2012-2014 Plan Outline

Telecom Italia Conference Call2012‐14 Plan Outline

Telecom Italia – TIM Brasil2012‐14 Plan Outline2012 14 Plan Outline

LUCA LUCIANI


Safe HarbourSafe HarbourThese presentations contain statements that constitute forward‐looking statements within the meaning of the Private

Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include

statements regarding the intent, belief or current expectations of the 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 Company and the Group.

Such forward looking statements are not guarantees of future performance and involve risks and uncertainties andSuch 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.

Forward‐looking information is based on certain key assumptions which we believe to be reasonable as of the dateForward 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 are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date

of this presentation. Telecom Italia S.p.A. 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 S.p.A. business or acquisition strategy or planned capital

expenditures or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged to consult the

Company's Annual Report on Form 20‐F as well as periodic filings made on Form 6‐K, which are on file with the United

States Securities and Exchange Commission.

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AgendaAgenda

TIM B il 2011 R lTIM Brasil 2011 Results

TIM Brasil Plan

Take-Aways

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Three Years in Few: Accelerating Growth and Profitability

Customer Base Expansion Revenues growth

18%3xMln Lines R$ Bln

Three Years in Few: Accelerating Growth and Profitability

4.79.9

13.1

0%+5%

+18%

Revenues Growth YoY

Net Adds

3x

Fastest growing

Company

$

64.1

CustomerBase

51.041.1

13.717.1

TotalRevenues

14.5

Growth YoY

+56% +25%

EBITDA , EBIT , EBITDA-CAPEXMarket share% lines R$ Bln

201120102009201120102009

Incremental market

shareEBIT

Leading growth for

the 2nd year

26.5%

33%34%

20%

R$ Bln

0.5

1.2

2,1

1.361.64

4x

Marketshare EBITDA-CAPEXBack to #2

25.1%

23.6%

201120102009

0.82

2x

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EBITDA 4.64.23.5201120102009


Two Markets One approach: Simplicity

“Voice is Good” “Internet for All”

Total Voice Traffic Volume P h Example: Infinity Web

>15 l i

Two Markets, One approach: Simplicity

Billion MinutesPush on

FMS

86.7

62 5

p yDaily Internet uniqueusers - Pre paid (Mln)

2.79x

>15mln unique users per month (Pre+Post)

2x

62.5

38.1

0.3

Data RevenuesVoice Revenues“Ride the

Simplicity”

Dec 11Aug 10

Voice Outgoing Revenues D R

201120102009

Voice Outgoing RevenuesR$ Billion

13.4

11.3

1

+34% 3.2

2.2+67%

Data RevenuesR$ Billion

+49% data growth in Q4

10.0 1.9

201120102009 201120102009

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Leading the Voice Market with just 2 concepts: Infinity and Liberty (voice and internet)


Efficiency in Go 2 Market (i e : Post paid)

Mln lines % Revenues, months

Customer Base Post-Paid Bad Debt and SAC/ARPU

Efficiency in Go 2 Market (i.e.: Post-paid)

0.20.3 0.3 0.2 0.2 0.3

0.6 0.7

6 602 6 944 7,222 7,465 7,688 8,005 8,636 9,291

Net Adds

Mln lines ,

Bad debt

2.00% 1.83%1.34% 1.04% 0.77% 1.08% 0.95%

0,92%

3.12.6 2.3

CB

6,602 6,944 ,

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

+24.5%YoY

SAC/ARPU

3

1.5 1.8 1.6 1.71.3

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

R$ Mln

Product Revenues and Capitalized Subsidy

Care/1.000 Bills

Anatel’s SMP 11 Indicator*

R$ Mln

286380

424 468 433

732 712664

Product

Care/1.000 Bills

1 85 1 91

115 8564 26 8 0 0 0

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

CapitalizedSubsidy

Revenues1.61

1.53

1.55

1.47

1.85

1.69

1.91

1.63

1.17

1.10

1.11

0.76

Dic’11May’11Jan’11 Sep’11

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*Care relative to billing problems

5


AgendaAgenda


TIM Brasil Plan

Take-Aways

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Continuous Reshaping of the Brazilian TLC Market

R$ Billion 106 115 126 134

Market Transformation

Pure Mobile Advantage

Continuous Reshaping of the Brazilian TLC Market

R$ Billion

Fixed 59(56%)

