TELECOM ITALIA GROUP
Telecom Italia Deutsche Bank European TMT ConferenceLondon, September 7th 2011
MARCO PATUANOChief Operating Officer
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
These 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,
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 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.
Safe Harbour
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Domestic 2Q11 Progress Report
Mobile
Fixed
Appendix
Agenda
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
1H 11 Domestic Operating FCF: 2,423 mln € (+61 mln vs 1H10) Financial Discipline
Focus on Core
Markets
Wireline
Mobile
Improving trend in line losses reduction: -183K vs. -206K 1Q11
Slowdown in BB acquisitions due to overall weak market (+65K vs. quarterly avg ~200K)Progress on symmetry in the win-back procedures starting from current August
ICT service revenues increase offsetting traditional data decline
Core Domestic Wireline Service revenues (net of Sparkle) are -3.5% YoY, stabilized QoQ and significantly better than total Fixed performance (-5.1%)
Customer base rebuilding process on track (+715K YoY)
Strong performance on main operating metricsConsumer outgoing prices QoQ stabilization confirmed
Mobile BB: Small Screen strong improvement (Consumer revenues +25.6% YoY)
Macroeconomic pressure/volatility still affecting Business and Top Customers
Domestic 2Q11 Progress Report
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
3,542 3,360
1,966 1,817
2Q10 2Q11
Domestic: Organic (*) ResultsEuro mln, Organic data, %
Mobile Consumer segment recovery trend confirmed
Mobile Business and Top impacted by macroeconomic slowdown
Fixed Access Value protection (market share ~67%)
Continued selective approach on Int’l Wholesale Contracts
Continued strong focus on cash cost reduction and improved YoY marginality. Cash costs on revenues still below 66%
% on Revenues-304 M€
-6.0%
-5.1%Wireline
5,064 4,760
2,435 2,318
2Q10 2Q11
-117 M€-4.8%
48.1% 48.7%+0.6 p.p.
-7.6%Retail Revenues
-6.6%Mobile
(*) excluding closing impact of TIM Loyalty Program on 2Q10 of 35€ mln
2,629 2,442
735 695
2Q10 2Q11
-40
-187
66.4%65.9%- 0.5 p.p.
CAPEX
-7.1%OPEX
-5.4%
-227 M€ -6.7%
3,364 3,137
% on Revenues
Cash Cost reduction
Revenues by Technology EBITDA
Highlights
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Domestic 2Q11 Progress Report
Mobile
Fixed
Appendix
Agenda
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Mobile Handset Revenues Trend – YoY % change
Mobile Retail Service Revenues Trend – YoY % change
Total Mobile Revenues
Euro mln, Organic Data
Mobile Revenues: 2Q11 Results at a Glance
-149-7.6% (*)1,966Total Mobile
1,823 1,683
65 82
7752
2Q10 2Q11
1,817
Total Retail1,765
1,888
Wholesale
-123-6.6%
Service -7.7%
Handset +26.2%
-9.2% -10.6% -9.0% -10.9%-7.7%
2Q10 3Q10 4Q10 1Q11 2Q11
(*)
(*) Net of Billing Shock impact:Total Mobile Revenues -5.5%Mobile Retail Service revenues -6.6%
2Q10 3Q10 4Q10 1Q11 2Q11
-59.6% -58.0%-39.9%
-22.4%
26.2%
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
‘000+9.6%
‘000
‘000
Domestic Mobile: Customer Base Trend
‘000
30,545 31,038 31,260
2Q10 3Q10 4Q10 1Q11 2Q11
152222
2Q10 2Q11
+46.0%
1,850 2,028
2Q10 2Q11
CB Change YoY+715
