Telecom Italia Rsp

Investor Presentation • Mar 11, 2020

Disclaimer

This presentation contains statements that constitute forward looking statements regarding the intent, belief or current expectations of future growth in the different business lines and the global business, financial results and other aspects of the activities and situation relating to the TIM 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.

The financial results of the TIM Group are prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board and endorsed by the EU (designated as "IFRS").

The accounting policies and consolidation principles adopted in the preparation of the financial results for FY19 and for 2020-22 of the TIM Group are the same as those adopted in the TIM Group Annual Audited Consolidated Financial Statements as of 31 December 2018, to which reference can be made, except for the adoption of the new accounting principle (IFRS 16 - Lease), adopted starting from January 1, 2019. In particular, TIM adopts IFRS 16, using the modified retrospective method, without restatement of prior period comparatives.

To enable the comparison of the economic and financial performance for the FY2019 and Q4'19 with the corresponding period of the previous year, "IFRS 9/15" figures, prepared in accordance with the previous accounting standards applied (IAS 17 and related Interpretations) are provided, for the purposes of the distinction between operating leases and financial leases and the consequent accounting treatment of lease liabilities. Please note that, starting from January 1, 2018, the TIM Group adopted IFRS 15 (Revenues from contracts with customers) and IFRS 9 (Financial instruments).

As of today, the audit work by our independent auditors on the FY19 results have not yet been completed.

Alternative Performance Measures

The TIM Group, in addition to the conventional financial performance measures established by IFRS, uses certain alternative performance measures for the purposes of enabling a better understanding of the performance of operations and the financial position of the TIM Group. In particular, such alternative performance measures include: EBITDA, EBIT, Organic change and impact of non-recurring items on revenue, EBITDA and EBIT; EBITDA margin and EBIT margin and net financial debt. Moreover, following the adoption of IFRS 16, the TIM Group provides the following additional alternative performance indicators:

* EBITDA adjusted After Lease ("EBITDA-AL"), which is calculated by adjusting Organic EBITDA, net of non-recurring items, of the amounts related to the accounting treatment of finance lease contracts in accordance with IAS 17 (applied until year-end 2018) and IFRS 16 (applied starting from 2019);

* Adjusted Net Financial Debt After Lease, which is calculated by excluding from the adjusted net financial debt the liabilities related to the accounting treatment of finance lease contracts in accordance with IAS 17 (applied until year-end 2018) and IFRS 16 (applied starting from 2019).

Such alternative performance measures are unaudited.

Agenda

• 2019: Deliver & Delever
• 2020-22: Operations TIMe
• Sustainability embedded in our plan
• TIM Brasil remains a growth engine
• New cash generation culture
• Guidance and final remarks
• Q&A

We said it, we delivered it

Strategic initiatives			Executing the plan
Sale of Persidera		▪ Completed in 2019	Equity Free Cash Flow	▪ 2019 EFCF at € 1.7bn, well above target
Mobile towers		▪ Merger with Vodafone Towers approved by European antitrust ▪ Cash in for TIM of € 1.4bn on the way	generation Debt reduction	▪ Half of 3-year target reached in one year
		▪ Exclusivity to KKR in negotiation with Open Fiber (dual track)	Stabilized governance	▪ Positive dynamics in board and committees
Fixed line network		▪ Exclusivity to KKR to acquire c. 40% of TIM's secondary network ▪ Secondary network EV of € 7.5bn and cash in for TIM of € 1.8bn	Revamp domestic	▪ Prices up in upper segment of mobile market ▪ Launched convergence offer at YE to
Cloud services and data centers		▪ Partnership with Google ▪ Carve-out of cloud business – estimated 2024 EBITDA € 0.4bn	business	stabilize fixed lines ▪ TIM Vision partnership of choice of Disney+. Now the richest content provider in Italy
Develop Brasil		▪ Promoting consolidation in Brazil in partnership with Telefonica	Consumer credit JV	▪ Signed JV with Santander ▪ Implied debt reduction of € 0.5bn

From "Deliver & Delever" to "Operations TIMe"

"Deliver & Delever"

Organic cash-flow generation and strategic initiatives allow meaningful deleverage paving way for return to dividend distribution

2020-22 "Operations TIMe"

Focus remains on:

• Equity FCF: upgrading guidance today from ~€ 3.5bn cumulated Organic Equity FCF in 2019-21 to € 4.5-5.0bn in 2020-22 (after lease view already reflecting deconsolidation of INWIT cash flows, equivalent to ~€ 5.0-5.5bn on like-for-like IFRS 9/15 basis)
• Debt reduction: target improved to <€ 20bn After Lease by 2021 (<€ 21.5bn like-for-like), <€ 19bn including INWIT proceeds. Stable in 2022 after 5G licence payment
• Finalizing revenue model transformation leveraging on convergence as "core platform" and add on markets
• Stabilizing profitability by accelerating cost cutting
• Evolving organizational structure, capabilities and engagement to develop an ecosystem of industrial and financial partners fostering technological and infrastructural innovation

