Telecom Italia Group 9M 2014 Results Marco Patuano Piergiorgio - - PowerPoint PPT Presentation

Telecom Italia Group

9M 2014 Results TELECOM ITALIA GROUP 9M 2014 Results

Rome, November 7th, 2014 Piergiorgio Peluso Marco Patuano

9M 2014 Results 2

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 developments and changes in 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 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

• 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 business or acquisition strategy or planned capital expenditures or to reflect the occurrence

• f 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
• n file with the United States Securities and Exchange Commission which may identify factors that affect the forward looking statements included herein.

The accounting policies and consolidation principles adopted in the preparation of the Condensed Consolidated Financial Statements as of and for the nine months ended 30 September 2014 have been applied on a basis consistent with those adopted in the Annual Consolidated Financial Statements at 31 December 2013, to which reference should be made, except for the new standards and interpretations adopted by the Telecom Italia Group starting from 1 January 2014 which had no effects on the Condensed Consolidated Financial Statements as of and for the nine months ended 30 September 2014. The Telecom Italia Group Condensed Consolidated Financial Statements at 30 September 2014 have not undergone an external audit/review. Following the classification, starting from the fourth quarter 2013, of the Sofora - Telecom Argentina group as a disposal group (Discontinued operations/Non-current assets held for sale) the consolidated financial statements data of prior periods (including the nine months ended 30 September 2013) have been restated accordingly and therefore the Sofora - Telecom Argentina group is no longer separately presented as a business unit. Furthermore:

• starting from 2014, Organic changes in Revenues, EBITDA and EBIT are determined excluding, where applicable, only the effects of the changes in the scope of

consolidation and exchange differences and therefore don’t take into account, as in the past, non-organic income and expenses, including those non-recurring;

• starting from 2014, the Domestic business unit includes the Olivetti group, in addition to Core Domestic and International Wholesale. This different presentation

reflects the commercial and business placement of the Olivetti group and the process of integrating its products and services with those offered by Telecom Italia in the domestic market. Therefore, the Olivetti group is no longer separately presented as a business unit; as a result, the data for prior periods under comparison have been restated, accordingly. In this presentation reference is also made to a normalization called “Domestic Underlying Ebitda trend”, which is based on the Adjusted (for one-offs and discontinuities) Reported Domestic Ebitda. This representation is provided as additional information to our Reported Ebitda that represents Operating profit before depreciation and amortization, capital gains (losses) and impairment reversals (losses) on non-current assets. Marco Patuano - Piergiorgio Peluso

9M 2014 Results 3

• TI 3Q’14 Results
• Financial Update
• Take-Aways
• Appendix

Agenda

Marco Patuano

9M 2014 Results 4 Marco Patuano

3Q’14 Group Highlights

Service Revenues

4,943 mln €

(2Q’14: 4,871 mln €)

• Improving organic performance at -5.7% YoY vs -7.1% in 2Q’14 due to a different mix:
• Better domestic trend both in Fixed and Mobile underpinned by healthier competitive

environment and good acquisition results in UBB KPIs

• TIM Brasil: Positive “Business Generated” results supported by an excellent MBB take-up

Ebitda

2,243 mln €

(2Q’14: 2,145 mln €)

• Group Ebitda at 2.2 bln € in 3Q’14 (Reported -8.0% YoY, Organic -8.5% YoY)
• Performance at domestic level (Reported Ebitda -11.6% YoY) impacted by non-recurring

items; Underlying Domestic Ebitda (net of new handset subsidy approach and one-offs) -7% YoY in 3Q’14

• Sound performance in Brazil (+6.5% YoY in 3Q’14) driven by a strong results in data

revenues, efficiency on network and reduction in interconnection costs

Net debt reduction to

26.57 bln €

• Lower by 0.2 bln € vs FY’13 and by 0.8 bln € vs 2Q’14. Usual 2H NFP improvement kicks in

Innovative Capex

~620 mln € YTD

(Italy & Brazil)

• Focus on innovation confirmed:
• Italy: current 27% NGN coverage is above the mid-point of 2014-16 of the Original Plan target;

actual 74% LTE coverage shows strong upbeat vs FY’14 target at 60% and FY’15 target at 70%

