DB Conference sett 2011 - Telecom Italia · 2020-06-12 · 3 Deutsche Bank European TMT Conference London, September 7-8 2011 MARCO PATUANO Financial Discipline 1H 11 Domestic Operating

TELECOM ITALIA GROUP

Telecom Italia Deutsche Bank European TMT ConferenceLondon, September 7th 2011

MARCO PATUANOChief Operating Officer

1

Deutsche Bank European TMT ConferenceLondon, September 7-8 2011

MARCO PATUANO

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.

Safe Harbour

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MARCO PATUANO

Domestic 2Q11 Progress Report

Mobile

Fixed

Appendix

Agenda

3


MARCO PATUANO

1H 11 Domestic Operating FCF: 2,423 mln € (+61 mln vs 1H10) Financial Discipline

Focus on Core

Markets

Wireline

Mobile

Improving trend in line losses reduction: -183K vs. -206K 1Q11

Slowdown in BB acquisitions due to overall weak market (+65K vs. quarterly avg ~200K)Progress on symmetry in the win-back procedures starting from current August

ICT service revenues increase offsetting traditional data decline

Core Domestic Wireline Service revenues (net of Sparkle) are -3.5% YoY, stabilized QoQ and significantly better than total Fixed performance (-5.1%)

Customer base rebuilding process on track (+715K YoY)

Strong performance on main operating metricsConsumer outgoing prices QoQ stabilization confirmed

Mobile BB: Small Screen strong improvement (Consumer revenues +25.6% YoY)

Macroeconomic pressure/volatility still affecting Business and Top Customers


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MARCO PATUANO

3,542 3,360

1,966 1,817

2Q10 2Q11

Domestic: Organic (*) ResultsEuro mln, Organic data, %

Mobile Consumer segment recovery trend confirmed

Mobile Business and Top impacted by macroeconomic slowdown

Fixed Access Value protection (market share ~67%)

Continued selective approach on Int’l Wholesale Contracts

Continued strong focus on cash cost reduction and improved YoY marginality. Cash costs on revenues still below 66%

% on Revenues-304 M€

-6.0%

-5.1%Wireline

5,064 4,760

2,435 2,318

2Q10 2Q11

-117 M€-4.8%

48.1% 48.7%+0.6 p.p.

-7.6%Retail Revenues

-6.6%Mobile

(*) excluding closing impact of TIM Loyalty Program on 2Q10 of 35€ mln

2,629 2,442

735 695

2Q10 2Q11

-40

-187

66.4%65.9%- 0.5 p.p.

CAPEX

-7.1%OPEX

-5.4%

-227 M€ -6.7%

3,364 3,137

% on Revenues

Cash Cost reduction

Revenues by Technology EBITDA

Highlights

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MARCO PATUANO


Mobile

Fixed

Appendix

Agenda

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MARCO PATUANO

Mobile Handset Revenues Trend – YoY % change

Mobile Retail Service Revenues Trend – YoY % change

Total Mobile Revenues

Euro mln, Organic Data

Mobile Revenues: 2Q11 Results at a Glance

-149-7.6% (*)1,966Total Mobile

1,823 1,683

65 82

7752

2Q10 2Q11

1,817

Total Retail1,765

1,888

Wholesale

-123-6.6%

Service -7.7%

Handset +26.2%

-9.2% -10.6% -9.0% -10.9%-7.7%

2Q10 3Q10 4Q10 1Q11 2Q11

(*)

(*) Net of Billing Shock impact:Total Mobile Revenues -5.5%Mobile Retail Service revenues -6.6%

2Q10 3Q10 4Q10 1Q11 2Q11

-59.6% -58.0%-39.9%

-22.4%

26.2%

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MARCO PATUANO

‘000+9.6%

‘000

‘000

Domestic Mobile: Customer Base Trend

‘000

30,545 31,038 31,260

2Q10 3Q10 4Q10 1Q11 2Q11

152222

2Q10 2Q11

+46.0%

1,850 2,028

2Q10 2Q11

CB Change YoY+715

TIM is Leader on Gross Adds Market Share

Gross Adds

Total SIM cards Net Adds

MNP Performance

2Q10 2Q11

-36%

BALANCE - TIMIncreasing Customer Loyalty

+43%

RECIPIENT - TIMBetter vs Competitors

2Q10 2Q11

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MARCO PATUANO

154 272

24,614 24,707

1Q11 2Q11

yoy growth

Customer Base: continued improvement in our recovery plan paired with calling CB growth: a healthy acquisition process

