Presentation Slides - M. Patuano, P. Peluso, R. Abreu

Transcription

TELECOM ITALIA GROUP
FY 2014 Preliminary Results & 2015-2017 Plan Outline
London, February 20th, 2015
Telecom Italia Group
Agenda
Giuseppe Recchi – TI Chairman
 Opening Overview
Marco Patuano – TI CEO
 FY 2014 Preliminary Results & 2015-2017 Plan Outline
Piergiorgio Peluso – TI CFO
 Financial Update
Rodrigo Abreu – TIM Brasil CEO
 2015-2017 TIM Brasil Plan Outline
Q&A
Buffet Lunch
2
TI Senior Management attending the event includes
Simone Battiferri
Business
Pietro Labriola
Business Transformation & Quality
Franco Brescia
Public & Regulatory Affairs
Guglielmo Noya
CFO TIM Brasil
Stefano Ciurli
National Wholesale Services
Giuseppe Opilio
Chief of Operations
Antonino Cusimano
General Counsel
Alessandro Talotta
Telecom Italia Sparkle
Stefano De Angelis
Consumer
Carlotta Ventura
Brand Strategy & Media
Mario Di Loreto
People Value
Enrico Zampone
Planning & Control
Mario Di Mauro
Strategy & Innovation
3
Giuseppe Recchi – TI Chairman
 Opening Overview
4
Preliminary FY’14 Results & FY’15-’17 Plan Outline
Marco Patuano – TI CEO
 FY 2014 Preliminary Results & 2015-2017 Plan Outline
Piergiorgio Peluso – TI CFO
Rodrigo Abreu – TIM Brasil CEO
5
Safe Harbour
This presentation contains 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 Telecom Italia 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 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 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 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 2014 preliminary financial results of the Telecom Italia Group and the data of the previous years provided for comparison were drafted in accordance with the International Financial
Reporting Standards issued by the International Accounting Standards Board and endorsed by the European Union (designated as “IFRS”).
The accounting policies and consolidation principles adopted in the preparation of the preliminary financial results for the 2014 FY have been applied on a basis consistent with those
adopted in the Annual Financial Statements at 31 December 2013, to which reference should be made, except for the new standards and interpretations adopted by the Telecom Italia
Group starting from 1 January 2014 which had no effects on the 2014 preliminary financial results. The 2014 preliminary financial results have not been verified by the independent auditors.
Following the classification, starting from the fourth quarter 2013, of the Sofora - Telecom Argentina group as a disposal group (Discontinued operations/Non-current assets held for sale),
the consolidated financial statements data of prior periods (including the twelve months ended 31 December 2013) have been restated accordingly and therefore the Sofora - Telecom
Argentina group is no longer separately presented as a business unit.
Furthermore:
• starting from 2014, Organic changes in Revenues, EBITDA and EBIT are determined excluding, where applicable, only the effects of the changes in the scope of consolidation and
exchange differences and therefore don’t take into account, as in the past, non-organic income and expenses, including those non-recurring;
• starting from 2014, the Domestic business unit includes the Olivetti group, in addition to Core Domestic and International Wholesale. This different presentation reflects the commercial
and business placement of the Olivetti group and the process of integrating its products and services with those offered by Telecom Italia in the domestic market. Therefore, the Olivetti
group is no longer separately presented as a business unit;
as a result, the data for prior periods under comparison have been restated, accordingly.
In this presentation reference is also made to a normalization called “Domestic Underlying EBITDA trend”, which is based on the Adjusted (for one-offs and discontinuities) Reported
Domestic EBITDA. This representation is provided as additional information to our Reported EBITDA that represents Operating profit before depreciation and amortization, capital gains
(losses) and impairment reversals (losses) on non-current assets.
Marco Patuano - Piergiorgio Peluso – Rodrigo Abreu
6
2014 Group Main Financials and Innovative KPIs
Organic, €Bln, %YoY
Domestic Efficiency(1)
Revenues
Ebitda
21.6 €Bln
104%
of FY’14 Target
8.8 €Bln
Capex
Net Debt
4.0
€Bln
(-5.4% YoY)
excluding Brazilian 700MHz Auction
25.8
€Bln
(-1.0 €Bln YoY)
excluding Latam Frequencies
5.0 €Bln (+13.3YoY)
26.65 €Bln (-0.2 €Bln YoY)
Italy
Brazil
Fiber Coverage: 29%
MBB project: 125 Cities in 2014
4G coverage: >80%
4G site: +92% YoY @ 3.7k
(2)
(3)
(1) excluding one-offs: 82 €mln Sparkle provision reversal in 2014 and 84 € mln Antitrust fine in 2013; including one-offs: 190% of FY’14 target
(2) Brazilian spectrum acquisition and clean-up costs=936 €Mln; (3) Latam Spectrum= 540 €Mln for Brazilian Spectrum & 344 €Mln for Argentinean Spectrum
Marco Patuano
7
TI’s New Course started in 2014: Deploying UBB and
selling it
wider LTE
coverage in Italy
Today
>80%
LTE Coverage
77%
74%
actual 2014
61%
+27pp
target 2014
51%
~50%
~40%
FY'13
’000
MBB
1Q'14
1H'14
9M'14
Plan ‘13-’15
FY'14
MBB Users Growth YoY
+1.825
NGN
Agrigento
Alessandria
Ancona
Aprilia
Arezzo
Asti
Bari
Benevento
Bergamo
Bologna
Bolzano
Brescia
Brindisi
Busto A.
Cagliari
Carpi
Casoria
Catania
Catanzaro
Cesena
Cinisello B.
