Results at 30 September 2007 approved

11/09/2007 - 05:00 PM

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Revenues in-line, margins exceed 
2007 target results, thanks to an improved revenue mix and efficiency enhancements Domestic market discontinuities absorbed, worth over 1 billion euro in revenues Net profit grows 4.3% eliminating non-recurring effect of the disposal of equity holdings Industrial investment exceeds 3.6 billion euro,  an increase of approximately 12% compared with the first 9 months of 2006 Net financial debt was 37.4 billion euros, down 1.7 billion euros compared with 30 June 2007 César Alierta Izuel and Julio Linares Lopez co-opted as members of the Board of DirectorsTELECOM ITALIA GROUP REVENUES: 23,207 MILLION EUROS (+0.4% COMPARED WITH THE FIRST NINE MONTHS OF 2006); -0.7% ORGANIC VARIATION (+1.0% HIGHER NET OF CONTRACTUAL CHANGES LINKED TO NON-GEOGRAPHIC NUMBERS). ANNUAL TARGET +1.0%/2.0% 
 
EBITDA: 9,433 MILLION EUROS (-3.6% COMPARED WITH THE FIRST NINE MONTHS OF 2006); -3.5% ORGANIC VARIATION ORGANIC EBITDA MARGIN WAS 41.3% (-1.2pp COMPARED WITH THE FIRST NINE MONTHS OF 2006, ANNUAL TARGET -2.5pp/-2.0pp)  EBIT: 5,138 MILLION EUROS (-8.6% COMPARED WITH THE FIRST NINE MONTHS OF 2006); -6.3% ORGANIC VARIATION ORGANIC EBIT MARGIN WAS 22.8% (-1.3pp COMPARED WITH THE FIRST NINE MONTHS OF 2006, ANNUAL TARGET -3.0pp/-2.5pp) NET PROFIT: 2,220 MILLION EUROS; -6.6% COMPARED WITH THE FIRST NINE MONTHS OF 2006. +4.3% ELIMINATING THE NON-RECURRING EFFECT OF THE DISPOSAL OF EQUITY HOLDINGS

The Quarterly Report at 30 September 2007 of the Telecom Italia Group is unaudited and was prepared in accordance with Article 82 of the Rules for Issuers (published by CONSOB with Resolution No. 11971 dated May 14, 1999 and subsequent amendments), as envisaged by Annex 3D of the aforementioned Regulation.
The accounts of the Telecom Italia Group for the third quarter of 2007 and the first nine months of 2007, as well as compared periods were prepared in application of the international accounting standards issued by the Internal Accounting Standards Board and approved by the European Union (“IFRS”).
This press release also contains alternative performance indicators not contemplated under IFRS standards (EBITDA; EBIT; Organic Variation in Revenues, EBITDA and EBIT; and Net Financial Borrowings). These terms are defined in the Appendix.

Milan, 8 November 2007 – The Telecom Italia Board of Directors, chaired by Pasquale Pistorio, examined and approved the Group accounts at 30 September 2007.

 

TELECOM ITALIA GROUP

At 30 September 2007, the area of consolidation of the Telecom Italia Group differed from 30 September 2006 and 31 December 2006 as follows:

inclusion of AOL Internet operations in Germany (consolidated from 1 March 2007);

- inclusion of InterNLnet B.V., following BBNed’s acquisition of 100% of the ISP (the transaction was finalized in July 2007) at a total price of 5.5 million euros, including 1.7 million euros cash and cash equivalents.

In the third quarter of 2007, the entire stake (10.36%) in Oger Telecom was sold by subsidiary TIM International to Saudi Oger. The transfer contributed to reduce the Group’s net financial debt by 462 million euros.

Revenues for the first nine months of 2007 amounted to 23,207 million euros, up 0.4% compared with the first nine months of 2006 (23,104 million euros). Excluding exchange rate fluctuations (+7 million) and changes in the area of consolidation (+248 million, mainly attributable to the inclusion of AOL Internet operations in Germany), organic variation was -0.7% (-152 million euros).