• Brazil: 700Mhz spectrum acquired at fair price, ensuring a better coverage (Indoor and Rural)

with a much larger penetration than the 2,500 MHz band currently used for 4G services. 81 cities have been covered so far by our MBB Project (36% Urban coverage); 100 cities will be covered by end of 2014

Argentina

• On October 24, Sale Agreement with Fintech was Amended and Restated:
• Total Sale Proceeds confirmed at US$ 960mln, which now translate into a 6x Ebitda

multiple after recent Peso devaluation

• 2nd Tranche for US$ 215.7mln cashed in
• Cash collateral and Break-up Fee to support completion of transaction

9M 2014 Results 5

3,895 3,914 3,834 3,785 3,554 3,567 3,594 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14

• 10.1%
• 10.5%
• 9.1%
• 9.1%
• 8.8%
• 8.9%
• 6.2%

Marco Patuano

Domestic Service Revenues trend

YoY

Domestic Service Revenues improvement:

• constant topline recovery on YoY basis:
• 6.2% in 3Q’14 vs -8.9% in 2Q’14 and
• 8.8% in 1Q’14
• growing performance quarter on

quarter: +0.7% in 3Q’14 and +0.4% in 2Q’14 vs -1.0% on average in 2013

• Service revenues stabilization

at 3.6 bln € per quarter in 2014

QoQ

2,715 2,664 2,639 1Q'14 2Q'14 3Q'14 1,099 1,138 1,189 1Q'14 2Q'14 3Q'14

• 7.4%
• 8.6%
• 7.2%
• 14.9%
• 13.3%
• 7.1%

YoY YoY € mln

Improving performance in fixed business thanks to better results in all components Sound recovery in mobile service revenues driven by better results both in Business Generated & Received

+19

• 80
• 49

+13 +27

Domestic top line recovery gains momentum

Fixed Service Revenues Mobile Service Revenues

9M 2014 Results 6

2,031 1,795

3Q'13 3Q'14

Marco Patuano

40

• 9.8%
• 11.6%

net of new handset subsidy approach

Domestic Ebitda Ebitda trend

%YoY,€ mln

Domestic Ebitda: progressing towards an improving FY trend

• Effects on Year-on Year performance for this quarter

are:

• ~ 30 mln euro for
• incentive plans for employees &

management and

• salary discontinuous increases enabling

insourcing

• ~ 30 mln euro for regulatory termination disputes

and other provisions

• 40 mln euro for new handset subsidy approach

Ebitda Discontinuities

Normalized for discontinuous increases in labour costs, provisions & handset subsidy

net of new handset subsidy approach reported

• 9%
• 7%

1H'14 3Q'14 4Q'14

+

Underlying Ebitda trend

• 7.9%
• 11.6%
• 5.4%
• 9.8%

1H'14 3Q'14

9M 2014 Results 7 138 1,089 1,122 443 380 249 195 106

• 63
• 54
• 11
• 138

95

9M'13 network IT commercial&others IT

• thers

subsidy 9M'14

32% 32% 35%

24% 25% 28%

1Q 2Q 3Q 31% 32% 33%

28% 28% 30%

1Q 2Q 3Q

(2) net of wholesale

2014 2013

Translating Domestic Innovative Capex into Revenues

Marco Patuano

2,025 1,792

handset subsidy network IT commercial&

• thers IT
• thers

+102

• 69

innovative traditional network

Efficiency(1): -197 mln €

(1) total domestic capex efficiency=

a b c d

+ + +

a b c d 33% 35% 37% 1Q'14 2Q'14 3Q'14

Innovative portion on network capex

9M’14 35% +8pp YoY

Innovative Mobile Service Revenues(3) Innovative Fixed Service Revenues(4)

(3) Broadband & VAS Content (4) Broadband, VAS Content & ICT commercial&others IT

Growing penetration of Innovative Revenues on total(2)

