Telecom Italia Rsp

Annual / Quarterly Financial Statement • Aug 3, 2022

ATTACHMENTS TO THE PRESS RELEASE

TIM Group – Reclassified Statements	2
TIM Group - Separate Consolidated Income Statements	2
TIM Group - Consolidated Statements of Comprehensive Income	3
TIM Group - Consolidated Statements of Financial Position	4
TIM Group - Consolidated Statements of Cash Flows	6
TIM Group - Net Financial Debt	7
TIM Group - Change in Adjusted Net Financial Debt	9
TIM Group - Information by Operating Segments	10
Domestic	10
Brazil	11
TIM Group - Headcount	12
TIM Group - Effects of non-recurring events and transactions on each item of the Separate Consolidated Income Statements	13
TIM Group - Debt Structure, Bond Issues and Expiring Bonds	14
Alternative Performance Measures	16

This document has been translated into English for the convenience of the readers. In the event of discrepancy, the Italian language version prevails.

August 3, 2022

TIM GROUP - RECLASSIFIED STATEMENTS

The reclassified Separate Consolidated Income Statements, Consolidated Statements of Comprehensive Income, Consolidated Statements of Financial Position and the Consolidated Statements of Cash Flows, as well as the Consolidated Net Financial Debt of the TIM Group, herewith presented, are the same as those included in the Interim Management Report of the Half-year Financial Report at June 30, 2022 and are unaudited.

Such statements, as well as the Consolidated Net Financial Debt, are however consistent with those included in the TIM Group Half-year Condensed Consolidated Financial Statements at June 30, 2022.

The accounting policies and consolidation principles adopted are consistent with those applied for the TIM Group Consolidated Financial Statements at December 31, 2021, to which reference can be made, except for the amendments to the standards issued by IASB and adopted starting from January 1, 2022.

As described in the 2021 TIM Group Consolidated Financial Statements, during the fourth quarter of 2021, TIM refined some aspects of the booking of certain commercial agreements concerning the sale of goods with deferred delivery. This refinement entailed, for the first, second and third quarters of 2021, the redetermination of the distribution over time of revenues and purchases of materials and services. In connection with the foregoing, the economic data of the first half of 2021, has been recalculated.

Furthermore, please note that the limited review work by our independent auditors on the TIM Group Half-year Condensed Consolidated Financial Statements at June 30, 2022 has not yet been completed.

TIM GROUP - SEPARATE CONSOLIDATED INCOME STATEMENTS

(million euros)	1st Half 2022	1st Half 2021	Changes
			(a-b)
	(a)	(b)	absolute	%
Revenues	7,557	7,543	14	0.2
Other income	78	169	(91)	(53.8)
Total operating revenues and other income	7,635	7,712	(77)	(1.0)
Acquisition of goods and services	(3,385)	(3,113)	(272)	(8.7)
Employee benefits expenses	(1,554)	(1,715)	161	9.4
Other operating expenses	(342)	(424)	82	19.3
Change in inventories	35	49	(14)	(28.6)
Internally generated assets	269	244	25	10.2
Operating profit (loss) before depreciation and amortization, capital gains (losses) and impairment reversals (losses) on non-current assets (EBITDA)	2,658	2,753	(95)	(3.5)
Depreciation and amortization	(2,295)	(2,268)	(27)	(1.2)
Gains (losses) on disposals of non-current assets	34	(1)	35	—
Impairment reversals (losses) on non-current assets	—	—	—	—
Operating profit (loss) (EBIT)	397	484	(87)	—
Share of profits (losses) of associates and joint ventures accounted for using the equity method	31	22	9	40.9
Other income (expenses) from investments	—	12	(12)	—
Finance income	773	546	227	41.6
Finance expenses	(1,459)	(1,128)	(331)	(29.3)
Profit (loss) before tax from continuing operations	(258)	(64)	(194)	—
Income tax expense	(102)	7	(109)	—
Profit (loss) from continuing operations	(360)	(57)	(303)	—
Profit (loss) from Discontinued operations/Non-current assets held for sale	—	—	—	—
Profit (loss) for the period	(360)	(57)	(303)	—
Attributable to:
Owners of the Parent	(483)	(149)	(334)	—
Non-controlling interests	123	92	31	33.7

TIM GROUP - CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In accordance with IAS 1 (Presentation of Financial Statements) here below are presented the Consolidated Statements of Comprehensive Income, including the Profit (loss) for the period, as shown in the Separate Consolidated Income Statements, and all non-owner changes in equity.

