Telecom Italia Group Strategic Plan UpdateANDREA MANGONI
Safe HarbourThese presentations contain 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, beliefor current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company and the 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 orimplied in the forward looking statements as a result of various factors. Forward-looking information is based on certain key assumptions which webelieve 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 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 are encouraged to 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 MANGONI
Key Objectives and Strategic Levers ConfirmedEnhanced DomesticFocus on Free Cash Core FlowMarketsA Platform to BrazilGenerationCreate Solid Growth of Shareholder No M&A for Geographic Deleverage & ValueExpansionCapital Strengthen Balance DisciplineNon-Core Asset SheetDisposals2ANDREA MANGONI
Cash Flow Generation Confirmed as our PriorityEuro BlnOFCF and FCF before Dividends (2009)OFCF and FCF before Dividends (2010-12)~,083, NormalizedOFCFMaximumFinancialHansenetFCFExp./TaxesbeforerecurringFCFSpaExp./TaxesDisposalbeforerkleDividendstaxesbeforeImpactDividendsDividends3ANDREA MANGONI
Cash Taxes now almost NormalizedEuro BlnAverage Normalized Cash ~ for ’10-’12: ~ bnLast year of tax asset benefit~ Tax RateAverage Group Tax Rate in ’10-’12: ~36%(P&L Tax Rate)4ANDREA MANGONI
Stable Financial Expenses due to Solid Financial ManagementYE 2009 average cost of debt at %Minimizing the refinancing risk remains a priority: Group’s liquidity shall cover 12/18 months of the forthcoming maturitiesMarkets and products will be further diversified. Fixed rate portion on gross debt is expected to be not lower than ̴62%Substantially stable Financial Expenses in the 3 year plan 5ANDREA MANGONI
Group Liquidity Matches 2010–2012 Maturities Euro Bln€ blnGroup LiquidityPosition*of which € blnsigned on Feb 12, 2010.+3Y tenor, no covenants, margin as a function of the rating. 25 Italian and International banks, rated at least A, *€ in the Facilities=€ blnGroup LiquidityMargin~~,356486BondsDrawnBank Facility1,500316720Loans4,1721, 2011 2012CumulatedDebtMaturitiesTotal M/L ‘10-’12Beyond2012TermDebtDebtMaturities6ANDREA MANGONI
Focus on Deleveraging ConfirmedAdjusted Net Financial Position (€Bln)-5 ~: a re-affirmed key ~<28priority 2008-11 €5 BlnNet Debt reduction confirmed201220082009201020117ANDREA MANGONI
2010-12 Net Debt/EbitdaGuidance: reducing, in a range3,0x2,0x20082009201020112012A range for the New Plan horizon has been identified as consistent with our desired credit profile, with a comfort zone closer to Impact on TI’sNet Debt from Adjustments carried out by the Rating Agencies isrelatively limited (no pension funds issues and reduced operating leases)We therefore believe that, in the context of TI Group’s operating performance as per 2010-2012 Plan, our deleverage trend is in line with our current ratings8ANDREA MANGONITi Net Debt/ Ebitda
Telecom Italia Strategic Plan UpdateOSCAR CICCHETTI
Safe HarbourThese presentations contain 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, beliefor current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company and the 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 orimplied in the forward looking statements as a result of various factors. Forward-looking information is based on certain key assumptions which webelieve 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 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 are encouraged to 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 CICCHETTI