9M 2014 Results 8

15 45 103 151 34 77 123 163 0.2 0.5 >1.0 ~1.0 4Q'13 1Q'14 2Q'14 3Q'14

TI Retail NGN OLO Subloop/NGN Avg daily acquisition

Market Fiber Lines Mobile BB CB

today @ 27%

51% 2014 2015 2016

today @ 74%

2014 2015 2016

Marco Patuano

6,853 7,166 8,023 8,444 8,677 9,151 9,596 0% 1% 2% 4% 5% 7% 9%

1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 MBB % LTE

>50% >80%

‘000

+10pp vs FY’13 FY’14 target already exceeded

NGN & LTE current Coverage

Additional Giga take-up >50k clients per week

49 122 226 313

October ~1.5k/day Target further upgradable First mover advantage to be preserved

NGN Coverage LTE Coverage

«Open Fiber» launched

9M 2014 Results 9 Marco Patuano

530 531 536 52 56 57 132 139 134 264 281 301 64 61 90 58 70 72 76 126 95

1Q'14 2Q'14 3Q'14 713 726 727 328 342 390

1,175 1,264 1,284

1,099 1,138 1,189

Outgoing voice Incoming voice SMS

Traditional

Broadband VAS content

Innovative

wholesale

Service

handsets

Total

+13 +14

+39

+12

+89

+1 +48

+51

+2

+20

+50

• 31

€ mln, QoQ

• 14.9%
• 13.3%
• 7.1%

1Q'14 2Q'14 3Q'14 4Q'14

+

• 24.1%
• 21.9%
• 16.7%

+9.9% +8.4% +16.6% +8.7% +5.6%

• 0.5%

Traditional Innovative wholesale

Domestic Mobile

• Mobile Service Revenues improvements due to:
• Constant recovery in outgoing voice and positive support from

incoming thanks to zero MTR drag

• Sound performance in Innovative revenues driven by progressive

growth in browsing and additional revenue stream from new digital entertainment services

• We confirm Mobile Service Revenues is trending towards

parity in 4Q’14

Quarterly Mobile Revenues Breakdown Service Revenues Trend YoY

9M 2014 Results 10

367 352 334 666 647 632 238 232 229 395 402 410 37 38 38 133 134 135 878 859 861 56 73 79

1Q'14 2Q'14 3Q'14 1,271 1,231 1,195 Traditional 565 574 583 Innovative 2,715 2,664 2,639 Service 2,771 2,737 2,718 Total Traditional Innovative

• 10.4%
• 13.1%
• 10.1%

+0.1% +1.8% +3.0% Wholesale & others

• 7.2%
• 7.9%
• 9.3%
• 7.4%
• 8.6%
• 7.2%

1Q'14 2Q'14 3Q'14 4Q'14

+

Outgoing voice Access Others National, Int’ wholesale + Subs&others VAS ICT Broadband handsets

• 40

+9

• 51
• 34
• 36

+9

• 25
• 19

Marco Patuano

Domestic Fixed

• 7.4%
• 8.9%
• 6.2%

1Q'14 2Q'14 3Q'14

Fixed Service Retail YoY

• Monthly Retail Fee

upward revision effective November 1st to provide further uplift in 4Q’14

• Significant support from

increasing fiber take-up

€ mln, QoQ

Quarterly Fixed Revenues Breakdown Service Revenues Trend YoY

9M 2014 Results 11

“Business Generated” trend in Q3 is supported by…

Marco Patuano

Ebitda Performance remains sound

YoY, %

+1% ‐1% ‐4% +3% +1% 1Q'14 2Q'14 3Q'14 ex MTR

… increased Data Penetration

• Mobile:«business generated»

revenues growing at a good pace (+5% YoY) thanks to data 26% 30% July'13 July'14 Strong performance in 4G Market Share +4pp 24 32 3Q'13 3Q'14 +32% Double-digit growth in data users

Mln users YoY, %

Innovative VAS revenue growth accelerating +36% +44% +50% 1Q'14 2Q'14 3Q'14

700Mhz spectrum Acquisition

39 53 66 81 2013 1Q'14 2Q'14 3Q'14

MBB project: «on track»