Revenues for the first nine months of 2007, compared with the same period of the previous year, were mainly impacted by:

the change following which, as of 1 January 2007, in line with AGCOM Decision 417/06/CONS, Telecom Italia is not liable for the insolvency risk associated with customer calls to Other Carriers' non geographical numbers. As of that date, revenues and costs associated with interconnection have no longer taken into account the traffic generated by such calls, which in the first nine months of 2006 totalled 373 million euros (along with a corresponding figure as costs); net of this effect organic growth was +1.0%;

the change in fixed-line/mobile termination rates in the second half of 2006 (-152 million euros);

the application as of March 2007, of the so-called “Bersani Decree” (-273 million euros, net of the positive elasticity effect worth 171 milion euro);

the self-regulation of international roaming tariffs within the European Union, in compliance with European Commission rulings (-47 million euros).

Overall, compared with the first nine months of 2006, these changes including the NNG effect, amounted 845 million euros (1,016 million euros pre-tax elasticity effect).

Among the main drivers of the variation in organic growth for the first nine months of 2007 were:

the development of the Mobile Brazil BU (+772 million euros +27.6%, or +16.2% net of the elimination the Bill and Keep rule), thanks to the development of the customer base and of value-added services;

the significant contribution from the European BroadBand BU (+190 million euros), spurred by customer portfolio growth in France and Germany,

the contribution of the Media BU (+42 million euros), driven by advertising revenue growth and higher revenues from Digital Terrestrial operations.

In the third quarter of 2007, revenues amounted to 7,737 million euros, down 0.4% (7,769 million euros in the third quarter of 2006). Excluding exchange rate fluctuations and changes in the scope of consolidation, the organic variation in revenues was -2.2% (-0.5% excluding the NNG effect). Revenues for the third quarter of 2007 were impacted by the aforementioned discontinuities to a total value 337 million euros.

 

The following table provides a breakdown of revenues by Business Unit:

(millions of euro)

 

Domestic

European BroadBand

Brazil Mobile

Media

Olivetti

Other operations

Adjustments and eliminations

Consolidated total

 

 

 

 

 

 

 

 

 

 

Revenues

1/1-30/9/2007

 18,108

1,106

 3,603

178

283

166

 (237)

23,207

1/1-30/9/2006

19,223

662

2,792

136

298

177

 (184)

23,104

 

EBITDA (operating result before amortization and depreciation, capital gains/losses, revaluations/write-downs of non-current activities) amounted to 9,433 million euros, down 3.6% compared with the first nine months of 2006 (-353 million euros). EBITDA margin for the first nine months of 2007 was 40.6% (42.4% for the first nine months of 2006). Excluding the effects of exchange-rate fluctuations and changes to the scope of consolidation, the organic variation in EBITDA amounted to -3.5% (-344 million euros):


Organic EBITDA margin amounted to 41.3% (-1.2 pp compared with the figure of 42.5% registered for the first nine months of 2006, thus improving compared with the annual target of -2.5pp/-2.0pp versus 41.5% for FY 2006).
It should be noted that the above-mentioned discontinuities had a negative impact on EBITDA of 323 million euros (273 million euros from the Bersani Decree net of the elasticity effect, 42 million euros due to changes to fixed-line/mobile termination rates, 8 million euros for adjustments to international roaming traffic tariffs).
In the third quarter 2007, EBITDA was 3,139 million euros (3,268 in the third quarter 2006), down 3.9%. The organic variation in EBITDA was -4.8% (-158 million euros). In detail, the improvement in the European BroadBand (33 million euros), Olivetti, Media and Other Operations Business Units (a total of 17 million euros), was offset by the slowdown in the Domestic (-188 million euros, impacted by regulatory discontinuities for 132 million euros) and Mobile Brazil Business Units (-20 million euros, impacted by the one-time write-off of receivables for 64 million euros as a result of the implementation during the quarter of a new credit and collection system which revealed the remote billing probability of said commercial credits; this effect has definitively ceased and, as a consequence, the EBITDA margin target of approximately 23% for 2007 is confirmed).The organic EBITDA margin was 40.8% (41.9% in the third quarter 2006).

