: Focus...
15MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
LTE: a Growth Opportunity, starting from Large Screens
4G Pricing Str...
16MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Agenda
Domestic 3Q12 Progress Report
Fixed Business
Mobile Business
A...
17MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Domestic Wireline Revenues
Euro mln, Organic Data, %
102
2,932
1,385
...
18MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Domestic Mobile Revenues
Euro mln, Organic Data, %
(*
) Including Vis...
19MARCO PATUANO
TELECOM ITALIA GROUP
9M 2012 Results
Personnel
-4G&A &
Other 376
Progress on Domestic Efficiency PlanEuro ...
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Telecom Italia 3Q 2012 Results – Operations – Marco Patuano

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Telecom Italia 3Q 2012 Results – Operations – Marco Patuano

  1. 1. TELECOM ITALIA GROUP 9M 2012 Results Milan, November 9th, 2012 Telecom Italia 9M 2012 Results MARCO PATUANO
  2. 2. 1MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 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 2011 financial year used in comparisons included into this presentation are restated as a result of the early adoption of the revised IAS 19 (Employee Benefits) version and the reclassification of Matrix from the Business Unit Domestic–Core Domestic to the Business Unit Other Activities
  3. 3. 2MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Agenda Domestic 3Q12 Progress Report Fixed Business Mobile Business Appendix
  4. 4. 3MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Domestic Results: 3Q12 vs 1H12 Evolution Euro mln, Organic data, % Domestic Service Revenues EBITDA 3Q12 vs 1H12: EBITDA Bridge 3Q12 vs 1H12: Revenues Bridge -7.7% -2.9% -7.0% -3.3% 1H 3Q 1H 3Q Δ-616 M€ -4.5% -321 M€ -4.6% % on Total Revenues 50.0%0.0 p.p.50.0% 13,552 12,936 7,034 6,713 Mobile: -0.7pp Fixed: -0.2pp Mobile: -1.9pp WH&Transit: -1.2pp Operating Performance Δ Revenues Efficiency Total Revenues FY Target Confirmed EBITDA FY Target Confirmed -0.8 pp
  5. 5. 4MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Euro mln, Reported Data 1 32 Domestic Operating Free Cash Flow Evolution +61 mln % on Revenues 28.3% 30.1%+1.8 pp Δ EBITDA Δ Capex ΔWC 1 2 3 Cost Control Accelerating Right Spending ΔWC Improvement (335) 1H12 (82) 3Q12 (79) (22) Days Receivables Turnover Cash Cost +0.2 +0.2 -0.1 € bln ΔWC impact Euro mln, Organic Data
  6. 6. 5MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Source: ISTAT and Prometeia Consumer Segment Trend – YoY% change Service Revenues Trend by Segment: Consumer & Corporate Corporate Segment Trend – YoY% change Consumer Confidence * 1Q12 & 2Q12: Data Normalized for bad weather and calendar discontinuities – 3Q12: Excluding Regulatory impact (Δ MTR and price cap Roaming UE) Corporate Confidence Index: 2005=100 Index: 2005=100 Δ% YoY Italian GDP
  7. 7. 6MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Delivering Domestic Targets during an Economic Slowdown Delivering our Targets for 2012… …while working for the Future Traditional Services Innovative Services Traditional Services Innovative Services • Traditional Services under pressure • Fixed Market weak, but TI holds a stable Market Share • Mobile BB: Small Screen Penetration up • LTE Launched (Nov. 7th) • Fixed UBB ready to go • Cloud & ICT Portfolio enriched Mantening Tight Expenses Control Commercials •No subsidy increase •Advertising expenses reduced but «Top of Mind» confirmed •Cost of caring under control while CSI improved Industrial Human Resources Well on Track • Bundling is the way to defend ARPU • Leveraging on Fixed and Mobile Customer Base • Explore Regulatory opportunities • Best UBB experience • Enrich connectivity • Multi-devices approach • Extract value from the Cloud (Consumer & Corporate) • ICT offering upgrade Working on non-core activities in order to further benchmark with «best-in-class» players Maintaining high level of Efficiency Focus on: •New technologies •Architectural simplification Right-Spending on: •Day-by-day operations •Commercial Capex Pursue Group Synergies Introduce Discontinuities Efficiencies and Right-Spending on Investments confirmed, notwithstanding LTE & NGN deployment
