The Telecom Italia 2009 Results and the 2010-2012 Strategic Plan Update

1. Telecom Italia Group
2009 Results & Strategic Plan Update
FRANCO BERNABE’

2. 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.
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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FRANCO BERNABE’

3. Agenda
 TI Group 2009 Results
 TI Group 2010-2012 Strategic Plan Update
 Focus on Domestic Market
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FRANCO BERNABE’

4. Confirming Organic 2009 Group Results
Operating Free Cash Flow: 6.3 bln € (+12% YoY)
Focus on TARGET REACHED
Core Organic Domestic Ebitda: 10.1bln € (-2.1% YoY)
Organic Ebitda Margin: 46.5% (+2.3 p.p. YoY)
Markets:
Domestic TARGET REACHED
& Domestic Cash Cost Efficiencies: 0.9 bln € 2009 DPS
Brazil Ord.: 5.0 €/cents
TARGET REACHED
TIM Brasil Ebitda: 1,289 mln € (+9.6% YoY) Sav.: 6.1 €/cents
Ebitda Margin: 25.7% (+2.3 p.p. YoY)
TARGET REACHED
NFP Adj.: 33,949 mln € at YE09 (-577 mln € vs
YE08)
Financial
Discipline
HanseNet Disposal: 0.9 bln € Net Debt Reduction
in Feb.’10
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FRANCO BERNABE’

5. Strong Operating Free Cash Flow
Euro mln, Reported data
Operating FCF % OFCF on Revenues
+662
6,298
5,636
23.2%
+3.8 p.p.
19.4%
2008 2009 2008 2009
Figures considering HanseNet classified as Discontinued Operations.
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FRANCO BERNABE’

6. Net Income Evolution
11,115 (5,622)
 HanseNet GW
Writedown/Provisions (597)
 HanseNet Net Income (23)
(2,154)  Other provisions (2)
3,339 (1,121)
(622)
(15) 1,581
EBITDA Deprec. / Net Interest & Income Taxes Net Income Minorities Net Income
Reported Amortiz.* Net Income Before Taxes of assets 2009
/Equity & Disc.Ops. disposed
 vs.
+0.2% -0.5% -15.3% +15.4% +65.6% -27.4%
FY 2008
* Including gains/losses of non current assets realization
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FRANCO BERNABE’

7. Net Debt Dynamics
Euro mln
+1,839 Income Taxes  +2,225 Cash Financial Expenses o/w
+248 Tax Litigation  (206) Financial Accruals +52 Disc. Ops. HanseNet
+214 Substitutive Tax
34,526 (6,298) +404 33,949
+1,050
+2,019
+2,301
(53)
(577)
2008YE Operating Disposals Cash Cash Dividends Financial 2009YE
FCF Taxes Financial Investments
Adjusted Expenses/ & other Adjusted
Financial impacts
Accruals
2007YE (1,347) 2008YE
(*)
35,873 (5,636) (599) +633 +2,102 +1,665 +488 34,526
vs. 08 (662) +546 +1,668 (83) (615) (84)
(*) o/w
+202 Disc. Ops. HanseNet 6
FRANCO BERNABE’

8. Focus on TI Sparkle Provision
Euro mln
2005-2007 Revenues and Commercial Margin
TI Sparkle Provision 2005-2009
Restatement
FY ’07: 70 Mln Commercial
FY ’06: 256 Mln Revenues
Margin
FY ’05: 77 Mln
72 32 507 Cum.
403 ’07-’05 -1,246 -72
FY ‘07 -169 -13
FY ‘06 -754 -47
VAT* Commercial Interests Total FY ‘05 -323 -12
Margin Provision
* Includes Penalties
No Impact on 2008-2009 Revenues and Ebitda
2008-2009 Net Income impacted by €10 mln of Annual Financial Charges
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FRANCO BERNABE’

9. Telecom Italia Group
Strategic Plan Update
FRANCO BERNABE’

10. Global Macro Economic and TLC Market Outlook
CAGR% ’10-’12 Brazil 8.6%
+4.5%
Italy
 Modest growth for
+1.1% 3.9% 4.5% developed countries
3.0% (in particular WE)
GDP Outlook 1.4%
 China and India still
By Geography*
driving emerging
Western North Latin China & Middle East & markets growth
Europe America America India Africa
CAGR% ’10-’12 12.4%
6.5%
 Fixed voice decline
Worldwide  Mobile voice growth
TLC Market 1.5% driven by emerging
markets
Outlook By
Technology**  Mobile BB confirmed
as the new growth
-5.4%
area
Fixed Mobile Fixed Mobile
Voice Voice Data Data
Source: TI processing on Global Insight data
* ** TLC Services Revenue. Source: TI processing on Ovum data
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FRANCO BERNABE’

