FRANCO BERNABE NOME COGNOME DEL RELATORE Safe Harbour This - - PowerPoint PPT Presentation

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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

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FRANCO BERNABE’

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NOME COGNOME DEL RELATORE

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Safe Harbour

This presentation contains statements that constitute forward-looking statements within the meaning

  • f 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

  • bligation 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

  • n 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.

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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

Agenda

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Key Objectives and Strategy’s Levers

Brazil Brazil

Enhanced Enhanced Free Cas Free Cash Flow Flow Generat neration ion

Dom Domestic Capi Capital tal Di Disci scipli line ne No M&A for Geographic No M&A for Geographic Expansion Expansion Non-Cor Non-Core As Asset set Di Disposals

  • sals

De Dele leve vera rage & & Strengthen Strengthen Balance lance Sh Sheet

Focus on Focus on Core Core Markets Markets

A Platform to A Platform to Create Solid Create Solid Growth of Growth of Shareholder Shareholder Value Value

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Key Objectives and Commitments – 2009-2011

Group Operating Free Cash Flow Group Operating Free Cash Flow Domestic Cash Cost Efficiency Plan Domestic Cash Cost Efficiency Plan Domest Domestic Headcount Reduction ic Headcount Reduction Non-Core Asset Disposals Non-Core Asset Disposals ~€22.0 Bn ~€22.0 Bn cumulative ’09 – cumulative ’09 – ‘11 11 ~ - ~ - €2.0 Bn 2.0 Bn ’11 vs. ‘08 ’11 vs. ‘08 9,000 vs 9,000 vs 2007 YE(1) 2007 YE(1) 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

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Key Objectives and Strategy’s Levers – Core Markets

Brazil Brazil

Enhanced Enhanced Free C Free Cash sh Flow Flow Generation Generation

Dom Domestic

Reverse Revenue Trend Reverse Revenue Trend Custome Customer Satisfacti Satisfaction

  • n

Cash Cost Rat Cash Cost Rational

  • nalizat

ization ion Enhanced Enhanced Regulatory Regulatory D Dialogue alogue

Focus on Focus on Core Core Markets Markets

Pro Promote

  • te F

Fixe xed-Mo Mobi bile le Mig Migration Mobile Broadband Challenger Mobile Broadband Challenger

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Operating Free Cash Flow is our priority

2008 2008 2009 2009 2010 010 2011 011 Opex Opex Reve Revenues Capex Capex

Working Capital Working Capital Op Opera erating ing FCF*

~25 ~25%

Cash Costs Effi Cash Costs Effici cien ency Cash Costs Effi Cash Costs Effici cien ency % on % on Re Reve venue nues: % on % on Re Reve venue nues: -

  • ~

~5pp 5pp 5pp 5pp (2011 (2011 (2011 (2011 vs vs vs vs 2008) 2008) 2008) 2008)

  • Cum. ‘09-’11
  • Cum. ‘09-’11

Operat erating Free ing Free Cash Flow: Cash Flow: € ~ € ~22 b bn Reverse th verse the e Reverse th verse the e Revenues trend Revenues trend Revenues trend Revenues trend CA CAGR: > : >2.0 .0% CA CAGR: > : >2.0 .0% (Organic) (Organic) (Organic) (Organic)

* OPFCF on Revenues based on Group Reported Data

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Reverse Revenue Trends

2008 2008

2011 2011 In Int’l & Othe & Other Domestic Domestic

Group R Group Revenu nues es Trend end

CA CAGR GR ‘08 ‘08 – – ‘11 11

“Innovat “Innovative e Reve Revenues”

17% 17% 17% 17%

~ +18% 18% ~ +18% 18%

28% 28% 28% 28%

2007 2008 2009 2010 2011

TI Domes TI Domestic ic Reven Revenues es “Traditional “Traditional Revenues” Revenues” “I “Innovative nnovative Revenues” Revenues”

~ -4%

  • 4%

~ -4%

  • 4%

14% 14% 14% 14%

BroadBand BroadBand Conn

  • nnecti

ctivity ity:

  • Fi

Fixed and M xed and Mobi bile B Broadba dband nd

  • Mob

Mobile ile VAS VAS Adjacent Bu Adjacent Busines sinesses es:

  • IP

IPTV/Dig igital H Home/ICT

  • On

On lin line a e adv.

