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MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Telecom Italia – Domestic MarketFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Safe Harbour
2
These presentations contain statements that constitute forward‐looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and includestatements regarding the intent, belief or current expectations of the customer base, estimates regarding future growthin the different business lines and the global business, market share, financial results and other aspects of the activitiesand situation relating to the Company and the Group.Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, andactual results may differ materially from those projected or implied in the forward looking statements as a result ofvarious factors. As a result thereof, Telecom Italia S.p.A. makes no representation, whether express or implied, as to theconformity 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 datehereof, but forward looking information by its nature involves risks and uncertainties, which are outside our control, andcould significantly affect expected results.Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of thedate of this presentation. Telecom Italia S.p.A. undertakes no obligation to release publicly the results of any revisions tothese forward looking statements which may be made to reflect events and circumstances after the date of thispresentation, including, without limitation, changes in Telecom Italia S.p.A. business or acquisition strategy or plannedcapital expenditures or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged toconsult the Company's Annual Report on Form 20‐F as well as periodic filings made on Form 6‐K, which are on file withthe United States Securities and Exchange Commission.It should also be noted that starting from the year 2010, Telecom Italia reclassified some taxes paid in Brazil of non‐material amount, previously included in “Other operating expenses”, in reduction of “Revenues” and “Other income” inorder to ensure a better comparability and intelligibility of the financial information.
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Agenda
Telecom Italia Domestic 2011 Results
Telecom Italia Domestic Plan Fixed Business Mobile Business Innovation Focus on Costs Capex Allocation
Take-Aways
3
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
2011: Continued Recovery in a worsened context%, Euro mln, Organic data
1Q11 2Q11 3Q11 4Q11
-7.4%-6.0%
-3.8%-2.0%
Revenues EBITDA
19,033-4.8%FY11
4
4,596 4,760 4,742 4,935Abs
YoY
1Q11 2Q11 3Q11 4Q11
-7.6%
-4.8%-2.5%
-0.3%
2,273 2,318 2,478 2,282Abs
FY11
Ebitda-Capex
-5.7%-4.5%
-2.9%-1.3%
1,610 1,623 1,821 1,320Abs
YoY
1Q11 2Q11 3Q11 4Q11
FY116,374
Highlights
Tough external macro-economic
conditions, regulatory evolution and
competitive environment
Strong Cash Generation, critical for TI
Group strategic achievement
9,351-3.9%
YoY Including effect of:- Credit provisions: -41 €Mln- VAT increase: -12 €Mln- IAS19: +43 € Mln
LTE excluded
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Euro mln, Organic data, %
1Q
2Q
3Q
-1.9%4Q
-2.1%
-4.9%
-4.9%
13,466 13,001-3.5%
‘000 Access
Total TI
Domestic Fixed: Paving the Way to Access Valorisation
Highlights
Telecom Italia Access TI Lines Evolution
Wireline Services Revenues Trend
‘000
2009 2010 2011
+1,221
+612+289
-1,255
-746 -699
Who
lesa
leR
etai
l
5
Better performance on Line Losses in a worse market and economic environment
Infra-OLO churn increased
Wireline Service Revenues trend improvement confirmed
Important evidence of TI’s ability to monetize its premium value proposition
Who
lesa
leR
etai
l
TI -206OLO +181
-25-133
-176-77
22,122
15,351
6,771
1Q 2Q Q Q2010 2011
14,652
7,060
21,712
-410
TI -183OLO +51
TI -135OLO -42 TI -175
OLO+98
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Domestic Fixed: Adding Value to Broadband
Broadband Services Revenues
TI Retail Broadband Accesses Highlights
Broadband ARPU
Euro/month/line -1.3%
18.6 18.4
2010 2011
6
Lower market growth.
OLO’s price war not followed by TI: BB
Customer Base successfully defended.
Success on Value Approach: growth in
Revenues and in consumer ARPU,
supported by SuperInternet results.