Network EvolutionApplicationsServicesAggregation of automatic componentsEcosystems of servicesPlatform APIsOverlays of autonomic virtualized componentsGeneral Control & Management (eZro Touch)IP NBOther PlatformResources/FiberNetworks/Optical PlatformTerminalsSubscriberAccessAggregationEdgeCoreOSCAR CICCHETTI3Service SSeerrvvicicee Bit CarrierEnablerProviderProvider
AgendaWired AccessWireless AccessCore NetworkPlatformsCapex BreakdownOSCAR CICCHETTI4
Wired Access –Copper and Fiber will coexist Copper Access EvolutionFiber Access Evolution (NGAN)CapacityCapacityWDM PON100 Gbpsdown, 100 GbpsupTarget of 100 kmVDSL3Dynamic Spectrum XG-PONManagement10 Gbpsdown, 2 .5 GbpsupTarget of 100 kmGPON Gbpsdown, 1 .25 Gbpsup Up to 60 Km More xDSLefficiency & stability200920102012year200920102012yearCopper: continue innovation, increase performanceFiber: to match a symmetric Gigabit per clientOSCAR CICCHETTI5xDSLxPON
iWred Access –Copper aVlueLast mile lengthRelevant portion of TI asset10090Lower Average Length 8070ItalyxDSLstill evolving (DSM, VDSL3)60United Internal EstimatesHigh ProfitabilityExtentionand RenewalPerformance Improvement+100k Householdsper yearMore robustxDSLtechnologiesin the switchingcentersExtraordinary maintenanceon mostvulnerableelementsFiber+ MSAN in case of Copperpairslongerthan3 km:OSCAR CICCHETTI6%
Wired Access –Fiber Selective DevelopmentTimetable Roll-outPoor Market Demand(‘000)1,3001,400Unclear Savings1,200933927Large Investments1,000800637557600386400Home Semi-Passed200Home Passed2002009201020112012Uncertain ProfitabilityRegulatory ExpectationsMarket FocusTechnical SolutionsInfrastructureBasedBusiness CustomersFTTH G-PON architecture CompetitionMain metropolitan areas Innovative less expensive No Retail Obligations(Rome and Milan)digging solutionsWholesale PricesIncreaseWireless BackhaulingOSCAR CICCHETTI7
Wired Access -EvolutionCopper Network ArchitectureStreetCentralOfficeMDFResidentialcustomersMSANBusinesscustomersBB Fixed –Coverage*EvolutionBroadBandPlatform Investment100%Capex per per xDSLport98%63%FTTxADSL baseAll IP ADSLxDSL(*)NGN26%20092010201120120%20092012* Gross coverage* Copper capexnot includedOSCAR CICCHETTI8
AgendaWired AccessWireless AccessCore NetworkPlatformsCapex BreakdownOSCAR CICCHETTI9
Wireless Access –Voice & Broadband2G evolution (GSM, GPRS, EDGE)3/4G (UMTS, HSPA, LTE)HSPA+ evolution: 84 Mbps DLLTE: large availability PerformancePerformanceof terminalsLTE -GSM Interworking: enhanced & seamless mobility HSPA+: 42 Mbps DLLTE: voice supportExtra capacity of GSM First handsets availablevoice serviceHSPA+: 21 e 28 Mbps DLLTE: first data card (2G/3G/LTE) Voice quality and commercial releasesimprovement200920102012year200920102012yearExtended BB coverage (whole country)Selected areas for HSPA+ and LTE deployments based on macro, micro/picoand femtocellsFemtocellsbackhauling via fixed BB connectivityOSCAR CICCHETTI10
Wireless Access -EvolutionMobile Network ArchitectureCopper Link SL)D(SHRNCnxE1oVice + DataoidaR GHzEth o nxE1nxE1Voice+R99 OPMADSL/DVSLEthEthHSPAEthernet on CopperFiber OpticsDevelopment of Radio Access CoverageBackhauling600(unit)1051,700100%1,100100%6051,60086%1,0002,7002,600>60%3,70012,15010,350GSM/Edge7,550UMTS5,050HSDPA 21/2820092010201120120%20092012RadioFiberBondingNxE1OSCAR CICCHETTI11
Wireless Access -Cash Cost Reduction3G NodesxepaCpre oNedMultistandard solution13,50013,10012,70012,20011,200+APSH)000,(5ETL )052(20082009201020112012Site Sharing (k number of sites)Mobile Petabytes137neRtpre etiSxepaCpre CICCHETTI12