  • v. / S

/ Serv rvic ice e Exp Exposure re

  • Ver

Vertical Applicati ical Application

Mobi Mobile v voice Nar Narrow B

  • w Band

nd Fixed voice Fixed voice Trad Traditional tional Fixed Data Fixed Data

….value ….value growth rowth

Group Group Cagr Cagr Organic ’08-’11 ’08-’11 >2.0% >2.0% Group Group Cagr Cagr Organic ’08-’11 ’08-’11 >2.0% >2.0%

Innovative on Revenue (%)

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Domestic Cash Cost Efficiency Plan

2008 2008 2011 2011 EF EFFICIENCY FICIENCY

<+1.0 <+1.0 Bn

GROWTH GROWTH ENABLER ENABLER ~ - ~ - 2.0 .0 Bn Bn ~ - ~ - 2.0 .0 Bn Bn

Efficiency by Ye Efficiency by Year ar Initiatives Initiatives

2009 2009 2010 2010 2011 2011 CUM ’09 CUM ’09-’11 ’11

30% 30% 55% 55%

Cape Capex Ope Opex Organization ganization & & Supp Suppor

  • rting

ting Pr Process Delivery & livery & Assur Assuranc nce Customer Customer Operat Operatio ions ns IT IT

0.5 0.5 0.4 0.4 0.3 0.3 0.2 0.2 (€ Bn)

45% 45%

0.1 0.1 0.3 0.3 0.2 0.2

Sales Sales & Distribution Distribution Building & ilding & En Energy ergy Manag Management ment Net Network Ope k Operat ations ns

Or Organic ganic Domestic

  • mestic Cash Costs

ash Costs

25% 25%

60% 60% 40% 40%

1 2 3 4 5 6 7

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Domestic Headcount Reduction

Plan 2009 - 2011 Redundancy Program 2008 – 2010 Agreed with Unions (5,000 Employees) 2008 2009 2010 ~55.1 2011 64.1 ~ -2.0 ~ -3.0 ~ -2.0 ~ -2.0

~ 9, ~ 9,000 000 HEADCOUNT HEADCOUNT REDUCTION REDUCTION ~ 14% ~ 14% v vs 2007 2007

~85% ~15% ~60% ~40% ~70% ~30% 100% Plan 2009 - 2011

He Headco coun unt ( t (‘000) 000)

Year end 2007 Year end 2011

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Enhanced Regulatory Dialogue

Protect existing access infrastructure value Create a clear and stable contest for new infrastructure deployment Obtain more market simmetry conditions for TI

Achievements ‘08 Achievements ‘08 Key Targets ’09-’11 y Targets ’09-’11

  • Reach

h mo monthly r y rent ntal fee i al fee in lin line with EU with EU avera average (costing criteria, inflation recovery)

  • Preserve retail minus pricing on naked

bitstream differ differentiat tiated b ed by c cust stomer er typology (C/B) typology (C/B)

  • Avoid “significant” acce

access ob ss obligat ligations

  • ns on

NGN deployment in competitive geographic areas

  • Introduce for

forwar ard l d lookin ing pr pricin ing c g criteria ia to balance NGN investment incentivation and allowing risk sharing

  • Achieve symmetry

symmetry with fixed OLO’s termination rates

  • Review retail price replicability

retail price replicability: Price tests rules and obligations

Strategic Objectives Strategic Objectives

  • “Glide path” for mobile and

mobile and fi fixe xed d terminati termination ta n tariffs riffs

  • Improved capability to deal with the

requests for custom customers migration ers migration

  • New data pr

data prote

  • tection
  • n an

and d pr privacy ivacy reg regula ulatio tion (ie: commercial databases)

  • TI

TI undertakings draft prop undertakings draft proposal

  • sal on key

access markets (Oct. 29th)

  • 2009

2009 LLU monthly rental fee LLU monthly rental fee increase increase: reference Offer to AGCOM (Oct. 23th)

  • 2009

2009 PSTN TN monthly rent monthly rental fe al fee incr increase ease: : (+1,26 €/month) request to AGCOM (Oct. 30th)

  • Bill

Bill fo for public fu r public funding to su nding to supp pport BB

  • rt BB

development development (800 mln€ + 200 mln€ ‘07- ’13)

  • Bill for simplification of author

authorization ion process a process and d sharing of ing of public public in infr frast astruc uctu tures for NGN deployment

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Non-Core Asset Disposals

Consolidation / growth opportunities Market attractiveness / Competitive scenario Prioritisation of usage of Telecom Italia cash flow Domestic and Brazil are core strategic markets Assets not meeting the above criteria will be considered for disposal

  • European Broadband
  • TI Sparkle
  • Cuba

Recently completed the sale of Alice France for an Enterprise Value of € 0.8 bn

Financial Criteria Financial Criteria Strategic Criteria Strategic Criteria

Review of Assets Portfol Review of Assets Portfolio

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Agenda

Key Key Messages Messages Focus on Core Markets Focus on Core Markets

Domesti Domestic Highlights Highlights TI TIM Brasil M Brasil Highlights Highlights

Targets Targets

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Domestic Highlights

Red Reduce Domestic Cash Costs ce Domestic Cash Costs Rebalanced Revenue Mix Enhancing Domestic Growth Rebalanced Revenue Mix Enhancing Domestic Growth

NOME COGNOME DEL RELATORE

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Domestic Cash Cost Efficiency Plan

