Telecom Italia 1Q 2011 Results (Bernabè)

TELECOM ITALIA GROUP
1Q 2011 Results
Milan, May 6th, 2011

Telecom Italia
1Q 2011 Results

FRANCO BERNABE’
BERNABE

1Q 2011 Results

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
intent, 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.
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
6-K, Commission.
It should also be noted that starting from the year 2010, Telecom Italia reclassified some taxes paid in Brazil of
non-material amount, previously included in “Other operating expenses”, in reduction of “Revenues” and “Other
income” in order to ensure a better comparability and intelligibility of the financial information.

FRANCO BERNABE’ 1

1Q 2011 Results

Agenda

 TI Group 1Q11 Results

 Telecom Italia Core Markets Results
Italy
Brazil
Argentina

 Appendix

FRANCO BERNABE’ 2

1Q 2011 Results

TI Group 1Q11 Key Achievements

Operating Free Cash Flow: 1.1 bln € (+322 mln € YoY, +42.7%YoY)

Group Reported Revenues: 7.1 bln € (+10.3% YoY, Org. -0.2% YoY)

Focus on Group Reported Ebitda: 2.9 bln € (+3.6% YoY)
Core
Group Organic Ebitda: 3.0 bln € (-3.6% YoY)
Markets

Group Organic Ebitda Margin: 41.9% (-1.5 p.p. YoY)

Group Net Income ante Minorities: 648 mln € (+6.9% YoY)
( 6.9%
Group Net Income post Minorities: 549 mln € (-8.7% YoY)

Disposal Plan Completed
Cash in:
ETECSA Cuba Cash-in: 706 mln US$ (of which 511 mln US$ in Q1)
Financial
Discipline
NFP Adj.: 30.6 bln € (-2.6 bln € vs 1Q10, -846 mln € vs FY10 )

FRANCO BERNABE’ 3

TELECOM ITALIA GROUP Italy
Enhance
1Q 2011 Results Brazil Free Cash Flow
Generation

Strong Free Cash Flow Generation
Argentina

Euro mln, Reported Data

Operating Free Cash Flow Net Cash Flow

+159

+660 7,073
Revenues 6,413  Etecsa Cuba: 374
 Economic Interest TA (155)
 Hansenet: 817
 Sparkle: (282) 846
4,144
Opex 3,587 -557 687 219

1,042
1 042 +141
141 901 535
Capex
627
+78 952
 WC 1,030
754 +322 1,076 Normalized 152
+475
OFCF

1Q10 1Q11 1Q10 1Q11

FRANCO BERNABE’ 4

Enhance
Generation

TI Group: Revenues & Ebitda
Argentina

Euro mln, %

Reported Revenues Organic Revenues

-15 M€
+660 M€ -0.2%
+10.3% 7,073 7,088 7,073
6,413

1Q10 1Q11 1Q10 1Q11

Reported EBITDA Organic EBITDA
% on % on
Revenues 44.1% Revenues 43.4% -1.5 p.p.
pp 41.9%
-2.7 p.p.
pp 41.4%

-111M€
+103M€
+3.6% 2,929 3,077 -3.6%
2,966
2,826

1Q10 1Q11 1Q10 1Q11

FRANCO BERNABE’ 5

Enhance
Generation

Net Income Evolution
Argentina

Euro mln; reported data

(1,430)

2,929
(457)

(394)
0 (99)
1,042
648 549 549

EBITDA Deprec. / Net Interest & Income Bef. Taxes Net Income of Net Income Minorities Net income
Reported Amortiz.* Net Income / Taxes & Disc. assets disposed ante Minorities
Equity Ops.
 % vs. 1Q10

+3.6%
3 6% +0.8%
0 8% +2.2%
2 2% +8.4%
8 4% +11.0%
11 0% n.m. +6.9%
6 9% n.m. -8.7%
8 7%

 abs. vs. 1Q10
+103 +12 +10 +81 +39 +0 +42 +94 (52)