AgendaWired AccessWireless AccessCore NetworkPlatformsCapex BreakdownOSCAR CICCHETTI13
Core Network –Delayeringtoward IP over ROADMIPIPATMPhotonic LayerSDH(ROADM)WDMLarge implementation of xDSL(DSLAM) IP within the accessProgressive migration of ATM and SDH to IPOSCAR CICCHETTI14
Core Network -EvolutionCore Network EvolutionOPMPTN aggregation areaThe Capacity increaseIP Traffic Capexper Petabyte100Gb/s100Gbps40Gbps10Gb/s10Gbps3,,6801Gb/s622Mbps1,940155Mbps100Mb/s1,35086010Mb/s610INNOVATION199020002010year200720082009201020112012OSCAR CICCHETTI15Bit rate per channelPetaBytes
AgendaWired AccessWireless AccessCore NetworkPlatformsCapex BreakdownOSCAR CICCHETTI16
IT PlatformsInterface Standardization800380 260 180 systemsCentralizedsystemssystemsSystemsManagement20092012IT Systems800 Systems180 SystemsManaged40,000 ThinClient80,000 PCsWorkstation25,000 portablePCsServer12,000 Servers2,000 Servers+ iVrtualizationData Center8 Data Centers3 Campus Data CentersArchitecture StreamliningManagement Costs ReductionOSCAR CICCHETTI17
Service PlatformsReverse Revenues TrendEnriched ConnectivityFlexibleBandwidthEnrichedP2PSelfProvisioning& SelfCaringMobile InternetBack HigherThroughputto GrowthApplications uQalityDifferentiation(1)& Platforms UltrabrowsingExperienceon selectedareas7%12%(2)Broadband 13%16%Personal CommunicationEnhancedPhonebookAccess & (3)80%EnhancedMessagingoVice Personal Communities72%Business Collaboration SuiteUnifiedMessagingIP iVdeoconferencingCollaborationTools200920121)(CIT Sreiv ,cseBB Contnet (A d,.vPI T,)VMolib eVSA Contnet2)(oMbli eBB ,dexiFBB (cAc)sse3)( :dexiFA ,sseccuOogtni goV ,eciVoic eV ,SABuniss se ,ataD naH ;stesdoMlib :euOogtni goVic ,enigasseM ,gnaHstesdOSCAR CICCHETTI18
Enabling PlatformsMachine to MachineReverse Revenues TrendSmart CitiesDigital HomeSmart CarProfiling & Recommendation Back Traditional Customer Profilingto GrowthLocation on Mobile NetworksApplications Web Profiling(1)& Platforms Network Profiling7%12%(2)Broadband 13%16%Cloud ComputingAccess & Infrastructure as a Service(3)80%Platform as a ServiceoVice Software as a Service72%Content Delivery IPTVWEB and OTT TVCDN based Services200920121)(CIT Sreiv ,cseBB Contnet (A d,.vPI T,)VMolib eVSA Contnet2)(oMbli eBB ,dexiFBB (cAc)sse3)( :dexiFA ,sseccuOogtni goV ,eciVoic eV ,SABuniss se ,ataD naH ;stesdoMlib :euOogtni goVic ,enigasseM ,gnaHstesdOSCAR CICCHETTI19
AgendaWired AccessWireless AccessCore NetworkPlatformsCapex BreakdownOSCAR CICCHETTI20
CapexBreakdownFocus on Network & IT Euro Network Service Netwok& OthersCapexreduction around 20% among the 3 year Plan 2009201020112012 %Full support of all our business commitments Core Network 31%31%30%28%and Service Platforms32%25%24%23%ITAccess Netwok37%44%46%49%& Others2009201020112012OSCAR CICCHETTI21
Technology -Take AwaysIncrease coverage and throughput to support BB (Fixed/Mobile) development Slightly increase in capexamount trough:Access introduction of multistandardmobile access nodesNetworkprice decline in xDSLselective fiberroll out and innovative digging technologiescooperation with P. Administrations for Digital Divide and new networks roll out Delayeringand strengthening to support data traffic growth and effectiveness of service offering Core Network Capexbroadly slightly declining trough:and Service price decline in optical equipment Platforms smooth phase out of legacy platformsadoption of OTT approach in service developmentIntegrate and empower to simplify business processes and supportefficiency planStrong reduction in capexdue to:integrated architectureIT Platformsvirtualised infrastructuresvendor consolidationOSCAR CICCHETTI22
