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Consolidated Reported EBIT: is a negative 603 million euros in 2011 (a positive 5,818 million euros in 2010) and is penalized by the impact of the above impairment charges for a total of 7.4 billion euros relating to the Goodwill allocated to Core Domestic and Media. Consolidated Organic EBIT: is 6,808 million euros in 2011 (+5.1% compared to 2010) and 1,756 million euros in the fourth quarter of 2011 (+5.9%). The consolidated Organic EBIT Margin is 22.7%, with an improvement of 0.5 percentage points compared to the prior year. Finance income/expenses and Investment Results: show the balance of Finance income and expenses presenting an improvement of 76 million euros mainly in connection with the reduction in Net financial debt. At the same time, investment management and the equity valuation of associates display an overall decline of 411 million euros; the change is mainly due to the presence, in 2010, of the positive impact of the fair value adjustment of the stake held in the Sofora group prior to acquisition of control (266 million euros) and the negative effect of the equity valuation of associates (negative for 39 million euros in 2011 and positive for 99 million euros in the prior year). Loss for the year attributable to owners of the Parent: is 4,726 million euros, with a reduction of 7,847 million euros compared to 2010 (profit of 3,121 million euros). In comparable terms, the result attributable to owners of the Parent is in line with 2010. In particular, comparable profit in 2011 would be 2.6 billion euros, calculated by excluding the impact of the goodwill impairment charge and other non-recurring items; the profit in 2010 would have been the same amount if calculated by excluding the positive impact connected with the acquisition of control of Sofora, the benefit of over 600 million euros from the recognition of deferred tax assets in Brazil and other non-recurring items. Operating free cash flow: is 5,767 million euros in 2011 and 446 million euros lower than the prior year mainly owing to the acquisition of LTE (Long Term Evolution) frequencies for 1,223 million euros. Excluding the impact of the acquisition of LTE frequencies in 2011 and the payment made to the Revenue Agency relating to the Telecom Italia Sparkle case in 2010, operating free cash flow would record an improvement of 388 million euros. This is a confirmation of the Group’s strong and growing capacity to generate cash flow, thanks to the staying power of Domestic and the positive contribution of Brazil and also the entry of the Argentina Business Unit in the scope of consolidation. Adjusted net financial debt: is 30,414 million euros at December 31, 2011, with a reduction of 1,054 million euros compared to December 31, 2010 (31,468 million euros). This reduction is even more significant when considering that in the fourth quarter of 2011 an amount of 1,223 million euros was spent for the acquisition of LTE frequencies. Excluding this investment, net financial debt would have been more than 2 billion euros lower. More to the point, cash generated by operating activities, together with the receipt of 464 million euros from the sale of the investments in EtecSA (millions of euros) Adjusted Net Financial Debt 31,468 -1,054 30,414 12/31/2010 Change 12/31/,2011 (Cuba) and Loquendo and the effects of the subscription by the market to the TIM Participações S.A. capital increase (about 240 million euros, net of the relative incidental expenses), more than guaranteed the cash requirements for the payment of dividends (1,326 million euros, of which 1,183 million euros was distributed to the market by the Parent), income taxes (1,381 million euros), acquisition of control of two companies in the AES Atimus group in Brazil (about 686 million euros) and purchases of shares which in 2011 enabled the Telecom Italia Group to increase its economic interest in the Telecom Argentina group from 16.2% to 22.7%. Annual Report 2011 Key Operating and Financial Data - Telecom Italia Group 10
Liquidity margin: at December 31, 2011 is 14.7 billion euros and consists of liquidity for 7.7 billion euros and long-term irrevocable credit lines for 7 billion euros (6 billion euros expiring in 2014 and 1 billion euros expiring in 2013), not subject to restrictions on their utilization. During 2011, three new bonds were issued on the European market for a total of 2.75 billion euros while about 5.3 billion euros of debt was repaid or repurchased. Given the particular context of the financial markets, the Telecom Italia Group has adopted a more prudent approach and – at the end of 2011 – the Group’s liquidity margin is more than sufficient to meet its debt repayment obligations for the next 24 months. Annual Report 2011 Key Operating and Financial Data - Telecom Italia Group 11
Page 1 and 2: Annual Report 2011 Relazione interm
Page 3 and 4: Statements of Comprehensive Income
Page 5 and 6: Letter to the Shareholders To the S
Page 7 and 8: Key Operating and Financial Data -
Page 9: The trend of the key operating and
Page 13 and 14: Consolidated Operating and Financia
Page 15 and 16: Review of Operating and Financial P
Page 17 and 18: The fixed-line area, with a contrac
Page 19 and 20: - lower expenses of 246 million eur
