Rai Way

Investor Presentation • Mar 14, 2019

2018FY Results Presentation

Rome, 14 March 2019

FORWARD LOOKING STATEMENTS

This presentation contains forward-looking statements regarding future events and the future results of Rai Way that are based on current expectations, estimates, forecasts, and projections about the industries in which Rai Way operates, as well as the beliefs and assumptions of Rai Way's management. In particular, certain statements with regard to management objectives, trends in results, margins, costs, rate of return and competition tend to be forward-looking in nature. Words such as "expects", "anticipates", "targets", "goals", "projects", "intends", "plans", "believes", "seeks" and "estimates", variations of such words and similar expressions, are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Therefore, Rai Way's actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. They are neither statements of historical fact nor guarantees of future performance. Rai Way therefore cautions against relying on any of these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, the impact of competition, political, economic and regulatory developments in Italy. Any forward-looking statements made by or on behalf of Rai Way speak only as of the date they are made. Rai Way undertakes no obligation to update any forward-looking statements to reflect any changes in Rai Way's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

• Aldo Mancino, Chief Executive Officer
• Adalberto Pellegrino, Chief Financial Officer
• Giancarlo Benucci, Head of Corporate Development & IR

Continuous improvement

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14 March 2019

• ➢ Good set of numbers fully in line with expectations
• o Top-line growth supported by CPI and New Services for Rai
• o Further improvement in profitability also supported by continuous focus on efficiencies
• o Further improvement in Net Income, with Industrial Plan target exceeded 1 year in advance
• o 21,96 €/cent dividend proposed to the AGM
• ➢ Refarming process reshaped
• o 2019 Budget Law approved in December 2018 and new PNAF released in February
• o Upcoming decisions of the Authorities and agreement with Rai on technical solutions to define investments for Rai Way
• ➢ Commercial activity with Rai unlocked following Concession renewal and ahead of refarming
• o Services already contractualized exceed the Industrial Plan pipeline and will help to mitigate impact from refarming
• ➢ Business with third parties still hit by MNOs but with supportive growth in the other segments
• ➢ Good momentum expected to continue also in 2019

2019 Budget Law reshaped the Refarming process

• ➢ In order to address the criticalities flagged up on the PNAF 2018 (frequency allocation to local operators, conversion criteria, MUX1 entirely in VHF), MiSE established the "TV 4.0" working group, involving broadcasters and trade associations
• ➢ Incorporating the feedback coming from the working group, 2019 Budget Law approved in December 2018 reshaped the refarming process
• ➢ AGCOM consequently released the updated PNAF in February 2019

Under this scenario, Rai Way would likely manage 3 MUXes for Rai

➢ Still keeping the 30 June 2022 deadline, the 2019 Budget Law rescheduled the main milestones of the process

NEW PROCESS DEADLINES

• o 31 Mar: conversion and awarding criteria (AGCOM)
• o 15 Apr: updated Roadmap (MiSE)
• o 30 June: capacity awarded to national operators (MiSE)
• o 30 Sept: auction criteria to award additional capacity (AGCOM)
• o 30 Nov: auction for the additional capacity (MiSE)
• ➢ Based on the outcomes of the regulatory steps, the definition of the activities for Rai Way will follow agreement with Rai on technical solutions

POTENTIAL AREAS OF INVESTMENT

• o Release of radio-links frequencies
• o Roll-out of new regionalized UHF MUX with a 99% coverage
• o Upgrade to DVB-T2 technology
• o Head-end upgrade
• o Optional further coverage extension of other national MUXes

Thanks to the ownership of active equipment, impact on Rai Way expected to be mitigated

by investments on network

Activity with Rai unlocked following Concession renewal and ahead of refarming

	NETWORK QUALITY	SPECTRUM REFARMING	OTHER
SIGNED	MUX coverage • extension DAB roll-out (I • tranche) DAB roll-out (II • tranche)	3.7–3.8 Ghz Radio • links refarming 3.6–3.7 Ghz Radio • links refarming	New thematic radio • channels broadcasting International • distribution in HD Satellite contribution • network	Capex 50-60 Mln (2018-20) Run-rate 10-11 Mln EBITDA (from 2021)
TO BE ASSESSED/ NEGOTIATED	Further extension of DAB network	Network upgrade to new configuration	Support/enable enhancement of IP distribution	Consistent with Rai's integrated multiplatform distribution strategy and obligation to fulfill Service Contract/Refarming

