telecom italia

Telecom Italia – TI GroupFull-Year 2011 Preliminary Results and 2012-14 Plan Outline

TELECOM ITALIA

Full-Year 2011 Preliminary Results and 2012-14 Plan OutlineFebruary 24th, 2012

FRANCO BERNABE’

1

TELECOM ITALIAFull-Year 2011 Preliminary Results and 2012-14 Plan Outline

These presentations contain statements that constitute forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995. These statements appear in a number of places in thispresentation 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, financialresults 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 aresult of various factors.Forward-looking information is based on certain key assumptions which we believe to be reasonable as of the datehereof, 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 ofthe date of this presentation. Telecom Italia S.p.A. undertakes no obligation to release publicly the results of anyrevisions to these forward looking statements which may be made to reflect events and circumstances after thedate of this presentation, including, without limitation, changes in Telecom Italia S.p.A. business or acquisitionstrategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts andinvestors are encouraged to consult the Company's Annual Report on Form 20-F as well as periodic filings made onForm 6-K, which are on file with the United States Securities and Exchange Commission.It should also be noted that starting from the year 2010, Telecom Italia reclassified some taxes paid in Brazil ofnon-material amount, previously included in “Other operating expenses”, in reduction of “Revenues” and “Otherincome” in order to ensure a better comparability and intelligibility of the financial information.

Safe Harbour

2


Agenda

TI Group 2011 Preliminary Results

Telecom Italia Plan Outline

Italy

Brazil

Argentina

Focus on Ebitda-Capex Generation

Targets

Appendix

3


Guidance

Revenues

Ebitda

Capex

Broadly Stable YoY

Broadly Stable YoY

4.8 bln €

NFP Adj. 29.5 bln € (LTE excluded)

+2.7% YoY (29,958 mln €)

Flat (12,339 mln €)

4,872 mln €(6,095 mln €, LTE included)

29,191 mln €(30,414 mln € LTE included)

FY 2011Organic Figures

TI Group Full Year 2011 Progress Report: Targets Met

Reached

Reached

Reached

Reached

4


Euro mln, %

3,077 2,966

3,066 3,055

3,186 3,213

3,006 3,105

FY 2010 FY 2011

Organic EBITDA

IQ

IIQ

IIIQ

IVQ

12,33912,335

-0.4%

-3.6%

+0.8%

+3.3%

+4+0.0%

7,088 7,073

7,318 7,470

7,246 7,516

7,520 7,899

FY 2010 FY 2011

Organic Revenues

-0.2%

29,172

+2.1%

29,958

+3.7%

+5.0%

+786+2.7%

IQ

IIQ

IIIQ

IVQ

TI Group 2011 Revenues and Ebitda by Quarters

Domestic

Brazil

Argentina

Other B.U.

Contribution to YoY Change Contribution to YoY Change

0.0%

Domestic

Brazil

Argentina

Other B.U.

2.7%

5


* Revenues based on net contributions

Euro mln, Organic Data

TI Group

FY 11 % yoy FY 11 % yoy

Brazil

FY 11 % yoy

Argentina

FY 11 % yoy

Revenues 35%29,958 +2.7% 7,343 +18.2% 3,220 +26.5%19,033 -4.8%

EBITDA-CAPEX 7,467 -0.4% 708 +20.7% 479 +23.3 %6,374 -3.7%

85%

Domestic

EBITDA 25%12,339 Flat 1,998 +10.7% 1,035 +24.1%9,351 -3.9%

Cash Generation

for the Group

Engine of Growth

for the Group

Weight in TI Group

Combining a Sound Cash Generation with a Solid Growth

6


Normalized Operating Free Cash Flow

Normalized data:(1) TIS settlement - July 2010 -(2) LTE - October 2011-

6,213 5,767

389 1,223

FY 2010 FY 2011

+3886,602

6,990

Adj.