TIM is Leader on Gross Adds Market Share
Gross Adds
Total SIM cards Net Adds
MNP Performance
2Q10 2Q11
-36%
BALANCE - TIMIncreasing Customer Loyalty
+43%
RECIPIENT - TIMBetter vs Competitors
2Q10 2Q11
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
154 272
24,614 24,707
1Q11 2Q11
yoy growth
Customer Base: continued improvement in our recovery plan paired with calling CB growth: a healthy acquisition process
Outgoing traffic increase partially offsetting outgoing prices reduction: another step towards rebalancing
Price stabilization since YE2010
Mobile Browsing : solid performance thanks to push on handsets sales and internet options (offers, sales channel)
SMS revenues impacted by prices reduction, not completely compensated by usage increase
SMS & Mobile Browsing
Main KPI’s
Highlights
+77%
Customer Base (SIM 000)
1Q10 2Q10 1Q11 2Q11
QoQ Prices
Stabilizationsince YE’10
-31%
-26%
Outgoing Prices – YoY % change
2Q10 2Q11
+22%
Outgoing Traffic – YoY % change
SMS
Users
Usage
Prices
BroadlyFlat
Small screen users
Browsing
+23%
Small screen revenues
+26%
No SMS cannibalization from Data
Domestic Mobile – Focus on Consumer
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
TIM Young OfferBuilding market share on Youth segment
Focused on browsing and SMS, consistent with spending capacity of the younger
Contains attractive side-features for this age category , such as a music quiz giving right to winners to participate in concerts / meetings with their favourite artist.
Advertised via radio and web
Initially, only available on the Web and Facebook ; now also via Sales channel
After September 4th, promotional phase ended and price moved from 6€ to 9€/month)
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Spectrum AuctionItalian Spectrum Allocation
299.2+20 MHz
Already allocated On Auction
255 MHz
► A large bouquet of frequencies is being auctioned (800, 1800, 2000 and 2600 MHz bands). They all can play a role in LTE evolution
► 255 Mhz auction started on August 31. All the 4 Italian Mobile Network Operators are participating.
► Given the size and structure of this auction, this will be all the new available band for the foreseeable future.
► Auction Base (€/MHz/Pop) in Italy for 800 MHz and 2600 MHz is below the peaks reached in other major Countries
► Relaunch rounds are still open on all bands
► Italian Government indicated an overall cash-in target of about € 3.1bn
2600 MHz
800 MHz 0.58 €/MHz/PopItalian Auction base (€ 2,118M)
0.05 €/MHz/PopItalian Auction base (€ 327M)
€/MHz/Pop
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Domestic 2Q11 Progress Report
Mobile
Fixed
Appendix
Agenda
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
389 325
3,081 2,973
150 133
2Q10 2Q11
1Q11 2Q11
-4.9%
-3.5%
-4.9%
-3.5%
Total Service Rev.Core Domestic Service Rev.
YoY %
Euro mln, Organic Data, %
0.8% 0.0%
5.9%8.2%
1Q10 2Q10 1Q11 2Q11
Service Revenues QoQ trend stabilization
Core Domestic Service revenues (net of Sparkle Group): -3.5% YoY, stable QoQ and significantly better than total Fixed performance (-5.1%)
Strong ICT Service Revenues performance offsetting Traditional data decline
Domestic Fixed: Revenues Dynamics
Total Fixed Revenues Key highlights
Core Domestic
Products
Sparkle Group
Service Rev.
