Telecom Italia S.p.a. · MIL:TIT
Telecom Italia — 9M 2008 Earnings Presentation
40 slides from Telecom Italia's earnings presentation, Nov 7, 2008
Slide 1: Telecom Italia 9M '08 Business Performance
GRUPPO TELECOM ITALIA 9M ’08 Results Milan, November 7th, 2008 Telecom Italia 9M ’08 Business Performance OSCAR CICCHETTI
Slide 2: Safe Harbour
Safe Harbour These 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, belief or current
Slide 3: Agenda
Agenda 9M ‘08 business performance: Domestic Fixed business performance Mobile business performance Cost Analysis HanseNet TIM Brasil Appendix 9M ’08 Results 2
Slide 4: Domestic Results - Highlights
Domestic Results - Highligths 9M 08 YoY 9M 08 YoY 3Q 08 YoY YoY € Mln reported reported Organic Organic (*) reported reported Organic (*) Revenues 17,154 -5.3% 17,108 -5.0% 5,734 -3.2% -3.2% of which fixed 11,128 -5.3% 11,152 -4.9% 3,643 -3.2% -3.1% of which mobile 7,120 -4.2% 7,120 -4.2% 2,451 -2.5
Slide 5: Agenda
Agenda 9M ‘08 business performance: Domestic Fixed business performance Mobile business performance Cost Analysis HanseNet TIM Brasil Appendix 9M ’08 Results 4
Slide 6: Fixed: progressing on 2008 targets
Domestic Fixed: progressing on 2008 targets 2008 Revised Targets 3Q08 Evidence Total domestic Fixed revenue: ~15 Bln €, Total Revenues: 11.1 Bln €, -4.9% organic YoY in 9M08 (-5,3% -4.0/-4.5% organic YoY, -1.9%/-2.5% net of reported), -2.1% net of discontinuities. Regulatory Discontinuities and Carr
Slide 7: Domestic Fixed: Revenue Analysis
Domestic Fixed: Revenue Analysis 2008 ∆% 08/07 € mln 1Q 2Q 3Q 9M 1Q 2Q 3Q 9M VOICE 1,970 1,926 1,796 5,692 -8.8% -9.3% -10.6% -9.6% TRAFFIC 824 805 728 2,357 -11.2% -10.2% -11.2% -10.9% ACCESS 952 927 903 782 -5.3% -6.6% -7.6% -6.5% VOICE VAS 75 66 58 200 -17.6% -26.7% -34.8% -25.9% HANDSETS 118 128
Slide 8: Fixed: TI Access and Traffic Performance
Domestic Fixed: TI Access and Traffic Performance Telecom Italia access evolution Telecom Italia Voice traffic evolution Mln access lines Bln minutes; TI Voice traffic QoQ Line loss -0.36 -0.42 -0.66 -0.35 - 7% 19.6 19.2 18.8 18.1 17.8 15.8 15.5 13.6 14.7 12.7 3Q07 4Q07 1Q08 2Q08 3Q08 3Q07 4Q07 1Q08
Slide 9: Fixed: TI and OLO Access Evolution
Domestic Fixed: TI and OLO Access Evolution ‘000 Access lines TI Line Loss Evolution OLO Access Growth ULL Growth Naked Growth WLR Growth 4Q07 1Q08 2Q08 3Q08 336 265 223 271 110 -356 -355 83 -423 26 41 39 77 66 0 -659 4Q07 1Q08 2Q08 3Q08 4Q07 1Q08 2Q08 3Q08 4Q07 1Q08 2Q08 3Q08 TI line losses back to
Slide 10: Fixed: TI Retail BB Portfolio Evolution and ARPU
Domestic Fixed: TI Retail BB Portfolio Evolution and ARPU Retail Broadband Portfolio Retail Broadband Portfolio – net adds trend ‘000 Access lines ‘000 access lines +183 Monthly average net adds 6,427 6,541 6,564 6,610 In line with access retention +57 +54 ~+55 Free +183 9M08 Flat 71% 73% 75% 76% +2
Slide 11: Fixed: 4Q08 Offer and Business Evolution
Domestic Fixed: 4Q08 Offer and Business Evolution Guarantee Broadband Targets Improve TI positioning on Small / ICT Growth Medium Enterprices “Zero Canone” and Commercial Focus on Innovation to increase penetration of Upselling on TI BB Customer Base main Cities Broadband and Managed Services OFFER
Slide 12: Agenda
Agenda 9M ‘08 business performance: Domestic Fixed business performance Mobile business performance Cost Analysis HanseNet TIM Brasil Appendix 9M ’08 Results 11
