to download Telecom Italia Annual Report 2011 - Company Reporting

Description of other Telecom Italia S.p.A. equity compensation plans
• Performance Share Granting Plan 2008-2011
The Plan grants free Telecom Italia ordinary shares to beneficiaries (Top Management of
Telecom Italia or subsidiaries) for a pre-determined maximum and variable number of shares,
according to the period of each individual beneficiary’s effective participation in the plan and the
extent to which the pre-set share performance targets have been reached.
Since the performance targets were not met, all the rights were forfeit and the plan expired on
June 30, 2011.
• Broad-based Employee Share Ownership Plan
The Plan consists of a subscription offering for Telecom Italia ordinary shares at a discount off the
market price, reserved for employees of Telecom Italia or companies controlled by Telecom Italia
with registered offices in Italy. A further grant of ordinary shares shall be made, in a ratio of one
bonus share for every three subscribed shares, subject to retaining the subscribed shares and
maintaining an employment relationship with companies of the Telecom Italia Group.
The first part of the plan was carried out and on July 29, 2010 a number of Telecom Italia ordinary
shares was issued equal to 27,056,139 (of which 24,427,422 were reserved for employees of
Telecom Italia S.p.A. and 2,628,717 for employees of Italian subsidiaries).
These shares were offered for subscription at a per share price of 0.84 euro, corresponding to the
arithmetic mean of the market price of the shares between May 25, 2010 and June 25, 2010,
discounted by 10%.
On August 2, 2011, capital was increased by the grant of 8,876,296 bonus ordinary shares to those
entitled, for a total par value of 4,881,962.80 euros.
• Long Term Incentive Plan 2010-2015 (Piano LTI 2010-2015)
The Plan grants, to a selected number of Group management who are not already beneficiaries of
other long-term incentive plans, a cash bonus based on three-year performance measured against
pre-set targets, with the option of investing 50% of the bonus in Telecom Italia ordinary shares at
market price. At the end of the three-year performance period, if the manager decides to invest half
of the bonus, retaining these shares and maintaining an employment relationship with companies of
the Group for the next two years, the manager will have the right to the grant of an equal number of
free ordinary shares.
The performance targets are measured using the Total Shareholder Return of Telecom Italia (TSR TI)
and Free Cash Flow (FCF). In particular, the payment of 65% of the bonus will be linked to the
relative TSR TI in the three years 2010-2012 whereas the payment of 35%, instead, will be linked to
an absolute performance indicator represented by the cumulative FCF during the period 2010-2012.
The beneficiaries were identified in relation to the person’s organizational role and strategic
potential and the bonus was determined as a percentage of the beneficiary’s fixed annual
compensation.
At the start of the Plan, the total maximum bonus potentially available to the 121 beneficiaries at the
end of the three years was 8,754,600 euros, eventually to be paid in cash in early 2013 in a variable
amount in relation to the level of the pre-set three-year 2010-2012 performance targets reached.
The option of investing 50% of the bonus in Telecom Italia ordinary shares would have determined,
at the time of the grant, a share capital increase in cash reserved for the beneficiaries for the
maximum equivalent of 4,377,300 euros, and this same amount was the maximum value of the
bonus grant and the relative bonus increase in capital.
Beneficiaries of the Plan who subscribed to the shares and observed the terms and conditions
above, in early 2015 will be allocated profits, under ex art. 2349 of the Italian Civil Code, through the
issue of one bonus share for every subscribed share.
In reference to the situation at December 31, 2011, the total maximum bonus that may be granted
to the 117 beneficiaries is 8,236,350 euros; the maximum amount of the investment at market
price, and the relative capital increase in cash, is therefore equal to an equivalent amount of
4,118,175 euros, and this same amount was the maximum value of the bonus grant, and the
relative bonus increase in capital.
Telecom Italia Group
Consolidated Financial Statements
Note 40 – Equity compensations plans 283