Telecom Italia Rsp

Earnings Release • May 25, 2016

TELECOM ITALIA TIM GROUP

1Q'16 Results Rome, 16 May 2016

1Q'16 Results and Path to Upside

Giuseppe Recchi - Flavio Cattaneo – Piergiorgio Peluso

Safe Harbour

This presentation contains statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations, estimates regarding future growth in the different business lines and the global business, financial results and other aspects of the activities and situation relating to the Telecom Italia Group. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected or implied in the forward looking statements as a result of various factors. Consequently, Telecom Italia makes no representation, whether expressed or implied, as to the conformity of the actual results with those projected in the forward looking statements. Forward-looking information is based on certain key assumptions which we believe to be reasonable as of the date hereof, but forward looking information by its nature involves risks and uncertainties, which are outside our control, and could significantly affect expected results. Analysts and investors are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telecom Italia undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telecom Italia business or acquisition strategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and investors should consult the Company's Annual Report on Form 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securities and Exchange Commission which may identify factors that affect the forward looking statements included herein.

The financial and operating data, with the exception of some data, have been extracted or derived from the Condensed Consolidated Financial Statements as of and for the three months ended 31 March 2016 which have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board and endorsed by the European Union (designated as IFRS). Such interim financial statements are unaudited.

Within the Brazil Business Unit, TIM Brasil's Management recently identified that incorrect accounting entries were made in prior years in connection with the recognition of service revenue from the sale of prepaid traffic. Such incorrect accounting entries, resulted in the early recognition of revenues and consequently the underestimation of deferred revenue liabilities for prepaid traffic not yet consumed. The incorrect accounting entries did not have any impact either in terms of net financial position nor on cash and cash equivalents.

In light of the above, the comparative financial information as of 31 December 2015 and for the three-month period ended 31 March 2015 have been revised, segment information included. Furthermore, such revision did not have any material impact on the income statement of the three-month period ended 31 March 2015 (both at Group and at Brazil Business Unit levels).

Segment information is consistent with the prior periods under comparison with the exception of the Media Business Unit that, starting from 1 January 2016, as a result of the change in the operational mission of Persidera, is included in the Domestic Business Unit.

Agenda

Opening Remarks - Giuseppe Recchi

Main Value-Creation Lines of Action - Flavio Cattaneo

Domestic, Brazilian & Group Financial 1Q'16 Results - Piergiorgio Peluso

Take-aways - Flavio Cattaneo

Back-up

Agenda

Opening Remarks - Giuseppe Recchi

Main Value-Creation Lines of Action - Flavio Cattaneo

Domestic, Brazilian & Group Financial 1Q'16 Results - Piergiorgio Peluso

Take-aways - Flavio Cattaneo

Back-up

Domestic Revenues: Growing Coverage and Quality for All our Customers

Top line	Today	Our Goals
Mobile	Market Improved, Service Revenues growth	Speed-up LTE coverage to Consolidate our Leadership
Fixed	Fiber gaining traction, commercial approach is changing, line losses reducing	Faster and Deeper Fiber Rollout supports Service Revenues Performance

Italy: Faster and Deeper on Ultra-BroadBand

Bringing Italy to European Best-in-Class Digital Level: we confirm our 2018 targets for NGN (from 45% to ~84% - further coverage subject to Public policy) and LTE (from 92% to 98%)

* shared

Domestic Costs: Recovery Plan

Domestic Ebitda 2016: At least stable YoY

(1) Opex Efficiency Area: Process Driven+Market Driven+Labour Costs

(2) Opex Efficiency Area: Process Driven+Market Driven+Labour Costs (0.7 Bln €) + Volume Driven & Others (0.1 Bln€)

TIM Brasil: Time for a change

Ongoing Tough Macro Environment..

