Telecom Italia Rsp

Earnings Release • Nov 7, 2016

TELECOM ITALIA GROUP

3Q'16 Results Rome – November 7, 2016

3Q'16 Update

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 of 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 nine months ended 30 September 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.

The accounting policies adopted in the preparation of the Condensed Consolidated Financial Statements as of and for the nine months ended 30 September 2016 have been applied on a basis consistent with those adopted in the Annual Consolidated Financial Statements at 31 December 2015, to which reference should be made, except for the new standards and interpretations adopted by the Telecom Italia Group starting from 1 January 2016 which had no effects on the Condensed Consolidated Financial Statements as of and for the nine months ended 30 September 2016.

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 and nine-month periods ended 30 September 2015 have been revised, segment information included. Furthermore, such revision did not have any material impact on the consolidated income statement of the three-month and nine-month periods ended 30 September 2015.

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.

Furthermore, the Sofora - Telecom Argentina group, which was disposed of on 8 March 2016, is classified as Discontinued operations.

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Group Progress Overview - Flavio Cattaneo

3Q'16 Results – Piergiorgio Peluso

Take-Aways – Flavio Cattaneo

Back-up

Another Quarter of Outperformance on Domestic

Organic*, % YoY

<-- 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16

• Best Domestic Quarterly performance since 2007
• Combining Top Line Growth with strong EBITDA * and EBITDA-CAPEX
• Sound growth in Organic Ebitda Margin: +3.1pp YoY at 49.3% in 3Q
• 9M'16 YoY EBITDA* +3.3% already ensures YTD the 2016 «low-single digit growth» Target

<-- 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16

<-- 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16

FY performance

Group Shifting Gear, with also Brazil in Recovery mode

Organic*, % YoY

* Organic: before non-recurring items and excluding exchange rate fluctuations **Excl. license

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Building-up further upside for 4Q'16

	3Q'16	KPIs	What's next
Mobile	Working on our Customer Base  Service revenue growth confirmed at +1.1% YoY  New offers gain momentum  More upselling on CB	 ARPU upwards to 12.8€ vs 12.5€ in 3Q'15  LTE penetration increased to 51%*  Good MNP Balance at -44k (vs -70k in 2Q'16)  Best-in-class Churn at 23.5% confirmed	Further Performance supported by:  Growing LTE penetration and densification  Quality and Caring  Push on Innovation: TIM Turbo Giga and more to come…
Fixed	Moving into attack-mode  Consumer: Successful September campaign leads to double-digit growth in new fixed lines  Business: Performance step-up in just one quarter (gross adds +30% YoY, net losses at historical low)	 Record-low line losses at -100k  BB Net Adds +37K  BB ARPU up to € 22.4 (vs 3Q'15 20.7€)  > 1.1 million NGN customers  New HD TV campaign delivers top-of-the-charts results  +100k TIM Smart gross adds in September	A growing Fiber beat enables more convergent sales  Upgrading 80k HH per week to FttC and 20k HH per week to FttH  Voice-only upgrades to BB  Fiber Try-and-Buy  Further reduction in line losses

TIM Ultra BroadBand Roll-Out has never been Faster

Turnaround has just started

• Consistent Recovery on Revenues and KPIs, with ARPU up 12% YoY at R\$ 18.4in 3Q'16 (from R\$ 16.4 in 3Q'15)
• TIM Improving Customer Mix while taking part to a more rational pricing environment
• Organic* EBITDA back to positive in 3Q, reaching a 33.1% margin (up ~2pp both YoY and QoQ)
• TIM at the forefront in LTE Urban Coverage (66%) with an efficient Capital Allocation
• Strong Performance in Cash Generation (9M Organic* EBITDA-Capex +30% YoY)

Group Progress Overview – Flavio Cattaneo

3Q'16 Results – Piergiorgio Peluso

Take-Aways – Flavio Cattaneo

Back-up

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3Q'16 Revenues and EBITDA

000, €mln, % YoY

* Organic: before non-recurring items and excluding exchange rate fluctuations

Piergiorgio Peluso

Domestic

Mobile and Fixed Dashboard

Piergiorgio Peluso

Telecom Italia Group Results - 3Q'16

Opex Efficiencies continue to Accrue

Net Debt: 3Q Step-down supported by Financial Discipline

€mln, % YoY

Group Progress Overview - Flavio Cattaneo

3Q'16 Results - Piergiorgio Peluso

Take-Aways - Flavio Cattaneo

Back-up

Guidance Update

• NGAN coverage upgraded from 56% to ~60% YE'16 and from 75% to ~ 80% YE'17, with no increase of CAPEX targets*
• LTE Coverage upgraded from 95% to >96% YE'16 and from 96% to 98% YE'17
• YE'18 NGN Customers target increased 10%, from 5mln to 5.5mln Italy
• Lines losses reducing towards parity in current Plan scenario