2008 008 2011 011 EF EFFI FICIENCY <+ <+1.0 B Bn GROW GROWTH TH EN ENABLE LER ~ - ~ - 2.0 Bn Bn

Efficie ficiency b cy by Year ar In Initiatives

2009 009 20 2010 10 20 2011 11 CUM ’ M ’09-’11 30 30% 55% 55% Cape Capex Op Opex Or Organi nization & & Sup Supporting Proc Proces ess Del Delivery ry & & Assura rance Cust Customer O Opera erations IT IT 0. 0.5 0. 0.4 0. 0.3 0. 0.2 (€ Bn) 45 45% 0. 0.1 0. 0.3 0. 0.2 Sales & s & Distri ribu bution

  • n

Bu Buildi ding & & Energy M Mana nagement nt Ne Netwo twork O k Operations ns

Organi nic D c Domestic Ca Cash sh Co Cost sts

25 25%

60 60% 40 40%

1 2 3 4 5 6 7

NOME COGNOME DEL R ELATOR E

8

Reverse Revenue Trends

2 0 2 008

20 2011 11 In Int’l & O & Other Do Domest stic

Gr Grou

  • up R

Revenues es T Tren end

CA CAGR ‘08 – 08 – ‘11 11

“I “Innovative Re Revenues”

17 17% ~+18 18% 28 28%

2 00 7 2 008 20 09 20 10 20 11

TI TI D Domestic Revenues “T “Traditional Re Revenues” “I “Innovativ ive Re Revenues” ~ -4

  • 4%

14 14%

B ro adBa nd C Conn ecti tivity ty:

  • Fixed an

d an d M d Mobi le B roa db dband and

  • Mo bile

ile V VAS A d A djacen t B Busin ess es:

  • IP TV/Dig

ig it ital H H

  • me/IC T
  • On lin

line a ad v . / / S ervic ice E Exposure

  • Ve rtic

ical A Applic licat io ion

Mo Mobilevoi ce Na NarrowBand Fi Fixedv oice Tradit itio ional Fixed Data

…. ….value g growth

Gro Group Ca Cagr O Organic ’0 ’08-’11 >2 >2.0%

Innovative on Revenue (%)

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Customer Centric Approach

A New Convergent Customer A New Convergent Customer Centri ntric appr c approa

  • ach

ch

21% 60%

Top Clie Top Client nt (F-M-IC (F-M-ICT) Busines Business (F-M-IC (F-M-ICT) ) Co Consu nsumer er (F-M-IP (F-M-IPTV) TV)

19%

Breakdown of 2008 Domestic Retail Revenues

Segmentation Segmentation Offerin Offering Services/Packages Cap Capabiliti ties es Caring Systems Sales Channels Key Operating Key Operating Drivers Drivers

Im Implementation plementation

  • f customer
  • f customer

cent centric ric

  • rg
  • rganization

nization from January from January 2009 2009

Br Bran and Pl d Platf atform

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Reverse Revenue Trend on Domestic Market

Object Objectives ives Ac Action tions KP KPIs Is

TI line losses per year

(MM)

Increa Increase the Lo se the Loyalt yalty y

  • f
  • f O

Our Cu Customer stomer Ba Base se

Improve Improve cust customer

  • mer re

retent tention n ac activities to re to reduc duce churn churn on

  • n

both P both PSTN TN/B /BB B (QoS, caring) Migrate grate cust customers

  • mers towards IP solutions

Pr Promote

  • te Fi

Fixed xed Br Broadband

  • adband

Penetration in Italy netration in Italy

Leverage on growing PC/ ”N PC/ ”Networked” etworked” Device pe e penetratio ation Innovative offer for “l “low pe

  • w penetr

trated” ed” consumers, SME rs, SME and d mi micr crobus usiness se segm gment ents In Incre crease se “Premium” mium” and Fiber Fiber cust customer

  • mer base

base

TI Fixed BB Access

(MM)

1 2

6.7 6.7 8.2 8.2 12.7 12.7 16.3 16.3

Fixed BB consumer ARPU (1)

(€/month)

~ -1.9

1.9

  • 0.
  • 0.7

Fo Foster the Grow er the Growth o th of Mo Mobile BB and bile BB and Intera Interactive S ctive Servi rvices es

Fla Flat offerings

  • fferings managing Mobile BB Premium price

“P “Pur ure” e” Mobile bile BB BB promotions in Digital Divide Areas Strengthen interactive services development through

  • fferi
  • ffering e

ng enrich richment

3

13 13% 21 21%

Interactive VAS Rev / Service Rev (2)

Pr Promote

  • te Str

Strong Convergent BB nvergent BB Demand Demand

Develop new Develop new innovative innovative co convergent offeri nt offerings ngs Seamless experience for premium consumer customers Bundle for business customers (cross selling)

4

0.6 0.6 2.2 2.2

Potential Convergent BB TI customers

(mln households) 08-11 CAGR ~54% 2008E 2011 2009

  • 1.
  • 1.5

2008E 2011 2009

7.2 7.2

ARPU ’08 +6.5% vs ‘07

2008E 2011 2008E 2011 2008E 2011 (1) Includes Entry Level customers (avg ARPU 5.4€/month). Voice IPTV & Content excluded (2) Mobile Advertising Revenues included, messaging excluded