* Including gains/losses of non current assets realization  Equity +29 o/w
 Income from inv. (15)  Brasil +40
 Net Fin. Charges (4)  Argentina +44
o/w related to debt (29)  Dom. (43)
FRANCO BERNABE’ 6

Enhance
Generation

Net Debt Dynamics
Argentina

Euro mln, Reported Data

-2.6 Bln € YoY

31,468
31 468 (1,076) 30,622
(377) +439 +156 +12

 EBITDA (2,929)
(2 929)  +633 Fi E (Cash impact)
633 Fin. Exp.
 CAPEX +901  (194) Fin. Accruals
  WC & Others +952
 Operating FCF (1,076)

(846)

2010YE Operating FCF* Disposals Cash Financial Financial Cash Taxes/Other 1Q11
Adjusted Expenses/ Financial Investments Impacts Adjusted
Accruals

2009YE (687) 1Q10
33,949 (754) (818) +419 +0 +466 32,262
vs. 10 (322) +441 +20 +156 (454)
* Argentina: (87)

FRANCO BERNABE’ 7

1Q 2011 Results

Agenda


Italy
Brazil
Argentina

 Appendix

FRANCO BERNABE’ 8

Enhance
Generation

Italy: Revenues & Ebitda Trend
Argentina

Euro mln, Organic data, %

Revenues EBITDA
% on 0.0 p.p.
pp
49.5% 49.5%
-369 M€ Revenues
4,965 -7.4%
-187 M€
4,596 2,460 -7.6%
2,273

1Q10 1Q11 1Q10 1Q11
Ebitda-Capex Highlights

-98 M€  Sluggish domestic demand curbing economic recovery
gg g y
-5.7%
5 7%
and impacting corporations & SMEs
1,708 1,610
 Top & Business segments in the mobile affected by
difficult YoY comparison

 Selective approach to Int’l Wholesale Contracts with low
marginality

 Continuous effort on Cash Cost reduction
1Q10 1Q11

FRANCO BERNABE’ 9

Enhance
Generation

Italy: Protecting the Value of our Customers
Argentina

Drivers Highlights
Fixed Mobile
 Fixed retail monthly fee increase from July mln lines mln lines

 Line Losses reduced vs 4Q10 despite competitors
Defend aggressiveness and OLO’s win-back cap -187k
+600k
31.0
30.4
Traditional  Mobile Calling CB rebound confirmed
excluding
ULL Back-log

Services  Double digit decrease in Mobile Churn Rate
(-13.9% YoY)
1Q10 1Q11

Fixed BB Access Mobile Large Screen Users
mln lines mln lines, Consumer Segment

 Lever on QoS to sustain price premium and fight +25.8%
Strengthen back the OLO’s aggressiveness
7.1 7.2
1,853
2,332

BB  Broadband ARPU broadly stable QoQ
Experience  Leadership on Large Screen confirmed % Flat 84% 87%

1Q10 1Q11 1Q10 1Q11

ICT Revenues Top ICT Portfolio Value
€m
+39%
Regained leadership on PA winning all new Consip +13.3%
Develop
D l 
Contracts (Fixed & Mobile)
179

Innovative  Increasing ICT contracts value boosted by Cloud 158 Cloud
Computing
Services Computing

1Q10 1Q11 1Q10 1Q11

FRANCO BERNABE’ 10

1Q 2011 Results

Agenda


Italy
Brazil
Argentina

 Appendix


Enhance
Generation

Brazil: Revenues & Ebitda Trend
Argentina


Revenues EBITDA
% on 28.8%
28 8%
+200 M€ 1,646 Revenues
-1.3 p.p. 27.5% Subsidy Policy
+13.8% Changed:
+36 M€ +23% YoY like
+8.6% for like
1,446 452
416

1Q10 1Q11 1Q10 1Q11

+208 M€ 322
+182.3%
182.3%
 Brazil confirmed as a booming economy with a solid
monetary and fiscal regime

 F-M substitution strategy success confirmed
114
 Voice and data revenues growing double digit

