Telecom Italia Group 1Q 2013 Results

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1 Milan, May 9 th, 2013 Telecom Italia Group FRANCO BERNABE - PIERGIORGIO PELUSO

2 Safe Harbour These presentations contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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. Consequently, Telecom Italia S.p.A. makes no representation, whether expressed or implied, as to the conformity of the actual results with those projected in the forward looking statement. 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. Some data for the first quarter 2012, used in comparisons, included into this presentation have been restated as a result of the early adoption, starting from the first half 2012, of the revised version of IAS 19 (Employee Benefits) and the reclassification of Matrix (company that was disposed of on October 31, 2012) from the Business Unit Domestic Core Domestic to the Business Unit Other Activities. FRANCO BERNABE PIERGIORGIO PELUSO 1

3 Agenda TI Group Results and Core Markets Performance Italy Brazil Argentina Financial Position Strategic Update Wrap-up Appendix FRANCO BERNABE PIERGIORGIO PELUSO 2

TI Group Main Results Euro mln, Organic data, % Revenues EBITDA CAPEX -227 M -3.2% 7.023 6.796 % on Revenues 41.1% -1.4 pp -186 M -6.4% 2,885 2,699 39.7% % on Revenues 12.9% -28 M -3.1% 906 878 12.

4 TI Group Main Results Euro mln, Organic data, % Revenues EBITDA CAPEX -227 M -3.2% % on Revenues 41.1% -1.4 pp -186 M -6.4% 2,885 2, % % on Revenues 12.9% -28 M -3.1% % Contribution to YoY change Contribution to YoY change % on Revenues EBITDA - CAPEX Domestic -6.5% Domestic -7.6% 28.2% -1.4 pp 26.8% LatAm 3.3% -3.2% LatAm 1.5% -6.4% -158 M -8.0% Other B.U. 0.0% Other B.U. -0.3% FRANCO BERNABE PIERGIORGIO PELUSO 3

5 TI Group Core Markets Performance Euro mln, Organic data Weight on TI Group TI Group Domestic Brazil Argentina D% yoy D% yoy D% yoy D% yoy Revenues 6, % 4, % 1, % % 58.9% 26.3% 13.5% 39.8% EBITDA 2, % 2, % % % 74.1% 17.2% 10.0% 27.2% EBITDA-CAPEX 1, % 1, % % % ~78% ~16% ~9% FRANCO BERNABE PIERGIORGIO PELUSO 4

6 Domestic Euro mln, Organic data, % Revenues EBITDA M -10.1% % on Total Revenues 49.5% +0.2 pp 49.7% M % Highlights Dual-speed Top Line: Mobile Service Revenues: negative impact due to regulated prices combined with a harsh competition; Core Fixed: in line with last year trend, mainly due to ICT services (+9.4% YoY) and Broadband services (+1.5% YoY). Networks: confirming our UBB deployment to leverage on our distinctive and unique infrastructure. Convergence Approach: Multiple-Play offers to expand the integration of voice, data, images, information, entertainment, multimedia and communication services. EBITDA margin: outstanding level at ~50%. FRANCO BERNABE PIERGIORGIO PELUSO 5

7 Brazil Euro mln, Organic data Revenues EBITDA M +5.4% % on Total Revenues 26.2% -0.3 pp 25.9% +20 M +4.4% Highlights Top Line: positive performance mainly due to re-acceleration in the net mobile service revenues trend (+3.2% YoY in 4Q12, +4.0% YoY in ). Effective cost control aimed at supporting marginality: SAC/ARPU ratio declining (-15.1% YoY) and bad debt under control (1% of gross revenues). Commercial Strategy: focus on innovation and unique market positioning. In the month of March, TIM totalled over 50% of market net adds. Network: infrastructure evolution to foster voice demand and to support Mobile Data. Quality & Transparency: renewed commitment to quality, to strengthen regulatory & institutional dialogue and to improve customer relationships. FRANCO BERNABE PIERGIORGIO PELUSO 6

8 Argentina Euro mln, Organic data, % Revenues EBITDA M +18.3% 917 % on Total Revenues 32.1% -2.5 pp 29.6% +23 M +9.2% Highlights Top Line double-digit growth, offsetting limited nominal price adjustments: Mobile: consolidating leading position in revenue share, +13% YoY ARPU for better postpaid/prepaid mix and consistent VAS revenue expansion; Fixed: +20% YoY ARPU BB thanks to enhancing value proposition and compelling BB offers. EBITDA: strengthening cost control to manage impact of labour-related cost increases. Capex Plan focused on quality of service and on improving customer experience through: Network evolution: speeding-up roll-out process to upgrade capacity and increase effectiveness of the available spectrum (refarming); Network innovation: FTTCab deployment to ensure best BB experience. FRANCO BERNABE PIERGIORGIO PELUSO 7