• Increase in Efficiency Plan to be announced in February

• TIM Group

• Capital Intensity is projected to drop below 20% in the medium term, in line with coverage targets fulfillment
• Operational and Financial Discipline fully supports <2.7x Net Debt/Ebitda target in 2018, without the need of any Disposal*

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Group Progress Overview – Flavio Cattaneo

3Q'16 Results – Piergiorgio Peluso

Take-Aways – Flavio Cattaneo

Back-up

Telecom Italia Group Results - 3Q'16 Flavio Cattaneo – Piergiorgio Peluso

3Q'16 - TI Group Results Overview

Group

• Revenues: € 4.8 bln
• EBITDA* : € 2.2 bln
• Revenues: € 3.8 bln
• EBITDA* : € 1.9 bln
• Revenues: € 1.1 bln
• EBITDA* : € 0.4 bln
• Revenues: € 83.9 mln

• EBITDA* : € 41.7 mln

• Capex: € 1.1 bln

• Net Debt: € 26.7 bln
• NGN: 13.6 mln Households in 1,509 Cities
• 4G: 95% of Population in 6,600 Cities
• 4G: 746 Cities with 66% of urban population covered
• 3G: 2,084 Cities with 83% of urban population covered
• Tenancy Ratio: 1.70x
• Ebitda Growth: +15% YoY

Inwit

Brazil

Domestic

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Group 3Q'16: Organic Revenues and EBITDA

Organic*, €mln, % YoY

* Before non-recurring items and excluding exchange rate fluctuations

Telecom Italia Group Results - 3Q'16 Flavio Cattaneo – Piergiorgio Peluso

Group 9M'16: Capex and Net Debt

€mln, % YoY

fully generated in the Domestic Business (1.937 mln euro)

* Before non-recurring items and excluding exchange rate fluctuations ** Other activities & eliminations included

Mobile and Fixed Performance

000, €mln, % YoY

Domestic Mobile Details

000, €mln, % YoY

4G 51% of MBB

Telecom Italia Group Results - 3Q'16

Flavio Cattaneo – Piergiorgio Peluso

Domestic Fixed Details

000, €mln, % YoY

€/month

TIM Brasil: 3Q'16 Results

R\$mln, % YoY

Mobile Service Revenues (YoY%) confirm their rebound

Maturities and Liquidity Margin

€mln

(1) € 30.951 mln is the nominal amount of outstanding medium-long term debt. By adding Mandatory Convertible Bond (€ 1.300 mln), IAS adjustments (€ 1.237 mln) and current financial liabilities (€ 803 mln), the gross debt figure of € 34.291 mln is reached.

(2) Committed Bank lines are undrawn

OpFCF Generation in 9M'16

Piergiorgio Peluso

Well Diversified and Hedged Debt

Net financial position 26,735

Maturities and Risk Management

Average m/l term maturity: 7.75 years (bond only 8.15 years) 3.2%

Fixed rate portion on gross debt approximately 70.8%

Around 36% of outstanding bonds (nominal amount) denominated in USD and GBP and is fully hedged

Cost of debt: ~5.1 %

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 2.338 €/mln (of which 370 €/mln on bonds)

• the impact on Financial Assets is equal to 1.662 €/mln.

Therefore, the Net Financial Indebtedness is adjusted by 676 €/mln.

€mln

N.B. The difference between total financial assets (€ 7.556 mln) and C&CE and marketable securities (€ 5.767 mln) is equal to € 1.789 mln and refers to positive MTM derivatives (accrued interests and exchange rate) for € 1.440 mln, financial receivables for lease for € 177 mln, deposits beyond 3 months for € 100 mln and other credits for € 72 mln.

Domestic Fiber and LTE Coverage Trend

Focus on Domestic Opex

€mln, % YoY

9M'16 Domestic: Focus on Investments

€mln

• Innovative Investments (+209 €mln YoY) driven by a faster pace in LTE, NGN and Cloud Services
• 81% of Innovative Capex and 83% of Traditional Capex are Network and IT, indicating strong focus on Infrastructure

Domestic Capex Breakdown

Domestic - Cash Cost Efficiency Dashboard

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€

TIM Brasil - Cash Cost Efficiency Dashboard*

For further questions please contact the IR Team

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