to download Telecom Italia Annual Report 2011 - Company Reporting

Capital expenditures on an accrual basis
The breakdown of capital expenditures by operating segment is as follows:
(millions of euros) 2011 2010 Change
% of total % of total
Domestic 4,200 68.9 3,106 67.8 1,094
Brazil 1,290 21.2 1,216 26.5 74
Argentina 556 9.1 188 4.1 368
Media, Olivetti and Other Operations 66 1.1 76 1.7 (10)
Adjustments and Eliminations (17) (0.3) (3) (0.1) (14)
Total consolidated capital expenditures 6,095 100.0 4,583 100.0 1,512
% of Revenues 20.3 16.6 3.7
Capital expenditures total 6,095 million euros in 2011, increasing 1,512 million euros (+33%)
compared to 2010. In particular, the increase is due to: investments made by the Domestic Business
Unit for the acquisition of user rights for the 800 MHz, 1800 MHz and 2600 MHz frequencies to be used
for broadband mobile communication services, for a total amount of 1,223 million euros, the
consolidation of the Argentina Business Unit for the full year (+368 million euros, including the negative
exchange rate effect of 18 million euros) and higher capital expenditures by the Brazil Business Unit
(+74 million euros, including a positive exchange rate effect of 3 million euros). Further details on the
aforementioned acquisition of the user rights to the frequencies are provided in the paragraph “Principal
changes in the regulatory framework” of the Domestic Business Unit.
Sale of investments and other disposals flow
Sale of investments and other disposals flow totals 486 million euros and principally relates to:
• 411 million euros for the portion already received, net of related incidental expenses, on the sale of
EtecSA (Cuba). The transaction specifically provides that the Telecom Italia Group will receive a total
of 706 million U.S. dollars, of which 500 million U.S. dollars has already been paid by the buyer on
January 31, 2011; the remaining amount will be paid by EtecSA in 36 monthly installments. The
receivable is secured by specific guarantees;
• 53 million euros received, net of related incidental expenses and the net financial debt of the
subsidiary, on the sale of the entire stake held in Loquendo on September 30, 2011.
Financial investments flow
• Acquisition of interests in the Sofora – Telecom Argentina group
During 2011, the Telecom Italia Group increased the stakes held in Sofora Telecomunicaciones S.A.,
in Nortel Inversora S.A. (the controlling holding company of the Telecom Argentina group, which, in
turn, is controlled by Sofora Telecomunicaciones) and in Telecom Argentina S.A. for a total
investment of 211 million euros. Following these acquisitions, the economic interest of the Telecom
Italia Group in Telecom Argentina went from 16.2% at December 31, 2010 to 22.7% at December
31, 2011.
In particular:
– on January 24, 2011, the Telecom Italia Group, through its subsidiary Telecom Italia
International N.V., purchased 2,351,752 Nortel American Depositary Shares (ADS),
representing Preferidas B shares, from Fintech Investment Ltd for 65.8 million U.S. dollars
(approximately 48 million euros). The ADSs in question represent 117,587.6 Preferidas B
shares (without voting rights). This share package was later conferred to the Argentina
company Inversiones Milano S.A., later renamed Tierra Argentea S.A., a wholly-owned
subsidiary of the Telecom Italia Group;
– on March 9, 2011, Telecom Italia, through its subsidiary Telecom Italia International N.V.,
purchased a 10% stake for approximately 104 million euros in Sofora
Report on Operations Review of Operating and Financial Performance - Telecom Italia Group 27