3Q.2011 Italy Mobile Operator ForecastItaly to have 100 million mobile subscriber connections in 2015 with Wind taking 31% market share

October 2011

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

INDUSTRY AVERAGE SUBSCRIBER GROWTH IN ITALY’S WIRELESS MARKET WAS 2.8% IN THE LATEST QUARTER

The operator-wide average subscriber growth (YoY) was 2.8% in 2Q.2011, up from 1.1% in 2Q.2010.

Vodafone Italy saw its subscriber growth decrease from 3.2% in 2Q.2010 to 0.7% in 2Q.2011.

3 Italy’s subscriber growth (YoY) also decreased from 1.3% in 2Q.2010 to 1.2% in 2Q.2011.

On the other hand, Telecom Italia Mobile (TIM)’s subscriber growth increased to 2.3% in 2Q.2011, up from -6.4% in 2Q.2010.

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Telecom Italia Mobile Vodafone ItalyWind Telecomunicazioni SpA 3 Italy Industry Total

Chart 1: Subscriber Growth (4Q08 – 2Q11), %

Subscriber growth has turned positive in Italy+2.8% industry average subscriber growth in 2Q.2011

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

INDUSTRY AVERAGE ARPU IN ITALY IS DECLINING

The industry average monthly ARPU was US$ 27.73 in 2Q.2011, down -0.7% YoY.

TIM’s ARPU growth continues to decline. It was -12.6% in 2Q.2011, down from 1.8% in 2Q.2010.

Vodafone Italy’s monthly ARPU decreased by -3.4% (YoY) to reach US$ 28.79 in 2Q.2011.

While the three largest operators in Italy all had negative ARPU growth, 3 Italy saw its ARPU increase by +38.1% (YoY) in 2Q.2011.

Chart 2: ARPU Growth (4Q08 – 2Q11), %

ARPU growth in Italy remains negative-0.7% industry average ARPU growth in 2Q.2011

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Telecom Italia Mobile Vodafone ItalyWind Telecomunicazioni SpA 3 Italy Industry Total

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

The operator-wide average Minutes of Use (MOU) per subscriber was 158 minutes per month in 2Q.2011, up +7.0 % YoY.

MOU/Sub at TIM continues to increase and its MOU/Sub growth rate was 7.7% in 2Q.2011.

MOU/Sub at Vodafone Italy, TIM and Wind was 167 minutes, 167 minutes, and 198 minutes respectively in 2Q.2011.

Chart 3: MOU/Sub Growth (4Q08 – 2Q11), %

Minutes of Use per Subscriber is increasingIndustry average MOU/Sub is 158 minutes per month

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4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Telecom Italia Mobile Vodafone Italy

Wind Telecomunicazioni SpA Industry Total

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

-7.3% INDUSTRY AVERAGE EBITDA GROWTH IN 2Q.2011

• The industry average EBITDA growth rate (YoY) in 2Q.2011 was -7.3%, down from -1.4% in 2Q.2010.

• TIM's EBITDA growth was -13.1% in 2Q.2011, down from -5.8% in 2Q.2010.

• EBITDA growth at Vodafone Italy was also negative. In 2Q.2011, Vodafone Italy’s EBITDA growth was -3.4% (down from -3.2% in 2Q.2010).

• Wind’s EBITDA growth was -4.6% in 2Q.2011.

Chart 4: EBITDA Growth (4Q08 – 2Q11), %

Negative EBITDA growth at all of Telecom Italia Mobile, Vodafone Italy and Wind in 2Q.2011

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4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Telecom Italia Mobile Vodafone Italy

Wind Telecomunicazioni SpA Industry Total

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

We forecast that the number of total wireless subscriber connections in Italy will reach 100 million in 2015.

Given the latest quarter numbers, our model predicts that TIM will have approximately 33.4 million mobile subscribers in 2015.

In our view, TIM and Vodafone Italy will continue to hold similar market shares at approximately 33.2% and 30.9% respectively in 2015.

We expect that Wind will have 23.6 million wireless subscribers in 2015 (23.5% market share).

Chart 5: Subscribers by operator (CY09 – CY15F)

So what is IEMR’s Forecast? Total wireless subscriber connections in Italy to reach 100 million in 2015

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CY09 CY10 CY11F CY12F CY13F CY14F CY15F

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Telecom Italia Mobile Vodafone Italy

Wind Telecomunicazioni SpA 3 Italy

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

WE EXPECT THE OPERATOR-WIDE AVERAGE ARPU LEVEL TO REMAIN AT EUR 17 – EUR 18 OVER THE NEXT TWO YEARS

Our forecasting model predicts that the industry average ARPU in Italy will be declining over the next two years.

The industry average ARPU will be about EUR 17.50 per month in 2013, according to our model.

We expect that Vodafone Italy’s ARPU level will remain the highest among the largest operators over the forecast period.

Chart 6: Average Revenue per User (ARPU) per month (CY09 – CY13F), EUR

So what is IEMR’s Forecast?ARPU levels in Italy to remain stable

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Telecom Italia Mobile Vodafone Italy Wind Telecomunicazioni SpA 3 ItalyAverage

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

Vodafone Italy enjoys the highest EBITDA margin among the Italian mobile operators. We expect that Vodafone Italy’s EBITDA margin (calculated as EBITDA/service revenue) will be about 55% in 2013.

Our model is predicting that TIM’sEBITDA margin will be about 46.6% in 2013.

We forecast that Wind’s EBITDA margin will remain at about 47% from 2012 to 2013.

Chart 7: EBITDA margins (CY09 – CY13F), %

So what is IEMR’s Forecast? Telecom Italia Mobile to enjoy the highest profitability

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Telecom Italia Mobile Vodafone Italy Wind Telecomunicazioni SpA 3 ItalyAverage

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© 2011 IE Market Research Corp.All rights reserved.

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