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Third Quarter 2009 Results

Telecom Italia Group reported results for the first 9 months of 2009. The key highlights included: 1) Improved operating free cash flow generation of 515 million euros, a 15% increase year-over-year. 2) Operating profitability was stable with an EBITDA of 8.6 billion euros and EBITDA margin increasing 1.8 percentage points. 3) Strong cash cost control with cash costs decreasing 1.146 billion euros, or 7.3%, year-over-year.

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TELECOM ITALIA GROUP 9M 2009 Results Milan, November 5th, 2009 Telecom Italia 9M 2009 Results FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 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. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors. 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 Spa 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 Spa business or acquisition strategy 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. 1 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 2 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results TI Group 9M 09 Progress Report Improved Cash Flow Generation Restated with HanseNet +515M€, +15% YoY +581 M€, +18% YoY Focus on Improved Operating Profitability: Restated with HanseNet Ebitda 8.6BN€ - Stable YoY (Ebitda Margin +1.8 p.p. YoY) Core Ebitda 8.8BN€ - Stable YoY (Ebitda %+1.8 p.p. YoY) Markets: Strong Cash Cost Control: Domestic Cash Cost -1,146M€, -7.3% YoY & Improved Domestic Ebitda trend: Brazil -0.4% 3Q; -0.7% 2Q; -4.4% 1Q Brazil Defending Profitability: Ebitda 880M€ - Ebitda Margin 24.3% (+2.3 p.p. YoY) Disposal of non-core assets: HanseNet expected cash in ~900M€ Financial Discipline Reduced Average Cost of Debt: 5.5% vs. 6% at YE08 Figures considering HanseNet classified as Discontinued Operations Restated Figures include HanseNet consolidated line by line 3 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Improved Operating Free Cash Flow Euro mln, Reported data Operating FCF % OFCF on Revenues +515 3,932 3,417 19.5% Restated +3.6 p.p. 3,872 Restated 3,291 15.9% 9M 08 9M 09 9M 08 9M 09 Figures considering HanseNet classified as Discontinued Operations; Restated Figures include HanseNet consolidated line by line 4 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results TI Group Improved Profitability: Organic Results vs. 2008 Revenues Revenues – Restated with HanseNet Euro mln, % -972M€ -925M€ 21,963 -4.4% 21,119 -4.4% 20,991 20,194 IIIQ -418, -5.6% IIIQ -404, -5.6% IIQ -284, -3.8% IIQ -268, -3.7% IQ -253, -3.7% IQ -270, -3.8% 9M 08 9M 09 9M 08 9M 09 EBITDA EBITDA – Restated with HanseNet +1.8 p.p. 42.7% 42.0% % on 40.9% +1.8 p.p. Revenues % on Revenues 40.2% -32M€ -21M€ 8,646 -0.4% 8,614 8,831 -0.2% 8,810 IIIQ -12, -0.4% IIIQ -9, -0.3% IIQ +49, +1.8% IIQ +58, +2.0% IQ -69, -2.4% IQ -70, -2.4% 9M 08 9M 09 9M 08 9M 09 Figures considering HanseNet classified as Discontinued Operations; Restated Figures include HanseNet consolidated line by line 5 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Cash Cost Control: a Group-Wide Commitment Organic OPEX 9 Months 09 EBITDA Margin Euro mln, Organic data, % Δ abs. vs. Δ %. vs. Δ %. 1H09 vs 9M ‘08 9M ‘08 1H08 9M08 9M09 47.8% 46.1% Domestic 8,471 -775 -8.4% -6.5% +1.7 p.p. 24.3% TIM 2,742 -56 -2.0% -2.6% 22.0% +2.3 p.p. Brasil -3.7% TI Media 168 -20 -10.6% -10.4% -17.5% +13.8 p.p. Other BU & Eliminations 199 -42 42.7% 40.9% TI Group 11,580 -893 -7.2% -6.0% +1.8 p.p. Figures considering HanseNet classified as Discontinued Operations 6 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 7 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Domestic – Steady Cost Control Offsetting Revenue Decline Euro mln, Organic data, % Revenues Key Highlights -920M€ Fixed business: 17,159 -5.4% 16,239 stable retail service revs* (down 5% in 3Q09, in line with 2Q09) with strong growth from BB and ICT Mobile -589, -8.3% services. small decline of total revenues performance vs. 2Q09 due to lower equipment sales in the business segment Wireline -198, -1.8% and lower contribution of wholesale Mobile business: Elim & Decline of service revenues trend reflecting impact of