Alex Bolis - Head of Investor Relations Marco Patuano - Chief Executive Officer Piergiorgio Peluso - Chief Financial Officer

Carola Bardelli - Deutsche Bank Nick Brown - Goldman Sachs George Ierodiaconou - Citi Micaela Ferruta - Intermonte Mandeep Singh - Redburn Partners Luigi Minerva - HSBC Paul Marsch - Berenberg Bank Giles Thorne - Jefferies James Ratzer - New Street Research

Good morning, ladies and gentlemen. Alex Bolis speaking. Welcome to Telecom Italia's second quarter 2015 results call. Our Chief Executive Officer, Marco Patuano, will guide us through the main events and performance of the period, entering also in the detail of our domestic improving operating trends and innovative CapEx progression. Our CFO, Piergiorgio Peluso, will be then giving an update on efficiency, operating cash flow and net income and debt performance, as well as commenting on special projects. The presentation will be followed by a Q&A session, to which also TIM Brasil's CEO, Rodrigo Abreu, will participate. After drawing your attention to slide number three, which states our disclaimer policy, I will now give the floor to Marco.

Thank you, Alex. Good morning, ladies and gentlemen. The second quarter 2015 delivers important results for our Group, while the course has been set for further achievements. Let us start reviewing them on slide four. First of all, we registered further material progress on overall domestic service revenues and underlying EBITDA, both of which improved versus the previous quarter respectively by 1.7% and 2.1%. Mobile service revenues were up almost 2 percentage points quarter-on-quarter, performing minus 2.5% year-on-year, supported in their recovery path by increased LTE penetration on our customer base. Our fixed service revenues scored a solid performance at minus 1.9% year-on-year and joined the uplift coming from continued positive broadband performance and from structural improvement on the business segment. The next slides will further detail our positive domestic results, which we see in continuous progression. In Brazil, no challenges from regulation, market evolution, and the state of the economy, which were well explained on the Wednesday call of TIM Participacoes, have further confirmed how important it is for our operation there to stick to their sound organic value-generating course. In second quarter 2015, mobile-generated revenues remained positive year-on-year on an organic basis at plus 1.1%, in which prepaid scored minus 3.7% and postpaid plus 7%. This tells you where we are heading. In the quarter, we have scored second in Brazil in postpaid net adds with 525 new lines; on 2015-2017 investment plan, is worth more than BRL14 billion in aggregate. Supported by the company's strong financial flexibility and the evolution of our commercial strategy, it will enable further data monetization and overall better trends, from our unique quality position for the big middle [ph]. Therefore, taking into account the quarter, but also the many levers offered by our network and commercial evolution, as well as by efficiencies, we're not changing our 2015-2017 guidance for Brazil organic growth both in revenues and EBITDA terms. Back to Italy, the IPO of Inwit has created the strongest independent Italian mobile telecommunication tower operator open to further opportunities. Related net cash in registered by June 30 from floating 36% of the company was EUR784 million. Another EUR74 million were cashed in in July from exercising the greenshoe option on another 4%. At the consolidated level, this transaction generated a 253 million net worth strengthening. While scoring this positive result, we decided to rebase our position versus a number of charges and risks, including domestic litigation and regulatory-related matters, by posting in our first-half accounts provisions for EUR369 million, comprehensive of all possible adverse economic impacts, which to the best of our current knowledge could originate from these areas. We will cover the subject with more detail during our presentation. At the same time, we have kicked off full speed our real estate rationalization project, which involves a relevant reduction of the number of buildings we are operating, the repurchase of certain high node network premises and the renegotiation of the lease related to the buildings that we will continue to retain. On the overall project, we are aiming to secure savings there from 2018 onwards for more than EUR150 million per year. EBITDA contributions are expected to build up progressively. On full-year 2015, the related positive impact should be of about EUR50 million. As of June 30, the first round of lease renegotiation involved about 500 buildings and secured lower yearly costs. Related IAS 17 debt impact was EUR676 million, without any effect on our liquidity. All in, our adjusted group net financial position at June 30, 2015 was reduced by EUR400 million from the previous quarter to just inside EUR27 billion. We remind you that the Italian 2G license renewal cost of EUR117 million was already fully paid in Q1. Let's now take a closer look to our domestic operations. In second quarter 2015, total domestic revenues rose by about EUR100 million from the last quarter standing above EUR3.7 billion, minus 2 percentage point year-on-year. Overall domestic service revenue further improved their trend to minus 1.7% year-on-year, improving by 7.2 percentage points the performance of the second quarter of 2014. As seen in the first quarter, our domestic