FRANCO BERNABE’
NOME COGNOME DEL RELATORE Safe Harbour This presentation contains 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 Company with respect to 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 Company's activities and strategies. 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 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 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 , which set out certain factors that could cause actual results to be materially different from the forward-looking statements contained herein. 2
NOME COGNOME DEL RELATORE Agenda � Key Key M Messages ssages � Focus on Core Markets Focus on Core Markets � Domesti Domestic Highlights Highlights � TIM Brasil M Brasil Highlights Highlights � Targets Targets 3
NOME COGNOME DEL RELATORE Key Objectives and Strategy’s Levers Dom Domestic Enhanced Enhanced Focus on Focus on Free Cas Free Cash Core Core Flow Flow Markets Markets A Platform to A Platform to Brazil Brazil Generat neration ion Create Solid Create Solid Growth of Growth of Shareholder Shareholder No M&A for Geographic No M&A for Geographic De Dele leve vera rage & & Value Value Expansion Expansion Capi Capital tal Strengthen Strengthen Balance lance Disci Di scipli line ne Non-Core As Non-Cor Asset set Di Disposals osals Sheet Sh 4
NOME COGNOME DEL RELATORE Key Objectives and Commitments – 2009-2011 ~€22.0 Bn ~€22.0 Bn Group Operating Free Cash Flow Group Operating Free Cash Flow cumulative ’09 – cumulative ’09 – ‘11 11 ~ - €2.0 Bn ~ - 2.0 Bn ’11 vs. ‘08 ’11 vs. ‘08 Domestic Cash Cost Efficiency Plan Domestic Cash Cost Efficiency Plan 9,000 vs 2007 YE(1) 9,000 vs 2007 YE(1) Domestic Headcount Reduction Domest ic Headcount Reduction Non-Core Asset Disposals Non-Core Asset Disposals Up to €3.0 Bn Up to €3.0 Bn Strong Focus on Deleveraging Strong Focus on Deleveraging Net Debt/Ebitda Net Debt/Ebitda 2011 ~ 2.3X 2011 ~ 2.3X (1) Including 5,000 announced in June 08 5
NOME COGNOME DEL RELATORE Key Objectives and Strategy’s Levers – Core Markets Reverse Revenue Trend Reverse Revenue Trend Cash Cost Rational Cash Cost Rat onalizat ization ion Dom Domestic Enhanced Enhanced Enhanced Regulatory Enhanced Regulatory D Dialogue alogue Focus on Focus on Free Cash Free C sh Custome Customer Satisfacti Satisfaction on Core Core Flow Flow Markets Markets Mobile Broadband Challenger Mobile Broadband Challenger Generation Generation Brazil Brazil Pro Promote ote F Fixe xed-Mo Mobi bile le Mig Migration 6
NOME COGNOME DEL RELATORE Operating Free Cash Flow is our priority Reverse th Reverse th verse the verse the e e Revenues trend Revenues trend Revenues trend Revenues trend Revenues Reve CA CAGR: > : >2.0 .0% CAGR: > CA : >2.0 .0% (Organic) (Organic) (Organic) (Organic) Opex Opex Cum. ‘09-’11 Cum. ‘09-’11 Cash Costs Effi Cash Costs Effici Cash Costs Effi Cash Costs Effici cien cien ency ency Operat erating Free ing Free % on % on Re Reve venue nues: - - ~ ~5pp 5pp 5pp % on % on Re Reve venue nues: 5pp Cash Flow: Cash Flow: (2011 (2011 (2011 vs (2011 vs 2008) vs vs 2008) 2008) 2008) € ~22 b € ~ bn Capex Capex Working Capital Working Capital ~25% ~25 Opera Op erating ing FCF* 2008 2008 2009 2009 2010 010 2011 011 * OPFCF on Revenues based on Group Reported Data 7
