Rai Way

Investor Presentation • Sep 29, 2015

2015-2019 Industrial Plan presentation

Investor Day

Milan, 29 September 2015

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.

Executive Summary

• 2015-2019 Industrial Plan

• Rai Way: the Smarter Tower Company -
• Industrial Plan strategic pillars
• TV and radio broadcasting market
• TLC market -----
• Focus on efficiency
• Financials

The Smarter Tower Company

Asset base and know how…

Unique network capillarity

• •The only terrestrial network capable of covering over 99% of the population
• •Over 2,300 sites dedicated to transmission and broadcasting
• • Over 1,800 facilities spread in ^a capillary way, able to host equipment, as well as more than ¹⁵⁰ towers over ⁵⁰ meters tall
• • ^A national transmission network spread throughout the national territory, integrating different technologies like radio, satellite and fiber optic links
• •Unique capillarity in rural areas

Active equipment

• •Owned state-of-the art TV and radio broadcasting equipment
• •23 operating facilities (including quality control centers)
• •Digitalization process completed in 2012

Know how

• • Qualified people who have accumulated the vastest and most consolidated broadcasting experience in Italy:
• -Over 600 people with different professional backgrounds and skills
• -Over 70% of these people work in the field

…enable a full service offering…

TV and RadiobroadcastingTransmission Tower hosting Network services

• • Delivers client's television and radio signals to end users using frequencies assigned to the broadcasters
• • Digital terrestrial and satellite broadcasting
• • Services at local, national and international level

• • Turnkey solutions for transmission and broadcasting networks

• Interconnects major event venues with Clients' newsrooms and offices

• •Examples:

•

• Expo
• The Venice Film Festival

• Italian National Football League

• • Provides availability of tower infrastructures for radio transmitters

• • Customers include telco operators, public administrations and broadcasters and other various corporations
• • Consulting and technical support services

…addressing the demand of different clients

Business model

Competitive advantages and opportunities

		Co t i t ive dv ta m p e a an g es	O tu i t ie p p or n s
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	Ma t te na g em en am	H ig h s k i l le d e loy i t h s tro mp ee s w ng ies te co mp e nc	in ing Pro tra k r d t he bro dc t ve n c ec or a as tw k f ie l d ne or
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<	l l in te te d s ice Fu g ra erv	Ma ing te lev is ion d io d m b i le na g , ra an o to se c r	A lar be f c to fro d i f fer t g e n um r o us me rs m en to se c rs

Executive Summary

• 2015-2019 Industrial Plan

Rai Way: the Smarter Tower Company

Industrial Plan: strategic targets

• TV and radio broadcasting market
• TLC market
• Focus on efficiency
• Financials------

Life before the IPO: goals achieved so far

…from IPO to date…

Main achieved goals

• •Management team completed
• •Finalization of first contracts for new services to RAI
• •Ongoing upgrade of Rai Way contribution network
• •Test of first B2B broadband LTE services
• •Recovery of one lost broadcasting customer
• •Redesign of organizational model

2015-2019 Industrial Plan: new strategic targets

Executive Summary

• 2015-2019 Industrial Plan

• Rai Way: the Smarter Tower Company
• Industrial Plan strategic pillars
• TV and radio broadcasting market ------ • Market trend
• TLC market
• Focus on efficiency
• Financials

TV broadcasting value chain: main players

Broadcasters

Audience share (1H2015)FTA offer (100% of RAI channels) dominates the TV audience, with ^a share stable at ca. 91-92%

National Network Operators

M U X	i F d T V h l r e q u e n c e s a n c a n n e s	f i i i N b t l l d t M U X u m e r o n s a e e q u p m e n o n m a n
5	i io fre ies 4 S ha ls M U X Ra 1: D T V va r us q ue nc ; c nn e M U X Ra i 2: 5 4 6 M Hz 4 S D T V ha ls ; c nn e i 3: 4 S ha ls M U X Ra 5 1 M Hz 5 D T V ; c nn e i M U X Ra 4: 6 2 6 M Hz 2 S D 1 H D T V ha ls + ; c nn e M U X Ra i 5: 2 1 9, 5 M Hz ;	So lab tio AG CO M Ca tas to bb lico » d ata urc e: co mp an y e ora n o n « pu -
5	d ia t 2 2 8 ha ls M U X M 1: 7 M Hz e se ; c nn e ia M U X M d t 2: 5 9 4 M Hz 7 S D 1 H D T V ha ls + e se ; c nn e M U X M d ia t 3: 6 1 0 M Hz 4 S D 2 H D T V ha ls + e se ; c nn e d ia t 4: 6 9 8 6 S ha ls M U X M M Hz D T V e se ; c nn e ia M U X M d t 5: 7 5 4 M Hz 9 S D ha ls e se ; c nn e
5	6 8 2 S ha ls M U X T I M B 1: M Hz 7 D T V ; c nn e M U X T I M B 2: 7 8 6 M Hz 1 1 S D T V ha ls ; c nn e M U X T I M B 3: 6 9 0 M Hz 1 1 S D T V ha ls ; c nn e te 6 8 S ha ls M U X Re A 1: 5 M Hz 7 D T V ; c nn e M U X Re te A 2: 5 7 0 M Hz 1 6 S D T V ha ls ; c nn e
1	M U X D- F R E E: 7 0 6 M Hz 5 S D T V ha ls ; c nn e
1	3: 6 0 2 S 4 ha ls M U X L A M Hz 1 D H D T V + ; c nn e
1	M U X Eu 7: 1 9 8. 5 M Hz 5 S D T V ha ls ro p a ; c nn e
1	i: M U X Re te Ca 7 6 2 M Hz 9 S D T V ha ls p r ; c nn e

