Clarifications as requested by Consob

12/23/2010 - 10:48 PM

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The company provides the following details and clarification on the decisions taken during the Board of Directors meeting held on 16 December 2010

At the request of Consob Telecom Italia provides the following details regarding the content of the press release issued following the Board of Directors meeting held on 16 December 2010.

The specific topic of interest came up under point 3 (“Communications”) of the agenda of the meeting, sub-point 3.1 (“Project Greenfield - Findings”), covered by the dossier provided to the Directors and Auditors on the same day as the convening notice, sent within the time limits as prescribed by the company bylaws. “Project Greenfield” is the code name given to the internal review mentioned in the press release of 16 December 2010.

All Board Members took part in the meeting:

- Gabriele Galateri (Chairman of the Board of Directors)

- Franco Bernabè (Chief Executive Officer)

- Cesar Alierta

- Paolo Baratta (Chairman of the Internal Control and Corporate Governance Committee;  member of the Supervisory Body ex d.lgs. n. 231/2001; independent)

- Tarak Ben Ammar (via audioconference)

- Roland Berger (member of the Executive Committee and of the Internal Control and Corporate Governance Committee; independent)

- Elio Cosimo Catania (member of the Executive Committee; Chairman of the Appointment and Remuneration Committee; independent)

- Jean Paul Fitoussi (member of the Internal Control and Corporate Governance Committee; independent)

- Julio Linares (member of the Executive Committee)

- Gaetano Miccichè

- Aldo Minucci (member of the Executive Committee, of the Internal Control and Corporate Governance Committee and of the Appointment and Remuneration Committee, post he covers as per decision of the same Board Meeting of 16 December 2010)

- Renato Pagliaro (member of the Executive Committee)

- Mauro Sentinelli

- Luigi Zingales (member of the Appointment and Remuneration Committee; independent)

and all the Auditors:

- Enrico Maria Bignami (Chairman of the Board of Statutory Auditors)

- Gianluca Ponzellini

- Lorenzo Pozza

- Salvatore Spiniello

- Ferdinando Superti Furga (Chairman of the Supervisory Body ex d.lgs. n. 231/2001)

During the treatment of the specific point (and specifically during the presentation of the work carried out by the advisors) the Board Member Ben Ammar left the meeting due to previous engagements.

The Project Greenfield review was examined on the basis of:

  • a note summing up the scope and purpose of the review, enclosed with the documentation provided before the meeting;
  • ad hoc presentations of the findings of the review by Deloitte (Deloitte Financial Advisory Services S.p.A.), Studio Paul, Hastings, Janofsky & Walker (Avv. Bruno Cova) and by Bonelli, Erede, Pappalardo (Professor Franco Bonelli), handed out during the meeting.

During the meeting full reports and opinions were available to the participants, consultable at the Board of Directors secretariat.

Antonio Cattaneo of Deloitte, Bruno Cova and Professor Franco Bonelli illustrated in turn their findings and conclusions.

The presentations were followed by a discussion, with requests for clarification from the advisors, in which each of the Directors present spoke (therefore with the sole exception of Director Ben Ammar). Given the complexity of the topic and the amount of the documentation elaborated by the advisors, the CEO proposed that any decisions be postponed to a subsequent meeting. Nevertheless, bearing in mind the rumours concerning Project Greenfield already circulating in the press, the Board decided to adopt an orientation during the same meeting. About this, it then made an assessment of the costs to be borne and the likely benefits to the Company to be expected, as well as the likelihood and times of a gain.

Thus the Board of Directors, on the basis of the information available, of the advice of legal counsel, and in light of the discussion undertaken, decided not to submit to the forthcoming Shareholders’ Meeting the proposal to commence legal action against the directors in office at the time of the events reviewed. The only board member to express a contrary opinion ("his complete disagreement") was Luigi Zingales.

The Board of Directors also established that its orientation could be modified in case new information and/or new events emerged, also resulting from the ongoing judicial proceedings.

Meanwhile the decision was unanimous to make a public statement on the above resolution in a press release whose content was agreed by top management and board member Zingales.

On the request of Consob, we should point out that – after the Chairman had invited each board member to express their evaluations - the above-described orientation was taken without formal voting process.

Regarding the issues raised by Director Zingales in light of his “complete disagreement”, it has to be pointed out that initially he shared the CEO’s suggestion to postpone the discussion to a subsequent meeting. Since the discussion was not postponed, based on his evaluation of the presentation of the legal opinion, that technically allows the possibility to take legal action, Mr. Zingales declared himself in favour of legal action against the former executive directors on the basis of considerations of principle and fairness, and in view of the reputational and management costs which, in his opinion, would follow from a decision not to act.

Regarding the other issues raised by Mr. Zingales, in opening the discussion of point 3.1, the Director asked and was permitted to present his own documentary analysis of the Sparkle case, including some personal remarks and posing a number of queries. Part of the issues raised were explicitly treated by the advisors, who arrived at conclusions different to those reached independently by Director Zingales, who based his conclusion on a more limited range of documentation.

The Board took due note of the Director's report together with the opinions of the advisors. Some of the issues raised by Mr. Zingales are still to be examined and could be treated in a following meeting.

Milan, 23 December 2010