-446

1 2

Euro Bln

33.9

2009

34.5

31.5

2008 2010 2011

30.4

-0.6-2.5

Deleverage - Net Financial Position Adjusted

29.2

LTE

-1.05

Euro mln, Reported Data

Group Business Performance and Financial Discipline

35.9

2007

-1.3

5.5 € bln Net Debt reduction

7


Agenda



Italy

Brazil

Argentina


Targets

Appendix

8


Fully Exploit TI

Multi -Country

Businesses

Brazil – Continue the Business Expansion

Argentina – Managing Growth and Profitability

Italy – Proactively Manage for Cash

Generation

Enhance Free Cash Flow

Generation

Sustainable Shareholders’ Remuneration

Complete the Deleverage

Program

2012-14 – TI Strategic Priorities are Confirmed

9


Italy

Revenues Defence

Opex Efficiency

Protect the Value of Traditional Services

Improve Performance of Fixed Broadband Portfolio

Profitable Mobile Data Growth

Continuous Focus on Efficiency Improvement

Selective Network Deployment

Market-driven Approach to Exploit UBB Demand

Brazil

Exploit Growth as a Strong Mobile and Fixed BB Challenger

Capturing further Voice Increase and Opportunities from FMS

Continuous boost from Mobile Data

Deployment of TIM Fiber

ArgentinaConsolidate Mobile and Pursue Convergence

Score results from MNP introduction

Gradual Expansion of Integrated Network

2012-14 – Key Drivers

FlexibleC

apexA

llocation

10


ITALY

ARGENTINA

BRAZIL

Limited Market at Present

Be «FTTH-Ready»

Potential Mass Demand

Begin Deployment

2012-14 Milan and selectedareas with possible

Partnerships

2012 Greenfield2013 in Selected Areas

2012 Greenfield2013-14 São Paulo & Rio

2014 Target: 100 towns,25% of Housing Units

2011 begin Roll-Out2014 50% of Cabinets

2012: start in São Paulo & Rio2013-14 in other Selected Areas

FTTCab FTTCVDSL2

FTTCVDSL2VDSL2

FTTH/B FTTHFTTH

Flexible Capex Allocation

11


AgendaAgenda



Italy

Brazil

Argentina


Targets

Appendix

12


Italy: Performing also in Times of Crisis

• EBITDA-Capex. Organic: same perimeter, 2011 FX rates, excluding Latam spectrum acquisitions.

Caring & Sales Force Model Rationalization;

Additional efficiencies in industrial costs;

Personnel right-sizing

Profitability

Selective deployment of NGAN and LTE;

Efficiency on maintenance to support UBB development

Capex Optimization

Customer-driven innovation

Offer based on Customer Value

Innovation

Allows to devote all needed resources to Network Development to confirm Technological Leadership

Financial discipline

DomesticCash Generation~80% of Group(cum. 12-14)*

13


Agenda



Italy

Brazil

Argentina


Targets

Appendix

14


Tim Brasil is the Fastest Growing TLC Player in

its Country

Proven Track record in integrating and

extracting Value from Acquisitions: Intelig

paved the way for AES

Continuing Top Line growth, doubling FCF/sales ratio

Macroeconomic context: a sound growth

Exploiting Market Opportunities

Brazil: Ensure a Self-Sustained and Efficient Growth

TLC Market (CAGR 11-14)

20142011

2.9%

GDP growth

CAGR 11-14

4.5%CAGR 2011-14 Voice BB Tot

Mobile +2% 47% 9%

Fixed -8% 16% -3%

TLC spend -3% 28%

2011 2014

FCF on sales

2x

FMS (voice)

Mobile CB expansion

Internet for all

3 Development Waves

15


Agenda



Italy

Brazil

Argentina


Targets

Appendix

16


Strong Financial Position and Cash Generation of the Company to fund

necessary network investments

The Company is set to increase Mobile and

Fixed Customer Base, Revenues and

Profitability

Mobile for growth, Fixed for value

Macroeconomic context is continously monitored

Argentina: Carefully Manage Opportunities

Top Line Promote Mobile Data and Social

Networking

Upgrade bandwidth to deliver capability

Upselling services to boost ARPU

Develop ICT market

41%

59%

2011 2014

Voice Non-Voice

Source: Global Insight Feb. 2012

Consumer Spending Delta%

10.9

4.85.5 5.0

2011 2012 2013 2014

Unemployment Rate %

7.2

7.57.7

7.8

2011 2012 2013 2014

GDP growth %

9.3

4.04.9 5,1

2011 2012 2013 2014

17


Agenda



Italy

Brazil

Argentina


Targets

Appendix

18


Group Operations focused on Cash Generation

Domestic Ebitda Stabilization

Strengthen Our Core Assets

Latam Ebitda Growth

Invest to Perform in Italy Enlarge

Operations and Profitability in Latam

>22Bln €* cum. ‘12-’14 Cash Generation

2012 2013 2014 2012 2013 2014

Cum. Ebitda

‘12-’14

~38 Bln €*

Cum. Capex ‘12-’14 >15 Bln €*

Stable/Slightly Growing

• Organic: same perimeter, 2011 FX rates, excluding Latam spectrum acquisitions.

