Telecom Italia Update and Focus on UBB BofA - Merrill Lynch Global Telco and Media Conference

Transcription

1 Telecom Italia Update and Focus on UBB BofA - Merrill Lynch Global Telco and Media Conference Chief Operating Officer 0

2 Safe Harbour These presentations contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These statements appear in a number of places in this presentation and include statements regarding the intent, belief or 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 or implied in the forward looking statements as a result of various factors. Consequently, Telecom Italia S.p.A. makes no representation, whether expressed or implied, as to the conformity of the actual results with those projected in the forward looking statement. 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 are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telecom Italia S.p.A. 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 S.p.A. 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 Commission. 1

3 Agenda Group Overview Domestic Progress Report Focus on UBB 2

4 TI Group Key Results Euro mln, Organic data, % Revenues EBITDA % on Revenues 42.0% -1.9 p.p. 40.1% 7, M +5.3% 7,392 2,951 2, M +0.5% 1Q11 1Q12 1Q11 1Q12 Revenues Trend YoY EBITDA-CAPEX 5.0% 5.3% % on Revenues 29.3% -2.1 p.p. 27.2% 3.7% 2, M -2.1% 2, % -0,2% 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 1Q12 3

5 TI Group Key Results by Core Markets Euro mln, Organic Data Weight on TI Group TI Group Domestic Brazil Argentina 1Q12 Δ% yoy 1Q12 Δ% yoy 1Q12 Δ% yoy 1Q12 Δ% yoy Revenues 7, % 4, % 1, % % 60.4% 26.0% 12.2% 38.2% EBITDA 2, % 2, % % % 74.0% 17.0% 9.7% 26.7% EBITDA-CAPEX 2, % 1, % % % ~80% ~14% ~8% 4

6 Telecom Italia Group FY 2012 and Plan Key Guidance Organic Data* TI Group FY 2012 Key Guidance Revenues Ebitda Stable Broadly Stable NFP Adj.** 27.5 bln Organic Data* Capex cum NFP Adj *exchange rates 2011 (R$/ 2.33; ARS/ 5.74), excluding impact from non-organic items ** excluding Latam spectrum licences *** reported figure TI Group Plan Key Guidance ** Ebitda-Capex cum >22 bln >15 bln FY 2012: 27.5 bln FY 2013: 25 bln From FY 2014: < 2x Net Debt/Ebitda *** 5

7 Agenda Group Overview Domestic Progress Report Focus on UBB 6

8 Domestic Results: Trend still improving Euro mln, Organic data, % Total Domestic Revenues Domestic Service Revenues 4, M -2.4% 4,486 Mobile -1.7% Wireline -2.9% % on Revenues EBITDA 49.5% -0.5 p.p. 49.0% 2, M -3.4% 2,196 EBITDA-Capex -4 M 1, % 1,607 % on Revenues 35.1% +0.7 p.p. 35.8% 7

9 Domestic Fixed: Revenue Dynamics Euro mln, Organic Data, % Total Fixed Revenues Fixed Revenues Trend YoY % change 3, % 3,235 Total Services Wholesale Revenues Trend YoY % change Retail Service Revenues Trend YoY % change Domestic Sparkle Group* Equipment *Gross of Elim. & Adj. Tariff simplification process begins 8

10 Domestic Fixed: Focus on Broadband 000 Total TI retail accesses TI Retail Broadband Accesses Market 13,248 13,394 13,485 7,194 7,125 7,092 Euro/month/line Broadband Retail ARPU -0.6% +0.3% Flat (%) 87% 87% 88% M/S 54.3% 53.2% 52.6% % YoY BB Service Revenues Highlights Confirming the right direction in TI s Value Strategy: Continued positive BB Service Revenues trend QoQ ARPU increase +1.0 p.p. of Flat offers on TI s BB Customer Base Increasing BB penetration (+1.5 p.p.) on fixed CB, confirming the low value of TI s line losses 9