Our goals:

• Complete operations' turnaround
• Be Top European Telco in ESG and one of the top three companies in Italy
• Distribute 20-25% of Equity FCF to shareholders with a floor of € 1cent dividend to ordinary shares starting from FY 2019 with savings shares stable at € 2.75cents throughout the period

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TIM has overdelivered on 2019 guidance

IFRS 9/15

Historical high Equity FCF and first time organic Net Debt reduction since 2016

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Transformational initiatives on commercial, operating and business model kicked off in 2019

Commercial conduct Towards sustainable cash generation Operating model Implementation of the first wave of transformation Commercial: retain vs. acquire Acquisition costs reduction, caring efficiency, credit management Operations optimization On line / on field technicians productivity increase, insourcing HR and organization streamlining Optimize infrastructure and Capex: INWIT-Vodafone, Fiber Provide best B2B ICT services: Google Cloud partnership and Data Center newco Revolutioning content offering: TIM TV – TIM Vision enrichment Optimize NWC management: TIM Fin Telefonica and TIM to jointly submit an expression of interest for Oi mobile assets More value oriented conduct in mobile to slow down MNP Limited repricing in fixed to reduce churn Stricter commercial credit management Tightening of commercial processes begun Business model Towards an ecosystem of industrial & financial partners benefiting top line, CAPEX and NWC

In a challenging telco environment, TIM took the lead of the move to rationality

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World's best in class content partners to build a "must-have" convergent offer content key in increasing customers loyalty

From just another platform to the richest content provider in Italy in less than 1 year

Distinctive proposition to enhance convergent offer and improve customer base retention through aggregation of the best content available

Signed MoU with Canal+ for platform development

TIM & Disney+: the future together

• Streaming platform with the best content of Disney, Pixar, Marvel, Star Wars and National Geographic (over 1000 films, series and original productions)
• Italy launch on March 24th
• TIM as exclusive Telco/MVPD for 3 years from launch for bundling; after 12 months from launch, only one 3rd party MVPD operator on "A La Carte" basis
• Pricing strategy: tailored pricing for customer base and special bundle offer for new customers

Optimizing invested capital through network sharing & Infra-funds involvement

Network sharing Partnership TIM-Vodafone Italia

TIM is offering Infra-funds 3 co-investment opportunities…

… enhancing assets value while maintaining control of core businesses & infrastructures

In towers: network sharing with Vodafone, selling process for a 12.4% stake

Received clearance on both passive and active sharing on 6th March

In talk with Infra funds for a 12.4% stake of New INWIT

Tim and Vodafone to maintain joint control (25% each)

Distribution of >80% of net income subject to debt/EBITDA <6x and BB+rating

INWIT transaction implies € 1.4bn debt fall

• Proceeds minority stake sale: c. € 1bn
• Extraordinary dividend: c. € 0.2bn
• Inwit deconsolidation: c. € 0.1bn

In fiber: KKR chosen for a dual track approach towards one single network

We delivered on our promises

• TIM selected KKR Infrastructure ("KKR") as financial partner
• Dual track approach:
  • Integration with Open Fiber
  • Minority investment of KKR in TIM's secondary network
• Government support for a single network
• Preparatory works similar in both cases

Partnership with KKR

TIM entered an exclusivity period with KKR in response to KKR's offer to acquire a ~40% stake in FiberCop, a Newco owning TIM's entire secondary network (both fiber and copper)

FiberCop will:

• Manage TIM's secondary copper network, which is going to progressively switch to fiber (and partially to FWA) over time
• Develop fiber secondary network in Black & Grey areas
• Continue to provide copper access in areas not reached by FTTH
• Act as a wholesale operator providing copper and fiber access passive services to TIM and other OLOs
• Act as integrator of Open Fiber at the right conditions

Development of the infrastructure will remain under TIM's control

• Network deployment in ~1,600 cities (in Black and Grey areas)
• Target coverage c. 13.5m HH¹ by 2026 (i.e. >55% of total HHs¹ in Italy)

First step overview: KKR transaction financials and perimeter

• Compelling valuation, valuing TIM's secondary network (incl. both fiber and copper) € 7.5bn EV
• The transaction represents a first step towards a potential deal with Open Fiber, which would unlock potential synergies

Envisaged transaction perimeter includes all of TIM's network infrastructure from the cabinet to the home, both fiber and copper (ducts, copper and fiber secondary network, sockets, etc. with cabinet excluded)

The company will be a wholesale operator providing copper and fiber access passive only services to TIM and other OLOs

In data centers: partnership with Google to strengthen leadership in cloud

A clear vision towards strong leadership

• Italian cloud demand expected to grow at 21% CAGR in 2020-22, driven by corporates and public administration increased adoption
• TIM aiming at enhancing Cloud offering, infrastructure and application services to strengthen its leadership in Italy
• TIM uniquely positioned to capture demand in public, private, hybrid cloud (proprietary assets and track-record with Nuvola Italiana)

A unique strategic partnership

• First strategic partnership with Telco provider worldwide for Google
• Accelerated capability building with Google support through recruiting, upskilling and creation of Center of Excellence
• Upgrade and optimization of TIM's infrastructure

A clear implementation roadmap

• Signed 5-years (renewable) partnership agreement with Google in February (+ 2 years)
• Go-to-market activities and roadshow started in January
• Training plan jointly defined with Google
• Evolution of Data Centers infrastructure to host Google Region
• Carve-out of Cloud and data center business by YE 2020
• Competence center by Q3

Italy to become EU tech front-runner thanks to TIM's combination of 5G, fiber, cloud and edge computing

TIM is the leading Cloud player in Italy Market share on business customers (2)

11% 1. TIM 2. 3. 4. 5.