30% 36% 31% 32% Urban coverage

Investing in Network infrastructure to strengthen

• ur position in

Mobile Data

Total investment of R$ 2.85bln

• «Block 2» cost R$ 1.95bln
• clean-up costs R$ 0.9bln

Brazil: Usage of Mobile Data is Rapidly Expanding

3Q'13 3Q'14

Business Generated Business Received

• 4%

+1% ex MTR +5%

• 34%

Local+Long distance Voice + VAS Incoming (Voice&SMS) * Mobile Service Revenues based on net contributions

Source: ANATEL

+7.8% +8.0% +6.5% 1Q'14 2Q'14 3Q'14

YoY, %

Mobile Service Revenues Performance*

YoY, %

9M 2014 Results 12 Piergiorgio Peluso

• TI 3Q’14 Results
• Financial Update
• Take-Aways
• Appendix

Agenda

9M 2014 Results 13

3Q’14 Reported

€ mln, %YoY

Organic(1)

(1) Starting from 2014, Organic performance includes only exchange rate variations and impacts from perimeter changes (2) Including TI Media, Other & Elimination. Olivetti is included in the Domestic perimeter

Piergiorgio Peluso

Telecom Italia 3Q’14 Group Results

net of new handset subsidy approach

Weight(2) €mln YoY YoY

Capex

Domestic Brazil

933

615 317

• 13.2%
• 9.3%
• 19.7%
• 12.5%
• 9.3%
• 18.4%
• 9.1%
• 3.6%

66% 34%

Revenues

Domestic Brazil

5,421

3,805 1,608

• 4.5%
• 5.0%
• 3.1%
• 4.9%
• 5.0%
• 4.5%

70% 29%

n.a. Ebitda-Capex

Domestic Brazil

1,310

1,180 124

• 4.0%
• 12.8%
• 5.4%
• 12.8%
• 90%

9%

n.a. Ebitda

Domestic Brazil

2,243

1,795 441

• 8.0%
• 11.6%

+8.4%

• 8.5%
• 11.6%

+6.5%

• 7.0%
• 9.8%

80% 20%

• 7%

Normalized for cost of labour, provisions & handset subsidy

9M 2014 Results 14

2,045 2,034 1,327 1,080 864 762 2,148 2,164

9M'13 9M'14 ‐53 +17 +24

1Q'14vs'13 2Q'14vs'13 3Q'14vs13

(1) Interconnection, Cost of Equipment, Other COGs (2) Acquisition costs, ADV, Customer Care, Other commercial costs

Volume/ Revenue- Driven (1) Market/ Customer- Driven (2) Process/ Asset- Driven (3) Labour Cost

Solid Cost Reduction:

• Commissioning: volume acquisition reduction
• Advertising: cost optimization supported by single

format and brand

• Operating Costs for Network & IT: savings in

procurement and positive impacts of process reengineering

• G&A: zero-budget approach and policy review

6,040 6,383

• 102
• 246

Piergiorgio Peluso

9M’14 Domestic Opex Efficiency Plan to Overperform FY Target

€ mln

• 11

Solidarity Agreement Extraordinary Compensation Plans

Labour Cost YoY

YoY impact neutral negative negative neutral negative Salary Increase(4)

€ mln

positive negative

• 72
• 31
• 66
• 180
• 348

comm./adv./ccare bad debt/other commercial industrial costs/G&A

• ther opex

total efficiency

Market-driven

• 102 mln euro

Process-driven

• 246 mln euro

Including:

• 71 mln euro

Sparkle provision reversal

• 84 mln euro

Antitrust fine in 2013

Operating Expenditures External Opex net of COGs

• 348 mln € YoY

(3) Industrial costs, G&A, Real Estate, Other (4) Starting from February 1, 2014

9M 2014 Results 15

Reported, € mln

Piergiorgio Peluso

9M’14 Operating FCF Generation Remains Solid

1,281 107

• 843
• 331

Ebitda Capex D operating WC&others OpFCF

Group Domestic Brazil

 vs. 2013

• 184
• 29

+397

• 552

OpFCF on Revenues

13% 20% 25% 1Q'14 2Q'14 3Q'14

• 491

306 292 1Q'14 2Q'14 3Q'14

OpFCF quarterly breakdown TI recurring stronger Second Half Operating Free Cash Flow is confirmed

