Telecom Italia Group FY 2013 Results - Piergiorgio Peluso

1. PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
Milan, March 7th 2014
Telecom Italia Group
FY 2013 Results

2. 1
TELECOM ITALIA GROUP
FY 2013 Results
PIERGIORGIO PELUSO
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 inTelecom 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 byTelecom 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 theTelecom 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, theTelecom 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.

3. 2PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
 YE13 Debt Position and Cost Reduction
 2014: A year for Capital & Financial Strengthening
 Capital Markets Outlook and Related Liability Management
 Backup
Agenda

4. 3PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
FY13 Net Debt Evolution
Euro mln, Reported Data
(2,140)
EBITDA
CAPEX
∆ WC & Others
Operating FCF
(9,540)
+4,400
+337
(4,803)
∆ vs. 12
2011 YE
30,414
28,274
2012YE
Adjusted
+85
(138)
(53)
Disposals/
Financial
Investments
(75)
+1,809
+1,734
Cash Financial
Expenses/
Financial Accruals
(223)
+1,408
+1,185
Cash
Taxes/Other
Impacts
2012 YE
28,274
26,807
2013YE
Adjusted
+1,233
(6,036)
(4,803)
Operating
FCF
+964
(427)
+537
Dividends
(67)
Net CF
from Disc.
Ops.
(147)
+80
(*) 2013 Net Cash Flow was affected by One-offs: ~0.3 €bln from 4Q12 suppliers payment deferral and ~0.2 €bln due to Brazilian Frequencies payment in 2Q13
(1,467)*

5. 4PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
Progress on Domestic Efficiency
11,273
+297
12,143 (497) (670)
2012YE 2013YEInterconnection EfficiencyVolume
Driven
111% of FY13Target
>60% Opex
Cash Costs
Euro mln, Organic Data
(870)

6. 5PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
(1) € 32,737 mln is the nominal amount of outstanding medium-long term debt. Including Mandatory Convertible Bond (€ 1,300 mln), discontinued operations (€ 26 mln), IAS adjustments (€ 748 mln) and current financial
liabilities (€ 469 mln), the gross debt figure of € 35,280 mln is reached.
N.B. Debt maturities are net of € 1,830 mln (face value) of repurchased (€ 1,206 mln in 2013) own bonds (of which € 1,615 mln related to bonds due within 2015).
Loans (of which long-term rent, financial and operating lease
payable € 1,276)
Drawn bank facilityBonds
13.59
6.50
7.09
Liquidity Margin Debt Maturities
Undrawn Portion
of Facility/Committed
Group Liquidity Position
(Ex. Disc. Ops)
Euro bln Euro mln (1)
Robust Liquidity Margin and Well-Distributed Debt Maturities
1,408
1,323
854
968
897
2,203
7,653
1,789
2,025
2,250
2,900
2,975
11,646
23,585
1,500
1,500
4,697
3,347
3,104
3,868
3,872
13,849 32,737
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Beyond 2018 Total M/L Term Debt
Covered Until 2017

7. 6PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
 YE13 Debt Position and Cost Reduction
 2014: A year for Capital & Financial Strengthening
 Capital Markets Outlook and Related Liability Management
 Backup
Agenda

8. 7PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
Capital and Financial Strengthening Plan on-track
Financial Contribution
 Mandatory Convertible Bond
 Telecom Argentina Disposal
 Towers Italy &TI Media Broadcasting
 Towers Brazil
1.3 € bln
>2 € bln in aggregate*
Overall increase of financial flexibility above 4 € bln
* Estimated Cash proceeds. The overall treatment of the transactions will be subject to IFRS rules.
960 US$ mln
Of which US$ 109mln cashed-in Dec. 2013,
rest expected within 1H14
Cash-in
According to
Timetable
Done
Underlying Capital
Increase approved by EGM
on Dec 20, 2013
Work-in-Progress,
Aimed to Financing
Brazilian LTE auction
and Roll-Out
Asset Valorization
Process Ongoing

9. 8PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
2014 Dividend Payment
DecisionTaken in line with recent Capital Strengthening Measures
OurYE2016 ~2.1x Net Debt/EBITDA target ratio is consistent
with Investment Grade Ratings
Priority for 2014 is to ConcentrateTI Financial Resources to support UBB Investments
TI is committed to a new course in SustainableTotal Shareholder Return,
based on future Net Cash Flow Generation.
We expect to Pay Dividend on Both Classes of Shares Next Year (2015)
• Dividend Suspension for this year on Ordinary Shares
• 166 Million Euro Minimum Mandatory Payment on Savings Shares