MUX L3: 506 Mhz;

1

17 29 September 2015 2015-2019 Industrial Plan

Regional Network Operators

• • Ca. 410 regional network operators, managing ca. 470 MUX, hosting ca. 500 broadcasters high level of vertical integration BC + NO
• • Few macro-regional network operators with size comparable to minor national operators

2015-2019 Industrial Plan

Broadcasting Tower Companies

TV Platforms

DTT is by far the key TV broadcasting platform, with stable audience share at around 84%

Increasing presence on DTT of traditional DTH-players

• •Audience and advertising share expansion, leveraging on existing structure
• •Optimization of use of TV rights

Radio broadcasting market: publishers

• In 1H2015 the Radio market reached ^a total audience of 34.9m listeners (stable vs. 2013) with ^a penetration rate of about 67% of the population

• •The key market players are diversified companies such as Rai, RCS and Gruppo Editoriale l'Espresso
• •Rai is the second Radio group in Italy with an advertising market share of c.12% in 1H2015

TV and radio BC market: opportunities and threats

• In ²⁰¹⁴ AGCOM started ^a reorganization of regional TV frequencies (frequencies planning)
• AGCOM selected certain channels(1) (6,7,11 VHF and 57, 58, 59, ⁶⁰ UHF in ⁷⁰⁰ MHz) to be allocated, on ^a regional basis, to consortiums of local network operators through ^a beauty contest

i R l e g o n a	i i F P l r e q u e n c e s a n n n g
ion Re	fre ies be l loc Ne to te
g	d w q ue nc a a
P I E M O N T E	5 8
L O M B A R D I A	7, 1 1
F R I U L I V. G.	6 0
V E N E T O	5 8
M A R C H E	5 8, 6 0
A B R U Z Z O	6 ( A Q lu de d ), 5 8 ( A Q ly ) ex c on
M O L I S E	7
P U G L I A	2 4, 5 8, 6 0
E M I L I A	( ), ( ) 6 0 R N lu de d 6 R N ly ex c on
C A M P A N I A	6
B A S I L I C A T A	6
C A L A B R I A	5 8
S G A R D E N A	6 0

• Awarded network operators to subsequently allocate capacity to local broadcasters selected through ^a beauty contest, with pricing set by AGCOM (expected below current range of 0,010-0,016 €/Mbps/inhabitant, public consultation under way)
• Next step: MiSE to publish ranking of network operators and broadcasters admitted to frequencies planning/awarding

Reorganization of regional TV frequencies (2/2)

Within the reorganization process, frequencies interfering with neighbouring countries(1) (76 on ^a regional basis) excluded from planning and to be compulsorily released by network operators

Interfering frequencies (1,2)

• Impacted network operators to be compensated through ^a cash indemnity (€ ⁵⁰ Mln in total)
• Impacted network operators and broadcasters to be admitted to frequencies planning

	Fre ies to be lea d to lve qu en c re se so		N. f im te d o p ac	Ma f x n . o
ion Re g	in fer iss ter en ce ue	inc Pro v es	tor op era s	ip t eq u me n
LI G U RIA	4 3, 45	AL L	2	9 3
T O S C AN A	4 3, 45	G R, LI, LU M S, PI ,	2	1 0
PIE M O NT E	3 2	BI, N O, V C, V B	1	7
O L MB AR DIA	3 2	G, C O, C C, O, S O, B R, L L M I, MB PV VA , ,	3	41
FR IU LI V G.	2 2, 27 2 8, 2 9, 3 4, 3 5, 3 9, 45 5 3 , ,	AL L	8	41
VE NE T O	2 2, 27 2 8, 2 9, 3 5, 3 9, 45 5 3 , ,	AL L	1 4	1 6 2
MA R C HE	21 2 3, 2 8, 2 9, 3 1, 3 3, 3 4, 3 9, 41 45 5 3, 5 9 , , ,	( 2 3, 3 3, 3 4, 41 ) C AP FM M , , ( 2 8, 2 9, 3 9 ) AN PU ,	6	4 6
		( ) 3 3 AP FM ,
AB RU ZZ O	21 2 3, 3 1, 3 3, 3 4, 41 45 5 1, 5 3, 5 9 , , ,	AL L	11	9 5
M O LI S E	21 2 3, 3 1, 3 3, 3 4, 41 45 5 1, 5 3, 5 9 , , ,	AL L	8	4 4
PU G LIA	21 2 2, 2 3, 2 8, 3 1, 3 3, 3 4, 41 45 5 1, 5 3, 5 9 , , ,	AL L	2 0	2 0 9
EM ILIA	2 9, 3 9, 4 2, 45 5 3 ,	( 2 9, 3 9, 45 5 3 ) B O, FE F C, M O, RA RE RN , , , , ( 4 2 ) RN	6	6 1