9M’14 figures

• 14

1,058 1,228 1Q'14 2Q'14 3Q'14 4Q'14



6,588 2,272 2,640 1,676

Ebitda Capex

• perating

WC&others OpFCF 

2014 Free Cash Flow Generation

5,296 2,166 1,792 1,338

Ebitda Capex D operating WC&others OpFCF 19% on Revenues 

9M 2014 Results 16

• 2,272

+1,213 +396

• 47

+234 +241

FY'13 OpFCF Cash Financial Expenses/Financial Accruals Taxes & other impacts M&A Telecom Argentina (discontinued) Dividends/ Change in equity 9M'14

9M’14 Net Financial Position Improvement

26,807 26,572

• 235

+184

• 88

 vs. 2013

• 304

+394

• 89
• 287

Piergiorgio Peluso

FX impact FX negative impact

• 190
• 1,657 mln €

vs 9M’13

Including 1.3 bln euro Mandatory Convertible Bond 25,507 25,272

Mandatory Convertible Bond Mandatory Convertible Bond

€ mln

9M 2014 Results 17

Italy Brazil Argentina

• Digital terrestrial network

businesses merger completion with Gruppo Editoriale L’Espresso

• Sale process on track, while new

regulatory framework still developing

Towers 700Mhz Auction TI Media

Sale Agreement renegotiated to allow for transaction completion

• Same amount granted
• TI Management
• Discontinued operation
• New US$175mln break-up fee in place

New Agreement Supports Disposal

Towers, Frequencies and Disposals Update

Towers



US$113.7mln already cashed in in Dec’13 US$215.7mln cashed in on Oct 29th, 2014 US$600.6mln TI note issued entirely purchased by the Buyer, providing Cash collateral US$30mln service fee

Structure of the deal

a b c d US$ 960 mln Total Consideration

Piergiorgio Peluso

TIM Tower sale finalization soon

• Process in its Final Stage; final

agreement expected to be signed by year end

• Transaction scope involving about

6.4k TIM Towers

• Proceeds expected to finance TIM

network deployment, including 700 MHZ license costs

A Positive Outcome for TIM

• Overall Cost in Line with

expectations

• Awarded “Lot n.2” Fits our Existing

Spectrum Profile at best

• Increased 4G Frequencies to

maintain momentum in TIM’s mobile data strategy

Value Extraction from Separation remains a Priority

• Tower Division created
• Service Management Agreement

finalized

• Advisors appointed for further steps

3G/4G Spectrum Auction

• “Lot 8” awarded to TEO consisting in

30MHz for 15-year licenses on AWS (band 1700-2100Mhz) and 20Mhz

• n 700MHz

 

9M 2014 Results 18

• TI 3Q’14 Results
• Financial Update
• Take-Aways
• Appendix

Agenda

Marco Patuano

9M 2014 Results 19

Domestic

• Upbeat 3Q’14 paves the way for further improvements in 4Q and beyond:
• Transition from price-based to quality-driven competition opens to further value generation

from Data, while polarization between High-Quality Network Operators and Other Operators increases

• Recovery in Mobile is well ahead and has started in Fixed, whose upside is shown by both
• ur Retail and Wholesale take-up of Fiber offers
• Further push on convergence, offer simplification and superior quality experience for both
• ur Consumer and Business segments ongoing
• Domestic Opex Efficiency Plan to overperform the €200mln FY’14 target, while favorably

facing 2015 step-up to €400mln. In Brazil, TIM presented a strong Opex saving in 3Q with

• 8.1% YoY, mainly due to efficiency on network and lower interconnection costs

Efficiency Plan Innovative Capex

• We are investing to strengthen our role of Digital Champion in Italy, where innovative

services and content create more and more demand for bandwidth and speed – not a game for all. Network and IT transformation and delayering are a key part of the process

• Also in Brazil innovative investments are being increased in order to accelerate the

implementation of new technologies for mobile data and further stimulate the commercial take-up of 4G. TIM currently covers around 36% of the urban population with 4G, serving 45 municipalities