adj 9M 08 9M 09 repricing in 3Q08 Strong push on mobile BB reflected into strong pick- EBITDA up of browsing revs % on +1.7 p.p. 47.8% 9M 09 EBITDA trend confirms outperforming EBITDA Revenues 46.1% guidance for 2009 (9.9-10 bln euro, down YoY -3/4%) -145M€ EBITDA margin reached 50% in 3Q09 confirms TI as the 7,913 -1.8% 7,768 industry benchmark for profitability. -11, -0.4% Effective & selective action on OPEX base IIIQ IIQ -18, -0.7% Ebitda 2009 Target confirmed IQ -116, -4.4% 9.9 – 10.0 BN€ 9M 08 9M 09 * Wireline service revenues net of wholesale revs (both national & intl) 8 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Domestic Fixed – TI Access Performance ‘000 access Telecom Italia Retail Access Evolution & Line Losses Key Highlights ‘000 17,776 17,352 16,972 16,621 16,358 Lowest line losses level since third quarter TI Access 2007 through successful retention activities 3Q08 4Q08 1Q09 2Q09 3Q09 ‘000 3Q08 4Q08 1Q09 2Q09 3Q09 Competitors increasingly relying on wholesale product such as Wholesale Line Line losses -355 -380 -351 -263 Rental and Naked -424 OLO Access Growth (TI Wholesale) ‘000 ‘000 ‘000 ULL Naked WLR 3Q08 4Q08 1Q09 2Q09 3Q09 3Q08 4Q08 1Q09 2Q09 3Q09 3Q08 4Q08 1Q09 2Q09 3Q09 +211 9 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Domestic Fixed: Focus on BB Broadband Market Market Share on Net Adds ‘000 Total Italian BB accesses 10,834 11,775 11,968 +62 TI retail 6,754 6,843 6,859 6,921 43.6% accesses 6,610 26.5% 24.5% 31.9% Free 79% 81% 82% 6.7% Flat (%) 76% 77% 3Q08 4Q08 1Q09 2Q09 3Q09 3Q08 4Q08 1Q09 2Q09 3Q09 Broadband Service Revenues Key Highlights Euro million, Euro/month 18.2 Strong commercial push with the continued uptake ARPU BB 18.0 of Alice Casa (around 490K customers) and the + 8.0% launch of Alice Day, the new pay-as-you go offer BB Serv Revs 1,100 1,188 Successful advertising campaign with a high IIIQ +8.1% popularity rating IIQ +8.2% Confirm high single digit BB service revenues IQ +7.4% growth 9M 08 9M 09 10 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Domestic Fixed: Focus on ICT Italian ICT Market Revenues Trend (*) Key Highlights Euro Bln Continuously improving TI scale in a highly -22% fragmented ICT Market with an unique end-to-end proposition 6.6 5.1 Top / Large Account segment TI Market Public Administration Share on ICT 7% 11% Fully maximize the value of CNIPA contract won Revenues +4 p.p. in 2007, through Successful Web hosting, data center and application/desktop management for big 9M 08 9M 09 Customers such as INPS, INAIL and Ministry of Justice Focus Telecom Italia ICT Revenues Private sector Euro Mln Continuous up-take of an Infrastructure as a +11.2% Service Revenues service business model based on monthly fee +17.5% pricing structure 565 508 370 Business segment 315 Strong push on segment-specific offerings under the “Impresa Semplice” brand Standardizing off-the-shelf solutions for SME customers, by creating bundles of products, to 9M 08 9M 09 9M 08 9M 09 simplify the marketing process /adoption of solutions (*) Source SIRMI 11 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Domestic Mobile Revenues Euro mln Δ% 9M’09 YoY Total 6,496 (8.3) = Mobile Handsets (mln) 4.8 3.3 44% Handsets 339 (33.3) (2.4) 2G 3G+Laptops & 56% 63% Internet keys + 9M 08 9M 09 €cent/minute Mln minutes Outgoing +0% -3.7% Voice 3,508 (5.5) (2.9) 12.2 12.2 26,649 25,655 o/w Roaming 177 (16.9) 9M 08 9M 09 9M 08 9M 09 + €cent/minute Euro mln Visiting (foreign) -11.5% Business -10% Incoming 9.6 Traffic Received * 1,152 (10.1) (1.8) 8.5 150 135 9M 08 9M 09 9M 08 9M 09 + Euro mln Messaging Content Browsing -7% 774 717 +13% -27% VAS 1,497 (5.6) (1.2) 343 469 530 250 9M 08 9M 09 9M 08 9M 09 9M 08 9M 09 (*) Incoming, Visiting and Other Revenues 12 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Focus on Consumer Main Achievements in 3Q09 Key Activities Key Evidence TIM market share on TIM x 2 ARPU Internet Keys* uplift 45% >70% Increased push on mobile BB 40% Offer 39% Enriching TIM community products Dec’08 Jun ‘09 Sep ‘09 Consumer TIM x 2 Further push to improve fixed BB penetration Pre-paid AVG Continuous reduction of BB churn rate Strong improvement of spontaneous awareness A new format with very