Telecom Italia Rsp

Investor Presentation • Feb 22, 2019

TIM Group

FY'18 Results and 2019-'21 Plan TIMe to deliver and delever

February 22nd, 2019

Luigi Gubitosi Piergiorgio Peluso

Safe Harbour

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.

The financial results of the TIM Group are prepared in accordance with the International Financial Reporting Standards issued by IASB and endorsed by the EU (IFRS). The accounting policies and consolidation principles adopted in the preparation of the financial results for the FY18 and the 19-21 Industrial Plan have been applied on a basis consistent with those adopted in the 2017 Consolidated Financial Statements.

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 FY 2018 results include the effects arising from the adoption, starting from 1 January 2018, of the new standards IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers). To enable the year-on-year comparison of the economic and financial performance, this presentation shows "comparable" statement of financial position figures and "comparable" income statement figures, prepared in accordance with the previous accounting standards applied (IAS 39, IAS 18, IAS 11, and relative Interpretation). The FY18 results have not yet been verified by independent auditors. Segment information is consistent with the prior periods under comparison.

FY'18 Results and 2019-'21 Plan

1 CEO Introduction

2 2018 Highlights

3 2019-'21 Strategic Plan

4 Outlook

CEO Introduction Where TIM stands today

Longstanding brand value and awareness

Largest customer base in Italy

Most complete "one-stop-shop" offering for B2B

Largest commercial footprint across all segments

Best mobile network quality and fixed backbone infrastructure

Best performing player in the Italian market, resilient to challenging market environment on top line …

Unique assets Unresolved issues

• Resiliency in top-line at the expense of:
• Rising cost structure
• Cash-flow erosion
  • Working capital absorption
  • Increasing need for investments
• Strategic priorities identified by previous plans still not executed
• Employees engagement
• Short term and tactical business conduct
• Siloed, functionally and geographically fragmented organization

CEO Introduction The First 100 Days

Revamp Culture and Organization

Strategic Initiatives

2019-2021 Strategic plan: TIMe to deliver and delever

• Revamp management team: new managers appointed
• Delivery Units launched: focus on execution
• People Accountability
• Network sharing partnership with Vodafone Italia on both active and passive infrastructure
• Signed non-binding memorandum of understanding
• Active sharing: partnership for 5G technologies
• Passive sharing: potential Business Combination of respective passive infrastructures
• Potential partnership in fiber roll-out with Open Fiber
• NDA signed and advisors appointed
• Both parties are exploring all potential options with the objective of maximising synergy realisation, including full business combination
• Persidera: received an additional non-binding offer, started exclusive negotiations
• Execution: discipline, focus and simplicity
• Revamp domestic business: value and quality positioning, modernization, efficiency
• Further develop Brazil: ride growth waves and efficiency plan

CEO Introduction Network Sharing Partnership with Vodafone Italia Principles of the Transaction

Transaction rationale

Transaction structure

• TIM and Vodafone Italia signed a non-binding memorandum of understanding to enter into a new network sharing agreement Current status
• Accelerate and enhance the deployment of 5G technology and use network infrastructure more efficiently
• Expansion of existing passive sharing agreement and potential Business Combination of Inwit and Vodafone Italia passive infrastructure in a single entity
• Active network sharing partnership
• Open architecture approach: competitors welcome
• Co-operation to upgrade their respective fibre transmission networks for mobile backhauling
• No mandatory tender offer on Inwit will be triggered
• Parties will have equal shareholding and governance rights
• Closing subject to all necessary regulatory approvals is expected by end of 2019

CEO Introduction Network Sharing Partnership with Vodafone Italia

Expansion of existing passive sharing agreement and new active network sharing agreement

	Description	Envisaged Benefits
Passive Infrastructure	Expansion of current passive sharing agreement • to a nationwide agreement Potential Business Combination of Inwit and • Vodafone Italia towers infrastructure Combined portfolio of c. 22,000 towers •	Accelerate deployment of 5G • Increased infrastructure mutualisation • Cost / CAPEX optimisation • New revenue streams and site • decommissioning for Inwit
Active Infrastructure	Joint roll-out of 5G infrastructure • Joint ownership of active equipment to remain • with TIM and Vodafone	Accelerate 5G deployment • Wider geographic coverage • Significant OPEX and CAPEX synergies •
Backhauling	Upgrade of respective fiber transmission • networks with higher capacity optic fibre cables	Increased capital efficiency • Improved customer experience, allowing • development of new use cases Faster speed • Lower latency •
		FY'18 Results and 2019-'21 Plan