Outgoing traffic increase partially offsetting outgoing prices reduction: another step towards rebalancing

Price stabilization since YE2010

Mobile Browsing : solid performance thanks to push on handsets sales and internet options (offers, sales channel)

SMS revenues impacted by prices reduction, not completely compensated by usage increase

SMS & Mobile Browsing

Main KPI’s

Highlights

+77%

Customer Base (SIM 000)

1Q10 2Q10 1Q11 2Q11

QoQ Prices

Stabilizationsince YE’10

-31%

-26%

Outgoing Prices – YoY % change

2Q10 2Q11

+22%

Outgoing Traffic – YoY % change

SMS

Users

Usage

Prices

BroadlyFlat

Small screen users

Browsing

+23%

Small screen revenues

+26%

No SMS cannibalization from Data

Domestic Mobile – Focus on Consumer

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MARCO PATUANO

TIM Young OfferBuilding market share on Youth segment

Focused on browsing and SMS, consistent with spending capacity of the younger

Contains attractive side-features for this age category , such as a music quiz giving right to winners to participate in concerts / meetings with their favourite artist.

Advertised via radio and web

Initially, only available on the Web and Facebook ; now also via Sales channel

After September 4th, promotional phase ended and price moved from 6€ to 9€/month)

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MARCO PATUANO

Spectrum AuctionItalian Spectrum Allocation

299.2+20 MHz

Already allocated On Auction

255 MHz

► A large bouquet of frequencies is being auctioned (800, 1800, 2000 and 2600 MHz bands). They all can play a role in LTE evolution

► 255 Mhz auction started on August 31. All the 4 Italian Mobile Network Operators are participating.

► Given the size and structure of this auction, this will be all the new available band for the foreseeable future.

► Auction Base (€/MHz/Pop) in Italy for 800 MHz and 2600 MHz is below the peaks reached in other major Countries

► Relaunch rounds are still open on all bands

► Italian Government indicated an overall cash-in target of about € 3.1bn

2600 MHz

800 MHz 0.58 €/MHz/PopItalian Auction base (€ 2,118M)

0.05 €/MHz/PopItalian Auction base (€ 327M)

€/MHz/Pop

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MARCO PATUANO


Mobile

Fixed

Appendix

Agenda

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MARCO PATUANO

389 325

3,081 2,973

150 133

2Q10 2Q11

1Q11 2Q11

-4.9%

-3.5%

-4.9%

-3.5%

Total Service Rev.Core Domestic Service Rev.

YoY %

Euro mln, Organic Data, %

0.8% 0.0%

5.9%8.2%

1Q10 2Q10 1Q11 2Q11

Service Revenues QoQ trend stabilization

Core Domestic Service revenues (net of Sparkle Group): -3.5% YoY, stable QoQ and significantly better than total Fixed performance (-5.1%)

Strong ICT Service Revenues performance offsetting Traditional data decline

Domestic Fixed: Revenues Dynamics

Total Fixed Revenues Key highlights

Core Domestic

Products

Sparkle Group

Service Rev.

-5.1%Total Fixed 3,5423,360

3,3923,227

-4.9%

Eliminations

YoY %

-3.5%

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MARCO PATUANO

Telecom Italia Retail Access Evolution & Line Losses

TI Access

Line losses

Key Highlights

Defend a solid market share on fixed accesses

Improving line losses trend despite the new rules on win-back to be implemented on August 7 (as per Agcom’s Decision 62/11/CIR)

Decline in OLOs commercial activity anticipating a more rational competitive scenario

‘000

‘000

OLO Access Growth (TI Wholesale)

ULL Naked WLR

+51

‘000 ‘000 ‘000

77 83

154109

50

33

9

-2

12

-1

1233 38

60

2

2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q112Q10 3Q10 4Q10 1Q11 2Q11

