TELECOM ITALIA GROUP. Telecom Italia Group. Investor Meetings Paris, July Franco Bernabè Chairman and Group CEO

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1 Telecom Italia Group Investor Meetings Paris, July Franco Bernabè Chairman and Group CEO 0

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. 1

3 Agenda Telecom Italia Group Overview 1Q12 Results Focus on UBB Financial Position and Group Targets Sustainability at TI 2

4 FY2011 Group Key Figures Weight in TI Group Euro mln, Organic Data TI Group Domestic Brazil Argentina FY 11 Δ% yoy FY 11 Δ% yoy FY 11 Δ% yoy FY 11 Δ% yoy Revenues* 29, % 19, % 7, % 3, % 35% EBITDA 12,339 Flat 9, % 1, % 1, % 25% EBITDA-CAPEX 7, % 6, % % % 85% Cash Generation for the Group Engine of Growth for the Group * Revenues based on net contributions 3

5 Topline Breakdown Across Core Markets Domestic Bn Retail Revenues by Technology Bn Retail Revenues by Customer Segment Mobile Consumer Fixed Business Top Clients Brazil Argentina R$ Bn Total Revenues by Technology AR$ Bn Total Revenues by Technology Historical «pure mobile» positioning % TIM Fiber 5.5% Intelig TIM Mobile Mobile Fixed

6 TI s Domestic Market: the Growing Importance of Innovation Domestic Retail Revenues Fixed bn bn Innovative Innovative Broadband Web Contents ICT (products and services) Traditional Traditional bn Innovative Traditional 7.4 Mobile Mobile browsing (Large & Small Screen) Contents (premium services, donwloads, games, ringtones, Infotainment) 5

7 TI Strategic Priorities Fully Exploit TI Multi -Country Businesses Italy Proactively Manage for Cash Generation Brazil Continue the Business Expansion Enhance Free Cash Flow Generation Complete the Deleverage Program Argentina Managing Growth and Profitability Sustainable Shareholders Remuneration 6

8 Telecom Italia Group FY 2012 and Plan Key Guidance Organic Data* TI Group FY 2012 Key Guidance Revenues Ebitda Stable Broadly Stable NFP Adj.** 27.5 bln Organic Data* TI Group Plan Key Guidance ** Ebitda-Capex cum Capex cum NFP Adj >22 bln >15 bln FY 2012: 27.5 bln FY 2013: 25 bln From FY 2014: < 2x Net Debt/Ebitda *** *exchange rates 2011 (R$/ 2.33; ARS/ 5.74), excluding impact from non-organic items ** excluding Latam spectrum licences *** reported figure 7

9 Agenda Telecom Italia Group Overview 1Q12 Results Focus on UBB Financial Position and Group Targets Sustainability at TI 8

10 TI Group Key Results Euro mln, Organic data, % Revenues EBITDA % on Revenues 42.0% -1.9 p.p. 40.1% 7, M +5.3% 7,392 2,951 2, M +0.5% 1Q11 1Q12 1Q11 1Q12 Revenues Trend YoY EBITDA-CAPEX 5.0% 5.3% % on Revenues 29.3% -2.1 p.p. 27.2% 3.7% 2, M -2.1% 2, % -0,2% 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 1Q12 9

11 Domestic Results: Trend still improving Euro mln, Organic data, % Total Domestic Revenues Domestic Service Revenues 4, M -2.4% 4,486 Mobile -1.7% Wireline -2.9% % on Revenues EBITDA 49.5% -0.5 p.p. 49.0% 2, M -3.4% 2,196 EBITDA-Capex -4 M 1, % 1,607 % on Revenues 35.1% +0.7 p.p. 35.8% 10

12 Mobile Revenues: 1Q12 Results at a Glance Euro mln, Organic Data Total Mobile Revenues Mobile Handsets Revenues Trend YoY % change Normalized (*) ~-2.5% Total Mobile Handset revenues 1, % +71.1% 1,650 Mobile Service Revenues Trend YoY % change Service revenues -3.7% Normalized (*) ~-4.5% (*) Leap year 11

13 Domestic Mobile Surfing the Data Wave Increasing Smartphone Penetration in All Segments Bringing Innovation to the Mass Market Operating Systems on TIM s Network - The Android Growth Smartphones increasingly Service-Driven Data Bundle users and Renewal Rate +1,9X Doubling smartphone penetration on CB Further room for growth Smartphone Penetration on Customer Base May 2012 Dealer Convention ~1,3 mln Of which >75% Smartphones 87% Renewal rate 79% Number of Data connections by Device (*) +~20% 2.2mln 1.9mln Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 * Peak of traffic on the average day of the second week of each month 12

14 LatAm: Revenues and EBITDA 1Q12 YoY Trend Euro mln, Organic Data Revenues EBITDA Brazil 1, M +19.1% 1,928 % on Revenues 27.5% p.p. +60 M +13.5% 26.2% 505 1Q11 1Q12 1Q11 1Q12 Argentina M +24.0% % p.p. +41 M +16.6% 32.1% 289 1Q11 1Q12 1Q11 1Q12 13

