Telecom Italia Rsp

Earnings Release • Nov 8, 2018

TIM Group

3Q 2018 Results November 9th, 2018

Amos Genish 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.

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 and operating data have been extracted or derived, with the exception of some data, from the TIM Group Interim Management Report at 30 September 2018 which have been prepared in accordance with the International Financial Reporting Standards issued by IASB and endorsed by the EU (IFRS) and are unaudited.

The first nine months of 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 for the first nine months of 2018 and 3Q2018 , 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).

3Q'18 Results

1 Highlights and Main Trends

2 Financial Update

3 Closing Remarks

3Q'18 Main Results Resilient top line, cash flow growth

Organic data (1), €mln

Stable group revenues: Italy meeting well all challenges, Brazil confirming steady growth

Stable group clean EBITDA: improvement on Domestic, positive high single-digit performance in Brazil

Strong growth in EBITDA less CAPEX

Group net debt down by more than €1bn YoY

(1) Excluding exchange rate fluctuations & non recurring items

3Q'18 Results (2) 3Q'17 Domestic Organic Ebitda excludes 28 mln € of liability reversals. This one off item impacted 2Q'17 by 39 mln € and 4Q'17 by 46 mln €. No further YoY impact from this item after 4Q'18 (3) Excluding 630 mln € GSM Licences in 3Q'17

3Q'18 Domestic Domestic transformation is building value

Best in Class Customer Engagement Leadership Positioning Agile Organization Cash-Flow Generation DigiTIM pillars Consumer: Building Sustainable Premium Main 3Q Domestic Achievements Unlimited mobile data for value customers strengthening convergence New consumer app (with self care messaging) Smart-life suite IoTIM Improved mobile customer journey Accelerated fiber migration Optimized B2B sales model More-for-more business portfolio Massive adoption of cyber-security services Business: Implementing IT Company Model Network simplification: decommissioning started Keeping the pace on network automation Intelligence: progress in big data & API exposure Increased technician productivity Pervasive FTTx approach Increased digital experience in assistance ▪ +1.2m retail FTTx lines ▪ +3pp ICT / total business revenues (from ~18% to ~21%) ▪ +394k ICT clients (from 135k to 529k), 43% penetration ▪ Pilot project on 7 central offices ▪ 34 IT systems shut down ▪ >40 network functions virtualized ▪ >100 APIs already implemented ▪ +8 big data use cases ▪ Productivity: +1.8 jobs/day per technician (1) ▪ +1.1 mln wholesale FTTx lines ▪ + 23% wholesale non-regulated revenues Operational Improvements 9M '17 9M '18 +14% Strong growth in Domestic EBITDA-CAPEX Financial Results (KPIs, D YoY) Shaping Convergent Digital Platform Reinforcing Best Italian Infrastructure 2,725 3,110 Commercial Technology Access

3Q'18 Domestic Wireline Improving service revenues and ARPU

Wireline Revenues

3Q'18 Domestic Wireline Healthy FTTx conversion continues

Retail and wholesale customers are migrating to fiber and FTTx adoption is growing:

• +12% customers upgraded to FTTx (QoQ)
• +2.3m total FTTx lines YoY, o/w +1.2m retail

+16 p.p. YoY retail FTTx penetration on total broadband customer base

TIM Connect Black

• Internet up to 1000 Mbps
• Modem included

TIM VISION

• Unlimited calls
• Unlimited ITZ Voice F2F (EU and North America)
• Mobile: 1000 minutes and 5 Giga

(1) Retail VoIP included (2) VoIP excluded

increased > 40% of consumer broadband base

Line Losses (2)

Line losses continued to be impacted by repricing, increase in competitive intensity and voice-only erosion

6

3Q'18 Domestic Mobile Limited revenue impact from a complex quarter

TIM 100% F-M package: 600k activations to-date TIM Party loyalty program: 1.5 mln signed-up (~350k convergent) since launch in June. Unlimited data for F-M customers Loyalty & Convergence Consumer Upgraded customer app providing new services (e.g. TIM Pay) and access to customer care via messaging TIM PERSONAL Business Portfolio Offers simplification and more-for-more approach and relevant win-back deals on enterprise customers Solid Performance Stable service revenues YoY with slight improvement QoQ. Positive 3Q MNP results

