Telecom Italia Group 2011-2013 strategic plan: guidelines

In 2008-2010, the Group focused its efforts on two main objectives: improve free cash flow generation and strengthen its financial structure. More specifically, focus was on core markets, financial discipline and cost reduction (approx. 4 billion euro). The Group also strongly focused on reducing its Debt.
The choice of disposing of some assets regarded as not big enough to achieve important targets, was associated with the strengthening in LatAm, where Intelig was acquired in Brazil and where the Group increased its stake in Argentina.

For the next three years, Telecom Italia confirms its aforementioned goals, also including its Argentinean operations since 4Q2010. The repositioning process and the revenue trend recovery in Italy as well as the strengthening our presence in Brazil and Argentina go in parallel with consistent focus on debt reduction and sustainable growth of shareholders’ remuneration.

In the Domestic market, the Group targets are:

• protect the value of the Customer Base and of traditional services both in the Fixed and Mobile Businesses;
• limit line losses by strengthening bundle offers penetration through enhanced quality of service;
• develop innovative services by accelerating BB and Smartphones penetration.

Our cost reduction efforts already brought about good results, in 2011-2013 timeframe efficiencies should reach 1 billion Euro.

The Plan allows to reach the target of reducing the cash cost revenues ratio to approx. 64%. The 2011 free cash flow generation target is 600 million euro.

In Brazil, the management will concentrate on increasing the size of the business, with the objective of reaching a Customer Base of 70 mln lines in 2013. Between 2011-2013, sound revenues, cost efficiencies and capex optimization will allow to obtain a 6 billion Reais operating free cash flow generation.

In Argentina, the management will invest in increasing the market share in the Mobile business through Mobile BB. In the Fixed business, the target is to consolidate the current position through Voice and BB bundle offerings, trying to increase brand loyalty and ARPU (average revenue per user).