Slide 13: Mobile: Rebounding Revenues Trend
Domestic Mobile: Rebounding Revenues Trend 2008 Targets 3Q08 Evidence Stable mkt share on key segments vs. reported mkt Focus on revenue share rather than share dilution: Market share/ ARPU Mkt share reported 38.6% (number of lines) market share (~ 40% mkt share) Stable in mass market (panel): 40.9%
Slide 14: Mobile Revenues: Rebound in Retail Business Generated
Domestic Mobile Revenues: Rebound in Retail Business Generated, as of September € mln, % 2007 2008 Δ % 08/07 Total Mobile IH IIIQ IH IIIQ IH Jul-Aug Sep IIIQ Revenues 4,916 2,513 4,669 2,450 (5.0) (3.3) (0.8) (2.5) Halved Total Services 4,595 2,366 4,345 2,267 (5.4) (5.5) (1.5) (4.2) Mobile Revenues
Slide 15: Mobile: Less Lines, More Valuable Customers
Domestic Mobile: Less Lines, More Valuable Customers Customer Base (‘000) Gross Adds (‘000) -1,057 ~-1.6 mln, -27% on -1,718 Pre-paid 36,331 35,796 35,310 35,274 -535K -522K 7,770 6,052 ARPU of gross adds +20% vs Reported 40.3% 40.3% YA Lines 39.4% Market 38.6% Share 9M07 9M08 % of total Gross Adds
Slide 16: Maintained market share on valuable segments
Maintained market share on valuable segments Customer Base %CB ARPU* Churn* Market Share** (%) Enterprise 7% 1.6X 0.5X 61.5% last available panel (June 2008) Business 1-9 employees 10-499 employees +0.8 p.p. +1.4 p.p. -0.2 p.p. 52.4 Business 8% 2.2X 1.0X 52.2 51.8 52.2 51.7 51.8 51.5 52.0 51.8 52.0
Slide 17: Mobile: ARPU Rebound
Domestic Mobile: ARPU Rebound ARPU (€/month/line) Drivers of ARPU Rebound 2,183 2,190 2,212 2,165 Retail Service 2,125 2,161 Revenues (mln €) 2,063 ARPU 13.6 13.1 13.2 Outgoing 12.0 12.3 2,078 2,082 2,066 2,079 2,045 Net of roaming 11.8 1,981 2,024 Voice 11.2 22.4 (mln €) 21.9 21.3 20.3 20.5 20.1 19
Slide 18: Mobile: Mass Market benefits from Pre-paid Repricing
Domestic Mobile: Mass Market benefits from Pre-paid Repricing Pre Paid Outgoing price Pre-paid Traffic Volume € cent/minute, roaming excluded Bln of minutes YoY IIIQ 5.5 5.6 5.6 +3% 4.8 2007 15.6 35% 35% 24% 25% -25% 14.4 27% Promo -10 p.p. 14.2 2008 Old 13.0 +17% plans New 2Q Jul-Aug Sep Oct (E) pl
Slide 19: Mobile: Q4 Offering Map
Domestic Mobile: Q4 Offering Map Rebound Voice Revenues Confirm Interactive VAS Growth Ride the convergence opportunity Upselling of TI ADSL Segmented Offering Mobile Broadband (Alice seamless experience) Elite - “Tutto Compreso”: Boost penetration of Alice Mobile (web users Upselling of TI ADSL Cus
Slide 20: Agenda
Agenda 9M ‘08 business performance: Domestic Fixed business performance Mobile business performance Cost Analysis HanseNet TIM Brasil Appendix 9M ’08 Results 19
Slide 21: Lean Company Domestic: Efficiency
Lean Company Domestic: Efficiency ORGANIC PERSONNEL COST +287 2.730 +47 2.443 2.396 - 59 Including Dimensioni di Valore OPEX TREND One Shot Benefits 2007 € mln 9,668 9,541 -127 -1.3% Personnel 9M07 Change Organic ‘08 Lay off costs ex 9M08 2,396 2,730 +334 +13.9% 223/91 Law ORGANIC EXPENSES Expenses
Slide 22: Domestic - Working on efficiency
Domestic - Working on efficiency ORGANIC DATA Key Messages € mln 1 VAS growth financing: content -9 MARKETING & SALES +18 -100 driven revenues +82 Mln +46 2,652 -52 2 Customer Satisfaction 2,600 improvements (CSI +1,2pp vs. YE ’07, ASR 119 +2pp, ASR 187 Total +4pp) Content Caring Handsets & -7 38% 3