Mobile Revenues

3Q'18 Domestic Mobile

New entrant effects minimized through proactive commercial approach

3Q'18 TIM Brasil Steady growth in top line and EBITDA

Organic Performance, R\$mln, Rounded numbers

Focus on 5G

5G will redefine competitive landscape, strengthening TIM position

5G spectrum leadership further enables seamless experience of TIM ultra broadband accessagnostic service all-over Italy

Enhanced Ultra Broadband Access

• FTTH complemented with 5G FWA on 3.7GHz and 26GHz where convenient
• FTTC complemented or improved - hybridized with 3.7GHz 5G FWA
• 700MHz to provide highspeed performances everywhere

FWA @ 3.7Ghz also from already existing mobile macro sites (~20k)

Spectrum Leadership

3.7GHz 80MHz 26GHz 200MHz

• 4x the bandwidth of Wind and Iliad in 3.7GHz
• Capability to stimulate/cope with future traffic growth
• Best suited for smart industry 4.0 and FWA services

700MHz 10MHz • "Deep indoor" and strong mobile broadband QoS in rural

• areas
• Strong positioning on automotive and public safety verticals

Lower Costs, Higher Quality, New Services

• Lower industrial cost of data traffic
• Superior throughput, low latency and improved capacity (n. of served devices x square km)
• Enhanced mobile broadband to differentiate retail offer
• Competitive advantage in new verticals for industrial automation
• 5G pilots in 4 cities, 55 partners, 70 use cases

3Q'18 Results

1 Highlights and Main Trends

2 Financial Update

3 Closing Remarks

3Q'18 Domestic OPEX: stable YoY trend despite increased commercial activity

Sales-related costs up YoY, supporting commercial performance in a very competitive environment. Caring cost sub-cluster showing some improvement

Industrial flat YoY, supported by lower energy costs

Rigorous cost discipline and zero-base approach on G&A and IT, also supported by YtD real estate space reduction of 380k sqm

Labor cost savings driven by FTE reduction of 3.2% YoY (down 1,464 YoY; domestic workforce 3Q18 44,260 vs 45,724 3Q17)

Other costs flat YoY excluding one-offs

(1) Associated to sales of receivables

(2) Capitalized costs are essentially those associated with delivery and activation of fixed lines, with directly related IT and Network costs, which are smoothed on an average 5-yr basis

(3) 3Q'17 Organic Domestic Opex is changed to €2,028 mln (€1,999 mln plus €28 mln of liability reversals)

9M'18 Domestic Capital intensity reduced, ultra broadband coverage improved

• Ultra broadband coverage extended in line with Plan
• Fixed access YoY reduction derived from having reached ~80% FTTx coverage, which will now continue in synergy with 5G (FWA)
• 4G access reduction will be rebalanced by up-and-coming VRAN technology and 5G roll-out
• Heavy traffic growth fully supported
• Procurement transformation in progress: number of suppliers and unitary costs reduced

9M'18 TIM Group Operating free cash flow generation

Reported, €mln

Δ operating working capital differences driven by:

• Roll-down effect of cash costs: 0.4bn €
• VAT change-in-law impact (split payment): 0.3bn €
• Early retirement cash-out and other: 0.2bn €

Most of these impacts are specific of 2018 only

9M'18 TIM Group Net financial position* has been reduced from 3Q'17 and YE'17

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

Focus on 5G

5G auction payments are back-end loaded in 2022, and will not increase group net financial position until cash-out occurs

MHz	700	3600-3800*	26000	800	900	1450	1800	2100	2600	TOTAL MHz
	5G			LTE	GSM/UMTS	Band "L" (SDL)	GSM/LTE	UMTS	LTE	EXCLUDING 26GHz
	2x10	80	200	2x10	2x10	20	2x20	2x15 5	2x15	265
Vodafone	2x10	80	200	2x10	2x10	20	2x20	2x15 5	2x15	265
Wind/3		20	200	2x10	2x10		2x20	2x20 10	2x20 30	220
Iliad	2x10	20	200		2x5		2x10	2x10	2x10	110
Fastweb			200