106

60(52%)

115

55(43%)

126 134

53(40%)

Pure Mobile Advantage

Mobile over Fixed” : towards 60/40 split

Force Fixed Mobile

Mobile47

(44%)55

(48%)

71(57%)

81(60%)

Force Fixed-Mobile substitution (voice)

Mobile Internet competitive vs <2 Mbps wireline BB accesses20142009 2011 2016

8296

51 29Fixed

Voice is Good

wireline BB accesses

Capital Allocation

45 53

20162009

Mobile

52

Voice is Good (Push the FMS)

2G CapacityIntelig Acquisition

2810

24

M bil

52

FixedInternet for All

3G CoverageTIM Fiber Acquisition(AES Atimus)

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2 8Mobile

20162009 7


Limited BB capabilities from incumbents create 3 opportunities Limited BB capabilities from incumbents create 3 opportunities for TIM

% of fixed accesses

Fixed

1. FMS VoicePrice per minute

100%

30%

Mobile

~70%

nominal speed nominal speed

20%

24%~~6%

80%

Total wireline market accesses

Voice only BB <2Mbps >2Mbps

3. TIM Fiber

S l ti tt k f th Ad l

2. FMS Data

13,2Mln clients

Selective attack of the Adsl

incumbents via Naked VDSL ultra BB

powered by the 5.500km Optical Fiber

in RJ/SP

6,7

Dic/10 Dic/11Smartphone

TIM monthly unique users (Pre-paid)

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ppenetration 10% 27%

8


Internet Booming (“Internet for All”)Internet Booming ( Internet for All )

A large potential market With high willingness to use/to buy Huge frustration from fixed lines

195Mln of Brazilian Internet Users Brazilian Households Mln Subscribers

117

195

Existing

Fresh Market

Broadband C+D

hat

Don

’t H

ave

80%

100%

Best fit to Mobile

Brazilian Households15.5

80%

Exposed to FMS even on Data

54

24

Existing Market

Broadband A+B

Fix C+D

Mobile C+D

% o

f H

ouse

hold

s th

20%

40%

60%

Concentrated 20%

TotalUsers

Not use (up to now)

Use but not

posses

Possesown

access % of Households that Have Intention To Buy

%0% 5% 10% 15% 20% 25% 30%

Co ce t atedin main cities

(RJ+SP) Total WirelineAccesses

Narrowband (< 2Mbps)

BroadBand(>2 Mbps)

…Internet Café Substitution to target Class C Potential

… the Ultimate Mobile Data Experience (powered by

… Ultra BB experience for Residential and Corporate

AES Atimus acquisition allows TIM to offer a “Internet for All” experience:

to target Class C PotentialFTTS) (Fixed)

Infinity WebLiberty Web TIM Fiber

LUCA LUCIANI 9


The New Integrate Network Approach

Fiber To The Site/Antenna (3G+ Evolution)

The New Integrate Network Approach(“Leveraging AES Atimus Fiber Optic based”)

MBB Overlay 3 Carriers per antenna3 sub-carriers of 21 MB each*Total Available = 360MB

Fiber To The Site/Antenna (3G+ Evolution)

Fiber to the Site in top 42 Cities (high capacity)3 Carriers per antenna (spectrum optimization)

Copper or

SIM Based Identification/BillingSingle SIM to identify and bill

optimization)Upgrade to 21 Mbps (HSPA+) of existing Node-B

Liberty Web

Fiber Drop

WiFi Underlay

100MB 200 ports

300 Mb

and bill

Wi-Fi offload (e.g. Rocinha)

50 Mb10 thousand hot spots semi publicRocinha example and 5 main airportsRoadmap to extend over 10,000 hot spots by YE 2012 and 25,000 by ‘14 <R$500/Household

High Capillarity of the aerial fiber based network (~250 meters to the Home)Flexibility: fast drop at the buildingUse of existing internal network

Infinity Web

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Use of existing internal network