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Rebalanced Revenue Mix Enhancing Domestic Growth

Object Objectives ives Ac Action tions KP KPIs Is

Promo

  • mote IPTV

e IPTV Penetration netration Enha hance cus nce customer experience

  • mer experience

Of Offering enh fering enhancement a ncement and segmenta d segmentation tion Overall platform potential exploitation Overall platform potential exploitation

0.3 0.3 1.5 1.5

TIM ARPU

(€/month)

Maintain Maintain Leader Leadersh ship on ip on Value

Value

in Mobile in Mobile

Continuous evolution of se segment gmented approach on d approach on consume consumer se segm gment ent Stre Strengthe ngthen po positi sitioning ing on

  • n busine

business consumer ss consumers s through integrated convergent solutions Pe Personal c rsonal communicat mmunication

  • n serv

service ices en enrichment chment Instant messaging, web services, interoperability and multi-device access

14, 14,8 5, 5,1 7, 7,2 15 15

20.1 20.1 22.0 22.0

VAS Voice

Str Strength then en Positioning with sitioning with Busines Business Client Clients

Partne Partnership hip with leading system integrators Strong growth of value ad value added ded infrastructure infrastructure services services New off New off-the- the-sh shelf of elf offering fering for SME for SME Selecti Selective acq e acquisitio isitions ns

ICT Revenues

(€ Bn)

0.7 0.7 2X 2X

Sales Serv.

Develop and Develop and Mon Monetize tize T TI’s O ’s Onlin line Multiplatfo Multiplatform Audience m Audience

Local advertising Local advertising offer development Development of a mult multi-c i-channe annel in l inte tegrat grated A Adv P Plat atform form Innovative network profiling a twork profiling and beh d behavi vioral targ

  • ral targeting

eting so solu lution

  • ns development

~130 ~130 ~250 ~250

Online Advertising Revenues (1)

(€ MM) ARPU Oct’08 month >21

5 6 7 8

2008E 2011

TI IPTV Customers

(MM) 2008E 2011 2008E 2011 2008E 2011 (1) Includes web services and intercompany ads revenues

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Domestic Highlights

Red Reduce Domestic Cash Costs ce Domestic Cash Costs Rebalanced Revenue Mix Enhancing Domestic Growth Rebalanced Revenue Mix Enhancing Domestic Growth

NOME COGNOME DEL RELATORE

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Domestic Cash Cost Efficiency Plan

2008 008 2011 011 EF EFFI FICIENCY <+ <+1.0 B Bn GROW GROWTH TH EN ENABLE LER ~ - ~ - 2.0 Bn Bn

Efficie ficiency b cy by Year ar In Initiatives

2009 009 20 2010 10 20 2011 11 CUM ’ M ’09-’11 30 30% 55% 55% Cape Capex Op Opex Or Organi nization & & Sup Supporting Proc Proces ess Del Delivery ry & & Assura rance Cust Customer O Opera erations IT IT 0. 0.5 0. 0.4 0. 0.3 0. 0.2 (€ Bn) 45 45% 0. 0.1 0. 0.3 0. 0.2 Sales & s & Distri ribu bution

  • n

Bu Buildi ding & & Energy M Mana nagement nt Ne Netwo twork O k Operations ns

Organi nic D c Domestic Ca Cash sh Co Cost sts

25 25%

60 60% 40 40%

1 2 3 4 5 6 7

NOME COGNOME DEL R ELATOR E

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Reverse Revenue Trends

2 0 2 008

20 2011 11 In Int’l & O & Other Do Domest stic

Gr Grou

  • up R

Revenues es T Tren end

CA CAGR ‘08 – 08 – ‘11 11

“I “Innovative Re Revenues”

17 17% ~+18 18% 28 28%

2 00 7 2 008 20 09 20 10 20 11

TI TI D Domestic Revenues “T “Traditional Re Revenues” “I “Innovativ ive Re Revenues” ~ -4

  • 4%

14 14%

B ro adBa nd C Conn ecti tivity ty:

  • Fixed an

d an d M d Mobi le B roa db dband and

  • Mo bile

ile V VAS A d A djacen t B Busin ess es:

  • IP TV/Dig

ig it ital H H

  • me/IC T
  • On lin

line a ad v . / / S ervic ice E Exposure

  • Ve rtic

ical A Applic licat io ion

Mo Mobilevoi ce Na NarrowBand Fi Fixedv oice Tradit itio ional Fixed Data

…. ….value g growth

Gro Group Ca Cagr O Organic ’0 ’08-’11 >2 >2.0%

Innovative on Revenue (%)

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Domestic Cash Cost Efficiency Plan

2008 2008 2011 2011 EF EFFICIENCY FICIENCY

<+1.0 Bn <+1.0 Bn

GROWTH GROWTH ENABLER ENABLER ~ - ~ - 2.0 .0 Bn Bn ~ - ~ - 2.0 .0 Bn Bn

Efficiency by Ye Efficiency by Year ar Initiatives Initiatives

2009 2009 2010 2010 2011 2011 CUM ’09 CUM ’09-’11 ’11

30% 30% 55% 55%

Cape Capex Ope Opex Organization & ganization & Supp Suppor

  • rting Pr

ting Process Delivery & livery & Assur Assuranc nce Customer Operat Customer Operatio ions ns IT IT

