Telecom Italia S.p.A. · MIL:TIT
Telecom Italia — FY2006 Earnings Presentation
39 slides from Telecom Italia's earnings presentation, Mar 8, 2007
Slide 1: TI FY06 Business Performance
TELECOM ITALIA FY 2006 Financial Results Milan, 8th March 2007 TI FY06 Business Performance
Slide 2: Agenda
TELECOM ITALIA FY 2006 Financial Results Agenda 2006 financial performance and business overview: Wireline TIM Italy TIM Brasil Appendix 1
Slide 3: Domestic market: 2006 challenges and responses
TELECOM ITALIA FY 2006 Financial Results Domestic market: 2006 challenges and responses Main challenges Responses Continued erosion of voice traffic Focus on flat rate and F2F/F2M packages Discontinuities in the VAS market (info services Followed price competition, while starting to 12xx: price comp
Slide 4: Agenda
TELECOM ITALIA FY 2006 Financial Results Agenda Agenda Agenda 2006 financial performance and business overview: Wireline TIM Italy TIM Brasil Appendix 3
Slide 5: Wireline: Main Results 2006 vs 2005
TELECOM ITALIA FY 2006 Financial Results Wireline: Main Results 2006 vs 2005 € Mln, % -80 Mln € (-0,4%) net of 43 Mln € in 2005 of Premium Services Positively impacted from change in reimbursed to customers depreciation criteria (asset lives) (219 Mln €) Organic Data Reported Data 2006 2005 Δ Abs Δ%
Slide 6: Wireline: 2006 Domestic and European Project
TELECOM ITALIA FY 2006 Financial Results Wireline: 2006 Domestic and European Project € Mln., %, Organic Growth -342 Mln € (-2.0%) net of 43 Mln € in -80 Mln € (-0,4%) net of 43 Mln € in 2005 of Premium Services 2005 of Premium Services reimbursed to customers reimbursed to customers Domestic Europe
Slide 7: Wireline: Main Results by Quarter – Organic data
TELECOM ITALIA FY 2006 Financial Results Wireline: Main Results by Quarter – Organic data € Mln, % -85 Mln € (-1,8%) net of 43 1Q06 2Q06 3Q06 4Q06 Mln € in 2005 of Premium Services reimbursed to Quarterly 2006 vs 2005 2006 vs 2005 2006 vs 2005 2006 vs 2005 customers Δ Abs Δ% Δ Abs Δ% Δ Abs Δ% Δ Abs
Slide 8: Revenue analysis
TELECOM ITALIA FY 2006 Financial Results Revenue analysis € Mln, Reported Data -39 mln. € -0.2% European European Project Project -783 +75 -124 +463 -20 +350 565 17,834 17,795 915 Subs., Adj. & others 349 329 Wholesale 3,526 3,989 -7.8% +5.2% -6.6% +13.1% -5.7% +61.9% Business Data 1,867 1,743 Inter
Slide 9: Voice retail service revenues in line with 2005 trends
TELECOM ITALIA FY 2006 Financial Results Voice retail service revenues in line with 2005 trends € Mln, %, Reported Data 634 mln with same - 783 mln. € - 7.8 % accounting criteria as in 2006 10,091 -445 Equipment 886 9,308 677* -80 -70 698 VAS -188 607 Of which -152 mln. € due to F2M tariff cut (-6.8
Slide 10: Wireline: Voice Traffic performance
TELECOM ITALIA FY 2006 Financial Results Wireline: Voice Traffic performance Italian market: domestic voice traffic trend Penetration of voice flat/semi-flat offers YoY % chg. in traffic volume New F2F/F2M ’04 vs ‘03 ’05 vs ‘04 ’06 vs ‘05 TI offers 6,468 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 6,321 5,8
Slide 11: Retention campaign and traffic Market Share
TELECOM ITALIA FY 2006 Financial Results Retention campaign and traffic Market Share Retention campaign Traffic Market Share ‘000, Number of lines % on total monthly traffic volumes 286 1,204 +15% +0.6 pp -0.4 pp 69 262 72.3% 71.9% 217 1,043 71.7% 244 60 260 Business 355 184 78 942 277 319 783 Famil
Slide 12: Consumer Internet: stabilizing ARPU in a slowing market
TELECOM ITALIA FY 2006 Financial Results Consumer Internet: stabilizing ARPU in a slowing market € Mln, %, Reported Data +75 mln. € +5.2% +127 1,511 -52 1,436 -15.7% +11.5% 1,231 Broadband 1,104 Narrowband 332 280 2005 Narrowband Broadband 2006 11
Slide 13: TI Wireline Broadband portfolio evolution
TELECOM ITALIA FY 2006 Financial Results TI Wireline Broadband portfolio evolution Broadband total portfolio Flat Offers on Total Alice Consumer Number of access lines (‘000) % D D Dec ‘04 Dec ’05 Dec ’06 ‘05 vs‘04 ‘06 vs‘05 Wholesale 599 890 1,131 +291 +241 Retail 3,411 4,817 5,639 +1,406 +822 50%