Total Italian BB accesses
13,082 13,455‘000
12,294
Free
7,125
2009 2010
7,1757,000
2011Total Market
Share 56.9% 54.8% 53.0%
87%86%83%
+788 +373
% yoy growth
1H11 2H11
-0.3%
+0.5%
4Q11 consumer ARPU +2.1%YoY
Flat
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Domestic Mobile: Customer Base Trend
Churned SIM cards
Total SIM cards Net Adds
Gross Adds
‘000
Churn Rate %
‘000
‘000
‘000
+1,209 vs YE10>7x FY 2010 performance
FY 11FY 10
7,343
8,344
+13.6%
FY 11FY 10
7
+3.9%
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
-11.7%
-8.7%
-7.5% -7.1%
-9.6%
-6.7%
-5.1%-4.7%
1Q 2Q 3Q 4Q
Oct-Nov ~- 6%
% YoY
Handsets Revenues
8
Total Revenues% YoY, Organic data
-7.1%FY11
FY10 -10.5%
Services Revenues
% YoY
Excl. MTR
Browsing Revenues
% YoY
% Browsing Revenues on Service Revenues
12% 13% 14% 15%
Domestic Mobile: 2011 Key Revenues Trends
FY11+40.2%
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
4.6 5.8
4Q10 1Q11 2Q11 3Q11 4Q11
Mobile Consumer: FY11 Highlights
In 2011 TIM became Best in Class in Customer satisfaction on:
Point of Sales, Customer Care & Web-Site
8.4% 8.8%
TIM Total Market
Flat offers (TIMx, Tutto Compreso)
% Smartphone on Handsets sold
~56%~56%
~3.4 mlnTotal H/S* Smartphones
+210% YoY
FY11
mln
FY10 FY11
1.542.29
+49%
ARPU(€/month)
6.9 7.1 +3%
Customer Base Growth Loyalty Increase Mobile BroadBand
Strong increase in acquisitions
Sound Growth in CB Calling
MNP Churn Rate
Push on flat offers
TIM MNP Churn lower than Market Average
Small Screen Handsets
*Source GFK Survey
Small Screen Users
9
(mln)
20.320112010
1Q 2Q 3Q 4Q
+19%YoY
Gross Adds Net Adds
FY11
>1 Mln
FY10 FY11
>1 mln
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
242
3,082
1,485
420
316
799
63
Q410
3,602
362
(84)
(15.3)
(3.1)
(6.0)
(1.7)
(4.4)
(1.0)
n.m.
YoY %
(2.8)
5.5
16.7
Products
Domestic Core Services
Voice & Access
Internet
Business Data
National Wholesale
Other
Total
Sparkle Group
Eliminations
205
2,985
1,396
413
302
791
83
Q411
3,502
382
(70)
Euro mln, Organic Data, %
Domestic Wireline Revenues
3Q11 vs 10 % YoY
(19.0)
(2.1)
(6.0)
(0.5)
1.7
3.0
n.m.
(2.8)
(4.9)
15.0
10
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Euro mln, Organic Data, %
(*) Total Retail Services Revenues net of Incoming(**) Including Roaming & Visitors
Total
o/w Services
WholesaleRetail
o/w VAS
o/w Incoming
Domestic Mobile Revenues
o/w Business Generated (*)
o/w Outgoing Voice (**)
Q410
1,870
1,719
65
1,805
508
221
86
1,498
990
Q411
1,828
1,612
47
1,781
534
178
169
1,434
899
% YoY
(2.2)
(6.2)
(27.7)
(1.3)
5.1
(19.5)
96.5
(4.3)
(9.1)
Handsets
3Q11 vs 10 % YoY
(6.5 )
(6.9 )
(21.4)
(5.9)
2.1
(19.3)
34
(5.2)
(8.6)
11
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Agenda
12
Telecom Italia Domestic 2011 Results
Telecom Italia Domestic Plan Fixed Business Mobile Business Innovation Focus on Costs Capex Allocation
Take-Aways
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
2012 Italian Economic Outlook
GDP ∆% Consumer Spending ∆%
Unemployment rate % Consumers refrain from non-essential spending in2012
Near-term outlook for households consumption ispoor
Unemployment rate expected to grow further
Rationalization on Corporate and PA spendingpartially offset by Government driven investmentsin innovation
Source: Global Insight Feb. 2012
1.40.4
-1.5
0.20.9
2010 2011 2012 2013 2014
1.10.4
-1.0
0.01.2
2010 2011 2012 2013 2014
8.4 8.3
9.1 9.3 9.1
2010 2011 2012 2013 2014
13
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
12.6
16.6
3.6
9.1
2011 2014
Italian TLC Market Evolution & Regulatory Framework
14
1 addressable
Bln €
ICT1
Mobile Service
Products
Fixed Services
Domestic Market by Technology
41.9
TLC
Regulatory Scenario
New MTR glide path
International roaming prices on EU’s agenda
FTR: full symmetry already reached, IPinterconnection transition in progress
Regulatory guideline on NGNA frameworkunder definition. Geographical segmentationof fiber bitstream confirmed. No constraints onTI’s NGAN architecture.