M&A

• Opportunities will be considered only if compliant with our Group’s Financial Discipline and

if clearly generating value for our Companies and our shareholders / bondholders

Marco Patuano

• Supported by all the above actions, FCF generation is key to preserve our leadership in
• ur Key Markets and to ensure our deleveraging goals

FCF generation

3Q’14 Group Take-Aways

Brazil

• TIM Brasil is set to generate relevant value from its important, country-wide MBB

expansion

9M 2014 Results 20 Marco Patuano - Piergiorgio Peluso

• TI 3Q’14 Results
• Financial Update
• Take-Aways
• Appendix

Agenda

9M 2014 Results 21

Reported data, € mln, %YoY 2Q'13 2Q'14 40 2Q'13 2Q'14 2Q'13 2Q'14 40 2Q'13 2Q'14

Total Revenues Ebitda - Capex Ebitda Capex

• n

revenues

50.7% 47.2%

• 9.8%

net of new handset subsidy approach

2,031 1,795

• 11.6%

4,007 3,805 678 615

• 5.0%
• 9.3%
• 173

1,353 1,180

• 3.6%

net of new handset subsidy approach

Domestic Performance Dashboard

3Q’13 3Q’14 3Q’13 3Q’14 3Q’13 3Q’14 3Q’13 3Q’14

normalized for cost of labour, provisions & handset subsidy

Marco Patuano - Piergiorgio Peluso

• 7%

9M 2014 Results 22

29 124

3Q'13 3Q'14

386 317

3Q'13 3Q'14

415 441

3Q'13 3Q'14

1,394 1,341

290 267

3Q'13 3Q'14 Organic data*, € mln, %YoY

24.6% 27.4%

+6.5%

• 4.5%
• 18.4%

+95

* Excluding exchange rate

Brazil Performance Dashboard 3Q’14

Service Handsets

1,608 1,684

• 4%

Mobile Service Revenues** +1% ex-MTR 9M’14

• 5.5% YoY

** Mobile Service Revenues based on net contributions

Marco Patuano - Piergiorgio Peluso

• n

revenues

Total Revenues Ebitda - Capex Ebitda Capex

9M 2014 Results 23

1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14

Marco Patuano - Piergiorgio Peluso

Domestic Mobile KPIs

‘000

31,858 31,706 31,554 31,221 30,996 30,660 30,374

83% 85%

1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14

+2pp YoY

• 28
• 20
• 8
• 17
• 41
• 34
• 80
• 2
• 1
• 111
• 107
• 178
• 197
• 124
• 92

+75 +16

• 18

Jan Feb Mar Apr May June July Aug Sep

MNP Balance

2014 2013

Cum. +504 YoY

Highlights

Clear signs of market stabilization translated into:

• better MNP balance +504k YTD
• lower gross adds  -36% YoY in Q3
• better churn rate  25.2%; -3.6pp YoY

Mobile CB Active CB

9M 2014 Results 24

761 736 711 684 655 625 597 965 1,014 1,045 1,084 1,122 1,155 1,164 1 1 4 15 45 103 151

1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 18.9 19.1 19.2 19.2 19.2 19.6 20.0

+3.5% +3.5% +3.6% +1.6% +1.8% +2.3% +3.9%

1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 ARPU BB YoY €/month

Domestic Fixed KPIs

13,777 13,555 13,372 13,210 13,027 12,828 12,656 7,238 7,233 7,164 7,169 7,211 7,258 7,167 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14

Fixed Access

OLO TI retail 21,016 20,788 20,536 20,378 20,238 20,085

‘000

19,823

965 1,015 1,050 1,100 1,167 1,259 1,315

6,984 6,933 6,892 6,915 6,933 6,939 6,932 Total

(201) (222) (183) (163) (182) (200) (171)