Slide 14: Business data revenues
TELECOM ITALIA FY 2006 Financial Results Business data revenues € Mln, %, Reported Data -124 mln. € -6.6% +52 -58 -2 1,867 -58 -58 1,743 ICT 549 -17.5% -26.1% -0.4% -20.6% +9.5% 601 Equipment 281 223 BB Data -118 mln € 484 (-11.5%) 482 Traditional 222 Includes the impact of 4Q price revision on Data
Slide 15: Wireline: Wholesale revenues
TELECOM ITALIA FY 2006 Financial Results Wireline: Wholesale revenues € Mln, %, Reported Data +463 mln. € +13,1% +283 3.989 3.526 +180 1,858 Intl. +9,2% +18,0% Wholesale 1,575 Natl. Wholesale 1,951 2,131 2005 2006 Natl. Intl. Wholesale Wholesale 14
Slide 16: Confirming strong focus on cost control
TELECOM ITALIA FY 2006 Financial Results Confirming strong focus on cost control € Mln, %, Reported Data +136 mln. € +1.3% European 10,321 10,185 Project 567 834 +1.5% +9.8% -6.0% -10.3% -8.8% +13.4% +47.1% Operating costs 5,449 5,256 +62 mln € -193 mln € +267 mln € -3,0 % excluding restructuring ch
Slide 17: CAPEX driven by broadband expansion in Europe
TELECOM ITALIA FY 2006 Financial Results CAPEX driven by broadband expansion in Europe € Mln, % +179 mln. € 2,823 3,002 European +163 +16 Project 467 304 2,519 2,535 Domestic Capex/ 14.6% 15.0% Revenues 2005 Domestic European 2006 Project 16
Slide 18: European Projects: Key facts
TELECOM ITALIA FY 2006 Financial Results European Projects: Key facts Broadband Portfolio Total customer portofolio: BB+NB ‘000 BroadBand Access ‘000 Access Hansenet at The +172 +122 1,031k at Netherlands the end of +125 1. 890 February* +158 1.718 186 The Netherlands 186 1. 596 1.471 190 1.313 196
Slide 19: Agenda
TELECOM ITALIA FY 2006 Financial Results Agenda Agenda 2006 financial performance and business overview: Wireline Domestic mobile TIM Brasil Appendix 18
Slide 20: Domestic mobile: Main Results 2006 vs 2005
TELECOM ITALIA FY 2006 Financial Results Domestic mobile: Main Results 2006 vs 2005 € Mln, % 5.0% excluding Positively impacted from change in termination cut depreciation criteria (asset lives) (100 Mln €) Organic Reported Data 2006 2005 D D% 2006 2005 D D% Revenues 10.210 10.076 +134 +1,3% 10.210
Slide 21: Domestic mobile: Main Results – Organic growth by Quarter
TELECOM ITALIA FY 2006 Financial Results Domestic mobile: Main Results – Organic growth by Quarter € Mln, % 1Q06 2Q06 3Q06 4Q06 Quarterly 2006 vs 2005 2006 vs 2005 2006 vs 2005 2006 vs 2005 Δ Abs Δ% Δ Abs D% Δ Abs Δ% Δ Abs Δ% Revenues 9 0.4% 43 1.7% 6 0.2% 76 3.0% Ebitda -37 -2.8% -27 -2.0% 14 1.1%
Slide 22: Domestic mobile: Revenue analysis
TELECOM ITALIA FY 2006 Financial Results Domestic mobile: Revenue analysis € Mln, % 134 mln +1.3% 10,076 +23 +106 10,210 +141 -288 +152 812 Handsets 706 457 Visitors and other 434 +2.6% -14.2% +10.2% +5.3% +15.0% VAS 1,497 1,649 Incoming Service revenues +28 1,743 2,031 Voice mln (+0.3%) +4.3% befor
Slide 23: Domestic Mobile: revenue and margin trends
TELECOM ITALIA FY 2006 Financial Results Domestic Mobile: revenue and margin trends Total revenues (YoY % chg) Service revenues (YoY % chg) 2.4% 3.0% 0.9% 1.7% 0.4% 0.2% -1.0% -1.1% 1Q06 2Q06 3Q06 4Q06 1Q06 2Q06 3Q06 4Q06 EBITDA (organic YoY % chg) EBITDA margin (Organic YoY pp chg) 1.1% 1.1% -0.2 p
Slide 24: TIM Italy: Customer base trend
TELECOM ITALIA FY 2006 Financial Results TIM Italy: Customer base trend SIM, ‘000 +962 +1,080 KPIs: +744 32.450 Contribution of Business +1,088 31.488 +2,459 30.408 customers to net adds in 4Q 29.664 (335k) remains strong, - 142 28.576 representing 35% of total 26.259 26.117 new customers Postpaid a
Slide 25: Voice: traffic volumes increase
TELECOM ITALIA FY 2006 Financial Results Voice: traffic volumes increase TIM Italy: Total Traffic Volumes* Bln. Min. 10.8 10.8 10.6 10.4 1Q06 2Q06 3Q06 4Q06 Total traffic Volume +7.9% +6.9% +4.9% +1.8% Δ % YoY Outgoing traffic price Δ% YoY -8.8% -7.5% +0.1% -0.6% Prices kept stable in 3Q and 4Q 06 T