6.3
3.5
1.70.98
5.3
2.51.5
current 07/2012 01/2013 07/2013
H3G TI/Vod/Wind
€cent/min
Source: Sirmi
32.8
Total
CAGR ‘11-’14
-2.1%-3/4% in 2012
TLC Services 29.2
Increase
Stable
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
15
Customer Base
Consumer Fixed
Loyallty
New Business
Consumer Mobile Business Top Client & PA
Preserve Free Cash
Flow GenerationEfficiency Processes Re-engineering
Efficiencies on Customer Ops (Credit & Caring Activities)
Sales Force Model Rationalization
Commercial Costs Industrial Costs Personnel
Sustaining Top Line
Unitary Cost reduction vs Volumesincrease
Focus on Right-sizing and Total Cost Control
Nurturing our Future
Network IT & Cloud
Efficiency Premium Performance
LTE Roll-out Market-driven NGAN
Maintenance and Development Innovative Broadband Services Internal Customer Driven
Platforms Cloud Infrastructure for
Market Development
Domestic Strategic Pillars: Aiming at Cash Generation
Increase Access Value Extend All Inclusive
penetration Sustain Premium
Positioning
Proactive caring approach
Lock-in differentiated offers
New Segment growth (ethnic and youth)
Further improvement on value acquisition mix
Improve Convergent approach/offer
Focus on win-backs, combining value for money with premium price defense
Widen content offer
Address new targets
Light ICT standardized solutions
Develop M2M application market
Leverage on Fixed-Mobile synergy
Increase flat offer penetration
Increase Cloud adoption leveraging on “the only cloud with its own network inside”
New business approach to better care for Top Clients
Proactive support to Govt. digitalization process
End2End service management
Enlarge ICT portfolio
Enrich smartphone and
tablet application portfolio
“Beyond connectivity”
Maximize Mobile Ultra Broadband wave
Personal Cloud and Innovative service enhancement
Strengthen CRM activities on voice and data for enhancing value
Customer view (vs sim)
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Agenda
16
Telecom Italia Domestic 2011 Results
Telecom Italia Domestic Plan Fixed Business Mobile Business Innovation Focus on Costs Capex Allocation
Take-Aways
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
17
Fixed Business: Safeguarding the Value
Increase flat/bundle offers
penetration
Increase focus on prospect
customers to improve win-back
Refining Segmentation to Address
new Targets
CB lock-in through innovative
products and new offerings
Widen bolt-on offers portfolio
Proactive Caring approach
Engage TIM Shops to increase
BB sales
Portfolio enhancement
Widening portfolio for content,
applications bundled services
Quality and Service Level
Agreement differentiation
according to Customer Value
Wireline Access trend
‘11‐’14 CAGR
BB penetration on TI CB
2011 2014 2011 2014
48.6%
14.7
mln
BB Services Revenues
1.6
‘11-’14 CAGR
2011 2014
Euro bln
-4% >5pp>2%
Access Value Increase Enhance Broadband Experience Sustain Premium Positioning
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Agenda
18
Telecom Italia Domestic 2011 Results
Telecom Italia Domestic Plan Fixed Business Mobile Business Innovation Focus on Costs Capex Allocation
Take-Aways
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
19
Customer Base Growth Loyalty Increase Mobile BroadBand
Mobile Business: Surfing Data Opportunities
Maintaining leadership on acquisitions keeping focus on quality & value
More focus on segmented offers with limited and targeted use of pricing lever
CRM campaign optimization through deeper customer knowledge (profiling and social network analysis)
Increase focus on bundle and lock-in offers tailored by segment
Technological Distinctiveness
Leveraging on network leadership to deliver innovation to Mass-Market
Exploit recognized TIM brand attribute of reliability to lead LTE evolution
Continue to push on bundle smartphone/services and pack offerings for mass market
CRM activities extended to data services
PREMIUM offers introduction with higher speed, better network quality and radio priority
Wireless CB trend
‘11‐’14 CAGR
Mobile BB penetration on TIM CB
2011 2014 2011 2014
22%
32.2
mlnMobile BB Revenues trend
‘11‐’14 CAGR
2011 2014
>3%
10pp10%
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Mobile Technological Evolution while Protecting Profitability
Increasing speed availability
Strengthening HSDPA and LTE introduction