Slide 23: Agenda
Agenda 9M ‘08 business performance: Domestic Fixed business performance Mobile business performance Cost Analysis HanseNet TIM Brasil Appendix 9M ’08 Results 22
Slide 24: HanseNet: Main Results
HanseNet: Main Results Reported Data Million Euro, % 9M ’07 9M ’08 Δ YoY Δ YoY % Revenues 767 899 +132 +17.2% Ebitda 197 185 -12 -6.1% Quarterly EBITDA margin build-up % on revs 25.7% 20.6% 23.5% 19.5% 18.8% 1Q08 2Q08 3Q08 Capex 262 240 -22 -8.4% % on revs 34.2% 26.7% HanseNet’s quarterly revenues a
Slide 25: HanseNet: Broadband Portfolio Evolution
HanseNet: Broadband Portfolio Evolution Customer Base Offer Segmentation ‘000 Access Lines %, ‘000 Access Lines Total BB 2,244 2,343 Mobile bundles Single, 2/3 Play active customers 576 885 + 480 AOL 2/3 play 61% 76% 636 +30% 1,767 1,359 Alice 1play 39% 156 24% Sep-07 Sep-08 Sep-07 Sep-08 Sep-07 Sep
Slide 26: Agenda
Agenda 9M ’08 business performance: Domestic Fixed business performance Mobile business performance Cost Analysis HanseNet TIM Brasil Appendix 9M ’08 Results 25
Slide 27: TIM Brasil: Main Results
TIM Brasil: Main Results IAS/IFRS Reported Data - Euro Growth in local currency Million Euro, % Million R$, % 9M ’07 9M ’08 Δ YoY Δ YoY % Δ YoY Δ YoY % Quarterly organic revenue growth REVENUES 3,603 3,973 +370 +10.3% +484 +5.0% 6.4% 4.7% 3.8% EBITDA 824 875 +51 +6.2% +25 +1.1% 1Q08 2Q08 3Q08 % on R
Slide 28: TIM Brasil: Marking the Value Market
TIM Brasil: Marking the Value Market TIM lines evolution TIM share performance Mln Lines 20.7% Revenue share* 33.8 35.2 27.7% ~28% 27.5% 29.2 Market share 28.4 25.9% 25.4% Pre-paid 27.0 27.0 28.4 25.0% 22.6 Post-paid 6.6 6.8 6.8 3Q07 2Q08 3Q08 1Q08 2Q08 3Q08 * Based on 5 main wireless players which
Slide 29: TIM Brasil: Performance Drivers
TIM Brasil: Performance Drivers Revenues - mln R$ IAS/IFRS YoY Organic Top-line progressive pick-up supported by: 3,381 3,596 +6.4% improved outgoing voice pricing trend with volume resiliency 2,874 and upside to incoming stream thanks to MTR tariff Voice* 2,720 +5.7% adjustment and volume effect la
Slide 30: Agenda
Agenda 9M ‘08 business performance: Domestic Fixed business performance Mobile business performance Cost Analysis HanseNet TIM Brasil Appendix 9M ’08 Results 29
Slide 31: OLO Fixed Access Lines
OLO Fixed Access Lines '000 access OLO Access (on TI infrastructure)* 1Q 07 1H 07 9M 07 2007 1Q 08 1H 08 9M 08 ULL 1,967 2,322 2,521 2,930 3,218 3,411 3,500 Virtual ULL 357 327 250 178 154 185 206 Shared Access (ADSL)** 288 279 260 244 232 220 210 WLR - - - - 77 348 414 Naked 216 253 281 307 349 432
Slide 32: TI Broadband Portfolio Evolution
TI Broadband Portfolio Evolution ‘000 Access lines Δ Dec ’06 Δ Dec ’07 Δ Sep ’08 Dec ’05 Dec ’06 Dec ’07 Sep’08 vs vs vs Dec ’05 Dec ’06 Dec ’07 Retail 4,817 5,639 6,427 6,610 +822 +788 +183 Consumer 3,875 4,544 5,157 5,221 +687 +613 +64 Business 960 1,095 1,270 1,389 +135 +175 +119 Wholesale 890 1,
Slide 33: Domestic Fixed: Voice Revenues
Domestic Fixed: Voice Revenues € Mln, %, Reported Data -602 mln. € -9.6% 6,294 -287 -193 Handsets 404 -70 -51 5,692 Voice VAS 270 353 -10.9% -6.5% -25.9% -12.6% 200 Access 2,975 Q2 YoY Q3 YoY: Disabling of trend in line -7.6% selected Decrease in 2,782 with 1H Q2 YoY: premium equipment -7.8% net -6.