1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14

Line Losses

+18 +22 +12 YoY

BB ARPU

Marco Patuano - Piergiorgio Peluso

6,019 5,918 5,842 5,814 5,766 5,679 5,617 Flat ADSL Total BB Fast

Total Free ADSL

Total ADSL SI+20Mb Fiber

BB Access

9M 2014 Results 25

+1.9%

• 10.7%
• 12.6%
• 22.2%

+0.7%

• 8.9%

+16.9%

• 18.7%
• 64.7%

+0.5%

• 6.0%
• 7.6%
• 18.5%

+4.6% +18.9% +18.4%

• 15.4%
• 61.8%

81 1,203 1,109 536 523 50 94

519 17

wholesale(1) Consumer+Business services

• utgoing voice

VAS business received handsets

(1) Including Visitors (2) Total Retail Service Revenues net of Incoming

voice fees&other

• 10.0%
• 5.6%

1,284 Total 1,360

80 1,280 1,200

• 12.7%
• 8.5%

1,059 business generated(2) 1,158 658 500 42 80

613 44

3Q’13 3Q’14 YoY 9M YoY

Domestic Mobile Revenues Breakdown

Reported, € mln, %YoY

Marco Patuano - Piergiorgio Peluso

9M 2014 Results 26

Reported, € mln, %YoY

Sparkle group Wholesale Domestic Retail Service

Service Wireline 2,844 2,639

• 7.2%
• 7.7%

339 304

• 10.3%
• 3.2%

650 595

• 8.5%
• 10.3%

1,899 1,781

• 6.2%
• 7.5%

voice & access 1,178 1,056

• 10.4%
• 11.2%

internet 401 415 +3.5% +1.5% business data 279 264

• 5.3%
• 2.9%
• ther

41 46 n.m. n.m.

• elim. & other

(43) (41) n.m. n.m.

Total Wireline 2,898 2,718

• 6.2%
• 7.1%

products 54 79 +47.8% +22.1%

Domestic Fixed Revenues Breakdown

3Q’13 3Q’14 YoY 9M YoY

Marco Patuano - Piergiorgio Peluso

9M 2014 Results 27

Liquidity Margin

€ 30,657 mln is the nominal amount of outstanding medium-long term debt. Adding the Mandatory Convertible Bond (€ 1,300 mln), the discontinued operations (€ 28 mln), IAS adjustments (€ 1,223 mln) and current financial liabilities (€ 487 mln), the gross debt figure of € 33,695 mln is reached. N.B. Debt maturities are net of € 1,262 mln (face value) of repurchased (of which € 504 in the 2013 and € 543 in the 2014) own bonds (of which € 1,047 mln related to bonds due within 2016).

Loans (of which long-term rent, financial and

• perating lease payable € 1,200)

Drawn bank facility Bonds

Debt Maturities

Undrawn Portion of Facility/Committed C&CE (escluded discontinued) Marco Patuano - Piergiorgio Peluso

Robust Liquidity Margin and Well-Distributed Debt Maturities

Fully Covered until 2018

€ mln € mln

449 1,359 918 896 1,030 1,354 1,264 7,270 7,000 1,949 1,880 2,965 2,295 3,138 11,160 23,387 5,305

12,305 449 3,308 2,798 3,861 3,325 4,492 12,424 30,657

Liquidity margin Within 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Beyond 2019 Total M/ L Term Debt

9M 2014 Results 28

N.B. The figures are net of the adjustment due to the fair value measurement of derivatives and related financial liabilities/assets, as follows:

• the impact on Gross Financial Debt is equal to 2,455 €/mln (of which 687 €/mln on bonds)
• the impact on Financial Assets is equal to 966 €/mln.

Therefore, the Net Financial Indebtedness is adjusted by 1,489 €/mln.

Total Gross Debt net of Adjustment: Euro 33.695 mln

• Gross debt

33,695

• (of which 30 mln disc. Operations)
• Financial assets

(6,699)

• f which Cash & CE and marketable securities

(5,304)

• Cash & Cash Equivalent

(4,105)

• Marketable securities

(1,199)

• Italian Government Securities

(864)

• Other

(335)

• Discontinued operations

(424) Net Financial Position 26,572

Maturities and Risk Management

Cost of debt:  5.4%

• Average debt maturity: 7.35 years

(bond only 8.05 years)

• Fixed-rate portion on gross debt approximately

66.9%

• Around 40% of outstanding bonds (nominal amount)

is denominated in USD, GBP and YEN and is fully hedged

Marco Patuano - Piergiorgio Peluso

Well-Diversified and Hedged Debt

1,270 1,176 6,026 25,195

. . . .

28

€ mln