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TIM's cloud revenues and EBITDA expected to double from 2020 to 2024

Next level commitment on cloud… …for next level impact

• ~800 new hires to cover market need and technological requirements
• +6,000 technical and business resources trained on cloud and GCP offering
• +500 resources formed to obtain the Google Cloud professional certification
• ~60 Google resources dedicated to the partnership to support initial business scale-up
• +16,000 sqm of new tier IV data center space to support clients and Google Italian region launch

• Pipeline of new joint Google/ TIM cloud products tailored for Italian market

• TIM will create and retain control of a new legal entity that will own TIM's data centers

• Expected financial performance of the new legal entity (from both TIM captive needs and the market):

Revenues 2024 €, million

400

1,000

EBITDA 2024 €, million

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An infrastructure investor will be invited to enter in the equity to finance expansion and a subsequent potential listing may be considered ("INWIT-like")

Access to Google innovation ecosystem and know-how pave the way for developments in the consumer market

Brasil: partnering with Telefonica for the acquisition of Oi mobile assets

• Telefonica and TIM to jointly submit an expression of interest for Oi mobile assets
• Interested in Oi's mobile assets only
• Deal will not impact deleveraging at TIM Group level
• Synergies will be generated from the first year
• Deal will be accretive thanks to significant synergies

2020 -22: Operations TIMe

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TIM aims to transform a challenging context into growth opportunities

In a context that remains

• Market revenues on core connectivity still under pressure in the low end of the mobile market and new entrant in fixed
• Wholesale competition from infrastructure players
• OTTs competing in B2B through cloud and integrated services
• Need to respond to data traffic growth
• Macro-economic uncertainty

challenging… …TIM is riding all opportunities

• Taking additional steps towards market rationality and socially responsible, sustainable cash flows for the long term
• Partnering with world-class champions to respond to demand for integrated B2B offers and to offer innovative adjacent consumer services
• Exploring innovative technological paradigms to unlock cost reduction and new business opportunities (5G, FWA)
• Partnering with Infrastructure funds to boost return on capital invested
• Exploiting low interest rate environment and benefits of ESG conduct
  • Cheaper cost of financing, higher employee engagement and talent attraction, operating costs reduction

Making our cash flow sustainable on the path towards a growing dividend

Back to dividend distribution on ordinary shares

• 2019 TIM Board of Directors proposes to AGM dividend reinstatement on ordinary shares (last dividend distributed in 2013 on 2012 results)
  • € 1 cents / ordinary share paid in May 2020 on 2019 results
    • € 2.75 cents / saving shares (unchanged)

2019

2019

2019 payout equal to 18% of Equity FCF and 33% of net income

2020 2022

2022

• ordinary: floor of €1 cent per share, aiming at distributing 20-25% of yearly organic Equity FCF. Payout policy above floor subject to deleverage execution 2020-2022 distribution policy
  • savings: €2.75 cents per share throughout 2020-2022

Long term ambition: distribute 50% of yearly organic Equity Free Cash Flow

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Consumer: retain rather than acquire, extracting more value from existing CB

Key strategic priorities KPIs expected evolution

New offering focused on new digital demand	▪ Convergence as core platform (launched in January) ▪ 4G-5G FWA launched in rural areas (1.3m virgin market for TIM) ▪ New ecosystem of services (content, smart home, security, gaming, financial services)	fixed - =	Customer base mobile -
Data-driven CB management	▪ AA- driven CVM for upselling and retention	2019 2022 fixed	2019 2022 ARPU mobile
Digital sales channels and stores redesign	▪ Local marketing actions (e.g. Milan) ▪ Retail footprint optimization and stores redesign ▪ New role of field force to address more articulated product offering/focus on retention ▪ Benefiting from new regulatory framework: technicians now able to upsell services to customers	+ 2019 2022 Line balance ++	+ 2019 2022 MNP +
Simplification & digitization	▪ Acceleration of digital touchpoints (targeting 30% of e-Commerce sales in fixed) ▪ Caring model evolution, offer simplification ▪ Agile organization to break functional silos ▪ Lower churn of mobile CB with direct payments (-15pp lower)	2019 2022 UBB penetration on CB, % 23pp 2019 2022	2019 2022 Direct payments on CB, % +30pp 2019 2022