-5.1%Total Fixed 3,5423,360
3,3923,227
-4.9%
Eliminations
YoY %
-3.5%
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Telecom Italia Retail Access Evolution & Line Losses
TI Access
Line losses
Key Highlights
Defend a solid market share on fixed accesses
Improving line losses trend despite the new rules on win-back to be implemented on August 7 (as per Agcom’s Decision 62/11/CIR)
Decline in OLOs commercial activity anticipating a more rational competitive scenario
‘000
‘000
OLO Access Growth (TI Wholesale)
ULL Naked WLR
+51
‘000 ‘000 ‘000
77 83
154109
50
33
9
-2
12
-1
1233 38
60
2
2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q112Q10 3Q10 4Q10 1Q11 2Q11
15,741 15,584 15,351 15,145 14,962
2Q10 3Q10 4Q10 1Q11 2Q11
-160 -157-233 -206 -183
2Q10 3Q10 4Q10 1Q11 2Q11
Market Share ~ 67%
Domestic Fixed: TI Access Performance
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
385 386 388 384
‘000
Free
TI retail accesses
Despite OLOs aggressiveness, slowdown of overall BB market growth
Negative impact of backlog increase still due to daily cap win-back limiting OLOs workload during 2Q11
Macroeconomic adverse phase still affecting Business and Top market segments
On BB, TI’s decision not to respond to aggressive promotions by competitors at the beginning of the year proved to be the right choice
192 172 188 213
65
2Q10 3Q10 4Q10 1Q11 2Q11
BB Market
TI
63 52
-11
19
-252Q10 3Q10 4Q10 1Q11 2Q11
2Q10 3Q10 4Q10 1Q11 2Q11
Flat (%) 85% 86% 86% 87% 87%
7,134 7,186 7,175 7,194 7,169
MKT BB Spending *
1Q10 4Q10
+7,6%
-1,1% -2,7%
1Q11 2Q11
Change yoy % € Mln
(*) Source: SIRMI
TI BB Service Revenues
2Q10
BB arpu 18.7 18.6 18.5 18.4 18.3(€/month)
Domestic Fixed: Focus on Broadband
BB Service Revenues
TI Retail Broadband Accesses BB Net Adds
Key Highlights
1Q111Q10
Stable Stable
‘000
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Super Internet offer
Source: Between Osservatorio Banda Larga‐ lug 2010
% of u
sers on BB
10%20%30%40%50%60%
80%70% Social Networking
Video Steraming
Gaming
A strong acceleration of services that require
high network performance are driving
demand for higher speeds in
► Download, for video streaming
► Upload, for social networking
► Super Internet is a bolt-on option enabling speed
increase ( up to 1Mb/s in upload, 10 or 20 Mb/s in
download) against a monthly fee increase starting
from € 4/month.
► There is a 2- months free trial promotion, and is
assisted by a proactive caring (“satisfied or
refunded” approach).
The Offer is consistent with our quest for value in Fixed Broadband
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Wrapping-up: running towards the target
TI DOMESTIC
TI GROUP
Improving our commercial positioning while enhancing profitability
• On Mobile: outgoing price stabilization, recovered handset strategy and consequent
positive trend on browsing
• On Fixed: wireline repricing, value-driven strategy on Broadband, International
Wholesale stabilization and ICT growing in importance and impact
• Overall Latam contribution to 1H11 TI results stands at 34%of Group Revenues and
24% of Ebitda
• Brazil and Argentina continue outperforming, with a double-digit top line growth
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Domestic 2Q11 Progress Report
Mobile
Fixed
Appendix
Agenda
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
Euro mln, Organic Data, %
Benefits from efficiency programs on Fixed costs
MTR and Wholesale traffic reduction
Selective growth of service-driven Smart-phones slightly impacting Ebitda
Mobile Acquisitions cost increase offset by rationalized advertising, and efficiencies on other commercial costs
1
2
3
4
* Costs and operating income related to credit management are reclassified from Fixed Opex to Marketing & Commercial Opex
Focus on 1H11 Domestic EBITDA
3 4
-304M€, -6.2%
214,895 4,591 (673)
+246 (13) +57 +79
1H10 Revenues Interconn. Costs Handsets costs Mktg&Comm.Opex
Fixed Opex* 1H11*
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Deutsche Bank European TMT ConferenceLondon, September 7-8 2011
MARCO PATUANO
2,362 2,423
(1,071) (766)
(1,487) (1,358)
(5,171)(4,809)
Focus on FCF Generation
Domestic Operating Free Cash Flow
Euro mln, Reported Data
Opex
Working Capital
OFCF
Capex
+305
+61
-735
1H111H10
+129
+362
9,35610,091Revenues
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