Como
Cremona
Cuneo
Faenza
Fano
Ferrara
Firenze
Foggia
Forli
Gela
Genova
Giugliano
Grosseto
Gugliasco
Imola
Coverage(1)
La Spezia
Perugia
Latina
Pesaro
Legnano
Pescara
Livorno
Piacenza
Lucca
Pisa
Mantova
Pistoia
Massa
Potenza
Prato
+95Matera
cities YoY
Messina
Quartu S. Elena
Milano
Ragusa
Modena.
Ravenna
Monza
Reggio Calabria
Napoli
Reggio E.
+12
pp YoY
Novara
Rimini
Padova
Roma
Palermo
Salerno
Parma
Sassari
Pavia
Savona

29% coverage
Fiber Users Growth
’000
+80
+1.627
64%
+47
45%
21%
+58
27%
% of LTE
15
1Q'14
2Q'14
3Q'14
4Q'14
MBB CB 8,677
9,151
9,596
10,071
610
844
1,343
LTE CB
409
Siena
Siracusa
Taranto
Terni
Torino
Torre del
Greco
Trento
Treviso
Trieste
Udine
Varese
Venezia
Verona
Vicenza
Vigevano
Viterbo
133 Municipalities covered
+1.985
+1.573
more than 4x the
coverage of our
main competitor
Sesto S.G.
+30
231 151 103 45 4Q'13
1Q'14
2Q'14
3Q'14
4Q'14
Average daily acquisition (k)
0.5
1.0
0.8
1.3
(1) As of Jan 30, 2015
Marco Patuano
8
BB-based services and Monetization of Quality supported
Domestic Top Line Improvement
Domestic Service Revenues trend
€ mln,’000
net of AGCOM
price revision(1)
Abs QoQ
1Q
+70
2Q
3Q
4Q
YoY
3,664
3.554
3.619
3.594
3.567
net of AGCOM
price revision(1)
-3,2%
-4,4%
+13
+27
-6,2%
+25
+4.7pp
2014
2013
1Q'14
2Q'14
3Q'14
1,805
YoY
1.138
1.099
-3.7%
(1)
1.183
+1.4pp
-8,9%
net of AGCOM price revision(1)
1.189
-3,9%
1Q'14
2Q'14
3Q'14
4Q'14
Fixed Service Revenues Trend (Retail+Wholesale)
-8.6%
-7.2%
-5.3%
-7.4%
-9,1%
-10,5%
1,800
1,779
-6,2%
-9,1%
-10,1%
Mobile Service Revenues trend
+2.3pp
-7,4%
-8,9%
4Q'14
Retail Fixed Service Revenues trend
1,836
-8,8%
YoY
-14,9%
1Q'14
45 €mln for adjustment access price 2010-2012
-7,1%
-5,7%
3Q'14
4Q'14
-13,3%
2Q'14
Marco Patuano
9
Domestic Ebitda trended upwards
%YoY,€ mln
Domestic Ebitda
handset
subsidy
1,910
50
-10.9%
Reported Ebitda trend
1H YoY
1,702
3Q YoY
4Q YoY
net of new
handset subsidy -5,4%
approach
net of new handset
subsidy approach
-8.5%
reported
-7,9%
-8,5%
-9,8%
-10,9%
-11,6%
4Q'13
4Q'14
Domestic Discontinuities
Adjustments for non-recurrent effects on 4Q’14 Ebitda YoY
performance are:
Underlying Ebitda trend
1H YoY
3Q YoY
4Q YoY
-3%
on 4Q’14:
 ~+45 mln euro for AGCOM LLU 2010-2012 revision
impact
 ~ +10 mln euro for incentive plans & other labour costs
 ~+15 mln euro for other provisions
on 4Q’13:
 ~ -75 mln euro, of which ~ -50 mln euro for new handset
subsidy approach and ~ -25 mln euro for other
-7%
FY’14 -7%
-9%
Normalized for discontinuous increases in labour costs,
provisions, handset subsidy and AGCOM price revision
Marco Patuano
10
Domestic Mobile: Building Further Improvements in a
Polarized Market
Service Revenues
Total Revenues
€ mln, %YoY
1Q'14
2Q'14
3Q'14
4Q'14
-5,6%
-5,1%
1Q'14
2Q'14
3Q'14
-5,7% -5.0%(1)
-7,1%
+8.6pp
-10,0%
2014
-13,3%
-14,4%
-11,2%
2013
-13,6%
-16,4%
Revenues
2014
2014
-14,9%
-14,8%
2013
-17,8%
-17,8%
1,175
1,264
1,284
1,368
Revenues
1,099
2014
+12,9%
-18,3%
1,138
1,189
1,183
+18,2%
+11,5%
+11,7%
+11,5%
+10,9%
 Price War Drag is going away
 MTR effect has bottomed-out
+2,4%
2013
-14,3%
Highlights
Browsing Revenues
2014
4Q'14
double-digit
growth for 6
months in a row
-4,2%
 Increased Bundle adoption: 63% overall (+8 p.p. YoY)
59% on Consumer Segment (+9 p.p. YoY)
Revenues
2014
264
281
301
(1)
326
Net of national roaming price reduction
Marco Patuano
11
Domestic Fixed: Hitting the Gas on Internet
€ mln, %YoY,
Service Revenues Trend
net of AGCOM
price revision(1)
Internet Service Revenues
Speeding-up
growth
-3,7%
+4,4%
+3,5%
-5,3%
-7,2%
-7,4%
-8,6%
1Q’14
2Q’14
3Q’14
-6.9%
-8.3%
+1,7%
2014
-0,1%
+1,3%
+1,2%
+1,1%
-0,8%
4Q’14
net of AGCOM
price revision(1)
Total
Revenues
2013
-6.2%
-3.9%
1Q'14
2Q'14
3Q'14
4Q'14
19.2
19.6