(million euros)	1st Half 2022	1st Half 2021
Profit (loss) for the period	(a) (360)	(57)
Other components of the Consolidated Statement of Comprehensive Income
Other components that will not be reclassified subsequently to Separate Consolidated Income Statement
Financial assets measured at fair value through other comprehensive income:
Profit (loss) from fair value adjustments	(4)	5
Income tax effect	—	—
	(b) (4)	5
Remeasurements of employee defined benefit plans (IAS19):
Actuarial gains (losses)	58	22
Income tax effect	(14)	(5)
Share of other comprehensive income (loss) of associates and joint ventures accounted for using the equity method:	(c) 44	17
Profit (loss)	—	—
Income tax effect	—	—
	(d) —	—
Total other components that will not be reclassified subsequently to Separate Consolidated Income Statement (e=b+c+d)	40	22
Other components that will be reclassified subsequently to Separate Consolidated Income Statement
Financial assets measured at fair value through other comprehensive income:
Profit (loss) from fair value adjustments	(88)	(12)
Loss (profit) transferred to Separate Consolidated Income Statement	14	(3)
Income tax effect	3	1
	(f) (71)	(14)
Hedging instruments:
Profit (loss) from fair value adjustments	631	565
Loss (profit) transferred to Separate Consolidated Income Statement	(384)	(427)
Income tax effect	(59)	(33)
	(g) 188	105
Exchange differences on translating foreign operations: Profit (loss) on translating foreign operations	715	307
Loss (profit) on translating foreign operations transferred to Separate
Consolidated Income Statement Income tax effect	— —	— —
	(h) 715	307
Share of other comprehensive income (loss) of associates and joint ventures accounted for using the equity method:
Profit (loss)	—	—
Loss (profit) transferred to Separate Consolidated Income Statement	—	—
Income tax effect	—	—
	(i) —	—
Total other components that will be reclassified subsequently to Separate Consolidated Income Statement (k=f+g+h+i)	832	398
Total other components of the Consolidated Statement of Comprehensive Income (m=e+k)	872	420
Total comprehensive income (loss) for the period (a+m)	512	363
Attributable to:
Owners of the Parent	170	175
Non-controlling interests	342	188

TIM GROUP - CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(million euros)	6/30/2022	12/31/2021	Changes
	(a)	(b)	(a-b)
Assets
Non-current assets
Intangible assets
Goodwill	19,009	18,568	441
Intangible assets with a finite useful life	7,899	7,147	752
	26,908	25,715	1,193
Tangible assets
Property, plant and equipment owned	13,971	13,311	660
Rights of use assets	5,554	4,847	707
Other non-current assets
Investments in associates and joint ventures accounted for using the equity method	335	2,979	(2,644)
Other investments	128	156	(28)
Non-current financial receivables arising from lease contracts	50	45	5
Other non-current financial assets	1,961	2,285	(324)
Miscellaneous receivables and other non-current
assets	2,343	2,266	77
Deferred tax assets	3,441	3,513	(72)
	8,258	11,244	(2,986)
Total Non-current assets (a)	54,691	55,117	(426)
Current assets
Inventories	324	282	42
Trade and miscellaneous receivables and other current assets	4,481	4,358	123
Current income tax receivables	114	79	35
Current financial assets
Current financial receivables arising from lease contracts	54	56	(2)
Securities other than investments, other financial receivables and other current financial assets	1,883	2,391	(508)
Cash and cash equivalents	2,391	6,904	(4,513)
	4,328	9,351	(5,023)
Current assets sub-total	9,247	14,070	(4,823)
Discontinued operations /Non-current assets held for sale
of a financial nature	—	—	—
of a non-financial nature	2,631	—	2,631
	2,631	—	2,631
Total Current assets (b)	11,878	14,070	(2,192)
Total Assets	66,569	69,187	(2,618)

(million euros)		6/30/2022	12/31/2021	Changes
		(a)	(b)	(a-b)
Equity and Liabilities
Equity
Equity attributable to owners of the Parent		17,590	17,414	176
Non-controlling interests		4,935	4,625	310
Total Equity	(c)	22,525	22,039	486
Non-current liabilities
Non-current financial liabilities for financing contracts and others		21,762	23,437	(1,675)
Non-current financial liabilities for lease contracts		4,707	4,064	643
Employee benefits		812	699	113
Deferred tax liabilities		234	245	(11)
Provisions		1,007	926	81
Miscellaneous payables and other non-current liabilities		1,322	1,413	(91)
Total Non-current liabilities	(d)	29,844	30,784	(940)
Current liabilities
Current financial liabilities for financing contracts and others		3,768	5,945	(2,177)
Current financial liabilities for lease contracts		782	651	131
Trade and miscellaneous payables and other current liabilities		9,410	9,473	(63)
Current income tax payables		239	295	(56)
Current liabilities sub-total		14,199	16,364	(2,165)
Liabilities directly associated with Discontinued operations/Non-current assets held for sale
of a financial nature		—	—	—
of a non-financial nature		1	—	1
		1	—	1
Total Current Liabilities	(e)	14,200	16,364	(2,164)
Total Liabilities	(f=d+e)	44,044	47,148	(3,104)
Total Equity and Liabilities	(c+f)	66,569	69,187	(2,618)