0.5 0.5 0.4 0.4 0.3 0.3 0.2 0.2 (€ Bn)

45% 45%

0.1 0.1 0.3 0.3 0.2 0.2

Sales & Sales & Distribution Distribution Building & ilding & En Energy Manag ergy Management ment Net Network Ope k Operat ations ns

Organic Domesti Organic Domestic Ca Cash Costs sh Costs

25% 25%

60% 60% 40% 40%

1 2 3 4 5 6 7

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Object Objectives ives Ac Action tions KP KPIs Is

Red Reduce no ce non- n-co core re infrastructure costs infrastructure costs thr through co-opera co-operation with other tion with other players players Exploit potential of ploit potential of

  • ut
  • utsourcing
  • urcing
  • pportunities
  • pportunities

TIM – Vodafone site site sh shar aring program full deployment: macro-sites for old-SRB migration new sites deployment TI Fiber Ba ber Backhauling S ckhauling Sharing ing Evaluation of potential extension towards Network Network Sh Shar aring (single/multiple PLMN) also with other MNOs Contract Optimization TI Sites S TI Sites Shar ared in ‘11 (%) ed in ‘11 (%) 23% ’08-’11 Saving ’08-’11 Savings (€ s (€ Bn) Bn)

  • 0.5
  • 0.5

‘08-’11 FTE Reduction (#) ‘08-’11 FTE Reduction (#) 100 100

Network Operations

1

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Object Objectives ives Ac Action tions KP KPIs Is

Ne New int w integrat grated F- ed F-M M go-to mark

  • to market b

base sed d

  • n
  • n g

geog

  • grap

raphic ical al focu focus Ra Rationaliz tionalize pus e push and and low-end productivity low-end productivity channel nnels Lean Customer centric organization New “geographical” Go to Market ‘08-’11 Cons ‘08-’11 Consumer Pa umer Partner rtner Ra Rationaliz tionalization ation New approach on New approach on state o ate of t the a e art t processes and processes and integrated F-M integrated F-M

  • ffering

ffering Ra Rationaliz tionalization of ation of Bu Busine siness Pa Part rtne ners rs F–M Integration: sales channels and offering portfolio Lean Customer Centric organization New Go To Market Model (“local focus”) Rationalization of Business Partners Increase of exclusive channels ‘08-’11 Busine ‘08-’11 Business P Partne ner r Ra Rationaliz tionalization ation ‘08-’11 Opex Saving ‘08-’11 Opex Savings* s* (€ (€ Bn) Bn)

  • 0.4
  • 0.4

‘08-’11 FTE Red ‘08-’11 FTE Reduction** (#) ction** (#) 500

Sales and Distribution: Consumer and Business

2

*Including labour cost saving from efficiency program ** FTE related to efficiency Program

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Organization

Organization Righ Rightsi tsizing ing

Align St

Align Staff functions aff functions to Bes Best P Practi actice o ce of mat mature i re indus dustries ries ‘08-’11 FTE Red ‘08-’11 FTE Reduction *(#) ction *(#) 700 700 ‘08-’11 Opex Saving ‘08-’11 Opex Savings (€ s (€ Bn) Bn)

  • 0.3
  • 0.3

Organization Right Organization Rightsizing izing Staff functio ff functions rest s restructuring through: ructuring through: “shared services” activities centralization and rationalization streamlining of “address and control” activities G&A cost G&A costs st s strong reduction rong reduction Review o Review of HR vari HR variable compensa le compensation policies tion policies Managerial roles reduction Managerial roles reduction (vs. 2007) (vs. 2007)

  • 50%
  • 50%

Organization Simplification and Rightsizing

Object Objectives ives Ac Action tions KP KPIs Is

3

* FTE related to efficiency Program

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Object Objectives ives Ac Action tions Targets Targets

Align share o Align share of IT cas IT cash cost costs on industry Best s on industry Best Pr Practi actice Simplify plat Simplify platfo forms to rms to improve flexibility a improve flexibility and d increa increase relia se reliabilit ility Implement One Single Integrat Integrated So ed Softw ftware Fa Fact ctor

  • ry

y Ra Rationaliz tionalization of A ation of Appl pplica ication Pla ion Platform form based on: : Customer centric E2E process re-engineering Decommis Decommissioning ioning of services with marginal revenues and/or profitability New sourcing model New sourcing model (i.e.: off-shoring) leading to cost efficiency, flexibility and focus on internal core competences Virt Virtualiza ualization of IT infras tion of IT infrastructure ucture (Next Generation Data Centers and Next Generation Work Place) ‘08-’11 Cash Co ‘08-’11 Cash Cost Saving st Savings (€ (€ Bn) Bn)