EBIT (operating result) amounted to 5,138 million euros (22.1% of revenues), down 8.6% compared with the first nine months of 2006 (-483 million euros). The EBIT margin was down from 24.3% for the first nine months of 2006 to 22.1% for the first nine months of 2007. The organic variation in EBIT was -358 million euros, or -6.3% as follows:

 

9 months to
9/30/2007

9 months to
9/30/2006

Change

(millions of euro) 

(a)

(b)

(a-b)

%

EBIT (HISTORICAL BASIS)

5,138

5,621

(483)

(8.6)

Effect of change in the scope of consolidation

 

23

 

 

Effect of change in exchange rates

 

(8)

 

 

Non-organic (Income) Expenses

142

2

 

 

Non-organic (Income) Expenses already described under EBITDA

156

119

 

 

Additional non-recurring (Income) Expenses

(10)

(116)

 

 

Gains on sale of properties

(10)

(123)

 

 

Gains on sale of Ruf Gestion

-

(27)

 

 

Loss on sale Telecom Italia Learning Services

 

25

 

 

Loss on sale “Radiomaritime activities”

 

9

 

 

Additional non-organic (income) expenses:

(4)

(1)

 

 

Other (income) expenses

(4)

(1)

 

 

COMPARABLE EBIT

5,280

5,638

(358)

(6.3)

 

Organic EBIT margin amounted to 22.8% (down 1.3pp on the figure of 24.1% registered for the first nine months of 2006, thus improving on the annual target of -3.0pp/-2.5pp versus 24.0% for FY 2006).

In the third quarter 2007, EBIT amounted to 1,689 million euros, down 7.2% compared with the same period of 2006 (1,820 million euros). The organic variation in EBIT was -8.3% (-154 million euros, impacted by discontinuities of 132 million euros). The organic EBIT margin amounted to 22.0% (23.5% in the third quarter 2006).

Net consolidated result for the first nine months of 2007 was 2,220 million euros (2,208 million euros before minority interests), down 6.6% compared with the first nine months of 2006 (2,376 million euros). The above-mentioned EBIT reduction was partially offset by lower income taxes (302 million euros) and improved financial management and equity stakes (+88 million euros). Eliminating the net effects generated by the disposal of equity holdings and discontinued operations, the net consolidated result increased 4.3% compared with the first nine months of the previous year.

Net consolidated result for the third quarter of 2007 was 720 million euros (706 million euros before minority interests), down 160 million euros from 880 million euros for the third quarter of 2006 (878 million euros before minority interests).

Industrial investment for the first nine months of 2007 amounted to 3,688 million euros, 389 million euros more than in the corresponding period last year. This was mainly due to higher investment in the development of new domestic services (+202 million euros), European Broadband (+19 million euros) and Mobile Brazil (+113 million euros).

Net financial debt at 30 September 2007 amounted to 37,443 million euros, down 1,732 million euros from 39,175 million euros at 30 June 2007, due to the cash flow generated by operations and the sale of equity stakes.
In the third quarter of 2007, net financial debt decreased thanks to the following transactions:

sale of the entire stake in Oger Telecom (10.36% of share capital), 462 million euros

sale of the entire stake in Capitalia (0.399% of share capital), 74 million euros

sale of Mediobanca ordinary shares, 26 million euros;

Compared with end-2006, debt increased by 142 million euros to 37,301 million euros: the generation of cash flow from operations (4,561 million euros), disposals carried out in the first nine months (635 million euros) offset the dividend payout (2,830 million euros), the acquisition of AOL (666 million euros) and cas-out for financial charges, taxes and other operations (1,837 million euros).

At 30 September 2007, the Group’s Headcount stood at 83,691, compared with 83,209 at 31 December 2006.  The increase is linked to international activities, mainly AOL (1,101 employees).

BUSINESS UNIT RESULTS

From the first quarter of 2007, for organisational and accounting purposes, the new structure divides the company into the following categories:

Domestic

European Broadband

Mobile Brazil

Media

Olivetti

Other Operations

 

Specifically:

The “Domestic” Business Unit includes fixed-line and mobile telecommunications operations of Telecom Italia S.p.A. and the Telecom Italia Sparkle Group, along with associated support operations;

The “European Broadband” Business Unit covers broadband services in France, Germany and the Netherlands;

The “Mobile Brazil”, “Media” and “Olivetti” Business Units remain virtually unaltered;

“Other Operations” consists of finance enterprises, foreign operations not included under other business units (such as Entel Bolivia), and other minor enterprises not strictly involved in Telecom Italia Group core business.