Telecom Italia Strategic Plan UpdateMARCO PATUANO
Safe HarbourThese presentations contain 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, beliefor current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company and the 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 orimplied in the forward looking statements as a result of various factors. Forward-looking information is based on certain key assumptions which webelieve 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 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 are encouraged to 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 PATUANO
AgendaTI Group 2010-2012 Strategic Plan UpdateItalian Market OverviewTelecom Italia Domestic Strategy and GoalsTask #1 Speed-up Mobile TurnaroundTask #2 Consolidate Positive FixedMomentumTask #3 Fully Exploit Integrated Approach OpportunitiesTask #4 Continue to Attack Adjacent ServicesTask #5 Further Cash Cost Efficiencies to Sustain Growth3MARCO PATUANO
Italian Market Evolution ‘08-’12Market by TechnologyMarket by Customer SegmentBln€Bln€+ %+ %5858TotalTotal575755552Open Market 22MediaProducts + 6%131111Media + 6%111113ICT10Stable99TopSlight decreaseTotal TLCBroadly Stable131212353635Products54Stable4Broadly stableBusiness998~ + 2%Mobile171817Consumer~ + 1%222222Fixed141413~ -3%200820092012200820092012RGAC 0’1’-9244MARCO PATUANO
AgendaTI Group 2010-2012 Strategic Plan UpdateItalian Market OverviewTelecom Italia Domestic Strategy and GoalsTask #1 Speed-up Mobile TurnaroundTask #2Consolidate Positive FixedMomentumTask #3Fully Exploit Integrated Approach OpportunitiesTask #4Continue to Attack Adjacent ServicesTask #5Further Cash Cost Efficiencies to Sustain Growth5MARCO PATUANO
Domestic Revenues: Trend ReversalEuro lbn ,rOnagcitaDaCAGR change 0‘21’-9yoyModelImBack proveChangeBroadly stableStabilizeto : Paving the way to Growthchange % yoy200920101Q092Q093Q094Q091Q102Q103Q104Q10-5%-5%-7%-11%FY09FY10-7%-4% / -5%6MARCO PATUANO
Domestic Market: the Repositioning Path200820092010-2012aV“lue for Money”Proposition RepositioningMarket Share Recoveryimpaired by RepricingFocus on volumesCompetitive pressure increaseMarket share recoveryStrong leverage on handsets C“ost Conscious”Customer Base erosionBest value for Money Push Strategy based on Handsets subsidyNew handsets strategy Focus on c“ost conscious”customers and h“igh spenders”Weaker brand perception (E“xpensive)” New advertising & communication after consumer tariff repricingformatPull strategy through AdvertisingPricing Strategy: focus on CommunityDistribution Network –Strength and DevelopDistribution Network RefocusMarket Positioning Restore Regulatory DialogueLeverage on FlexibilityConsolidationStrong competitive asymmetryRetail & LLU monthly fee increaseLine losses reduction Large line losses (~ mln)Progressive asymmetry reduction Full symmetry on winbackGood performance on BB acquisitionsSlowdown in line losses trendNew LRIC model introductionPush on free to flat migration in BBIncrease value of BB offersIncrease market share and reduce churn on BB Gain market share on ICTLaunch of new over-the-top servicesCustomer Centric ApproachLead ICT evolution7MARCO PATUANOFixedMobile
Domestic “Retail”Service RevenuesEuro lbn ,rOnagci t,aDa%*%Business -TOP18%25%16%Business -SME21%24%74%Consumer61%51%Totalo/wo/w2009Fixed + ICTMobileWeight on oTtal Retail 56%44%Service Revenues** Net of Fixed-Mobile interdivisional sales elimination (€in 2009)8MARCO PATUANO