TIM GROUP - CONSOLIDATED STATEMENTS OF CASH FLOWS

(million euros)		1st Half 2022	1st Half 2021
Cash flows from operating activities:
Profit (loss) from continuing operations		(360)	(57)
Adjustments for:
Depreciation and amortization		2,295	2,268
Impairment losses (reversals) on non-current assets (including investments)		8	(9)
Net change in deferred tax assets and liabilities		83	(54)
Losses (gains) realized on disposals of non-current assets (including investments)		(34)	1
Share of losses (profits) of associates and joint ventures accounted for using the equity method		(31)	(22)
Change in employee benefits		241	256
Change in inventories		(37)	(55)
Change in trade receivables and other net receivables		77	134
Change in trade payables		(67)	(236)
Net change in income tax receivables/payables		(62)	(235)
Net change in miscellaneous receivables/payables and other assets/liabilities		380	(66)
Cash flows from (used in) operating activities	(a)	2,493	1,925
Cash flows from investing activities:
Purchases of intangible, tangible and rights of use assets on a cash basis		(2,589)	(1,960)
Capital grants received		3	—
Acquisition of control of companies or other businesses, net of cash acquired		(1,183)	—
Acquisitions/disposals of other investments		(25)	(66)
Change in financial receivables and other financial assets (excluding hedging and non-hedging derivatives under financial assets)		768	(204)
Proceeds from sale that result in a loss of control of subsidiaries or other businesses, net of cash disposed of		—	—
Proceeds from sale/repayments of intangible, tangible and other non-current assets		2	9
Cash flows from (used in) investing activities	(b)	(3,024)	(2,221)
Cash flows from financing activities:
Change in current financial liabilities and other		(505)	(518)
Proceeds from non-current financial liabilities (including current portion)		228	1,912
Repayments of non-current financial liabilities (including current portion)		(3,635)	(2,108)
Changes in hedging and non-hedging derivatives		(25)	—
Share capital proceeds/reimbursements (including subsidiaries)		7	—
Dividends paid		(37)	(336)
Changes in ownership interests in consolidated subsidiaries		(4)	1,758
Cash flows from (used in) financing activities	(c)	(3,971)	708
Cash flows from (used in) Discontinued operations/Non-current assets held for sale	(d)	—	—
Aggregate cash flows	(e=a+b+c+d)	(4,502)	412
Net cash and cash equivalents at beginning of the period	(f)	6,904	4,508
Net foreign exchange differences on net cash and cash equivalents	(g)	(19)	48
Net cash and cash equivalents at end of the period	(h=e+f+g)	2,383	4,968

Purchases of intangible, tangible and rights of use assets

(million euros)	1st Half 2022	1st Half 2021
Purchase of intangible assets	(603)	(661)
Purchase of tangible assets	(1,277)	(1,113)
Purchase of rights of use assets	(402)	(287)
Total purchase of intangible, tangible and rights of use assets on an accrual basis	(2,282)	(2,061)
Change in payables arising from purchase of intangible, tangible and rights of use assets	(307)	101
Total purchases of intangible, tangible and rights of use assets on a cash basis	(2,589)	(1,960)

Additional Cash Flow information

(million euros)	1st Half 2022	1st Half 2021
Income taxes (paid) received	(38)	(254)
Interest expense paid	(934)	(863)
Interest income received	284	229
Dividends received	96	86

Analysis of Net Cash and Cash Equivalents

(million euros)	1st Half 2022	1st Half 2021
Net cash and cash equivalents at beginning of the period:
Cash and cash equivalents - from continuing operations	6,904	4,829
Bank overdrafts repayable on demand – from continuing operations	—	(321)
Cash and cash equivalents - from Discontinued operations/Non-current assets held for sale	—	—
Bank overdrafts repayable on demand – from Discontinued operations/Non current assets held for sale	—	—
	6,904	4,508
Net cash and cash equivalents at end of the period:
Cash and cash equivalents - from continuing operations	2,391	4,969
Bank overdrafts repayable on demand – from continuing operations	(8)	(1)
Cash and cash equivalents - from Discontinued operations/Non-current assets held for sale	—	—
Bank overdrafts repayable on demand – from Discontinued operations/Non current assets held for sale	—	—
	2,383	4,968