Telecom Italia Media’s results at 30 September 2007 were reported in the press release issued yesterday (7 November 2007), following approval by the relevant Board of Directors.

 

DOMESTIC 

Revenues of 18,108 million euros decreased by 5.8% (-1,115 million euros) compared with the first nine months of 2006. On an organic basis, the decrease was 5.7% (-1,088 million euros). Excluding changes relating to non-geographical numbers, the decrease was 3.8% .
As explained above, performance was impacted by the introduction of the so-called “Bersani Decree” in March 2007, by reductions in fixed-line/mobile termination rates, and by self-regulation of international roaming traffic prices (in compliance with European Commission rulings). Taken together, the impact of these developments (including the non-geographical numbers effect) amounted to 845 million euros (1,016 million euros pre-tax elasticity effect).

Fixed-Line Telecommunications
Fixed-line telecommunications revenues amounted to 11,748 million euros, a 7.5% reduction (-959 million euros) compared with the first nine months of 2006.  The organic variation in revenues was -4.5% excluding exchange rate fluctuations, changes to the scope of consolidation, and the impact of the above-mentioned non-geographical numbers.

Retail Voice
Retail Voice revenues amounted to 6,294 million euros. Excluding the effect of the above-mentioned changes to non-geographical numbers, a 7.6% reduction compared with the first nine months of 2006 reflects a reduction in traffic and rates (reduced termination tariffs) for fixed-line/mobile calls, a migration of fixed-line market traffic towards mobile telephony, and competitive price pressure, particularly in the Top Clients segment.  In the third quarter of 2007, the reduction compared with the same period of 2006 (-6.4%), was lower than prior quarters.

Internet
Internet unit revenues amounted to 1,071 million euros, a reduction of 52 million euros (-4.6%) compared with the first nine months of 2006. Excluding the effect of the above-mentioned changes relating to non-geographical numbers, this figure registered 8.1% growth (+80 million euros) compared with the first nine months of 2006, due the continued strong revenue growth in Broadband and content which increased by 10.9% compared with the same period of 2006 (+99 million euros).  
Telecom Italia’s overall domestic market broadband access customer portfolio grew to 7.4 million customers at 30 September 2007, of whom 6.2 million are retail customers. The strategy aimed at migrating customers towards innovative broadband access solutions, which enable services and new generation IP applications, has been further implemented.   
The unit continues to implement Flat-rate offerings, which accounted for 59% of the entire Alice Consumer customer portfolio; the VoIP customer portfolio grew to 1,099,000, with a 17.7% ratio to total retail broadband access lines. The expansion of IPTV service on the Consumer market and the implementation of web content and services have also continued.

Data Business
Data Business revenues amounted to 1,236 million euros, an overall 4.2% decrease (54 million euros) compared with the first nine months of 2006, all of which was registered during the first quarter of 2007. This was the result of increasing competitive pressure in the Corporate clients market, and of a public administration contract price review. The decrease is particularly attributable to leased lines and traditional data transmission services. ICT services, however, continued to register dynamic growth, increasing 12.0% compared with the first nine months of 2006 (up 48million euros) and broadband data (+10.8%, +39 million euros compared with the previous year).

Wholesale
Revenues from Wholesale services amounted to 2,854 million euros, an overall 2.8% decrease (-82 million euros) compared with the first nine months of 2006.   
Revenues from domestic wholesale services grew 13.1% compared with the first nine months of 2006 to 1,730 million euros (+200 million euros). Revenues from international wholesale services amounted to 1,124 million euros, down 20.0% (-281 million euros) compared with the first nine months of 2006, as a result of the suspension of some contracts beginning from the second quarter of 2007.

Mobile Telecommunications
Revenues for the first nine months of 2007 amounted to 7,429 million euros, down 1.8% (revenues from services: -1.0%). Results were impacted by the negative effects of the so-called “Bersani Decree”, by changes to fixed-line/mobile termination rates, and by the self-regulation of international roaming tariffs within the European Union in compliance with European Commission rulings. Regulatory discontinuities apart, overall Domestic mobile revenues would have grown 4.0%, and revenues from services alone would have risen 5.2%.