6

CEO Introduction Potential Partnership in Fiber Roll-out Update on Dialogue with Open Fiber

Rationale of the project	• TIM strongly believes in the value potentially generated by a single state-of-the-art network infrastructure, delivering benefits for all the stakeholders: TIM and OF, market, shareholders, Italian citizens and the whole Country • In light of this, TIM has started a dialogue with OF to explore all the potential options, including commercial partnership, co-investment agreement or full business combination between NetCo and OF
Status and next steps	• In order to analyse a potential deal between TIM and OF, the following actions have been taken: — Confidentiality agreement has been signed and advisors have been appointed by both parties — Various teams, including financial advisors, external technical advisors and selected corporate functions, are working already in order to support TIM and OF — Induction presentations have been already organized and activities will proceed in the forthcoming weeks to refine analyses on the nature, structure and implications of the various options available for a potential deal between TIM and OF
Regulatory framework supportive	• In December 2018, the Parliament approved the "Collegato Fiscale" aimed at encouraging the development of investments in ultra-broadband network infrastructure • Most stakeholders have expressed interest and support for a single network

FY'18 Results and 2019-'21 Plan

1 CEO Introduction

2 2018 Highlights

3 2019-'21 Strategic Plan

4 Outlook

FY'18 Main Results FY'18: Stable revenues and growing Operating Free Cash Flow, despite challenges

Organic data (1), €mln

xxx Group service revenues +0.4% on a full year basis: Brazil growing mid single digit, domestic almost flat, overperforming competitors

Market dynamics and non-linear items impacting 4Q domestic service revenues and EBITDA

FY EBITDA less CAPEX growing double digit excluding license payments

Stable Group net debt despite payment of a total of €513m on licenses in 2018 (€477m for 5G in Italy) and NWC absorption (-€964m(3))

(1) Excluding exchange rate fluctuations & non recurring items; before IFRS 9, 15, 16

(2) Adjusted EBITDA growth: excluding non-linear items (€195m FY and €105m 4Q: €45m liability reversal, €26m vendor rebates, €34m accounting adjustments). See annex

FY'18 Results and 2019-'21 Plan

(3) CAPEX and NWC net of License: 2017 €630m, 2018 €2,399m for Italian 5G (of which €477m paid) and €36m for Brazilian spectrum clean up (4) Adjusted

FY'18 Domestic Wireline 4Q FSR +1.2% yoy, driven by consumer ARPU growth, business, wholesale

Consumer

• Positive net effect on revenues from two price increases (€1.95 net of VAT in July and €1.2 in Nov) led to strong ARPU growth at the expense of line losses
• Head of Business now in charge of Consumer. Focus on upselling rather than repricing. Line loss trend improving from Q1 as a result
• TIM Vision reaching ~1.7 mln registered clients

Business

• Benefiting from quality perception and pricing power. Growing in 4Q as well as on a FY basis
• ICT grew 15% YoY, strong contribution from Cloud services to PA, growing further in 2019

ICT Revenue (€ mln)
168	188	191	217
1Q'18	2Q'18	3Q'18	4Q'18

Wholesale

• Domestic WHS grew 1.7% yoy in 4Q despite 3.2% drag from regulated prices (expected to fade). Strong growth in VULA demand more than offsetting decline in LLU
• Sparkle revenues stabilized in 4Q

Wireline Revenues

FY'18 Domestic Wireline Strong fixed ARPU growth from FTTx conversion and repricing

Strong migration to fiber: TIM retail fiber subs +47% yoy (42% penetration on BB customer base, +14 p.p. yoy); wholesale fiber lines +129%

Consumer ARPU growth accelerating to 8.7% yoy (+6.4% in Q3) with BB ARPU +15.4% yoy (+11.8%) positively impacted by repricing actions during 2018 and offsetting the 28-days to monthly billing effect