Opportunities for Rai Way

R A I	3 d t i r p a r e s
-	i h i f T t t e a m -u p w c o n s o r u m s o - i l C f t k B r e g o n a s o r n e w o r d l d t e v e o p m e n a n t m a n a g e m e n

Italian market has the lowest penetration of HD FTA channels on DTT

Opportunities for Rai Way

• • In ²⁰⁰⁹ AGCom approved regulation setting out steps for digital radio roll out across Italy:
• • ¹ block to be assigned to national public radio RAI, ² blocks to national commercial consortiums and additional blocks to local radio consortiums (174-230 MHz band)
• -National and local multiplexes must carry at least ⁷ stations each
• •Digital roll-out started in Trentino in December ²⁰¹² through ^a pilot project, with regular broadcasting licenses assigned in ²⁰¹³
• •National players, with dedicated block, already reached ^a significant level of coverage (ca. 68% of population)
• • Licenses in new areas/regions to be progressively awarded (plan for ⁴⁰ regions published in May 2015), allowing local radios consortiums to develop digital network

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			d e	l t v e o p m e n a	d n	m a n a g	t e m e n 29	Se tem p	be r 2 015 2 7

2015-2019 Industrial Plan

Transition to DVB-T2

• In 2011, CSA (Conseil Supérieur de l'Audiovisuel) and French government committed to using DVB-T2 and MPEG-4 standards for DTT channels, favoring the development of HD and ^a more efficient use of broadcast frequencies
• In October 2011, first DVB-T2 tests by TDF in the city of Rennes
• In 2013, CSA recommended to switch to DVB-T2 by ²⁰²⁰ at the latest; mandatory switch to MPEG4 and HEVC compression also recommended
• In May 2014, first tests for Ultra HD transmission on DTT platform using DVB-T2/HEVC standard (e.g. for Roland Garros, launch of Test UHD ¹ and Test UHD ² channels)

Roadmap to DVB-T2 transition approved by TDF:

Frequencies reallocation to mobile operators

30

700 MHz

According to the Lamy report to the EU Commission (Sept 2014):

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i f T t b m e r a m e o e - N b 2 0 1 5 o v e m e r	i f i l k l d t t h e c o n r m e a e y	f i I T U C o n e r e n c e n
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• Timeframe to be likely confirmed at the ITU Conference in November ²⁰¹⁵
• In Italy, AgCom and MiSE pushing to anticipate ⁷⁰⁰ MHz

The reallocation of frequencies to mobile operators might lead to a reduction of the number of channels currently used for TV broadcasting (from 40 to 28) and, consequently, to a reduction of the number of MUX

Mitigating factors

M k t a r e
i d b d d i i l i k ly b l hy R t t t e q u r e c r o s s- o r e r c o o r n a o n, e o e e n g -	i i 0 0 f i R t t 7 M Hz a n o o p e r a n g o n r e q u e n c e s -
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Fixed terrestrial frequencies

2015-2019 Industrial Plan

700 MHz band reallocation: status in Europe

• • Germany, with process completed in June 2015, and France, with structure of the auction published in July 2015, speeding up the process
• •Italy to face issues due to country-specific peculiarities

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d i Aw a r n g h i m e c a n s m	l t i- d d i M u r o u n a s c e n n g ( S ) M R A	l t i- d d i M u r o u n a s c e n n g ( S ) M R A	t i Au c o n	S i t tu t p e c ru m s a r a o n, -
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IP-TV driven by increasing broadband penetration

Increasing UBB coverage/penetration, targeted by Italian Government's plan

Availability of premium contents

Mitigating factors

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						br d ba d bs ip t io S ky t to bo T I M + oa n su cr n se p y -	x
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		M k a r e	t
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I t l i B a a n - t i m e a u	C k t h i h m a r e g d i d e n c e a n c	ly c o n c e n 8 1 % T V a.	t t d ( R A I M S + r a e : d t i i h a e r s n g s a r e v	7 3 % i c a. p r m e )	b d T V r o a c - t i f R p o r o n o	h h ly i l i i t t t R A I t t a s e r o e r a n c u r r e n r e p r e s e n n g a m i W 's a a r e e nu e s y v	d t e