11. Key Objectives and Strategic Levers Confirmed
Focus on Domestic Enhanced
Free Cash
Core Flow
Markets Brazil Generation A Platform to
Create Solid
Growth of
No M&A for Geographic Shareholder
Deleverage
Expansion Value
&
Capital
Strengthen
Discipline Balance
Non-Core Assets Disposal Sheet
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FRANCO BERNABE’

12. TI Domestic: the Transformation Journey
Transformation journey Telcos’ path Telcos’ Main Challenges
High
“Enhanced
Connectivity & Monetize market
Service convergence
Company”
“Customer Power”
Customer Loyalty
Market Share
Protection Brand Free Cash Flow
“Lean Reinforcement
Telco”
Generation
“Connectivity & Protect the value of
Transport”
connectivity through a
New Operating Model
Low
Low High
“Efficiency”
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FRANCO BERNABE’

13. TIM Brasil: a Solid Platform for Growth
Exploiting Market Opportunities
TLC Market (Revenues) Fixed vs. Mobile (Revenues) BB Growth (Users)
122
105
52 26.5
Data 50 49 16.0
Fixed
Fixed
Voice 10.0
Mobile 47 Fixed
48
Data 42 Mobile
Mobile
Voice
Service
2009 2012 2008 2010 2012 2008 2010 2012 Revenues
Growth
&
Building a Platform of Growth
Margin
#1 & #2 Task #3 Task #4 Task #5 Task Improvements
3 Development Waves Intelig: Option Value Network Infrastructure Ebitda% - CAPEX%
MAN
~6% ~15%
Back-hauling 2009* 2012
Penetration Usage Data
EBITDA % CAPEX %
Back-
bone
*: 2009 Proforma Intelig 12 months
Source: TIM Brasil Estimates
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FRANCO BERNABE’

14. Cash Flow Generation Remains our Key Priority
ORGANIC CAGR
09-12
REVENUES Model Improve
Back to Growth
Change Stabilize
Trend ~1%
Organic
EBITDA 11.4 11.3 Cum. ’10-’12 OFCF*:
~21 bln €
OFCF/Organic Revenues
+3 p.p.
23% ~26%
CAPEX 5.0 4.6 2009 2012
2008 2009 2010 2011 2012
* Based on reported Ebitda and Capex, including  working Capital & excluding Sparkle impact.
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FRANCO BERNABE’

15. Cash Allocation Priorities: Continuous Deleverage
and Shareholders Remuneration
Free Cash Flow Generation Cum. 2010 – 2012 Net Financial Position Adjusted
Euro Bln
Euro Bln
34.5 33.9
29.5 < 28
€5 bln
Net Debt
21 reduction
confirmed
(YE ’11 vs. YE ’08)
-0.5
2008 2009 2011 2012
~1 10.5
-11 Total Shareholders Remuneration
3,08
Euro Bln
~1.0 ~1.0
OFCF Maximum Financial Hansenet FCF
Sparkle Exp./Taxes Disposal before
Impact Dividends
2009 2010 2011 2012
* Source: UBS
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FRANCO BERNABE’

16. Agenda
 TI Group 2009 Results
 TI Group 2010-2012 Strategic Plan Update
 Focus on Domestic Market
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FRANCO BERNABE’

17. The Transformation Journey: Business and Operating Model
 Speed up Mobile Turnaround
Reverse  Consolidate Positive Fixed Momentum
Revenues  Exploit Convergent Opportunities on Business segment
Trend
 Continue to attack Adjacent Services
“Enhanced
Connectivity &  Front-end loaded efficiency program confirmed and
Service Company” Cash Cost extended
Rationalization
 New “Lean Company” operating model to better adapt
& Operating to new industry scenario
Model
 Selective Capex approach
 Reinforce strategic Touch Points and improve assistance
“Lean
Telco”
Excellence in and caring
Customer
“Connectivity &  Re-launch Points of Sales
Transport” Satisfaction
& QoE  Prepare the network to business evolution
 Reduce ex-ante obligations
Regulatory  Improve symmetry
Dialogue  Set a favourable scenario for NGAN
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FRANCO BERNABE’

18. Reverse Revenues Trend
Operating Model
Domestic
Customer Satisfaction
Reverse Revenues Trend: TI Priorities
Regulatory Dialogue
Speed-up Mobile CAGR ’09-’12: Broadly stable
turnaround 13% Strategic
Improve Back
Trend Stabilize 16%
to Growth priority
Applications
& Platforms (1)
7% 12%
Broadband (2) Cooperation
Consolidate positive 13%
16%
Fixed momentum Leadership
Access &
Voice (3)
80%
72% Protection
Exploit Convergent
Opportunities
on Business Segment
2009 2010 2011 2012
Continue to Attack (1)
ICT Services, BB Content (Adv., IPTV), Mobile VAS Content
Adjacent Services (2)
Mobile BB, Fixed BB (Access)
(3)
Fixed: Access, Outgoing Voice, Voice VAS, Business Data, Handsets; Mobile: Outgoing
Voice, Messaging, Handsets
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FRANCO BERNABE’