Market is starting to follow TIM's rationality: strong promos cooling down, several price increases in recent weeks

Peak impact on line losses in 4Q churn related. January on an improving path thanks to end of 28-day billing noise and competitors' price increase

ARPU - Pricing trends(3)

Line Losses (2)

Line losses impacted by repricing and voice-only churn (~ -200k in 4Q'18), progressively easing in 1Q 2019

FY'18 Domestic Mobile TIM best-in-class in defending its customer base from new entrant/MVNOs

4Q mobile service revenues affected by ARPU pressure (lower out of bundle, very low entry level prices) Market prices on customer acquisition now on an increasing trend

Positioning on quality to be enhanced further in the new plan

FY'18 TIM Brasil Strong Results Rewarding a Year of Many Challenges in the Brazilian market

Organic Performance, R\$mln, Rounded numbers

FY'18 SERVICE REVENUES EBITDA EBITDA-CAPEX FY'17 FY'18 4Q'18 4Q'17 4Q'18 Mobile ARPU R\$ 23.7 in 4Q'18 +8% YoY 12 Months Postpaid Net Adds +2.4 Mln (CB: 20.2 Mln) TIM Live ARPU R\$ 82.1 in 4Q'18 +14% YoY 12 Months TIM Live Net Adds +75k (CB: 467k) FTTH HH (1) +1.1Mln vs YE'17 Mobile 14,703 +4.5% 15,369 Total 15,474 +4.7% 16,205 3,867 4,003 5,894 6,505 1,758 1,853 +10.4% +5.4% 1,746 2,528 97 444 +44.8% +357.7% Total 4,075 +3.7% 4,225 +3.5% TIM Live Revs R\$ 383 mln in FY'18 +39.4% YoY Service Revenues up 3.7% YoY in 4Q and +4.7% in 2018 MSR increased 3.5% YoY in 4Q and +4.5% in 2018 TIM Live Revenues up by 37.5% YoY in 4Q and +39.4% in 2018 Solid network development: ▪ 510 new cities out of 1,426 with 700 Mhz ▪ 9 new cities out of 14 with FTTH in 2018 2018 Guidance delivered

FY'18 Domestic OPEX: one-offs affect YoY comps; action taken to improve underlying performance

Commercial: higher COGS and commissioning to support revenue generation, higher bad debt and credit costs(1). New plan envisages new commercial structure

Industrial: energy efficiency on industrial sites

G&A, IT: positive impact of "zero-based" approach and real estate space reduction (sqm -500k)

Labour: headcount decrease related to Art.4, partially off-set by lower Solidarity impact vs. '17

Other costs comparison heavily impacted by one offs: e.g. liabilities reversal €112m in '17, vendor rebates €83m

FY'18 Domestic CAPEX on a decreasing trend. 5G spectrum provides competitive advantage

UBB coverage extended in line with Plan. Further expansion will now continue in synergy with 5G (FWA)

4G access CAPEX will benefit from up-and-coming VRAN technology

Heavy traffic growth fully supported

Procurement optimization on the way: number of suppliers and unitary costs on a falling path expected to accelerate

5G spectrum auction (€2.4bn) creating a 2-tier market, with TIM playing in «premium league»

FY'18 Results and 2019-'21 Plan

FY'18 TIM Group Net financial position affected by license payments and NWC absorption

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

FY'18 TIM Group Key Take-aways on 2018

A challenging year

Mixed results

Time to turnaround

• Competition: Iliad launch, competitors reaction to Iliad's launch, aggressive fiber promos
• Comparability: positive 2017 and adverse effect of non linear items
• Regulatory: 28 days billing roll-back, wholesale prices, roam-like-at-home
• Stable FY'18 revenues, thanks to Brazil's growth and resilience of domestic business
• EBITDA impacted by OPEX dynamics, non-linear items and commercial push
• Net Debt: stable on 2017, despite €0.5bn spectrum payments (5G in Italy) and NWC absorption
• Early signs of market dynamics improving and competitive intensity easing
• Time to tackle unresolved issues in TIM
• Time to deliver and delever