popular testimonials Advertising for both fixed and mobile 25 TIM Vod Highly commercial communication style to Wind 15 maximize acquisitions H3G Continued on air presence until year-end 5 Fastweb Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 September October Push of multi-brand channels to improve Continuous increase in multi-brand targeting 200 Distribution win-back capabilities PoS by YE Sales & New geomarketing approach in segmenting Launch of a specific sales channel fully focused points of sale on Ethnic segment Strong push on BB acquisition trough Around 60% of BB September activation through Telemarketing channel 187 channel (*) Source GFK 13 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Main Actions for 4Q09 – Consumer Segment Increase ADSL acquisition Launch of a new Tutto Compreso offer for RTG customers Push ADSL penetration bundling PC & BB connectivity (46% of households do not own a PC) Improve market Raise the game on Internet Mobile Increase up-selling push of mobile BB on existing BB customers with billing on TI positioning monthly fee First and only to launch14.4 Mbps speed all across the board Continue the turnaround of the mobile business Further enrich friend & family offers adding TIMx4, with no activation fee for new TIM customers Launch tailor made tariffs for further ethnic segment leveraging with TI Sparkle – a key TI advantage Fewer handsets but more TIM exclusivity 14 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Focus on Business Main Achievements in 3Q09 Key Activities Key Evidence Improved TI positioning based on Impresa Semplice brand and higher Quality of Net adds (‘000 lines) 1Q09 2Q09 3Q09 Service Fixed Increased commercial effort to improve Mobile* percentage of BB services on Win-back and * Human new customers Offer BB Churn reduction due to higher Quality of Mobile BB Access Net Adds (‘000 lines) Services Launch of new bundle offers: device + 1Q09 2Q09 3Q09 browsing / mailing services (to be continued in 4Q) Improved competitiveness and simplicity of Satisfaction both Fixed and Mobile offering Customer Satisfaction Index (out of 100) Customer New go-to-market approach, with fixed- mobile sales force integration and customer 1Q09 2Q09 3Q09 portfolio management 15 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Main Actions for 4Q09 - Business Segment Fixed: sustain price premium positioning & improve QoS Line repair within next business day, free of charge: at least 3 times faster than average competitors SLAs Double upload rate on 20Mbit/s connection free of charge Defend our core ICT: letting every Italian company experience TI’s superior infrastructure Bundling PC and ICT services to broaden certified @mail and remote backup strength, penetration attack New “Tutto Compreso”offer: a turn key solution including minimum guaranteed speed connectivity, scalable Cisco router and customer service assistance on the adjacent following working day businesses Mobile: improve acquisition and VAS penetration Voice minutes basket shared among company employees for SMEs Tailor made bundle for SoHo including voice, handsets and bolt-on SMS & Data features. Enriching mail and browsing portfolio offering, adding Flat solutions for light users and heavy users 16 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 17 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results TIM Brasil: Improving Market Share & Quality Service Market Share Evolution Prepaid Net 33.3 29.1% mln lines Share (%) 26.5% 27.3% 29.8 29,. 25.4% 25.0% 24.2% Market 23.5% 25.2 + 3.4 Share (%) 25.9% 23.7% 23.8% Jan 08 Dec 08 Mar 09 Sep 09 Postpaid 18.3% 12.1% mln lines 17.4% 6.8 -0.6 + 0.1 -10.1% 6.3 6.2 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 Jan 08 Dec 08 Mar 09 Sep 09 Overall Quality Service –YTD 2009 Customer Satisfaction % of target reached on overall service quality, TIM vs. competitors CRC Average satisfaction, consumer segment YoY - 0.2 + 5.2 + 2.1 -1.2 - 5.1 -7.8 - 0.9 7.5 7.5 (p.p.) Pre-paid 7.4 99.3% -0.5 7.1 +0.5 7.0 96.8% 95.5% 93.9% 92.6% 90.2% 6.6 6.7 Post-paid 6.3 83.0% 6.1 +0.7 6.0 3Q08 4Q08 1Q09 2Q09 3Q09* Player 1 TIM Player 6 Player 5 Player 4 Player 2 Player 3 * Jul/09 e Aug/09 Sources: TIM