The first nine months of 2007 saw strong growth (+14.5%) in revenues from value-added services (VAS), which increased to 1,403 million euros (+178 million euros compared with the corresponding period of 2006). Revenues were boosted by ongoing innovation in the interactive and mobile broadband ranges of services (+51% compared with the same period a year earlier)). The ratio of VAS revenues to total revenues from services reached 20.2% (17.4% for the first nine months of 2006), 20.6% in the third quarter. “Voice” revenues of 5,194 million euros (despite the sharp growth in traffic +6.2% compared with the first nine months of 2006, +10.8% in the third quarter) decreased for outbound calls (-3.4%) and inbound calls (-9.4%). This variation is fully attributable to the above-mentioned negative impact of changes in regulations. Revenues from the sale of handsets decreased 11.9% to 468 million euros (-63 million euros compared with the first nine months of 2006) as a result of the continuing reduction of average prices and notwithstanding the increase in volume.

At 30 September 2007, Telecom Italia supplied 35.3 million mobile lines, of which 5.7 million (16.2% of total customers) using UMTS technology. The total rose by 2.9 million compared with December 2006, corresponding to a market share of 40.3%.

In 2007, the Domestic Mobile Services BU focused on maintaining the market share and the use of traditional services (voice) and innovative services (VAS), thanks to an effective policy aimed at acquiring subscribers, increased flat or bundle offerings (both voice and VAS), as well as greater penetration of UMTS users and handsets.  

Total Domestic business unit EBITDA amounted to 8,440 million euros, down 8.5% (-780 million euros) compared with the first nine months of 2006. EBITDA margin was 46.6% (48.0% for the first nine months of 2006). Compared with 2006, the result was strongly impacted by the above-mentioned changes to the regulatory environment introduced under the “Bersani Decree” (corresponding to 323 million euros net of the recovery due to the above-mentioned positive elasticity effect).
 
The organic variation in EBITDA compared with the first nine months of 2006 was -7.7% (-714 million euros):

Organic EBITDA margin was 47.4% (-1.1pp on the figure of 48.5% registered for the third quarter of 2006, and in line with the 2007 target of -2.0pp/-1.5pp). In the third quarter , the organic Ebitda margin, 47.9%, was 0.1pp higher than the same quarter of 2006.

Domestic business unit EBIT (operating result) was 5,184 million euros, down 11.9% (-699 million euros) compared with the first nine months of 2006. EBIT margin was 28.6% (30.6% for the first nine months of 2006). The organic variation in EBIT compared with the first nine months of 2006 was -9.1% (-530 million euros):

Organic EBIT margin was 29.4% (30.5% in the first nine months of 2006); in the third quarter the margin was essentially in line with that of the third quarter 2006

Industrial investment amounted to 2,817 million euros (+202 million euros compared with the same period in 2006). The ratio of industrial investment to revenues was 15.6% (13.6% in the first nine months of 2006). Higher investment reflects the Group’s ongoing commitment to modernising its network, technology and services.

At 30 September 2007, the headcount stood at 65,528, a decrease by 1,307 from 31 December 2006.

EUROPEAN BROADBAND

European Broadband business unit revenues (France, Germany and the Netherlands) grew by 67.1% to 1,106 million euros (+444 million euros) compared with the first nine months of 2006. Organic growth on an equal scope of consolidation basis amounted to 190 million euros (+20.7%). The broadband access portfolio stood at 3.3 million, most of which are dual or triple play customers.

EBITDA amounted to 161 million euros, an increase of 121 million euros compared with the first nine months of 2006, with a ratio to revenues of 14.6% (6.0% for the first nine months of 2006), higher than the year’s target (>14%). Organic growth amounted to +117.1% (+89 million euros) compared with the first nine months of 2006:

EBIT was -59 million euros, a 47 million euro improvement (up 44.3%) compared with the first nine months of 2006. Organic EBIT improved by 21 million euros (+27.6%) compared with the first nine months of 2006:

Industrial investment amounted to 363 million euros, increasing compared with the same period in 2006 (+19 million euros).

The Headcount at 30 September 2007 was 4,503, up 1,437 compared with 31 December 2006, mainly attributable to the acquisition of AOL (1,101 people) and, for the remaining amount, to the development of operating units (call centres and network) of Hansenet, Telecom Italia S.A.S. and the BBNed Group.