AgendaTI Group 2010-2012 Strategic Plan UpdateItalian Market OverviewTelecom Italia Domestic Strategy and GoalsTask 1# Speed-up Mobile TurnaroundTask #2Consolidate Positive FixedMomentumTask #3Fully Exploit Integrated Approach OpportunitiesTask #4Continue to Attack Adjacent ServicesTask #5Further Cash Cost Efficiencies to Sustain Growth9MARCO PATUANO
Task #1 Speed-up Mobile TurnaroundObjectivesActionsKPIsCustomer Base CallingSimplified Portfolio offeringand strengthened (mln ,%)CB Gross AddRecovers and MNP Advertising pressurewith focus on product key-benefitsMarket Share 76%85%85%85%Ethnic segment vertical offeringincrease2008200920102012Completing Consumer Sales Network Gross Adds Rebound in 2010restructuring: focus on Franchising & Dealer (mlnSI), restyle PoS, New sales commissions 8>.0model Best aVlue for Money Proposition both for 2008200920102012“Community users”and for “Off-net users”with the aim to reduce Churn, increase lock-in aVlue Consumer Outgoing Calling ARPUCustomer (€/month)Customers and boost usageBase value Confirm leadership on customer care adopting protectionmultichannel approach to keep quality while BROADLY STABLEreducing costs200820092012Pre-retentionon high end customers10MARCO PATUANO
Mobile –Offer: Best Value for Money in the Consumer SegmentCommunity Offer (U speak with friends?)Off net Offer (U speak with everybody?)Size of Many How long community One Many friends In my you speak?& location ?friends also on countryfriend270 500 1000 1500 fixed linemin/month min/month min/month min/month (60week)UNLIMITED TRAFFIC1€/week + 17€/ best price 2€/week3€/week4€/weekmonth 29€/ month 49€/ month69€/ monthITZ(4€/week)294969HANDSET MONTHLY INSTALLMENTSUnlimited SMS 1€/week60 SMS for 2€/weekSMS usage?Light usageHeavy usageINTERNET 40: 9€/month INTERNET 100: 19€/month Mobile SometimesInternet?40h/month100h/monthINTERNET PACK 100: 159€INTERNET PACK 40:99€Often100h/month x 12 months + Dongle40h/month x 12 months + Dongle11MARCO PATUANO
Task #1Mobile –Re-design Sales Channels*Changing Mix & SizePoSproductivity 20092012DeltaMar ’10YoY%nwO +%evAegaFranchisingnwOSotrse&+%FranchisingoMnorbnad&+%oMnorbnad&+%%%-ODGTOTAL~4,500~6,100(*) eWelky rGos s dA/PoS12MARCO PATUANO
Task #1Mobile BB -Consolidating LeadershipItalian Mobile BB Market (Value)TI Mobile BB usersB(n€)(mln)CAGR’09-’+%+40%%72%71%69% %We bresUs20082009201020122008200920102012Structural AdvantagesLever to Reinforce LeadershipMarketing approachFocus on medium users to:Network coveragedefend price per MBstabilize yearly consumptionNetwork capacityServicesComplete and competitive prepaid offer portfolioLeadership in Smartphone marketshare (TIM market Internet Pack (new annual bundle device+service)share FY09 ~37%) New postpaid “all-inclusive”offers (Internet Key +pc+service)Device portfoliosimplification DevicesEfficient pricingin order to avoid network overloadWidest product portfolio, best design, materials and colors13MARCO PATUANOSmart Internet phonesKeys
Task #1 Mobile -Handsets StrategySell in Volumes ConsumerStrategy and ImpactHandsetlm(n)USB dongleMore volumes, mores costs, less Approx 8 . of handset volume sold (with SIM embedded)Strong push on handsets resulting into a “long ”of silent lines lasting until in 1H10Almost 800 mlneuro of handset sold per year with impact on volumes, higher Focus on advanced data enabled devices to drive Massive increase on USB dongle sale ReduceSmartphonesat competitive price56%40%39%26%2GSignificant improvement in revenues mix with positive impact on SAC and margins200720082009201014MARCO PATUANOFrom 2009 onwardsSince 2008