9 Agenda TI Group Results and Core Markets Performance Italy Brazil Argentina Financial Position Strategic Update Wrap-up Appendix PIERGIORGIO PELUSO 8

10 Net Debt Evolution affected by One-Offs & Seasonalities Euro mln, Reported Data 28,274 (137) (26) ,767 EBITDA CAPEX D WC & Others Operating FCF (2,672) ,657 (137) YE Adjusted Operating FCF Disposals Cash Financial Expenses/ Financial Accruals Cash Taxes/Other Impacts Adjusted 2011YE (102) 30,414 (626) (10) ,312 D vs (16) (31) +153 PIERGIORGIO PELUSO 9

11 Progressive FCF Generation will allow the achievement of 2013 Debt Target Operating Free Cash Flow vs YE NFP Bridge: Apr-Dec 2013 vs 2012 Euro mln, Reported Data Revenues 7, ,796 Euro bln Net Cash Flow FY Opex 4, , ~1.9 Expected Net Cash Flow FY13E <27 Capex (954 ) +76 (878) Δ Apr-Dec 2013 NCF YoY Breakdown (~) Δ WC OFCF (1,393) (1,657) Operating: -0.2 bln EBITDA less Capex One-Offs: -0.3 bln from 4Q12 suppliers payment deferral OFCF Brazil spectrum payments M&A (Matrix, La7) Dividends (Group) Taxes FX & other bln bln bln +0.4 bln +0.2 bln bln bln PIERGIORGIO PELUSO 10

Robust Liquidity, Well-Distributed Debt Maturities Euro mln Bonds Loans (of which long-term rent, financial and operating lease payable 1,317) Drawn bank facility 7.

12 Robust Liquidity, Well-Distributed Debt Maturities Euro mln Bonds Loans (of which long-term rent, financial and operating lease payable 1,317) Drawn bank facility 7.20 bln Group Liquidity Position bln Undrawn Portion of Facility/Committed = bln Group Liquidity Margin (1) mln is the nominal amount of outstanding medium-long term debt. By adding IAS adjustments ( 899 mln) and current liabilities ( 592 mln), the gross debt figure of mln is reached. N.B. Debt maturities are net of 856 mln (face value) of repurchased own bonds (of which 641 mln related to bonds due in the next 24 mounths). PIERGIORGIO PELUSO 11

La7 Stop-Loss Euro Mln; Organic Data TI 1Q 2013 results TI Group Domestic Brazil Argentina Media Olivetti Revenues 6,796 4,024 1,786 917 48 52 OPEX 4,097 2,024 1,323 646 58 71 EBITDA 2,699 2,000 463

13 La7 Stop-Loss Euro Mln; Organic Data TI 1Q 2013 results TI Group Domestic Brazil Argentina Media Olivetti Revenues 6,796 4,024 1, OPEX 4,097 2,024 1, EBITDA 2,699 2, EBITDA - CAPEX 1,821 1, Euro mln TI Media EBIT evolution TI Media excl. La7 La7 La7 disposal La7 Sale completed On April 30 th, 2013 TI Media has completed the sale of La7 Srl to Cairo Communication Group; In September 2012, when TI Media spun-off the TV business, the estimated full year loss for La7 TV channel was above 100 euro mln; In the first 4 months of 2013, La7 TV channel loss was equal to 24 euro mln (of which 17 euro mln in ); P&L-wise, TI s provision amounted to 105 euro mln; the overall stop loss at the end of April totalled 130 euro mln (100 euro mln post minorities); Cash-wise, TI contributed 114 euro mln for the disposal. PIERGIORGIO PELUSO 12

14 Agenda TI Group Results and Core Markets Performance Italy Brazil Argentina Financial Position Strategic Update Wrap-up Appendix FRANCO BERNABE PIERGIORGIO PELUSO 13

Major Elements of TI s Fixed Access Network UBB Access equipment (ONU FTTC) 2,137 active 2,745 installed COPPER km of cables 576,000 CABLES BLUEPRINT 575,000 km DISTRIBUTORS

km of fibre 724,000 TWISTED PAIRS 102m km couple Main Distribution Frames 10,500 USERS STUDS ~33.