 Good balance between growth and profitability

1Q10 1Q11


Enhance
Generation

Brazil: Accelerating Growth
Argentina

Drivers Highlights
 TIM Brasil confirmed as the best performer for CB
Increase Size
Mln users, %
growth (+24.7% YoY vs market +17.5% YoY) +25% 52.8
Total 42.4 7.7
 Strong increase in data users @ ~600 k lines +17%
Size (+35.5% YoY)
Post-Paid 6.6

+26% 45.1
Pre-Paid
Pre Paid 35.8
35 8
 Sound reduction in Consumer Voice Churn Rate:
- 1.2pp YoY @1.7% in 1Q11
1Q10 1Q11

Revenues Growth: the Key Driver
Voice outgoing revenues confirming double digit Usage
U g Data Revenues
D t R
growth (+13.4% YoY) Min/month % YoY
126
Revenues Data Revenues reaching 14% of service revenues 100 +26%
+28%

Growth leveraging on the success of Infinity Web
OUT +37%
Smartphones reaching 40% of total handsets sales
(16% in 1Q10) IN 22%
-22%

1Q10 1Q11 1Q10 1Q11
1Q10 1Q11

Ebitda-Capex Evolution
Euro mln, Organic data
416 452
Enhance
E h Consolidation of th «No Subsidy» Model
C lid ti f the N S b id M d l Ebitda

Value  Improve Cash Generation Capex

Creation  Strong Net Income growth 302
130

1Q10 1Q11


1Q 2011 Results

Agenda


Italy
Brazil
Argentina

 Appendix


Enhance
Generation

Argentina: Revenues & Ebitda Trend
Argentina


Revenues EBITDA
+161 M€ 753 35.4% -1.3 p.p.
13
+27.2% 34.1%
+47 M€
592 +22.5% 257
210

1Q10 1Q11 1Q10 1Q11

+49 M€ 166
+41.4%
 Argentine economy continued its growing trend with an
117 expansion in consumer and industrial consumption

 Solid Ebitda performance despite strong support to top
line growth

 Mobile Service Revenues boosting top line performance

 Strong FCF Generation
1Q10 1Q11


Enhance
Generation

Argentina: Consolidating a Healthy Growth
Argentina

Drivers Highlights
Increase Customer Base
 Fixed Business: Improving performance in BB
Fixed BB Mobile*
acquisitions Mln lines Mln lines

 Sustained churn reduction (@ 1.2% vs 1.8% +14% 1.4 +13% 16.9
Size 1Q10) in fixed BB 1.2
14.9

 Strengthening Mobile position with 3G clients
more than doubled
1Q10 1Q11 1Q10 1Q11

BB ARPU Mobile Service Revenues*
ARS/month ARS Mln
2,453
2 453
 #2 mobile operator in Argentina 1,888
+29.9%
+10% 81
Revenues  Sound increase in Mobile ARPU (+16% YoY) 73 +72.8%

Growth  Weight of VAS as % of Service Revenues @ 45%
+8.1%
(+11 p.p. YoY)
1Q10 1Q11

Ebitda-Capex Evolution
Euro mln, Organic data
 Accelerating Smartphone penetration with 257
Enhance
E h narrowed SAC costs 210
Ebitda
Value  Selective CAPEX approach
Capex
Creation  Sound cash position increase 93 91

1Q10 1Q11

*Argentine Operations only


1Q 2011 Results

Agenda


Italy
Brazil
Argentina

 Appendix


1Q 2011 Results

TI Group – Revenues Evolution
Euro mln

+660 (+10.3%)

+124 7,088 (369) ( )
(5) +5 7,073 7,073
+551
551 +200 +161 (7)
6,413 - -

Brazil +123
Domestic +1

Argentina + 592
Domestic (10)
Other & Elim. (31) Organic Variation
1Q11
-15 (-0.2%)

1Q10 Change in Exchange Other non 1Q10 Domestic Brazil* Argentina** Media Olivetti Other & 1Q11 Other non 1Q11
consolid. rate impact organic Organic Elim. Organic organic
area items items

