#1Telecom Italia Conference Call 2010 Results & Plan Update February 25th, 2011 Telecom Argentina Plan 2011-13 FRANCO BERTONE TELECOM ITALIA#2Telecom Italia Conference Call 2010 Results & Plan Update Safe Harbour These presentations contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company and the Group. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected or implied in the forward looking statements as a result of various factors. Forward-looking information is based on certain key assumptions which we believe to be reasonable as of the date hereof, but forward looking information by its nature involves risks and uncertainties, which are outside our control, and could significantly affect expected results. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telecom Italia S.p.A. undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telecom Italia S.p.A. business or acquisition strategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged to consult the Company's Annual Report on Form 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securities and Exchange Commission. Furthermore, the data and information contained in this presentation only refer to Telecom Argentina group and do not include data from its controlling companies Sofora Telecomunicaciones and Nortel Inversora; such companies are part of the business unit Argentina that is consolidated in the Telecom Italia Group.TELECOM ITALIA FRANCO BERTONE 1#3Telecom Italia Conference Call 2010 Results & Plan Update Agenda ▸ Telecom Argentina Group 2010 Results (IFRS) ▸ Telecom Argentina Plan TELECOM ITALIA 2 FRANCO BERTONE#4Telecom Italia Conference Call 2010 Results & Plan Update 2010 Main Results Euros, in million Reported Revenues +483M€ +21% 2,820 2,337 798 4Q 640 +25% 9M 2,022 1,697 +19% FY09 EBITDA FY10 +126M€ 926 +16% 800 246 40 4Q 211 +17% 9M 680 589 +15% FY09 TELECOM ITALIA FRANCO BERTONE Key Highlights Increasing revenues and customer base in all businesses ▸ 4Q10 revenues growth acceleration ▸ VAS+Data+BB accounting for 35% of revenues and growing at a 2x the rate ▸ 2010 mobile market leadership with est. 46% of net adds Bundled BB fixed and mobile offer ▸ Strong financial position Net Financial Position Evolution (+Cash/-Debt) -185 -430 231 86 -831 FY10 FY06 FY07 FY08 FY09 FY10 3#5Telecom Italia Conference Call 2010 Results & Plan Update Mobile Business MIn, % Market Share(2) Mobile Customers(1) 16.0 16.3 15.3 14.9 14.5 12.6 10.7 31.6% 31.8% 30.6% 30.8% 30.9% 29.4% 28.3% 2007 2008 2009 1Q10 2Q10 3Q10 4Q10 KPI's 2010 Highlights ‣ 46% of estimated 2010 market net adds ; 1.2% market share increase YoY ▸ Over 50% market share of smartphones sales ‣ 9% ARPU growth YoY ▸ 3G devices approaching 10% of base ▸ VAS reaching 40% of service revenues (46% increase YoY) ▸ High 30/70 postpaid-prepaid mix Service Revenues & VAS(1)(3) Pesos, in billion $ 44 $ 41 $ 41 $ 39 222 85 91 103 125 101 102 8.5 +24% +17% 6.8 +23% 5.8 4.8 5.1 +13% 4.5 4.1 +10% 299 3.5 +18% 2007 2008 2009 2010 MOU SMS ARPU (pesos) TELECOM ITALIA FRANCO BERTONE +46% 3.4 +36% 1.3 1.7 +34% 2.3 2007 2008 VAS revenues 2009 2010 Non-VAS revenues VAS includes: SMS, MMS, SMS revenue sharing, Contents, Mobile internet & others Figures are in Argentinean GAAP, with no material difference in terms of growth under IFRS for 2009 and 2010. (1) Argentinean Operation only (2) Estimated, data not available for 4Q10 (3) Net of Intercompany 4#6Telecom Italia Conference Call 2010 Results & Plan Update Fixed Business Fixed & BB Access Total Lines in market (In millions) 46.6% 46.8% 46.8% 46.9% 46.9% 46.9% Market 45.6% Share (1) 3.92 4.01 4.06 4.06 4.07 4.09 4.11 Fixed Voice Fixed 1.21 1.23 1.27 1.33 1.38 1.03 BB 0.77 2007 2008 2009 1Q10 2Q10 3Q10 4Q10e BB ARPU & Churn 2.0% 1.8% 2010 Highlights ▸ Lines in services and market share maintain marginal growth ▸ Regulated revenues participation down 7 p.p. to 44% ▸ Fixed ARBU up 5% despite frozen tariffs ▸ BB revenues reached 30% of fixed business passing voice revenues (net of monthly fee) ▸ BB ARPU up 14% ▸ BB churn down to 1.4% from 1.8% in FY09 30% of BB net adds in voice bundled offers Fixed Revenues Breakdown 1.8% 17% 20% 20% 18% 1.4% 62% 54% 48% 45% 76 21% 26% 32% 37% 67 56 57 2007 2008 2009 2010 2007 2008 2009 2010 ARPU (in Pesos) CHURN (monthly) TELECOM ITALIA (1) Estimated, data not available for 4Q10 FRANCO BERTONE ■ BB&Data ■Volce ■ITX&Others Figures are in Argentinean GAAP, with no material difference in terms of growth under IFRS for 2009 and 2010. 