Range of New services to RAI already secured wider than the pipeline included in the 2015-19 Industrial Plan

• Signal transport services for Rai Sport
• Acquisition of 4th transponder
• Simulcrypt on satellite broadcasting platform
• Transmission/contribution services for special events (RIO2016; Euro Cup 2016; Taormina G7 summit, etc)

Future investments in network upgrade to mitigate impact from refarming

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Further opex efficiencies achieved in 2018

11 14 March 2019 2018FY Results Presentation

% YoY growth

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Core Revenues

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• Revenues from RAI up 2% supported by •
• CPI–link (0.8%) ✓

• Ramp-up of New Services mainly driven by first contribution from MUX coverage extension and activities related to spectrum refarming ✓

• Excluding non-core items, revenues from Third-Party customers down 4,8%, driven by two opposite trends: •

• Headwinds from MNO customers ✓
• Mid-single digit growth from other customers, supported by FWA providers, radio broadcasters and corporations ✓

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• Further reduction of personnel costs, down 1%, mainly driven by full impact on core salary component of early retirement plan •
• Other Operating costs benefitted from efficiencies on all main items, more than offsetting higher energy price •

Adjusted EBITDA evolution

Mln Eur; % Adj. EBITDA Margin

2017FY Δ Core revenues Δ Other revenues Δ Personnel Δ Rents Δ Maintenance Δ Utilities Δ Inter-Company Δ Other Costs 2018FY 118,3 115,5 +1,5 (0,6) +0,8 54,3% 53,4% +0,1 +0,1 +0,5 (0,1) +0,5

Eur Mln, %	4Q 2017	4Q 2018	% YoY	2017 FY	2018 FY	% YoY
Core Revenues	54,1	54,5	0,6%	216,2	217,7	0,7%
Other Revenues & income	0,0	0,1		0,8	0,1
Adj. EBITDA	26,5	27,7	4,3%	115,5	118,3	2,4%
% margin	49,0%	50,8%		53,4%	54,3%
Non recurring costs	-1,3	-0,7		-1,7	-1,2
EBITDA	25,3	26,9	6,5%	113,8	117,1	2,9%
% margin	46,7%	49,4%		52,6%	53,8%
D&A(1)	-7,5	-9,0	19,9%	-32,4	-33,3	2,8%
Operating Profit (EBIT)	17,8	18,0	0,9%	81,4	83,8	3,0%
Net financial income (expenses)	-0,3	-0,2	-39,9%	-1,6	-1,2	-23,2%
Profit before Income taxes	17,4	17,7	1,8%	79,7	82,5	3,5%
Income Taxes	-5,2	-5,2	-0,4%	-23,5	-22,8	-2,9%
% tax rate	29,9%	29,3%		29,5%	27,6%
Net Income	12,2	12,6	2,7%	56,3	59,7	6,2%
EPS	0,0449	0,0461		0,2069	0,2197

• FY18 Net Income up 6,2% at € 59,7m driven by:

• Further improvement in profitability, with margin reaching 54,3% vs. 53,4% in FY17 despite lower benefit from Other Revenues & income
• One-off expenses (€ 1,2m in FY18 vs. € 1,7m in FY17) related to early retirement incentive and advisory fee
• Higher D&A, in particular in 4Q, with comparison impacted by release of provision for risk and charges reported in 2017
• Lower tax rate, with 2018 favorably affected by deferred taxes

Cash flow generation

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• Cash generation before development capex and dividends stood at 84,1Mln

17 14 March 2019 2018FY Results Presentation

Balance sheet

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14 March 2019 2018FY Results Presentation

Dividend proposal

• ➢ Dividend proposal of 21,96 €cent/share (pay-out ratio of 100% of Net Income), with a dividend yield(1) of 4,6%
• ➢ Including the proposed dividend for 2018, approx. € 229 million (29% of the IPO Market Cap.) distributed to the shareholders since listing