Task #1 Mobile –Early EvidenceObjectivesKPI’sTIMX UsersCustomerBase Calling-Changeyoy(‘000) mlnCB Value Stabilized protection-401-537-544-762Sept09Dec09Mar10Consumer Gross Adds (‘000)Outgoing traffic Trend –Change yoy+15%+2%477450Market Share 4221Q092Q093Q094Q09Feb10March103943783712009& Usage +2%lftaincrease2010%-JanFebMarConsumer Mobile BB Users(mln)Consumer BB Revenues(€mln)+31+ BB +38%+38% consolidation10Q911Q010Q911Q015MARCO PATUANO
AgendaTI Group 2010-2012 Strategic Plan UpdateItalian Market OverviewTelecom Italia Domestic Strategy and GoalsTask #1 Speed-up Mobile TurnaroundTask 2#Consolidate Positive FixedMomentumTask #3Fully Exploit Integrated Approach OpportunitiesTask #4Continue to Attack Adjacent ServicesTask #5Further Cash Cost Efficiencies to Sustain Growth16MARCO PATUANO
Task #2Consolidate Positive Fixed MomentumObjectivesActionsKPIsLine Losses Evolution (mln)Portfolio simplification and flat offers 2008200920102012deployment to increase value for money perception and reduce impact of traffic <>70% accessDifferentiated caring approach based on segments and needsULL Win-back (‘000)Defend >400Customer Base Value Continuous quality improvement(fault rate 182163and minimize and repair time) to sustain loyaltylines loss reduction200820092012Retention/pre-retentioninbound and outbound (churn predictive models)with Market Share -Access Calling (%)customized offers on specific %%~64%~62%Distinctive communication formatwith stable presence in the media200820092010201217MARCO PATUANO
Task #2Consolidate Positive Fixed MomentumObjectivesActionsKPIsTarget CustomerBase BB (mln)Launch of BB entry fee tariffand bundle ~21%~18%~17%~17%BB Churnpackage with PC and push onflat BB % Flat97%91%Develop strong high value customers 77%83%Customer Offersretentionthrough multimedia innovative Penetration 2008200920102012devices (Cubovision) enabling flexible and Valueprovisioning of TV services according to BB ARPU (euro/month)available bandwidth (IPTV / OTTV)~Push on ULL win-backs leveraging on symmetrical regulation (from April ‘10)200820092012Improve sales effectiveness through channel Adsl Sales–CustomerCare (mln)specialization (egagent sales on win back), Improve quality target on inbound and outbound -to-MarketacquisitionsSuccess Rate>5%%%Re-launch of web sales channel20082009201018MARCO PATUANO
Task #2Fixed –Early EvidenceObjectivesKPI’sLineLosses(‘000)1Q094Q091Q10Defend Customer -190-260Base Value-380BB Customers(‘000 access)+89+157+717,0716,8437,0006,754Increase rFeeBB Customer ValueFlat77%79%83%+176+398+89FY081Q094Q091Q10ADSL Sales–CustomerCare (‘000)~10% excluding calls from BB customers11210198Improve % Redemption 4%%%Go-to-MarketOn inbound calls1Q094Q091Q1019MARCO PATUANO
AgendaTI Group 2010-2012 Strategic Plan UpdateItalian Market OverviewTelecom Italia Domestic Strategy and GoalsTask #1 Speed-up Mobile TurnaroundTask #2Consolidate Positive FixedMomentumTask 3#Fully Exploit Integrated Approach OpportunitiesTask #4Continue to Attack Adjacent ServicesTask #5Further Cash Cost Efficiencies to Sustain Growth20MARCO PATUANO
Task #3Integrated Approach: Focus on the Business Segment SalesCustomer OperationsOffering“ImpresaSemplice”new Sales networkis already F/M Integrated Customer Business conceptintegrated, with differentiated Operations with singlechannelssegmentation for fixed and TraNoi,” first convergent mobile customersHigh End customers P“ortfolio”offer(200k), that generate 40% of tot Same segmentation as Salesrevenues, have a dedicated Sales “Leverage on fixed representatives and few2few customer base exploiting Customer Operations team convergent offering and communicationSalesCustomer careFixed Only: mnPotentialSales RepsFew 2 FewPortfolio(~200k)Fixed + mnBusiness PartnersSME/SohoStandard “Ready to use basicICT (~)Call caringofferingcenters21MARCO PATUANOShopsAssociations