Page 21 and 22: Business Unit (-329 million euros)
Page 23 and 24: Income tax expense Income tax expen
Page 25 and 26: eflect the definitive fair value of
Page 27 and 28: Capital expenditures on an accrual
Page 29 and 30: Finance expenses, income taxes and
Page 31 and 32: The financial risk management polic
Page 33 and 34: On August 3, 2011, a bilateral stan
Page 35 and 36: Research and Development As for “
Page 37 and 38: Consolidated Financial Statements -
Page 39 and 40: Consolidated Statements of Financia
Page 41 and 42: Consolidated Statements of Cash Flo
Page 43 and 44: Highlights - The Business Units of
Page 45 and 46: The Business Units of the Telecom I
Page 47 and 48: International Wholesale (millions o
Page 49 and 50: compared to the same period of 2010
Page 51 and 52: In detail: (millions of euros) 2011
Page 53 and 54: Cubomusica GRATIS per 1 anno. Durin
Page 55 and 56: In particular, for the unbundling c
Page 57 and 58: International roaming On July 6, 20
Page 59 and 60: For the telecommunications operator
Page 61 and 62:
Brazil The Telecom Italia Group ope
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EBIT EBIT is 2,294 million reais, i
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Argentina The Telecom Italia Group
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Mobile telephony service: Telecom P
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Again with regard to value-added se
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Revenues Revenues amount to 238 mil
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Principal changes in the regulatory
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• it erroneously attributed the m
Page 77 and 78:
European sales recorded a good tren
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Review of Operating and Financial P
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The reduction of 483 million euros
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(162 million euros, on the basis of
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Equity Equity amounts to 20,537 mil
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Dividends flow Dividends paid amoun
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Bonds Bonds at December 31, 2011 to
Page 91 and 92:
Financial Statements - Telecom Ital
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Statements of Financial Position (m
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Additional Cash Flow Information (m
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Corporate Boards at December 31, 20
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Macro-Organization Group at Decembe
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other sources of information, the p
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Relative performance by Tim Partici
Page 105 and 106:
Related Party Transactions In accor
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the Dow Jones Sustainability World
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Economic value generated and distri
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Type of customer care customer Over
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Involvement initiatives For the fif
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Vehicles Telecom Italia S.p.A. 2011
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• cogeneration/trigeneration: 5 l
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• an increase in emissions attrib
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channels have been registered as "D
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• Network and service platform in
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• E-learning and evolved teaching
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Tim Brasil Group (units) 12.31.2011
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Development The 2010 Group performa
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Internal communication The main act
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introduced on this subject. The agr
Page 135 and 136:
On August 2, 2011 the second phase
Page 137 and 138:
The Risk Management department mana
Page 139 and 140:
Net financial debt is calculated as
Page 141 and 142:
Bundle. Commercial offer including
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HFC (Hydrofluorocarbons). Hydrofluo
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Shared Access. Methods of shared ac
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Consolidated Financial Statements a
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Note 34 - Other income (expenses) f
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Equity and Liabilities (millions of
Page 153 and 154:
Consolidated Statements of Comprehe
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Consolidated Statements of Cash Flo
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Note 1 - Form, content and other ge
Page 159 and 160:
• Argentina: includes fixed (Tele
Page 161 and 162:
Note 2 - Accounting policies Going
Page 163 and 164:
case of loss of control of a subsid
Page 165 and 166:
Impairment of intangible and tangib
Page 167 and 168:
• held to maturity (originally mo
Page 169 and 170:
Inventories Inventories are measure
