Telecom Italia Group May 2016

Telecom Italia Group May 2016

Telecom Italia Strategic Plan 2016-2018: investments TOTAL INVESTMENTS Italy (2016-2018) of which INNOVATIVE INVESTMENTS of which NEW GENERATION NETWORK INVESTMENTS ~12 billion 6.7 billion ~4.8 billion ~10 billion in the previous plan ~5 billion in the previous plan ~3.8 billion in the previous plan ~ +1.9 billion ~ +1.7 billion ~ +1 billion THE NEW PLAN IS STILL FOCUS ON INNOVATION INNOVATION IS STILL FOCUS ON NETWORKS 2

New network investments and coverage target 2016-2018 ~250km/h SPEED OF FIBER LAID in 2015 ~1,100 MUNICIPALITIES COVERED Industrial districts and UBB Plan included 11 million Km OPTICAL FIBER INVESTIMENTs IN THE NEW NETWORKS FIXED (FIBER) 45% households 84% of which 100 MUNIC. FTTH 4.8 bln MOBILE (4G/LTE) coverage march 2016 END of 2018 >91% pop. ~98% 4G >6,250 MUNICIP. COVERED Of which 149 large-sized towns 4G Plus >300 MUNICIP. COVERED 4G Plus = 225Mb/s 3

In the last 12 months Telecom Italia has covered more than 3 milion households Ultrabroadband Coverage in Italy (households reached) 2013 2014 2015 17% 4,1 million 29% 7,0 million 42% 10,2 million +3,2 million 4

Italian Telecommunications Market is one of the most competitive in the EU A look to the USA Retail Prices Telecommunications services Price -10% reduction over the last 3 years -4% EUROPE Price-based competition USA Network-based competition Price/month last mile For OLOs access (Italy vs EU5) 8,7 9,2 The US, in the last 10 years, have caught up on the technological GAP versus Europe Fonti Retail Prices: Eurostat HICP historical series 2013-2015 Price/month last mile: Cullen International 2015 > 100 mobile operators 4G Network Coverage is still at 85% of the population 4 mobile operators 4G Network Coverage is almost completed since 2013 5

Fixed and mobile Ultrabroadband take-up is still low, especially in Italy FIXED ultrabroadband MOBILE Ultrabroadband % households % population 77% 81% 91% 90% 78% 79% 94% 90% 4% 44% 45% 20% 28% 21% 33% 10% 23% 22% 23% 40% ITALIA ITALY FRANCIA FRANCE SPAGNA SPAIN GERMANY GERMANIA REGNO UKUNITO ITALIA ITALY FRANCIA FRANCE SPAGNA SPAIN GERMANY GERMANIA REGNO UKUNITO % HOUSEHOLDS with Ultrabroadband subscriptions COVERAGE 2015 Ultrabroadband (Cable + Fiber) % USERS Mobile Ultra broadband users over the total population COVERAGE 2015 DEMAND SUPPLY DEMAND SUPPLY Source: Coverage: European Commission- Demand: elaborations on EUROSTAT data June 2015 Source: Coverage: European Commission- Demand: elaborations on GSMA data June 2015 6

TARGETS Digital Agenda targets Europe has already achieved the 2015 Demand Digitalization Target, while ltaly has not. 2013 2015 2020 BROADBAND COVERAGE E-COMMERCE USE OF THE INTERNET E-GOVERNMENT COVERAGE 30 Mb/s SUBSCRIPTIONS 100 Mb/s 100% 33% 20% 50% 60% 75% 85% 50% 25% 100% 50% BROADBAND FOR ALL (100% POP.) SME SELLING ONLINE POP. BUYNG ONLINE CROSS-BORDER POP. BUYING ONLINE DISADVANTAGED PEOPLE USING INTERNET REGULARLY POP. USING INTERNET REGULARLY POP. USING INTERNET IN THE LAST 12 MONTHS POP. USING E-GOVERNMENT POP. RETURNING FORMS E-GOVERNMENT BAND 30 Mb/s FOR ALL HOUSEHOLDS WITH ACTIVE 100 Mb/s 100% 100% 16% 53% 52% 63% 63% 76% 72% 84% 46% 26% 71% 16% 11% 26% 24% 12% 44% 7% 0.5% 8% ITA UE Source: European Commission - DESI 2016 Further Targets Double public expenses in R&D dedicated to ICT within 2020; Lower roaming prices at national levels 7