• 2019 ADJUSTED EBITDA

➢ Further organic growth

• 2019 CAPEX

➢ Maintenance capex on core revenues ratio expected substantially in line with the 2018 figure

Comparison with Industrial Plan target for 2019

• ➢ Adjusted EBITDA: lower revenues mostly compensated by efficiencies
• ➢ Normalized FCFE(1) : in line, with 2015-19 cumulated figure above target mainly driven by faster rationalization of maintenance capex

14 March 2019

Q&A Session

Upcoming events
Date	Event
18/04/2019	Shareholders' Meeting
14/05/2019	1Q19 results
31/07/2019	1H19 results
14/11/2019	3Q19 results

Appendix

Detailed summary of Income Statement

(€m; %)	4Q17	4Q18	FY17	FY18
Core revenues	54,1	54,5	216,2	217,7
Other revenues and income	0,0	0,1	0,8	0,1
Purchase of consumables	(0,5)	(0,4)	(1,3)	(1,0)
Cost of services	(13,9)	(13,0)	(50,9)	(50,3)
Personnel costs	(13,3)	(13,2)	(47,1)	(46,1)
Other costs	(1,1)	(1,1)	(3,8)	(3,4)
Opex	(28,9)	(27,6)	(103,2)	(100,8)
Depreciation, amortization and write-downs	(9,6)	(8,9)	(34,5)	(33,3)
Provisions	2,1	(0,1)	2,1	(0,1)
Operating profit (EBIT)	17,8	18,0	81,4	83,8
Net financial income (expenses)	(0,3)	(0,2)	(1,6)	(1,2)
Profit before income taxes	17,4	17,7	79,7	82,5
Income taxes	(5,2)	(5,2)	(23,5)	(22,8)
Net Income	12,2	12,6	56,3	59,7
EBITDA	25,3	26,9	113,8	117,1
EBITDA m argin	46,7%	49,4%	52,6%	53,8%
Non recurring costs	(1,3)	(0,7)	(1,7)	(1,2)
Adjusted EBITDA	26,5	27,7	115,5	118,3
Adjusted EBITDA m argin	49,0%	50,8%	53,4%	54,3%

(€m)	2017FY	2018FY
Non current assets
Tangible assets	188,7	180,9
Intangible assets	11,2	12,9
Financial assets, holdings and other non-current assets	0,4	1,3
Deferred tax assets	2,2	3,3
Total non-current assets	202,4	198,5
Current assets
Inventories	0,9	0,9
Trade receivables	72,0	71,5
Other current receivables and assets	5,4	5,8
Current financial assets	0,1	0,1
Cash and cash equivalents	55,9	17,2
Current tax receivables	0,0	0,1
Total current assets	134,3	95,5
TOTAL ASSETS	336,7	294,0

(€m)	2017FY	2018FY
Shareholders' Equity
Share capital	70,2	70,2
Legal reserves	12,2	14,0
Other reserves	37,0	37,1
Retained earnings	57,0	59,5
Total shareholders' equity	176,4	180,8
Non-current liabilities
Non-current financial liabilities	30,6	0,4
Employee benefits	16,4	15,1
Provisions for risks and charges	16,0	17,0
Other non-current liabilities	0,0	0,3
Deferred tax liabilities	0,0	0,0
Total non-current liabilities	63,0	32,8
Current liabilities
Trade payables	37,7	45,6
Other debt and current liabilities	28,9	33,9
Current financial liabilities	30,3	0,3
Current tax payables	0,4	0,6
Total current liabilities	97,3	80,4
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	336,7	294,0