TIM GROUP - NET FINANCIAL DEBT

(million euros)	6/30/2022	12/31/2021	Change
	(a)	(b)	(a-b)
Non-current financial liabilities
Bonds	16,414	17,383	(969)
Amounts due to banks, other financial payables and liabilities	5,348	6,054	(706)
Non-current financial liabilities for lease contracts	4,707	4,064	643
	26,469	27,501	(1,032)
Current financial liabilities (*)
Bonds	1,683	3,512	(1,829)
Amounts due to banks, other financial payables and liabilities	2,085	2,433	(348)
Current financial liabilities for lease contracts	782	651	131
	4,550	6,596	(2,046)
Financial liabilities directly associated with Discontinued operations/Non-current assets held for sale	—	—	—
Total Gross financial debt	31,019	34,097	(3,078)
Non-current financial assets
Securities other than investments	—	—	—
Non-current financial receivables arising from lease contracts	(50)	(45)	(5)
Financial receivables and other non-current financial assets	(1,961)	(2,285)	324
	(2,011)	(2,330)	319
Current financial assets
Securities other than investments	(1,532)	(2,249)	717
Current financial receivables arising from lease contracts	(54)	(56)	2
Financial receivables and other current financial assets	(351)	(142)	(209)
Cash and cash equivalents	(2,391)	(6,904)	4,513
	(4,328)	(9,351)	5,023
Financial assets relating to Discontinued operations/Non current assets held for sale	—	—	—
Total financial assets	(6,339)	(11,681)	5,342
Net financial debt carrying amount	24,680	22,416	2,264
Reversal of fair value measurement of derivatives and related financial liabilities/assets	(26)	(229)	203
Adjusted Net Financial Debt	24,654	22,187	2,467
Breakdown as follows:
Total adjusted gross financial debt	30,188	32,564	(2,376)
Total adjusted financial assets	(5,534)	(10,377)	4,843
(*) of which current portion of medium/long-term debt:
Bonds	1,683	3,512	(1,829)
Amounts due to banks, other financial payables and liabilities	1,046	898	148
Current financial liabilities for lease contracts	779	648	131

TIM GROUP - CHANGE IN ADJUSTED NET FINANCIAL DEBT

(million euros)	1st Half 2022	1st Half 2021	Change
	(a)	(b)	(a-b)
EBITDA	2,658	2,753	(95)
Capital expenditures on an accrual basis	(1,906)	(1,808)	(98)
Change in net operating working capital:	(261)	(96)	(165)
Change in inventories	(37)	(55)	18
Change in trade receivables and other net receivables	77	134	(57)
Change in trade payables	(373)	(390)	17
Change in payables for mobile telephone licenses / spectrum	(380)	—	(380)
Other changes in operating receivables/payables	452	215	237
Change in employee benefits	241	256	(15)
Change in operating provisions and Other changes	(379)	(286)	(93)
Net operating free cash flow	353	819	(466)
% of Revenues	4.7	10.9	(6.2)pp
Sale of investments and other disposals flow	2	1,766	(1,764)
Share capital increases/reimbursements, including incidental expenses	7	—	7
Financial investments	(1,771)	(66)	(1,705)
Dividends payment	(37)	(336)	299
Increases in lease contracts	(376)	(253)	(123)
Finance expenses, income taxes and other net non-operating requirements flow	(645)	(676)	31
Reduction/(Increase) in adjusted net financial debt from continuing operations	(2,467)	1,254	(3,721)
Reduction/(Increase) in net financial debt from Discontinued operations/Non-current assets held for sale	—	—	—
Reduction/(Increase) in adjusted net financial debt	(2,467)	1,254	(3,721)

Equity Free Cash Flow

(million euros)	1st Half 2022	1st Half 2021	Change
Reduction/(Increase) in adjusted net financial debt from continuing operations	(2,467)	1,254	(3,721)
Impact for finance leases (new lease operations and/or renewals and/or extensions (-)/any terminations/early extinguishing of leases (+))	535	201	334
Payment of TLC licenses and for the use of frequencies	469	240	229
Financial impact of acquisitions and/or disposals of investments	1,771	(1,668)	3,439
Dividend payment and Change in Equity	30	336	(306)
Equity Free Cash Flow	338	363	(25)

TIM GROUP - INFORMATION BY OPERATING SEGMENTS

Domestic

(million euros)	1st Half 2022	1st Half 2021		Changes (a-b)
	(a)	(b)	absolute	%	% organic excluding non-recurring
Revenues	5,754	6,209	(455)	(7.3)	(7.5)
EBITDA	1,854	2,129	(275)	(12.9)	(17.3)
% of Revenues	32.2	34.3		(2.1) pp	(4.4)pp
EBIT	146	296	(150)	(50.7)	(43.0)
% of Revenues	2.5	4.8		(2.3) pp	(4.6)pp
Headcount at period-end (number) (°)	42,864	*42,591	273	0.6