Convergence as core platform, first step towards adjacent markets

• Fixed and Mobile Convergence boost (e.g., TIM Unica - unlimited data for all Mobile lines linked to Fixed bill and charged directly on the bill)
• Expected benefits on churn and credit risk reduction, stickiness on mobile, lower ARPU dilution
• Future evolutions to include advantages to TV and Smart Home customers beyond single invoicing

Short term actions (2020) Medium-long term actions (2021-2022)

▪ Brand-new ecosystem leveraging new services beyond convergence and partnerships with best-in-class players

Online gaming € 0.4bn market size '18 +10% p.a. market growth

Business: evolution towards end-to-end technology and solution provider

Key strategic priorities KPIs evolution

Unique one-stop-shop solution for Italian businesses

Distribution model radically evolved

Ecosystem of factories

▪	5G positioning to maintain leadership in connectivity and develop IoT
	vertical solutions

• Convergence as core platform
• Full IP-based offer

trusted services

system integration

▪ Expansion towards cloud services for Large customers and vertical IT solutions for SME

▪ Internal factories for Cloud Services, IoT platforms, cybersecurity and

▪ Strategic partnerships for Public Cloud, TLC platforms, virtualization and

▪ Expansion into selected opportunities beyond ICT

▪ Large: refocus on industries and vertical capabilities

▪ SME: improved client coverage and service model

2019 2022 +34pp

Convergent customer base

ICT Revenues Percent of Large customers' revenues

Direct payments

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B2B adjacent markets: leveraging own factories & strategic partnerships

CMD 2020

Wholesale: UBB and solution provider in regulated and non regulated market
Vision	Key strategic priorities		KPIs evolution
Leverage full potential of TIM's network to accelerate UBB migration	Fast UBB migration to defend market share	▪ Acceleration of UBB migration: maintain growth of VULA lines above loss of ULL lines ▪ New offer for Non Infrastructured OLOs. White label on OF resources in C/D areas ▪ More competitive offer for Bitstream/NGA in Milan & 26 competitive cities (no cost-orientation)	Fiber accesses VULA + BTS NGA, million accesses 3.3 2019	1.5x 5.1 2022
Push Not		▪ More speed: FTTH, vectoring, bonding	Not Regulated revenues
Regulated services focusing on value added, digital and mobile services	Revenue share increase in Not Regulated services	▪ Connectivity and infrastructures: new options for Giganet, IP evolutions and security platforms ▪ Value extended services: Wholesale Network Advanced Management, advanced logistics model ▪ Digital and mobile services: new IoT offer on 4G narrow band, broadening of FWA offer	Percent of Wholesale revenues 20% 2019 GEA '000 links	+6 p.p. 27% 2022 Giganet '000 links
	Sales and processes digitization	▪ New commercial platform: more efficient sales process, multi-channel support ▪ Digitization of Order2Cash processes	+80% 22.0 12.3 2019 2022	+113% 2.8 1.3 2019 2022

Addressable cost base to fall 10% by 2022 (-12% on a cash view)

Rebase the cost structure through a radical review of the operating model to be more efficient and effective

Addressable baseline 2019 € bn		Main initiatives	Opex evolution
		▪ Benefitting from new more disciplined commercial conduct
		▪ Boost self-care and call deflection through automation and AI towards	P&L view
Commercial	1.5	▪ Improve credit management to reduce cost of risk by 20-30%
		▪ Optimize distribution model, leverage digital touchpoints
		▪ Increase field technicians productivity through AI, implement 360° proactive assurance
Industrial	1.1	▪ Optimize network suppliers and logistic footprint
		▪ Reduce energy consumption, increase renewable sourcing
G&A		▪ Automate back-office processes and support functions	Cash view
	0.5	▪ Reduce office space and dismiss buildings
Labour	2.1	▪ Continued use of Art. 4 Fornero Law and Quota 100 (de-layering, functions consolidation, journey and process redesign)
		▪ Better use of resources: through massive insourcing
	5.2	~65% of total 2019 OPEX baseline (€ 8,023m) (2)

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Stabilize CAPEX, hike ROI through technological and infrastructural innovation

Main transformation initiatives

• Grow & Transform Run Run Grow & Transform ▪ Digitization of field force: augmented reality app, AI dispatching, proactive assurance ▪ Digitization of assets: digital twin, remote accesses and monitoring, virtualization of network elements (VRAN) ▪ 100% IP transport, upgraded photonic ▪ Robotization of NOC ▪ ROI driven mobile and fixed access development (4G and 5G, FWA, FTTx) ▪ Decommissioning of legacy hardware and applications ▪ Network cloudification, automation and simplification ▪ Full IT operations & service automation through DevOps ▪ Enterprise-wide Data Lake, AI competence center ~2.9 ~2.9 ~2.9 ~2.9
  • Public Cloud adoption including EDGE applications

