Telecom Italia 1Q 2012 Results - Franco Bernabè (10/05/2012)
1. TELECOM ITALIA GROUP
1Q 2012 Results
Milan, May 10th, 2012
Telecom Italia
1Q 2012 Results
FRANCO BERNABE’
2. TELECOM ITALIA GROUP
1Q 2012 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, 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.
FRANCO BERNABE’ 1
3. TELECOM ITALIA GROUP
1Q 2012 Results
Agenda
TI Group 1Q12 Results
Telecom Italia Core Markets Results
Italy
Brazil
Argentina
Wrap-up
Appendix
FRANCO BERNABE’ 2
4. TELECOM ITALIA GROUP
1Q 2012 Results
TI Group Key Results
Euro mln, Organic data, %
Revenues EBITDA
% on 42.0%
Revenues -1.9 p.p. 40.1%
+373 M€ 7,392 2,951 +15 M€ 2,966
7,019 +5.3% +0.5%
1Q11 1Q12 1Q11 1Q12
Revenues Trend YoY EBITDA-CAPEX
% on 29.3% -2.1 p.p.
Revenues 27.2%
5.3%
5.0%
-43 M€
3.7% 2,055 -2.1%
2,012
2.1%
-0,2% 1Q11 1Q12
1Q11 2Q11 3Q11 4Q11 1Q12
FRANCO BERNABE’ 3
5. TELECOM ITALIA GROUP
1Q 2012 Results
TI Group Key Results by Core Markets
Euro mln, Organic Data
Weight on
TI Group
TI Group Domestic Brazil Argentina
1Q12 % yoy 1Q12 % yoy 1Q12 % yoy 1Q12 % yoy
Revenues 7,392 +5.3% 4,486 -2.4% 1,928 +19.1% 901 +24.0%
60.4% 26.0% 12.2% 38.2%
EBITDA 2,966 +0.5% 2,196 -3.4% 505 +13.5% 289 +16.6%
74.0% 17.0% 9.7% 26.7%
EBITDA-CAPEX 2,012 -2.1% 1,607 -0.2% 271 -14.6% 168 +5.1 %
~80% ~14% ~8%
FRANCO BERNABE’ 4
6. TELECOM ITALIA GROUP
1Q 2012 Results
Tl Media: Corporate Re-organization leading to Disposal
Current Structure Post Re-organization
77.7% 77.7%
TI Media MTV Italia
Broadcasting (51%) NewCo
(100%)
MTV Adv.
51% 100%
(100%)
FRANCO BERNABE’ 5
8. TELECOM ITALIA GROUP
1Q 2012 Results
Free Cash Flow Generation: in line with Targets
Operating Free Cash Flow Guidance OFCF FY12E
Euro mln, Reported Data Euro bln
FY2011 1Q12 FY2012E
+319
7,392 Stable
Revenues 7,073
TI
Group 7.0* ~7.0*
0.6
4,144 4,429
Opex -285 Breakdown
Domestic
5.8* 1.2
Capex 901 -53 954
WC 952 - 431
1,383
OFCF 1,076 - 450
626 Brazil 0.7
1Q11 1Q12
-0.5
Brazil: - 0.3bln € (capex acceleration for network
upgrades and increased cashout from TLC fees) Argentina
Domestic: - 0.1bln € (increased VAT payment)
0.6 0.05
Argentina: stable
TI Media: -0.04bln €
* Excluding spectrum acquisitions
FRANCO BERNABE’ 7
9. TELECOM ITALIA GROUP
1Q 2012 Results
Net Income Evolution
Euro mln
+57 (+10.4%)
Brazil (34)
Argentina (9) Argentina (76)
Domestic (18) Brazil (43)
T.I. Media +5
+15 (61) 720
+114 (114)
103 652
606
549
Equity +1
Income from inv. (17)
Net Fin. Charges +31
Net Income 1Q11 Minorities Income ante Min Minorities Net Income
Income/(Loss) ante
1Q11 & Disc. Ops. 1Q11 Net Interest & 1Q12 1Q12
EBIT Taxes Min & Disc. Ops.