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2011-2013 Deleverage Targets Confirmed

Cash Flow Generation (EBITDA- Capex) Net Financial Position Adjusted**

New Dividend Policy

Euro Bln

35.930.4

2007 2011 2012

27.5

-5.5 Bln € Net Debt

2013

25

2014

Latam

Domestic

Financial Discipline

2012 and 2013 targets confirmed

~20%

~80%

>22 Bln €

Cum. ‘12-’14

Organic Data*

*Organic: same perimeter, 2011 FX rates, excluding spectrum licences acquisitions.** Excluding Latam spectrum licences acquisitions.

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.

a) Ensure Delivery of Debt Reduction: 2012: 27.5 € bln2013: 25.0 € bln

b) Dividend Progressionafter meeting Debt

Targets

Worsening in Italy’sEconomy and Ratings

prioritizes the De-Riskingof TI

13 Jan 2012 13 Feb 2012 27 Jan 2012

1.2

0.9

2011 2012 2013 2014

Dividend Cashout (€bln)

Floor

Previous 15% yearly growth guidance

New Dividend Policy

21


Agenda



Italy

Brazil

Argentina


Targets

Appendix

22


** excluding Latam spectrum licences

Telecom Italia Group – FY 2012 and 2012-14 Plan Key Guidance

TI Group – FY 2012 Key Guidance

Revenues

Ebitda

Capexcum ’12-’14

NFP Adj.**

NFP Adj. 2012-’14

Stable

Broadly Stable

>15 € bln

27.5 € bln

FY 2012: 27.5 € bln

FY 2013: 25 € bln

From FY 2014: < 2x Net Debt/Ebitda***

Organic Data*

TI Group – 2012-14 Plan Key Guidance **Ebitda-Capexcum ’12-’14 >22 € bln

Organic Data*

*exchange rates 2011 (R$/€ 2.33; ARS/€5.74), excluding impact from non-organic items

*** reported figure

23


Agenda



Italy

Brazil

Argentina


Targets

Appendix

24


TI Group – Main Results by BU – Reported Figures

Euro mln 9M Reported IV Quarter Reported Full Year Reported

REVENUESActual 2011

Actual 2010 Abs

Actual 2011

Actual 2010 Abs

Actual 2011

Actual 2010 Abs

Domestic 14,098 15,032 -934 (6.2) 4,935 5,036 -101 (2.0) 19,033 20,068 -1,035 (5.2)Wireline Domestic 10,040 10,516 -476 (4.5) 3,502 3,600 -98 (2.7) 13,542 14,116 -574 (4.1)Tim Domestic 5,286 5,822 -536 (9.2) 1,828 1,870 -42 (2.2) 7,114 7,692 -578 (7.5)

Brazil 5,395 4,498 897 19.9 1,948 1,701 247 14.5 7,343 6,199 1,144 18.5Argentina 2,324 0 2,324 - 896 798 98 12.3 3,220 798 2,422 303.5Media 170 177 -7 (4.0) 68 81 -13 (16.0) 238 258 -20 (7.8)Olivetti 226 259 -33 (12.7) 117 132 -15 (11.4) 343 391 -48 (12.3)Other Activities 2 64 -62 (96.9) 0 0 0 - 2 64 -62 (96.9)Elim. -156 -131 -25 -65 -76 11 -221 -207 -14

TI Group 22,059 19,899 2,160 10.9 7,899 7,672 227 3.0 29,958 27,571 2,387 8.7

9M Reported IV Quarter Reported Full Year Reported

EBITDAActual 2011

Actual 2010 Abs

Actual 2011

Actual 2010 Abs

Actual 2011

Actual 2010 Abs

Domestic 6,993 7,210 -217 (3.0) 2,250 2,183 67 3.1 9,243 9,393 -150 (1.6)Brazil 1,444 1,281 163 12.7 546 520 26 5.0 1,990 1,801 189 10.5Argentina 759 0 759 - 276 245 31 12.7 1,035 245 790 322.4Media 27 10 17 170.0 1 3 -2 (66.7) 28 13 15 115.4Olivetti -36 -24 -12 (50.0) 1 5 -4 (80.0) -35 -19 -16 (84.2)Other Activities -11 -3 -8 (266.7) -4 -18 14 77.8 -15 -21 6 28.6Elim. -1 1 -2 1 -1 2 0 0 0

