Telecom Italia Group 2Q15 Results Marco Patuano Piergiorgio Peluso - PowerPoint PPT Presentation

TELECOM ITALIA GROUP 2Q’15 Results Rome, August 7th, 2015 Telecom Italia Group 2Q’15 Results Marco Patuano Piergiorgio Peluso

Agenda TI 2Q’15 Results  Marco Patuano Financial Update  Piergiorgio Peluso Take-Aways  Marco Patuano Appendix 2Q’15 Results 2 Marco Patuano - Piergiorgio Peluso FY 2014 Preliminary Results & 2015-2017 Plan Outline

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 estimates regarding future growth in the different business lines and the global business, financial results and other aspects of the activities and situations relating to the Telecom Italia 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 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 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 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 Half-Year Condensed Consolidated Financial Statements as of and for the six months ended 30 June 2015 have been applied on a basis consistent with those adopted in the Annual Consolidated Financial Statements at 31 December 2014, to which reference should be made, except for the new standards and interpretations adopted by the Telecom Italia Group starting from 1 January 2015 which had no effects on the Half-Year Condensed Consolidated Financial Statements as of and for the six months ended 30 June 2015. Please note that the limited review on the Telecom Italia Group Half-Year Condensed Consolidated Financial Statements at 30 June 2015 has not yet been completed. 2Q’15 Results 3 Marco Patuano - Piergiorgio Peluso

2Q’15 Main Events Domes Domestic Brazil Brazil  Positive performance on Mobile Business  Improving trends both on Domestic Service Generated (+1.1% YoY), supported by very strong Revenues (+1.6pp QoQ) & Underlying Ebitda performance in Innovative Mobile VAS (+44% YoY) (+2.1pp QoQ)  Negative Service Revenues Trend affected by  Further recovery in Mobile Service Revenues: MTRs, Reduction in Prepaid lines, weak Macro and -2.5% YoY vs -4.2%YoY in 1Q’15 slowdown in Traditional (-13.9% YoY)  Solid performance in Fixed Service Revenues:  Solid postpaid CB growth: +525k lines in 2Q’15 -1.9%YoY vs -4.4% YoY in 1Q’15 Inwi In wit Charges & arges & Risk P sk Provisions isions  Successful IPO ~ 36% of Inwit ( greenshoe  369 mln euro posted in our 1H’15 Accounts include excluded) delivered to TI in 2Q’15 a net total charges and risk provisions resulting from: consideration of 784 mln euro  regulatory disputes and penalties and the  Related Group-level Net Worth strengthening liabilities related to those expenses, of 253 mln euro  disputes with former employees, and  liabilities with customers and/or suppliers Real Estat Real Estate P Plan an Ne Net Debt Debt  Overall savings of > 150 mln euro per annum  Net debt reduction to ~27 bln euro in 2Q’15 vs from 2018 ~27.4 bln euro in 1Q’15 incorporates:  Lease renegotiations as of June 30 carry a  ~ -0.7 bln euro from operations, M&A IAS-17 impact on Debt of 676 mln euro; and special projects;  ~ +0.1 bln euro for 4G license clean-up yearly cost reduced, no impact on liquidity costs in Brazil  Expected Ebitda contribution on FY’15 from  ~ +0.2 bln euro for dividend payments the ongoing Plan is about 50 mln euro 2Q’15 Results 4 Marco Patuano

Domestic Revenues are Accelerating their Uptrend Reported data, € mln, %YoY Total Revenues Service Revenues 1Q 2Q 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 -1.6% -2.6% -1.7% -3.3% 1H’15 -5.0% -5.0% -2.1% YoY +5.5pp +7.2pp 15vs14 FY’14 -6.6% 14vs13 +1.3pp +1.6pp -8.8% -8.9% -8.2% +113 -8.3% -10.1% -10.5% 3,728 3,803 3,805 3,967 3,631 3,744 2013 2014 2015 Mobile Service Revenues Fixed Service Revenues € mln, %YoY 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 +10.8 pp +6.7 pp YoY YoY -2.5% -1.9% -4.2% -7.1% 1H’15 -5.3% -5.7% -3.3% YoY -4.4% FY’14 -10.3% FY’14 -7.1% 1H’15 -3.1% YoY -7.2% -13.3% -7.4% -8.6% -14.9% 2Q’15 Results 5 Marco Patuano