Page 171 and 172:
Revenues are recognized to the exte
Page 173 and 174:
Use of estimates The preparation of
Page 175 and 176:
Note 3 - Business combinations Acqu
Page 177 and 178:
Acquisition of control of Sofora Te
Page 179 and 180:
Note 4 - Goodwill Goodwill shows th
Page 181 and 182:
Core Domestic International Wholesa
Page 183 and 184:
Changes in key variables needed to
Page 185 and 186:
Concessions, licenses, trademarks a
Page 187 and 188:
Note 6 - Tangible assets (owned and
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Gross carrying amount, accumulated
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Gross carrying amount, accumulated
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Aggregate data for 2011 and 2010, p
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Note 9 - Financial assets (non-curr
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Note 10 - Miscellaneous receivables
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The temporary differences which mak
Page 201 and 202:
In addition to this effect, the inc
Page 203 and 204:
Note 13 - Trade and miscellaneous r
Page 205 and 206:
Note 14 - Equity Equity includes: (
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• the reduction of share capital
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• to mandate the board of directo
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Gross financial debt according to t
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The following table lists the bonds
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Nortel Inversora S.A. Preferred Ser
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Such obligation, required by nation
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Revolving Credit Facility The follo
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Note 17 - Financial risk management
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of market parameters, even though t
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In order to limit the risk of the n
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Note 18 -Derivatives Derivative fin
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Note 19 - Supplementary disclosures
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Comparison between carrying amount
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Carrying amount for each class of f
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Fair value hierarchy level for each
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Note 20 - Employee benefits Employe
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The effect on the income statement,
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Note 22 - Miscellaneous payables an
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Note 24 - Contingent liabilities, o
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On December 16, 2011 Telecom Italia
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In a judgement on November 2, 2011,
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Greece -DELAN During 2009, the comp
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c) Commitments and guarantees Guara
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Note 27 - Acquisition of goods and
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Note 29 - Other operating expenses
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Note 32 - Gains (losses) on disposa
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Note 34 - Other income (expenses) f
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Finance expenses Finance expenses d
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Note 36 - Profit (loss) for the yea
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Future potential changes in share c
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Note 38 - Segment reporting a) Repo
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Headcount by Operating Segment (num
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The effects on the individual line
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Transactions with associates and jo
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Transactions with companies control
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Transactions with other related par
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(millions of euros) 12/31/2011 12/3
Page 281 and 282:
In the 2011, the contributions paid
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Description of other Telecom Italia
Page 285 and 286:
Calculation of fair value measureme
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Note 41 - Significant non-recurring
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Note 42 - Positions or transactions
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c) Operating leases Revenue related
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Note 44 - Events subsequent to Dece
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Name Head office Currency Share cap
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Name Head office Currency Share cap
Page 299 and 300:
Certification of the Consolidated F
Page 301 and 302:
Consolidated Financial Statements T
