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Note 40 – Equity compensation plans
Equity compensation plans in effect at December 31, 2011 are used for retention purposes and as a
long-term incentive for the managers and employees of the Group.
However, it should be noted that these plans do not have any significant effect on the economic result or
on the financial position or on cash flows at December 31, 2011.
The Telecom Italia and Tim Participações compensation plans are described in the following paragraphs.
Description of stock option plans
• Top 2008 Stock Option Plan
This plan refers to options granted on April 15, 2008 to the then chairman and chief executive
officer, originally for 11,400,000 options, exercisable at the end of the vesting period, expiring after
three years from the grant date at a price of 1.95 euros per option. The exercise period is from April
15, 2011 to April 15, 2014. Each option gives the right to one Telecom Italia S.p.A. ordinary share.
75% of the options granted (equal to 8,550,000 options) are not subordinate to performance
targets and is still valid while the remaining 25% (equal to 2,850,000 options) were forfeited in
2010 because the performance target were not reached. During 2011, no options were exercised.
Unexercised options expire at the end of the plan.
• Tim Participações S.A. Stock Option Plan
A long-term incentive plan for managers in key positions in the company and its subsidiaries was
approved by the shareholders’ meeting of Tim Participações S.A. on August 5, 2011. The option to
purchase shares was granted to certain directors and employees. On the grant date of
August 5, 2011, the exercise price of the options granted was calculated using the weighted
average price of the shares of Tim Participações S.A. considering volumes traded and the market
price of the company’s shares in the 30 days prior to July 20, 2011 (the date on which the board of
directors approved the incentive plan).
The exercise of the options is subordinate to reaching two performance objectives simultaneously:
the increase in value of the company’s ordinary shares and the performance of the prices of the
company’s shares against a reference index, defined by the directors of Tim Participações S.A. and
composed principally of the share price of other companies in the telecommunications, information
technology and media sectors.
Performance targets refer to the three years 2011-2013 and performance is recorded in July of
each year. The period of the options is six years, and one-third of these options can be exercised
after the first half of 2012, another one-third after the first half of 2013 and the remaining one-third
after the first half of 2014. The options are exercisable up to six years starting from the grant date;
the company does not have the legal obligation to repurchase or settle the options in cash or in any
other form.
On August 5, 2011, the grantees of the options were granted the right to purchase a total of
2,833,596 shares.
As of December 31, 2011, there were no options that could have already been exercised.
The expenses connected with the long-term incentive plan were allocated on a monthly basis and at
December 31, 2011 amounted in total to about 4 million Brazilian reais (about 2 million euros).
Telecom Italia Group
Consolidated Financial Statements
Note 40 – Equity compensations plans 282