20.0
20.1
ARPU BB
€/month
-5.5%
BB Customer Base
Fixed Access
‘000
12.828
-200
12.656
-171
12.480
total 6,933
Flat BB
13.027
-176
6,939
5.111
6,932
5.054
5.019
-35
-57
6,921
4.961
-58
Free BB Fast BB
+292 upselling to Fast BB (2)
1Q'14
2Q'14
3Q'14
(1)
(2)
4Q'14
1,167
+92
-30
1.259
+56
-28
1.392
1.315
+77
-29
655
625
597
568
1Q'14
2Q'14
3Q'14
4Q'14
45 €mln for adjustment access price 2010-2012
Fast ADSL + Fiber (both Flat)
Marco Patuano
12
Agenda
 FY 2014 Preliminary Results
 2015-2017 Plan Outline
 Appendix
Marco Patuano
13
Future-Proofing our Infrastructure for Enhanced Cash Flow
New Investments
Italy
Brazil
~10 €Bln in ’15-’17
>14 R$Bln
in ’15-’17
of which 5 €Bln for
innovation
Innovation
Italy
NGN: ~75% coverage
in 2017
LTE: >95% coverage
in 2017
Single Brand
& Convergence
Business Transformation
Italy
Brazil
Brazil
Investment Monetization
Commercial Efficiency
& Core Revenues
Evolution
Stabilization
Network Costs Optimization
Efficiency & Process
Process-Driven Efficiency
Transformation
LTE: ~80% coverage
in 2017
4G Sites: >15k in 2017
3G Sites: >14k in 2017
Hetnet Strategy
People: Change of Mix
Moving Cash Flow (2) beyond
Stabilization
~3.8(1)
2014
(1)
(2)
2015
2016
Including Brazil License & Clean-up costs
Group Ebitda-Capex
2017
Marco Patuano
14
Creating Value through Next-Generation Networks
Acceleration
Innovative Capex Breakdown
Domestic Capex Plan
a NGN
New ’15-’17 Plan
Domestic Capex ~10€Bln
o/w 0.5 €Bln
on FttH
b LTE
Old ’14-’16 Plan
Domestic Capex ~9€Bln
~2.9 €Bln (+1.1 €Bln vs Old Plan)
~0.9 €Bln (flat vs Old Plan)
c IT Cloud
d Sparkle
e Transformation
~0.5 €Bln (+0.4 €bln vs Old Plan)
New ‘15-’17 Plan
Innovative Capex
~5 €Bln
Peak years
~23.0%
Avg Capex/Revenues
New ‘15-’17 Plan
Avg Capex/Revenues
Old ‘14-’16 Plan
~18.5%
Old ‘14-’16 Plan
Innovative Capex
~3.4 €Bln
2014
2015
2016
2017
2018
onwards
2014
2015
2016
2017
Efficiency Delivers a Relevant Contribution
for the funding of Innovation
Marco Patuano
15
Fiber Italy: We are increasing our Competitive Advantage
Fiber CB Growth
Fiber Coverage Plan
~75%
~10x
New
Plan
<60%
Fiber CB on
TI BB CB
~3%
>50%
2015
2016
Connection speeds faster than DAE targets:
 50 Mb/s currently
 100 Mb/s through Vectoring
 Up to 1Gb/s with FttH
2017
2014

+1mln
Old ‘14-’16
CB Fiber Growth
Old
Plan
today @
29%
2014
New ‘15-’17
CB Fiber Growth
2015
2016
2017
Expected Ebitda monthly uplift from Fiber ranges
5-10 €/line coming from:
 Fiber Premium;
 +ve contribution from New Services Content
 Lower churn
Marco Patuano
16
LTE Italy: Pushing on Quality, Not on Price
LTE Users on Mobile BB CB
LTE Coverage Plan
>95%
~60%
+45
p.p.
New
Plan
13%
today @
>80
2014
80%
2015
2016
2017
Revenues Mix(1)
Target reached
Old
Plan
2
years in
advance
64%
60%
2014
2015
2016
2017
50%
36%
Geographic Coverage
~50%
Indoor Coverage
+40
p.p.
~90%
>80%
2014
2015
innovative on business generated
2016
Revenues
Cagr ‘14-’17
+10%
2017
traditional on business generated
(1) Innovative revenues = browsing+data content; traditional revenues =voice+SMS
Marco Patuano
17
The TI Plan fits into the Italian Market
TV Households
TLC Households
~26 mln
Mobile BB
only
~7
~26 mln
Push on win-backs from the
dongle community through F-M
Convergence & Quad-Play
TI M/S 30%
2
1
~3.5
Voice only
pay-per-use
~1.5
Voice only
on flat options
TI M/S 100%
 Rebuild the Value of the Voice
 Push on Convergence through
flatization to reduce churn
 Upgrade to BroadBand through
New Special offer & Video Content
Upgrade to Fiber &
TV potential target
Fixed BB
TI M/S 50%
No PayTV
Interested in PayTV
o/w KO dish 1 mln
~12
~7
3
~14 (1)
10% <40 years & holiday homes
30% 40-70 years
60% >70 years
Consumer HH
Already
on PayTV
~7
TV HH
(1) Addressable market.