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Contents Telecom Italia S.p.A. Sepa
Page 305 and 306:
Statements of Financial Position As
Page 307 and 308:
Separate Income Statements (euros)
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Statements of Changes in Equity Sta
Page 311 and 312:
Additional Cash Flow Information (t
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Profit (loss) before tax from conti
Page 315 and 316:
• the capitalized costs can be me
Page 317 and 318:
Intangible and tangible assets with
Page 319 and 320:
Financial liabilities hedged by der
Page 321 and 322:
Starting from January 1, 2007, Ital
Page 323 and 324:
Finance income and expenses Finance
Page 325 and 326:
• IFRIC 19 (Extinguishing Financi
Page 327 and 328:
The cost of capital used for the es
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Type of license The net carrying am
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Note 5 - Tangible assets (owned and
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12/31/2010 Accumulated impairment l
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Note 6 - Investments Investments de
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(thousands of euros) Carrying amoun
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5,620 thousand euros for receivable
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Note 8 - Miscellaneous receivables
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The temporary differences which mak
Page 345 and 346:
Note 10 - Inventories Inventories a
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Trade receivables amount to 4,162,0
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Note 12 - Equity Equity is composed
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Share capital carries a restriction
Page 353 and 354:
The following statement provides ad
Page 355 and 356:
With regard to additional capital i
Page 357 and 358:
Note 13 - Financial liabilities (no
Page 359 and 360:
The main components of financial li
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elating to items classified as curr
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• the loan contract signed by Tel
Page 365 and 366:
Note 14 - Net financial debt As req
Page 367 and 368:
Total Financial liabilities (at the
Page 369 and 370:
Financial liabilities - Maturities
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Currency of denomination Notional a
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Carrying amount for each class of f
Page 375 and 376:
Fair value hierarchy level for each
Page 377 and 378:
Comparison between carrying amount
Page 379 and 380:
Gains and losses by IAS 39 category
Page 381 and 382:
Under IAS 19, employee severance in
Page 383 and 384:
Note 19 - Provisions Provisions dec
Page 385 and 386:
Note 21 - Trade and miscellaneous p
Page 387 and 388:
Note 22 - Contingent liabilities, o
Page 389 and 390:
outcome is considered probable. As
Page 391 and 392:
Federazione Anti Pirateria Audiovis
Page 393 and 394:
offers, contractual profile changes
Page 395 and 396:
Note 23 - Revenues Revenues decreas
Page 397 and 398:
Note 26 - Employee benefits expense
Page 399 and 400:
Note 30 - Depreciation and amortiza
Page 401 and 402:
Note 34 - Finance income and Financ
Page 403 and 404:
Note 35 - Related party transaction
Page 405 and 406:
STATEMENT OF FINANCIAL POSITION LIN
Page 407 and 408:
Transactions with subsidiaries The
Page 409 and 410:
Total income (expenses) from invest
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(thousands of euros) 12/31/2011 12/
Page 413 and 414:
STATEMENT OF CASH FLOWS LINE ITEMS
Page 415 and 416:
Page 417 and 418:
Page 419 and 420:
Page 421 and 422:
Remuneration to key managers In 201
Page 423 and 424:
The beneficiaries were identified i
Page 425 and 426:
Parameters used to determine fair v
Page 427 and 428:
Note 37 - Significant non-recurring
Page 429 and 430:
Expense related Telecom Italia has
Page 431 and 432:
Note 41 - List of investments in su
Page 433 and 434:
Certification of the Separate Finan
Page 435 and 436:
Telecom Italia S.p.A. Separate Fina
Page 437 and 438:
Report of the Board of Statutory Au
Page 439 and 440:
The Board of Auditors has overseen
Page 441 and 442:
amendments Agreed procedures and de
Page 443 and 444:
PricewaterhouseCoopers S.p.A. commu
Page 445 and 446:
On 7 July 2011, after the alignment
Page 447 and 448:
met the Chairman of the Conselho Fi
Page 449 and 450:
Regarding the provisions of article
Page 451 and 452:
18. No significant facts that shoul
Page 453 and 454:
non-compliances imputable to the ex
Page 455 and 456:
corporate bodies, and in particular
Page 457 and 458:
amount equal to 2% of the par value
Page 459 and 460:
curricula vitae are attached) as Di
Page 461 and 462:
at least twenty-five days before th
Page 463 and 464:
Authorization to increase share cap
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and this is confirmed in a report p
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5.6 - For five years starting from
Page 469 and 470:
Proposed Resolution The Shareholder
Page 471 and 472:
9.8 - In appointing directors who f
Page 473 and 474:
only one slate. 17.10 - The Board o
Page 475 and 476:
17.17 - At the first renewal of the
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