• High inflation: ~6% expected for 2016
• GDP decline: ~-4% expected in 2016
• Lower consumer confidence

Business Recovery and further Cost Reduction Needed

Management Change	Adapt Workforce	Upgrade Network	Further Efficiencies
• Strengthening the managerial team, widening competences and skills	• Workforce reduction generating ~R\$ 90 mln recurring cost saving • More internal and external labour cost streamlining to be evaluated	• Confirming 4G leadership (439 cities, 60% of urban pop) • Expanding 3G (1,860 cities covered, 82% of urban pop) • Refarming Opportunities on 1,800 MHz	• Current R\$ 1 bln 2015-17 efficiency plan to be reinforced • New Targets to be announced in 2Q'16

* Oi: figures estimated on published data

Agenda

Opening Remarks - Giuseppe Recchi

Main Value-Creation Lines of Action - Flavio Cattaneo

Domestic, Brazilian & Group Financial 1Q'16 Results - Piergiorgio Peluso

Take-aways - Flavio Cattaneo

Back-up

1Q'16 - TI Overview

Group Results

• Revenues: 4.4 bln euro
• Ebitda(1): 1.8 bln euro
• Domestic Results
• Revenues: 3.5 bln euro
• Ebitda(1): 1.5 bln euro
• Brazilian Results
• Revenues: 0.9 bln euro
• Ebitda(1): 0.3 bln euro

Argentina Sale

• Completed

• Capex: 0.9 bln euro

• Net Debt: 27.1 bln euro
• NGN: 45% Households & >1k Municipalities
• 4G: >6.2k Municipalities of which 317 4G Plus
• 4G: 60% Coverage, 439 Cities
• 3G: 82% Coverage, 1,860 Cities

(1) before non recurring items

Domestic 1Q'16: Revenues & Ebitda

000, €mln, % YoY

• Slight Organic Ebitda QoQ erosion (-0.9pp vs 4Q'15) due to wholesale price impact revision and higher volume driven costs related to handsets
• Reported Ebitda impacted by 67 mln euro of non recurring items related to costs for labour restructuring program

Domestic Mobile Performance

000, €mln, % YoY

• Continued improvement in Mobile Service Revenues Trend confirmed. Sound growth in Consumer Segment (+5% YoY). Slower Business Segment performance affected by Consip contract renewal
• Solid KPIs driven by growing number in calling customer base (+52k YoY) and wider adoption of Mobile BB services, supported by strong growth in 4G clients

Domestic Fixed Performance

000, €mln, % YoY

Group Telecom Italia TIM Results - 1Q'16 Piergiorgio Peluso

Domestic 1Q'16: Focus on Investments

000, €mln

(1) Including 117 €mln for 2G license renewal in 2015

214 390 39 94 43 Network IT Real Estate Comm. & Others Total

• Sound growth in Innovative Investments (+169 €mln YoY) driven by a faster pace in NGN & LTE components and additional Capex in Transformation Projects
• Net of 117 €mln occured in 2015 for 2G license renewal, +50 €mln YoY Traditional Capex growth is mainly driven by increasing expenditure on decommissioning & site sharing projects

TIM Brasil: 1Q'16 Results

R\$mln, % YoY

(1) labour costs restructuring program

• Weaker Macro: high inflation, GDP decline, lower consumer confidence

Focus on Domestic Opex

000, €mln, % YoY

Domestic Costs: Areas of Action

Enforce tight cost control and ROI analysis approach

Commercial Industrial

• Acquisition unit cost reduction
• Channel rationalization
• Self caring & self provisioning
• Media Plan evolution
• Sponsorship optimization
• New Handsets policy

Rental & Power, Support Labour Cost

• Zero-base budget approach
• Space optimization
• Reduction on travel, lodge, facilities and all overhead costs
• Energy saving project

• Supplier consolidation

• Increase internal productivity and insourcing on delivery and assurance activities

• Automation of recursive activities
• Application and platform delayering

• Supplier consolidation

• Rewarding and welfare policy review

• Productivity increases
• Non-strategic IT branches outsourcing
• Creation of back office shared service center

