Telecom Italia 1Q 2011 Results (Patuano)

TELECOM ITALIA GROUP

1Q 2011 Results6th 2011Milan, May 6th, 2011

Telecom Italia 1Q 2011 Results1Q 2011 Results

MARCO PATUANOMARCO PATUANO

TELECOM ITALIA GROUP1Q 2011 Results

Safe HarbourSafe Harbour

These presentations contain statements that constitute forward-looking statements within the meaning of the

P i t S iti Litig ti R f A t f 1995 Th t t t i b f l i thiPrivate 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 Groupresults 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

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which are on file with the United States Securities and Exchange Commission.


AgendaAgenda

Domestic 1Q11 Progress ReportDomestic 1Q11 Progress Report

Fixed BusinessMobile Business

Cash Cost Rationalization & Operating ModelCash Cost Rationalization & Operating Model

Appendix

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Domestic 1Q11 Progress Report

Back to line losses reduction: -206K (-187K net of backlog) vs. -233K 4Q10

Domestic 1Q11 Progress Report

Wireline

BB churn: 4.3% (-0.7p.p. QoQ) BB Flat offers: 87% (+1p.p. QoQ; +3p.p. YoY)

Retail monthly fee increase and tariffs simplification as of July’11

Focus on Core

Markets

Even stronger leadership on PA (win-back Consip contract)

C t b b ildi t k ( 645K Y Y)Markets

Mobile

Customer base rebuilding process on track (+645K YoY)

Closing the gap between volumes and prices in outgoing traffic trend on the Consumer segment

Mobile

Mobile BB (Large Screen) leadership confirmed (~36% market share in 4Q10, +12 p.p. vs 2nd Competitor)

Still high macroeconomic pressure/volatility on Business and Top customers

Financial Discipline Continued Cash Cost Control: -0.3€ bln (-8.3% YoY)Organic OpFCF generation (Ebitda-Capex): ~1.6€ bln

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Domestic: Organic Results

49 5 49 5

Revenues by Technology EBITDA

Domestic: Organic ResultsEuro mln, Organic data, %

%

2,460 2,273 1,907 1,679

-187 M€-7.6%

49.5% 49.5%0.0 p.p.

4,9654,596

-369 M€-7.4%

-12.0%Retail Service Rev.

-10.9%

Mobile

% on Revenues

3,489 3,331 -4.5%Wireline

1Q10 1Q111Q10 1Q111Q10 1Q11

Cash Cost reduction Highlights65.6%

65.0%- 0 6 p p

% on Revenues

752 663

High macroeconomic pressure/volatility on Business and Top customers

Mobile Consumer segment recovery trend confirmed

-89

65.0%- 0.6 p.p.

CAPEX -11.8%

-271 M€ -8.3%

3,257 2,986

2,505 2,323

1Q10 1Q111Q10 1Q11

Selective approach to the Int’l Wholesale Contracts

Strong focus on cash cost reduction

89

-182-7.3%OPEX

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AgendaAgenda

Domestic 1Q11 Progress Report Domestic 1Q11 Progress Report



Appendix

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Domestic Fixed: Revenues DynamicsEuro mln, Organic Data, %

Domestic Fixed: Revenues Dynamics

Total Fixed Revenues Total Fixed Revenues – YoY % change

3,489 -4.5%

1Q10 4Q10 1Q113,331

1Q10 1Q11-4.8% -4.6% -4.5%

National8.7%

2.6%5.3%

Wholesale Revenues – YoY % change Retail Revenues – YoY % change

1Q10 4Q10 1Q11

International

1Q10 4Q10 1Q11

1Q10 4Q10 1Q11

-10.1% -15.5% -21.0%

1Q10 4Q10 1Q11

-8.1%-5.8% -5.7%

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Domestic Fixed: TI Access Performance