(°) Includes employees with temp work contracts: 20 employees at june 30, 2022 (16 employees at December 31, 2021). (*) Headcount at December 31, 2021

(million euros)	2nd Quarter 2022	2nd Quarter 2021		Changes (a-b)
	(a)	(b)	absolute	%	% organic excluding non-recurring
Revenues	2,908	3,132	(224)	(7.2)	(7.4)
EBITDA	892	1,271	(379)	(29.8)	(16.3)
% of Revenues	30.7	40.6		(9.9) pp	(4.0)pp
EBIT	54	356	(302)	(84.8)	(34.3)
% of Revenues	1.9	11.4		(9.5) pp	(3.7) pp

Fixed

	6/30/2022	12/31/2021	6/30/2021
Total TIM Retail accesses (thousands)	8,765	8,647	8,765
of which NGN (1)	4,926	5,186	4,926
Total TIM Wholesale accesses (thousands)	7,659	7,729	7,822
of which NGN	5,110	4,819	4,516
Active Broadband accesses of TIM Retail (thousands)	7,564	7,733	7,783
Consumer ARPU (€/month) (2)	28.4	30.1	31.1
Broadband ARPU (€/month) (3)	33.9	33.4	32.6

(1) UltraBroadband access in FTTx and FWA mode, also including "data only" lines and GBE (Gigabit Ethernet). (2) Revenues from organic Consumer retail services in proportion to the average Consumer accesses.

(3) Revenues from organic broadband and ICT services in proportion to the average TIM retail accesses.

Mobile

	6/30/2022	12/31/2021	6/30/2021
Lines at period end (thousands)	30,427	30,466	30,317
of which Human	18,620	19,054	19,306
Churn rate (%) (4)	6.9	14.7	7.5
Broadband users (thousands) (5)	12,717	12,783	12,853
Retail ARPU (€/month) (6)	7.0	7.5	7.5
Human ARPU (€/month) (7)	11.4	11.7	11.6

(4) Percentage of total lines that ceased in the period compared to the average number of total lines.

(5) Mobile lines using data services. (6) Revenues from organic retail services (visitors and MVNO not included) compared to the total average number of lines.

(7) Revenues from organic retail services (visitors and MVNO not included) compared to the average number of human lines.

Details of revenues for the first half of 2022 for the Domestic Business Unit are presented in the following table, broken down by customer/business segment and compared to the first half of 2021.

(million euros)	2nd Quarter 2022	2nd Quarter 2021	1st Half 2022	1st Half 2021			% Change
	(a)	(b)	(c)	(d)	(a/b)	(c/d)	organic excluding non recurring (a/b)	organic excluding non recurring (c/d)
Revenues	2,908	3,132	5,754	6,209	(7.2)	(7.3)	(7.4)	(7.5)
Consumer	1,177	1,289	2,340	2,636	(8.7)	(11.2)	(8.7)	(11.2)
Business	1,008	1,016	1,979	1,999	(0.8)	(1.0)	(0.8)	(1.0)
Wholesale National Market	479	572	958	1,105	(16.1)	(13.3)	(16.1)	(13.3)
Wholesale International Market	245	250	484	468	(2.0)	3.4	(5.4)	0.4
Other	(1)	5	(7)	1

Brazil

	(million euros)			(million Brazilian reais)
	1st Half 2022	1st Half 2021	1st Half 2022	1st Half 2021		Changes
					absolute	%	% organic excluding non recurring
	(a)	(b)	(c)	(d)	(c-d)	(c-d)/d
Revenues	1,819	1,348	10,095	8,747	1,348	15.4	15.4
EBITDA	813	630	4,512	4,086	426	10.4	11.8
% of Revenues	44.7	46.7	44.7	46.7		(2.0)pp	(1.5)pp
EBIT	260	194	1,449	1,256	193	15.4	19.7
% of Revenues	14.4	14.4	14.4	14.4		—pp	0.6pp
Headcount at period-end (number)			9,147	(°)9,325	(178)	(1.9)

(°) Headcount at December 31, 2021.

		(million euros)		(million Brazilian reais)
	2nd Quarter 2022	2nd Quarter 2021	2nd Quarter 2022	2nd Quarter 2021		Changes
					absolute	%	% organic excluding non recurring
	(a)	(b)	(c)	(d)	(c-d)	(c-d)/d
Revenues	1,013	690	5,368	4,407	961	21.8	21.8
EBITDA	457	326	2,421	2,078	343	16.5	18.2
% of Revenues	45.1	47.2	45.1	47.2		(2.1)pp	(1.4)pp
EBIT	140	104	746	664	82	12.3	17.6

TIM GROUP - HEADCOUNT

Average salaried workforce

(equivalent number)	1st Half 2022	Year 2021	1st Half 2021	Change
	(a)	(b)	(c)	(a-c)
Average salaried workforce – Italy	37,071	38,826	39,951	(2,880)
Average salaried workforce – Outside Italy	8,960	9,116	9,069	(109)
Total average salaried workforce (1)	46,031	47,942	49,020	(2,989)

(1) Includes agency contract workers: 11 average employees in Italy in the first half 2022; 12 average employees in Italy in 2021; 12 average employees in Italy in the first half 2021.