operations are confirming to be trending up year-on-year in 2015 much faster than last year. Mobile service revenues have further improved quarter-on-quarter by 1.7 percentage points at minus 2.5% year-on-year. The underlying Italian market environment remains rational and yesterday's news can only improve the situation. TIM continues to lead in quality and innovation on the basis of its outstanding LTE performance. Latest figures on net promoter score show that TIM is leading on consumer mobile with a grade of 34 points versus second player's 28. On yearly, churn further improved to 21.6%, preserving our by far best-in-class position. Calling line percentage is at 85.5%, the highest level ever. The path for further recovery on mobile will continue on the tracks that we have already set. Let's take a snapshot now on fixed, which has been the star performer of this quarter. We see a 20% year-on-year growth in gross adds on consumer; better trends from the business segment on the back of a growing cloud and ICT penetration; structural growth of broadband revenues from better ARPU mix; and mobile-only winbacks, which are starting to build up; and accretive re-pricings on monthly rental fees. All this has delivered a solid minus 1.9% year-on-year for fixed service revenues, up 3.1 percentage points from the first quarter. We’ll give ample comment to domestic top line during the following presentation. So let's now review EBITDA performance. On the back of a growing profitability coming from our operation and of careful control of commercial and industrial costs, our underlying EBITDA has further improved, trending up to minus 2.7% year-on-year from last quarter's minus 4.8%. Reported performance of this quarter is affected mainly by charges and risk provisions for EUR369 million, which given recent developments we now think are appropriate to post. These provisions include domestic litigation, regulatory-related disputes. Underlying procedures are evolving and the company is defending itself at various judiciary levels. Although we prefer competing on the market than courts, we are determined to defend our rights. Our market practices with competitors have always been fair and transparent. And in any case, we have always followed all the indications and directions that have been issued to us by relevant regulatory bodies. Having said that, we are proactively looking to do our share for the building of a better inter-operator environment. Going back to the slide. Further minor adjustment for one-offs on our domestic EBITDA this quarter come from labor-related items. Our priority in this area remains the hiring of up to 4,000 young employees, but these need to be delivered within in a sustainable, reliable related environment. This is why we are deepening our dialog with the unions and the competent governmental bodies on sizing and costs in order to make this plan sustainable over the long term. Let me close this part of our presentation of domestic EBITDA telling you once more that we continue to be committed to the highest degree to stabilizing 2016 domestic EBITDA year-on-year. This performance will be, of course, measured against the underlying EBITDA, which we will achieve for full-year 2015 without the inclusion of one-offs, so the impact of these provisions would be excluded from this target. Now domestic CapEx. On slide seven, I would like to draw your attention on the absolute size of year-to-date network investments. They are above EUR1 billion, up by 42.5% from the first half of 2014. Fiber plus LTE accounted for about 50% of the increase and were worth about EUR500 million, about 80% higher than in the same period last year. The result of this impressive acceleration is shown in the next slide. Driven by the pace of our innovative investments in Italy, our LTE and fiber coverage has now reached more than 83% of the population of 4G and about 37% of households on NGN. As you can see, we are continuing to sell what we build. LTE users are now 25% of our mobile broadband customers, up from 17% in the last quarter, while the base is growing as well. There is some ongoing erosion in dongles in favor of small LTE screens, which indicate for the leeway for structural winbacks for fixed from mobile-only Internet and also through triple and quadruple play offers. Fiber customers are up to over 370,000, now 5% of our overall fixed broadband customer base and obviously with a huge growth potential. Take up per quarter has been accelerating. Increasing fiber penetration on our customer base is our key opportunity for turning around our domestic operations and we are fully pursuing it. So for year-end 2015, we are committed to increase NGN coverage to above 45% of the Italian households. Let us now give a look to the positive evolution of our domestic mobile environment. On mobile, service revenues are up-trend in this quarter involved both consumer and business. Overall bundle adoption increased to 67%, plus 8 percentage points year-on-year. Consumer stability, which was already noticeable in the first quarter, has further improved. Innovation is growing in our revenue pie and its success has been a strong motivator also for our sales forces. Leveraging on the increased penetration of 4G, we were able to shift the main focus of our customer both on consumer and business away from price. So minus 2.5% year-on-year mobile service revenue stands out as another important step in the way of continued progression, while more ARPU increase potential is being