Telecom Italia Retail Access Evolution & Line Losses Key Highlights‘000

Domestic Fixed: TI Access Performance

15,901 15,741 15,584 15,351 15,145

TI Access Improved line losses trend (net of backlog)

Churn rate under control despite OLOs aggressiveness1Q10 2Q10 3Q10 4Q10 1Q11

‘000

196 -160 -157Line losses

gg

Backlog increase due to win-back daily cap from OLOs

New Opt-out regulation started from Febr’11

‘000 1Q10 2Q10 3Q10 4Q10 1Q11

-187K*

-196 160-233 -206

Retail monthly fee increase and tariff simplification – Focus on Consumer€/month

TO BE Avg monthly spending AS IS TO BE (July ‘11)

Avg Spending Elasticity to tariffs simplification

Avg SpendingMonthly feeincrease

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* Net of Backlog


Domestic Fixed: Focus on Broadband & ICT

TI Retail Broadband Accesses Broadband ARPU

Domestic Fixed: Focus on Broadband & ICT

‘000 Euro/month/line

18.5 18.4

Free

+19

TI retail accesses 7,071 7,134 7,186 7,175 7,194 Flat on

Consumersegment

-0.5%

4Q10 1Q11

Flat (%)

Free

84%

1Q10 2Q10

85% 86%

3Q10 4Q10

86%

1Q11

87%

5 0% 4Q10 1Q11Churn (%) 4.0% 5.0% 4.3%

Euro mln, %

1 8 179+13.3%

ICT Revenues Nuvola Italiana

TOP ICT contract value increase 158 179

Double-digit growth of Cloud services on total ICT Services

(+39% YoY; services +48% YoY) boosted by “Nuvola Italiana” TLC-ICT convergent services

1Q10 1Q11Market Share (%)* 10.1% 11.3%

Enhancement of Cloud computing offer portfolio for Top clients based on pay-per-use/on-demand concept (improved time-to-delivery and time-to-market applications)

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* Top sector


Domestic Wireline RevenuesDomestic Wireline RevenuesEuro mln, Organic Data, %

1Q10 YoY %1Q11

3,397

3,489

(4.9)

(4.5)

Services

Total

3,230

3,331

1,551

432

(8.4)

(5.8)

Voice

Internet

1,420

407Flat

Net of SoccerRights*

294

1,035

+0.3

(1.9)

Business Data

Wholesale

295

1,015

749

286

+5.3

(21.0)

National

International

789

226

92

85

+9.8

n.m.

Handsets

Other

101

93

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* From July’10 TI exited Soccer rights reselling business.


AgendaAgenda




Appendix

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Mobile Revenues: 1Q11 Results at a GlanceEuro mln, Organic Data

Mobile Revenues: 1Q11 Results at a Glance

Total Mobile Revenues

1 679

-228-12%1,907

Normalized (*)

-8.9%

Total Mobile

Mobile Retail Service Revenues Trend – YoY % change58

45

7249

Handset revenues

1,679

Total Retail1,630

1,835

Wholesale revenues

-205-11.2%

-22.4%

1,778 1,584 Service revenues

-10.9%

Normalized*

-8.8%Normalized *

8 8%9 2% 9 2% 10 6% 9 0%

1Q10 2Q10 3Q10 4Q10 1Q11

1Q10 1Q11

* N li d b

-8.8%-9.2% -9.2% -10.6% -9.0% -10.9%

* Normalized by

Extraordinary Bank-Holiday (17 March) 6€ mln

Data shock billing revenues eliminated from second half 2010,

on the basis of AGCOM 326 principles 34€ mln

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Domestic Mobile: Customer Base TrendEuro mln, Organic Data