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activities

2019 '20 '21 2022

Capex evolution and mix, €bn

TIM's key asset remains the unbeatable combination of networks

An integrated ecosystem for TIM Corporate Innovation

Corporate innovation ecosystem dimensions

Innovation Office	▪ Interact with BU / Purchasing / HR as coordinator and business developer ▪ Enhance WCAP goals: – Strategic cooperation with Venture Capital fund to coordinate business needs with market opportunities – Partnerships with global players, collaboration with Universities – New products, services and processes using "transformation" technologies	▪ Smart cities ▪ Cyber security ORAN
Venture Capital	▪ Focus on Telco-related verticals and contribute € 50-60m as anchor investor in a VC fund to: – Access innovation and technology relevant to TIM, in Italy and abroad – Support Italian economy, financing / accelerating / scaling / utilizing new entrepreneurial ideas – Invest over plan period in companies at growth stage with financial discipline (in deal structure and return)	drones) technologies
Sustainability	▪ Promote a culture of sustainable growth through innovation
HR	▪ Ensure Executives' commitment and internal communication ▪ Attract talent through inorganic growth ▪ Promote innovative capability building through co-working and self training	monitoring

Main research areas

• Cloud Native for 5G
• Cyber security
• Open Radio technologies with
• Edge solutions (e.g., for BVLOS
• 5G V2X for Smart Road
• Laser transmission
• Quantum computing for Radio coverage optimization
• Artificial Intelligence for client interaction services (e.g., Angie) and advanced network

Sustainability embedded in our plan

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Sustainability remains embedded in our plan

Our ambition	How we will deliver	Planned targets
Environment We want to be green	▪ Increasing efficiency and taking advantage of green energy cost reduction ▪ Developing infrastructures and Data-Center to give more to our customer with less impact from operations	Eco-efficiency +50% Renewable energy +5pp /yr increase of weight on total energy (%) Indirect emissions -70% Carbon neutral by 2030	2025
Social We believe that new capabilities are a key factor to maintain leadership	▪ Keep promoting diversity ▪ Re-skilling, hiring and retaining talents with new capabilities ▪ Developing the digital education in Italy to support demand for connectivity	Employees +14 p.p. engagement Reskilled people 2,000 Churn of young <15% employees	2022
Governance Innovation + Sustainability means access to cheaper financing and new revenue streams	▪ Developing new services that give our customers the opportunity to hold a more sustainable behavior ▪ Launching green offering in TIM's retail channels ▪ Having Customer Satisfaction Index in management's MBO	New VC fund size € 50m IoT and Security +20% services revenues Green smartphone > 15%	2024

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ESG short term actions (2020 Domestic)

▪ Power usage optimization in data centers and networks:

Environment

• Metamorfosis, full green Data Center in Greece by Sparkle, operative from 2021
• TIM-Google Cloud partnership and Data Center newco
• First round of decommissioning of PSTN network stations in 2020 with a saving on energy spending (- 18 GWh by 2022)
• Increase renewable sourcing 11% in 2020
• Food and beverage plastic free buildings by 2020

▪ Training initiatives through re-skilling and up-skilling: plan of training for all TIM population

Social

• Young employees project: Development program to support their growth in the organization
• Job rotation programs: about 1000 job rotations by 2020
• Launch coaching and mentoring programs for specific targets
• Digital Renaissance Operation: 1m people involved, 107 provinces, 20,000+ training hours

▪ Management engagement also introducing MBO & LTI on ESG objectives

Governance

• Startup funding and TIM WCAP to foster technological innovation
• Reinforce ESG KPIs in supply chain
• New ESG services, like:
  • Cyber-protection service for B2B market (blocking about 3m dangerous access/day)
  • Implementation of the Web application firewall service for the National italian railways (Ferrovie)
  • Installation in Italy of 25.000 detectors using TIM cabinets for environment predisposition
  • Ivrea as best practice of circular economy by 2022

TIM Brasil remains a growth engine

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2019 Financial and Operational highlights

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Strategic Pillars for 2020 Evolution Transformation -22

INFRASTRUCTURE 1 Preparing for the future

Evolution

• → IT: solve operational issues through architecture and platforms review leveraging digital and automation
• → Network: focus to improve spectrum efficiency through new sites deployments and use of innovative technology (M-MIMO) and refarming

Transformation

• → 5G and data monetization
• → Artificial Intelligence
• → 2G / 3G consolidation
• → Content distribution

MOBILE From Volume to Value 2

• → Sustaining residual growth opportunity in a mature market
• → Portfolio review to unlock upselling opportunities
• → Selective "more for more" approach to increase ARPU
• → Leveraging customer experience and mitigate attrition to reduce churn

UBB Growth Opportunity 3

• → Rollout plan with cherry picking approach based on geomarketing analyses
• → Naked broadband with OTT friendly approach to differentiate our offers

Transformation

→ Creation of an infrastructure vehicle through partnership to further accelerate the coverage

Evolution Evolution Evolution

• → Accelerate digital & automation
• → Revise make vs. buy approach

Transformation

• → E2E transformation to improve cash cost efficiency
• → Network sharing
• → Cloudification

BEYOND CORE Monetizing customer base

• Transformation
• → IoT Services
• → Growing market in mobile digital advertising
• → Unique opportunity in mobile financial services

Technology and Operations: Transformational agenda to prepare the future

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Mobile: Move from volume to value to sustain mobile business growth, leveraging customer experience

Innovation positioning: ensuring execution and customer satisfaction to succeed.