The Future of Free to View TV – ^A discussion document (28 May 2014)

«Our base case remains that DTT will continue to be an important delivery technology for free to view TV over the next decade. We do not currently expect ^a full switch-off of DTT until post 2030, unless there was significant policy intervention to support ^a more aggressive timetable for change»

«Current free to view television platforms will only remain popular in the long term if they evolve in terms of the range of content and functionality on offer, in line with wider market developments»

«We believe that industry needs to give further consideration to how it wants the platform to develop moving forward»

Executive Summary

• 2015-2019 Industrial Plan

• Rai Way: the Smarter Tower Company
• Industrial Plan strategic pillars
• TV and radio broadcasting market
• TLC market
• Focus on efficiency ------ • Rai Way strategy
• Financials

TV & Radio broadcasting market: Rai Way strategy

Expand non-DTT traffic (e.g. long distance carrier services), leveraging on enhanced broadband capacity of Rai Way contribution network

TV & Radio broadcasting market: enabling factors

• •Increase sales effort
• • Improve service and client management:
• • Improve setting of broadcasting infrastructures in order to reduce the time-to-market of broadcast services
• -Implement measures for previsioning improvement
• • Reduce effort for network management through ^a new model of production based on remote control and maintenance
• • Offer services to monitor end-to-end network quality to increase the experience and the confidence of customers

• • Intensify implementation of systems to manage multiplatform systems, in particular DAB services

• • Extend customer base targeting both:

• . national broadcasters
• . local broadcasters, in the context of reorganization of regional TV frequencies
• •…leveraging on unique infrastructure, commercial focus and integrated service offering

Technical levers

• • High coverage, technical quality of infrastructure and service reliability
• •Full-HD distribution, also via IP
• •DVB-T2 coverage development
• •Simplified broadcasting networks roll-out

Commercial levers

• • Commercial agreements with broadcasters / network operators
• •Acquisition of local infrastructure
• •Full-integrated-service offering

Advanced negotiations (A)To be negotiated (B)Future initiatives• MUX "Francofono" for Valle d'Aosta region• Tidying up of frequencies for MUX1 (channel 25 only) • MUX 2/3/4 extension of coverage• DAB+ roll-out to cover Milan-Trieste and Milan-Naples highways • Satellite contribution network• SDH radio link spectrum redefinition• Completion of DAB+ roll-out • Full tidying up of frequencies for MUX1• Full HD• Transition to DVB-T2Not included in 2015-2019 Industrial PlanFinalized contracts• Contribution network upgrade• RAI Sport HD• Transmission services for Expo•International distribution for RAI Com

• • The project includes the development of the contribution network of Rai Way through the implementation of ^a fiber-optic network, in order to meet:
• the needs of RAI's Production TV Department resulting from the digitization process of production studios
• the need to transport contents in highdefinition (news, sports, drama, etc.)
• The project started in 2013, with operational plan synchronizing the upgrade of RAI's production facilities with the implementation of the Rai Way's network infrastructure
• • Upgraded contribution network representing the high-capacity platform to develop broadband services offering

Target DAB+ coverage

• • Project targeting the extension of RAI's DAB+ service coverage throughout the country
• • Considering that radio service is mainly enjoyed in car, first step is focused on coverage of the highways and is developed in collaboration with "Autostrade per l'Italia" and Rai Research Centre
• • The first goal is to cover the highways Milan-Trieste and Milan-Naples together with the new stretch "Variante di valico", to be opened by "Autostrade per l'Italia" next year

MUX "Francofono": broadcasting service in Valle D'Aosta region

Coverage and foreign broadcasting networks

Current Rai Way equipment

• -AOSTA GERDAZ, channel 41
• -BLAVY, channel 41
• -COL DE COURTIL, channel ⁴¹
• -PLATEAU ROSA, channel 41
• -PONT SAINT MARTIN, channel 41
• -SAINT NICOLAS, channel 41
• -SAINT VINCENT, channel 41
• -TETE D'ARPY, channel 45

Current coverage: 84,6% of population

Target: extend population coverage to 99% by end of 2015

Differentiating product offering to 3rd Parties

• •Customer's content acquisition from Rai Way's Hubs distributed on the whole country via High capacity link
• •Signal encryption
• •Satellite Up-link via Rai Way's network
• • Distribution through global satellite network:
• network already used by Rai Way for the distribution of RAI channels all over the world (Americas, Australia, Asia and Africa)
• •Interest from regional broadcasters for content distribution to expat communities

Differentiating product offering to 3rd Parties

• • Distribution services for Expo ²⁰¹⁵ replicable and scalable:
• Wireless LTE-based connection from specific venues to Rai Way site (access to Rai Way contribution network)
• Content transmission to customer's production center via Rai Way contribution network