OpFCF Generation & Net Debt Evolution

Agenda

Opening Remarks - Giuseppe Recchi

Main Value-Creation Lines of Action - Flavio Cattaneo

Domestic, Brazilian & Group Financial 1Q'16 Results - Piergiorgio Peluso

Take-aways - Flavio Cattaneo

Back-up

Take Aways

Agenda

Opening Remarks - Giuseppe Recchi

Main Value-Creation Lines of Action - Flavio Cattaneo

Domestic, Brazilian & Group Financial 1Q'16 Results - Piergiorgio Peluso

Take-aways - Flavio Cattaneo

Group 1Q'16: Revenues & Ebitda

Organic figures, €mln, % YoY

Group 1Q'16: Capex & Net Debt

Reported figures, 000, €mln, % YoY

(1) Other activities & eliminations included

Capex Highlights

• Group Capex reduction due to different mix:
• An efficiency gain and better negotiation process in Brazil
• More investment in Italy mainly driven by UBB Network roll-out & Transformational Projects

• Net Debt reduction vs YE'15 due to the successful disposal of Telecom Argentina that more than offset the seasonality impact of DWC in 1Q16 for Trade Payable dynamic and for Brazilian Fistel payment occured in 1Q'16

Maturities & Liquidity Margin

€mln

(1) € 29,395 mln is the nominal amount of outstanding medium-long term debt. By adding Mandatory Convertible Bond (€ 1,300 mln), IAS adjustments (€ 1,004 mln) and current financial liabilities (€ 597 mln), the gross debt figure of € 32,296 mln is reached (2) Committed Bank lines are undrawn

Well Diversified and Hedged Debt €mln

Maturities and Risk Management

Average m/l term maturity: 7.94 years (bond only 8.31 years)

Fixed rate portion on gross debt approximately 69.9%

Around 39% of outstanding bonds (nominal amount) denominated in USD, GBP and YEN and is fully hedged

Net financial position 27,139

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

• the impact on Gross Financial Debt is equal to 2,498 €/mln (of which 394 €/mln on bonds)
• the impact on Financial Assets is equal to 1,404 €/mln.

Therefore, the Net Financial Indebtedness is adjusted by 1,094 €/mln.

Group Telecom Italia TIM Results - 1Q'16 The difference between total financial assets (€ 5,157 mln) and C&CE and marketable securities (€ 3,400 mln) is equal to € 1,757 mln and refers to positive MTM derivatives (accrued interests and exchange rate) for € 1,577 mln, financial receivables for lease for € 111 mln and other credits for € 69 mln. Giuseppe Recchi - Flavio Cattaneo – Piergiorgio Peluso

Domestic Mobile Details

000, €mln, % YoY

Group Telecom Italia TIM Results - 1Q'16 Giuseppe Recchi - Flavio Cattaneo – Piergiorgio Peluso

Domestic Fixed Details

000, €mln, % YoY

Business Segment Revenues Breakdown

€mln, % YoY

Infrastructure Management, IT Device Management IT Application, Trust, Parallels

Domestic Fiber & LTE Coverage Trend

Scenarios of UBB Bandwidth Consumption

Balance to New Efficiency Target

Run rate @2018	Original '16-'18 Efficiency Target	Additional Efficiency '16-'18 Target	New Efficiency '16-'18 Target
Process Driven Costs	0.2 bln€	+0.12 bln€	0.32 bln€
Market Driven Costs	0.1 bln€	+0.13 bln€	0.23 bln€
Labour Costs	0.1 bln€	+0.1 bln€	0.2 bln€
Other Costs	-	+0.05 bln €	0.05 bln€
Total Opex	0.4 bln€	+0.4 bln€	0.8 bln€
Traditional	0.2 bln€	+0.3 bln€	0.5 bln€
NGN Optimization	-	+0.15 bln€	0.15 bln€
Real Estate & Other	-	+0.15 bln€	0.15 bln€
Total Capex	0.2 bln€	+0.6 bln€	0.8 bln€
Total Cash Cost Efficiency	0.6 bln€	+1.0 bln€	1.6 bln€

For further questions please contact the IR Team