TIM Fiber10


WiFi Off load supporting the “Internet for All” Rocinha results

Option 1: Add One Additional Base Station Option 2: Cover With WiFi

WiFi Off-load supporting the Internet for All - Rocinha results

TIM BTSTIM BTS

25 Access points

Average distance: 200m

Throughput: 5Ghz

Performances: 5,000

One additional BTS

Throughout : 201 Mbps

TIM BTS

TIM BTS

TIM BTS simultaneous connections

1-2 Mbps per user

Capex Results AchievedpR$ and R$ per MBps

~ 300 K~ 1’500 Mbps

‐54% Reduced capexReduced time to market

~ 137 K

7X

educed e o a eReduced operating costsIncreased customer experience/speedExecuted Internet for All – LAN Houses

~ 200 Mbps

Executed Internet for All LAN Houses already reduced by 25%

Gained company brand image with local and federal government

LUCA LUCIANI

Alternative 1: BTS Alternative 2: WiFi Alternative 1: BTS

Alternative 2: WiFi

11


AgendaAgenda


TIM Brasil Plan

Take-Aways

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2012 14 Drivers of Growth2012-14 Drivers of Growth

Revenue Growth

CAGR ‘11 – ‘14

R$ Billion

3 Ways of Growth

R$ Billion

TotalRevenue

13.612.815.3 Fixed

13.8 14.517.1

XX%

90 mln lines

200 mou

ServicesRevenues 12.9

0.7

12.2

0.6

14.5 Mobile

0.8

25% VAS Incidence

Mobile Customer Base FMS – Voice (MOU) Internet for All (Mobile Data)

Community Expansion FMS (Voice) Internet for All2009 20142013201220112010

Million of lines D t % f S i RMinute of usage per line

4

Million of lines

116129

˜200

11% 12%14%

˜25%

Data as % of Service RevenueMinute of usage per line

90

4151

64

+XX%

83

116 11% 12%

2009 2010 2011 2012 2013 2014

+XX%+XX%

Outgoing Voice Revenues

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2009 2010 2011 2012 2013 2014

13

2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014


Network Continuous Evolution

Network roadmap 2G (TRX Installed) 3G roll out

000 TRX Pop %

Network Continuous Evolution

Managing the growth2G

Speed up the roll-out in HSPA mode

3G

253

157

000 TRX Pop %

64%

>80%

>10,000 hot spots by YE2012WiFi

FTTS Backbone

2011 2014 20142011

Deployment in Top 42 citiesFTTS

~1 Mln households by 2015FTTH 42 Cities

50%

% of total traffic 000 km

49.0

24.0

~50,000 km in fiber opticEfficiency 2014Swap + built out

201120142012

14 Cities 25.0

TIM Fib it l i t i2G (TRX I ll d) TIM Fiber – non capital intensive2G (TRX Installed)

Street equipment

ModemInstallationMetropolitan

networkInternal network

Aerial ~2 400~500

Tim Fiber: a “no Capex intensive” approach to offer Residential Ultra BB

S

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~250+ + ~125+~125network

Undergroundnetwork

~200

~2,400

~500+ =

~500

~1,700

in SP/RJ


Take aways on main TIM Brasil trends

Revenues (New vs Old Plan)

Bln R$

Take-aways on main TIM Brasil trends

New

Old

Bln R$

17.1Revenues

MTR glide path (-20% real term) as of feb’12 impacts approx. 250 bp in Revenues and EBITDAGrowth resulting from further CB, voice MOU and

internet browsing

201220112010 20142013

14.5

14.515.5

1yr in advance

internet browsingFor 2012, revenues growth at >10% YoY (vs.

R$17.1Bn in 2011)

Network sinergies from AES Integration

19.617 5

Organic CAPEX (as % of Sales)

Bln R$

Ebitda

Network sinergies from AES IntegrationContinuous efficiency in Go2Market (no subsidy,

SAC/bad debt)Absorbing MTR cut and TIM Fiber start-up For 2012, Ebitda growth at >10% YoY (vs.

R$4 6Bn in 2011) 17.5

2.8 3.0 3.0 3.0 3.0

% of Revenues

CAPEX

R$4.6Bn in 2011)

Expanding 2G capacity and 3G coverageAccelerate FTTS in Top 42 Cities and Wi-fi

˜14%

CAPEX

201220112010 20142013Capex offloading

Tim Fiber start-upCAPEX flat at 3 bn/year; R$9bn in 3 Years

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2012-2014 Plan Outline

Business

Transcript of 2012-2014 Plan Outline