Summary of Cash Flow Statement

(€m)	4Q2017	4Q2018	FY2017	FY2018
Profit before income taxes	17,4	17,7	79,7	82,5
Depreciation, amortization and write-downs	9,6	8,9	34,5	33,3
Provisions and (releases of) personnel and other	(0,7)	1,4	0,3	4,0
funds
Net financial (income)/expenses	0,3	0,2	1,4	1,0
(Retained earnings)/Losses carried forward and	0,0	0,0	0,0	(0,8)
other non-monetary items
Net operating CF before change in WC	26,6	28,2	116,0	120,0
Change in inventories	0,0	0,0	0,0	0,0
Change in trade receivables	6,6	13,1	(5,7)	0,2
Change in trade payables	(2,2)	7,8	(5,0)	7,9
Change in other assets	1,3	0,5	(0,7)	(0,4)
Change in other liabilities	(8,9)	(3,4)	(5,4)	2,7
Use of funds	(0,6)	(0,1)	(1,3)	(0,9)
Payment of employee benefits	(1,2)	(0,6)	(4,0)	(3,2)
Change in tax receivables and payables	0,9	0,0	(0,1)	0,3
Taxes paid	(2,0)	(2,3)	(23,1)	(21,6)
Net cash flow generated by operating activities	20,4	43,3	70,6	105,0
Investment in tangible assets	(8,0)	(12,5)	(14,9)	(24,0)
Disposals of tangible assets	0,1	0,1	0,1	0,1
Investment in intangible assets	(1,1)	(2,2)	(1,4)	(3,0)
Disposals of intangible assets	0,0	0,0	0,0	0,0
Change in other non-current assets	(0,0)	0,0	0,0	(1,0)
Change in holdings	0,0	0,0	0,0	0,0
Change in non-current financial assets	0,0	0,0	0,1	0,1
Interest received	0,0	(0,0)	0,1	0,0
Business combination	0,0	0,0	(7,4)	0,0
Net cash flow generated by investment activities	(9,0)	(14,6)	(23,4)	(27,8)
(Decrease)/increase in medium/long-term loans	(0,1)	(0,1)	(30,2)	(60,2)
(Decrease)/increase in current financial liabilities	(0,0)	(17,9)	(0,3)	(0,0)
Change in current financial assets	(0,0)	0,1	0,1	0,1
Interest paid	(0,0)	(0,2)	(0,9)	(0,7)
Dividends paid	0,0	0,0	(41,8)	(55,1)
Net cash flow generated by financing activities	(0,1)	(18,2)	(73,1)	(115,9)
Change in cash and cash equivalent	11,3	10,5	(25,8)	(38,7)
Cash and cash equivalent (beginning of period)	44,6	6,7	81,3	55,9
Cash and cash equivalent of newly consolidated companies (beginning of period)	0,0	0,0	0,4	0,0
Cash and cash equivalent (end of period)	55,9	17,2	55,9	17,2

14 March 2019 2018FY Results Presentation

Update on main initiatives for RAI

• Contribution network upgrade
• RAI Sport HD
• Transmission services for Expo
• International distribution for RAI Com
• Acquisition of 4th transponder
• Simulcrypt on satellite broadcasting platform
• RAI4 HD (on satellite platforms)
• International TV contribution for RIO 2016
• RAI Sport 2 HD for RIO 2016
• Additional HD channels broadcasting on satellite platforms (full HD offer)
• MUX "Francofono" for Valle d'Aosta region
• Tidying up of frequencies for MUX1 (channel 25 only)
• Satellite contribution network (bandwidth provisioning)
• Transmission services for Euro Cup 2016
• Further tidying up of frequencies for MUX1 in selected areas
• Upgrade of DTH and DTT platforms to transport new radio channels
• Transmission services for G7 Summit in Taormina
• DAB+ roll-out to cover Northern Italy Highways
• DTT extension of coverage in selected municipalities
• Signal transport services for Rai Sport
• Renewal and upgrade of radio link equipment for reallocation of 3.6-3.8 GHz frequencies
• Further DAB+ roll-out
• MUX 2/3/4 coverage extension
• New thematic radio channels broadcasting
• International distribution in HD

Main finalized contracts

➢ The contract follows RAI obligation, as per the Service Contract with the Government, to assure a coverage for the thematic MUXes of at least 95%

SCOPE & TIMING OF THE CONTRACT

• o Extension of 2 / 3 MUXes' DTT UHF network from current ca. 400 to ca. 1,000 sites
• o Progressive activation between 2019 and 2020

FINANCIALS (Run-rate from 2021)

• o CAPEX: 40-50 Mln, depending on final project scope
• o Run-rate contribution:
• 9-11 Mln of revenues
• profitability above Rai Way current level

• o Project IRR >10%, in line with target

• ➢ Compared to Industrial Plan assumptions:

• o Lower contribution in 2019
• o Higher contribution from 2020 due to overall CAPEX exceeding the targets