Maximum speed(kbps) 2009 2010 2011 2012 2013
3,6 7,2 14,442
84100
2014 January2012
June2012
Roadmap 42MB coverage
The advantages of 42MB
With PREMIUM offers Customers have an effective perception of Higher Speed
Fiber Bakhauling Dual Carrier NetworkPriority
Offer based on the Value of the Customer
Mass Market
Premium Customers
Speed
Up to14,4 Mbps
Up to 42 Mbps
100 Mbps
Network
HSDPA
HSDPA/LTE
Priority
NO
YES
Quality (everywhere/every time) Pricing
Speed Quality Priority
20
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Agenda
Telecom Italia Domestic 2011 Results
Telecom Italia Domestic Plan Fixed Business Mobile Business Innovation Focus on Costs Capex Allocation
Take-Aways
21
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
22
Innovation: «Beyond Connectivity»
ENTERPRISE & PUBLIC SECTORCONSUMER
Customerneeds-driveninnovation
Exploit Digital Agenda opportunities (simplification, digitalization)
Provide saving opportunities
Deeply revise Enterprise go2market through:
- New ICT-dedicated sales channels
Spread innovation and digital life in the mass market
Selective Development of a new positioning in music, video and apps markets
CLOUDTI DIFFERENTIATION
FULLY MANAGED SERVICES APPROACH
Leveraging on recognized network expertise, quality and
capillary presence (E2E caring and technical assistance)
Allow OTT to sell their apps to TI customers through ad hoc APIs
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Agenda
23
Telecom Italia Domestic 2011 Results
Telecom Italia Domestic Plan Fixed Business Mobile Business Innovation Focus on Costs Capex Allocation
Take-Aways
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Efficiency Processes Re-engineering
24
Caring & Sales Force Model Rationalization
2011 2014
Unitary Cost reductionvs Volumes increase
Right-sizing & Total Cost Control
2011 2014
SlighlyReduction Stable Reduction
Bln €
> -1 Bln €
* TFR IAS adjustment excluded
*
Commercial Costs Industrial Costs Personnel
Domestic Opex
2012 2013 2014
0.30.2
0.1Efficiency on Opex
New Plan:-0.5 Bln € in 2012-2013
Old Plan:-0.2 Bln € in 2012-2013
Total Efficiency on Cash Cost ‘12-’141.0 Bln €
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Agenda
25
Telecom Italia Domestic 2011 Results
Telecom Italia Domestic Plan Fixed Business Mobile Business Innovation Focus on Costs Capex Allocation
Take-Aways
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
26
Fixed
&
Mobile
Maintenance and Development
Balance between Traditional Network and Innovative Enablers
Network Service
Platform
Innovation
Enhance quality of voice and data trasmission through network optimization
Steady increase in the ratio Fiber/Copper on Access Network
Excel in 2G & 3G network coverage
Continue the efficiency programs to finance Innovation Capex (0.4 Bln €in 12-14)
Staying on top for a UltraBB- Experience:
- Best-in-class in LTE launch and coverage
- First-rate in fixed Network: NGAN roll-out through FTT-x
Turning the Network into an All-IP technology
Cloud Infrastructures enhancement
Profiling
Policy Management
Autentication SIM Based
Content Delivering
QoS Differentiation
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
27
Capex Allocation
Strengthen the Network for a Technological Leadership
UltraBB Roadmap
35%
13%
52%
2011 2014
Customer Service& Traffic Driven
Network Development
Network Maintainance
Acceleration
Decrease
HSPDA 42 Mbps LTE
NGAN Roll-out
Mobile Coverage
Optimize Network Investment to maintain excellent quality in TLC services
Increase the effort in Network Development and Innovation to confirm Technological Leadership and grant the Best Experience on the Net
2014100 Cities (including all
main ones) covered throughFTTH&Cab Technology
~¼ of Housing unitspassed with >30 Mb/s
Speed
2014More than 40% of
population covered by LTE
Optimization
Network Capex
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Agenda
28
Telecom Italia Domestic 2011 Results
Telecom Italia Domestic Plan Fixed Business Mobile Business Innovation Focus on Costs Capex Allocation
Take-Aways
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Take-aways on main TI Domestic trendsEuro bln, Organic data
Strengthen the Network infrastructure with a strong focus on newtechnologies and services, to support data wave of growth, mantainingquality and performance excellence as distinctive asset.