5G licences will expire in 2037, 2100MHz will expire in 2021, all other licences will expire in 2029

TIM Schedule of payments		2018	2019	2020	2021	2022	TOTAL investment in 5G
	mln	477€	18€	110€	55€	1,738€	2,399€
		Only 606 mln	€ spend in the next three years				680,2 million in 700 MHz 1,686 million in 3.6-3.8 GHz 33 million in 26 GHz

Best in class allocation in 3.6-3.8 GHz available from 2018, without material cash-out impact in plan horizon

TIM Group Actively managing refinincing needs to keep a strong liquidity margin €mln

(€ 766 mln) and current financial liabilities (€ 814 mln), the gross debt figure of € 30,001 mln is reached

(2) In June, July and October TIM signed € 1.4 bln of bilateral loans at an average term of 3.5 years

3Q'18 Results

1 Highlights and Main Trends

2 Financial Update

3 Closing Remarks

Closing remarks

3Q'18 operational achievements:

• Domestic transformation leads to strong operational KPIs in a challenging context
• Resilient performance in Italy, growth confirmed in Brazil

5G auction financial undertakings will be met with the firmest determination to deleverage:

▪ Debt reduction remains an utmost priority, driven by organic performance, and further supported by the disposals of Persidera and Sparkle

The Company remains committed to the strategic priorities of its plan, which will be reviewed and enhanced

Annex

3Q'18 TIM Group Service revenues breakdown

TIM Domestic Ultra broadband network

• ~113 k cabinets passed
• ~366 k FTTH OTB installed
• ~19.4 mln HH passed FTTC
• 2,511 cities with commercial active service, o/w:
• 2,395 cities FTTC
• 116 cities FTTH/FTTC

88% >96% >98% >98% 2015 2016 2017 1Q'18 2Q'18 3Q'18 Mobile UBB

• >19.7k LTE nodes
• 7,367 cities LTE with commercial active service, o/w:
• 1,524 with 4Gplus
• 12 cities with 4.5G

TIM Group Well diversified and hedged debt

€mln

Maturities and Risk Management

Average m/l term maturity: 7.67 years (bond only 7.78 years)

Fixed rate portion on gross debt approximately 70.3%

Around 31% of outstanding bonds (nominal amount) denominated in USD and GBP and is 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 1,489 €/mln (of which 169 €/mln on bonds);

• the impact on Financial Assets is equal to 552 €/mln.

Therefore, the Net Financial Indebtedness is adjusted by 937 €/mln

N.B. The difference between total financial assets (€ 4,811 mln) and C&CE and marketable securities (€ 3,603 mln) is equal to € 1,208 mln and refers to positive MTM derivatives (accrued interests and exchange rate) for € 909 mln, financial receivables for lease for € 90 mln, deposits beyond 3 months for € 1 mln and other credits for € 208 mln.

3Q'18 Results

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 3Q'18 with those for the same period of 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 (1)					Services Revenues		EBITDA
	9M '18 old IFRS	D IFRS 15	9M '18 new IFRS		9M '18 old IFRS	D IFRS 15	9M '18 new IFRS	9M '18 old IFRS	D IFRS 9 - 15	9M '18 new IFRS
TIM Group	14,217	(140)	14,077		13,165	(140)	13,025	6,030	(252)	5,778
Domestic	11,311	(129)	11,182		10,397	(141)	10,256	4,958	(219)	4,739
Brazil	2,929	(11)	2,918		2,791	1	2,792	1,084	(34)	1,050

(1) The ongoing refinements, also on supporting IT systems, related to the process of implementation of the new accounting standards, together with the high number of new commercial offers in recent months, have led - in the financial statements of the first nine months of 2018 - for some specific contractual cases within the fixed and mobile sectors, to the recalculation of the temporal distribution of revenues during the year.