44 29 September 2015 2015-2019 Industrial Plan

Executive Summary

• 2015-2019 Industrial Plan

• Rai Way: the Smarter Tower Company
• Industrial Plan strategic pillars
• TV and radio broadcasting market ------ • Market trend
• TLC market
• Focus on efficiency
• Financials

Mobile tower market

Tower in the TLC network infrastructure

Tower demand drivers

Mobile market trend

Diffusion of bandwidth-intensive services driving the development of networks able to bear increasing traffic…

4G network roll-out: expected evolution

• •Network roll-out starting from densely populated area (urban) in order to maximize coverage
• •Further coverage expansion involving rural areas, main location of broadcasting towers

Other TLC market trend: Fixed Wireless Access

• •BTC and BTB offer, with main focus on rural areas
• • Speed currently up to ³⁰ Mbps, with plan to reach up to ⁵⁰ Mbps driven by evolution of modulation technology
• •Using both licensed (3,4-3,6 GHz) and unlicensed spectrum (5,4 GHz)
• • 3,4-3,6 GHz band auction completed in Feb 2008: ³⁵ licenses (14 national ^{+ 21} regional) awarded for ca. ¹³⁶ € Mln, expiring in ²⁰²³
• • Potential future awarding of additional spectrum (in the 2-6 GHz band, likely 3,6-3,8 GHz)
• • FWA technology to contribute to ultra-broadband coverage target set by the Italian Government (in particular in rural areas)

Coverage distance: up to 50 Km

TLC market: opportunities and threats

• • MNOs' network coverage extension (tenancy)
• • Development of multi-layer network: small cells, DAS (built-to-suit…but mostly in metro areas)
• • FWA providers increasing market share (tenancy)

• •Take-up of new broadband services

• • Pressure on MNOs' profitability, with increasing focus on hosting cost reduction

• • Customers' consolidation (although reducing MNO's price competition and pressure on profitability)
• •MNOs' site-sharing agreements
• • Competition from new entrants (Inwit, Cellnex), limiting built-to-suit opportunities

Executive Summary

• 2015-2019 Industrial Plan

• Rai Way: the Smarter Tower Company
• Industrial Plan strategic pillars
• TV and radio broadcasting market
• TLC market
• ------ Rai Way strategy: the Fiber to the Tower option
• Focus on efficiency
• Financials

TLC market: Rai Way strategy

TLC market: enabling factors

•Lead time reduction

• •Sales effort and customer relationship management
• • Improve hospitality service, by enhancing the role of Rai WAY in simplifying, optimizing and expanding the coverage of networks used by mobile and wireless operators
• •Incentivizing pricing policy on new sites for existing customers
• • Enhance network wireless capacity in order to improve commercial appeal and intercept the demand for bandwidthintensive services

Upgraded contribution network +Fiber to the Tower

Fiber to the Tower option

	t d t h d d t i b t i t k i t h i l b i l i t f h i h i t t t h i t / t E e n e p g r a e c o n r o n n e o r a a a o g c a p a c a e s e o e r • x u u w w v y y w
	i i f T l t b t d t k o w e r a s w r e e s s n e r a c e e w e e n u s e r s a n c o r e n e w o r •
W h t a	i i i i i f i ( i f f i i f ) G l b l d t t / d t b t R W H b t k d t t t o a a a r a n s m s s o n s r u o n r o m a a y u o p e n n e w o r a s a e r e n a n g a c o r •
	b d b d i f f i b t h h l l t ( f t h i d t i ) d N e r o a a n s e r c e s o e r n g o a s o e s a e o p e r a o r s r e s o r c e s o r r p a r e s a n • w v w u d i t B 2 B T L C t r e c o p e r a o r
h W e r e	T i i t h h i h d d f t k i ( b t h b i d l l t ) t t t o e r s c o e r n g a r e a s g e m a n o n e o r s e r c e s o g a n s m a o n s o e s • w v w w v w i l l c o m m e r c a a p p e a
	d d i i D t e m a n r v e n c o v e r a g e e x e n s o n • -
H o w	f i i i i i i f f i i ( B t 2 0 1 5 d 2 0 1 6 b t t b t t k l l t t e w e e n a n n e w e r o p c c o n r u o n n e w o r w n c r e a s e r a c c a p a c y v s. • d i l i k d / t l l i t b d t k ), l l i i t f f t d t h t R W R A I r a o n a n o r s a e e- a s e n e w o r a o w n g a a y o o e r o a n o e r c u s o m e r s t t i i l l d l t f h i l f f i F H D U H D r a n s p o r s e r c e s n a n r a r o m e a c r e g o n a o c e v u
	T h i l b i l i t f t h t i b t i t k ( R i W 's h i h i t b k b ) f i l i t t e a a a o e n e c o n r o n n e o r a a g c a p a c a c o n e a c a e s • v y w u w y y f t h d l t t h F t t T d l e e e o p m e n o e m o e v

Rai Way high capacity network

Fiber to the Tower: why?