Marco Patuano
18
A n-Play Strategy to Grow the Value of our Access
1
2
3
Defend the Value
Proposition of Access
Lever on Convergence
TV Business: Hub Approach
Fixed
Mobile BB
Video Content
Change of Fixed Access Mix
Massive Flatization
Pay tv penetration in Italy is 27%:
market is dominated by Premium Pay
DTT/DTH and BB TV is modest (~5%)
Enlarge Proposition of
Convergent Offers
F-M for
Mobile only customers
Retention of Voice Customers
Use BB as an anchor
Keeping price points rational
Upgrade to TV
% Convergent Offers(1)
Less Erosion
3-Play
2%
growing
2-Play
57%
stable
1-Play
41%
decreasing
2014
Targeted Actions for specific
segments
+20
p.p.
2017
2014
Launch
in April
Premium offer with live
events & on-demand
channels
Wide range of content offering:
SVOD, events, etc
Integration with linear TV
2017
Base-content enabler
Defend traditional, Drive Mobile BB – to – Fixed BB substitution
and further expand Fixed BB penetration through Video Content
(1) % Convergent offers on Total Consumer Fixed Access
Marco Patuano
19
Moving to a single Brand: TIM brings together our best parts
 Repositioning to a single commercial
brand that already enjoys best in class CSI
scores on mobile (LTE-driven) and fiber
 Position TIM as the official enabler of
“Digital Italy”
 Towards a new value proposition focused
on innovation and quality
 Simplifying the overall customer
experience and OTN services
 Meeting the increasing demand for a
multiple and bundled products available
anytime, anywhere, anydevice
Marco Patuano
20
More Value in Our People
TI Workforce
Labor cost restructuring to combine
Efficiency & HR Development
Age Curve Evolution
today
 Insourcing
age
 Rightsizing
 Use of new “Jobs Act” for workforce
mix evolution
60-70
1%
50-60
40%
40-50
47%
30-40
9%
20-30
3%
2017-2018
age
 “Active Solidarity” agreement to
materially increase young personnel
Mix
60-70
6%
50-60
53%
40-50
27%
30-40
6%
20-30
8%
Marco Patuano
21
Domestic Opex Efficiency
€ bln
Plan 2015 – 2017
2013 - 2014
8.6
8.3
Volume/
RevenueDriven (1)
3.1
3,1
Personnel
Costs
2,7
~20% on
rev.
Not Applicable
2,7
Allow insourcing and
increase productivity
Process /
Asset Driven(2)
Market /
Customer
Driven(3)
~1.6
~1.5
~1.4
~1.2
~1.1
~1.1
2013
Target
2014
Actual
2014
target
-0.2
Addressable Efficiency
Area
2015
2016
-20%
‘17 vs ‘14
2017
> -0.1
actual
‘15-’17 cum.
Efficiency Target
-0.4
190% of target reached including one-offs(4)
104% of target reached excluding one-offs(4)
~ -0.3
>1 €Bln
> -0.1
(4) 82
mln euro Sparkle provision reversal in 2014 and 84
mln euro Antitrust fine in 2013
(1) Interconnection, Cost of Equipment, Other COGs
(2) Industrial costs, G&A, Real Estate, Other
Marco Patuano
(3) Acquisition costs, ADV, Customer Care, Other commercial costs
22
Group Operating and Financial Outlook
Organic data
Group
Ebitda
Capex(1)
Cum. ‘15-’17
Net Debt Adj.
/Ebitda 2017
YoY Growth in
2017
~14.5 €Bln
Domestic
YoY Stabilization in
2016
Brazil
Continued Growth
YoY Growth in
2017
~10 €Bln
>14 R$Bln
Reducing Towards
2.5x(2)
(1) Including Italian GSM license extension
(2) On reported EBITDA; ratio includes Mandatory Convertible equity strengthening effect for 1.3€Bln in November 2016
Note: Organic data exclude impact from change in perimeter and FX.
Avg €/Reais exchange rate: 3.21
Marco Patuano
23
Agenda
 Appendix
Piergiorgio Peluso
24
Solid Operating FCF Generation Confirmed
€ Mln
€ Bln
8,786(1)
Group Capex(1) -4,984
-2,783
6.998
- 1,259
FY’14
WC Domestic
-1.0
Trade Payables
-0.4
Trade Receivable
o/w AGCom price revision(2)
-0.2
-0.1
Others
o/w AGCM fine
o/w TI Sparkle provision
reversal
-0.4
-0.1
Group WC(1) -628
-936
+396
-1,024
3,174(1)
Domestic
3,203
Brazilian 4G Auction Cash Out
-540
1.774
EBITDA
Capex
-0.1
Capex License
WC Licenses
Brazilian Contribution
to OpFCF
(excluding 4G auction)
518 mln €
Brazil
–22
 WC excluding
OpFCF
licenses
Domestic Contribution
Brazilian Contribution
(1)TI Group figures include TI Media & other subs.