Net Income 1Q12
/Equity
FRANCO BERNABE’ 8
10. TELECOM ITALIA GROUP
1Q 2012 Results
Agenda
TI Group 1Q12 Results
Telecom Italia Core Markets Results
Italy
Brazil
Argentina
Wrap-up
Appendix
FRANCO BERNABE’ 9
11. TELECOM ITALIA GROUP
1Q 2012 Results
Italy: Continued Resilience in a Weak Macro Context
Real GDP trend Consumer Spending
0.0% 0.0%
-2.5% -2.5%
-5.0% -5.0%
4Q11A 1Q12A 2Q12E 3Q12E 4Q12E 4Q11A 1Q12A 2Q12E 3Q12E 4Q12E
Source: Research Dep. Intesa Sanpaolo Source: Research Dep. Intesa Sanpaolo
Wireless Wireline
96.5% 71.1%
34.0% 0.5% 0.5% 0.8%
26.2% 0.3%
-1.0%
-3.7% -1.9% -1.7%
-2.1%
-7.1%
-7.5%
-8.7%
-11.7% -22.4% -4.9% -4.9%
1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12
Service Revenues (YoY) Handset Revenues (YoY ) Service Revenues (YoY) Broadband Service Revenues (YoY)
Continuous recovery also supported by a more rational Confirmed the positive growth in broadband service
competition and strong improvement in main KPIs. revenues with a slight sequential improvement (+0.8% YoY).
Mobile data momentum sustained by high smartphones TI market share on fixed accesses keeps almost stable.
sales.
FRANCO BERNABE’ 10
12. TELECOM ITALIA GROUP
1Q 2012 Results
Agenda
TI Group 1Q12 Results
Telecom Italia Core Markets Results
Italy
Brazil
Argentina
Wrap-up
Appendix
FRANCO BERNABE’ 11
13. TELECOM ITALIA GROUP
1Q 2012 Results
Brazil: Revenues and EBITDA Trend
Euro mln, Organic Data
Revenues Size
+309 M€ TIM Brazil confirmed as #2 operator, with service
+19.1%
1,928 revenues up 15.9% YoY
1,619 Postpaid users increased to about 10 mln (+25% YoY)
Revenue Growth
1Q11 1Q12 Top line growth driven by community expansion and
“internet for All” concept
EBITDA VAS Revenues acceleration (>60% YoY) thanks to
% on 27.5% -1.3p.p. 26.2%
continued smartphone penetration increase, now at
Revenues
31.1% (12.6% in 1Q11)
+60 M€
+13.5%
505 Value Creation
445
In the last three quarters, TIM Brasil confirmed its #2
position without penalizing margins. Service EBITDA
margin stable YoY
1Q11 1Q12 Bad Debt/Gross Revenues ratio stable
FRANCO BERNABE’ 12
14. TELECOM ITALIA GROUP
1Q 2012 Results
Agenda
TI Group 1Q12 Results
Telecom Italia Core Markets Results
Italy
Brazil
Argentina
Wrap-up
Appendix
FRANCO BERNABE’ 13
15. TELECOM ITALIA GROUP
1Q 2012 Results
Argentina: Revenues and EBITDA Trend
Euro mln, Organic Data, %
Revenues Size
+174 M€ Argentina: Personal #1 in Mobile Revenue Share
+24.0%
901 Steady growth in fixed BB accesses (+1% QoQ)
727
Revenue Growth
Personal: strong VAS Revenue growth still driven by
1Q11 1Q12
SMS & Internet
ARPU Personal +16% YoY
EBITDA
VAS reached 52% of service revenues
34.1% -2.0 p.p. 32.1% Strong Broadband growth: 1Q12 BB ARPU +16% YoY
+41 M€
+16.6%
289
248 Value Creation
Confirmed double-digit EBITDA Growth: +16.6% YoY
Sound organic EBITDA-CAPEX generation: +5.1% YoY
1Q11 1Q12 Solid cash position: around €450 million, also due to
the delay in spectrum auction
FRANCO BERNABE’ 14
16. TELECOM ITALIA GROUP
1Q 2012 Results
Agenda
TI Group 1Q12 Results
Telecom Italia Core Markets Results
Italy
Brazil
Argentina
Wrap-up
Appendix
FRANCO BERNABE’ 15
17. TELECOM ITALIA GROUP
1Q 2012 Results
Telecom Italia Group – FY 2012 and 2012-14 Plan Key Guidance
Organic Data*
TI Group – FY 2012 Key Guidance
Revenues Stable
Ebitda Broadly Stable
NFP Adj.** 27.5 € bln
Organic Data*
TI Group – 2012-14 Plan Key Guidance **
Ebitda-Capex
>22 € bln
cum ’12-’14
Capex
>15 € bln
cum ’12-’14
FY 2012: 27.5 € bln
NFP Adj.