open by our evolving data-centric commercial strategy, as we will see on the following slide. Over the past couple of years, we have sharply reduced the number of our mobile offers from about 100 to about a dozen. Our main clusters are, in fact, only six: TIM Young for youth, TIM Special for the middle-aged, TIM 60 plus for seniors, Ethnic for our increasing multinational community, and Smart for the end players. Transparency and simplification has improved our relationship with our customers. LTE has further enabled this process. Its growing adoption is becoming more and more a transformational tool in terms of monetization. Our main offers are continuously adapting to the changing priorities of our clients. On slide number 10, you see how the opening of the 4G experience to our customers that already own LTE handsets, but are still on 3G bundles has still some traction to deliver. The ARPU upside we derive from clients moving from 3G to 4G bundles today ranges around EUR3 to EUR4 per month. Another area of fruitful intervention is enclosing more data and even more voice in the bundle, while excluding SMSs from the flat option. This creates an evolution from full to voice and data packages, prioritizing what our customers really want and what they are willing to pay us for. It is reasonable to expect an ARPU uplift of about EUR2 from this bundle shift. In the last two months, about 100,000 lines were involved by this transition. On top of this content are playing a growing role in value creation through churn reduction and service revenue generation. So, a lot of action going on there. Let's spend now a few minutes on domestic fixed. On slide 11, we updated a waterfall representation of fixed revenues for the second quarter 2015. I would like to draw your attention to the two main points. Broadband revenues, they are growing by 6.8% year-on-year. A better offer mix is driving ARPU and customer base increases, both of which are in positive territory since a number of quarters. ICT and cloud; on the enterprise segment, the effect of our growing cloud and ICT penetration is becoming more and more visible in recent contract renegotiation, where the average revenue per account is holding out well in a premium price context. Last quarter, top line growth in this area has been plus 10.7%. At the same time, we are working with unprecedented energy on curbing fixed net line losses that still took a toll of about 200,000 lines per quarter. We are tackling this issue from a few sides. The common goal of these actions is to deliver to our customer more value from fixed. So let's look at the development of our flatenization and our pay TV open platform projects. Very importantly, while our flatenization campaign is getting its peak, for the moment we are seeing no reduction, no worsening in quarterly fixed net line losses, and this is exactly as planned. If we move to the specific cluster of fixed clients that are being moved to flat monthly billing, as shown in slide 12, we note that while monthly churn ramped up in May under the effect of the loud media and competitor reaction, our continued strong commitment to carrying and explain step-by-step to our clients all what was being offered to them proved once more to their willing. Related churn was down again in June to where it was in average in 2014 before the launch of our flatenization plan. In addition to this, opt-out percentage remains well below our expectation at about 5%. We, therefore, have the performance cushion that gives us comfort in remaining within our overall opt-out estimate. We will keep you updated on this. A growing pay TV adoption from our customer base is building up. While TIM has secured important agreements also with Netflix and Mediaset Premium, on TIMvision we plan to reach 550,000 video clients by the end of this year. Slide 13 tells us that a large last part of our video customers come from our ADSL base that upgrades to fiber in the process. Good news for the ARPU. But we are interestingly seeing that one out of five video clients are coming from outside our broadband base. All this is supporting our end play offer growth, leading to more fixed broadband clients and overall churn. This market condition remains in line with what we are seeing. With the support of the many sides of our action, fixed line losses should start reducing in the fourth quarter this year, securing further structural improvement to our overall domestic business. On Brazil, well, you already had a lot of information from Wednesday TIM Participacoes’ earnings call. What we see there is more data and postpaid fighting against the erosion on traditional. On one side, mobile service revenues have decreased by 5.7% year-on-year in the second quarter 2015 due to a 33% year-on-year MTR cut and to volume declines in voice and SMS outweighing data growth. On the other, mobile generated revenues increased again year-on-year, showing a plus 1.1% performance in the second quarter, supported by continuous growth in innovative services that this quarter scored plus 44% year-on-year. We are pushing ahead on our important network investments throughout Brazil to support a solid position on data. About 160 cities are now covered with our mobile broadband project. Preserving our big middle approach, we will also devote more and more attention to postpaid value-oriented offers. Piergiorgio? On to Piergiorgio now for an overview on costs, cash flow and contribution from the ongoing projects. Piergiorgio, the floor is yours.

