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Contents Letter to the Shareholders ______________________________________________________________ 5 Key Operating and Financial Data - Telecom Italia Group ________________________________ 7 Review of Operating and Financial Performance - Telecom Italia Group ___________________ 15 Research and Development ____________________________________________________________ 35 Events Subsequent to December 31, 2011 _______________________________________________ 35 Business Outlook for the Year 2012 _____________________________________________________ 35 Consolidated Financial Statements – Telecom Italia Group _______________________________ 37 Highlights – The Business Units of the Telecom Italia Group _____________________________ 43 The Business Units of the Telecom Italia Group _________________________________________ 45 Domestic ____________________________________________________________________________________ 45 Brazil ________________________________________________________________________________________ 61 Argentina ____________________________________________________________________________________ 65 Media _______________________________________________________________________________________ 70 Olivetti_______________________________________________________________________________________ 76 Review of Operating and Financial Performance - Telecom Italia S.p.A. ____________________ 79 Financial Statements – Telecom Italia S.p.A. ____________________________________________ 91 Reconciliation of Consolidated Equity ___________________________________________________ 96 Corporate Boards at December 31, 2011 _________________________________________________ 97 Macro-Organization Chart of the Telecom Italia Group at December 31, 2011 ______________________________________________________________________________ 99 Information for Investors ____________________________________________________________ 100 Related Party Transactions __________________________________________________________ 105 Sustainability Section _______________________________________________________________ 106 Customers _________________________________________________________________________________ 110 Suppliers __________________________________________________________________________________ 112 The Environment ____________________________________________________________________________ 114 The Community _____________________________________________________________________________ 122 Human Resources ___________________________________________________________________________ 126 Shareholders _______________________________________________________________________________ 136 Alternative Performance Measures ___________________________________________________ 138 Glossary ___________________________________________________________________________ 140 Telecom Italia Group Consolidated Financial Statements _______________________________ 147 Contents ___________________________________________________________________________________ 148 Consolidated Statements of Financial Position ____________________________________________________ 150 Separate Consolidated Income Statements ______________________________________________________ 152 Consolidated Statements of Comprehensive Income _______________________________________________ 153 Consolidated Statements of Changes in Equity ____________________________________________________ 154 Consolidated Statements of Cash Flow __________________________________________________________ 155 Notes to the Consolidated Financial Statements __________________________________________________ 157 Certification of the Consolidated Financial Statements pursuant to art. 81-ter of Consob Regulation 11971 dated May 14, 1999, with Amendments and Additions ______________________ 299 Independent Auditors’ Report __________________________________________________________________ 300 Telecom Italia S.p.A. Separate Financial Statements ___________________________________ 302 Contents ___________________________________________________________________________________ 303 Statements of Financial Position _______________________________________________________________ 305 Separate Income Statements __________________________________________________________________ 307 Annual Report 2011 Contents 2
Statements of Comprehensive Income __________________________________________________________ 308 Statements of Changes in Equity _______________________________________________________________ 309 Statements of Cash Flow _____________________________________________________________________ 310 Notes to the Separate Financial Statements ______________________________________________________ 312 Certification of the Separate Financial Statements pursuant to art. 81-ter of Consob Regulation 11971 dated May 14, 1999, with Amendments and Additions _____________________________ 433 Independent Auditors’ Report __________________________________________________________________ 434 Other Information __________________________________________________________________ 436 Board of Statutory Auditors’ Report _____________________________________________________________ 437 Motions for Resolutions ______________________________________________________________________ 456 Useful Information ___________________________________________________________________________ 476 This document has been translated into English solely for the convenience of the readers. In the event of a discrepancy, the Italian language version prevails. Annual Report 2011 Contents 3
Page 1: Annual Report 2011 Relazione interm
Page 5 and 6: Letter to the Shareholders To the S
Page 7 and 8: Key Operating and Financial Data -
Page 9 and 10: The trend of the key operating and
Page 11 and 12: Liquidity margin: at December 31, 2
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
Page 63 and 64:
EBIT EBIT is 2,294 million reais, i
Page 65 and 66:
Argentina The Telecom Italia Group
Page 67 and 68:
Mobile telephony service: Telecom P
Page 69 and 70:
Again with regard to value-added se
Page 71 and 72:
Revenues Revenues amount to 238 mil
Page 73 and 74:
Principal changes in the regulatory
Page 75 and 76:
• it erroneously attributed the m
Page 77 and 78:
European sales recorded a good tren