Slide 26: TIM accelerates in UMTS and interactive VAS penetration
TELECOM ITALIA FY 2006 Financial Results TIM accelerates in UMTS and interactive VAS penetration Handsets sold VAS Revenues ‘000, % mln € +1,622 +1,188 7,420 UMTS 5,798 1,649 +10.2% 2,580 4,610 1,497 1,724 62.9% +5.0% Messaging 66.0% 4,075 4,840 Interactive 37.1% +20.2% 34.0% VAS Dic '04 Dic '05 Dic
Slide 27: Cost analysis
TELECOM ITALIA FY 2006 Financial Results Cost analysis +178 mln. € +3,6% 5.168 4.990 +8,2% +8,3% +5,4% -18,7% -14,4% -29,9% Operating costs 3.464 3.415 -12.6% excluding +129 mln € +49 mln € restruct. Charges (Δ 06 vs 05 -14 Mln€) +49 mln (+63 excluding restructuring charges), vs. +100 (+88) in 1H 06
Slide 28: Agenda
TELECOM ITALIA FY 2006 Financial Results Agenda Wireline financial performance and operational overview Mobile financial performance and operational overview TIM Italy TIM Brasil Appendix 27
Slide 29: TIM Brasil: Main Results 2006 vs 2005
TELECOM ITALIA FY 2006 Financial Results TIM Brasil: Main Results 2006 vs 2005 IAS/IFRS Data Reported - Euro Data Reported - Reais Organic Growth Million Euro, % Million R$, % % 2006 2005 Δ Abs Δ% 2006 2005 Δ Abs Δ% Δ% Revenues 3,964 2,900 1,064 36.7% 10,836 8,784 2,052 23.4% 23.4% Ebitda 950 466 48
Slide 30: TIM Brasil revenue analysis
TELECOM ITALIA FY 2006 Financial Results TIM Brasil revenue analysis IAS/IFRS; R$ Mln Voice revenues* 8,545 6,621 +29.1% Voice Traffic revenues growth driven by strong Voice Customer Base increase, while retaining ARPU premium over competitors 2005 2006 * Excluding visitors & other VAS Revenues 665
Slide 31: TIM Brasil: market performance
TELECOM ITALIA FY 2006 Financial Results TIM Brasil: market performance TIM Brasil Customer Portfolio Customer base almost doubled in two years mln Lines 24.1 25.4 TIM maintained strong net adds, while keeping post- 21.0 22.3 20.2 paid at 21% of customer base Improving TIM Market Positioning on Cust
Slide 32: Agenda
TELECOM ITALIA FY 2006 Financial Results Agenda Wireline financial performance and operational overview Mobile financial performance and operational overview Appendix 31
Slide 33: Appendix
TELECOM ITALIA FY 2006 Financial Results Agenda Appendix Wireline TIM Italy TIM Brasil 32
Slide 34: Wireline: Main Results – organic trend YTD December 2005
TELECOM ITALIA FY 2006 Financial Results Wireline: Main Results – organic trend YTD December 2005 Mln. € Organic trend Changes 2005 Exchange 2006 Except. 2006 2006 vs 2005 in Except. 2005 Reported rate items Pro- consolid. items Organic Reported Δ Abs Δ% (IAS) impact 2006 Forma Area -80 Mln € (-0,4%
Slide 35: Access lines
TELECOM ITALIA FY 2006 Financial Results Access lines 2002 2003 2004 2005 2006 million access TI Wireline Retail Access 23.7 23.0 22.4 21.7 20.5 '000 access OLO Access (on TI infrastructure) ULL 119 510 759 1,117 1,706 Virtual ULL n.a. n.a. n.a. n.a. 254 Shared Access (ADSL)* n.a. n.a. 29 141 329 *
Slide 36: Appendix
TELECOM ITALIA FY 2006 Financial Results Agenda Appendix Wireline TIM Italy TIM Brasil 35
Slide 37: Domestic Mobile: Main Results - 2006 vs 2005 – Organic Growth
TELECOM ITALIA FY 2006 Financial Results Domestic Mobile: Main Results - 2006 vs 2005 – Organic Growth € Mln, % 2005 2006 Organic Growth 2005 2006 2005 vs 2004 Exceptional 2005 Exceptional 2006 Δ Abs Δ% Reported items Organic Reported items Organic (IAS) Revenues 10,076 10,076 10,210 10,210 +134 +1.
Slide 38: Appendix
TELECOM ITALIA FY 2006 Financial Results Agenda Appendix Wireline TIM Italy TIM Brasil 37
Slide 39: TIM Brasil: Main Results 2006 vs 2005 Organic Growth in LC
TELECOM ITALIA FY 2006 Financial Results TIM Brasil: Main Results 2006 vs 2005 Organic Growth in LC IAS/IFRS - Million Reais, % Organic Growth 2005 2006 '06 vs '05 2005 Exceptional 2005 2006 Exceptional 2006 Delta ass Delta % Reported Items Organic Reported Items Organic Revenues 8,784 8,784 10,836