FY 2013: 25 € bln
2012-’14
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
FRANCO BERNABE’ 16
18. TELECOM ITALIA GROUP
1Q 2012 Results
Agenda
TI Group 1Q12 Results
Telecom Italia Core Markets Results
Italy
Brazil
Argentina
Wrap-up
Appendix
FRANCO BERNABE’ 17
19. TELECOM ITALIA GROUP
1Q 2012 Results
TI Group – Revenues Evolution
Euro mln
+319 (+4.5%)
+174 +6 (13) +6 7,392 0 7,392
7,073 (3) (51) 0 7,019 (109) +309
Domestic +2
Brazil (27)
Argentina (26)
Domestic
Olivetti
(3)
(6)
Organic Variation
Other & Elim. +6 +373 (+5.3%)
1Q11 Change in Exchange Other non 1Q11 Domestic Brazil* Argentina** Media Olivetti Other & 1Q12 Other non 1Q12
consolid. rate impact organic Organic Elim. Organic organic
area items items
* Average Exchange rate (Real/Euro): 2.32 in 2012, 2.28 in 2011 * * Average Exchange rate (Peso/Euro): 5.69 in 2012, 5.49 in 2011
FRANCO BERNABE’ 18
20. TELECOM ITALIA GROUP
1Q 2012 Results
TI Group – EBITDA Evolution
Euro mln
+34 (+1.2%)
Agreements and Transactions +6 Agreements and Transactions (1)
Other net costs +31 Other net costs (2)
2,929 0 (15) +37 2,951 (78) +60 +41 (8) 0 0 2,966 (3) 2,963
Domestic 1
Brazil (7)
Argentina (9)
41.4% 42.0% Organic Variation 40.1% 41.4%
+15 (+0.5%)
1Q11 Change in Exchange Other non 1Q11 Domestic Brazil* Argentina** Media Olivetti Other & 1Q12 Other non 1Q12
consolid. rate impact organic Organic Elim. Organic organic
area items items
* Average Exchange rate (Real/Euro): 2.32 in 2012, 2.28 in 2011 * * Average Exchange rate (Peso/Euro): 5.69 in 2012, 5.49 in 2011
FRANCO BERNABE’ 19
21. TELECOM ITALIA GROUP
1Q 2012 Results
TI Group – EBIT Evolution
Euro mln
+114 (+7.6%)
+56 +17 (8) +1 1,622 (3) 1,619
1,534 +22 0
1,505 0 (8) +37
Brazil (4)
Argentina (4)
Organic Variation
22.0% 21.4% +88 (+5.7%) 21.7% 21.2%
1Q11 Change in Exchange Other non 1Q11 Domestic Brazil* Argentina** Media Olivetti Other & 1Q12 Other non 1Q12
consolid. rate impact organic Organic Elim. Organic organic
area items items
* Average Exchange rate (Real/Euro): 2.32 in 2012, 2.28 in 2011 * * Average Exchange rate (Peso/Euro): 5.69 in 2012, 5.49 in 2011
FRANCO BERNABE’ 20
22. TELECOM ITALIA GROUP
1Q 2012 Results
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 13,323 35,884 (*)
Group Liquidity Position 2,249
+
€ 7.00 bln
Undrawn Portion of 11,357
Facility/Committed
=
€ 13.16 bln
Group Liquidity Margin 2,765 1,966
2,981 1,900 25,257
2,250 865
3,032
1,768 731
6,067
1,999 1,264
2,857
5,237
250 1,211
3,335
2,479 8,378
1,790 1,652
689
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).
FRANCO BERNABE’ 21
23. TELECOM ITALIA GROUP
1Q 2012 Results
Well Diversified and Hedged Debt
Total Gross Debt Net of Adjustment: Euro 37,513 mln Maturities and Risk Management
Euro mln Op. Leases and long rent Bank & EIB
1,512 5,734
Bank Facility
Average debt maturity: 7.32 years (bond
Other 4.0% 15.3%
2,248 only 8.38 years)
2,498
6.7% 6.0%
Fixed rate portion on gross debt
Bonds approximately 72.4%
25,521
Around 47% of outstanding bonds (nominal
68.0%
amount) is denominated in USD, GBP and
YEN and is fully hedged
Gross debt 37,513
Financial assets (7,201)
Cost of debt: 5.5%
of which C & CE and marketable securities (6,158)
- C & CE (5,492)
- Marketable securities (666)
- Italian Government Securities (527)
- Other (159)
Net Financial Position 30,312
N.B.The figures are net of the adjustment due to the fair value measurement of derivatives and related financial liabilities/assets, as follows:
- the impact on Gross Financial Debt is equal to 2.545 €/mln (of which 789 €/mln on bonds);
- the impact on Financial Assets is equal to 1.878 €/mln.