‘000‘000

Domestic Mobile: Customer Base Trend

Total SIM cards Net Adds

‘000‘000

30,393 30,545 30,632 31,018 31,038 152 88

386

20

1Q10 2Q10 3Q10 4Q10 1Q11

+645+2.1% YoY

-463

1Q10 2Q10 3Q10 4Q10 1Q11

+483

Change YoYChange YoY

1 6301,822

‘000-13.9%+11.8%‘000

1Q10 2Q10 3Q10 4Q10 1Q11 1Q10 2Q10 3Q10 4Q10 1Q11

Gross Adds Churned SIM cards

1,630

Churn Rate %

2,093

1,802

6.45 5

1Q10 1Q111Q10 1Q11

5.5

1Q10 1Q11

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Domestic Mobile – Focus on Consumer

Main KPI’s

Domestic Mobile – Focus on Consumer

2010

2011

Customer Base (SIM Mln) Outgoing Traffic – YoY % change

+29%Out prices stabilized

since Dec’10

Outgoing Prices – YoY % change

-31%25.1

24 6

1Q10 1Q111Q10 1Q11

24.5 24.4 24.4 24.724.7

24.6

4Q 1Q 2Q 3Q 4Q

Customer Base: closed the Gap vs 2010

Consumer Service Revenues Highlights

YoY % change

Q Q Q Q Q

Customer Base: closed the Gap vs 2010

Outgoing prices and traffic: reducing the YoY gap

Outgoing Traffic: consolidate 2010 growth

Ch rn increase lo alt le eraging on b ndle offers

Normalized*-10.4%

1Q10 2Q10 3Q10 4Q10 1Q11

Churn: increase loyalty leveraging on bundle offers (1Q11 6.3%; -0.9pp YoY)

Incoming traffic&revenues stabilized

-13.0% -12.3%-14.4%

-11.6% -10.7%

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*Extraordinary Bank-Holiday (17 March)


Domestic Mobile – Focus on Business&Top

Customer Base Highlights

SIM H (Ml )

Domestic Mobile – Focus on Business&Top

1Q11 +1.7% YoY

3,170 3,161 3,186 3,189 3,218 3,214

Usage SME/SoHo impacted by macroeconomicspressure

Consip pricing list effect on top customers

SIM Human (Mln)

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

Market share protection

Data Offer repositioning pushing on bundles to overcome shock-billing and increase loyalty (AGCOM Decision ex326)

Business&Top Service Revenues Data Offer Repositioning

% Change YoY

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

Small screens Smartphone renewal every 2 years

Large screens USB dongle

All risk insurance

Recurring data bundles up to 2GB

Normalized*1.6%

0 6% -4 9%

1Q10 2Q10 3Q10 4Q10 1Q11

Recurring data bundles up to 20 GB

Roaming data bundle 100MB

Premium help desk for PC sw issues-11.5%

-0.6%-3.0% -3.9%

4.9%

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* Data shock billing revenues eliminated from second half 2010, on the basis of AGCOM 326 principles


Mobile BB Small Screen Large Screen DynamicsMobile BB – Small Screen-Large Screen Dynamics

Main Highlights KPIs

Large Screen users - Consumer (‘000)

1,853 2,332 +25.8% Market share leadership confirmed

Continued increase of 24 months Internet

LARGESCREEN

1Q10 1Q11

Internet Pack – gross adds (‘000)

~120~180+43.6%

~70% totalGross Adds

pack offering

Increased gross adds through the adoption of Tablets and i-Pads

Increased customer loyalty

Small Screen users - Consumer (‘000)

1Q10 1Q11

1 376 1 542 +12 1%

Increased customer loyalty

Handsets mix improved: smartphone on

SMALL SCREEN % Smartphone on Handsets sold - Consumer

1,376 1,542

1Q10 1Q11

+12.1%~7% penetration

on voice CB

p ptotal handsets sold (~+5pp vs.FY10)

Push on Tutto Compreso with smartphone included

Bundles with smartphones and internet Smartphones+128% YoY

~36%

March'11

~35%

Bundles with smartphones and internet options (~60% Tutto Compresocustomers with high-end smartphoneshave an internet option)