  • 0.2
  • 0.2

‘08-’11 ‘08-’11 FT FTE Re Reduction ( (#)

  • 100

‘08-’11 Server R ‘08-’11 Server Ratio tio 6:1 ‘08-’11 Data Center Ra ‘08-’11 Data Center Ratio tios 3:1

Information Technology

4

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Impr prove effic e efficiency & & effecti effectivenes ess s through ugh a a new E2E i w E2E integra grated & ed & multi- ulti- channe channel appr l approach

  • ach

Increa ease op

  • per

erating efficie ing efficiency t through ugh a balance balanced make make v vs buy mi buy mix F-M integratio M integration

Enhance multi-channel “contact” model F-M integration (119 vs. 187) E2E process reengineering Off-shoring for “low value” activities Geographical Centers restructuring

  • 0.2
  • 0.2

‘08-’11 FTE Red ‘08-’11 FTE Reduction **(#) ction **(#) 2,150 2,150 (***) ‘08-’11 Opex Saving ‘08-’11 Opex Savings* s* (€ (€ Bn) Bn)

Reach e Reach exce cell llence ence thr through ugh a a new E w E2E integrated & tegrated & multi-ch lti-channel app nnel approa

  • ach

ch Increa ease op

  • per

erating ing efficie efficiency leveraging on F-M leveraging on F-M integration integration

F-M Operations optimization: TeleContact Center Rightsizing New CRM systems F-M processes integration and cross-fertilization: Not-human channels increase Certified electronic billing Credit management integration Reduction of geographical areas (from 8 to 4)

Customer Care: Consumer and Business

5

* Including labour cost saving from efficiency program ** FTE related to efficiency Program *** Include MKT Support & DA

Object Objectives ives Ac Action tions KP KPIs Is

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* FTE related to efficiency Program

‘08-’11 Saving ‘08-’11 Saving (€ (€ bn) bn) Internal Ma Manpower P npower Prod

  • ductivity

uctivity Improvement “Ready Line” “Ready Line” Installation Project optimization Fa Fault-rat ult-rate reduction reduction due to maintenance and quality improvement of access network Project Reload: Re-engineering of supply chai pply chain n proces processes ses and External Manpower renegotiation

  • 0.3
  • 0.3

‘08-’11 FTE Red ‘08-’11 FTE Reduction *(#) ction *(#) 800 800

Delivery & Assurance

6

Object Objectives ives Ac Action tions KP KPIs Is

Lea Lean Operati Operations & ns & Productivity Productivity Improveme Improvement

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Object Objectives ives Ac Action tions

Ra Rationaliz tionalize Indust e Industrial rial an and O d Office ce S Spac aces es Op Optimize ene timize energy & gy & cooling cons cooling consumption umption “H “Hybrid buil ybrid buildings dings” ra rationalization: tionalization: compact space in Central Offices and use cleared space to reallocate employees or for rent to third parties Buildings maintenance cost Buildings maintenance costs efficiency s efficiency thanks to space rationalization and suppliers optimization and renegotiation Minimize energy consumption: Minimize energy consumption: elimination of “high cons “high consumption” umption” obsolete equipment innovative & “green” innovative & “green” technologies echnologies introduction (i.e. cogeneration….) new energy s new energy sour urces ces (i.e. natural gas,…) ’08-’11 Saving ’08-’11 Savings (€ s (€ MM) MM)

  • 0.1
  • 0.1

‘08-’11 Clea ‘08-’11 Cleared building red buildings (#) s (#)

  • 20

(-247,000 mq2)

‘08-’11 Ener ‘08-’11 Energy Savings gy Savings

  • 12.6%

(-280 GWh)

‘08-’11 “Gree ‘08-’11 “Green” energ nergy y incidence ( incidence (∆pp) pp)

+5 pp

KP KPIs Is

Buildings & Energy Management

7

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Agenda

Key Key Messages Messages Focus on Core Markets Focus on Core Markets

Domesti Domestic Highlights Highlights TI TIM Brasil M Brasil Highlights Highlights

Targets Targets

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TIM Brasil 2008 Turnaround Actions

Actions by TIM Actions by TIM 1. Improving caring processes on Heavy Users 2. Innovation Enhancement through a Convergent Offer 3. Bad Debt Recovery 4. Tariffs rebalancing 5. Roll out capacity acceleration to support strong traffic growth 6. Focus on internal processes and strict cost control First Positive Resul First Positive Results

Apr ‘08 Oct ‘08

85 85% 91 91%

First Call Resolution on Value Post Paid Customers (% on total calls) Trend Outgoing price per minute (Jan = 100) Jan Oct May

100

Jul

1Q08 3Q08

9.0% 9.0% 4.4% 4.4%

Bad Debt (% on Net Service Revenues)

85

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TIM Brasil – TLC Market overview

144 ~10% 3 ~50% 41 ~3%

Fixed Mobile BB Mobile Billion of R$ Lines:

