TELECOM ITALIA GROUP Building a new course for TI Milan, March 7th 2014 Telecom Italia Group Building a new course for TI MARCO PATUANO TELECOM ITALIA GROUP Building a new course for TI 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 developments and changes in 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 statements. 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 and investors 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 should 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 which may identify factors that affect the forward looking statements included herein. The accounting policies adopted in the preparation of the Separate and Consolidated Financial Statements as of, and for the full year ended, 31 December 2013 have been applied on a basis consistent with those adopted in the Annual Separate and Consolidated Financial Statements at 31 December 2012, to which reference can be made, except for the new standards and interpretations adopted by Telecom Italia, which, other than for the prospective adoption of IFRS 13 (Fair Value measurement), didn’t impact on the Separate and Consolidated Financial Statements as of, and for the full year ended, 31 December 2013. Please note that the audit of the Telecom Italia Separate and Consolidated Financial Statements at 31 December 2013 has not yet been completed. Some data for the first quarter 2012, used in comparisons, included in 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. Furthermore, on November 13, 2013, the Telecom Italia Group accepted an offer to sell its entire controlling stake in Sofora Group – Telecom Argentina (Business Unit Argentina). Consequently , the latter was accounted for as Discontinued Operations (Assets held for sale) starting from the current Annual Report as of December 31, 2013. MARCO PATUANO 1 TELECOM ITALIA GROUP Building a new course for TI Agenda  Building a new course for TI  Takeaways MARCO PATUANO 2 TELECOM ITALIA GROUP Building a new course for TI TI Gaining Traction 2011-2013 Next 3 years Investment • focus on copper/traditional investment and tightening deleverage priority • increasing innovative vs traditional capex to sustain faster UBB deployment aiming at preserving our unique technological leadership Profitability/ Marginality • leading position on Ebitda margin among EU peers • continuous cost control and transformational processes ongoing: network & IT delayering, real estate & channel rationalization, insourcing Regulation • regulatory approach focused on competition and customer protection • clear and firm attitude from the European Commission towards encouraging long term investment Governance • provided stability but also complexity • evolving to a more independent BoD with clarity of roles Economic enviroment • multi-years macro economic constraints • improving economic outlook: from negative to positive Wireless ARPU • Total:-13% • Generated: -9% • Received: -41% • zero MTR drag & rational market behavior; upsell value through LTE expansion Fixed lines • Access:-5% • BB: -1% • fresh market BB growth & focus on convergent propositions; voice/access value defence Fixed ARPU • BB Arpu:+1% • increasing BB ARPU through new internet services/contents on high-speed network Cagr’10-’13 MARCO PATUANO 3 PALERMO ANCONA TELECOM ITALIA GROUP AREZZO TI’s push on Building a new course for TI PERUGIA «Network Quality BARIOur Fiber Plan PESCARA Strategy» PISA BERGAMO Population coverage PRATO BOLOGNA REGGIO NELL'EMILIA BRESCIA 2016 >50% New NGN Plan ROMA BRINDISI 2015 ‘14-’16(2) +5pp vs SAN GIOVANNI IN CAGLIARI old Plan PERSICETO CASALECCHIO DI Old NGN Plan ‘13-’15 SAN LAZZARO DI in RENO Active service today ~18% SAVENA 42 cities(1) CATANIA vs 25 cities for the main SAVONA CATANZARO 2013 2014 2015 2016 TARANTO competitor COMO TORINO FIRENZE • Building phase: • deployment process better than expected TREVISO FORLÌ • strategic agreement with Enel ensures further technological opportunities and savings TRIESTE GENOVA UDINE IMOLA • Commercial take-up: • gaining momentum on customer acquisition VARESE LIVORNO VENEZIA LUCCA • Geomarketing: • BB M/S opportunities in the areas where TI has weaker position VERONA MILANO Source Telecom Italia: internal data; For NGNVICENZA update Feb ’14 - For competitors: company web site MONZA (1) includes industrial districts, (2) including public funds ZOLA PREDOSA NAPOLI PAD MARCO PATUANO 4 PALOMBARA SABINA CORTE FRANCA MASERADA SUL PIAVE ANCONA CAMPI BISENZIO CREDARO SOVIZZO BARI