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The Board approved the voluntary conversion at a premium of Telecom Italia's saving shares

02/05/2001 - 12:00 PM

Approved by the Telecom Italia Board today

- Voluntary savings share conversion at a premium
- Buy-back by way of a tender offer on up to 10% of share
- Redenomination of share capital in euros
- Significant improvement of financial structure and flexibility
- Project financially neutral
- Increase in all per share economic indicators
- Olivetti´s voting participation in Telecom Italia to 40%
- Major reduction in Olivetti´s financial indebtedness

Telecom Italia announces that a Board meeting, concluded earlier today, it unanimously approved an important project aimed at simplifying and strengthening the Group´s financial structure.

The project is centred on the voluntary conversion at a premium of Telecom Italia´s savings shares ("savings shares") into an equivalent number of Telecom Italia ordinary shares ("ordinary shares"), and on a subsequent buy-back, by way of a tender offer, on up to a maximum of 10% of the Telecom Italia´s post conversion share capital.

Savings Shares Conversion
The conversion of Telecom Italia´s savings shares will be effected via the payment of a conversion premium equal to 48% of the market price of Telecom Italia´s ordinary shares, with a minimum level of Euro6.25 per share.

The operation will be proposed to holders of all the 2,053,122,025 savings shares in circulation and is conditional on the participation of shareholders representing at least 80% of the savings share capital following the cancellation of those savings shares held by the company. In this event, the minimum cash proceeds will be approximately Euro10 billion.

Ordinary shares issued as a result of the conversion, and converted savings shares, will be eligible for the 1 January 2000 dividend.

To secure the clear support of the market, Olivetti, Telecom Italia´s absolute majority shareholder, has indicated that it will not approve the operation in the event that at the Telecom Italia Extraordinary Shareholders Meeting called to approve it, shareholders representing an absolute majority of the shares not held by Olivetti vote against the proposal.

In the event of full conversion of the savings shares, the share of the voting rights in Telecom Italia held by Olivetti will pass from the current 54.8% to approximately 40% bringing it in line with its current participation in Telecom Italia´s share capital, which will remain unchanged.

Buy-Back of Ordinary Shares by way of Tender Offer on up to 10% of its post conversion share capital
The proceeds of the savings share conversion will be entirely used for a buy-back of Telecom Italia ordinary shares up to a maximum of 10% of the share capital. The buy-back will be made in the form of a tender offer, subject to the authority of an Ordinary Shareholders Meeting which will not provide for any re-sale of the shares acquired.

The tender offer will take place on completion of the conversion of savings shares into ordinary shares, at a price equal to the market price at the time the tender offer is launched, plus 15% and, however, at a level of not less than Euro17.5 per ordinary share eligible for 1 January 2001 dividend.

From a financial point of view the operation will be neutral for Telecom Italia. Therefore the total outlay for the buy-back operation will not exceed the cash proceeds of the savings share conversion, and any eventual cash remaining after the buy-back will subsequently be distributed to all shareholders.

As a result of the buyback, the financial indebtedness of Olivetti - which has indicated its desire to take part in the operation - will fall by an amount of at least Euro4.3 billion - Euro5.1 billion, depending on the percentage level of savings shareholders converting their shares, a level that could fall between 80% and 100%.

Redenomination of share capital in Euros
In advance of the above operations, Telecom Italia will move to redenominate its share capital in Euros increasing the nominal value per share to Euro0.55, cancelling savings shares that it already owns, and with the consequent transfer of reserves.

Benefits of the savings share conversion and the ordinary share buy-back
The proposal approved by the Board will facilitate the achievement of three fundamental objectives:

1. The optimisation of Telecom Italia´s capital structure which, in the event of full conversion of the savings shares, will consist of a single category of shares, with an increase in earnings per share. Further, the conversion of Telecom Italia´s savings shares, completes a series of similar operations by other group companies (Olivetti, Tim and Seat).

2. The improvement of all the company´s per share economic indicators, including earnings, by approximately 10%.

3. The increase in Telecom Italia´s financial flexibility, as a result of the reduction of the majority shareholder´s total indebtedness, with the consequent improvement in the entire Group´s credit rating prospects;

Preliminary Timetable
- February
: Telecom Italia Extraordinary Shareholders Meeting called to approve the proposal considered today.
- March
: Shareholders meeting to approve project.
- April
: Savings Share conversion and payment of relevant premium
- June
: Distribution of dividend relating to the period ended 31 December 2000.
- July
: Shareholders meeting to approve an in period balance sheet to 30 April and the buy-back tender offer proposal
- End of July - Early August
: Tender offer on ordinary shares and payment of consideration
- By end 2001
: Payment of any extraordinary dividend