15 Major Elements of TI s Fixed Access Network UBB Access equipment (ONU FTTC) 2,137 active 2,745 installed COPPER km of cables 576,000 CABLES BLUEPRINT 575,000 km DISTRIBUTORS 5,700,000 PHYSICAL ACCESSES Retail+WHS 22,000,000 UBB equipment in the local exchange (OLT) 84 Fixed Access Network CABINETS 151,000 FIBRE OPTIC ACCESS POLES km of cables 14,200 km of fibre 724,000 TWISTED PAIRS 102m km couple Main Distribution Frames 10,500 USERS STUDS ~33.6 m 8,900,000 Structural Separation would: Guarantee full Equivalence of Input; Focus on the Development of the New Fiber Network; Continue to improve the existing Copper Network quality; Stabilize the Regulatory Framework. FRANCO BERNABE PIERGIORGIO PELUSO 14

16 Agenda TI Group Results and Core Markets Performance Italy Brazil Argentina Financial Position Strategic Update Wrap-up Appendix FRANCO BERNABE PIERGIORGIO PELUSO 15

17 Telecom Italia Group FY2013 Guidance Confirmed Organic Data* Revenues EBITDA NFP Adj. ** TI Group targets Stable YoY Low-single digit decline YoY < 27 bln * excluding impact from non-organic items and FX. ** reported figure FRANCO BERNABE PIERGIORGIO PELUSO 16

18 Agenda TI Group Results and Core Markets Performance Italy Brazil Argentina Financial Position Strategic Update Wrap-up Appendix FRANCO PIERGIORGIO BERNABE PELUSO PIERGIORGIO PELUSO 17

19 TI Group - Revenues Evolution Euro mln -596 (-8.1%) 7,392 (9) (360) 0 7,023 (453) (10) (7) +9 6, ,796 Brazil (234) Argentina (126) Others & Elim. (9) Organic Variation -227 (-3.2%) Change in consolid. area Exchange rate impact Other non-organic items Organic Domestic Brazil* Argentina** Media Olivetti Other & Elim. Organic Other non-organic items * Average Exchange rate (Real/Euro): 2.64 in 2013, 2.32 in 2012 * * Average Exchange rate (Peso/Euro): 6.62 in 2013, 5.69 in 2012 FRANCO PIERGIORGIO BERNABE PELUSO PIERGIORGIO PELUSO 18

20 TI Group - EBITDA Evolution Euro mln -301 (-10.1%) Others & Elim +12 Agreements and Transactions (1) Restructuring charges (21) Other net cost (5) 2, (103) +3 2,885 (218) (4) (6) (1) 2,699 (27) 2,672 Brazil (62) Argentina (41) Organic Variation -186 (-6.4%) Change in consolid. area Exchange rate impact Other non-organic items Organic Domestic Brazil* Argentina** Media Olivetti Other & Elim. Organic Other non-organic items * Average Exchange rate (Real/Euro): 2.64 in 2013, 2.32 in 2012 * * Average Exchange rate (Peso/Euro): 6.62 in 2013, 5.69 in 2012 FRANCO PIERGIORGIO BERNABE PELUSO PIERGIORGIO PELUSO 19

21 TI Group - EBIT Evolution Euro mln -343 (-21.1%) 1, (48) +3 1,596 (187) Agreements and Transactions (1) Restructuring charges (21) Other net cost (5) Provision for La7 disposal (105) (5) (1) 1,414 (132) 1,282 Organic Variation -182 (-11.4%) Change in consolid. area Exchange rate impact Other non-organic items Organic Domestic Brazil* Argentina** Media Olivetti Other & Elim. Organic Other non-organic items * Average Exchange rate (Real/Euro): 2.64 in 2013, 2.32 in 2012 * * Average Exchange rate (Peso/Euro): 6.62 in 2013, 5.69 in 2012 FRANCO PIERGIORGIO BERNABE PELUSO PIERGIORGIO PELUSO 20

Well Diversified and Hedged Debt Total Gross Debt Net of Adjustment: Euro 37,222 mln Maturities and Risk Management Euro mln Other 2,143 Op. Leases and long term rent Bank & EIB 1,331 5,858 3.6% 15.