  8. 8. 7MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Agenda Domestic 3Q12 Progress Report Fixed Business Mobile Business Appendix
  9. 9. 8MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Euro mln, Organic Data, % Domestic Fixed: Focus on core Service Revenue Performance 3,343 -6.2% Total Fixed Revenues Domestic Service Revenues Trend – YoY % change 3,136 Sparkle Core Service -9.5% -4.9% Sparkle*CoreService *net of elim. & adj Highlights Elim. Equipment -39.7% Core Service Revenues Trend – YoY % change RetailDomestic Wholesale Core Services down to -4.9% YoY due to: expected worse comparison effect on Consumer worse Macro scenario on Corporate segment unexpected retroactive reduction of WLR Sparkle: New round of low-margin transit contracts discontinuation, with no impact on Ebitda Positive support from monthly rental fee increase
  10. 10. 9MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Domestic Fixed: TI Access Performance Fixed Access Line Losses Trend -187k 21,789 21,562 21,195 TIRetailWholesale TIRetailWholesale Voice ARPU Highlights 65.8%66.2%67.2%M/S on total Mrk Line Losses neither caused nor caught by OLO’s Our competitors are continuing to increase churn among each other Consumer ARPU stable as the CB reduction affected low-end clients and slow-down mainly impacted the Corporate segment 21,382 65.9% 9M11 +190 9M12 +3 9M11 -524 9M11 -519 Consumer Retail Flat -1.6% % YoY
  11. 11. 10MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results ‘000 TI retail accesses M/S 53.9% 52.0% 51.9% Broadband Accesses BB Lines Evolution Domestic Fixed: Broadband Figures Broadband Retail Highlights Total Markets 13,313 13,527 13,544 Italian Fixed Broadband: Stability in TI’s Market Share. Constant decline in OLO’s net acquisitions. TI’s ARPU upbeat trend confirmed. Increase in Superinternet and Flat Offers on CB without leveraging on promos. Euro/month/line BB OLO 13,263 53.8% TIRetailBBOLO ‘000 ARPU Service Revenues Euro mln +0.9%
  12. 12. 11MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Agenda Domestic 3Q12 Progress Report Fixed Business Mobile Business Appendix
  13. 13. 12MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Euro mln, Organic Data Mobile Revenues: 3Q12 Results at a Glance Total Mobile Revenues Business Generated Business Received Handsets Retail Services Total Service Revenues Wholesale & others Total Mobile Revenues -7.9% -51.6% 1,624 1,419 1,727 1,502 1,790 1,584 -12.6% -19.3% -13.0% +29.5% -11.5% % YoY -5.9% Excluding Roaming UE impacts Retail Business Generated Trend – Δ YoY Excluding Roaming EU impacts Handset Revenues Trend – Δ YoY Positive effects from bad weather and calendar discontinuities
  14. 14. 13MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results ‘000 TIM’s MNP 9M12 Total SIM cards Annualized Market Churn +0.4 mln Domestic Mobile: Customer Base Trend OUT/IN Aggressive Summer Campaign by some competitors Launch of new TIM Portfolio offers: More Value for Money 3Q2Q1Q 1.0 x as of May -102 TotalMNP Avg Market