10. 9PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
 YE13 Debt Position and Cost Reduction
 2014: A year for Capital & Financial Strengthening
 Capital Markets Outlook and Related Liability Management
 Backup
Agenda

11. 10PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
Improving Capital Markets Conditions…
..set a Constructive Stage for Refinancing, as shown by our January Bond Issue
• Recent Debt issuance shows that TI can roll/extend maturities in
very cost-efficient terms even as a High Yield borrower
• Book statistics showed the participation of ~600 institutional
investors
• Market’s positive attitude towards Telecom Italia’s credit
confirmed
• The yield of the bond, equal to 4.594%, is largely below the
average cost of debt (5.5% at the end of December 2013)
150bps
200bps
250bps
300bps
350bps
400bps
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
150bps
200bps
250bps
300bps
350bps
400bps
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
Nominal Amount 1,000,000,000
Settlement date 23-jan-14
Maturity date 25-jan-21
Coupon 4.5%
Issue Price 99.447%
Yield 4.594%
Redemption price 100%
Telecom Italia’s 5 -Year CDSGovernment BondYield Spread:
10Y Italian BTP vs German BUND
Telecom Italia SpA Notes
due Sept 2021

12. 11PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
TI’s Active 2014 Liability Management
Our 750 mln € Hybrid Bond issued last year was redeemed on March 3
TodayTelecom Italia is launching a new 0.5 bln € Buy-Back on four EuroBond Issues
expiring between 2014 and 2016, as indicated below
Such exercises allow us to utilize the Company’s very significant liquidity position to
manage the overall cost of debt and to reduce the cost of carry
Telecom Italia SpA Notes
due May 2014
Purchase Price 100.70%
Telecom Italia SpA Notes
due Jan 2016
Purchase Spread 105 bps
Telecom Italia SpA Notes
due June 2015
Purchase Spread 65 bps
Telecom Italia SpA Notes
due March 2016
Purchase spread to be determined
pursuant to a Modified Dutch Auction
Max Purchase Spread 130 bps

13. 12PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
 YE13 Debt Position and Cost Reduction
 2014: A year for Capital & Financial Strengthening
 Capital Markets Outlook and Related Liability Management
 Backup
Agenda

14. 13PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
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 1,950 €mln (of which 652 €mln on bonds)
- the impact on Financial Assets is equal to 815 €mln
Therefore, the Net Financial Indebtedness is adjusted by 1,135 €mln
Well Diversified and Hedged Debt
Total Gross Debt net of Adjustment: Euro 35,280 mln
3.7% Op. Leases and long rent 1,293
4.8% Other 1,708
15.4% Banks & EIB 5,424
4.1% Bank Facilities 1,453
71.9% Bonds 25,375
 Gross debt (of which 27 mln disc. Operations) 35,280
 Financial assets (7,816)
of which Cash & CE and marketable securities (7,087)
 Cash & Cash Equivalent (5,744)
 Marketable securities (1,344)
 Italian Government Securities (1,044)
 Other (300)
 Discontinued operations (657)
Net Financial Position 26,807
Maturities and Risk Management
Cost of debt:
5.5%
 Average debt maturity: 7.00 years (bond only 7.82 years)
 Fixed rate portion on gross debt approximately 67.1%
 Around 36% of outstanding bonds (nominal amount) is
denominated in USD, GBP and YEN and is fully hedged
0.1% Discontinued operations 27
Euro mln

15. 14PIERGIORGIO PELUSO
TELECOM ITALIA GROUP
FY 2013 Results
**Includes Other Operating costs/Income and Capitalized Costs* Costs related to credit management are reclassified from G&A & Other to Mktg & Sales
Progress on Domestic Efficiency FullYear ‘13 - Breakdown
Euro mln, Organic Data, %
-
-125
-56
-185
-40
-406
D
Efficiency
D Abs
’13 vs ‘12
Total Cash Cost
FY‘13
-497
3.027Total Capex - 45
2.599
1.068
-175
2.653
+8
-188
+27
8.246Total Opex*
- 825
1.451
-497
-
-497
-
-
-
-
-497
D
ITX
+297
+219
-
- 50
+64
- 3
+67
+78
D
Vol. Driven
Industrial
Personnel
Mktg &
Sales
ITX
G&A &
Other **
-870
475
11.273
Delta Cash Cost
FY’13 vs FY ‘12
110% of FY13 Target
115% of FY13 Target
111 % of FY13 Target
-264
-670