Domestic 2012 Capex: Almost Stable vs 2011.
Capex
2011 2012
Negative mid-single digit yoytrend
9.35
Cost control: efficiency measures and operational business modeloptimization on caring and go to market will counter margin erosion.
For 2012, we expect an EBITDA trend similar to Revenues one, with abroadly stable EBITDA margin.
EBITDA
2011 2012
Negative mid- single digit yoytrend
19.03
Macro-economic pressure, traditional services commoditization andMTR new glide path suggest a challenging scenario on consumer andcorporate spending and revenues trend, partially offset by browsing andinnovative services increase.
For 2012, we expect a mid-single digit decrease on Top Line yoy trend.
Revenues
29
2011 2012
Almost Stable vs
20113.0
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Agenda
30
Back Up
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
611
12,260
6,036
1,688
1,204
3,093
240
FY10
14,077
1,528
(322)
(11.5)
(3.1)
(7.1)
(2.8)
(0.6)
2.7
n.m.
YoY %
(3.8)
(8.8)
14.3
Products
Domestic Core Services
Voice & Access
Internet
Business Data
National Wholesale
Other
Total
Sparkle Group
Eliminations
541
11,884
5,607
1,641
1,197
3,176
262
FY11
13,542
1,393
(276)
Euro mln, Organic Data, %
Domestic Wireline Revenues
31
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
Euro mln, Organic Data, %
(*) Total Retail Services Revenues net of Incoming(**) Including Roaming & Visitors
Total
o/w Services
WholesaleRetail
o/w VAS
o/w Incoming
Domestic Mobile Revenues
o/w Business Generated (*)
o/w Outgoing Voice (**)
FY10
7,657
7,116
285
7,372
2,042
951
256
6,165
4,123
FY11
7,114
6,552
203
6,911
2,034
786
359
5,766
3,731
% YoY
(7.1)
(7.9)
(28.7)
(6.3)
(0.4)
(17.4)
40.2
(6.5)
(9.5)
Handsets
32
MARCO PATUANO
Telecom Italia Conference CallFull‐Year 2011 Preliminary Results and 2012‐14 Plan Outline
33
Domestic Efficiency : Delta Cash Cost by Quarter
Abs’11 vs ‘10FY ‘11
-356
2,977Total Capex
1,976
945
-82
2,975
+10
-243
-26
9,682Total Opex* -585
2,332
Delta Cash CostFY 11 vs FY 10
Industrial
Personnel
Mktg &Comm.
ITX
G&A &Other ** 457
12,659
**Includes Other Operating cost/Income and Capitalized Costs* Costs related to credit management are reclassified from G&A & Other to Mktg & Sales
-715TotalCash Cost
997 +112Handset
-130
Abs by Quarter
1Q
-124
-3
-7
-54
+7
-182
-271
-3
-89
-123
-51
-7
-38
+22
-187
-227
+15
-40
-84
-27
+14
-46
-1
-121
-130
+17
-9
2Q 3Q
-25
-
+9
-105
-2
-95
-87
+82
+8
4Q