Headcount at period end

(number)	6/30/2022	12/31/2021	6/30/2021	Change
	(a)	(b)	(c)	(a-b)
Headcount – Italy	42,620	42,347	42,910	273
Headcount – Outside Italy	9,403	9,582	9,494	(179)
Total headcount at period end (1)	52,023	51,929	52,404	94

(1) Includes agency contract workers: 20 employees in Italy at 6/30/2022; 16 employees in Italy at 12/31/2021; 12 employees in Italy at 6/30/2021.

Headcount at period end – Breakdown by Business Unit

(number)	6/30/2022	12/31/2021	6/30/2021	Change
	(a)	(b)	(c)	(a-b)
Domestic	42,864	42,591	43,157	273
Brazil	9,147	9,325	9,234	(178)
Other Operations	12	13	13	(1)
Total	52,023	51,929	52,404	94

TIM GROUP - EFFECTS OF NON-RECURRING EVENTS AND TRANSACTIONS ON EACH ITEM OF THE SEPARATE CONSOLIDATED INCOME STATEMENTS

The effects of non-recurring events and transactions on the separate consolidated income statements line items are set out below in accordance with Consob communication DME/RM/9081707 dated September 16, 2009:

(million euros)	1st Half 2022	1st Half 2021
Other income:
Recovery of operating expenses	—	1
Acquisition of goods and services, Change in inventories:
Professional expenses, consulting services and other costs	(27)	(27)
Employee benefits expenses:
Charges connected to corporate reorganization/restructuring and other costs	(262)	(335)
Other operating expenses:
Other expenses and provisions	(3)	(86)
Impact on Operating profit (loss) before depreciation and amortization, capital gains (losses) and impairment reversals (losses) on non-current assets (EBITDA)	(292)	(447)
Impact on EBIT - Operating profit (loss)	(292)	(447)
Finance expenses:
Other finance expenses	(3)	(1)
Impact on profit (loss) before tax from continuing operations	(295)	(448)
Income taxes on non-recurring items	6	104
Impact on profit (loss) for the period	(289)	(344)

TIM GROUP - DEBT STRUCTURE, BOND ISSUES AND MATURING BONDS

Revolving Credit Facility and Term Loan

The following table shows committed credit lines available at June 30, 2022:

(billion euros)	6/30/2022						12/31/2021
	Agreed	Drawn down	Agreed	Drawn down
Sustainability-linked RCF – maturing May 2026	4.0	—	4.0	—
Total	4.0	—	4.0	—

At June 30, 2022, TIM had bilateral Term Loans for 950 million euros with various banking counterparties.

On July 6, 2022, TIM stipulated a new loan with a pool of leading international banks, which benefits from the "Italy Guarantee" (in accordance with art. 1, subsection 1 of Decree-Law no. 23 of April 8, 2020 as subsequently amended and supplemented) for an amount of 2 billion euros.

Bonds

The change in bonds in the first half of 2022 was as follows:

(millions of original currency)	Currency	Amount	Repayment date
Repayments
Telecom Italia S.p.A 2002-2022 reserved for subscription by employees	Euro	214	1/1/2022
Telecom Italia S.p.A 1,250 million euros 5.25% (1)	Euro	884	2/10/2022
Telecom Italia S.p.A. 2,000 million euros 1.125% Convertible bond	Euro	2,000	3/26/2022

(1) Net of buy-backs totaling 366 million euros made by the company in 2015.

The nominal amount of repayment, net of the Group's bonds buyback, related to the bonds expiring in the following 18 months as of June 30, 2022 issued by TIM S.p.A., Telecom Italia Finance S.A. and Telecom Italia Capital S.A. (fully and unconditionally guaranteed by TIM S.p.A.) totals 2,437 million euros. With the following detail:

• 1,000 million euros, due January 16, 2023;
• 437 million euros, due May 19, 2023;
• 1,000 million euros, due July 19, 2023.

Bonds issued by the TIM Group do not contain financial covenants (e.g. ratios such as Debt/EBITDA, EBITDA/ Interest, etc.) or clauses that result in the automatic early redemption of the bonds in relation to events other than the insolvency of the TIM Group; furthermore, the repayment of the bonds and the payment of interest are not covered by specific guarantees nor are there commitments provided relative to the assumption of future guarantees, except for the full and unconditional guarantees provided by TIM S.p.A. for the bonds issued by Telecom Italia Finance S.A. and Telecom Italia Capital S.A..