5 Οι#7Telecom Italia Conference Call 2010 Results & Plan Update Agenda ▸ Telecom Argentina Group 2010 Results (IFRS) ▸ Telecom Argentina Plan TELECOM ITALIA FRANCO BERTONE 6 CO#8Mobile Penetration Telecom Italia Conference Call 2010 Results & Plan Update Latam Market Argentina's Telecoms Market In a Reglonal Context Service Revenues (Cagr '10-'13) -5% -10% 10% Peru 5% Paraguay 0% Argentina Chile México Uruguay Colombia Panama Brazil Costa Rica Venezuela 1.000 3.000 5.000 7.000 9.000 11.000 USD GDP per capita (2010) Paraguay 94% Perd 78% Colombla 96% Venezuela 100% Mexico 80% Argentina 129% #2 Brazil 102% Chile 112% Fixed BB Penetration Uruguay 135% Paraguay Perú 10% 15% Colombla 18% Venezuela 18% Mexico 28% Argentina 37% #1 Brazil 23% Chile 36% Uruguay 25% Source: Pyramid Research. Residential population only TELECOM ITALIA FRANCO BERTONE Pay TV Penetration Paraguay 15% Perú 17% Colombla 26% Venezuela 38% Mexico 38% Argentina 65% #1 Brazil 17% Chile 46% Uruguay 37% 7#9Telecom Italia Conference Call 2010 Results & Plan Update Argentina: TLC Competitive Landscape Snapshot TLC Access (mln lines) TLC Operators Mobile (1) Personal 2010 M/S 31.8% Arnet Claro Broadband 2010 M/S 35.3% TELECOM FiberTel Speedy 2010 Penetration (2) Argentina 129% Latam 97% 51.4 47.4 42.8 37.8 2007 2008 2009 (1) Does not include trunking subscribers (2) 2010 Telefonica Fixed 2010 M/S 46.9% 2010 Penetration (2) Argentina 37% Latam 23% 2010 Penetration (2) Argentina 67% Latam 55% 8.6 8.6 8.7 8.7 3.0 3.4 3.9 2.3 2007 2008 2009 2010 2007 2008 2009 Source: Pyramid Research. Fixed line penetration residential only The Market Share for 4Q is a Company estimate TELECOM ITALIA FRANCO BERTONE 2010 Source: Telecom Argentina 8#10Telecom Italia Conference Call 2010 Results & Plan Update Regulatory Environment Fixed Business Current Regulatory Framework ▸ Fixed voice tariffs frozen since Jan 2002 ‣ BB unregulated prices ‣ Universal Service implemented as incumbent: no cash contribution required ▸ Triple play currently not allowed to Telcos Expectations over the next three years ▸ Number Portability ▸ Video incorporated into VAS licences ▸ Growing interest of federal and local Government in the telecommunications infrastructure Mobile Business Current Regulatory Framework ▸ Number Portability by YE 2011 ‣ Unregulated prices ▸ 50 MHz frequency cap ► Limited MVNO participation ▸ Universal Service partly contributed with shared mobile access infrastructure Expectations over the next three years ▸850-1.900MHz spectrum auction with current frequency cap ▸ AWS (Advanced Wireless Service) 1.700 - 2.100Mhz spectrum auction with separate frequency cap ▸ Shift from CPP F2M to mobile termination rates TELECOM ITALIA FRANCO BERTONE 9#11Telecom Italia Conference Call 2010 Results & Plan Update Mobile Business: Main Goals and Action Plan Goals Consolidate VAS leadership through strong Mobile Lines (Millions) growth in data revenues Increase customer base smartphones & tablet penetration Further development of youth segment and social networking Action Plan Upgrade 3G network, capacity, quality and coverage Handset upgrade plan with 3G devices Bundled data + social network plans Mobile internet massification through convenient prepaid packaging offers Loyalty targeted customer care programs ahead of mobile number portability (1) Argentinean Operation only TELECOM ITALIA FRANCO BERTONE Outlook (1) Cagr '10-'13 +5% 17.6 16.3 2010 2011 2013 ARPU 50 Cagr '10-'13 +12% (ARS per month) 44 + ARPU VAS 2010 2011 2013 Business Model 2009-10 <2009 2011-13 + Customer Development +Capture 10#12Telecom Italia Conference Call 2010 Results & Plan Update Fixed Business: Main Goals and Action Plan Goals Increase BB penetration of existing customer base Fixed BB Lines (Millions) Develop ICT market Introduce video services Outlook (1) Cagr '10-'13 +7% 1.5 1.4 2010 2011 2013 ARPU (ARS per month) 87 Cagr '10-'13 +14% 76 2010 2011 2013 Action Plan Upgrade local loop capacity to increase bandwidth Introduce