11 Mobile Revenues: 1Q12 Results at a Glance Euro mln, Organic Data Total Mobile Revenues Mobile Handsets Revenues Trend YoY % change Normalized (*) ~-2.5% Total Mobile Handset revenues 1, % +71.1% 1,650 Mobile Service Revenues Trend YoY % change Service revenues -3.7% Normalized (*) ~-4.5% (*) Leap year 10

12 Consumer Mobile - The Value of the Options Community Users (*) Growth 4.1 mln +1.4 mln 4.6 mln 4.4 mln 5.5 mln Continues 1Q11 2Q11 3Q11 Apr-12 Churn rate -8p.p. Increasing Loyalty Avg /month Outgoing ARPU exante/expost activation Neutralizing CB cannibalization * TIMx, TIM Young and Tutto Compreso Ricaricabile 11

13 Domestic Mobile Surfing the Data Wave Increasing Smartphone Penetration in All Segments Bringing Innovation to the Mass Market Operating Systems on TIM s Network - The Android Growth Smartphones increasingly Service-driven Data Bundle users and Renewal Rate +1,9X Doubling smartphone penetration on CB Further room for growth Smartphone Penetration on Customer Base May 2012 Dealer Convention ~1,3 mln Of which >75% Smartphones 87% Renewal rate 79% Number of Data connections by Device (*) +~20% 2.2mln 1.9mln Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 * Peak of traffic on the average day of the second week of each month 12

14 Agenda Group Overview Domestic Progress Report Focus on UBB 13

15 Plan Strengthen the Network for a Technological Leadership Capex Allocation UltraBB Roadmap Network Capex Customer Service & Traffic Driven Network Development Optimization Acceleration NGAN Roll-out Cities (including all main ones) covered through FTTH&Cab Technology ~¼of Housingunits passed with >30 Mb/s Speed Network Maintainance Decrease Mobile Coverage Optimize Network Investment to maintain excellent quality in TLC services 2014 More than 40% of populationcoveredbylte Increase the effort in Network Development and Innovation to confirm Technological Leadership and grant the Best Experience on the Net HSPDA 42 Mbps LTE 14 14

16 Plan Mobile Technological Evolution while Protecting Profitability Increasing speed availability Strengthening HSDPA and LTE introduction 42 3,6 7,2 14,4 Maximum speed (kbps) January 2012 Roadmap 42MB coverage June 2012 The advantages of 42MB Fiber Bakhauling Dual Carrier Network Priority With PREMIUM offers Customers have an effective perception of Higher Speed Offer based on the Value of the Customer Mass Market Premium Customers Network HSDPA HSDPA/LTE Speed Up to 14,4 Mbps Up to 42 Mbps 100 Mbps Priority NO YES Quality (everywhere/every time) Pricing Speed Quality Priority 15 15

17 Ultra Broadband in Motion Fixed Mobile 100- cities FTTCab Plan begins, with 30 of them to be connected in 2012 / 1H2013. Retail commercial launch expected in 4Q Reference Offer for wholesale NGAN Access Services submitted to Agcom in March. Final approval expected by September 42 Mbps coverage in progress in 50 cities Ongoing trials extended to Turin, Milan, Rome and Naples Maintaining a fixed & mobile coordinated approach 16

18 The Context European Digital Agenda Main Objectives: 0% 50% 100% Basic BB 2013 > 2 Mb/s Ultra BB Mb/s > 30 Mb/s Demand status in Italy: Low ICT culture Low e-goverment level Low Broadband Penetration Percentage of users that have never used a PC Global Rank E-Government Index Broadband penetration (as % of tot. accesses) #38 #15 #10 #9 #4 Source: Eurostat 2010 Source: ONU «E-Government Survey» 2010 Source: Eurostat

19 Specific advantages for TI from FTTC Improved performances Lower Average Length of Local Loop guarantees highest speed for a FTTC solution No impact on legacy services (no switch-off) Capex optimization Utilization of a relevant portion of existing TI s Access Network Fix and Mobile UBB Synergy Leveraging on past investments Ducts/Passages already existing in large part % per line/capex Last mile length benchmark Italy United Kingdom Japan France Germany U.S.A km -50% / -75% FTTH FTTC 18