FY'18 Results and 2019-'21 Plan

1 CEO Introduction

2 2018 Highlights

3 2019-'21 Strategic Plan

4 Outlook

2019-'21 Strategic Plan: TIMe to deliver and delever 2019-'21 Plan

	Revamp domestic							ROIC
	Commercial Quality positioning tion			Technology Modernization, simplifica and intelligence			Boost return on capital invested (stabilize revenues,
Execution		Operations Quality and reliability on all customer touchpoints		Efficiency Structurally leaner cost base			cut costs and NWC absorption) • Optimize invested
discipline, focus and simplicity		Further develop Brasil						capital (new industry paradigm)
		Commercial Growth waves on Consumer postpaid, Mobile B2B, Digital		Infrastructure Fiber deployment acceleration, global deals for network access	Efficiency Continuous improvement			Delever

Commercial – Consumer: «Quality is the name of the game»

Our assets		Key Strategic Priorities	KPIs evolution
Network quality	New quality offer	• From "number of GB" to "quality of service and speed" on mobile (premium connectivity on video, gaming) • Premium positioning with "best speed and security" concept on fixed (modular adds-on, family convergence, modem and home devices) • From repricing to continuous upselling based on valuable services (e.g. security, 5play, priority network, assistance)	UBB penetration(1), % +35 pp. 45% 2018 ARPU	80% 2021
Scale	Channel simplifi cation	• Partners' consolidation with focus on mono-brand and stricter commissioning to maximize NPV • Flexible tactical alternative channels (e.g. telesales)	++ 2018	2021
Technical capabilities	Caring evolution	• Unified fixed-mobile and content caring • Scale-up self care (i.e. IVR, self SMS, APP), monetize human caring • Process efficiency (e.g. automation, process revision, offer simplification)	Customer Base - 2018	2021

Commercial – Business: evolution towards a solution provider

Large Evolve towards a solution provider

SME

Evolve offer and proposition towards "one stop shop"

Reinforce operating model

Key Strategic Priorities

– Maintain leadership in connectivity (e.g. FWA, flexible connectivity packages, premium profiles based on network slicing, smart manufacturing)

– Step-up from carrier to service manager (e.g. vertical app smart cities, public safety), hyperconvergence and multi-cloud

• Boldly entering ICT arena (partnerships and potential M&A)

• 100% IP-based offer: fiber connection and only VOIP cloudbased services
• "Real convergence": single number, single invoice including managed services / unified communication layer
• Tangible value added services (e.g. security, office assistance, insurance) and contiguous market offerings (e.g. ICT, energy)
• Reskilling direct sales force as a core asset
• Contract-to-delivery time reduction, streamlining and further automating provisioning and activation processes

21

Commercial – Wholesale: maintain access market leadership, grow in not regulated

Key Strategic Priorities		KPIs evolution
• UBB take-up by new pricing models and service rules (e.g. pay per use UBB for vacation houses) • OLOs(1) Fast access to services especially for non-infrastructured	Not Regulated Revenues, % on Total Wholesale Revenues
(e.g. temporary offering for exchanges not yet activated)		+4 pp
• Expand value chain offering (e.g. internal house wiring on demand)	19%	23%
• Complete remaining FTTC coverage and continue to develop FTTH access	2018	2021
	Fiber accesses
• Connectivity and big deals:	(VULA + BTS NGA, m)
– Leverage new network capabilities (e.g. automation, API) to allow greater flexibility and faster time to market for customers	+2x 2.1	4.1
– Introduce new pricing model based on volume and geographical areas	2018	2021
• Digital Services and mobile: – Evolve core offering portfolio (e.g. IoT wholesale, FWA) and introduce new cloud services (e.g. VoIP hosting)	GEA(2) direct pre-sale leadtime, # days	GEA indirect pre-sale leadtime, # days
• Improve customer experience with new digital channels and process simplification	-30%	-60%
• Improve sales effectiveness through better billing, targeted marketing campaigns	2018 2021	2018 2021
		FY'18 Results and 2019-'21 Plan