* Average Exchange rate (Real/Euro): 2.28 in 2011, 2.49 in 2010 * * Average Exchange rate (Peso/Euro): 5.49 in 2011, 5.31 in 2010


1Q 2011 Results

TI Group – Ebitda Evolution
Euro mln

+103 (+3.6%)

+206 +35 3,077 ( 8 )
(187) 2 966
2,966
+10 +47 (4) (3) (37) 2 929
2,929
2,826 +36 -
Brazil +35

Argentina +210
Domestic (1)
Other & Elim. (3) Organic Variation
44.1% 43.4% 1Q11 41.9% 41.4%
-111 (-3.6%)

1Q10 Change in Exchange Other non 1Q10 Domestic Brazil* Argentina** Media Olivetti Other & Elim. 1Q11 Other non 1Q11
consolid.
lid rate i
impact organic
i Organic
O i Organic
O i organic
i
area items items



1Q 2011 Results

TI Group – Ebit Evolution
Euro mln

+91 (+6.5%)

1,518
1 518 (117) +113
113 +33 (4) (7) 1 536
1,536 (37) 1 499
1,499
+94 +6 +10 -
1,408

Brazil +6

Argentina +92
Other +2 Organic Variation
22.0% 21.4% 1Q11 21.7% 21.2%
+18 (+1.2%)

1Q10 Change in Exchange Other non 1Q10 Domestic Brazil* Argentina** Media Olivetti Other & Elim. 1Q11 Other non 1Q11
consolid.
lid rate i
impact organic
i Organic
O i Organic
O i organic
i
area items items



1Q 2011 Results

Even and Back Loaded Maturities
Back-Loaded
Euro mln Bonds Loans (of which € 1,623 long-term rent, financial and operating lease payable) Drawn bank facility

€ 6.80 bln 13,807 37,109(1)
Group
G 1,500
1 500
Liquidity
Position
+ 11,139
€ 7.83 bln 2Q 2H
Undrawn Bonds 1,791 1,126
Portion of Loans 296 332
Facility 2,087 1,458 2,687 2,668
/Committed 2,846
= 2,250 27,312
€ 14.63 bln 5,482 437
Group 1,671
Liquidity 1,500
Margin 1,175
4,758 2,757

1,225
3,984 3,408

3,545 3,170 1,350
8,297
2,917 814

628

Within 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Beyond 2016 Total M/L Term Debt

(1) € 37,109 mln is the nominal amount of outstanding medium-long term debt by adding IAS adjustments (€ 729 mln) and current liabilities (€ 447 mln), the gross debt figure of € 38,285 mln is reached.
N.B. Debt maturities are net of € 180 mln (face value) of repurchased own bonds (TI Spa € 850 mln 5.25 % Notes due 2055), € 77 mln (face value) of repurchased own bonds (TI Spa € 750 mln 4.75 % Notes due
2014),
2014) € 35 mln (face value) of repurchased own bonds (TIF € 1 050 mln 7 75 % Notes due 2033) € 209 mln (face value) of repurchased own bonds (TIF € 2 000 mln 7 50 % Notes due 2011) and € 187 mln (face
1,050 7.75 2033), 2,000 7.50
value) of repurchased own bonds (TIF € 1,000 mln 7.25 % Notes due 2012).


1Q 2011 Results

TI Group 1Q11 Results - P&L I Quarter
Euro mln – Reported Data 2011 2010  Abs. %

REVENUES 7,073 6,413 660 10.3

Other Operating Income 48 53 (5) (9.4)