~270K

Total H/S

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Domestic Mobile RevenuesDomestic Mobile RevenuesEuro mln, Organic Data, %

T t l

1Q10

1 907

1Q11

1 679

% YoY

(12 0)Total

o/w Outgoing Voice

Services

1,907

991

1,850

1,679

876

1,634

(12.0)

(11 6)

(11.7)

o/w Outgoing Voice

o/w VAS

o/w Business Received

991

510

349

876

475

283

(11.6)

(6.9)

(18.9)

Consumer Browsing +5.5%

/

Handsets

349

58

283

45

(18.9)

(22.4)

Retail

Total

1Q10

1 835

1,907

1Q11

1 630

1,679

% YoY

(11 2)

(12.0)Net of

Discontinuities-8.9%

o/w Services

Wholesale

Retail

1,778

72

1,835

1,584

49

1,630

(10.9)

(32 0)

(11.2)Net of

Discontinuities-8.8%

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Wholesale 72 49 (32.0)


AgendaAgenda




Appendix

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Focus on 1Q11 Domestic EBITDAEuro mln, Organic Data, %

Focus on 1Q11 Domestic EBITDA

2 460 (369)2 3 41

2,460 2,273 (369)

+124 +3 +23 +32

-187M€, -7,6%

1Q10 Revenues Interconn. Costs Handsets costs Mktg&Comm. Opex Fixed Opex* 1Q11

MTR and Wholesale traffic reduction Acquisition costs offset by efficiencies on customer operations

1 3

Benefits from efficiency programs on Fixed costs and headcount reduction

Selective growth of Smartphone/ICT Products with no impact on Ebitda

2 4

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* Industrial + Personnel + G&A = Fixed Opex


AgendaAgenda



Cash Cost Rationalization & Operating Modelp g

Appendix

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Financial

Domestic Focus on Full Year

Revenues Ebitda

Organic Data, Euro Bln, %

Domestic – Focus on Full -Year

20.0~19.2

9.8>9.4

-7 4%

Balance to Target -3%

7 4%

~ -4% ~ -4%

Q1 Q2 Q3 Q4

FY2010

Guidance2011

FY2010

Guidance2011

-7,4%

Balance to Target -2.5%

-7.4%

Repricing Wireline2H10 impact of TIMX ItalyICT/Cloud Roll-Out

-7.6%

OPEX

2010 2011

10 3

2010 2011

-4%

Front -end loaded efficiency target to balance expected trend in 1H11 for Top Line

Balance to target shows further potentiality to secure full year Ebitda target

10.3~9.8

3 3%

Balance to Target1Q

full-year Ebitda target

Benefit from further headcount reductions in 2H11 in accordance with Trade Union agreement signed in August’10

FY2010

Guidance2011

-7.3%-3.3%

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Progress on Domestic Efficiency PlanProgress on Domestic Efficiency PlanEuro mln, Organic Data, %

ITX

Vol. Driven

Delta Cash Cost1Q11 vs 1Q10

EfficiencyCash Cost

-124 +56

49% of FY10 Target

-114-1243,257258+111

Target FY : -654Handsets: -3

2,323Total Opex -182

-124

+24 -50-271

-258111

2,986-124

550 -26

579

Mktg &Sales

ITX

+11

-5

-13

-48

EfficiencyVolume Driven

Intercon-nection

1Q10 1Q11 246

779

-2

-53

Industrial

PersonnelCash Cost on Revenues (%)

+55

+26

144

-3

663Total Capex 89

+23G&A &Other* 169

65.6%

65.0%- 0.6 p.p.

Cash Cost on Revenues (%)

Total Cash Cost -124 +111

+55

-271

40% of FY10 Target

-258

-144663Total Capex -89

1Q10 1Q11

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124 +111271 258*Includes Other Operating Income and Capitalized Costs

Investor Relations

Telecom Italia 1Q 2011 Results (Patuano)