VoD, content delivery and Connected Home applications Migrate from per minute charging to flat pricing Develop supplementary service offers on top of basic telephony (1) Net of Intercompany Internet & Data over Fixed Revenues(1) 37% 42% 2010 2011 2013 TELECOM ITALIA FRANCO BERTONE 11#13Telecom Italia Conference Call 2010 Results & Plan Update Revenues & Ebitda Outlook Consolidated ARS, BIn Revenues per Product & per Business VAS+data+ ADSL as % 35% 38% of Revenues >+21% >17.7 14.6 2.2 >+32% 5,1 1,8 5,5 2010 2011 Volce ITX VAS+data+ADSL Others EBITDA ARS, BIn TELECOM ITALIA FRANCO BERTONE >+21% >17.7 14.6 >+24% 10 >+12% 4,6 2010 2011 Fixed Mobile Cost Structure ■ITX Costs 14% >5.5 ■Marketing 25% and sales 4.8 "Taxes 28% 20% Labor Costs ■ Others 13% 2010 2011 2010 Focus on efficiency: ▸ Leaner cost structure through unified operation ➤ Lower incidence of ITX costs ▸ Growth in labor related costs 12#14Telecom Italia Conference Call 2010 Results & Plan Update CAPEX Plan Capex (ARS, in billions) 2.6 2,0 ~3.2 2011 18% Key Drivers ▸ Expand backhaul IP deployment to improve mobile broadband footprint and user experience ▸ Improve mobile coverage to reduce domestic roaming cost ▸ Expand, secure and integrate backbone networks and IT platforms. ▸ Upgrade fixed access network to increase bandwith ▸ Deploy content delivery capabilities ‣ Update IT solutions to improve customer care, provisioning business operations and 0,6 2010 ■Commercial* Industrial Capex as % of 17% Revenues *Include SAC Mobile & Internet TELECOM ITALIA FRANCO BERTONE 13#15Telecom Italia Conference Call 2010 Results & Plan Update Telecom Argentina - Main Takeaways Market Growth Competitive Edge Convergence Business Model ▸ Mobile business ▸ Fixed BB ▸ Mobile BB ▸ ICT and Data ▸ Focus on innovation and customer care ‣ State-of-the-art infrastructure ▸ Top-brand recognition ▸ OTT and Video ▸ Fully integrated operation ▸ CAPEX & OPEX efficiency gains from Proven track record of integrated operations sustainable growth in ▸ Convergent view on product development Ebitda-Capex Evolution revenues, margins and market share ▸ Strong cash flow generation ▸ Reduced FX exposure ARS, BIn Ebitda >5.5 4.8 4.2 2.6 ~3.2 Capex 2.2 2009 2010 2011 2012 2018 TELECOM ITALIA FRANCO BERTONE Cum'11-13 OFCF: >7 Bin ARS 14#16Telecom Italia Conference Call 2010 Results & Plan Update Back Up TELECOM ITALIA FRANCO BERTONE 15#17Telecom Italia Conference Call 2010 Results & Plan Update Telecom Argentina Footprint Nord Sud Telecom Argentina Presence Population: 18 mln ▸ Fixed: 4.1 mln lines GDP per capita: 6k $ ▸ BB: 1.4 mln lines Cities with >20k inh.: 96 ▸ Mobile: 11 mln lines ▸ Strong presence in this region Higher penetration of BB in LIS ▸ Higher penetration of mobile AMBA Metropolitan Area of Buenos Aires Population: 9 mln GDP per capita: 13k $ ▸ High density region ▸ Most wealthiest region ▸ Business segment is mostly in AMBA ▸ Strong competitive region Population: 14 min GDP per capita: 9k $ ▸ Fixed: 0.1 mln lines ▸ Increasing coverage ➤ BB: 0.1 mln lines ▸ Mobile: 6 mln lines Cities with >20k inh.: 69 ▸ Expanding network ▸ Increasing presence in the region TELECOM ITALIA FRANCO BERTONE 16#18Telecom Italia Conference Call 2010 Results & Plan Update Telecom Argentina - Shareholders Structure Shareholders Structure - ex ante Shareholders Structure - ex post Telecom Italia International Telecom Italia Spa Werthein de Argentina Inversiones Telecom Italia International Telecom Italia Spa Werthein de Argentina Inversiones S.L S.L 25.5 % 32.5% 42.0% 25.5 % 32.5% 42.0% 58.0% 58.0% Sofora Telecomunicaciones Sofora Telecomunicaciones S.A. S.A. 100% 67.79% (1) Nortel Common Stock 51.04% (2) Nortel Inversora 32.21% (1) 48.96% (2) Preferred A & B Shares 100% 67.79% (1) 51.04% (2) Nortel Common Stock TII 8% of Nortel Nortel Inversora Preferred B 32.21% (1) 48.96% (2) Preferred A & B Shares 54.74% -41% Public Telecom Argentina -4% Employees 99.99% Telecom Personal 67.50% Nucleo (Paraguay) (1) % of capital ownership; (2) % economic interest; TELECOM 54.74% -41% Public Telecom Argentina -4% Employees 99.99% Telecom Personal TI Economic Interest 67.50% in TA: ~16.2% Nucleo (Paraguay) ITALIA FRANCO BERTONE TI Economic Interest in TA: ~18.3% as of 24 January 2011 17