Regulated Defend access market and maintain UBB coverage leadership

Not regulated Grow in connectivity, dark fiber and boost sales effectiveness

(1) Other Licensed Operator (2) Gigabit Ethernet Aggregator service

Technology – Modernization, simplification & intelligence

	Key Strategic Priorities	KPIs evolution
Modernization & innovation as business enablers	New 5G and vRAN(1) • stacks, complete migration to all-IP for both core and transport • Automation of activities at scale on target platforms (5G, vRAN) and tactically on legacy platforms • OSS/BSS architecture renewal, completing to build a new digital and convergent "operating system"	Data centers, # cumulated	-8 23 2018	15 2021
Simplification and decom missioning to unlock savings	• Stop investments on legacy platforms as of 2019 • Decommissioning of legacy platforms, equipment and applications as soon as possible • Consolidation of ICT infrastructure and transformation into hybrid-cloud	IT applications, # cumulated	-279 617 2018	338 2021
Intelligence for long term opportunities	• Shift from technical to ROI-based coverage planning • Expose data, network capabilities and services to all LoB and selectively to 3rd parties • Drive TIM-wide Advanced Analytics roadmap bringing 3-4 new use cases at scale per quarter	Event management automated, %	+20 pp 2% 2018	22% 2021

23

Efficiency – Cost Base Resizing: Main Optimization Initiatives and Impacts

	Addressable baseline	Main initiatives	Impact
	2018 € mln	• Sales channels optimization and partners consolidation	OPEX view (IAS)
Commercial	1,511(2)	• Self caring (i.e. IVR(1), APP), back office automation and artificial intelligence	-8%
		• Equipment vendor management optimization
		• Improvement of credit management practices and processes
		• Processes redesign and automation to improve on-field productivity	2018
Industrial	1,009(3)	• Energy efficiency (incl. decommissioning, network virtualization, co-generation)		2021
G&A	523	• Office space rationalization and disposal of non-strategic buildings	Cash view -14%
		• Facility management optimization
Labour	2,537	• Workforce rightsizing (incl. de-layering, functions consolidation, etc.), leveraging on early retirement instruments
	5,126(4)	~60%(5) of total 2018 OPEX	2018	2021
	(1) Interactive Voice Response (3) includes capitalized costs (e.g. provisioning)	baseline (EUR 8,618 m) (2) Excludes €432 m of COGS not addressable and includes capitalized costs (e.g. commissioning) (4) Includes -€454 m of other costs (e.g. capitalized labour)	FY'18 Results and 2019-'21 Plan (5) Remaining ~40% includes: interconnection, equipment and COGS	24

ROIC-driven focused CAPEX Allocation 2019-'21 Plan

	Baseline	Main initiatives	Impact
Commercial	$2018, \in \text{mln}$ 618	Customer equipment (e.g., CPE) service and procurement excellence
Capacity	1,079	Sustain premium quality positioning on Fixed and Mobile Consolidate buildings and improve energy footprint Dismiss legacy and modernize platforms increasing automation	~2.2	~23.0	$-0.2$ ~23.0	~2.0
Fixed	714	Complete FTTC deployment Accelerate FTTH coverage prioritizing areas with higher take-up rate
Mobile	381	Deploy 5G, improve 4G coverage with a ROIC-driven approach Progressively adopt vRAN at scale
IT & Other	442	Accelerate digital transformation and processes improvement Complete OSS and BSS renovation and Data transformation Consolidate Data Centers infrastructure	2018	2019	2020	2021
	3,235				FY'18 Results and 2019-'21 Plan		25