Thank you, Marco. Good morning, ladies and gentlemen. Let me start from domestic OpEx efficiency. In the upper part of slide 16, we represent domestic OpEx divided in three main clusters. We focus on the market and process-driven ones on which we will roll out the efficiency plan we have already outlined to you in the February when we presented our 2015-2017 plan. In these areas, we have registered in the first half accumulated savings contribution of EUR17 million. Underlying progression is proceeding as planned as the goal in this first half of the year was to keep industrial and commercial costs under control against growing innovative investment and related marketing effort. As expected, in the second half, cash OpEx savings of about EUR50 million will kick in from the real estate, as Marco told you already in the beginning of our presentation. Roughly another EUR50 million in savings will come from the following areas. 10 million from the lower professional and consulting services; EUR20 million from network and IT operating costs benefiting also from our NGN expansion; 20 million coming from personnel-related indirect elements, like fringe benefits, company cars, travel and other; higher energy cost for about EUR10 million will be offset by further cuts in the industrial front. This will ensure our delivery of our efficiency target for the year. Let's take a closer look now to our real estate plan. We have been working for some while on crafting a large and transformational real estate project to both deliver relevant savings, but also relevant long-term industrial value deliveries. We decided to take on this project fully involving our internal expertise and involving a granular intervention on the size and the quality of our real estate portfolio. As you can see from slide 17, we today operate in about 10,700 buildings, of which about 6,000 are property of third parties. This represents our field of intervention, which calls for letting go a number of premises made redundant by technological evolution; totally reviewing office and industrial layout; returning to full ownership of certain core properties where industrial reason have already required relevant investment we’ll show in the future; buying and developing new headquarters in Rome, thus concentrating our presence from too many different locations. Not an easy task, as you can imagine, but we have set out our master plan and pulled the trigger on it earlier this year. We are playing with big numbers. Slide 17 summarizes them and depicting number of buildings involved and is showing three main variables. Yearly OpEx cash savings building up from this year's EUR50 million until reaching a running level of above EUR150 million per year from 2018-2019 onwards; progressive IAS 17 driven debt reclassification of lease growing in face value from first half 2015 about EUR700 million to a maximum level of about EUR2 billion in 2020; and pre-tax positive contribution accreting progressively to about EUR80 million per year running from 2018-2019 onwards. After this comprehensive and new description, let's move to operating free cash flow. On slide 18, we provide you the picture of our first half operating free cash flow performance, which at domestic level have remained stable year-on-year at EUR1.2 billion. In Brazil, it trended lower by about EUR200 million, mainly due a to harder comparison with first half 2014 when positive impacts from an active long-term indefeasible right of use was registered for about EUR60 million equivalent and a cash impact of about EUR100 million from higher CapEx in the first quarter 2015 versus the same period last year. Let's take a look at net income and debt, slide 19. Let us put now into a flow perspective the various net income contribution deriving from recurring operational performance together with the economic impact of our position, the year-to-date effect of our bond buybacks of our mandatory convertible and of our Brazilian tower sale. Once we adjust our reported first half income of EUR29 million for all these other elements, our normalized net income figure increases to more than EUR650 million. On the lower part of the slide, we move to year-to-date net debt evolution. We have the non-cash impact deriving from the application of IAS 17 to the real estate efficiency plan and the Brazil tower transaction, as well as those related to capital markets financial effects. We also have a negative cash flow effect coming from Argentina, which as you know we account as discontinued operation, deriving mainly from 4G license disbursements. Excluding all these impacts, debt reduction in the first half versus year-end 2014 figure would have been of about EUR500 million. So if you look underneath the surface of first half net income and net debt trends, we acknowledge that even if the net accounting impact of buybacks, equity-link insurance, real estate transformation and other special projects has lower reported net profit and debt performance in this first half of the year, we have secured through them real and relevant value for the company. We complete the second quarter 2015 review summarizing on slide 20 the successful closing of the IPO of Inwit, an important step in the valorization of our Italian tower portfolio, which still has more to give to the group and to its new shareholders. Net proceeds to date were about EUR860 million, generating a group level equity positive contribution of more than 250 million, as Marco reminded us in the beginning of this presentation. We are very proud of this result. The combination of the asset quality of the company, its expert management, the opportunities offered by further decommissioning and property renegotiation and future growth options open to more upside. Thank you very much for your attention, and back to Marco now for his final comments.