Enabled broadband services

Backhauling services for TLC customers

Smart metering

• •Wholesale bandwidth provider
• • Extend high capacity mobile network to areas where fixed telecom services are low-quality or non-existent
• • Connect smart meter devices, that record in real time the energy consumption (electric, gas, water, etc etc) of ^a building, to the data center's network
• • Remote control of modules for smart metering thanks to efficient communication protocols

Fiber to the Tower: possible support to Government BB plan

Coverage target

PO TIO N C OV GE PU LA ERA	RG TA ET
	20 14	20 18	202 0
ITA LY
Po lat ion ith at lea st 3 0 M bp pu co ve rag e w s	21%	75%	100 %
Po lat ion ith at lea st 100 M bp pu co ve rag e w s		40%	to 85 % up
EU RO PE
lat ion ith lea st 3 0 M bp Po at pu co ve rag e w s	62%		100 %
lat ion ith at lea st 100 bp Po M pu co ve rag e w s			50%

Technological neutrality

• • Adopt the most cost-effective technology:
• Fiber (FttH, FttB, FttC) -
• LTE
• FWA
• Satellite
• • Fixed primary network (up to the cabinet) optimized for radio stations connection (wireless broadband offering up to 30 Mbps)

Potential role for Rai Way

• • In Cluster ^D – including ca. 4.300 cities, 2,3 Mln buildings and 15%of population, mainly in southern Italy and rural areas – investments not economically viable for private operators
• • Direct public investment to upgrade connectivity from ² to ³⁰ Mbps in Cluster D: ca. ¹ Bln Eur (Government's estimate)
• • Consistently with the principle of technological neutrality, target to be possibly achieved through wireless technology (limiting investments vs. FttX)
• • Wireless solutions would require infrastructure with high backhauling capacity (Fiber to the Tower)
• • Potential benefit from government incentive (e.g. tax-relief on investments, subsidized loans, …)
• • Potential model for Rai Way:
• Hosting
• Wholesale access
  • 60 29 September 2015 2015-2019 Industrial Plan

Cluster, target and incentives

CLUSTER A	CLUSTER B	CLUSTER C	CLUSTER D
Le 15 città più popolose e le aree industriali	Ca 1130 comuni	Ca 2650 comuni	Ca 4300 Comuni (di cui circa 300 già oggetto dell'intervento pubblico in corso)
15%	45%	24%	13%
della popolazione	della popolazione	della popolazione	della popolazione
Upgrade	Upgrade	Upgrade	Upgrade
da 30 a 100 mbps	da 30 a 100 mbps	da 2 a 100 mbps	da 2 a 30 mbps
Defiscalizzazione	Defiscalizzazione	Defiscalizzazione	Defiscalizzazione
e accesso al credito	e accesso al credito	e accesso al credito	e accesso al credito
agevolato	agevolato	agevolato	agevolato
No fondo perduto. Intervento realizzato esclusivamente dal mercato	Minimo impiego di risorse pubbliche a fondo perduto	Risorse pubbliche a fondo perduto proporzionalmente maggiore rispetto al cluster B	Il pubblico interviene realizzando direttamente l'infrastruttura di sua proprietà

Size and target for each cluster depending on the magnitude of private investments (public investments targeted at ⁷ Bln €)

Fiber to the Tower: Int'l players expanding capacity (1/2)

• • TDF deploying its own ultra high-speed network for TV and radio transmission
• • Ca. 5.000 km of fiber optic with the ability to carry large data volumes
• • TDF to provide access to the ultra high-speed network for IT and telecoms firms
• • In addition to enabling transmission of DTT programs, TDF's ultra high-speed network will facilitate archiving of sensitive data (e.g. e-health, medical imaging etc. ), file-sharing, video conferencing, e-commerce, etc.

"Today, businesses, particularly in sparsely populated regions, must work with digital so as to improve competitiveness. With the deployment of its network, TDF becomes part of the very highspeed broadband technology panel in France thereby fostering the emergence of new services such as e-health, e-education, egovernment and e-training etc"(1)

Fiber to the Tower: Int'l players expanding capacity (2/2)

TE Connectivity

Crown Castle – Quanta FN Arqiva - Virgin

Crown Castle owns or has rights to ca. 16,000 miles of fiber to strengthen its position in small cell networks deployment and to expand presence in many of the top U.S. metropolitan markets

HOUSTON, April 30, ²⁰¹⁵ -- Crown Castle announced today that it has entered into ^a definitive agreement to acquire Quanta Fiber Networks, Inc. ("Sunesys") for approximately \$1.0 billion in cash. Sunesys, ^a wholly owned subsidiary of Quanta Services, is ^a fiber services provider that owns or has rights to nearly 10,000 miles of fiber in major metropolitan markets across the United States, including Los Angeles, Philadelphia, Chicago, Atlanta, Silicon Valley, and northern New Jersey, with approximately 60% of Sunesys' fiber miles located in the top ¹⁰ basic trading areas ("BTAs").