TIM Brasil: Key Strategic Priorities for 2019-2021 Plan 2019-'21 Plan

Areas	Key Strategic Priorities
Growth waves Consumer	• Mobile Pre Paid – offer simplification to improve CEx while evolving digital channels • Mobile Post Paid consumer ("the controle wave") – Growth based on a "Mobile Challenger" approach pushing migration and upselling – Leverage of 4G coverage leadership benefits and loyalty initiatives	ARPU Blended (R\$)	22.4 2018 2021	Mid to high single digit growth (CAGR)
Mobile B2B	• Gain relevance in overall Business revenues leveraging on: – Revision of value proposition and more convergent approach offering E2E solutions – Increase in efficiency and sales productivity	Churn (%)	2018 2021	Double digit decrease
Digital	• New revenues opportunity from being a platform provider (analytics, BD, mobile adv, …) • Increased role in IoT growing ecosystem (beyond connectivity) • Content offer aggregation to support mobile+fixed service revenue growth	bn ~1 Reais	Opportunity size by 2021 >30	m lines
Infrastructure deployment	• Fiber deployment acceleration (backbone, backhaul and FTTH), with FTTH offer in selected regions • Launch of global deals for network access, according to spectrum mix evolving towards significant use of 4G vs. 2G and 3G by 2021	FTTCITY FTTH (m HH)	601 2018 1.1 2018	>1,500 2021 >4 2021
Efficiency Plan	• Successful efficiency plan still leveraging TIM results • Digital transformation acceleration in customer facing activities and internal processes • Continuous margin improvement, reaching more than 40% in 2020, due to rigid cost control (OPEX growth below inflation)	Human Interac tions (%)	-60% 2018	2021
			FY'18 Results and 2019-'21 Plan

FY'18 Results and 2019-'21 Plan

1 CEO Introduction

2 2018 Highlights

3 2019-'21 Strategic Plan

4 Outlook

Outlook Outlook – pre IFRS 9/15 and IFRS 16

	Group		Domestic		Brasil
YoY growth rates	2019	2020-21	2019	2020-21	2019	2020-21
Organic Service revenues	Low single digit decrease	Low single digit growth	Low single digit decrease	Almost stable	+3% - +5% (YoY)	Mid single digit growth
Organic EBITDA	Low single Low single digit decrease digit growth		Low to Mid single digit decrease	Low single digit growth	Mid to High single digit growth (YoY)	EBITDA margin ≥ 40% in 2020
Capex	--		~EUR 3 bn / Year		~R\$ 12.5 bn cumulated
Eq FCF	Cumulated ~EUR 3.5 bn. To actions presently not included	be enhanced through inorganic		--	--
Adjusted Net Debt	~EUR 22 bn by 2021			--	--
	• IFRS 9/15 impact over coming years roughly stable vs. 2018. • IFRS 16 impact: Net Debt / EBITDA After Lease adoption implies no impact on leverage ratio based on preliminary analysis • Figures @ avg. Exchange Rate actual 4.31 Reais/Euro
					FY'18 Results	and 2019-'21 Plan

28

Q&A Session

Annex

Annex TIM Group IFRS 9-15 impacts

As from January 1, 2018, IFRS 9 (Financial Instruments) and IFRS 15 (Revenues from Contracts with Customers) have to be applied. In order to allow comparison of the results for FY'18 with those for the previous year, financial statements data are also prepared under previous accounting principles

IFRS 9 impacts the determination of expected losses on trade receivables and other financial assets (change from the incurred loss model provided by IAS 39 to the expected credit loss model).

IFRS 15 impacts the revenue recognition of fixed and mobile offerings as well as the recognition of relevant contractual costs, without any impacts on cash flows.

	Revenues			Services Revenues				EBITDA
	FY '18 old IFRS	D IFRS 15	FY '18 new IFRS	FY '18 old IFRS	D IFRS 15	FY '18 new IFRS		FY '18 old IFRS	D IFRS 9 - 15	FY '18 new IFRS
TIM Group	19.109	(169)	18.940	17.561	(182)	17.379		7.713	(310)	7.403
Domestic	15.185	(154)	15.031	13.834	(183)	13.650		6.221	(266)	5.955
Brazil	3.959	(16)	3.943	3.763	0	3.763		1.511	(44)	1.467

Annex TIM Brasil - Outlook

GOALS	DRIVERS	SHORT TERM TARGETS (2019)	LONG TERM TARGETS
Revenue Growth Sustainability	• Further improve mobile ARPU • Expand Residential BB Revenues contribution • Tap B2B opportunity	Service Revenues Growth: 3% – 5% (YoY)	Service Revenues Growth: Mid single digit (CAGR '18-'21)
Improve Profitability	• Accelerate digitalization efficiencies • Maintain zero-based approach and traditional initiatives • Improve risk management models	EBITDA Growth: Mid to High single digit growth (YoY)	EBITDA Margin: ≥40% in 2020
Infrastructure Development	• Additional Capex to grow fiber and improve mobile capacity	Capex on Revenues: Low 20's	Capex: ~R\$ 12,5 bln (cumulated '19-'21)
Expand Cash Generation	• Increase cash flow from operations • Continue with debt and tax rate optimization	EBITDA-Capex on Revenues: >15%	EBITDA-Capex on Revenues: ≥20% in 2021