 

MOBILE BRAZIL 
(Average euro/real exchange rate: 0.37168)
As of 30 September 2007, the Brazilian market provided a total of 112.8 million lines (59.4% population penetration), compared with 99.9 million lines at year-end 2006 (53.2% penetration), with a 12.9% growth. The TIM Brasil Group has continued to consolidate its position as No. 2 player on the market, totalling 29.2 million lines and holding a 25.9% market share (compared with 25.4% at year-end 2006). In September 2007 the market share gap with the first player was further reduced to 1.9pp, compared with 3.7pp at year-end 2006.
On 27 September 2007, the TIM Brasil Group, following the tender held by the Regulator Anatel, obtained further 14 frequency lots in the 900/1800 Mhz band. These additional frequencies expand the coverage and improve the quality of the GSM service at national level. Approximately 95.2% of Tim Brasil’s customer base is served with GSM technology.

TIM Brasil Group consolidated revenues for the first nine months of 2007 amounted to 9,694 million reais (3,603 million euros), a rise of 27.6% compared with the first nine months of 2006 (revenues from services rose 32.5%). The rise was boosted by strong growth in voice and value added services driven by the ongoing expansion of the customer base (+21.1% compared with the same period of 2006) and the success of sales offerings. The increase in revenues net of changes in regulations introduced in 2006 (elimination of the Bill and Keep rule) was 16.2% (service revenues: +19.2%).

Consolidated EBITDA for the third quarter of 2007 amounted to 2,216 million reais (824 million euros), a rise of 34.8% (up 572 million reais compared with the first nine months of 2006).
EBITDA margin was 22.9%, up 1.3 percentage points compared with the same period last year: excluding the aforementioned one-time write-off of receivables Ebitda margin would be 24.5%, an increase of 2.9pp compared with the same period a year earlier. Organic EBITDA growth was 34.0%, compared with the same period in 2006:

Third Quarter 2007 consolidated EBIT (operating result) was positive at 118 million reais or 44 million euros (compared with -128 million reais for the first nine months of 2006). The 246 million reais improvement compared with first nine months of 2006 was achieved despite higher depreciation and amortisation (up from 1,772 million reais in 2006 to 2,083 million reais in 2007), principally as a result of investment in network infrastructure and IT systems, and customer acquisition costs.

Organic EBIT for the first nine months of 2007 increased by 235 million reais compared with the same period in 2006. Organic growth is broken down as follows:

Industrial investment amounted to 1,190 million reais (895 million reais for the first nine months of 2006), up 295 million reais in part as a result of investment to expand the customer base (270 million reais).

At 30 September 2007, the headcount stood at 9,842, an increase of 311 from 31 December 2006.

 

OLIVETTI 
Revenues amounted to 283 million euros, down 15 million euros compared with the first nine months of 2006 (-5.0%). Excluding changes in the scope of consolidation, exchange rate fluctuations and the consideration received for the sale of its research activities, the difference remained stable.
EBITDA amounted to -21 million euros, a 15 million euro improvement on the same period in 2006, principally as a result of last year's re-conversion and rationalisation drives. EBITDA was negative mainly due to multi-functional products (MFP).
The following table provides a breakdown of organic variation, which was a positive 8 million euro (+28.6%):


EBIT (operating result) amounted to -32 million euros, a 17 million euro improvement compared with the same period in 2006.
The organic variation was a positive 10 million euro (+23.8%) and is broken down as follows:


Industrial investment amounted to 7 million euro, a rise of 1 million euro compared with the same period in 2006.
On 30 September 2007, the headcount stood at 1,329, an increase of 99 from 31 December 2006.

OUTLOOK: PROSPECTS FOR THE CURRENT YEAR

The figures for the first nine months of 2007 confirm the trend in the performance of operating activities during the current year described in the 2006 Annual Report and the 2007 Half-Year Report. The Group targets disclosed to the market in March 2007 are therefore confirmed.