Lines (000): NET ADDS Broadband is picking up again in Italy Broaband and Ultrabroaband Lines Net Adds Total Lines 2015 2,500 2,000 NET ADDS ANNUAL INCREASE BROADBAND LINES GROWTH BROADBAND 14.9 million of which 1,500 1,000 +250 +360 +540 ULTRA BROADBAND LINES 1.4 million last year 500 >650k 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: elaboration on AGCOM, European Commission, ECTA figures 8

Competition Model is changing: Focus switched from prices to quality Mobile market prices have dropped in 4 years, today we compete over quality. Mobile Retail Price Service, Price Index Dec 2010 = 100 Competition focus now has shifted towards quality 100 90 100.0 83.8 2011-2015 -50% Connection Speed 80 70 60 50 65.1 53.3 52.0 50.4 4G/LTE Network coverage 40 30 20 10 0 dic-10 dic-11 dic-12 dic-13 dic-14 dic-15 Offer differentiation navigation to social networks included without using Giga of traffic, and additional services such as music and entertainment Source: elaboration on Asstel-Tor Vergata and Istat figures 9

Italy: the best mobile broadband prices (source: OFCOM) International Communication Market Report OFCOM Best Price per MOBILE BROADBAND stand alone 2015 3Gbytes Average monthly price in euro ( ) 35 30 25 month 32.4 20 19.7 20.2 21.1 PRICE LEADERSHIP Confirmed for 1Gbytes and 5Gbytes 15 10 5 5.3 14.7 0 ITA FRA UK GER SPA USA 10

Italy: the highest Mobile broadband traffic consuption per user GB/month 1.20 1.17 AVERAGE TRAFFIC PER USER 1.00 0.87 Prezzo medio/mese in Euro PPP GB/month 0.80 0.62 0.76 0.64 Italy 0.60 Germany Spain 0.40 UK France 0.20 Source: National Authorities 0.00 2010 2011 2012 2013 2014 2015 11

Strategic Plan 2016-2018: Investments in Innovative Platforms NGN LTE ~3.6 ~1.2 (+0.7 bln vs Old Plan) (+0.3 bln vs Old Plan) FIBER / LTE INVESTMENTS INCREASE.7 bln IT Cloud Sparkle Transformation ~0.7 ~0.4 ~0.5 (+0.2 bln vs Old Plan) (+0.2 bln vs Old Plan) (Flat bln vs Old Plan) Commercial ~0.3 (+0.3 bln vs Old Plan) 12

Gbyte/month Growth opportunity: internet/pay TV Pay TV Penetration In Italy Pay TV market is focused on Digital Terrestrial TV and Satellite TV in the other Big EU countries Cable TV and IPTV have significant market shares TRAFFIC GByte/month per CUSTOMER In UK, BT experienced a 4x traffic per customer growth after the inclusion of football content in the offer 57% 57% 100 48% 13.6 80 82 26% 34% 10.9 8.4 13.4 43.9 6 35.6 17.9 21.1 0.5 19.9 4.9 7.8 3.1 7.5 7.6 Italy Italia Spagna Spain Francia France Germania Germany Regno UKUnito 60 40 20 0 58 42 26 30 17 27 16 12 2011 2012 2013 2014 2015 Digitale terrestre IPTV Satellite Cavo Cable TV Terrestrial TV UK IT DE ES Source: Ovum 2016 Sources: Ofcom, CNMC, BNetzA Italian data is base don Telecom Italia s Netbook http://www.telecomitalia.com/tit/it/innovazione/rete/netbook-2015.html 13

Italian Model: Mobile Broadband and no Cable TV Broadband Subscriptions % Households with a Broadband subscripion Pay TV Penetration % Households with a Pay TV subscription per platform 75% 76% 78% 22% 88% 90% 4% 5% 5% 9% 10.9 84% 85% 71% 69% 53% 26% 34% 48% 8.4 13.4 57% 57% 13.6 43.9 35.6 6 17.9 21.1 19.9 4.9 0.5 7.8 7.5 7.6 3.1 Italia Italy Francia France Spagna Spain Germania Germany Regno UKUnito Italy Italia Spagna Spain Francia France Germania Germany Regno UKUnito Famiglie Household con with banda a Fixed larga fissa Famiglie Household solo with con a banda Mobile larga mobile Digitale terrestre IPTV Satellite Cavo Cable TV Broadband Subscription Broadband Subscription Only Terrestrial TV Source: Eurostat 2016 Source: Ovum 2016 14

Convergence between video and telco: 3 different models ACQUISITION Telco operator acquires TV/Media operator or viceversa TELCO MEDIA INTERNAL PRODUCTION TV CONTENT Telco Operator becomes also TV/Media operator DISTRIBUTION PLATFORM Telco operator makes deals with TV/Media operators 15

Thank you 16