(2) AGCOM wholesale price revision 2008/2010
Brazilian 4G Auction Cash Flow Impacts
Piergiorgio Peluso
25
2014 Opex Efficiency Target Fully Reached
€ mln
Total Opex
-342 €Mln
8.647
+13
-113
-261
+19
8.305
Efficiency -374 €Mln
190% of Target
reached
Efficiency -208 €Mln
104% of Target
reached
Excluding from Process Driven:
82 €Mln Sparkle provision
reversal
84 €Mln euro Antitrust fine
FY'13
Volume Revenues
Driven (1)
Market / Customer
Driven (2)
Commissioning: Reduction in volume
of acquisitions
Advertising: Cost optimization due to
unification of format and brand
Customer Care: Productivity improved
along with Volume growth
Process / Asset
(3)
Driven
Labour Cost
FY'14
Operational Costs, Network & IT:
purchasing savings and positive
impact from process reengineering
G&A: Zero budget approach and policy
review
(1) Interconnection, Cost of Equipment, Other COGs
Piergiorgio Peluso
(2) Acquisition costs, ADV, Customer Care, Other commercial costs
(3) Industrial costs, G&A, Real Estate, Other
26
Domestic Capex Efficiency fueled more Innovation
2014 Capex Efficiency
€ mln
a
others
commercial &
other IT
IT
-97
+156
3,031
innovative
186
346
traditional
663
d
-60
-65
+6
Efficiency(1)=
-188
216 €mln
34%
33%
1.649
2013
handset
subsidy
c
24%
20%
1Q
1H
2,783
191
281
603
Innovative investment on network capex
2014
network
b
35%
36%
27%
28%
9M
FY
1.707
188
Network
FY'13
IT
commercial&others IT
others
subsidy
FY'14
2015-2017 Capex Mix
Traditional
Capex
Efficiency Target
‘15-’17 cum.
~0.7 €Bln
Innovative
Capex
~55%
33%
2014
2015
2016
(1) total domestic capex efficiency=
2017
a
+
b
+
c
+
d
Piergiorgio Peluso
27
Refinancing at record low rates
€ mln
12.930
Debt Maturities and liquidity Margin
31.443
11.313
4.782
3.436
Covered until 2018
13.112
4.067
6.112
2.854
3.374
7.000
1.879
975
1.970
1.404
FY 2015
Liquidity
margin
2.963
1.104
2.324
1.112
1.617
23.614
3.165
1.617
7.829
FY 2016
FY 2017
FY 2018
FY 2019
Beyond 2019 Total M/L Term
Debt
Undraw portions of committed
Bonds
C&CE (escluded discontinued)
Loans (of which long-term rent, financial and operating lease payable € 1,200)
2011-2015 Bond Issuance Yields
Highlights
 TI’s funding costs since 2013 have significantly
lowered
6,968%
6,184%
Yield on issue date
5,198%
4,769%
Drawn bank facility
5,054%
4,740% 4,570%
4,594%
4,134%
3,993%
3,330%
 New record-low coupon has been printed with
our January 8-yr issue @ 3.25%
 ECB QE plans running until September 2016
further support favourable funding environment
Tenor
5
7
5,25
6,5
3
5
8
7
7
10
8
 This context will continue offering TI significant
refinancing opportunities
Issue date
€ 31.443 mln is the nominal amount of outstanding medium-long term debt. Adding by Mandatory Convertible Bond (€ 1.300 mln), discontinued operations (€ 28 mln), IAS adjustments (€ 1.192 mln) and
current financial liabilities (€ 458 mln), the gross debt figure of € 34.421 mln is reached. N.B. Debt maturities are net of € 1.281 mln (face value) of repurchased (of which € 523 in the 2013 and € 543 in
the 2014) own bonds (of which € 1.066 mln related to bonds ue within 2016).
Piergiorgio Peluso
28
2014 Debt reduction & 2015-2017 Free Cash Flow Evolution
€ Bln
2014 – 2017
2013 - 2014
~1.0 €Bln of deleverage
before Latam frequencies
impact
Average debt reduction of ~700 €Mln per year
before Mandatory Convertible (Nov. ‘16)
~+0.9
~-1.0
-1.3
~26.8
~25.8
2013
2014
Net Debt
before Latam
frequencies
Latam
frequencies
impact
Net Debt/Ebitda Ratio
DPS BoD proposal
for 2014 (cash 2015)
~26.65
~26.65
2014
Net Debt
including
Latam
frequencies
2014
~3.0x
Mandatory
Convertible Bond
2017
towards 2.5x in 2017
Ordinary Shares
Zero
Saving Shares
2.75 €cent confirmed
Piergiorgio Peluso
29
Agenda
 Appendix
Rodrigo Abreu
30
Strategic Positioning - Internet Market Evolution
Mobile Net Service Revenues, %
Mobile Market Revenues Evolution
Revenue
Mix
•
Most households without internet access
Internet
Opportunities • Mobile better suited to break price barrier
Revenue
Mix
Internet
60%
12%
9,5
4%
SMS
1%
SMS Traffic Sharp
Decrease
(billions of SMS sent)
57%
Voice Outgoing
37%
27%
Voice Incoming
2010
Voice
Decline
2%
•
•
2020
MTR Cut
(R$)
2,6
Jan-13
Nov-14
Maturing market: Customer base
growth slowdown
Consumption migrating from voice to
data
0,34 0,30
0,23
0,16
0,10 0,06
0,03 0,02
2012 2013 2014 2015 2016 2017 2018 2019
Mobile Internet is the growth driver and will be the largest mobile market,
although Voice remains important
Rodrigo Abreu
31
Data: Connectivity and Beyond
Getting People Connected: Broadband Penetration
Fixed (% households)
90%
Developed
markets avg: 75%
105%
83%
73%
Developed
markets avg: 82%
Mobile (% population)
∆: 19 p.p.
90%
73%
55%
79%
∆: 43
p.p.