Ultrabroadband: Industrialization to capture growth opportunity with financial discipline

Strategic Partnership

Expanding TIM Live's services with the right balance between Sales and Capex, unlocking additional value of this asset

... To Transformation

Create in partnership a neutral fiber infrastructure asset in Brazil

Efficiency: Keep the lead in profitability taking efficiency to the next level, while enhancing customer experience

E2E transformation to improve cash cost efficiency, leveraging digital, automation, new make vs buy models

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Beyond the core: Leverage our assets with strategic partnerships through a unique window of opportunity

Sources: GlobalData Market Opportunity Forecasts to 2023: Global IoT; Latin America Digital Ad Spending 2019 eMarketer; Global Findex Database 2017

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TIM Brasil 2020-'22 Targets

GOALS	DRIVERS	SHORT TERM TARGETS (2020)	LONG TERM TARGETS
Revenue Growth Sustainability	→ Leverage mobile ARPU improve → Expand Residential UBB operations → Tap B2B opportunity	Service Revenues Growth: Mid single digit (YoY)	Service Revenues Growth: Mid single digit (CAGR '19-'22)
Improve Profitability	→ Accelerate digital transformation → Maintain zero-based budget approach → Reliable bill to cash process	EBITDA Growth: Mid single digit (YoY)	EBITDA Margin: ≥40% in 2022 (≥47% w/ IFRS 16)
Infrastructure Development	→ Smart and selective Capex approach	Capex on Net Revenues: Low 20's	Capex: R\$ 12.0 - 12.5 bln (∑'20-'22)
Expand Cash Generation	→ Strict financial discipline → Continue debt and tax rate optimization	EBITDA-Capex on Net Revenues: >16% (>20% w/ IFRS 16)	EBITDA-Capex on Net Revenues: ≥20% in 2022 (≥25% w/ IFRS 16)

New cash generation culture

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FY '19 Equity FCF 3x vs. FY '18

Service Revenues excluding Sparkle -2.6% YoY in FY '19: Domestic -4.0%; Brazil +2.4%

EBITDA -2.8% YoY: Domestic -5.0% and Brazil +6.8%. EBITDA margin up 1p.p. to 42.1%

Q4 performance better than Q3 thanks to acceleration in cost cutting

FY'19 showing strong improvement in cash generation:

• Equity FCF at € 1.7bn, 3x vs. FY' 18 (€ 491m in Q4 '19, +38% YoY)
• Net Debt at € 23,839m, reduced € 1.4bn from FY '18 and ~€ 0.5bn from Q3

(1) Excluding exchange rate fluctuations & non recurring items. Capex excluding licenses

(2) Service revenues growth excluding Sparkle's revenues (€ 934m in FY'19, o/w € 237m in Q4 and € 1,287m in FY'18, o/w € 355m in Q4), without any impact on EBITDA (3) Adjusted Net Debt

CMD 2020

Mobile Service Revenues continue to improve YoY performance

• Lines: TIM best performer in MNP and on an improving trend (-114k vs -263k in Q3)
• Mobile Service Revenues continue to improve YoY performance despite the reduction of Content Service Provider (CSP) revenues (-1,4p.p. drag YoY)
• ARPU YoY performance better than Q3 despite impact of CSP revenues (-0.2 €/month). Q4 seasonality lower than Q3 as usual
• Lower sales of handsets with improved marginality (strategy introduced in '19 benefiting EBITDA)

Domestic Fixed KPIs showing early signs of TIM's "fix the fixed" initiatives

Migration to UBB continues: ~7m lines reached, +5% QoQ and +27% YoY, thanks to push on fiber conversion, reduced delivery time (FTTx –5 days YoY) and new FWA offer launched in Q3

Early benefits from "fix the fixed" initiatives

• Continuous growth in broadband and fiber net adds: +60k bb net adds, 105k fiber net adds vs. 68k in Q3
• Wholesale lines continue to benefit from migration to fiber: +233k VULA net adds vs. +207k in Q3 (still 49k more than ULL losses); FY VULA net adds 1.05m
• Line losses continue improving trend: -220k retail and wholesale vs. 254k in Q3
• Market discipline: price gap vs. TIM reduced throughout the year. Competitors not levelling down prices in Q4
• Churn rate improving YoY thanks to early signs of retention activities
• ARPU growth affected by annualization of the July and November 2018 price increases and lower contribution from activation fees

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TIM Domestic

FSR still affected by Sparkle and new sustainable cash generation culture

Total Fixed Revenues -4.8% YoY excluding Sparkle's International Wholesale business

Fixed Service Revenues (FSR) affected by:

• Sparkle's strategy revision explaining 4.6pp decline YoY (no impact on margins; minor impact expected in 2020)
• Shift to equipment accounting explains another 1.6pp (different offer structure in consumer - modem now paid - and B2B - ICT related sales- )
• reduced washing machine effect (lower activation fees) but cash flow strongly benefiting (lower commissions and provisioning)
• Consumer affected by the decision not to reprice the client base, which benefitted KPIs
• ICT services growing steadily (+13.7% YoY)
• National Wholesale -2.7% YoY due to comparison with very strong Q4 '18. VULA revenue growth still greater than ULL decline
• Sparkle's International Wholesale revenues down 33.2%, following strategy revision (no impact on margins)

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TIM Domestic

Cost cutting accelerated in Q4: -12% YoY

Cost cutting has continued to accelerate, with OPEX down € 279m YoY (-12%, vs -9.3% in Q3) and addressable costs -5.4% (-7.4% cash-view)

Net of deferred costs, on a cash view, the overall reduction reaches € 315m (-12% YoY)

• Interconnection & equipment: benefiting from new strategy for both Sparkle and handsets (e.g. equipment margin +€ 35m in Q4, >€ 90m in 9 months)
• Commercial: positively impacted by the reduced "washing machine" effect and better bad debt
• Industrial: decrease in network and industrial building cost more than offsetting drag from energy prices (€ 13m, no drag expected from 2020)
• G&A: lower costs of consulting, civil building and land fleet management
• Labour: benefiting from FTE reduction (~2.7k exits in 2019)

Capex respecting guidance; NWC outflow improved € 550m YoY

Group recurring NWC improving €550m YoY

▪ Domestic improving € 740m YoY in FY'19 benefiting from improved cash conversion. Additional benefits from: lower inventories (+€ 223m), VAT impact from split payment (+€ 360m), change from billing in advance to billing in arrears in Q1 '18 (+€ 116m), higher trade payables due to better cost management (+€ 122m), lower trade receivables (+€ 48m) TIM Brasil worsening € 205m YoY in FY'19 due to reduction on payment delay (-€ 183m), lower legal and tax provision and higher indirect tax payments (-€ 115m)

Consumer finance JV: innovative credit management to optimize cash generation and increase commercial fire power

Scope	Development and distribution of consumer finance products to purchase TIM's fixed and mobile devices
Benefits	€ 50m cost reduction Credit management effectiveness and reduced credit risk translating into (bad debt) lower bad debt (-€ 50m ca. at run rate) Lower capital absorption bearing debt reduction (-€ 0.5bn ca. in 2020) € 500m Higher commercial flexibility and cross-selling opportunities opening new debt reduction profitability opportunities (personal loans, insurance products)
Partnership structure & governance	51% Santander (SCB), 49% TIM TIM in charge of commercial, SCB of key banking business matters SCB to appoint CEO/CFO, TIM to appoint Chairman/head of sales

Net Debt: a constant fall throughout the year

€ m; (-) = Cash generated, (+) = Cash absorbed, excluding call-outs

MARKET SENSITIVE

Liquidity margin - After Lease view Cost of debt ~3.6%, flat QoQ, -0.4p.p. YoY

(1) € 25,410m is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and fair value valuations (€ 725m), current financial liabilities (€ 776m) and held for sale (€ 84m), the gross debt figure of € 26,995m is reached

CMD 2020

After Lease view shows slightly better trends YoY

Net Debt After Lease

Under the After Lease view, results show slight improvements vs. the IFRS 9/15 view:

• Group EBITDA-AL –2.2% YoY vs. -2.8% in FY (-1.0% YoY vs. 1.6% in Q4)
• Domestic EBITDA-AL –4.4% YoY vs. -5.0% in FY (-3.9% YoY vs. -4.7% in Q4)
• Group Net Debt AL at € 21,893m with a reduction of € 1.4bn from FY 2018, of which € 572m in Q4

Domestic

€ m, organic

274 6,362 (329) 6,033 6,041 5,767 (-4.4%) (-5.0%) FY '18 EBITDA Lease impact FY '19 EBITDA Lease impact FY '18 EBITDA-AL FY '19 EBITDA-AL -3.9% in Q4 -4.7% in Q4

2020: Moving to IFRS 16 after lease, excluding Persidera and INWIT

			REPORTED		Pro-forma Baseline - excluding changes in consolidation area
FY 2019, €m		IFRS 9/15	IFRS 16	After Lease	Δ Persidera	Δ Inwit	2019 baseline After Lease	2019 baseline IFRS 16
Revenues reported	Domestic Brasil	14,081 3,937	14,078 3,937	14,078 3,937	-68	-9	14,001 3,937	14,001 3,937
	Group	17,977	17,974	17,974	-68	-9	17,897	17,897
EBITDA	Domestic Brasil	6,041 1,528	6,404 1,826	5,767 1,458	-36	-226	5,506 1,458	6,308 1,826
organic	Group	7,560	8,222	7,216	-36	-226	6,955	8,126
EBITDA	Domestic Brasil	5,345 2,153	5,708 2,451	5,071 2,083	-36	-220	4,816 2,083	5,618 2,451
reported	Group	7,489	8,151	7,145	-36	-220	6,890	8,061
CAPEX	Domestic Brasil	2,912 872	2,912 872	2,912 872	-5	-59	2,848 872	2,848 872
ex spectrum	Group	3,784	3,784	3,784	-5	-59	3,720	3,720
Net Debt (1) (Group)	Net Debt Debt/Ebitda	23,839 3.2	27,668 3.4	21,893 3.1		-72	21,821 3.2	27,024 3.4