Therefore, the Net Financial Indebtedness is adjusted by 667 €/mln.
FRANCO BERNABE’ 22
24. TELECOM ITALIA GROUP
1Q 2012 Results
TI Group 1Q12 Results - P&L
Euro mln – Reported Data
I Quarter
2012 2011 Abs. %
REVENUES 7,392 7,073 319 4.5%
Other Operating Income 52 48 4
TOTAL REVENUES & OTHER INCOME 7,444 7,121 323 4.5%
Total Purchases of materials and external services -3,231 -2,995 -236
Personnel -998 -990 -8
of which payroll -987 -980 -7
Other operating costs -456 -398 -58
Capitalized Cost and Others 204 191 13
EBITDA 2,963 2,929 34 1.2%
% on Revenues 40.1% 41.4%
Depreciation & Amortization -1,340 -1,425 85
Writedowns and revaluations of non current assets 0 1 -1
Gains/losses of non current assets realization -4 0 -4
EBIT 1,619 1,505 114 7.6%
% on Revenues 21.9% 21.3%
Income (loss) equity invest. valued equity method -3 -4 -29
Other income ( expenses ) from investments 0 17 15
Net Financial Income / (Expenses) -439 -470 4
Income before Taxes & Disc. Ops. 1,177 1,048 129 12.3%
% on Revenues 15.9% 14.8%
Taxes -457 -396 0
Income before Disc. Ops. 720 652 68
Net income (loss) of assets disposed 0 0 0
Net Income (ante Minorities) 720 652 68
% on Revenues 9.7% 9.2%
Minorities -114 -103 0
Net Income (post Minorities) 606 549 57 10.4%
% on Revenues 8.2% 7.8%
FRANCO BERNABE’ 23
25. TELECOM ITALIA GROUP
1Q 2012 Results
TI Group 1Q12 – Main Results by BU
Euro mln
I Quarter I Quarter
Reported Organic
2012 2011 Abs. % 2012 2011 Abs. %
REVENUES REVENUES
Domestic 4,486 4,596 -110 (2.4) Domestic 4,486 4,595 -109 (2.4)
Wireline Domestic 3,235 3,331 -96 (2.9) Wireline Domestic 3,235 3,330 -95 (2.9)
Tim Domestic 1,650 1,679 -29 (1.7) Tim Domestic 1,650 1,679 -29 (1.7)
Brazil 1,928 1,646 282 17.1 Brazil 1,928 1,619 309 19.1
Argentina 901 753 148 19.7 Argentina 901 727 174 24.0
Media 58 52 6 11.5 Media 58 52 6 11.5
Olivetti 59 78 -19 (24.4) Olivetti 59 72 -13 (18.1)
Other Activities 1 1 0 0.0 Other Activities 1 1 0 0.0
Elim. -41 -53 12 24.5 Elim. -41 -47 6 14.9
TI Group 7,392 7,073 319 4.5 TI Group 7,392 7,019 373 5.3
I Quarter I Quarter
2012 2011 Abs. % 2012 2011 Abs. %
EBITDA EBITDA
Domestic 2,193 2,236 -43 (1.9) Domestic 2,196 2,274 -78 (3.4)
Brazil 505 452 53 11.7 Brazil 505 445 60 13.5
Argentina 289 257 32 12.5 Argentina 289 248 41 16.6
Media -6 2 -8 - Media -6 2 -8 -
Olivetti -14 -14 0 0.0 Olivetti -14 -14 0 0.0
Other Activities -2 -2 0 0.0 Other Activities -2 -2 0 0.0
Elim. -2 -2 0 (50.0) Elim. -2
3 -2 0 (50.0)
TI Group 2,963 2,929 34 1.2 TI Group 2,966 2,951 15 0.5
EBITDA MARGIN 40.1% 41.4% -1.3 pp EBITDA MARGIN 40.1% 42.0% -1.9 pp
FRANCO BERNABE’ 24
26. TELECOM ITALIA GROUP
1Q 2012 Results DRAFT
Focus on Working Capital
Euro mln, Reported Data
Operating Working Capital (impact on 1Q12 Cash Flow)
Net Other Severance OWC
Trade Trade Receivables/ Indemnities, & Other
Inventories Receivables Payables Payables Funds & Other 1Q12
-48 +118
-1,014
-443 +4 -1,383
Change
vs 1Q11
-9 -43 -198 -185 +4 -431
FRANCO BERNABE’ * Excluding spectrum acquisition 25