72%
66%
63%
Fra
Bra
32%
Fra
UK
USA
Jap
Rus
Bra
Jap
USA
UK
Ita
 Huge gap between Brazil and developed markets
 Smaller gap between Brazil and developed markets
 Lack of infrastructure: low quality and speed
 Additional drivers for growth: days of use, data consumption
 Affordability issues (high prices, combos)
 Affordable prices
Entering in the Content World
Apps
Social
Video
Music
Gaming
RichCom
Content &
Usage Offer
COOL
OTT
TRUST
Proximity & MPayment
Connected Home & In Cars
Digital Identity & Security
Telco
Connectivity
(1) Quality of experience
QoE(1)
and
Caring
Pure
Connectivity
Offer
Rodrigo Abreu
32
State of the art Capex Allocation: Enhance Quality to Increase
Returns
Network Rollout
New Coverage Strategy
HetNet
MBB Project Geographic Area
•
1,137 cities prioritized due to business relevance, based on
IRR and Payback
•
MBB program is addressing >70% of TIM's business, and is
the key investment program in 2015-2017
•
High business concentration in few cities allows for a focused
infrastructure enhancement program
Number of 4G Sites
9.1k
3.7k
2013a 2014a 2015e 2016e 2017e 2013a
2014a
2013a
2015e
2016e
5k
Number of Wifi & Small Cells
0.7k
 800 sites in 2015
 3,477 sites in 15-17
1.5k
2014a
2015e
2016e
WiFi / Femto / DAS
>14k
10.4k
2017e
 3,000 WiFi in 2015
 >150 DAS in 2015
2G
3G
95%
78%
4G
27%
% of Urban Covered Population
2013a
2017e
Technology Capex Allocation
 1,400 sites in 2015
 3,902 sites in 15-17
SMALL CELLS
Number of 3G Sites
>15k
1.9k
Small Cells
MACRO SITES
2014a
2015e
2016e
95%
86%
79%
2017e
TIM LD Backbone
4G
3G
Legend
2G
IRU + Construction
SWAP until 2014
SWAP @ 2015-2017
2014 Actual
2014a
2015 Bdg
2015e
2016 Plan
2016e
2017 Plan
2017e
Rodrigo Abreu
33
Network and Commercial Synergies
Business Growth
Network & Interconnection Savings
Leased Lines Cost
Mobile Customer Base
Network &
Interconnection Cost
(R$)
(R$)
(mln customers)
75.7
2014a
2015e
2016e
2014a
2017e
Flat network and
interconnection
cost as a
percentage of total
costs
2015e
2016e
2017e
73.4
Operational Efficiency
2013a
2014a
2015e
2016e
2017e
SAC (Subscriber Acquisition Cost)
Bad Debt
(R$)
(R$)
Data Traffic Expectation
(in petabytes)
2014a
2017e
2014a
2017e
Fixed Business Progress
EBITDA Evolution
3G Data Traffic
EBITDA - Capex
(R$ without intercompany)
2014a
2017e
LTE Data Traffic
2013a 2014a 2015e 2016e 2017e
2014a
2015e
2016e
2017e
Rodrigo Abreu
34
Fixed Corporate Solutions & Live TIM Positive Trends
Corporate Solutions as a Sustainable Business
FIXED
Revenues from New Sales
EBITDA
CONVERGED
SOLUTIONS
(R$; YoY)
MOBILE
+9x
2015-2017 Drivers:
2013a
2014a
2015e
2016e
2013a
2017e
2014a
2015e
2016e
2017e
 Revenue and EBITDA rebound
 Sales team resizing and training
 Customer care unification (F+M)
 Improvement on service level
 Fine tuning mobile portfolio
 Launch of new convergent solutions
Live TIM Plan: Accelerating Growth
From option value to reality:
 Accelerate growth through
incremental investment
 Focus on keeping customer
experience leadership
 Introduction of new services
(Voice and Bluebox)
 Support the discussion on
“Banda Larga Para Todos”
program
Customer Base
Investments
(thousands customers)
(R$; YoY)
>500k
+3x
+9x
130k
60k
2013a
2014a
2015e
2016e
2017e
2013a
2014a
2015e
2016e
2017e
Rodrigo Abreu
35
Perspectives
A Close Look at
Business Performance
2015-2017 Guidance
MTR Impact Analysis
Net Revenues
(R$; %)
(R$ billion)
EBITDA
Exposure
31%
18%
Net Services 24%
Revenues
Exposure
Near
mid-single
12%
2010 2011 2012 2013 2014 2015e 2016e 2017e
MTR Cut (% YoY)
-15% -11% -25% -33% -35% -44%
Mobile Net Revenues Analysis
(R$; %)
Innovative:
Data
Content
Other
% YoY
Traditional:
Voice
Incoming
SMS
-11%
18.8
19.9
19.5
2012A
2013A
2014A
Continued
growth
2015e
2016e
2017e
EBITDA
(R$ billion)
+48%
2013A
2014A
Continued
growth,
improving
margin
5.0
5.2
5.5
2012A
2013A
2014A
2015e
2016e
2017e
2017e
Innovative and Traditional Investments
(R$; %)
6.9
CAPEX
(R$ billion)
Innovative
52%
60%
63% 65% ~9 bln
Organic
Traditional
48% 2014a
40%
2015e