22 Well Diversified and Hedged Debt Total Gross Debt Net of Adjustment: Euro 37,222 mln Maturities and Risk Management Euro mln Other 2,143 Op. Leases and long term rent Bank & EIB 1,331 5, % 15.7% 5.8% 3.9% Bank Facility 1,467 Average debt maturity: 7.09 years (bonds only: 8.08 years) Fixed rate portion of gross debt, approximately 74.7% Around 49% of outstanding bonds (nominal amount) is denominated in USD, GBP and YEN and is fully hedged Bonds 26, % Cost of debt: 5.3% Gross debt Financial assets of which C & CE and marketable securities - C & CE - Marketable securities - Italian Government Securities - Others 37,222 (8,455) (7,202) (6,476) (726) (509) (217) Net Financial Position 28,767 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 in Gross Financial Debt is equal to 2,424 /mln (of which 672 /mln on bonds) - the impact on Financial Assets is equal to 1,675 /mln Therefore, the Net Financial Indebtedness is adjusted by 749 /mln. FRANCO PIERGIORGIO BERNABE PELUSO PIERGIORGIO PELUSO 21

23 TI Group Results - P&L Euro mln Reported Data D Abs. REVENUES 6,796 7,392 (596) (8.1) Other Operating Income TOTAL REVENUES & OTHER INCOME 6,851 7,444 (593) (8.0) Total Purchases of materials and external services (2,964) (3,231) 267 Personnel (976) (988) 12 of which payroll (940) (977) 37 Other operating costs (440) (456) 16 Capitalized Cost and Others (3) EBITDA 2,672 2,973 (301) (10.1) % on Revenues 39.3% 40.2% I Quarter Depreciation & Amortization (1,292) (1,344) 52 D % (1.5) 3.9 Write-downs and revaluations of non-current assets Gains/losses of non-current assets realization (105) 0 (105) 7 (4) 11 EBIT 1,282 1,625 (343) (21.1) % on Revenues 18.9% 22.0% Income (loss) equity invest. valued equity method Other income ( expenses ) from investments Net Financial Income / (Expenses) (491) (449) (42) Income before Taxes & Disc. Ops ,173 (382) (32.6) % on Revenues 11.6% 15.8% Taxes (343) (455) 112 Income before Disc. Ops (270) Net income (loss) of assets disposed Net Income (ante Minorities) (270) % on Revenues 6.6% 9.7% Minorities (29) Net Income (post Minorities) (241) (39.8) % on Revenues 5.4% 8.2% (37.6) (37.6) (25.7) FRANCO PIERGIORGIO BERNABE PELUSO PIERGIORGIO PELUSO 22

24 TI Group - Main Results by BU Euro mln Reported I Quarter Organic I Quarter REVENUES D Abs. D % REVENUES D Abs. D % Domestic 4,024 4, (10.1) Wireline Domestic 2,976 3, (7.7) Tim Domestic 1,379 1, (16.4) Brazil 1,786 1, (7.4) Argentina Media (17.2) Olivetti (11.9) Other Activities & Elim TI Group Domestic 4,024 4, (10.1) Wireline Domestic 2,976 3, (7.7) Tim Domestic 1,379 1, (16.4) Brazil 1,786 1, Argentina Media (17.2) Olivetti (11.9) Other Activities ,796 7, (8.1) TI Group 6,796 7, (3.2) EBITDA I Quarter D Abs. D % Domestic 1,973 2, (10.9) Brazil (8.3) Argentina (6.2) Media (66.7) Olivetti (46.2) Other Activities & Elim EBITDA I Quarter D Abs. D % Domestic 2,000 2, (9.8) Brazil Argentina Media (66.7) Olivetti (46.2) Other Activities & Elim TI Group EBITDA MARGIN 2,672 2, (10.1) 39.3% 40.2% pp TI Group EBITDA MARGIN 2,699 2, (6.4) 39.7% 41.1% -1.4 pp FRANCO PIERGIORGIO BERNABE PELUSO PIERGIORGIO PELUSO 23

25 Net Income Evolution Euro mln -241 (-39.8%) o/w La7 Write-down (105) (343) (39) (84) 364 Equity +3 Net Fin. Charges (42) Net Income Minorities Income ante Min & Disc. Ops. 1Q11 D EBIT D Net Interest & Net Income /Equity D Taxes Income/(Loss) ante Min & Disc. Ops. Minorities Net Income FRANCO PIERGIORGIO BERNABE PELUSO PIERGIORGIO PELUSO 24

27 April (0)

27 April (0) Q1 2016 Results Presentation 27 April 2016 contact@bicworld.com +33 (0)1 45 19 52 26 Group and category highlights Mario Guevara GROUP Q1 2016 KEY FIGURES Net Sales: 517.3 million euros Consumer business