10 ~17%

BB Fixed 43 43 46 46 50 50 8 11 11 43 43

2008 2008 2011 2011

~5% Fixed Mobile BB Fixed 1 5 BB Mobile % of households Fixed + Mobile Only Fixed Only Mobile No phone 49.7 53.1 58.0 62.8 N° of Households (Mln)

% H % Househ usehol

  • lds with PC

ds with PC

~33% ~33% ~60% ~60% 11% 23% 34% 48% 36% 40% 41% 23% 12%

6%

1% 38% 28% 20% 10% 27%

2003 2005 2008* 2011*

MOBILE AND BROADBAN MOBILE AND BROADBAND D ARE THE DRIVERS ARE THE DRIVERS OF OF MA MARKET GROWT GROWTH MOBILE TECH MOBILE TECHNOLOGY IS TH GY IS THE E MOST COMMON COMMUNICATI MOST COMMON COMMUNICATION N EN ENAB ABLER IN LER IN BRAZILIAN HOUSEHOLDS AZILIAN HOUSEHOLDS Strong growth driven by Mobile BB Diffusion of service (~100% penetration in 2011) Fixed market growth due to increase of competition Mobile technology is dominant (in 2011 90% of households) and will trigger F-M substitution Penetration of PCs doubles in 4 years (2007-2011) Favourable regulatory context ~50% ~10% ~2%

∆ ab abs. s. 4 3 7 3

194 10 45 16

*Source: internal estimates; IBGE - Pesquisa Nacional por Amostra de Domicílios (2003 - 2007)

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TIM Brasil: Mobile Broadband is a Winning Technology in Brasil

* Regulatory minimum coverage Source Teleco ** Internal estimates based on ANATEL public figures and analysts projections

# cities # cities % of % of urban ban p popula pulation ion co covere red** d**

% o % of reac reacha hable ble cu customers stomers

Sp Speed eed (M (Mbp bps) s)

50 50 40 40 30 30 20 20 10 10 20 20 40 40 60 60 80 80 100 100

HSDPA (7.2 Mbps) HSDPA (7.2 Mbps) LTE (25 LTE (25 Mb Mbps)

ADSL ~75% ~75% ~70% ~70% ~80% ~80% Mobile -3G (2010*) Mobile -3G (2008)

Push for Push for mobile BB mobile BB Gr Growth

  • wth

Flexible/simple tariff plans (“no-frills”) Smartphone and 3G devices - new WiFi terminals Lower PC entry level New specialized kits for mass market distribution Development of IM, Social Networking, mobile advertising

Key Objectives Key Objectives

'08 '11

0.5 ~ 2.5

BB User BB Users (mln) 30% Contribution to Growth on Service Revenue

Actions Actions Stra Strate tegy gy

Superior Tec Superior Technolog nology For Wider Cov For Wider Coverag rage Rea Reach … h … … Allowing for Fa llowing for Faster Tim ster Time-to-m

  • to-market

0 .2 > 4 .0 0 .4 2 .0 1 .4 0 .8

Last mi Last mile length le length (km)

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TIM Brasil: Drive Fixed - Mobile Convergence Leveraging on Pure Mobile Position

*Source: IBOPE e SD&W

Key Objectives Key Objectives

0.1 > 3.0 TIM F TIM Fixo xo Customers Customers (mln) 7% Market Share

96% 84% 59% 29% 0% A B C D E

Actions Actions

Untapped m tapped mark rket of C a et of C and D Cl d D Class asses and and Nu Number Portability for A a mber Portability for A and B d B

Stra Strate tegy gy

Fixed line xed line pen penetration* ation*

Households of A/B/C/D in towns with more than 10K people (equal to 80% of TIM coverage)

>30% of existing fixed customers* have shown willingness to change fixed line provider Considering cities with >10K people,

  • pportunities are:

~8 mln households with fixed connection (A and B classes) ~17MM households with no fixed line connection (C and D classes) More than R$40 Bn of revenues to exploit Homezoni Homezoning ng

  • ffer
  • ffer

through through TIM Fi TIM Fixo xo

Inno Innovative Off vative Offerings rings Best value for price (eg. VAS Included) New packages for Heavy Users Packaging TIM Fixo + Mobile BB Dist Distribution ribution: Telesales, kiosks and door to door approach '08 '11

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TIM Brasil Strategy – Top Line

Im Improv prove Quality e Quality

  • f Service
  • f Service

Return to turn to leaders leadership in ip in innov innovatio tion Conc Concentrate on entrate on “Customer “Customer Cen Centric” c” Appro pproach ch

2009 ma 2009 main ta in tasks: i sks: impro prove qua e quality of ca y of caring… ring… Increase effort on customer care for Heavy Users Massive focus on post paid churn reduction …a …and netwo nd network co k coverage & perfo verage & performance nce 3G 3G: ambitious network roll-out plan wiith focus on cities with highest HU concentration 2G 2G: back to industry benchmark for network quality Fo Focu cus on pa n partners rtnership wi hip with th other

  • ther operato

perators rs of the new

  • f the new

TM TMT chain T chain (content content & 4-Play) 4-Play) Reinforce T Reinforce TIM cutting edge positi M cutting edge positioning on data off