Brasil - 12nd Customer Satisfaction Monitoring - may-jun/09; Source: Anatel CRC Monthly Satisfaction Research 18 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results TIM Brasil: Organic Main Results Revenues Key Highlights Euro mln, % +34M€ 3,588 +1.0% 3,622 Top line limited growth affected by long tail effects from 2008 loss in post-paid customer base IIIQ -13, -1.2% (*) Good performance of Value Added Services fuelled by microbrowsing stimulated through exclusive and distinctive offers of smartphones IIQ +40, +3.4% Lower push on 2G handset sales in order to stimulate a “Chip-only” approach IQ +7, +0.7% 9M 08 9M 09 EBITDA Ebitda margin increase driven by: +2.3 p.p. 24.3% Lower bad debt % on 22.0% Revenues Continued cash cost efficiencies +90M€ 880 790 +11.5% Improved revenue mix IIIQ -4, -2.0% Ebitda 2009 Target confirmed IIQ +50, +20.1% ~3.6 BNR$ IQ +44, +20.7% (*) 80 million reais (approx. 28 million euro) reclassified from “Other Operating Income” to “Other Service Revenues” 9M 08 9M 09 No EBITDA impact. No reclassification of previous year needed at TI Group level 19 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 20 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Focus on HanseNet: the Rationale behind the Disposal Regulatory framework very REGULATORY AND TECH HanseNet OpFCF Trend VDSL CapEx unfriendly towards alternative Scenario FRAMEWORK operators Capital intensive investments needed to match incumbent’s “High Speed” offering (VDSL/Fiber) 2007 2008 1H09 M/L Term compromising OpFCF generation Ebitda Capex ~900M€ expected cash BB market is growing at a slower consideration German Broadband Market Share pace… Implied value per MARKET SHARE 50,0% … with incumbent and cable sub at significant EVOLUTION operators reinforcing their position… 30,0% premium vs. … and alternative operators lagging 10,0% comparable behind 2007 2008 1H 09 transactions in Incumbent + cables Other Altnets HanseNet the last twelve months HanseNet ARPU Trend PRICING TREND Continued pricing pressure with very aggressive promotions by alternative operators trying to catch up with not replicable “High Speed” offers 1H07 1H08 1H09 21 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 22 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results TI Group 9M 09 Progress Report Improved Cash Flow Generation +515M€, +15% YoY Focus on Improved Operating Profitability: Ebitda 8.6BN€ - Stable YoY (Ebitda Margin +1.8 p.p. YoY) Core Markets: Strong Cash Cost Control: Domestic Cash Cost -1,146M€, -7.3% YoY Stabilise & Ebitda and Improved Domestic Ebitda trend: Brazil -0.4% 3Q; -0.7% 2Q; -4.4% 1Q Free Cash Brazil Defending Profitability: Flow Ebitda 880M€ - Ebitda Margin 24.3% (+2.3 p.p. YoY) Generation Disposal of non-core assets: HanseNet expected cash in ~900M€ Financial Discipline Reduced Average Cost of Debt: 5.5% vs. 6% at YE08 Figures considering HanseNet classified as Discontinued Operations 23 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 24 FRANCO BERNABE’
TELECOM ITALIA GROUP 9M 2009 Results Domestic – Revenues by Customer Segment and Technology Euro million, %, Organic data Domestic Revenues Domestic Revenues by Technology by Customer Segment -5.4% -5.4% Total Domestic 17,159 17,159 TI Sparkle & 16,239 16,239 2,639 Nat. wholesale 2,784 -4.0% Mobile -8.3% Top Business -9.3% Wireline -1.8% -7.5% Consumer Elim, adj & -352 -342 9M 08 9M 09 others 9M 08 9M 09 1Q09 2Q09 3Q09 Domestic 5,357 5,534 5,348 Mobile 2,059 2,253 2,184 Wireline 3,677 3,724 3,569 25 FRANCO BERNABE’

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Third Quarter 2009 Results

  • 1.
    TELECOM ITALIA GROUP 9M2009 Results Milan, November 5th, 2009 Telecom Italia 9M 2009 Results FRANCO BERNABE’
  • 2.
    TELECOM ITALIA GROUP 9M2009 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. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors. 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 Spa 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 Spa business or acquisition strategy 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. 1 FRANCO BERNABE’
  • 3.
    TELECOM ITALIA GROUP 9M2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 2 FRANCO BERNABE’
  • 4.