37%
2016e
35% ~5 bln
2017e
Others/
Licenses
3.8
3.9
3.1
3.5
0.6
0.4
2012A
2013A
3.9
CAPEX
2015-2017:
>14 R$Bln
2.9
2014A
2015e
2016e
2017e
Rodrigo Abreu
36
Agenda
 Appendix
37
Telecom Italia Performance by Markets – Full Year 2014
Organic data, € mln, %YoY
FY’14
Group
Domestic
Total
Revenues
21.6 €bln
15.3 €bln
6.2€bln
-5.4% YoY
-6.6% YoY
-2.1% YoY
Ebitda
8.8 €bln
7.0 €bln
1.8 €bln
-6.8% YoY
-9.6% YoY
+6.6% YoY
Excluding
License(1)
4.0 €bln
-5.4% YoY
Capex
5.0 €bln
Brazil
1.2 €bln
2.8 €bln
-8.2% YoY
Including
License(1)
+13.3%
Excluding
Licenses(2)
25.8 €bln; (-1.0 €bln vs FY’13)
YoY(3)
+1.5% YoY
2.2 €bln
+62.7% YoY(3)
Net Debt
Including
Licenses(2)
(1)
(2)
(3)
26.65 €bln; (-0.2 €bln vs FY’13)
Brazilian Spectrum & Clean-up cost
Brazilian & Argentinean Spectrum
Reported data
38
Telecom Italia Performance by Markets - 4Q’14
Organic data, € mln, %YoY
4Q’14
Service
Revenues
1Q
-6,5%
Group
Domestic
Brazil
4.9 €bln
3.6 €bln
1.3 €bln
-4.2% YoY
-4.5% YoY
-3.4% YoY
2Q
3Q
4Q
1Q
1Q
3Q
4Q
1Q
2Q
-4,2%
-6,2%
-4,5%
-2,0%
0,3%
1.7 €bln
0.5 €bln
-8.1% YoY
-11.0% YoY
+4.6% YoY
2Q
3Q
4Q
1Q
2Q
-8,2%
-7,4%
3Q
-4,8%
+8,0%
-11,6%
-8,1%
+4,6%
2Q
3Q
1.0 €bln
0.4 €bln
+4.1% YoY
-1.5% YoY
+19.2% YoY
3Q
4Q
1Q
2Q
+4,1%
-10,9%
-5,8%
+6,5%
-11.0%
1.4 €bln
2Q
-14,9%
-9,6%
-12,5%
-3,4%
4Q
1Q
1Q
-3,9%
2.2 €bln
-8,5%
Capex
4Q
-8,8%
+7,8%
-5,7%
3Q
-5,7%
-7,1%
-8,7%
Ebitda
2Q
3Q
-9,3%
4Q
1Q
2Q
3Q
4Q
+19,2%
+30,4%
-1,5%
4Q
-7,0%
-18,4%
39
Telecom Italia 4Q’14 Group Results
€ mln, %YoY
4Q’14
€mln
Revenues
Domestic
Brazil
Ebitda
Domestic
Brazil
Capex(3)
Domestic
Brazil
Ebitda-Capex(3)
Domestic
Brazil
Weight(2)
71%
29%
-5.0%
-2.3%
-5.1%
-0.3%
-8.4%
-8.1%
77%
22%
-10.9%
+1.4%
-11.0%
+4.6%
+3.3%
+4.1%
-1.5%
+16.5%
-1.5%
+19.2%
-23.8%
-23.9%
-21.3%
-
-21.5%
-
1,408
991
416
70%
30%
790
711
77
YoY
-3.7%
2,198
1,702
493
YoY
-4,1%
5,601
3,967
1,627
Organic(1)
Reported
90%
10%
net of new handset
subsidy approach
n.a.
-6.5%
-8.5%
-0.4%
-6.1%
n.a.
(1) Starting from 2014, Organic performance includes only exchange rate variations and impacts from perimeter changes
(2) Including TI Media, Other & Elimination. Olivetti is included in the Domestic perimeter
(3) Capex w/o licence
40
Domestic Mobile
€ mln, QoQ
Total
handsets
Quarterly Mobile Revenues Breakdown
1,175
76
+89
+50
Service Revenues
Trend YoY
1,264
+20
1,284
+84
1,368
126
-31
95
+90
185
Service
-7.1%
-14.9%
Service
1,099
+39
1,138
+51
1,189
-6
-5,7%
-13.3%
1,183
wholesale
wholesale
Innovative
58
+12
69
328
+14
342
+2
+48
72
390
+11
+14
83
+22.9%
+8,7%
+5.5%
-0.5%
Innovative
404
+16,6%
+13.1%
+13
726
+1
Traditional
713
SMS
Incoming
voice
132
52
139
56
134
57
Outgoing voice
530
531
536
1Q'14
2Q'14
727
3Q'14
-32
695
+9,9%
135
59
+8,4%
Traditional
-16,7%
501
-24,1%
-16.1%
-21,9%
4Q'14
41
Domestic Fixed
€ mln, QoQ
Total
handsets
Service
Quarterly Fixed Revenues Breakdown
2,771
-34
56
2,715
2,737
-19
73
-51
2,664
2,718
+55
2,639
2,773
118
79
-25
Service Revenues
Trend YoY
+19
878
Innovative
565
ICT
VAS
133
37
134
38
135
38
156
38
Broadband
395
402
410
411
Traditional
Others
1,271
238
+9
-40
574
1,231
232
-36
583
1,195
230
+23
-
-7,2%
606
-7,2%
-8,6%
-7,9%
-9,3%
-8.1%
Innovative
+1,8%
1,195
-5.3%
Wholesale
& others
854
860
+9
-7.4%
2,655
National, Int’
wholesale +
Subs&others
859
Service
+3,0%
+4.2%
+0,1%
205
Traditional
Access
666
647
632
622
-7,5%
-10,1%
-10,4%
Outgoing voice
367
352
334
368
1Q'14
2Q'14
3Q'14
4Q14
-13,1%
42
Domestic Mobile KPIs
‘000
Mobile CB
Active CB
31,858 31,706 31,554 31,221 30,996 30,660 30,374 30,350
85%
83%
82%
1Q'13
2Q'13
3Q'13
4Q'13
1Q'14
2Q'14
3Q'14
4Q'14
84%
85%
84%
83%
82%
1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14
Highlights
MNP Balance
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
+75
2014
-28
-8
-20
+16
-17
-41 -34
-2
-92
2013
-124
-111 -107
-178
Clear signs of market stabilization
translated into:
-80
better MNP balance+615k YTD
-1
-5
-5 -28
-18
-36
-41
lower MNP volume  -4,5 mln overall MNP
transations in FY’14 vs FY’13
better churn rate 24%; -4.8pp YoY
-72
Cum.