Slide 34: Domestic Fixed: Internet Revenues
Domestic Fixed: Internet Revenues € Mln, %, Reported Data +137 mln. € +12.8% 1,208 -20 +157 1,071 -31.3% +15.6% Broadband 1,007 1,164 Narrowband 64 44 9M07 Narrowband Broadband 9M08 9M ’08 Results 33
Slide 35: Domestic Fixed: Business Data
Domestic Fixed: Business Data € Mln, %, Reported Data -18 mln. € -1.5% 1,236 1,218 -30 0 -38 -10 +59 -16.5% 0.0% -9.5% -6.5% +13.1% ICT 449 508 Equipment 153 of which 143 +16.7% (+46 mln €) on Innovative -68 mln € (-10.7%), Services 399 +7.3% (+13 mln €) on 361 Data 1Q08 (-10.5%) 2Q08 (-9.3%) Equipm
Slide 36: Mobile: Outgoing Voice ARPU
Domestic Mobile: Outgoing Voice ARPU ARPU Outgoing (€) Volume (bn minutes) Retail Outgoing 1,331 1,365 9.0 1,295 1,284 8.8 8.9 Revenues (mln€) 1,247 1,196 1,235 8.7 Net of 1,246 8.4 1,253 roaming 1,209 1,184 1,204 1,140 1,159 (mln€) 13.6 7.7 13.1 13.2 12.0 12.3 11.8 6.9 11.2 1Q07 2Q07 3Q07 4Q07 1Q08
Slide 37: European BroadBand: Main Results by Country
European BroadBand: Main Results by Country € Mln,%, Reported Data Total European BB of which HanseNet + AOL of which BBNED 9M08 9M07 * Δ Abs Δ% 9M08 9M07 Δ Abs Δ% 9M08 9M07 Δ Abs Δ% Revenues 961 824 +137 +16.6% 899 767 +132 +17.2% 62 57 +5 +8.8% Ebitda 192 212 -20 -9.4% 185 197 -12 -6.1% 7 15 -8 -5
Slide 38: TIM Brasil: 3Q08 Commercial Activities
TIM Brasil: 3Q08 Commercial Activities VOICE: Remodeling tariffs and promotions dynamics VAS: Push on innovative services CONVERGENCE: Strengthening our portfolio Change in promotions conditions aiming profitability Segregate VAS promotion from voice Widening our TIM Web plan to address Shortening p
Slide 39: TIM Brasil: Addressing an Unattended Market
TIM Brasil: Addressing an Unattended Market TIM FIXO Monthly fee of R$29.90, including 250 minutes F2F calls Special tariff to TIM’s numbers TIM FIXO Including caller ID, receive SMS, waiting call and conference call Plug and play concept. Wireline market overview TIM´s positioning Low competitive e
Slide 40: Lean Company Domestic Cost Efficiency
Lean Company Domestic Cost Efficiency € mln, Reported data -127 M€ -1.3% 9,668 -461 9,541 +47 +287 Personnel (excl. lay-off charges ex 2,396 233/91 law) -6.3% +2.0% 2,443 - 59M€ excluding one-off benefit in 2007 (106M€) (*) Expenses 7,272 6,811 Expenses Personnel (excl. Lay-off ex 9M07 9M08 lay-off