ARZANO LECCO ISOLA VICENTINA BRINDISI GIOIA DEL COLLE MELEGNANO MONTEBELLUNA CATANZARO LORIA MELZO CAERANO DI SAN MARCO COMO MARTINENGO PAULLO CAMPOGALLIANO FORLÌ IMPRUNETA POZZUOLO MARTESANA TRIGGIANO GENOVA VAREDO ROVATO MONASTIER DI TREVISO MILANO PORTO SANT'ELPIDIO SARNICO MORETTA NAPOLI PERGINE VALSUGANA SEREGNO FONTE PADOVA SILEA TAVAZZANO CON ARESE PALERMO LADISPOLI VILLAVESCO CASAL DI PRINCIPE PERUGIA SOMMACAMPAGNA ALTIDONA BAGNOLO MELLA PISA POZZA DI FASSA SAN GIOVANNI IN PERSICETO PORTO SAN GIORGIO PRATO BASTIA UMBRA CASTELLANA GROTTE POMIGLIANO D'ARCO ROMA LEVERANO CONVERSANO CASTEL VOLTURNO TARANTO CORRIDONIA GRAVINA IN PUGLIA CORATO TORINO EBOLI MARTANO QUARTO TRENTO SESTO FIORENTINO MONOPOLI BOMPORTO TREVISO FERMO PUTIGNANO CASSANO D'ADDA UDINE LIMBIATE SANTERAMO IN COLLE CAVRIAGO VARESE SAN DONATO MILANESE ADRANO SASSUOLO VICENZA BREDA DI PIAVE CARLENTINI TARQUINIA ROZZANO CASTEL MAGGIORE PATERNO' SOMMA LOMBARDO CORMANO VEGLIE ARCO CAVARZERE SAN PIETRO DI MORUBIO MACERATA MEZZOLOMBARDO SANTA MARINELLA NAVE ISTRANA NAGO-TORBOLE SCANDIANO SERIATE PONZANO VENETO RIVA DEL GARDA VALDOBBIADENE BOLLATE MAGLIE STORO SAN SEVERINO MARCHE CERNUSCO SUL NAVIGLIO CALCINAIA BELLUNO CREVALCORE GHEDI MELITO DI NAPOLI CROCETTA DEL CORNUDA OSIO SOTTO VILLAFRANCA DI VERONA MONTELLO SOMMA VESUVIANA CASTANO PRIMO SAN POLO D'ENZA DOMEGGE DI CADORE CHIERI PALAZZOLO SULL'OGLIO SABAUDIA PIEVE DI CADORE AVEZZANO MONTANO LUCINO CONSELVE VALEGGIO SUL MINCIO BARONISSI MASSANZAGO MONTEGRANARO VALMADRERA MONTICELLO CONTE OTTO PALMA CAMPANIA LODI CASALE SUL SILE SAN GIUSEPPE VESUVIANO POVEGLIANO ALCAMO NETTUNO SAPRI LATISANA BUSSOLENGO MOENA TORRE ANNUNZIATA MUGNANO DI NAPOLI NICHELINO BORSO DEL GRAPPA ARTENA DRUENTO ROVERETO CAPANNOLI MINTURNO VERDELLO IMPERIA SANT'ILARIO D'ENZA SAN FELICE CIRCEO GALATONE ALA BAGNO A RIPOLI SPERLONGA SELVAZZANO DENTRO OSPEDALETTI SAREZZO TERRACINA SAVIGLIANO SAN BIAGIO DI CALLALTA CALDONAZZO CIPRESSA VILLORBA LISSONE GAVARDO LAIGUEGLIA ZERO BRANCO CASTELLAMONTE SANTA MARIA A VICO SANTO STEFANO AL MARE PONTE SAN NICOLO' CALENZANO POTENZA PICENA ARLUNO GIAVERA DEL MONTELLO MIRA MARCIANISE BREMBATE DI SOPRA MOGLIANO VENETO VEDELAGO DESIO BRENO CERCOLA PIOLTELLO NOCERA INFERIORE CALUSCO D'ADDA LANCIANO CANTU' CASTEL SAN PIETRO CALVISANO RUBANO VIGONZA TERME CARPENEDOLO CUORGNE' COLOGNO MONZESE LAVIS CENATE SOTTO RIVAROLO CANAVESE GRUGLIASCO CASSOLA CISLAGO ALBA SAN DONA' DI PIAVE ALBENGA COCCAGLIO CASTELFRANCO VENETO Italia:FRANCA internal data; For LTEPINZOLO update Jan’ 14 - For competitors: company VENARIA REALE web site CADONEGHE Source TelecomCORTE RENDE BASSANO DEL GRAPPA CREDARO MONTEMURLO ROSA' GRANAROLO LECCO MONTALE EMPOLI DELL'EMILIA MELEGNANO TOLMEZZO MADDALONI PALOMBARA SABINA POLLENZA CITTA' DI CASTELLO CREAZZO MARCO PATUANO ANDORA POZZUOLO MARTESANA CONEGLIANO ROVATO CADELBOSCO DI SOPRA TELECOM ITALIA GROUP Building a new course for TI First by far also in LTE TI’s push on «Network Quality Strategy» Active service in 651 municipalities vs 58 for the main competitor (of which 126 big cities for TI vs 25 big cities for the competitor) Population coverage 2016 80% 2015 +10pp vs old Plan today ~50% 60% +10pp vs 2013 target New NGN Plan ‘14-’16 Old NGN Plan ‘13-’15 ~40% 2013 2014 2015 2016 • LTE coverage: • TIM’s best position confirmed, outstripping #2 operator by +300bps on coverage • LTE valorization: going to monetize 4G via: • a reshaped “connectivity as a service” offer based on tiered data bundles (MB/GB) fitting with different customer needs • access to Premium content based services 5 TELECOM ITALIA GROUP Building a new course for TI Commercial Evolution: Sparked-up by Strategic Projects Strategic Projects Mobile Ultra BB Mobile Towers Rebranding x x x Mobile Voice, SMS & Data x x Fixed Ultra BB Fixed Voice, Access & Broadband x • Develop triple & quadruple play offers Convergent Offers x a x Convergent offers a SIM b • Maximise return on investment • • • c d • Valorization of Infrastructure • “TIM” as one single commercial brand MARCO PATUANO Customer Benefits A complete offer fixed and mobile needs for all family A very competitive and unique flat price One bill for all telecommunication expenses Telecom Italia Benefits • • • • Reduce churn on mobile and avoid F-M migration Lock-in fixed customer base through broadband experience Better promos policies and less SAC Lever on Telecom Italia unique high-speed networks make a «Smart» move out now! 6 TELECOM ITALIA GROUP Building a new course for