+615 YoY
-197
43
Domestic Fixed KPIs
‘000
Total
OLO
Fixed Access
Line Losses
21,016 20,788 20,536 20,378 20,238
20,085 19,823 19,704
7.238
7.233
7.164
7.169
7.211
7.258
7.167
1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14
7.224
(201)
TI retail
13.777
13.555
13.372
13.210
13.027
12.828
12.656
12.480
1Q'13
2Q'13
3Q'13
4Q'13
1Q'14
2Q'14
3Q'14
4Q'14
(183)
965
SI+20Mb
965
1
1,015
(200)
(171)
(176)
BB ARPU
6,984 6,933 6,892 6,915 6,933 6,939 6,932 6,921
Total BB Fast
Fiber
(182)
YoY
BB Access
Total
(163)
(222)
1,050
1,100
1,167
1
4
15
45
1,259
103
1.014
1.045
1.084
1.122
1.155
1,315
1,392
151
231
1.164
1.161
€/month
20,0
20,1
19,6
19,1
19,2
19,2
19,2
18,9
Flat ADSL
5.258
5.182
5.131
5.130
5.111
5.054
5.020
4.961
+3.9%
+3.5% +3.5% +3.6%
+1.6% +1.8%
Free ADSL
761
736
711
684
655
625
597
568
1Q'13
2Q'13
3Q'13
4Q'13
1Q'14
2Q'14
3Q'14
4Q'14
+4.8%
+2.3%
1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14
ARPU BB
YoY
44
Domestic Mobile Revenues Breakdown
Reported, € mln, %YoY
4Q’14
4Q’13
YoY
FY’14 YoY
1,368
1,442
-5.1%
-8.7%
89
75
+19,2%
+6,3%
Consumer+Business
1279
1,367
-6.5%
-9.6%
services
1,094
1,181
-7.4%
-11.3%
1,042
1,136
-8.3%
-11.6%
504
615
-18.1%
-21.2%
voice
487
576
-15.5%
-18,0%
fees&other
18
39
-55,3%
-62,8%
537
521
+3.2%
+1.3%
business received
52
45
+16,4%
-3.3%
handsets
185
186
-0.6%
+9,5%
Total
wholesale(1)
business generated(2)
outgoing voice
VAS
(1) Including Visitors & other items
(2) Total Retail Service Revenues net of Incoming
45
Domestic Fixed Revenues Breakdown
Reported, € mln, %YoY
4Q’14
4Q’13
YoY
FY’14 YoY
Total Wireline
2,773
2,935
-5,5%
-6.7%
Service Wireline
2,655
2,803
-5.3%
-7.1%
Sparkle group
258
245
+5.0%
-0.2%
Wholesale Domestic
540
633
-14.7%
-11.9%
1,800
1,873
-3.9%
-6.6%
1,073
1,173
-8.5%
-10.5%
internet
417
400
+4.4%
+2.2%
business data
287
286
+0.3%
-2.1%
other
23
14
n.m.
n.m.
60
53
n.m.
n.m.
118
132
-10.6%
+7.8%
Retail Service
voice & access
elim. & other
Products
46
FY14 Net Financial Position
€ mln
Brazilian
Licences
540 mln €
TA Licences
344 mln €
26,807
26,651
-3,174
+1,585
-206
+893
+238
+508
Mandatory Convertible Bond
& Licences Cash Out
Mandatory
Convertible Bond
-156
25507
25,507
Including 1.3 bln euro Mandatory Convertible Bond
& excluding 884 €Mln Cash out for Licences
24467
24,467
-1,040
FY'13
OpFCF
Cash Financial
Expenses/Financial
Accrual
Taxes & other
impacts
M&A
Telecom Argentina
(discontinued)
Dividends / change
in equity
-153
+575
-290
FY'14
1,311
 vs. 2013
+1,629
-149
-301
FX negative
impact license FY 2014 Preliminary Results & 2015-2017 Plan Outline
Piergiorgio Peluso
47
Well-Diversified and Hedged Debt
Total Gross Debt net of Adjustment:
Euro 34.421 mln
Maturities and
Risk Management
€ mln
Average m/l term maturity: 7,10 years
(bond only 7,85 years)
Fixed rate portion on gross debt approximately
66,3%
Around 41% of outstanding bonds (nominal amount)
is denominated in USD, GBP and YEN and is fully
hedged
Gross debt
34,421
(of which 30 mln disc. Operations)
Financial assets
of which Cash & CE and marketable securities
Cash & Cash Equivalent
Marketable securities
Italian Government Securities
Other
Discontinued operations
Net Financial Position
(7,605)
(6,112)
(4,812)
(1,300)
(915)
(385)
(165)
Cost of debt:
 5.4%
26,651
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 2.633 €/mln (of which 687 €/mln on bonds)
- the impact on Financial Assets is equal to 1.263 €/mln.
Therefore, the Net Financial Indebtedness is adjusted by 1.370 €/mln.
Marco Patuano - Piergiorgio Peluso
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Presentation Slides - M. Patuano, P. Peluso, R. Abreu

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