    TELECOM ITALIA GROUP 9M2009 Results TI Group 9M 09 Progress Report Improved Cash Flow Generation Restated with HanseNet +515M€, +15% YoY +581 M€, +18% YoY Focus on Improved Operating Profitability: Restated with HanseNet Ebitda 8.6BN€ - Stable YoY (Ebitda Margin +1.8 p.p. YoY) Core Ebitda 8.8BN€ - Stable YoY (Ebitda %+1.8 p.p. YoY) Markets: Strong Cash Cost Control: Domestic Cash Cost -1,146M€, -7.3% YoY & Improved Domestic Ebitda trend: Brazil -0.4% 3Q; -0.7% 2Q; -4.4% 1Q Brazil Defending Profitability: Ebitda 880M€ - Ebitda Margin 24.3% (+2.3 p.p. YoY) Disposal of non-core assets: HanseNet expected cash in ~900M€ Financial Discipline Reduced Average Cost of Debt: 5.5% vs. 6% at YE08 Figures considering HanseNet classified as Discontinued Operations Restated Figures include HanseNet consolidated line by line 3 FRANCO BERNABE’
  • 5.
    TELECOM ITALIA GROUP 9M2009 Results Improved Operating Free Cash Flow Euro mln, Reported data Operating FCF % OFCF on Revenues +515 3,932 3,417 19.5% Restated +3.6 p.p. 3,872 Restated 3,291 15.9% 9M 08 9M 09 9M 08 9M 09 Figures considering HanseNet classified as Discontinued Operations; Restated Figures include HanseNet consolidated line by line 4 FRANCO BERNABE’
  • 6.
    TELECOM ITALIA GROUP 9M2009 Results TI Group Improved Profitability: Organic Results vs. 2008 Revenues Revenues – Restated with HanseNet Euro mln, % -972M€ -925M€ 21,963 -4.4% 21,119 -4.4% 20,991 20,194 IIIQ -418, -5.6% IIIQ -404, -5.6% IIQ -284, -3.8% IIQ -268, -3.7% IQ -253, -3.7% IQ -270, -3.8% 9M 08 9M 09 9M 08 9M 09 EBITDA EBITDA – Restated with HanseNet +1.8 p.p. 42.7% 42.0% % on 40.9% +1.8 p.p. Revenues % on Revenues 40.2% -32M€ -21M€ 8,646 -0.4% 8,614 8,831 -0.2% 8,810 IIIQ -12, -0.4% IIIQ -9, -0.3% IIQ +49, +1.8% IIQ +58, +2.0% IQ -69, -2.4% IQ -70, -2.4% 9M 08 9M 09 9M 08 9M 09 Figures considering HanseNet classified as Discontinued Operations; Restated Figures include HanseNet consolidated line by line 5 FRANCO BERNABE’
  • 7.
    TELECOM ITALIA GROUP 9M 2009 Results Cash Cost Control: a Group-Wide Commitment Organic OPEX 9 Months 09 EBITDA Margin Euro mln, Organic data, % Δ abs. vs. Δ %. vs. Δ %. 1H09 vs 9M ‘08 9M ‘08 1H08 9M08 9M09 47.8% 46.1% Domestic 8,471 -775 -8.4% -6.5% +1.7 p.p. 24.3% TIM 2,742 -56 -2.0% -2.6% 22.0% +2.3 p.p. Brasil -3.7% TI Media 168 -20 -10.6% -10.4% -17.5% +13.8 p.p. Other BU & Eliminations 199 -42 42.7% 40.9% TI Group 11,580 -893 -7.2% -6.0% +1.8 p.p. Figures considering HanseNet classified as Discontinued Operations 6 FRANCO BERNABE’
  • 8.
    TELECOM ITALIA GROUP 9M2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 7 FRANCO BERNABE’
  • 9.
    TELECOM ITALIA GROUP 9M2009 Results Domestic – Steady Cost Control Offsetting Revenue Decline Euro mln, Organic data, % Revenues Key Highlights -920M€ Fixed business: 17,159 -5.4% 16,239 stable retail service revs* (down 5% in 3Q09, in line with 2Q09) with strong growth from BB and ICT Mobile -589, -8.3% services. small decline of total revenues performance vs. 2Q09 due to lower equipment sales in the business segment Wireline -198, -1.8% and lower contribution of wholesale Mobile business: Elim & Decline of service revenues trend reflecting impact of adj 9M 08 9M 09 repricing in 3Q08 Strong push on mobile BB reflected into strong pick- EBITDA up of browsing revs % on +1.7 p.p. 47.8% 9M 09 EBITDA trend confirms outperforming EBITDA Revenues 46.1% guidance for 2009 (9.9-10 bln euro, down YoY -3/4%) -145M€ EBITDA margin reached 50% in 3Q09 confirms TI as the 7,913 -1.8% 7,768 industry benchmark for profitability. -11, -0.4% Effective & selective action on OPEX base IIIQ IIQ -18, -0.7% Ebitda 2009 Target confirmed IQ -116, -4.4% 9.9 – 10.0 BN€ 9M 08 9M 09 * Wireline service revenues net of wholesale revs (both national & intl) 8 FRANCO BERNABE’
  • 10.