Thank you, Piergiorgio. Time to wrap up. Let's start from the results. Italy has delivered one small material step towards our planned recovery fully in line with our expectations. In-market consolidation on mobile will offer its support to an already much improved context. Our Brazilian operations continue to retain growth potential. We will be keeping the course there looking well beyond a really challenging quarter. Innovative investments are a priority in both of our two main countries, where although from different competitive positions we are uniquely positioned to monetize from them. And we trust we will contribute to ensure continued positive outlook for our group through a constructive approach with regulators and institutions, while strong focus on operations and efficiency will allow us to deliver our key targets. Thank you very much for this fairly long presentation, and back to Alex.

Thank you, Marco. We can now begin our Q&A session. As usual, to ensure maximum participation, I would kindly ask you to limit questions to only one per participant. We can start now, please.

Ladies and gentlemen, the Q&A session is now open. [Operator Instructions] First question comes from Ms. Carola Bardelli from Deutsche Bank. Ms. Bardelli, please.

Yes, good morning and congratulations on the improvement on the domestic trends. Just on the 14.5 billion CapEx target over the three-year period, I was wondering if what we saw decided yesterday by the government on public grants being 2.2 billion over the next couple of years, and 7 billion by 2020 would allow us to consider a lower CapEx amount in net terms. And given it's a debt-related question, remaining on the debt, maybe a little bit of help on how much we should consider as one-off impact on debt in H2 coming from the real estate, so the 700 million on increase due to the real estate net of Inwit and the Brazilian towers, considering also the leasing effect, et cetera. Thank you very much.

Thank you, Carola. So the first question is going to be answered by Marco, the second by Piergiorgio.

Thank you, Carola. Well, you are referring to the governmental plan that has been announced yesterday. I think that our commitment on investments is there. As you know, the funds have been made available for white areas, and for areas with market failure. As we demonstrated in the recent time with the Eurocell project, we have been the ones who decided to invest and this is something that will deliver us a good value. So we still don't know the details of the public intervention, but we are very much in favor of this intervention that combines public and private. This will not reduce our commitment to investment, so the money we get from the government are good money and we will invest the same amount we said before. And I think that we have - if the results on the fiber take up are the ones we are seeing now, I won't exclude that 2018 we will continue to push very strong as we did in the plan for 2015-2017. Piergiorgio?

Thank you, Marco. In terms of non-cash items impact on the second half 2015, the Brazilian tower transaction, we are getting a second closing in the second part of the year. And the real estate project, it could have an impact of 0.8 billion on net financial position. Let me maybe broaden a little bit the answer. We are expecting to have further renegotiations on real estate project of additional 300 contracts. And this will have an impact, as I said, on out of 0.8 billion of 0.7 billion, which explains more or less of the amounts of the IAS 17 impact on net financial position. On the Brazilian tower, as I said, we are targeting a second closing in the second half. This potential closing, if executed, and of course we are committed to do it, will have a net impact on net financial position positive of 100 million, out of which 200 million always in euro positive deriving from the cash impact of the transaction and 0.1 billion negative for the IAS 17 impact, which concludes to a net impact of 0.1 billion positive with a reduction of net financial position. In terms of, let’s say, other extraordinary transactions similar to the one discussed, I think it's also worth mentioning the additional buyback executed in July that will have an additional - a negative impact on net financial position of 0.2 billion. As you know, the accounting treatment, since we are not doing exchange offers on buybacks, provides a negative impact in this year and, of course, this will translate an accumulated positive impact over the next year, given the savings on the coupon of the bond buyback. And that's it. So I think if it is not clear, we can maybe discuss offline.

Yeah. And then 50 million from Inwit is still left, right, from the greenshoe, if I'm not mistaken?

Yeah, of course - yeah, this is, of course - we have 74 million of the greenshoe of Inwit, which comes to a total cash proceeds of 860 million, as discussed in the call.

Thank you very much.

Thank you.

Thank you, Carola. Next question, please.

Next comes from Mr. Nick Brown from Goldman Sachs. Mr. Brown, please.

Thanks. Litigation charges are significantly higher than last quarter. Are there any more outstanding claims against which you may have to make further provisions, or pending court cases we should be aware of? Why should we believe this isn't going to be an ongoing cost for the business in the next few quarters? And can you clarify that what you're saying is a target to stabilize EBITDA next year excludes all one-off charges in 2015? So your guidance is for underlying EBITDA to stabilize. Thanks.