TI Opex Efficiency Targets: Underwritten by Transformation Domestic cumulative efficiency on Opex Focus on Network & IT delayering bln €, breakdown by year 1 0.4 1.0 0.4 0.2 2014 2015 2016 Cum '14-'16 Transformation Projects Network delayering Real Estate planning 1 3 Channel 5 razionalization • Seeking «optimumminimum» simplification for the network architecture • Space optimization • Commercial channel revision MARCO PATUANO 2 • Delayering of application level & enterprise infrastructure Insourcing 4 • Processes internalization: “in-house” tasks for “core” activities Caring Services 6 • Inbound call reduction IT delayering Network Network rationalization is at the core of Telcos transformation • • • • reduction of decommissioning costs real estate optimization human skills re-engineering network components streamlining 2 Information Technology Coordinated Systems Transformation Plan • high complexity closely linked to platform obsolescence and incremental rather than organic evolution • the size of workforce is significant while the percentage of insourced business is small • system-based economic efficiency 7 TELECOM ITALIA GROUP Building a new course for TI Brazil: Sharpening our Marketing Approach A new way to look at the pre-paid segment From a two-tier market … a …to the addition of a new customer profile: • pre-paid = “low value “ customers & • post-paid = “high value” customers • a new way to look at pre-paid: higher users in this segment create a potential CB basin where to upsell clients a “hybrid” post paid concept  Plan Controle = the “mid value” customers Leverage on Mobile BB b Now: increasing Small- Screen penetration in our CB: the best-fitting way to deliver and sell our MBB strategy Next: strengthening our Network to widely address and capture intensive users (Large screen) From multi SIM to single SIM c The forthcoming MTR cuts will imply:  negative effect in the short term off-net costs reduction increasing value per line on pre-paid segment (opportunity to regain share of wallet of Multi-SIM customers) Our Customers will grow and will be worth more MARCO PATUANO 8 TELECOM ITALIA GROUP Building a new course for TI Governance A recent Corporate Governance benchmarking exercise employed by Telecom Italia highlights certain elements of comparison between Telecom Italia Corporate Governance practices and those of other large corporates(1). The analysis reveals the following main results: Composition of the Board of Directors • Domestic benchmark: on average, the Board includes 13 members, in line with Telecom Italia by-laws rules (between 7 and 19) Number of members appointed by Majority List • Domestic benchmark: in 40% of the cases the Majority List is entitled to appoint 7/10 of the Board members • Telecom Italia by-law: the Majority List is entitled to appoint 4/5 of the Board members Percentage of Independent Directors • Domestic benchmarking: on average, 60% of Board Directors are Independent • European TLC peers: on average, 50% of Board Directors are Independent (1) Italian panel: Eni, Enel, Unicredit, Intesa San Paolo, Generali, Snam, Atlantia, Fiat, Terna, Saipem, Pirelli, Mediobanca, Parmalat, Mediaset, Prysmian, Finmeccanica; EU TLC peers: Telefonica, Deutsche Telekom, British Telecom, Vodafone, Orange MARCO PATUANO 9 TELECOM ITALIA GROUP Building a new course for TI Agenda  Building a new course for TI  Takeaways MARCO PATUANO 10 TELECOM ITALIA GROUP Building a new course for TI Takeaways Group Domestic Brazil • No cash injection needed for deleveraging • Plan fully funded by recent €2bln capital strengthening and supported by cost cutting / transformation programs • Strong liquidity position • Powerful competitive position both in fixed & mobile • Investing for growth and to confirm leading technological position • Great data opportunities in Brazil to be reaped in 2014-2016 • Important investment plan to capture the full potential of data • TIM Brasil is a wellmanaged strategic asset Revenues Cagr ‘13-’16 Ebitda Cagr ‘13-’16 Capex(1) Stable Negative Low Single Digit Positive Mid Single Digit Stable Negative Low Single Digit Positive Mid Single Digit Capex/Revenues ~ 18% Capex/Revenues ~ 17% <14€bln Cum. ‘14-’16 Net Debt Adj /Ebitda 2016(2) ~ 2.1x(3) Domestic Ebitda: 2015 is the floor, stabilizing/growing from 2016 MARCO PATUANO (1) excluding spectrum (2) reported EBITDA (3) including announced equity strengthening excluding impact from non-organic items and FX. Avg exchange rate: Reais/€ 2.99 11