Annex 2018 Domestic EBITDA performance net of non-linear items

Organic Data
$mln \in$	FY'17	FY'18	Δ	Δ ΥοΥ	4Q17	4Q18	Δ	Δ ΥοΥ
Domestic EBITDA organic	7,050	6,629	(421)	$-6.0%$	1,778	1,544	(234)	$-13.2%$
Non-linear items Liability reversal (one-off) Vendor Rebates Accounting adjustment	$-216$ $-112$ $-104$	$-21$ $-21$	195 112 83		$-71$ $-45$ $-26$	34 34	105 45 26 34
Domestic EBITDA net of non-linear items	6,834	6,608	(226)	$-3.3%$	1,707	1,578	(129)	$-7.6%$
Group EBITDA organic	8,404	8,121	(283)	$-3.4%$	2,179	1,963	(216)	$-9.9%$
Group EBITDA net of non-linear items	8,188	8,100	(88)	$-1.1%$	2,108	1,997	(111)	$-5.3%$

Annex EBITDA-CAPEX (ex licenses) growing, but Equity Free Cash Flow affected by DNWC

		TIM Group		Domestic
mln €	2017	2018
EBITDA	7.790	7.713
CAPEX	(5.701)	(6.558)
Licences	(630)	(2.399)
EBITDA - CAPEX ex licenses	2.719	3.554
EBITDA - CAPEX	2.089	1.155
∆ WORKING CAPITAL	407	922
NET OPERATING FCF	2.496	2.077
Add back Licences Domestic	630	477
Add back Brazil Spectrum Clean-up installments NET OPERATING FCF ex licenses	257 3.383	36 2.590	•		Lower capex
Financial Expenses	(1.572)	(1.302)
Cash Taxes Other impacts (FX)	(1.113) 266	(739) 29
Eq FCF	964	578
					deferred costs
license D WC licenses payments	non recurring	2018
922 – ( 2,399 – 513) -	408	-1,372 = -1,372
-964

NWC absorption net of contribution

• ΔNWC inflow thanks to licence payment over 5 years and EUR 408m non cash one offs items (mainly restructuring costs)

• Group Recurring Operating ΔNWC absorbing EUR 1,372m
• Lower capex
• Absorption in domestic due to personnel exit (Fornero Law), VAT split payment, billing and deferred costs

		Recurring	Operating ΔWorking Recurring	Operating WC	Capital (Group)
license non payments recurring		2018 2018	2019 2019	2020 2020	2021 2021
	=	-1,372 -1,372

mln €	2017	2018
Operating WC & Other	573	946
5G License		(2.399)
5G License paid in the year		477
Non recurring items (not paid)	(883)	(408)
Recurring Operating WC	(310)	(1.384)

Inventory	(41)	(90)
Trade Receivables	138	(74)
Trade Payables	56	(160)
Other Operating Payables/Receivables & Funds	(463)	(1.061)
- o/w Litigations & Settlements	(95)	-
- o/w Payables vs. Personnel	-	(71)
- o/w Personnel Exit (Fornero Law)	(166)	(267)
- o/w VAT split payment	-	(373)
- o/w Litigations & Settlements	-	-
- o/w Billing (1)	-	(114)
- o/w Deferred Costs & Revenues	(346)	(194)

from licence deferred payment Improvement expected over time as some one off items will not be repeated (e.g. billing, VAT split payment) and action has been taken

Focus on Domestic

Annex Well diversified and hedged debt

€mln

Maturities and Risk Management

7.62 years (bond 7.75 years only)

Fixed rate portion on gross debt approximately 71%

Around 33% of outstanding bonds (nominal amount) denominated in USD and GBP and fully hedged

Cost of debt: ~4.4 %

N.B. The figures are net of the adjustment due to the fair value measurement of derivatives and related financial liabilities/assets, as follows:

• the impact on Gross Financial Debt is equal to € 1,540 mln (of which € 215 mln on bonds);

• the impact on Financial Assets is equal to € 815 mln.