Since the bonds were placed principally with institutional investors in major world capital markets (Euromarket and the U.S.A.), the terms which regulate the bonds are in line with market practice for similar transactions effected on these same markets. Consequently, they carry negative pledges, such as, for example, the commitment not to pledge the company's assets as collateral for loans.

Regarding loans taken out by TIM S.p.A. from the European Investment Bank (EIB), on May 19, 2021, TIM entered into a new loan for an amount of 230 million euros, in support of projects to digitize the country. In addition, it has extended the loan signed in 2019 for an amount of 120 million euros. Therefore, at June 30, 2022 the nominal total of outstanding loans with the EIB was 1,200 million euros, all drawn down and not backed by bank guarantee.

The three EIB loans signed on December 14, 2015, November 25, 2019 and May 19, 2021 contain the following covenants:

■ in the event the company becomes the target of a merger, demerger or conferral of a business segment outside the Group, or sells, disposes of or transfers assets or business segments (except in certain cases, expressly provided for), it shall immediately inform the EIB which shall have the right to ask for guarantees to be provided or changes to be made to the loan contract, or, only for certain loan agreements, the EIB shall have the option to demand the immediate repayment of the loan (should the merger, demerger or

contribution of a business segment outside the Group compromise the Project execution or cause a prejudice to EIB in its capacity as creditor);

• TIM undertook to ensure that, for the entire duration of the loan, the total financial debt of the Group companies other than TIM S.p.A. – except for the cases when that debt is fully and irrevocably secured by TIM S.p.A. – is lower than 35% (thirty-five percent) of the Group's total financial debt;
• "Inclusion clause", under which, in the event TIM commits to uphold financial covenants in other loan contracts (and even more restrictive clauses, including, for instance, cross default clauses and commitments restricting the sale of goods) that are not present in or are stricter than those granted to the EIB, the EIB will have the right – if, in its reasonable opinion, it considers that such changes may have a negative impact on TIM's financial capacity – to request the provision of guarantees or an amendment of the loan contract in order to establish an equivalent provision in favor of the EIB;
• "Network Event", under which, in the event of the disposal of the entire fixed network or of a substantial part of it (in any case, more than half in quantitative terms) to third parties not controlled by the Company, or in the event of disposal of the controlling interest in the company in which the network or a substantial part of it has previously been transferred, TIM must immediately inform the EIB, which may then opt to demand collateral or an amendment of the loan agreement or choose an alternative solution.

The loan agreements of TIM S.p.A. do not contain financial covenants (e.g. ratios such as Debt/EBITDA, EBITDA/Interests, etc.) which would oblige the Company to repay the outstanding loan if the covenants are not observed.

The loan agreements contain the usual other types of covenants, including the commitment not to pledge the Company's assets as collateral for loans (negative pledge) and the commitment not to change the business purpose or sell the assets of the Company unless specific conditions exist (e.g. the sale takes place at fair market value). Covenants with basically the same content can be found in the export credit loan agreement.

In the Loan Agreements and the Bonds, TIM is required to provide notification of change of control. Identification of the occurrence of a change of control and the applicable consequences – including, at the discretion of the investors, the establishment of guarantees or the early repayment of the amount paid in cash or as shares and the cancellation of the commitment in the absence of agreements to the contrary – are specifically covered in the individual agreements.

In addition, the outstanding loans generally contain a commitment by TIM, whose breach is an Event of Default, not to implement mergers, demergers or transfers of business, involving entities outside the Group. Such an Event of Default may entail, upon request of the Lender, the early redemption of the drawn amounts and/or the annulment of the undrawn commitment.

The documentation of the loans granted to certain companies of the TIM Group generally contain obligations to comply with certain financial ratios (e.g. capitalization ratios, debt servicing ratios and debt ratios), as well as the usual other covenants, under penalty of a request for the early repayment of the loan.

Finally, as at June 30, 2022, no covenant, negative pledge or other clause relating to the aforementioned debt position had in any way been breached or violated.

ALTERNATIVE PERFORMANCE MEASURES

In addition to the conventional financial performance measures established by IFRS, the TIM Group uses certain alternative performance measures in its internal presentations (business plan) and in external presentations (to analysts and investors) for the purposes of enabling a better understanding of the performance of its operations and its financial position. These indicators in fact represent a useful unit of measurement for assessing the operating performance of the Group (as a whole and at Business Unit level).

Such measures, which are presented in the periodical financial reports (annual and interim), should, however, not be considered as a substitute for those required by IFRS. As these measurements are not defined by the IFRSs, their calculation may differ from the alternative indicators published by other companies. This is why comparability between companies may be limited.