 

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EVENTS OCCURRING AFTER 30 SEPTEMBER 2007

Sale of Mediobanca Shares

From October 2007 to 7 November 2007, the company sold an additional 11,743,500 Mediobanca shares (78.271% of the 1.84% interest initially held), resulting in a decrease in net debt of 186 million euros and a positive impact on Group profit of 82 million euros (net of 5 million euros in taxes on the related capital gain).
Tax Assessments 
Between October and November, the Company was served four notices of contestation by the Financial Authorities pertaining to tax periods from 2002 to 2006 and referring to Telecom Italia and the other companies that were formerly incorporated within it (the “old” Telecom Italia, Tim and Tim Italia).  The most significant issues involve the write-down of “old” Telecom Italia shares held by Olivetti (financial statements 2002), the policies followed for the deduction of the contribution payable on telephony (financial statements of the “old” Telecom Italia and Tim for financial year 2002), and the taxation policies applied to the contingent asset carried in the financial statements 2004, when the Regional Administrative Court for Lazio declared that the contribution was not due for the year 1999, the tax regime applied in 2003 to the disposal of the stake in the so-called “new Seat” resulting from the de-merger of Seat Pagine Gialle (now TI Media).
These issues will be addressed in detail by the fiscal offices in charge of tax assessments, which will then decide whether or not to proceed with the tax audit. So far, the Company also feels that it can show that the relevant rules and regulations were correctly interpreted and applied.
Olivetti
Given that the ongoing negative trend recorded by Olivetti is expected to continue in future years, in light of the prospects of the multi-purpose product segment, a decision was made to implement a series of measures aimed at ensuring the rapid economic recovery of the Business Unit, entailing costs estimated at about 40 million euros.

Organisational and Corporate Governance Issues
At the meeting held on 8 November, 2007, the Board of Directors adopted a specific set of internal regulations governing the role of the Executive in charge of preparing corporate accounting documents. These regulations (which are currently available on the Corporate Governance page of the website www.telecomitalia.it) incorporate the corporate governance tools that Telecom Italia has gradually adopted in the area of internal auditing related to financial reporting.
On the same date, the Board of Directors formally appointed Enrico Parazzini (the Company’s General Manager and Head of the Group’s Finance, Administration and Control Department) Executive in charge of preparing Telecom Italia’s accounting documents.
At the meeting held on 8 November 2007, the Board also approved the criteria for the identification of transactions requiring advance authorisation from the Board of Directors as “owing to their nature, strategic importance, size or consequent commitments, [they] will have a major impact on the business of the Company and the Group” (as stated in the Company’s Self Regulatory Code). This document is also available from the websitewww.telecomitalia.it.
The Board of Directors, following the preliminary inquiry conducted by the Remuneration Committee, authorised the Chairman and Executive Deputy Chairman to implement the plan envisaging the free allotment of own shares to the Group's top management, which was approved by the General Shareholders' Meeting on 16 April 2007, and to develop the general terms set forth in the illustrative report submitted to the General Shareholders' Meeting in further detail.
Appointments
During the meeting held on 8 November 2007, after approving the Quarterly Report, following the resignations (on 25 October 2005) of Directors Carlo Alessandro Puri Negri and Claudio De Conto, the Board of Directors appointed César Alierta Izuel and Julio Linares Lopez, whose curricula vitae are annexed to this press release, as a reference.

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2008 CALENDAR

The calendar of meetings on financial reports for financial year 2008, as approved today by the Board of Directors is reported below:

7 March              BoD meeting – Annual Report

12-14 April        General Shareholders’ Meeting – Annual Report (with payment of dividend in April)

9 May                 BoD meeting – Quarterly Report

8 August             BoD meeting – Half-Year Report

7 November       BoD meeting – Quarterly Report

Any changes to the above dates will be immediately notified.

The company will avail of the option not to publish its Fourth Quarter 2007 Report and the Second Quarter 2008 Report.

***

The Executive in charge of preparing the corporate and accounting documents (Enrico Parazzini), pursuant to paragraph 2 of Article 154-bis of Italy’s Consolidated Finance Act (TUF) hereby declares that the accounting information contained herein corresponds to the Company’s evidence and accounting books and records.  

***

The results for the first nine months of 2007 will be presented to the financial community during a conference call on Friday, 9 November 2007, starting at 1:00pm (CET).Journalists may attend the conference call, which will not entail a Q&A session,by calling: +39 06 33168.Those who are unable to participate in the conference call will have the opportunity to listen to the presentation by calling +39 06 334843 (access code 169526#).

Enclosures (file .pdf, 255 Kb)