Marco speaking. The major amount you see in these charges and one-offs is due to previous fairly quite some time ago litigations due to an anti-trust commission positioning adverse to Telecom Italia. I think that through our - if you go one by one, there are a certain number of litigation. I would say that the Italian environment is the most active in terms of litigations all across Europe. When I look at Germany or France or Spain, I don't see such a high level of litigations. So my position is that as - being the largest player in the fixed market is extremely important to set a scenario in which this level of litigation goes down. And in order to have a better environment, we need to settle old litigation that continue to create a negative relation, a negative intra-operator relation. So as far as we know, taking into consideration all the disputes that we have on the table today, we decided to post such a big amount, which I recognize is big. And it is big exactly because of what we want to do is to create the conditions in order to have for the future an environment with less litigation among operators. So the list is fairly long, there are big ones, there are small ones. So my personal wish is to create big and smalls and to have a brand-new environment. As I said in my speech, since we consider ourselves managers fairly oriented to fairness, this is a one-off. So it cannot be considered part of our stabilization. The stabilization has to be considering the underlying EBITDA without these exceptionals. Exceptionals are exceptionals. We cannot consider I stabilize the results including them; its exception and they're out. Thank you.

Thank you. Thanks.

If this is all right for you, next question.

Next comes from Mr. George Ierodiaconou from Citi. Mr. Ierodiaconou, please.

Hi, thanks for taking the question. I just wanted to, perhaps, focus a bit on the second-half outlook. I think you have made certain changes on your mobile - the duration of the month, in a way. Can you please give us an idea of what the impact will be on your monthly revenues? Are there [indiscernible] revenues exposed to these? Or, perhaps, how many customers who fall under this category? And whether there will be any concerns around the anti-trust authorities getting involved. And if I could push you a bit further, given the cost savings that you have for the second half around real estate and around the other 50 million that you are planning, why wouldn't you expect to stabilize EBITDA later this year, rather than next year? Thanks.

Okay. You nicely said - referred to in-market consolidation. I think that the environment is already becoming much more rational, I would say, especially on the consumer segment. To be honest, on the business segment we see still some signals of some operators willing to invest in ARPU in order to get some market share. But I think that the market can become only more rational. As everybody knows, Q3 will have some comparability factor with 2014, but the trend is there, the trend is solid. As we said, we are now in the direction of the parity and this is something that is going to happen. You asked me what I do think will be the anti-trust approach. Well, I think that the anti-trust approach has been fairly, I would say, rational in other markets. If I look at Germany, if I look at - well, Ireland is not as big as Germany, but - so I think that it will take some time. I would be surprised if it will take less than 8, 9, even 12 months. But I don't see risks of failure in the process. Of course, there are some interesting points that should be evaluated, for example, frequency concentration. The frequency concentration will be an important item that the regulators will have to discipline. There is an excess of frequencies in the potential combined entity that have to be discussed with the competent authorities and, of course, even in this case there are several alternatives on how to proceed. But honestly, I think that the Italian market is doing well and solid. For the trending up of the EBITDA and the movement to parity, I think that it's realistic to say that we are - our target is 2016 and I'll tell you why. We expected from the Jobs Act some measures that could deliver to us some interesting opportunities already in 2015 that probably will be postponed to 2016. Now as I said, we are constructively discussing with unions and with the government, and the Minister of Labor, and the Minister of Economic Development in order to find a solution even in the 2015 environment. But what we see is that the discussion are on today, which means that every month that passes it's a month less in order to make something smart. I'm positive for 2016 even in the labor environment, but for the 2015 I would say that it should be overoptimistic to target the parity already this year.

Okay, Thanks.

Thank you, Georgios. Next question now.

Next comes from Ms. Micaela Ferruta from Intermonte. Ms. Ferruta, please.

Yes, Micaela Ferruta from Intermonte. First of all, congratulations, also on my side, on these results, especially on domestic fixed and on the business segment, if I may. But I'd like to ask you something as a follow-up on the questions about the non-recurring provisions on litigations, which are recurring somehow. I was intrigued by the working for regulatory peace phrase in your presentation, and I would like to ask you if you are thinking, in any form, to reconsider the reorganization of the access network, as was reported by the press, or if you can rule out this possibility; or as well, what you mean by working for regulatory peace. Thanks.