The alternative performance measures normally used are described below:

■ EBITDA: this indicator is used by TIM as the financial target, in addition to the EBIT. These measures are calculated as follows:

Profit (loss) before tax from continuing operations

• • Finance expenses
• Finance income
• +/- Other expenses (income) from investments

+/- Share of losses (profits) of associates and joint ventures accounted for using the equity method

• EBIT Operating profit (loss)
• +/- Impairment losses (reversals) on non-current assets
• +/- Losses (gains) on disposals of non-current assets
• • Depreciation and amortization

EBITDA – Operating profit before depreciation and amortization, capital gains (losses) and impairment reversals (losses) on non-current assets

• Organic change and impact of the non-recurring items on revenues, EBITDA and EBIT: these measures express changes (amount and/or percentage) in Revenues, EBITDA and EBIT, excluding, where applicable, the effects of the change in the scope of consolidation, the exchange differences and the non-recurring events and transactions. The TIM Group presents a reconciliation between the "accounting or reported" figures and the "organic excluding the non-recurring component".
• EBITDA margin and EBIT margin: TIM believes that these margins represent useful indicator of the ability of the Group (as a whole and at Business Unit level) to generate profits from its revenues. In fact, EBITDA margin and EBIT margin measure the operating performance of an entity by analyzing the percentage of revenues that are converted into EBITDA and EBIT, respectively.
• Net Financial Debt: TIM believes that the Net Financial Debt represents an accurate indicator of its ability to meet its financial obligations. It is represented by Gross Financial Debt less Cash and Cash Equivalents and other Financial Assets. The TIM Group presents a table showing the amounts taken from the statements of financial position and used to calculate the Net Financial Debt of the Group.

To provide a better representation of the true performance of Net Financial Debt, in addition to the usual indicator (renamed "Net financial debt carrying amount"), the TIM Group reports a measure called "Adjusted net financial debt", which neutralizes the effects caused by the volatility of financial markets. Given that some components of the fair value measurement of derivatives (contracts for setting the exchange and interest rate for contractual flows) and of derivatives embedded in other financial instruments do not result in actual monetary settlement, the Adjusted net financial debt excludes these purely accounting and non-monetary effects (including the effects of IFRS 13 – Fair Value Measurement) from the measurement of derivatives and related financial assets/liabilities.

Net financial debt is calculated as follows:

+	Non-current financial liabilities
+	Current financial liabilities
+	Financial liabilities directly associated with Discontinued operations/Non-current assets held for sale
A)	Gross financial debt
+	Non-current financial assets
+	Current financial assets
+	Financial assets relating to Discontinued operations/Non-current assets held for sale
B)	Financial assets
C=(A - B)	Net financial debt carrying amount
D)	Reversal of fair value measurement of derivatives and related financial liabilities/assets
	E=(C + D) Adjusted Net Financial Debt

■ Equity Free Cash Flow (EFCF): this financial measure represents the free cash flow available for the remuneration of own capital, to repay debt and to cover any financial investments and payments of licenses and frequencies. In particular, the indicator highlights the change in adjusted net financial debt without considering the impacts of payment of dividends, changes in equity, acquisitions/ disposals of equity investments, outlay for the purchase of licenses and frequencies, increases/ decreases of finance lease liabilities payable (new lease operations, renewals and/or extensions, cancellations/early extinguishing of leases).

The Equity Free Cash Flow measure is calculated as follows:

	Reduction/(Increase) in adjusted net financial debt from continuing operations
+/-	Impact for finance leases (new lease operations and/or renewals and/or extensions (-)/any terminations/early
-	extinguishing of leases (+)) Payment of TLC licenses and for the use of frequencies
+/-	Financial impact of acquisitions and/or disposals of investments
-	Dividend payment and Change in Equity
	Equity Free Cash Flow

Alternative performance measures after lease

Following the adoption of IFRS 16, the TIM Group presents the following additional alternative performance measures:

• EBITDA After Lease ("EBITDA-AL"), calculated by adjusting the Organic EBITDA, net of the nonrecurring items, from the amounts related to the accounting treatment of the lease contracts;
• Adjusted net financial debt After Lease, calculated by excluding from the adjusted net financial debt the net liabilities related to the accounting treatment of lease contracts. TIM believes that the Adjusted net financial debt After Lease represents an indicator of the ability to meet its financial obligations;
• Equity Free Cash Flow After Lease, calculated by excluding from the Equity Free Cash Flow the amounts related to lease payments. In particular, this measure is calculated as follows:

+	Equity Free Cash Flow
---	-----------------------

• Principal share of lease payments

This measure is a useful indicator of the ability to generate Free Cash Flow.