20 FTTC is frequently preferred by EU incumbents Best incumbent s choice (where network structure allows) European incumbents with a FTTC strategy Vectoring technology enhances FTTC speed up to 100 Mbps in downstream and up to 15 Mbps in upstream (considerably above current market demand and existing services) xdsl still evolving (accelerated DSL includes also: Bonding, Phanthom, G.Fast) Advantages in Implementation: Rapid Deployment More Coverage Lower Invasiveness More value for money Exploiting and maximizing value of existing access infrastructure (copper) The cost for a FTTC solution is a fraction of FTTH s Adequate match for expected demand «FTTH ready» on a selective basis approach (market-driven) Speed Capex per line Deployment timing FTTH FTTC 19

21 TI s 2-step strategy on NGAN Step 1: FTTCab Mbps Use of existing network elements: Cable ducts Cabinets Copper sub-local loop Step 2: FTTH 100 Mbps 1 Gbps Deployment costs > 3x FTTCab Use of FTTCab primary Network New elements Fiber secondary network Fiber deployment in the customer s building New modem in the customer s house 20

22 TI Fixed UBB Plan: and beyond H within cities 100 cities About 60% cities target in the North (i.e. Milan, Turin, Genoa); NewCo Trentino NGN for Trento region About 20% cities located in the Central part of the country (i.e. Rome, Florence) Driver for NGAN Plan: Density of population; Leverage on existing infrastructure (i.e. ducts already in place in most of 100 targeted cities) Moving towards DAE Targets About 20% cities located in the South (i.e. Naples, Bari, Palermo) 21

23 TI s Convergent Approach to Fixed and Mobile UBB The Value of our Core Asset Access Network Key asset both for fixed and mobile Huge capital and time already fruitfully invested High Capillarity Strategic asset in the economic, social & regulatory landscape Yesterday NGN Today: Pervasive Ultra Broadband UBB Fixed Network Super Internet + Fixed & Mobile Network NGAN Fttx HSPA+ LTE 22

24 Thank you Q&A BofA - Merrill Lynch Global Telco and Media Conference Chief Operating Officer 23

25 Robust Liquidity Margin and Well-Distributed Debt Maturities Euro mln Bonds Loans (of which long-term rent, financial and operating lease payable 1,497) Drawn bank facility 6.16 bln Group Liquidity Position bln Undrawn Portion of Facility/Committed = bln Group Liquidity Margin 2,765 13,323 35,884 (*) 2,249 11,357 1,966 2,981 1,900 25,257 3,032 2, ,067 1, ,999 1,264 2,479 1,790 5, ,335 1,652 2,857 1,211 8, Within 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Beyond 2017 Total M/L Term Debt (*) 35,884 mln is the nominal amount of oustanding medium-long term debt by adding IAS adjustments ( 805 mln) and current liabilities ( 824 mln), the gross debt figure of 37,513 mln is reached. N.B. Debt maturities are net of 646 mln (face value) of repurchased own bonds (of which 354 mln related to bonds due in the next 24 months). 24

26 Well Diversified and Hedged Debt Euro mln Other 2,498 Total Gross Debt Net of Adjustment: Euro 37,513 mln Op. Leases and long rent 1, % 4.0% 15.3% 68.0% Bank & EIB 5, % Bank Facility 2,248 Bonds 25,521 Maturities and Risk Management Average debt maturity: 7.32 years (bond only 8.38 years) Fixed rate portion on gross debt approximately 72.4% Around 47% of outstanding bonds (nominal amount) is denominated in USD, GBP and YEN and is fully hedged Gross debt Financial assets of which C & CE and marketable securities - C & CE - Marketable securities - Italian Government Securities -Other 37,513 (7,201) (6,158) (5,492) (666) (527) (159) Cost of debt: 5.5% Net Financial Position 30,312 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 /mln (of which 789 /mln on bonds); - the impact on Financial Assets is equal to /mln. Therefore, the Net Financial Indebtedness is adjusted by 667 /mln. 25