    TELECOM ITALIA GROUP 9M2009 Results Domestic Fixed – TI Access Performance ‘000 access Telecom Italia Retail Access Evolution & Line Losses Key Highlights ‘000 17,776 17,352 16,972 16,621 16,358 Lowest line losses level since third quarter TI Access 2007 through successful retention activities 3Q08 4Q08 1Q09 2Q09 3Q09 ‘000 3Q08 4Q08 1Q09 2Q09 3Q09 Competitors increasingly relying on wholesale product such as Wholesale Line Line losses -355 -380 -351 -263 Rental and Naked -424 OLO Access Growth (TI Wholesale) ‘000 ‘000 ‘000 ULL Naked WLR 3Q08 4Q08 1Q09 2Q09 3Q09 3Q08 4Q08 1Q09 2Q09 3Q09 3Q08 4Q08 1Q09 2Q09 3Q09 +211 9 FRANCO BERNABE’
  • 11.
    TELECOM ITALIA GROUP 9M2009 Results Domestic Fixed: Focus on BB Broadband Market Market Share on Net Adds ‘000 Total Italian BB accesses 10,834 11,775 11,968 +62 TI retail 6,754 6,843 6,859 6,921 43.6% accesses 6,610 26.5% 24.5% 31.9% Free 79% 81% 82% 6.7% Flat (%) 76% 77% 3Q08 4Q08 1Q09 2Q09 3Q09 3Q08 4Q08 1Q09 2Q09 3Q09 Broadband Service Revenues Key Highlights Euro million, Euro/month 18.2 Strong commercial push with the continued uptake ARPU BB 18.0 of Alice Casa (around 490K customers) and the + 8.0% launch of Alice Day, the new pay-as-you go offer BB Serv Revs 1,100 1,188 Successful advertising campaign with a high IIIQ +8.1% popularity rating IIQ +8.2% Confirm high single digit BB service revenues IQ +7.4% growth 9M 08 9M 09 10 FRANCO BERNABE’
  • 12.
    TELECOM ITALIA GROUP 9M2009 Results Domestic Fixed: Focus on ICT Italian ICT Market Revenues Trend (*) Key Highlights Euro Bln Continuously improving TI scale in a highly -22% fragmented ICT Market with an unique end-to-end proposition 6.6 5.1 Top / Large Account segment TI Market Public Administration Share on ICT 7% 11% Fully maximize the value of CNIPA contract won Revenues +4 p.p. in 2007, through Successful Web hosting, data center and application/desktop management for big 9M 08 9M 09 Customers such as INPS, INAIL and Ministry of Justice Focus Telecom Italia ICT Revenues Private sector Euro Mln Continuous up-take of an Infrastructure as a +11.2% Service Revenues service business model based on monthly fee +17.5% pricing structure 565 508 370 Business segment 315 Strong push on segment-specific offerings under the “Impresa Semplice” brand Standardizing off-the-shelf solutions for SME customers, by creating bundles of products, to 9M 08 9M 09 9M 08 9M 09 simplify the marketing process /adoption of solutions (*) Source SIRMI 11 FRANCO BERNABE’
  • 13.
    TELECOM ITALIA GROUP 9M2009 Results Domestic Mobile Revenues Euro mln Δ% 9M’09 YoY Total 6,496 (8.3) = Mobile Handsets (mln) 4.8 3.3 44% Handsets 339 (33.3) (2.4) 2G 3G+Laptops & 56% 63% Internet keys + 9M 08 9M 09 €cent/minute Mln minutes Outgoing +0% -3.7% Voice 3,508 (5.5) (2.9) 12.2 12.2 26,649 25,655 o/w Roaming 177 (16.9) 9M 08 9M 09 9M 08 9M 09 + €cent/minute Euro mln Visiting (foreign) -11.5% Business -10% Incoming 9.6 Traffic Received * 1,152 (10.1) (1.8) 8.5 150 135 9M 08 9M 09 9M 08 9M 09 + Euro mln Messaging Content Browsing -7% 774 717 +13% -27% VAS 1,497 (5.6) (1.2) 343 469 530 250 9M 08 9M 09 9M 08 9M 09 9M 08 9M 09 (*) Incoming, Visiting and Other Revenues 12 FRANCO BERNABE’
  • 14.
