Deutsche Bank Access Italy Conference - Marco Patuano presentation (17/05/2012)

Telecom Italia Update Deutsche Bank Access Italy ConferenceThursday, 17 May 2012, London

MARCO PATUANO – Chief Operating Officer

TELECOM ITALIA GROUP

1MARCO PATUANO

TELECOM ITALIA GROUP Deutsche Bank Access Italy ConferenceThursday, 17 May 2012, London

Safe Harbour

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. 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.

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Agenda

Group Overview

Domestic 1Q12 Progress Report

Fixed BusinessMobile BusinessFocus on Ultra BroadbandEBITDA Generation and Cost Efficiency Progress

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Revenues EBITDA

42.0% 40.1%% on Revenues -1.9 p.p.

Revenues Trend YoY EBITDA-CAPEX

Euro mln, Organic data, %

27.2%-2.1 p.p.29.3%

+15 M€+0.5%

-43 M€-2.1%

TI Group Key Results

+373 M€+5.3%7,019

7,392

1Q11 1Q12

2,055 2,012

1Q11 1Q12

2,951 2,966

1Q11 1Q12

-0,2%

2.1%

3.7%

5.0%5.3%

1Q11 2Q11 3Q11 4Q11 1Q12

% on Revenues

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Revenues

EBITDA

EBITDA-CAPEX

Weight on TI Group

38.2%

26.7%

Euro mln, Organic Data

TI Group

1Q12

7,392

2,966

2,012

Δ% yoy

+5.3%

+0.5%

-2.1%

1Q12

1,928

505

271

Δ% yoy

+19.1%

+13.5%

-14.6%

26.0%

17.0%

~14%

Brazil

1Q12

901

289

168

Δ% yoy

+24.0%

+16.6%

+5.1 %

12.2%

9.7%

~8%

Argentina

1Q12

4,486

2,196

1,607

Δ% yoy

-2.4%

-3.4%

-0.2%

60.4%

74.0%

~80%

Domestic

TI Group Key Results by Core Markets

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+439

(1)Δ vs. 11

2010YE

31,468 (1,076)

+450

(377)

+367

+156

(149) +77

+12 30,622

1Q11 (846)

Euro mln, Reported Data

EBITDACAPEXΔ WC & Others

Operating FCF

(2,963)+954

+1,383

(626)

(102)

Debt Reduction Progressing as per Planned Sequence

30,414 30,312 (626) (10) 438 7 89

2011YEAdjusted

Operating FCF Disposals Cash Financial Expenses/Financial Accruals

FinancialInvestments

Cash Taxes/OtherImpacts

1Q12Adjusted

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Free Cash Flow Generation: in line with Targets

TIGroup

TIGroup

* Excluding spectrum acquisitions

7.0* ~7.0*

FY2011 FY2012E

0.6

1Q12

StableStable

-0.5

0.7

5.8* 1.2DomesticDomestic

BrazilBrazil

ArgentinaArgentina

Guidance OFCF FY12E

0.6

Breakdown

Euro mln, Reported Data

Operating Free Cash Flow

Revenues

Opex

Capex

Δ WC

OFCF

7,0737,392

+319

-53

- 431

- 450

-285

Brazil: - 0.3bln € (capex acceleration for network upgrades and increased cashout from TLC fees) Domestic: - 0.1bln € (increased VAT payment)Argentina: stableTI Media: -0.04bln €

1,076 626

952 1,383

901 954

4,144 4,429

1Q11 1Q12

0.05

Euro bln

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** excluding Latam spectrum licences

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

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

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Agenda

Group Overview



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Domestic Results: Trend still improvingEuro mln, Organic data, %

4,595 4,486-109 M€

-2.4%

-1.7%

-2.9%Wireline

Mobile

Total Domestic Revenues Domestic Service Revenues

EBITDA

-78 M€-3.4%

49.5% 49.0%-0.5 p.p.% on Revenues

2,2742,196

EBITDA-Capex

1,611 1,607

35.8%+0.7 p.p.% on Revenues 35.1%

-4 M€-0.2%

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Agenda

Group Overview



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Tariff simplificationprocess begins

Euro mln, Organic Data, %

Domestic Fixed: Revenue Dynamics

3,330 -2.9%

Wholesale Revenues Trend – YoY % change

Total Fixed Revenues Fixed Revenues Trend – YoY % change

3,235

Tota

lS

ervi

ces

Retail Service Revenues Trend – YoY % change

Dom

estic

Equi

pmen

t

Spar

kle

Gro

up*

*Gross of Elim. & Adj.