TI Group 9,175 8,475 700 8.3 3,071 2,937 134 4.6 12,246 11,412 834 7.3

EBITDA MARGIN 41.6% 42.6% -1,0 pp 38.9% 38.3% 0.6 pp 40.9% 41.4% -0.5 pp

25


Euro mln 9M Organic IV Quarter Organic Full Year Organic

REVENUESActual 2011

Actual 2010 Abs

Actual 2011

Actual 2010 Abs Actual 2011

Actual 2010 Abs

Domestic 14,098 14,956 -858 (5.7) 4,935 5,038 -103 (2.0) 19,033 19,994 -961 (4.8)Wireline Domestic 10,040 10,475 -435 (4.2) 3,502 3,602 -100 (2.8) 13,542 14,077 -535 (3.8)Tim Domestic 5,286 5,787 -501 (8.7) 1,828 1,870 -42 (2.2) 7,114 7,657 -543 (7.1)

Brazil 5,395 4,591 804 17.5 1,948 1,623 325 20.0 7,343 6,214 1,129 18.2Argentina 2,324 1,824 500 27.4 896 722 174 24.1 3,220 2,546 674 26.5Media 170 177 -7 (4.0) 68 81 -13 (16.0) 238 258 -20 (7.8)Olivetti 226 259 -33 (12.7) 117 132 -15 (11.4) 343 391 -48 (12.3)Other Activities 2 2 0 0.0 0 0 0 - 2 2 0 0.0Elim. -156 -157 1 -65 -76 11 -221 -233 12

TI Group 22,059 21,652 407 1.9 7,899 7,520 379 5.0 29,958 29,172 786 2.7

9M Organic IV Quarter Organic Full Year Organic

EBITDAActual 2011

Actual 2010 Abs

Actual 2011

Actual 2010 Abs Actual 2011

Actual 2010 Abs

Domestic 7,069 7,437 -368 (4.9) 2,282 2,290 -8 (0.3) 9,351 9,727 -376 (3.9)Brazil 1,447 1,308 139 10.7 551 498 53 10.5 1,998 1,806 192 10.7Argentina 759 613 146 23.8 276 221 55 24.8 1,035 834 201 24.1Media 6 10 -4 (40.0) 1 3 -2 (66.7) 7 13 -6 (46.2)Olivetti -36 -24 -12 (50.0) 2 9 -7 (77.8) -34 -15 -19 (126.7)Other Activities -11 -14 3 21.4 -4 -15 11 73.3 -15 -29 14 48.3Elim. 0 -1 1 -3 0 -3 -3 -1 -2

TI Group 9,234 9,329 -95 (1.0) 3,105 3,006 99 3.3 12,339 12,335 4 0.0

EBITDA MARGIN 41.9% 43.1% -1.2 pp 39.3% 40.0% -0.7 pp 41.2% 42.3% -1.1 pp

TI Group – Main Results by BU – Reported Figures

26


Bonds Loans (of which long-term rents, financia land operating leases, payable € 1,534) Drawn bank facility

Evenly distributed and Back-Loaded Maturities Euro mln

€ 7.71 bln Group Liquidity Position

+€ 7.00 bln

Undrawn Portion of Facility/Committed

=€ 14.71 bln

Group Liquidity Margin

27


3.9%

5.9%

70.2%Bonds

27,635

Total Gross Debt, Net of Adjustment: Euro 39,382

mln

Gross debt Financial assets

of which C & CE and marketable securities (7,713) - C & CE (6,714)- Marketable securities (999)

- Italian Government Securities (856)- Other (143)

39,382(8,968)

Bank Facility

2,252

Bank & EIB

5,626Op. Leases and long rent

1,549

Other

2,320

Maturities and Risk Management

Average debt maturity: 7.26 years (bond only 8.22 years)

Fixed rate portion of gross debt approximately 70%

Around 45% of outstanding bonds (nominal amount) is denominated in USD, GBP and YEN and is fully hedged

Cost of debt: 5.6%

14.3%

5.7%

Euro mln

Net Financial Position 30,414

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 2,569 €/mln (of which 738 €/mln on bonds);- the impact on Financial Assets is equal to 2,164 €/mln.

Therefore, the Net Financial Indebtedness is adjusted by 405 €/mln.

Well Diversified and Hedged Debt

telecom italia – ti group fy 2011 preliminary results and 2012-14 plan outline (bernabè)

Investor Relations

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