    TELECOM ITALIA GROUP 9M2009 Results Focus on Consumer Main Achievements in 3Q09 Key Activities Key Evidence TIM market share on TIM x 2 ARPU Internet Keys* uplift 45% >70% Increased push on mobile BB 40% Offer 39% Enriching TIM community products Dec’08 Jun ‘09 Sep ‘09 Consumer TIM x 2 Further push to improve fixed BB penetration Pre-paid AVG Continuous reduction of BB churn rate Strong improvement of spontaneous awareness A new format with very popular testimonials Advertising for both fixed and mobile 25 TIM Vod Highly commercial communication style to Wind 15 maximize acquisitions H3G Continued on air presence until year-end 5 Fastweb Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 September October Push of multi-brand channels to improve Continuous increase in multi-brand targeting 200 Distribution win-back capabilities PoS by YE Sales & New geomarketing approach in segmenting Launch of a specific sales channel fully focused points of sale on Ethnic segment Strong push on BB acquisition trough Around 60% of BB September activation through Telemarketing channel 187 channel (*) Source GFK 13 FRANCO BERNABE’
  • 15.
    TELECOM ITALIA GROUP 9M2009 Results Main Actions for 4Q09 – Consumer Segment Increase ADSL acquisition Launch of a new Tutto Compreso offer for RTG customers Push ADSL penetration bundling PC & BB connectivity (46% of households do not own a PC) Improve market Raise the game on Internet Mobile Increase up-selling push of mobile BB on existing BB customers with billing on TI positioning monthly fee First and only to launch14.4 Mbps speed all across the board Continue the turnaround of the mobile business Further enrich friend & family offers adding TIMx4, with no activation fee for new TIM customers Launch tailor made tariffs for further ethnic segment leveraging with TI Sparkle – a key TI advantage Fewer handsets but more TIM exclusivity 14 FRANCO BERNABE’
  • 16.
    TELECOM ITALIA GROUP 9M2009 Results Focus on Business Main Achievements in 3Q09 Key Activities Key Evidence Improved TI positioning based on Impresa Semplice brand and higher Quality of Net adds (‘000 lines) 1Q09 2Q09 3Q09 Service Fixed Increased commercial effort to improve Mobile* percentage of BB services on Win-back and * Human new customers Offer BB Churn reduction due to higher Quality of Mobile BB Access Net Adds (‘000 lines) Services Launch of new bundle offers: device + 1Q09 2Q09 3Q09 browsing / mailing services (to be continued in 4Q) Improved competitiveness and simplicity of Satisfaction both Fixed and Mobile offering Customer Satisfaction Index (out of 100) Customer New go-to-market approach, with fixed- mobile sales force integration and customer 1Q09 2Q09 3Q09 portfolio management 15 FRANCO BERNABE’
  • 17.
    TELECOM ITALIA GROUP 9M2009 Results Main Actions for 4Q09 - Business Segment Fixed: sustain price premium positioning & improve QoS Line repair within next business day, free of charge: at least 3 times faster than average competitors SLAs Double upload rate on 20Mbit/s connection free of charge Defend our core ICT: letting every Italian company experience TI’s superior infrastructure Bundling PC and ICT services to broaden certified @mail and remote backup strength, penetration attack New “Tutto Compreso”offer: a turn key solution including minimum guaranteed speed connectivity, scalable Cisco router and customer service assistance on the adjacent following working day businesses Mobile: improve acquisition and VAS penetration Voice minutes basket shared among company employees for SMEs Tailor made bundle for SoHo including voice, handsets and bolt-on SMS & Data features. Enriching mail and browsing portfolio offering, adding Flat solutions for light users and heavy users 16 FRANCO BERNABE’
  • 18.
    TELECOM ITALIA GROUP 9M2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 17 FRANCO BERNABE’
  • 19.
    TELECOM ITALIA GROUP 9M2009 Results TIM Brasil: Improving Market Share & Quality Service Market Share Evolution Prepaid Net 33.3 29.1% mln lines Share (%) 26.5% 27.3% 29.8 29,. 25.4% 25.0% 24.2% Market 23.5% 25.2 + 3.4 Share (%) 25.9% 23.7% 23.8% Jan 08 Dec 08 Mar 09 Sep 09 Postpaid 18.3% 12.1% mln lines 17.4% 6.8 -0.6 + 0.1 -10.1% 6.3 6.2 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 Jan 08 Dec 08 Mar 09 Sep 09 Overall Quality Service –YTD 2009 Customer Satisfaction % of target reached on overall service quality, TIM vs. competitors CRC Average satisfaction, consumer segment YoY - 0.2 + 5.2 + 2.1 -1.2 - 5.1 -7.8 - 0.9 7.5 7.5 (p.p.) Pre-paid 7.4 99.3% -0.5 7.1 +0.5 7.0 96.8% 95.5% 93.9% 92.6% 90.2% 6.6 6.7 Post-paid 6.3 83.0% 6.1 +0.7 6.0 3Q08 4Q08 1Q09 2Q09 3Q09* Player 1 TIM Player 6 Player 5 Player 4 Player 2 Player 3 * Jul/09 e Aug/09 Sources: TIM Brasil - 12nd Customer Satisfaction Monitoring - may-jun/09; Source: Anatel CRC Monthly Satisfaction Research 18 FRANCO BERNABE’
  • 20.