Guidance and final remarks

CONFIDENTIAL -

MARKET SENSITIVE

Equity FCF guidance upgrade despite finishing in '20 sales/EBITDA restructuring INWIT deconsolidated (proceeds not yet embodied)

YoY growth rates, IFRS 16 / After Lease	Group		Domestic		Brasil
	2020	2021-'22	2020	2021-'22	2020	2021-'22
Organic Service revenues	Low single digit decrease	Low single digit growth	Low to Mid single digit decrease	Stable to Low single digit growth	Mid single digit growth	Mid single digit growth
Organic EBITDA AL	Low single digit decrease	Low to Mid single digit growth	Low to Mid single digit decrease	Low single digit growth	Mid single digit growth	EBITDA margin ≥ 40% in '22
CAPEX			~€ 2.9bn / Year		~R\$ 12-12.5bn
Eq FCF AL	Cumulated € 4.5 - presently not included	5.0 bn To be enhanced through inorganic actions	Equivalent to cumulated € 5.0 -	5.5 bn under old accounting standard before INWIT deconsolidation
Adjusted Net Debt AL	<€ 20 bn by 2021, stable in 2022 (<€ 19 bn by 2021, stable in 2022 including INWIT proceeds)		Equivalent to <€ 21.5 bn by 2021 under old accounting standard before INWIT proceeds
Dividend	ordinary: floor of € 1 cent per share, aim to distribute 20-25% of yearly Equity FCF subject to deleverage execution savings: €2.75 cents per share throughout 2020-2022

ESG Guidance (Group)

		2020-'22	2025
Environment	CO2 eq. emissions reduction vs 2019	-30%	-70%	Carbon neutral 2030
	Eco-efficiency		+50%
	Renewable energy % increase of weight on total energy	+5pp / year
Social	Employees engagement	+14p.p.(1)
	Reskilled people	2,000
Governance	Refurbished smartphones	increase	>15%(2)
	KPI Supply Chain	Reinforce ESG KPIs in supply chain Increase eco-materials

▪ TIM is working for the Country: today for the emergency, long term for its modernization

▪ We overdelivered our financial guidance in 2019 and we'll do our best to continue to do so

▪ Equity FCF has been and will continue to be our primary metric

▪ On dividend we are committed to € 1 cent / ordinary share with the ambition to do more subject to deleverage execution

▪ We are determined to improve sustainability and deliver results for all our stakeholders

Reported data, € m, Rounded numbers

CONFIDENTIAL -

MARKET SENSITIVE

Liquidity margin - IFRS 9/15 view Cost of debt ~3.9%, -0.1 p.p. QoQ, -0.5 p.p. YoY

* Without IFRS 16

CONFIDENTIAL -

MARKET SENSITIVE

(1) € 27,338m is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 743m), current financial liabilities (€ 776m) and held for sale (€ 84m), the gross debt figure of € 28,941m is reached

CMD 2020

IFRS 16 – TIM Group main results

Reported data, € m

	Revenues			Service Revenues			EBITDA
	FY' 19 IFRS 9-15	Δ IFRS 16	FY' 19 IFRS 16	FY' 19 IFRS 9-15	Δ IFRS 16	FY' 19 IFRS 16	FY' 19 IFRS 9-15	Δ IFRS 16	FY' 19 IFRS 16
TIM Group	17,977	(3)	17,974	16,306	(2)	16,304	7,489	662	8,151
Domestic	14,081	(3)	14,078	12,588	(3)	12,585	5,345	363	5,708
Brazil	3,937	-	3,937	3,760	-	3,760	2,153	298	2,451
	Q4 '19 IFRS 9-15	Δ IFRS 16	Q4' 19 IFRS 16	Q4 '19 IFRS 9-15	Δ IFRS 16	Q4' 19 IFRS 16	Q4 '19 IFRS 9-15	Δ IFRS 16	Q4' 19 IFRS 16
TIM Group	4,554	(3)	4,551	4,019	(2)	4,017	1,481	171	1,652
Domestic	3,558	(3)	3,555	3,075	(3)	3,072	1,060	94	1,154
Brazil	1,007	-	1,007	956	-	956	423	76	499

Liquidity margin - IFRS 16 view Cost of debt ~4.1%, -0.1 p.p. QoQ

* Including cost of all leases

(1) € 30,596m is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 755m), current financial liabilities (€ 776m) and held for sale (€ 655m) the gross debt figure of € 32,782m is reached

CMD 2020

For further questions please contact the IR Team

CONFIDENTIAL -

MARKET SENSITIVE