Page 79 and 80:
Review of Operating and Financial P
Page 81 and 82:
The reduction of 483 million euros
Page 83 and 84:
(162 million euros, on the basis of
Page 85 and 86:
Equity Equity amounts to 20,537 mil
Page 87 and 88:
Dividends flow Dividends paid amoun
Page 89 and 90:
Bonds Bonds at December 31, 2011 to
Page 91 and 92:
Financial Statements - Telecom Ital
Page 93 and 94:
Statements of Financial Position (m
Page 95 and 96:
Additional Cash Flow Information (m
Page 97 and 98:
Corporate Boards at December 31, 20
Page 99 and 100:
Macro-Organization Group at Decembe
Page 101 and 102:
other sources of information, the p
Page 103 and 104:
Relative performance by Tim Partici
Page 105 and 106:
Related Party Transactions In accor
Page 107 and 108:
the Dow Jones Sustainability World
Page 109 and 110:
Economic value generated and distri
Page 111 and 112:
Type of customer care customer Over
Page 113 and 114:
Involvement initiatives For the fif
Page 115 and 116:
Vehicles Telecom Italia S.p.A. 2011
Page 117 and 118:
• cogeneration/trigeneration: 5 l
Page 119 and 120:
• an increase in emissions attrib
Page 121 and 122:
channels have been registered as "D
Page 123 and 124:
• Network and service platform in
Page 125 and 126:
• E-learning and evolved teaching
Page 127 and 128:
Tim Brasil Group (units) 12.31.2011
Page 129 and 130:
Development The 2010 Group performa
Page 131 and 132:
Internal communication The main act
Page 133 and 134:
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
Page 143 and 144:
HFC (Hydrofluorocarbons). Hydrofluo
Page 145 and 146:
Shared Access. Methods of shared ac
Page 147 and 148:
Consolidated Financial Statements a
Page 149 and 150:
Note 34 - Other income (expenses) f
Page 151 and 152:
Equity and Liabilities (millions of
Page 153 and 154:
Consolidated Statements of Comprehe
Page 155 and 156:
Consolidated Statements of Cash Flo
Page 157 and 158:
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
Page 189 and 190:
Gross carrying amount, accumulated
Page 191 and 192:
Gross carrying amount, accumulated
Page 193 and 194:
Aggregate data for 2011 and 2010, p
Page 195 and 196:
Note 9 - Financial assets (non-curr
Page 197 and 198:
Note 10 - Miscellaneous receivables
Page 199 and 200:
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: (
Page 207 and 208:
• the reduction of share capital
Page 209 and 210:
• to mandate the board of directo
Page 211 and 212:
Gross financial debt according to t
Page 213 and 214:
The following table lists the bonds
Page 215 and 216:
Nortel Inversora S.A. Preferred Ser
Page 217 and 218:
Such obligation, required by nation
Page 219 and 220:
Revolving Credit Facility The follo
Page 221 and 222:
Note 17 - Financial risk management
Page 223 and 224:
of market parameters, even though t
Page 225 and 226:
In order to limit the risk of the n
Page 227 and 228:
Note 18 -Derivatives Derivative fin
Page 229 and 230:
Note 19 - Supplementary disclosures
Page 231 and 232:
Comparison between carrying amount
Page 233 and 234:
Carrying amount for each class of f
Page 235 and 236:
Fair value hierarchy level for each
Page 237 and 238:
Note 20 - Employee benefits Employe
Page 239 and 240:
The effect on the income statement,
Page 241 and 242:
Note 22 - Miscellaneous payables an
Page 243 and 244:
Note 24 - Contingent liabilities, o
Page 245 and 246:
On December 16, 2011 Telecom Italia
Page 247 and 248:
In a judgement on November 2, 2011,
Page 249 and 250:
Greece -DELAN During 2009, the comp
Page 251 and 252:
c) Commitments and guarantees Guara
Page 253 and 254:
Note 27 - Acquisition of goods and
Page 255 and 256:
Note 29 - Other operating expenses
Page 257 and 258:
Note 32 - Gains (losses) on disposa
Page 259 and 260:
Note 34 - Other income (expenses) f
Page 261 and 262:
Finance expenses Finance expenses d
Page 263 and 264:
Note 36 - Profit (loss) for the yea
Page 265 and 266:
Future potential changes in share c
Page 267 and 268:
Note 38 - Segment reporting a) Repo
Page 269 and 270:
Headcount by Operating Segment (num
Page 271 and 272:
The effects on the individual line
Page 273 and 274:
Transactions with associates and jo
Page 275 and 276:
Transactions with companies control
Page 277 and 278:
Transactions with other related par
Page 279 and 280:
(millions of euros) 12/31/2011 12/3
Page 281 and 282:
In the 2011, the contributions paid
Page 283 and 284:
Description of other Telecom Italia
Page 285 and 286:
Calculation of fair value measureme
Page 287 and 288:
Note 41 - Significant non-recurring
Page 289 and 290:
Note 42 - Positions or transactions
Page 291 and 292:
c) Operating leases Revenue related
Page 293 and 294:
Note 44 - Events subsequent to Dece
Page 295 and 296:
Name Head office Currency Share cap
Page 297 and 298:
Name Head office Currency Share cap
Page 299 and 300:
Certification of the Consolidated F
Page 301 and 302:
Consolidated Financial Statements T
Page 303 and 304:
Contents Telecom Italia S.p.A. Sepa
Page 305 and 306:
Statements of Financial Position As
Page 307 and 308:
Separate Income Statements (euros)
Page 309 and 310:
Statements of Changes in Equity Sta
Page 311 and 312:
Additional Cash Flow Information (t
Page 313 and 314:
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
Page 329 and 330:
Type of license The net carrying am
Page 331 and 332:
Note 5 - Tangible assets (owned and
Page 333 and 334:
12/31/2010 Accumulated impairment l
Page 335 and 336:
Note 6 - Investments Investments de
Page 337 and 338:
(thousands of euros) Carrying amoun
Page 339 and 340:
5,620 thousand euros for receivable
Page 341 and 342:
Note 8 - Miscellaneous receivables
Page 343 and 344:
The temporary differences which mak
Page 345 and 346:
Note 10 - Inventories Inventories a
Page 347 and 348:
Trade receivables amount to 4,162,0
Page 349 and 350:
Note 12 - Equity Equity is composed
Page 351 and 352:
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
Page 361 and 362:
elating to items classified as curr
Page 363 and 364:
• 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
Page 371 and 372:
Currency of denomination Notional a
Page 373 and 374:
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
Page 411 and 412:
(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
Page 465 and 466:
and this is confirmed in a report p
Page 467 and 468:
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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