  15. 15. 14MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Domestic Mobile Retail: Focus on VAS Retail VAS TIMxSmartphone: Focus on ARPU VAS -4.0% +0.1% -8.4% 1 2 Messaging2 Bundles on MBB+VAS (e.g. “TIMxSmartphone”) are the right Value Proposition for the Market: no cannibalization effect on VAS Consumer ARPU Negative balance between decreasing average SMS price and steady number of SMS user Increasing number of active smartphone users** (+49% YoY) enables alternative messaging services July 2011 July 2012 Without TIMxSmartphone With TIMxSmartphone Messaging Data 0.9x 3.0x vs ARPU 2011 -4.7% *Excluding Roming UE Cap Browsing1 Negative impact of Roaming EU Cap on data, occurred by July 1st +12.1%241 271 Browsing Revenues Normalized* **Usage 1x per week at least +1.6%*
  16. 16. 15MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results LTE: a Growth Opportunity, starting from Large Screens 4G Pricing Strategy… Avg Price Premium …beyond Early Adoption Avg Price Premium: LTE offers vs 3G 42MB offers Population Coverage Large Screens Italian Price Premium aligned to other operators, notwithstanding the «early adoption» phase Fit Data to Device: Large Screen, Large Pack Entry giga size to be adjusted to UBB Mobile attitude Source: Internal Estimates Bundles without Boundaries Diversify offer portfolio to fit customers’ demand Cross-check coordination in pricing vs ADSL Quality of Services Traffic Segmentation for a «Priority Service» Speed availability is key to ensure a real «Ultra Mobile Broadband Experience» “Tailor-made” VAS Content Exclusive VAS Content to make best use of the strong increase of network performance Market Approach Coverage: Selective and Focused, aimed at maximizing the Return on LTE Investments
  17. 17. 16MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Agenda Domestic 3Q12 Progress Report Fixed Business Mobile Business Appendix
  18. 18. 17MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Domestic Wireline Revenues Euro mln, Organic Data, % 102 2,932 1,385 396 302 789 60 3Q11 3,343 377 (68) Products Domestic Core Services Voice & Access Internet Business Data National Wholesale Other & Subs Total Sparkle Group Elimination 62 2,789 1,287 396 281 763 62 3Q12 3,136 341 (56) YoY % (39.7) (4.9) (7.1) - (7.0) (3.3) n.m. (6.2) (9.5) n.m. 9M12vs11 YoY % (38.3) (3.6) (5.8) 1.0 (5.8) (2.0) n.m. (4.0) 2.1 n.m.
  19. 19. 18MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Domestic Mobile Revenues Euro mln, Organic Data, % (* ) Including Visitors (** ) Total Retail Services Revenues net of Incoming Total o/w Services Wholesale (*) Retail o/w VAS o/w Incoming o/w Business Generated (**) o/w Outgoing Voice 3Q11 1,790 1,624 103 1,687 524 176 63 1,448 924 3Q12 1,584 1,419 83 1,501 503 85 82 1,334 831 Δ % YoY (11.5) (12.6) (19.3) (11.0) (4.0) (51.6) 29.5 (7.9) (10.1) o/w Handsets 9M12vs11 YoY % (6.2) (7.6) (17.7) (5.6) 1.8 (27.0) 46.6 (4.8) (8.4)
  20. 20. 19MARCO PATUANO TELECOM ITALIA GROUP 9M 2012 Results Personnel -4G&A & Other 376 Progress on Domestic Efficiency PlanEuro mln, Organic Data, % Δ Abs 9M 12 YoY9M12 -174 1,982Total Capex 1,331 793 -99 +83 6,709Total Opex* -335 1,533 Delta Cash Cost 9M12 vs 9M11 Industrial 2,103 -116 Mktg & Comm. ITX Cash Cost EfficiencyVolume Driven -1749,048 -395 Intercon- nection Target FY : -0.5 Bn 9M11 9M12 8,691 +212 Efficiency 8,691 64.8% + 0.5 p.p. -357 Total Cash Cost 573 -24Handset Fixed Opex -37 -22 - 357 64.3% % on Revenues FY12 Trend Euro Bln, Organic Data ITX 2.3 FY11 FY12 E -0.3 Handset Other External Cost* Personnel Cost 1.0 FY11 Stable FY12 E FY11 3.4 Stable FY12 E FY11 3.0 -0,2 FY12 E * Mktg&Comm.+Industrial+G&A & others Δ Abs 3Q12 YoY -2 -124 -28 +34 -203 -54 -29 -22 -206 -3 FY13-14 FY12 1.2x FY12 Target >80% FY Target Confirmed Confirmed Confirmed Improved Total FY 12 ~9.2Bln€

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