TOTAL REVENUES & OTHER INCOME 7,121 6,466 655 10.1

Total Purchases of materials and external services (2,995) (2,498) (497) 19.9

Personnel (990) (938) (52) 5.5
of which payroll (980) (931) (49) 5.3

Other operating costs (398) (265) (133) 50.2

Capitalized Cost and Others 191 61 130 213.1

EBITDA 2,929 2,826 103 3.6
% on Revenues 41.4% 44.1%

Depreciation & Amortization (1,431) (1,412) (19) 1.3

Writedowns and revaluations of non current assets 1 (5) 6 -

Gains/losses of non current assets realization 0 (1) 1 -

EBIT 1,499 1,408 91 6.5

Income (loss) equity invest. valued equity method (4) 25 (29)
Other income ( expenses ) from investments 17 2 15
Net Financial Income / (Expenses) (470) (474) 4

Income before Taxes & Disc. Ops. 1,042 961 81

Taxes (394) (355) (39)

Income before Disc. Ops. 648 606 42

Net income (loss) of assets disposed 0 0 0

Net Income (ante Minorities) 648 606 42

Minorities (99) (5) (94)

Net Income (post Minorities) 549 601 (52)


1Q 2011 Results

TI Group 1Q11 – Main Results by BU
Euro mln
I Quarter I Quarter
Reported Data Organic Data
2011 2010  Abs. % REVENUES 2011 2010  Abs. %
REVENUES
Domestic
D ti 4,596
4 596 4,974
4 974 -378
378 (7.6)
(7 6) Domestic 4,596
4 596 4,965
4 965 -369
369 (7.4)
(7 4)
Wireline Domestic 3,331 3,498 -167 (4.8) Wireline Domestic 3,331 3,489 -158 (4.5)
Tim Domestic 1,679 1,907 -228 (12.0) Tim Domestic 1,679 1,907 -228 (12.0)
Brasile 1,646 1,323 323 24.4 Brasile 1,646 1,446 200 13.8
Argentina 753 0 753 Argentina 753 592 161 27.2
Media 52 57 -5 (8.8) Media 52 57 -5 (8.8)
Olivetti
Oli tti 78 73 5 6.8
68 Olivetti 78 73 5 6.8
68
Other Activities 1 21 -20 (95.2) Other Activities 1 0 1 -
Elim. -53 -35 -18 (51.4) Elim. -53 -45 -8 (17.8)
TI Group 7,073 6,413 660 10.3 TI Group 7,073 7,088 -15 (0.2)

EBITDA 2011 2010  Abs. % EBITDA 2011 2010  Abs. %
Domestic
D i 2,236
2 236 2,451
2 451 -215
215 (8.8)
(8 8) Domestic
D ti 2,273
2 273 2,460
2 460 -187
187 (7.6)
(7 6)
Brasile 452 381 71 18.6 Brasile 452 416 36 8.6
Argentina 257 0 257 Argentina 257 210 47 22.5
Media 2 2 0 0.0 Media 2 2 0 0.0
Olivetti -14 -10 -4 (40.0) Olivetti -14 -10 -4 (40.0)
Other Activities -2 -2 0 0.0 Other Activities -2 -5 3 60.0
Elim.
Eli -2
2 4 -6-
6 Elim.
Elim -2
2 4 -6
6 -
TI Group 2,929 2,826 103 3.6 TI Group 2,966 3,077 -111 (3.6)
EBITDA MARGIN 41.4% 44.1% -2.7 pp EBITDA MARGIN 41.9% 43.4% -1.5 pp

2011 2010  Abs. % 2011 2010  Abs. %
EBIT EBIT
Domestic 1,222 1,366 -144 (10.5) Domestic 1,259 1,376 -117 (8.5)
Brasile 184 65 119 183.1 Brasile 184 71 113 158.0
Argentina 125 0 125- Argentina 125 92 33 35.4
Media -13 -13 0 0.0 Media -13 -13 0 0.0
Olivetti -15 -11 -4 (36.4) Olivetti -15 -11 -4 (36.4)
Other Activities -2 -8 6 75.0 Other Activities -2 -6 4 66.7
Elim. -2 9 -11- Elim. -2 9 -11 -
TI Group 1,499 1,408 91 6.5 TI Group 1,536 1,518 18 1.2
EBIT MARGIN 21.2% 22.0% -0.8 pp EBIT MARGIN 21.7% 21.4% 0.3 pp


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