Further Improvement in Underlying Domestic Ebitda € mln, %YoY 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 >+5 pp YoY Underlying -2.7% -3% Ebitda -4.8% -8% -7% on 2Q’14 on 2Q’15 Adjustments for  +72 mln euro release TIS  -369 mln euro for charges one-off effects in provision and risk provisions  ~-30 mln euro for  ~-40 mln euro for 2Q Ebitda YoY regulatory disputes labor-related items performance:  ~-15 mln euro for others  ~+10 mln euro for others Reported Ebitda -7.5% -10.2% -10.9% -11.6% -27.7% 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 2Q’15 Results 6 Marco Patuano

Domestic Capex: continued growth on Innovative € mln +28.0% +329 1,506 -16 +1 78 +31 135 1,177 +313 Total 246 47 Others 133 Commercial 261 IT 1,049 ~50% 736 +42.5% Network for NGN & LTE * 1H'14 Network IT Commercial others 1H'15 Total +257 Innovative +212 +4 +10 +31 -45 Traditional -16 -20 -9 - +117 2G License +117 * TIS & others 2Q’15 Results 7 Marco Patuano

Speeding Up on LTE & NGN MBB 4G 4G users 8,677 9,151 9,596 10,071 10,480 10,754 >83% 25% Co Coverage rage 77% 17% 13% % LTE on 7% 9% 5% MBB LTE 1,803 +860 1,343 +460 2,663 +499 844 users +234 +201 610 409 232 Cities 51% with 8,752 8,728 Internet 8,541 8,677 4G Plus 8,268 8,091 users 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 374 Fiber Fiber ~37% +84 Co Coverage rage Fiber CB 290 +59 29% 231 +80 +8 pp in 151 6 months 19% +48 103 +58 45 1% 1% 2% 3% 4% 5% Fiber CB on BB CB 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 6,933 6,939 6,932 6,921 6,945 6,971 BB CB 2Q’15 Results 8 Marco Patuano

Domestic Mobile € mln, %YoY Total Revenues Service Revenues - Trend YoY 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 Total 1,175 1,264 1,284 1,368 1,151 1,236 -0.4% -0.8% -1.3% -1.7% -1.8% -2.1% -2.0% -3.4% 185 -4.0% 95 126 -2.5% 127 Handsets -5.0% 76 98 -4.2% -5.7% -11.9% -13.1% -7.1% 1,189 1,183 Service Service 1,138 1,099 1,109 -13.3% 1,053 -14.9% Bundle adoption 67% overall (+8 p.p. YoY) QoQ +1.7 pp +6.1 pp +1.4 pp +1.5 pp +1.7 pp 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15  CB  ARPU/Mix Innovative vs. Traditional Consumer Consumer -2.1% -4.3% Service Rev. -6.6% -7.2% Innovative Traditional FY’14 -11.1% 40% +11.6 pp 60% -13.7% YoY -16.9% 32% Business Business -4.2% -5.3% Service Rev. 68% -8.4% 25% -10.3% FY’14 -11.7% 75% -12.1% +11.5 pp -15.7% 2Q’13 2Q’14 2Q’15 YoY 2Q’15 Results 9 Marco Patuano

Mobile Consumer: Offer Simplification & Evolution ~1.9 Commercial Strategy Consumer Small Screen LTE ~1.5 ~1.4  Innovation through ~1.2 Simplification ~1.0 ~0.9  Continuous Offer Evolution +1 mln  Maximise reach of LTE on Jan Feb Mar Apr May Jun our Customer Base Total Consumer Small Screen ~6.9 ~7.0 ~7.1 ~7.2 ~7.2 ~7.4 Focus on Options with Data (1) ~7.5 LTE 1.5 ~15% of «Full» Non-LTE bundles and ~20% of «Voice+Data» ones are on LTE devices without 6.0 LTE Options with Data Full Voice&Data SMS&Data Data Only on Smartphone Weight on total 83% 8% 1% 8% (1) excluding data only 2Q’15 Results 10 Marco Patuano