Task #3Integrated Approach: Up / Cross Selling for Business Segment ObjectivesActionsKPIsMobile Human -Net Adds (‘000) Leverage on integration to:Increase mobile penetration on fixed +160Boost mobile 79customer basecustomer base-37Improve loyalty and reduce churn-161Leverage on cross selling opportunities2008200920102012Fixed Net Adds (‘000) Fixed Line Losses (‘000) Strengthen win back and customers’lock-in and loyaltythanks to convergence (fixed-Stop losses of mobile integration, single billing, single caring)-42fixed -194-235customers-2662008200920122010Stabilize revenues by:ARPU (€/month/SIM)Shifting competition from price to innovation ~ -3%46and quality of serviceoVice*Stabilize 20092012Increasing share of walleton integrated revenues ~%11-23customersBB**20092012 )*(eveRnusen te SAVna dHansdstegvA/ MISuHnamRGAC 0’1’-9222 (**)RevenuesVAS BrowsingvgA/UsersBB We+W(bap)MARCO PATUANO
Task #3Business Segment –Early EvidenceObjectivesKPI’sMobMobile Human Net Adds (‘000) ile Human Gross Adds (‘000) +12+12%129125-24Boost mobile -53115-50-52customer base+54+54%1Q094Q091Q101Q094Q091Q10Fixed Access Net Adds (‘000) 1Q094Q091Q10Stop losses of fixed -25-44customers-78+68+68%Broad Band Net Adds (‘000) +125+125%Develop +27+12BroadBand+101Q094Q091Q1023MARCO PATUANO
AgendaTI Group 2010-2012 Strategic Plan UpdateItalian Market OverviewTelecom Italia Domestic Strategy and GoalsTask #1 Speed-up Mobile TurnaroundTask #2Consolidate Positive FixedMomentumTask #3Fully Exploit Integrated Approach OpportunitiesTask 4#Continue to Attack Adjacent ServicesTask #5Further Cash Cost Efficiencies to Sustain Growth24MARCO PATUANO
Task #4Continue to Attack Adjacent Services –Especially on TOP ClientsObjectivesActionsKPIsExtension of Data center proposition to fully support theICT RevenuesVirtualization model (Server, Networking, Storage, IP Become the €(lmn)PAB,X Desktop)leader in extended Selective innovation regardingSaaSinfrastructure ~+17%services1,342Bundling of TLC, infrastructure services and new offers831ICTRationalization of the partners program to improveTI 20092012Rationalize the positioning on Net Centric solutions (iVrtualization, partnership *SaaS)ICT Market Sharemodel and develop the ~11%~17%Vertical emerging markets(eg.: e-gov, e-health, finance, vertical marketssecurity, automotive ..) * rddAsselbaemra tekoT plCientMatrix –Revenues €(lmn)Reinforce iVrgilioleadershipin the digital advertising through vertical communities and customizable ~+13%Focalize Matrix ~200editorial offeringDigitalmission towards 154137Develop profiling assets and capabilities in IP/Network, an Information ADVWeb and Positioning profilingProvider role200920102012RGAC 0’1’-9225MARCO PATUANO
Domestic Take-away: Where does the “Reverse Revenues Trend”come from?Customer Centric Approach: different strategies for different Market SegmentsMOBILEFIXIncrease the number of calling lines being the Reduce LINE LOSSES“BEST VALUE FOR MONEY”optionMinimize impact of TRAFFIC decreaseKeep ARPU erosion from voice prices under Keep growing in XDSL BBcontrol Leverage on CONTENT DELIVERY Balance voice ARPU with BB ARPUPLATFORMS in order to enrich the offering Keep leadership in Mobile BBand increase BB ARPUFIX & MOBILEProtect market share and leverage on cross selling between F&M ICTcustomer baseCreate a “READY TO USE”Develop convergent offer in order to boost TOTAL REVENUES per offerforbasicICT servicescustomerSegment of the customer base in order to serve each cluster withthe most appropriate go-to-market modelVOICE & TRADITIONAL DATAICTProtect market shareEnhance value chain: from pure Control price erosion on Mobile VoiceNETWORK services to IaaSand SaaSBoost Mobile BB and Mobile VASDevelop vertical services on horizontal Minimize impact of fix VOIPplatformsDelay price pressure on traditional data26MARCO PATUANOTOPBUSINESSCONSUMER
