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Change in net financial debt (millions of euros) 2011 2010 Change EBITDA 9,000 9,089 (89) Capital expenditures on an accrual basis (4,122) (3,018) (1,104) Change in net operating working capital: (99) (237) 138 Change in inventories (13) 56 (69) Change in trade receivables and net amounts due on construction contracts 132 292 (160) Change in trade payables (*) (142) (588) 446 Other changes in operating receivables/payables (76) 3 (79) Change in provisions for employees benefits (221) 57 (278) Change in operating provisions and Other changes (61) (390) 329 Net operating free cash flow 4,497 5,501 (1,004) % of Revenues 24,9 29,0 Sale of investments and other disposals flow 60 (37) 97 Financial investments flow (42) (199) 157 Dividends flow (936) 1,323 (2,259) Issue of equity instruments - 23 (23) Financial expenses, income taxes and other net non-operating requirements flow (3,395) (3,502) (107) Reduction (Increase) in net financial debt 184 3,109 (2,925) (*) Includes the change in trade payables for amounts due to fixed asset suppliers. The reduction in net operating free cash flow in 2011 compared to 2010 (-1,004 million euros) is due to higher requirements for capital expenditures (mainly in connection with the acquisition of LTE frequency rights); such change is partially compensated by the improvement in working capital. In addition to what has already been described with reference to EBITDA, net financial debt in 2011 has been particularly impacted by the following: Capital expenditures flow Capital expenditures total 4,122 million euros (3,018 million euros in 2010), up 1,104 million euros (36.6%), due to 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 of 1,223 million euros. This follows the auction by the Ministry of Economic Development which took place in the second half of the year. The user rights, formally awarded by the Ministry on October 3, 2011, were assigned in February 2012. Sale of investments and other disposals flow Sale of investments and other disposals flow amounts to 60 million euros and principally relates to the collection of the consideration on the sale of the investment in Loquendo (equal to 55 million euros). Financial investments flow Financial investments flow amounts to 42 million euros for payments made to subsidiaries and associates for share capital increases or replenishments of share capital and/or the coverage of losses (of which 15 million euros is in favor of TLC Commercial Services and 10 million euros in favor of SSC). Report on Operations Review of Operating and Financial Performance – Telecom Italia S.p.A. 86
Dividends flow Dividends paid amount to 1,190 million. Dividends collected from Group companies total 254 million euros and particularly include the dividends collected from Telecom Italia Sparkle (250 million euros), Loquendo (2 million euros) and Pathnet (1 million euros). Finance expenses, income taxes and other net non-operating requirements flow Finance expenses, income taxes and other net non-operating requirements flow mainly includes the payment, during 2011, of income taxes (1,010 million euros), net finance expenses and the change in non-operating receivables and payables. Net financial debt Net financial debt is 36,402 million euros, decreasing 184 million euros compared to 36,586 million euros at the end of 2010. In addition to the usual indicator (renamed “Accounting net financial debt”), another indicator is also presented denominated “Adjusted net financial debt” which excludes effects that are purely accounting and non-monetary in nature deriving from the fair value measurement of derivatives and related financial assets and liabilities. The composition is the following: Report on Operations Review of Operating and Financial Performance – Telecom Italia S.p.A. 87
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Annual Report 2011 Relazione interm
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Statements of Comprehensive Income
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Letter to the Shareholders To the S
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Key Operating and Financial Data -
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The trend of the key operating and
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Liquidity margin: at December 31, 2
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Consolidated Operating and Financia
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Review of Operating and Financial P
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The fixed-line area, with a contrac
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- lower expenses of 246 million eur
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Business Unit (-329 million euros)
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Income tax expense Income tax expen
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eflect the definitive fair value of
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Capital expenditures on an accrual
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Finance expenses, income taxes and
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The financial risk management polic
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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: Equity Equity amounts to 20,537 mil
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
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The Risk Management department mana
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Net financial debt is calculated as
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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
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Consolidated Statements of Comprehe
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Consolidated Statements of Cash Flo
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Note 1 - Form, content and other ge
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• Argentina: includes fixed (Tele
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Note 2 - Accounting policies Going
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case of loss of control of a subsid
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Impairment of intangible and tangib
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• held to maturity (originally mo
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Inventories Inventories are measure
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Revenues are recognized to the exte
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Use of estimates The preparation of
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Note 3 - Business combinations Acqu
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Acquisition of control of Sofora Te
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Note 4 - Goodwill Goodwill shows th
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Core Domestic International Wholesa
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Changes in key variables needed to
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Concessions, licenses, trademarks a
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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
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In addition to this effect, the inc
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Note 13 - Trade and miscellaneous r
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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
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In the 2011, the contributions paid
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Description of other Telecom Italia
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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
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Certification of the Consolidated F
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Consolidated Financial Statements T
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Contents Telecom Italia S.p.A. Sepa
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Statements of Financial Position As
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Separate Income Statements (euros)
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Statements of Changes in Equity Sta
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Additional Cash Flow Information (t
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Profit (loss) before tax from conti
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• the capitalized costs can be me
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Intangible and tangible assets with
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Financial liabilities hedged by der
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Starting from January 1, 2007, Ital
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Finance income and expenses Finance
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• IFRIC 19 (Extinguishing Financi
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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
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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
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The following statement provides ad
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With regard to additional capital i
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Note 13 - Financial liabilities (no
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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
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Note 14 - Net financial debt As req
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Total Financial liabilities (at the
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Financial liabilities - Maturities
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Currency of denomination Notional a
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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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Comparison between carrying amount
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Gains and losses by IAS 39 category
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Under IAS 19, employee severance in
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Note 19 - Provisions Provisions dec
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Note 21 - Trade and miscellaneous p
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Note 22 - Contingent liabilities, o
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outcome is considered probable. As
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Federazione Anti Pirateria Audiovis
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offers, contractual profile changes
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Note 23 - Revenues Revenues decreas
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Note 26 - Employee benefits expense
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Note 30 - Depreciation and amortiza
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Note 34 - Finance income and Financ
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Note 35 - Related party transaction
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STATEMENT OF FINANCIAL POSITION LIN
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Transactions with subsidiaries The
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Total income (expenses) from invest
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(thousands of euros) 12/31/2011 12/
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STATEMENT OF CASH FLOWS LINE ITEMS
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Remuneration to key managers In 201
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The beneficiaries were identified i
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Parameters used to determine fair v
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Note 37 - Significant non-recurring
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Expense related Telecom Italia has
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Note 41 - List of investments in su
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Certification of the Separate Finan
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Telecom Italia S.p.A. Separate Fina
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Report of the Board of Statutory Au
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The Board of Auditors has overseen
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amendments Agreed procedures and de
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PricewaterhouseCoopers S.p.A. commu
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On 7 July 2011, after the alignment
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met the Chairman of the Conselho Fi
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Regarding the provisions of article
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18. No significant facts that shoul
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non-compliances imputable to the ex
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corporate bodies, and in particular
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amount equal to 2% of the par value
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curricula vitae are attached) as Di
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at least twenty-five days before th
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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
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Proposed Resolution The Shareholder
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9.8 - In appointing directors who f
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only one slate. 17.10 - The Board o
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17.17 - At the first renewal of the
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