15,741 15,584 15,351 15,145 14,962

2Q10 3Q10 4Q10 1Q11 2Q11

-160 -157-233 -206 -183

2Q10 3Q10 4Q10 1Q11 2Q11

Market Share ~ 67%

Domestic Fixed: TI Access Performance

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MARCO PATUANO

385 386 388 384

‘000

Free

TI retail accesses

Despite OLOs aggressiveness, slowdown of overall BB market growth

Negative impact of backlog increase still due to daily cap win-back limiting OLOs workload during 2Q11

Macroeconomic adverse phase still affecting Business and Top market segments

On BB, TI’s decision not to respond to aggressive promotions by competitors at the beginning of the year proved to be the right choice

192 172 188 213

65

2Q10 3Q10 4Q10 1Q11 2Q11

BB Market

TI

63 52

-11

19

-252Q10 3Q10 4Q10 1Q11 2Q11

2Q10 3Q10 4Q10 1Q11 2Q11

Flat (%) 85% 86% 86% 87% 87%

7,134 7,186 7,175 7,194 7,169

MKT BB Spending *

1Q10 4Q10

+7,6%

-1,1% -2,7%

1Q11 2Q11

Change yoy % € Mln

(*) Source: SIRMI

TI BB Service Revenues

2Q10

BB arpu 18.7 18.6 18.5 18.4 18.3(€/month)

Domestic Fixed: Focus on Broadband

BB Service Revenues

TI Retail Broadband Accesses BB Net Adds

Key Highlights

1Q111Q10

Stable Stable

‘000

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MARCO PATUANO

Super Internet offer

Source: Between Osservatorio Banda Larga‐ lug 2010

% of u

sers on BB

10%20%30%40%50%60%

80%70% Social Networking

Video Steraming

Gaming

A strong acceleration of services that require

high network performance are driving

demand for higher speeds in

► Download, for video streaming

► Upload, for social networking

► Super Internet is a bolt-on option enabling speed

increase ( up to 1Mb/s in upload, 10 or 20 Mb/s in

download) against a monthly fee increase starting

from € 4/month.

► There is a 2- months free trial promotion, and is

assisted by a proactive caring (“satisfied or

refunded” approach).

The Offer is consistent with our quest for value in Fixed Broadband

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MARCO PATUANO

Wrapping-up: running towards the target

TI DOMESTIC

TI GROUP

Improving our commercial positioning while enhancing profitability

• On Mobile: outgoing price stabilization, recovered handset strategy and consequent

positive trend on browsing

• On Fixed: wireline repricing, value-driven strategy on Broadband, International

Wholesale stabilization and ICT growing in importance and impact

• Overall Latam contribution to 1H11 TI results stands at 34%of Group Revenues and

24% of Ebitda

• Brazil and Argentina continue outperforming, with a double-digit top line growth

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MARCO PATUANO


Mobile

Fixed

Appendix

Agenda

18


MARCO PATUANO

Euro mln, Organic Data, %

Benefits from efficiency programs on Fixed costs

MTR and Wholesale traffic reduction

Selective growth of service-driven Smart-phones slightly impacting Ebitda

Mobile Acquisitions cost increase offset by rationalized advertising, and efficiencies on other commercial costs

1

2

3

4

* Costs and operating income related to credit management are reclassified from Fixed Opex to Marketing & Commercial Opex

Focus on 1H11 Domestic EBITDA

3 4

-304M€, -6.2%

214,895 4,591 (673)

+246 (13) +57 +79

1H10 Revenues Interconn. Costs Handsets costs Mktg&Comm.Opex

Fixed Opex* 1H11*

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MARCO PATUANO

2,362 2,423

(1,071) (766)

(1,487) (1,358)

(5,171)(4,809)

Focus on FCF Generation

Domestic Operating Free Cash Flow

Euro mln, Reported Data

Opex

Working Capital

OFCF

Capex

+305

+61

-735

1H111H10

+129

+362

9,35610,091Revenues

Documents

DB Conference sett 2011 - Telecom Italia · 2020-06-12 · 3 Deutsche Bank European TMT Conference London, September 7-8 2011 MARCO PATUANO Financial Discipline 1H 11 Domestic Operating