Rai Way

Investor Presentation • Dec 11, 2019

Agreement with RAI on refarming

11th December 2019

FORWARD LOOKING STATEMENTS

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

• ➢ The agreement defines the technical configuration of the DTT network post-refarming and updates the terms and conditions of the Service Contract with RAI
• ➢ Contract renewed at the new terms and conditions for the second seven-year period until 30 June 2028 (keeping the provision of tacit renewal until 2035), with no changes in the range of services provided
• ➢ In a base case scenario (3 MUX managed by Rai Way for RAI), planned upgrade investments of ca. € 150m and incremental recurring revenues for ca. € 16m (including the contribution of the project for the extension of coverage of the national MUX)
• ➢ Impact in case of 2 MUX reflects limited correlation between number of MUX and operating activities

Recap on the refarming process

➢ 2019 Budget Law and the subsequent evolution of the regulatory framework by the competent authorities(1) reshaped the refarming process and the DTT network configuration:

➢ Most of the process milestones set by the 2019 Budget Law have been completed:

• So far, RAI awarded through "conversion" 2 MUX and additional capacity equivalent to ½ MUX
• Final MUX allocation depending on outcome of the auction and possible agreements between operators

4

Post-refarming network configuration: base case scenario

➢ Obligations for RAI arising from RAI-State Service Contract and 2019 Budget Law include:

➢ Network configuration evolution expected in the base case scenario:

CURRENT CONFIGURATION				NEW CONFIGURATION
MUX 1
MUX 2			MUX Macro-regionalized
MUX 3				MUX A
MUX 4				MUX B
MUX 5
Total equipment	 3.250			Total equipment	 4.050
Total sites	2.050 			Total sites	2.050 

• Base scenario: Rai Way to manage 3 MUX with around 4k main equipment on the current ca. 2k sites

• Macro-regionalized MUX to be moved from a mix of UHF/VHF band to UHF band only

The investment activity set forth by the agreement

The approach on remuneration for activities

• ➢ Effort for network operation and management mainly related to coverage (sites and installed active equipment) and service levels
• ➢ Consistently, tariff for DTT broadcasting services to remain broadly unchanged in case of a similar number of sites, active equipment and service levels, independently from number of MUX
• ➢ On top, investments for the transition to the new network configuration to be remunerated depending on their nature:

Impacts on revenues (as of 1 st July 2021)

(1) Excluding one-off technical support services (2) Mark-up activities are Network Services provided through the resources of third-party operators (3) Reported New Services in 2019 estimated to include ca. € 0,9 m contribution from national MUX coverage extension project

Refarming contribution ramp-up

• ➢ In 2019, 2020 and 1H2021 incremental revenues ramp-up driven by MUX coverage extension contribution(1)
• ➢ Full impact of refarming contribution starting from 1st July 2021

Protection in case of further MUX reduction

➢ In a scenario with Rai Way managing 2 MUX for RAI, reduction in capex and revenues increase vs. base case already defined:

• ➢ Limited correlation between number of MUX and operating activities/costs
• ➢ Rules to regulate potential changes to network technical configuration and related economic impacts already defined

➢ Full de-risking of the refarming process: agreement provides high visibility on core revenues and cash flow, paving the way to proceed with the operational activities

➢ Strategic role of Rai Way as network provider and relevance of digital terrestrial television platform confirmed

➢ New industrial plan to be released in the first quarter 2020