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Domestic Fixed: TI Access Performance

Telecom Italia Access TI Line Losses

-150k22,098 21,712 21,562

TI R

etai

lW

hole

sale

1Q11 4Q11 1Q12

TI R

etai

lW

hole

sale

Stable

Voice ARPU – YoY % change Highlights

-25k -77k -150k

Reduction

66.2%66.6%67.7%M/Son total Mrk

Access Market reduction as result of stable TI’s line losses and decreasing OLO’s net adds

TI’s access market share above 66%

Line erosion driven byIn Consumer, disconnections in second

homes (low potential, voice only)In Business Segment, multi-line contracts

rationalization and increasing number ofCompanies exiting the market

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‘000Euro/month/line

Flat (%)

TI retail accesses

M/S 54.3% 53.2% 52.6%

TI Retail Broadband Accesses Broadband Retail ARPU

Domestic Fixed: Focus on Broadband

88%87%87%

7,194 7,125 7,092 -0.6%

+0.3%

BB Service Revenues Highlights% YoY

TotalMarkets 13,248 13,394 13,485

Confirming the right direction in TI’s Value Strategy:

Continued positive BB Service Revenues trend

QoQ ARPU increase

+1.0 p.p. of Flat offers on TI’s BB CustomerBase

Increasing BB penetration (+1.5 p.p.) on fixed CB, confirming the low value of TI’s line losses

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Agenda

Group Overview



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Mobile Revenues: 1Q12 Results at a Glance

Total Mobile Revenues

Mobile Service Revenues Trend – YoY % change

Handsetrevenues

Service revenues

1,650-29

-1.7%1,679

Normalized (*)

~-2.5%

Total Mobile

-3.7%

Normalized (*)

~-4.5%

+71.1%

(*) Leap year

Mobile Handsets Revenues Trend – YoY % change

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‘000‘000

Balance MPN 2012

Total SIM cards Net Adds

+1,290

X5

Domestic Mobile: Customer Base Trend

Highlights

Sound customer base growth in spite of weakseasonality

Progressive improvement in MNP balance, and lower promo agressivness

Best in class churn rate supported by CRM focus

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Domestic Mobile – Defending Value of our Customer Base

BusinessGenerated

BusinessReceived

Lower exposure toMTR cuts

Options benefit Consumer Churn

More Value from Options – Consumer Segment Consumer Calling ARPU

Business Generated Consumer Revenues

-8 p.p.

Progressive improvement on quarterly basis

% YoY

Avg Δ ARPU Ex-ante/Ex-post

+

+

-

Positive blended impact

Spontaneous migration by clientsfrom pay-as-you-go profile

to bundle and options

CRM activity on existing CB

14% 12%

86% 88%

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Content

Domestic Mobile – Focus on Mobile VAS Consumer

Browsing

Messaging

2011

2012

VAS+7.3%

VAS Consumer Revenues Trend

% YoY

Successful strategy pushing on bundle offers aiming at messaging revenues protection and CB fidelization:

Messaging Volumes: +25% YoYCB with Messaging Bundle Offers: +44% YoY

Continued solid growth in active

users and browsing revenues

underpinning Mobile recovery trend

~70% of Smartphoneon Handsets sold

Solid ARPU increase: +9.4% YoY

MBB Users

1Q11 1Q12

+32%

Browsing Revenues

1Q11 1Q12

+21%

Small Screen Large Screen

Leadership confirmedon dongle: M/S ~38%

Double digit growth in users (+11.5% YoY)

Marketing strategy focused on bundling data & SMS to avoid

cannibalization

Messaging Revenues – YoY % change

-

++

≈

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Agenda

Group Overview



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Ultra Broadband in MotionUltra Broadband in Motion

42 Mbps coveragein progress in 50cities

Ongoing Trialsextended to Turin, Milan, Rome and Naples

FTTC (covering 30 main cities) and FTTH (in Milan) Retail commercial launch expected in 4Q

Reference Offer for wholesaleNGAN Access Services submittedto Agcom in March, final approvalexpected by September

Fixed Mobile

Maintaining a fixed & mobile coordinated approach

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Agenda

Group Overview



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Euro mln, Organic Data, %

Personnel Cost reduction from lay-off program (-3% yoy) offsets the negative impact from market prices increase in energy and real estate**

•ITZ Wholesale: -36M€ due to gross Voice revenues increase

•Retail: +59M€ reflecting MTR cut impact

Push on Mobile Smartphone with limited impact on SAC/Subsidy

•Robust growth on Mobile Gross Adds managed through Acquisition Costs Control

•Efficiency program on Fixed Commercial Costs turned into yoy positive contribution to margins

1

2

3

4

* Industrial + Personnel + G&A = Fixed Opex

Focus on 1Q12 Domestic EBITDA

2 3 41

-78M€, -3,4%

** Energy unitary price (including taxation) and inflation adj (ISTAT), IMU on Real Estate

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Progress on Domestic Efficiency PlanEuro mln, Organic Data, %

Delta Cash Cost1Q12 vs 1Q11

Cash Cost

EfficiencyVolume Driven

-232.984

- 105

-134

Intercon-nection

Target FY : -0,5 Bn

1Q11 1Q 12

2.879

+52

Cash Cost on Revenues %

1Q11 1Q12

64.9%

64.2%- 0.7 p.p.

**Includes Other Operating cost/Income and Capitalized Costs* Costs related to credit management are reclassified from G&A & Other to Mktg & Sales

Δ Abs’12 vs ‘111Q12

-23

589Total Capex

442

250

- 29

757

+18

-20

+17

2.290Total Opex* -31

556

Industrial

Personnel

Mktg &Comm.

ITX

G&A &Other ** 120

2.879 -105TotalCash Cost

165 +6Handset Efficiency

FixedOpex

+151Q12

134

Opex Capex

% on FYTarget ~30%

-74

~25% ~35%