NOME COGNOME DEL RELATORE Reverse Revenue Trends Group R Group Revenu nues es Trend end ….value growth ….value rowth TI Domestic TI Domes ic Reven Revenues es 2008 2008 � BroadBand BroadBand Conn onnecti ctivity ity: CAGR CA GR “I “Innovative nnovative Fi Fixed and M xed and Mobi bile B Broadba dband nd � ‘08 – ‘08 – ‘11 11 Mobile Mob ile VAS VAS � Revenues” Revenues” � Adjacent Bu Adjacent Busines sinesses es: IP IPTV/Dig igital H Home/ICT � ~ +18% 18% ~ +18% 18% On On lin line a e adv. v. / S / Serv rvic ice e Exp Exposure re � “Innovat “Innovative e Domestic Domestic � Ver Vertical Applicati ical Application Revenues” Reve Group Group Group Group � Mobi Mobile v voice Cagr Organic Cagr Cagr Cagr Organic “Traditional “Traditional � Nar Narrow B ow Band nd ’08-’11 ’08-’11 ’08-’11 ’08-’11 Revenues” Revenues” � Fixed voice Fixed voice >2.0% >2.0% >2.0% >2.0% ~ -4% -4% ~ -4% -4% � Trad Traditional tional Fixed Data Fixed Data Int’l In & Other & Othe 2007 2008 2009 2010 2011 2011 2011 Innovative on 28% 28% 14% 14% 17% 17% 28% 28% 14% 14% 17% 17% Revenue (%) 8
NOME COGNOME DEL RELATORE Domestic Cash Cost Efficiency Plan Or Organic ganic Domestic omestic Cash Costs ash Costs Efficiency by Ye Efficiency by Year ar 55% 55% Opex Ope 30% 30% 25% 25% 60% 60% Cape Capex 45% 45% 40% 40% 2008 2008 2011 2011 CUM ’09-’11 CUM ’09 ’11 2009 2009 2010 2010 Initiatives Initiatives (€ Bn) GROWTH GROWTH <+1.0 Bn <+1.0 1 0.5 0.5 Network Ope Net k Operat ations ns ENABLER ENABLER Sales Sales & Distribution Distribution 2 0.4 0.4 Organization ganization & & 3 0.3 0.3 Supp Suppor orting ting Pr Process ~ - ~ - 2.0 .0 Bn Bn EF EFFICIENCY FICIENCY ~ - ~ - 2.0 .0 Bn Bn 0.2 0.2 4 IT IT 0.2 0.2 Customer Customer Operat Operatio ions ns 5 6 Delivery & livery & Assur Assuranc nce 0.3 0.3 2011 2011 Building & ilding & 7 0.1 0.1 Energy En ergy Manag Management ment 9
NOME COGNOME DEL RELATORE Domestic Headcount Reduction Headco He coun unt ( t (‘000) 000) 64.1 ~ -2.0 ~85% ~ 9,000 ~ 9, 000 ~ -3.0 ~15% HEADCOUNT HEADCOUNT ~60% REDUCTION REDUCTION ~ -2.0 ~ -2.0 ~40% ~ 14% ~ 14% v vs 2007 2007 ~55.1 ~70% 100% ~30% Plan 2009 - 2011 Plan 2009 - 2011 Redundancy Program 2008 – 2010 Agreed with Unions (5,000 Employees) 2008 2009 2010 2011 Year end 2011 Year end 2007 10
NOME COGNOME DEL RELATORE Enhanced Regulatory Dialogue Strategic Objectives Strategic Objectives Achievements ‘08 Achievements ‘08 Key Targets ’09-’11 y Targets ’09-’11 •TI TI undertakings draft prop undertakings draft proposal osal on key •Reach h mo monthly r y rent ntal fee i al fee in lin line with EU with EU access markets (Oct. 29th) average (costing criteria, inflation avera •2009 2009 LLU monthly rental fee LLU monthly rental fee increase increase: Protect existing access recovery) reference Offer to AGCOM (Oct. 23th) infrastructure value •Preserve retail minus pricing on naked •2009 2009 PSTN TN monthly rent monthly rental fe al fee incr increase ease: : bitstream differ differentiat tiated b ed by c cust stomer er (+1,26 €/month) request to AGCOM (Oct. typology (C/B) typology (C/B) 30 th ) •Avoid “significant” acce access ob ss obligat ligations ons on •Bill Bill fo for public fu r public funding to su nding to supp pport BB ort BB Create a clear and stable development (800 mln€ + 200 mln€ ‘07- development NGN deployment in competitive contest for new ’13) geographic areas infrastructure •Bill for simplification of author authorization ion •Introduce for forwar ard l d lookin ing pr pricin ing c g criteria ia deployment process a process and d sharing of ing of public public to balance NGN investment incentivation and allowing risk sharing infr in frast astruc uctu tures for NGN deployment •“Glide path” for mobile and mobile and fi fixe xed d •Achieve symmetry symmetry with fixed OLO’s termination ta terminati n tariffs riffs Obtain more market termination rates •Improved capability to deal with the simmetry conditions for •Review retail price replicability retail price replicability: Price tests requests for custom customers migration ers migration rules and obligations TI •New data pr data prote otection on an and d pr privacy ivacy regula reg ulatio tion (ie: commercial databases) 11
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