    TELECOM ITALIA GROUP 9M2009 Results TIM Brasil: Organic Main Results Revenues Key Highlights Euro mln, % +34M€ 3,588 +1.0% 3,622 Top line limited growth affected by long tail effects from 2008 loss in post-paid customer base IIIQ -13, -1.2% (*) Good performance of Value Added Services fuelled by microbrowsing stimulated through exclusive and distinctive offers of smartphones IIQ +40, +3.4% Lower push on 2G handset sales in order to stimulate a “Chip-only” approach IQ +7, +0.7% 9M 08 9M 09 EBITDA Ebitda margin increase driven by: +2.3 p.p. 24.3% Lower bad debt % on 22.0% Revenues Continued cash cost efficiencies +90M€ 880 790 +11.5% Improved revenue mix IIIQ -4, -2.0% Ebitda 2009 Target confirmed IIQ +50, +20.1% ~3.6 BNR$ IQ +44, +20.7% (*) 80 million reais (approx. 28 million euro) reclassified from “Other Operating Income” to “Other Service Revenues” 9M 08 9M 09 No EBITDA impact. No reclassification of previous year needed at TI Group level 19 FRANCO BERNABE’
  • 21.
    TELECOM ITALIA GROUP 9M2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 20 FRANCO BERNABE’
  • 22.
    TELECOM ITALIA GROUP 9M2009 Results Focus on HanseNet: the Rationale behind the Disposal Regulatory framework very REGULATORY AND TECH HanseNet OpFCF Trend VDSL CapEx unfriendly towards alternative Scenario FRAMEWORK operators Capital intensive investments needed to match incumbent’s “High Speed” offering (VDSL/Fiber) 2007 2008 1H09 M/L Term compromising OpFCF generation Ebitda Capex ~900M€ expected cash BB market is growing at a slower consideration German Broadband Market Share pace… Implied value per MARKET SHARE 50,0% … with incumbent and cable sub at significant EVOLUTION operators reinforcing their position… 30,0% premium vs. … and alternative operators lagging 10,0% comparable behind 2007 2008 1H 09 transactions in Incumbent + cables Other Altnets HanseNet the last twelve months HanseNet ARPU Trend PRICING TREND Continued pricing pressure with very aggressive promotions by alternative operators trying to catch up with not replicable “High Speed” offers 1H07 1H08 1H09 21 FRANCO BERNABE’
  • 23.
    TELECOM ITALIA GROUP 9M2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 22 FRANCO BERNABE’
  • 24.
    TELECOM ITALIA GROUP 9M2009 Results TI Group 9M 09 Progress Report Improved Cash Flow Generation +515M€, +15% YoY Focus on Improved Operating Profitability: Ebitda 8.6BN€ - Stable YoY (Ebitda Margin +1.8 p.p. YoY) Core Markets: Strong Cash Cost Control: Domestic Cash Cost -1,146M€, -7.3% YoY Stabilise & Ebitda and Improved Domestic Ebitda trend: Brazil -0.4% 3Q; -0.7% 2Q; -4.4% 1Q Free Cash Brazil Defending Profitability: Flow Ebitda 880M€ - Ebitda Margin 24.3% (+2.3 p.p. YoY) Generation Disposal of non-core assets: HanseNet expected cash in ~900M€ Financial Discipline Reduced Average Cost of Debt: 5.5% vs. 6% at YE08 Figures considering HanseNet classified as Discontinued Operations 23 FRANCO BERNABE’
  • 25.
    TELECOM ITALIA GROUP 9M2009 Results Agenda TI Group Main Achievements Focus on Domestic Business Focus on TIM Brasil Focus on HanseNet Wrap Up Appendix 24 FRANCO BERNABE’
  • 26.
    TELECOM ITALIA GROUP 9M2009 Results Domestic – Revenues by Customer Segment and Technology Euro million, %, Organic data Domestic Revenues Domestic Revenues by Technology by Customer Segment -5.4% -5.4% Total Domestic 17,159 17,159 TI Sparkle & 16,239 16,239 2,639 Nat. wholesale 2,784 -4.0% Mobile -8.3% Top Business -9.3% Wireline -1.8% -7.5% Consumer Elim, adj & -352 -342 9M 08 9M 09 others 9M 08 9M 09 1Q09 2Q09 3Q09 Domestic 5,357 5,534 5,348 Mobile 2,059 2,253 2,184 Wireline 3,677 3,724 3,569 25 FRANCO BERNABE’