Therefore, the Net Financial Indebtedness is adjusted by € 725 mln

FY'18 Results and 2019-'21 Plan N.B. The difference between total financial assets (€ 4,162 mln) and C&CE and marketable securities (€ 3,043 mln) is equal to € 1,119 mln and refers to positive MTM derivatives (accrued interests and exchange rate) for € 935 mln, financial receivables for lease for € 125 mln, deposits beyond 3 months for € 0 mln and other credits for € 59 mln.

(1) Includes € 545 mln repurchase agreements that will expire in January 2019 for € 450 mln and in March 2019 for the remaining amount (2) € 27,341 mln is the nominal amount of outstanding medium-long term debt. By adding the balance of IAS adjustments and reverse fair value valuations (€ 781 mln) and current financial liabilities (€ 1,310 mln), the gross debt figure of € 29,432 mln is reached

Annex

Sparkle: Multiple Strategic Options for Transformation and Growth

Our Vision	Key Strategic Priorities	Main KPIs
New Infrastructure to Expand Footprint	• Scale up Sparkle infrastructure presence and Italian role in the Mediterranean and Africa/Middle East: – Leverage on huge volumes from Asia/ Sub Saharan to Europe – New markets (KSA/ Gulf Region) • Investing in two significant projects: Mediterranean Cable (Blue: Sicily-East Med)/ Red Sea cable (Red: Aqaba-Djibouti)	• Total Capex: EUR 211 m • ~6,000 km submarine cable • Up to 120/ 160 Terabit upload • Ready for service in 2021 • Payback @2028 (12% IRR)
Growth in Enterprise Networking & Cloud	 Capture the opportunities of cloud/ SD-WAN technologies – Customer experience-focused platform – New PoPs – Sales channel expansion  Expand current South Europe DC facilities and create new DC hub in Caribbean  Evaluate partnerships to accelerate growth	• >2x Connectivity, DC and Cloud revenues • ~10x # of customers • ~3x PoPs
Efficiency in Voice, Develop Mobile Opportunities	 Automate Voice process – Clearing and settlements through block-chain based applications  Progressively expand the high-growth A2P message market – LatAm & Africa/MENA as target geographies  Global Roaming through the eSIM technology	• ~3x Mobile revenues growth

Annex Ultra Broadband network

• ~19.4 mln HH passed FTTC
• ~113,5 k cabinets passed
• ~429 k FTTH OTB installed
• 2,676 cities with commercial active service, o/w:
• 2,558 cities FTTC

• 118 cities FTTH/FTTC

• >22,6k LTE nodes

• 7,401 LTE cities with commercial active service, o/w:
• 1,635 with 4Gplus
• 12 cities with 4.5G

Organic data(1), €mln, % YoY

Annex FY'18 service revenues: Brazil, domestic wholesale and business, INWIT grew yoy

• Mobile: service revenues resilient until 3Q and slowing in 4Q due to Consumer ARPU decrease and price competition from other players and the new entrant. Competitive intensity peaked in 3Q, more rationality since YE 2018

• Fixed: retail service revenues up +1.3% for re-pricing activities and ARPU increase.

• Business: positive contribution from ICT, cloud offsetting the competitive dynamics of traditional services

• Consumer: growth in fixed offset by mobile
• National Wholesale: fiber services growth (VULA) offset copper decrease
• Sparkle: revenue mix shifting towards higher margin services, from voice to data

• Inwit: revenue increase driven by volumes for higher tenancy ratio (1.9x vs. 1.8x) and +1.4k new small cells

• Mobile: MSR increased 3.5% YoY in 4Q and +4.5% in 2018, following customer mix evolution towards higher ARPU customers (post-paid and controle)

• Fixed: revenue growth supported by TIM Live Revenues up +39.4% in 2018

For further questions please contact the IR Team