• Arqiva increased the capacity and speed of its network after ISP Virgin Media Business completed the build of new fiber optic network to link all ⁴⁰ of its sites across the country
• The new "data superhighway" (Arqnet2) network provides Arqiva capacity to expand and support TV, with rising demand for HD and 3D content), 4G based mobile broadband networks and new services offering (Small cells, IoT, Smart metering, Smart water, Smart grid) --

62 29 September 2015 2015-2019 Industrial Plan

Executive Summary

• 2015-2019 Industrial Plan

• Rai Way: the Smarter Tower Company
• Industrial Plan strategic pillars
• TV and radio broadcasting market
• TLC market ------

Focus on efficiency

Financials

Focus on efficiency: Rai Way strategy

OPEX

• Rents optimization
• Intercompany cost reduction
• Energy management
• Organizational improvement

CAPEX

Reduction of investments on active equipment

Focus on efficiency : enabling factors

• • Procurement process & procedures
• Improvement of procurement processes in order to reduce time and resources
• Evolution of procurement rules
• • Organization
• Re-design of organizational model consistently with company growth prospect, human resources valorization and cost structure rationalization

• Change Management initiatives focused on core competence, leadership, innovation and digital awareness

• • Reporting & Analysis management systems

• -Integrated evolution of the whole managing support systems

2014 Opex: the starting point

2015-2019 Industrial Plan

• •Maintenance capex currently in ^a 10-11% range on total revenues
• •Broadcasting equipment representing approximately 47% of Net Fixed Assets

Main areas of efficiencies (1/2)

Main areas of efficiencies (2/2)

69 29 September 2015 2015-2019 Industrial Plan

Asset portfolio management

• •Rai Way asset portfolio includes ¹⁹ fully owned, non-operating sites (ex-MW/SW sites)
• •Valorization / disposal options under assessment

Impact not included in 2015-2019 Industrial Plan

• • ² major sites:
• −Roma - Prato Smeraldo, located in Rome, with an extension of 28,8 hectares

−Roma - Santa Palomba, located in Rome and Pomezia, with an extension of 24,5 hectares

Executive Summary

• 2015-2019 Industrial Plan

-To recap: Rai Way strategy

2015-2019 Industrial Plan: new strategic targets

Rai Way: current company positioning

• •Listed company…
• • …managing the most capillary broadcasting tower network in Italy and ^a national transmission network with upgraded broadband capacity
• • …operating the broadcasting network for RAI, integrating passive infrastructure with ownership of active equipment and deep technical know-how
• • …offering ^a full-integrated-service to TV and radio broadcasters, TLC operators and public administration
• •…actively pursuing growth opportunities

Market trend: main opportunities and challenges

• • Need for network development and management, related to reorganization of TV frequencies

• • Technology driven demand/opportunities (HD, DVB-T2, DAB+)

• •MNOs and FWAPs coverage extension

• •Take-up of new wireless broadband services

• •

• Reallocation of frequencies to mobile operators

• •Increasing appeal of alternative platform

• •MNOs consolidation and site sharing agreements

• • Competition from tower portfolios now open to the market

TOWER MARKET STRUCTURE

•Potential for short to medium term market consolidation

2015-2019 Industrial Plan: Rai Way strategy

•Rents: technical and civil rents optimization

•

• Personnel: organization re-design and rightsizing
• •Capex: rationalization of investments on active components

75

Executive Summary

• 2015-2019 Industrial Plan

• Rai Way: the Smarter Tower Company
• Industrial Plan strategic pillars
• TV and radio broadcasting market
• TLC market ------
• Focus on efficiency
• Financials

Main assumptions

				i M a n a	i t s s u m p	o n s
-	C P I
		2 0 1 5	2 0 6 1	2 0 1 7	2 0 8 1	2 0 9 1
	C P I	0, 2 0 %	0 0 % 1,	2 % 1, 5	2 % 1, 5	2 % 1, 5

• RAI: new services for ca. €47 Mln cumulated investments with ^a top-line contribution of ca. €10 Mln in ²⁰¹⁹
• Third Parties: new services for ca. €5 Mln cumulated investments (including development/management of ¹ additional regional MUX)
• Opportunistic initiatives (progressive implementation of Fiber to the Tower option ⁺ small M&A): ca. € ¹⁵ Mln cumulated investments with expected EBITDA contribution of ca. € 1,5 Mln(1)
• Valorization/disposal of non-operating sites: impact not included

Financial highlights

Mln Eur; %

(1) EBITDA pre-non recurring costs in 2014 and 2015. 2019 not including any non recurring cost

(2) Normalized Equity Free Cash Flow (FCFE) defined as Adjusted EBITDA - Net financial charges - P&L Taxes (2015 adjusted by impact of restructuring cost) – Maintenance Capex