19. Reverse Revenues Trend
Operating Model
Domestic
Customer Satisfaction
TI Operating Model
Regulatory Dialogue
Integrated, Multi-access,
Network Flexible & Open
IT Lean IT as growth Enabler
Customer Operations End2End & On-line (Multichannel)
Quality Time
Efficiency
of Service to Market
Customer Operations Service Delivery* Progressing on the
Overall Satisfaction 17 Headcount Reduction Plan
Average days Headcount (’000)
7.56 13
7.44 +1.6% 64.1
+5.5% 10 57.4
7.05 9
6 6 - 6.7 - 10% of workforce
vs Jan. 2008
FY ‘08 FY ‘09 1Q ‘10 FY ‘08 FY ‘09 1Q’10 Jan 1, 08 March, 10
* Consumer Voice Retail ADSL Retail
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FRANCO BERNABE’

20. Reverse Revenues Trend
Operating Model
Domestic
Customer Satisfaction
Cash Cost Rationalization and Efficiency Plan
Regulatory Dialogue
Euro bln, Organic data
Cash Cost 2012 vs 2009 Efficiency YoY
-1.8 bln €
17%
30%
53% 58% Opex
Cash Cost on
69.8% Revenues ~65% 42% Capex
’10 vs ‘09 ’11 vs ‘10 ’12 vs ‘11 Cum. ’09-’12
+1.2
Efficiency by Programs (2009-12)
15.1
Total 1.8
Capex 3.5
1 Network
<14.0 Operations 0.2
-0.6
<3.0 2 MKT &
Distribution 0.4
-1.8 bln €
3 Organization &
Support process 0.2
Opex 11.6 <11.0
Information
4 0.5
Technology
> -1.1 bln €
Customer
5 Operations 0.1
Volume Delivery
2009 ITX Efficiency 2012 6 & Assurance 0.2
driven
7 Buildings and
Cum 09-12 Efficiency 2.7 bln € Energy Mng 0.2
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FRANCO BERNABE’

21. Reverse Revenues Trend
Operating Model
Domestic
Customer Satisfaction
Selective Capex Approach
Regulatory Dialogue
Capex by Function Key Highlights
Euro bln, % - Organic data
Total 3.5 Cum ‘10-’12 ~9€ bn Rebalancing Commercial Capex: strong effort
Comm. - Other 0.8 to reposition Sales Network PoS self-financed
by lower handset subsidies
Network & IT 2.7 Access Network Capex focused on BroadBand
development (Fixed and Mobile)
2009 2010 2011 2012 IT reduction driven by leaner architectures
and vendors consolidation
Capex by Destination
Total 3.5
Business Maintenance slight reduction driven
by network optimization
1,7 Business  Increasing focus on Capex related to
57% 58% 59% Development
business development to improve network
capacity and efficiency
Business
43% 42% 41% Maintenance
Selective approach on NGN development
2009 2010 2011 2012
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FRANCO BERNABE’

22. Reverse Revenues Trend
Operating Model
Domestic
Customer Satisfaction
Excellence in Customer Satisfaction
Regulatory Dialogue
& Quality of Experience
Goals Actions KPIs
Brand and Communication: Customer Satisfaction Index
CAGR ‘09-’12: 2%
Consistency and uniqueness in
CAGR: 2.1%
Communication Plan
72.70
Offer Proposition: 68.60
66.16
 Portfolio simplification
Reach excellence in Solid and consistent “Customer centric” value
Customer service IQ '08 IVQ '09 Tgt '12
proposition
increasing perceived
quality of the most Closeness to the customers with re-launch of the
important “Touch Points of Sales as strategic Touch Points and new
Point” for the Mobile Broadband Accessibility
initiatives for selected Business/TOP customers
Customer
99.5% 99.5%
Technical Quality increase technical quality of 98.7% 99.4%
broadband network (F-M) and reduce fault rates.
Leverage on past strong investment in capacity to
support mobile data traffic 2009 2010 2011 2012
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FRANCO BERNABE’

23. Reverse Revenues Trend
Operating Model
Domestic
Customer Satisfaction
Regulatory Main Goals
Regulatory Dialogue
 Reduction of the ex–ante obligations enhancing pricing flexibility on access and
Retail traffic services
markets
 New pricing test rules aimed at improving TI’s retail competitiveness
 Reduce the gap with the European average on ULL monthly fee
Wholesale
markets  Achieve a real symmetry in fixed termination charges between TI and Alternative
Operators
 Fully NGAN symmetrical regulatory approach where no bottlenecks exist
NGAN  NGAN access prices based on a “risk premium”
 Geographical differentiation of NGAN access obligations and pricing
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