  • ning on data offers for

rs for consum consumer & busi & business se ss segm gment: starting I-phone sales pre-Christmas Campaign further improve market leadership on SmartPhone segment (i.e. 50% market share on Blackberry) Inv Invest st i in Cu Custom stomer I Insi sigh ght an and CRM d CRM ca capabili pabiliti ties Se Selecti lective ap e approa proach by seg ch by segment ent and geography Imp Improve cus usto tomer mer life- ife-cycle cycle management anagement 2011 Key Ob 2011 Key Objec jectives ives

Actions Actions

Market share: Market share: Defend revenue sha Defend revenue share: e: Recovering brand Recovering brand aw awar aren eness ess Revenues growth Revenues growth

#2 in Revenue share Leadership in Brand awareness About 24%

focus on Value Customers

~8.0% (CAGR 08-11)

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TIM Brasil Strategy - Efficiency

Com Commercial Efficienc rcial Efficiency New commissioning model New commissioning model increasingly oriented on ac acquisitio quisition qu n quality and v ality and value lue, leading to higher higher effi efficiency of customer investments ciency of customer investments. Subsidy strategy increasing Subsidy strategy increasingly fo ly focused on hig cused on high user user se segmen gment Bad debt r d debt reduction to i duction to industry dustry be benc nchmark lev leveraging ging

  • n new control rules/
  • n new control rules/ st

stricter credit analysis ricter credit analysis Structural Efficienc Structural Efficiency Optimiz Optimize transport ne transport network infrastructure twork infrastructure (partnerships vs. make or buy) Maximum exploitation of IT pla ximum exploitation of IT platforms forms sy synergies with nergies with Telecom Italia Telecom Italia Tight G&A cost control Harvest Human Resources efficiency Financial objective Financial objective Actions Actions

Commercial ercial ca cash co sh cost as % of ser st as % of serv. . rev revs. Bad debt as % of service revs. Bad debt as % of service revs. Industrial (N Industrial (Network and IT) costs per etwork and IT) costs per customer customer per per y year ar G&A & labou G&A & labour co cost as % of serv. revs. st as % of serv. revs.

>2pp reduction in 2011 from 2008 level From ~6% in 2008 to ~4% in 2011 Slightly decrease ~1pp reduction in 2011 from 2008 level

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Agenda

Key Key Messages Messages Focus on Core Markets Focus on Core Markets

Domesti Domestic Highlights Highlights TI TIM Brasil M Brasil Highlights Highlights

Targets Targets

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Telecom Italia Group in 2011

A Platform to A Platform to Create Solid Create Solid Growth of Growth of Shareholder Shareholder Value Value

A A Solid Solid Capital Capital Structure Structure A Balanced Portfolio A Balanced Portfolio

DOMESTIC

Cas Cash Ge Generat nerators rs

BRASIL

Gr Growth

  • wth

Enabler Enabler

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TI Group 2008 estimates and 2009-2011 targets

Org Organic nic Da

Data* ta*

* Assuming perimeter as December 2008, 2008 exchange rates and excluding non organic items impact

bn € bn € CAGR 2008-2011

30.4-30.5 Stable >2%

% on revenues bn € % on revenues 2011

~38.0% Stable >39%

bn € bn € % on revenues 2011

~5.4 ~4.8 ~13.0%-13.5%

NFP/EBITDA reported NFP/ EBITDA reported NFP/EBITDA rep. 2011

<3.0X

~ 2.9X ~ 2.3X

Net Financial Net Financial Position

  • sition

EBITDA EBITDA CAPEX CAPEX Re Reven venues

2010-2011 2010-2011

Target

2008 E 2008 E 2009 2009 Plan Plan

Target

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TI Domestic 2008 estimates and 2009-2011 targets

* Assuming perimeter as December 2008, 2008 exchange rates and excluding non organic items impact

Or Organi ganic Dat ata* Plan Plan

bn € bn € CAGR 2008-2011

>23 22.7- 22.8 0.2%

% on revenues bn € % on revenues 2011

~44% 9.9 - 10 ~46%

bn € bn € % on revenues 2011

3.5 ~3.3 Revenues Revenues EBITDA EBITDA CAPEX CAPEX

Target

Cash Cash Cost Cost

% on revenues 2011

~67% - 68%

2008 E 2008 E

13.0%-13.5%

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TIM Brasil 2008 estimates and 2009-2011 targets

Local Currenc Local Currency -

  • Orga

rganic ic

bn Reais CAGR 2008-2011

>7% ~ 15.3 ~8%

% on revenues bn Reais % on revenues 2011

23 – 23.5% ~ 3.6 ~27.5%

bn Reais bn Reais % on revenues 2011

~3.7 (~1.5 € bn ) ~2.8 ~13.5% Re Reven venues EBITDA EBITDA CAPEX CAPEX

* Assuming perimeter as December 2008 and excluding non organic items impact

2009 2009 Plan Plan

Target

2008 E 2008 E