78

Revenues from RAI

• • Total Revenues from RAI at ca. €193 Mln in 2019, with ^a 2015-19 CAGR of 2,1%
• Fixed consideration linked to inflation
• Revenues from 5% mark-up stable at ca. €1 Mln
• Revenues from new services to RAI amounting to ca. €10 Mln in ²⁰¹⁹

Revenues from new services to RAI

Revenues from 3rdparties

• • Total Revenues from ³rd Parties at ca. €37 Mln in 2019, with ^a 2015-19 CAGR of 2,4%
• • Commercial focus on broadcasting customers and benefit from inflation almost fully offsetting sites optimization operated by other clients (mainly MNOs)
• • Growth driven by positive contribution of:
• New services for 3rd parties, in both broadcasting (regional MUX, DAB+, int'l distribution, etc) and TLC (broadband services) segment
• Opportunistic initiatives (Fiber to the Tower and small M&A)

Opex

• • Broadly stable operating expenses in 2015-19 period (+0,3% CAGR*):
• Personnel costs trend driven by headcount rightsizing (even through economic incentives to leaving the Company on ^a voluntary basis) and strengthening of core areas
• Efficiency measures on rents and intercompany partially offsetting growth related to new initiatives (mainly maintenance and energy)
• • Low single digit restructuring costs related to efficiency plan expected in 2016-2017

Adjusted EBITDA evolution

CAGR 2015-19

% margin on revenues

Mln Eur; %

Net Income

• • Net Income benefiting from:
• EBITDA growth
• Progressive D&A decline, resulting fromreduction of Capex vs. "switch-off period"

Capex

• • 2015-19 Capex plan includes:
• -Maintenance
• • Development, related to:
  • New services to RAI
  • New services to ³rd parties
  • Opportunistic initiatives

Maintenance Capex

• Optimization of maintenance capex / revenues ratio to ca. 8,5% in 2019, mainly driven by rationalization of investments on active equipment

Development Capex

Mln Eur

2015-19 cumulated Development Capex

Cash generation

(1) Normalized Equity Free Cash Flaw (FCFE) defined as Adjusted EBITDA - Net financial charges - P&L Taxes (adjusted by impact of restructuring cost) – Maintenance Capex

(2) Yield based on closing share price of 24/09/2015 of 4,524 €/share

88 29 September 2015 2015-2019 Industrial Plan

Dividend policy

• •Proposed dividend policy: pay-out ratio equal to 100% of Net Income
• •Resulting dividend yield(1) in ^a 3-5% range, broadly in line with infrastructure sector

• In the medium-long term, dividend yield asymptotic to normalized FCFE yield (D&A converging to maintenance capex Net Income converging to normalized FCFE)

Capital structure

•Also including cash-out for development capex and dividends, leverage is expected to decrease in the period

• •Strong financial flexibility to catch market opportunities
• •Business model (top-line visibility and cash generation) comfortable with higher level of debt
• •Potential releverage mainly through M&A
• •Should M&A not materialize, technicalities for enhanced distribution to shareholders under assessment

Approach to opportunistic initiatives

• • Approach to opportunistic initiatives matching two main criteria:
• Consistent with company strategic targets
• Value-accretive

i S t t t t r a e g c a r g e s	i R W t t a a y s r a e g y	i i P t t l t t o e n a n o n o r g a n c a r g e s
	Ex te d br dc t ing to ba d n oa as c us m er se a n • be f m d M U X nu m r o an ag e Co le te in du tr ia l fo tp in t in i f ic m p s o r sp ec • ar ea s i io ing S tre t he ke t p t • ng n m ar os n i f fe ia f fe ing D t te b l br d ba d • re n o r e na oa n ic se rv es t ing f f ic ie ( ies ) Inc re as e op er a e nc sy ne rg • y i ta l s tru tu Im p ro ve c ap c re •	S i l ( i ly i h t t t t n g e a s s e s e. g. s e s c u r r e n w • iv h t i t ) p a s s e o s n g a g r e e m e n s f i S l l t l t t l m a o a r g e o e r p o r o o s • w ( i ) fu A t t / t l l + s s e s o w e r s e q u p m e n • i t t s e rv c e c o n a c T i i i ty ( r a n s m s s o n c a p a c e. g. • i i f i ) t t b nv e s m e n s n e r

• Target: Eur ¹⁵ Mln included in the Industrial Plan, with full financial flexibility to scale up in case of additional market opportunities

Approach to non organic opportunities: rationale

TV AND RADIO BROADCASTING

• ----Customer base extension Infrastructure optimization (synergies) Economies of scale Value creation for shareholders

• --Differentiate offer enabling broadband services Strengthen market positioning TRANSMISSION CAPACITY

• Integration with MNOs' network

• Infrastructure optimization (synergies)
• Offer diversification
• Growth profile enhancement
• Fixed-mobile and TLC-media convergence----- TLC

Contacts