15 Market Leaders In Our Footprint (March 2012) Domestic Brazil Argentina Mobile #1 position mln lines 34.9% #2 position mln lines #2 position mln lines 26.8% 33.6% #1 position mln accesses #2 position mln accesses Fixed 66.2% #1 position mln accesses Tim Brasil acquired relevant fiber infrastructure through the Intelig and AES purchases, to further profitably develop its mobile business. AES now offers the opportunity to enter the Fixed BB business 47% #2 position mln accesses Broadband 52.7% 35% A Competitive and still Healthy Market where TI remains the Leading Operator Successful «Challenger «strategy and leadership in growth. TIM re-gained the second position during Customer base expansion across all segments, driven by mobile rebranding of Personal and the successful proposition of Arnet on broadband TV 14

16 Agenda Telecom Italia Group Overview 1Q12 Results Focus on UBB Financial Position and Group Targets Sustainability at TI 15

17 UBB Networks allow TI to further tap growing BB demand: Mobile BB is complementary to Fixed BB Italian Families - Broadband Penetration Italian Soho & SME - Broadband Penetration Families (mln) % families 71% % 61% 52% 45% 41% 29% 32% 30% 22% 24% 28% 2% 7% 2% 18% 8% 18% 12% 16% 15% FBB only families FBB & MBB families MBB only families "No BB" families Source: Between Source: <Osservatorio Banda Larga 16

18 Plan Strengthen the Network for a Technological Leadership Capex Allocation UltraBB Roadmap Network Capex Customer Service & Traffic Driven Network Development Optimization Acceleration NGAN Roll-out Cities (including all main ones) covered through FTTH&Cab Technology ~¼ of Housing units passed with >30 Mb/s Speed Network Maintainance Decrease Mobile Coverage Optimize Network Investment to maintain excellent quality in TLC services 2014 More than 40% of population covered by LTE Increase the effort in Network Development and Innovation to confirm Technological Leadership and grant the Best Experience on the Net HSPDA 42 Mbps LTE 17

19 TI s Convergent Approach to Fixed and Mobile UBB The Value of our Core Asset Access Network Key asset both for fixed and mobile Huge capital and time already fruitfully invested High Capillarity Strategic asset in the economic, social & regulatory landscape Yesterday NGN Today: Pervasive Ultra Broadband UBB Fixed Network Super Internet + Fixed & Mobile Network NGAN Fttx HSPA+ LTE 18

20 TI s 2-step strategy on NGAN Step 1: FTTCab Mbps New Light Cabinet Use of existing network elements: Cable ducts Cabinets Copper SLL (Possible) Step 2: FTTH 100 Mbps 1 Gbps Deployment costs > 3x FTTCab Use of FTTCab primary Network New elements Fiber secondary network Fiber deployment in the customer s building New modem in the customer s house 19

21 TI Fixed UBB Plan: and beyond H within cities 100 cities About 60% cities target in the North (i.e. Milan, Turin, Genoa); NewCo Trentino NGN for Trento region About 20% cities located in the Central part of the country (i.e. Rome, Florence) Driver for NGAN Plan: Density of population; Leverage on existing infrastructure (i.e. ducts already in place in most of 100 targeted cities) Moving towards DAE Targets About 20% cities located in the South (i.e. Naples, Bari, Palermo) 20

22 Agenda Telecom Italia Group Overview 1Q12 Results Focus on UBB Financial Position and Group Targets Sustainability at TI 21

23 Robust Liquidity Margin and Well-Distributed Debt Maturities Euro mln Bonds Loans (of which long-term rent, financial and operating lease payable 1,497) Drawn bank facility 6.16 bln Group Liquidity Position bln Undrawn Portion of Facility/Committed = bln Group Liquidity Margin 2,765 13,323 35,884 (*) 2,249 11,357 1,966 2,981 1,900 25,257 3,032 2, ,067 1, ,999 1,264 2,479 1,790 5, ,335 1,652 2,857 1,211 8, Within 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Beyond 2017 Total M/L Term Debt (*) 35,884 mln is the nominal amount of oustanding medium-long term debt by adding IAS adjustments ( 805 mln) and current liabilities ( 824 mln), the gross debt figure of 37,513 mln is reached. N.B. Debt maturities are net of 646 mln (face value) of repurchased own bonds (of which 354 mln related to bonds due in the next 24 months). 22

24 Deleverage Targets Confirmed Cash Flow Generation (EBITDA- Capex) Net Financial Position Adjusted** Organic Data* Latam >22 Bln ~20% Euro Bln Bln Net Debt and 2013 targets confirmed 25 Financial Discipline Domestic ~80% Cum New Dividend Policy (as announced on Feb ) *Organic: same perimeter, 2011 FX rates, excluding spectrum licences acquisitions. ** Excluding Latam spectrum licences acquisitions. 23

25 Agenda Telecom Italia Group Overview 1Q12 Results Focus on UBB Financial Position and Group Targets Sustainability at TI 24

26 Sustainability at TI: Key Actions and Results TI is part of all main global and European sustainability indexes Electricity consumption and Greenhouse Gas emissions have been curbed downwards (respectively, -6,3% and -6,2% versus 2010) TI delivers a wide range of Green and Social telecommunications solutions for the Public Administration and private Customers, improving their environmental footprint and lifestyle Relations with Trade Unions are excellent. This is key to deliver agreements which are considered satisfactory by all involved parties (e.g the one of August 4, 2010) A wide range of projects aimed at bridging the social digital divide are under way, sometimes with the involvement of the Public Administration Telecom Italia is a founding member of a joint auditing project on suppliers' production sites in developing countries, carried out in partnership with other leading Telecom operators. As of December 2011, 33 sites were audited involving 155,000 workers 25