AgendaTI Group 2010-2012 Strategic Plan UpdateItalian Market OverviewTelecom Italia Domestic Strategy and GoalsTask #1 Speed-up Mobile TurnaroundTask #2Consolidate Positive FixedMomentumTask #3Fully Exploit Integrated Approach OpportunitiesTask #4Continue to Attack Adjacent ServicesTask 5#Further Cash Cost Efficiencies to Sustain Growth27MARCO PATUANO
Task #5Cash Cost Rationalization and Efficiency PlanEuro lbn ,rOnagcit aDaCash Cost 2012 vs2009Efficiency bln€17%30%53%58%OpexCashCost on %~65%Revenues42%Capex’10 vs ‘09’11 vs ‘10’12 vs ‘11Cum. ’09-’12+ by Programs (2009-12) << & bln€Organization&<> bln€ Delivery & AssuranceBuildings andCum 09-12 Efficiency bln€ Mng28MARCO PATUANO
Task #5Domestic: Focus on Efficiency Plan 2009-2012Euro lbn ,rOnagci t,aDa%Building Delta Cash Cost NetwkMktg& Org. & Delivery oVl. & & vs2009AbsFY09’12 vs‘ +&+-+++&A&+ Capex+>>+ PATUANO
Focus on 2010 Domestic EBITDAEuro limloin ,rOnag ci ,ataD % / -4/-5% (*)Opex(**)13Focusing MTR impact and on on-Supporting Commercial net trafficTurnaround 24Completing Revenues mix Progressing on efficiency re-engineeringprograms(*) Handsets+ Marketing & Commercial = Marketing & Sales(**) Industrial + Personnel+ G&A= FixedOpex30MARCO PATUANO
aBc kup31MARCO PATUANO
DMO –Market by Segments TOP -Public sectorTOP -Private sectorItalian MarketPABusiness Wireline800 customers540 customersTopTop-350 central governmentMarket (mln)-Large CorporationsTop Clients-450 key local government-Financial 20,000 (LA and PA) EnterpriseLargePortfolio managed by k k customersrsDirect Sales force(managed at (managed at regional FixedFixedNo Totalleveregional level)l)BU CO Fixed ContractcontractlineBusinessBusiness Mobile Market (mln)Needs based segmentation:Business30% mlncustomers Single/Multiple 43%(enterpriceswith 1-location Customers 499 employees) mnmanaged by Indirect ProfessionalsMobileMobileSales force, high end No Total17%CO BU Mobilecustomers (200K) Nomadic 10%contractContractmanaged at PortfolioConsumerHouseholds with Fixed Access FixedCustomerBaseMobile CustomerBasemlnFamilies with Broadband 56%ConsumerTot mlnTot mlnEthnic ;Fixed:All HouseholdsaVlue BasedTeens ; 3,93,9SegmentationMobile:Individuals Young ; 4,2PrivilegePremiumSenior ; that use phone both BB+IPTVGold11,1for private and ProspectBBHigherSilverprofessional purposes Massive ; Standing23,9StandardStandard9,0with a consumer offer32MARCO PATUANO
Task #5Efficiency Programs Extension and New Operating ModelEnd of asymmetry on Fixed (uJly ’10) and Delta Cash Cost 2012 vs2009Mobile (uJly ’12) termination rate leading to ITXEuro lbn ,rOnagcitaDanet savings on interconnection expensesFY09D AbsTangible impact of TIM push on communities’12 vs‘09Speed-upand complete saleschannelsTotal turnaround(Consumer and Business)& SalesNew business modelforHandsetsand Network Platform decommissioning (ATM, single RAN) and “one touch”network approachIndustrial Mktg&Fuldeployment of TIM-Vodafone site sharing +Rightsizingtrougha LeanCompany concepton processesPersonnelStaff Real Estate rationalizationG&AG&A&Tight cost control on consultancies Refarming900 MHz for UMTS indoor coverageTotal CapexCAPEXRightsizing and restructuring of IT PATUANO