Thank you, Micaela. It's a matter where speculations are always on, so let me clarify. And I thank you for this question because you gave me the opportunity to clarify. We have been in the mood of network separation for quite some time. At the beginning, it was voluntary; then somebody tried to push us; and then somewhere in Europe there is a new wave of network separation desire. We are not targeting a network separation. What is fair to say is that we spend a lot of time discussing about regulatory models, it should be opt-in, it should be opt-down. It has to be - what is the preferred way to give - to deliver the service? And I think that finally what the alternative operator wants from us is good performances. So what we wanted to do is to sit very constructively with the regulator and with the OLO to set a list of KPIs, both on the delivery process and assurance process, to say what is important for the OLO, what is important for the quality of treatment. To define processes that have to be lean and simple and equal to contain necessary investments and to deliver what big customers like the OLO are for us have to be fully satisfied with the quality. It doesn't require any network separation, it requires only to be very clear, better organized, better systems, better processes, and clear KPIs. So what we want to define with the regulators is in a short term - so what we want to do is in a short term to define what is the goal and to settle the disputes in order to set up a new field for further viable solutions. Is it clear, Micaela?

Yes. Is there a timeline?

The sooner the better. I think that we should target a clear definition well before the year-end, I would say well before the year-end.

Perfect. Thank you.

Thank you very much, Micaela. Next question, please.

Next comes from Mr. Singh Mandeep from Redburn. Mr. Singh, please.

Okay, thank you. I'm just going to be a bit cheeky and ask you two, hopefully, quick questions. The first one is, have you had any meetings or discussions with your new largest shareholder? And if you can give us any broad points on the things you may have discussed. I know you may not be able to be too specific. And the second question I have is really around the savers share class. Now that the controlling shareholder, Telco SpA, is no longer there, do you think it's an appropriate time to think about optimizing your capital structure? Thank you very much.

Thank you much. I met Mr. de Puyfontaine, together with the Chairman; more or less it was, if I remember well, three weeks ago or something like that. We had another discussion. To be true, Mr. de Puyfontaine came mostly to visit Italian institutions. And we had so a first discussion; we didn't go into very much details. Keep in mind that we already discussed with them one year ago. Mr. de Puyfontaine was already there, and so what Telecom Italia is something they know fairly well. I don't know if you have been informed by the newspaper, yesterday, Mr. Bollore was in Italy to meet our Prime Minister. We had no meeting with him. Even if we think that, as far as we know, people said that the discussion was very constructive. Finally, shareholders are always welcome. So I think that we have to consider that large investors mean that there is value in our company. Savers, well, as you saw in Q2, we had a little time to rest. The IPO of Inwit, the active liability management, et cetera, took an important quantity of time of our Finance Department guys. I think they did very well. We discussed this topic many, many times if saving conversion should be appropriate or not. It has not been discussed in the Board yet. Even in the Board yesterday, we did not discuss the topic. I think that, of course, this topic should be addressed by the Board in the second half, but since now we haven't positioned yet.

Can I just follow up, briefly, on that final question, please?

Sure.

Previously in our meetings, you said that you didn't think it made sense until the ordinary shares were paying a dividend. Is that still your thinking? Or do you think this is something you would consider in the second half, even if the ordinary shares are not paying a dividend? Thank you.

Look, if you look across Europe who has a big portion of savings shares, it's now really limited number of companies. So if you ask me - if your question is, is it something that has to be considered a more than equity split, I would answer you no. Then if you ask me when and how it could be appropriate, I think that this is something that has to be analyzed. And since several shareholders have pointed out this topic, it's something that the Board will take into maximum consideration, of course, without now making any link to dividend or guidance. I think that dividend is not really the point.

Thank you very much.

Thank you very much, Mandeep. Next question, please.

Next question comes from Mr. Luigi Minerva from HSBC. Mr. Minerva, please.

Yes, good morning, and thanks for taking my questions. Firstly, on the AGCOM proposed VULA wholesale tariffs, I was wondering if you can tell us your views on both the levels proposed and also the methodology used. AGCOM seems to be still keen to use their cost model to fetch those tariffs, which seems to go against the European Commission principles, so your opinion on that would be welcome. And if I may squeeze in another one, just an update on the Enel pilot, which you were supposed to run over the summer. Thank you.

Yes, sure. VULA, well, it's a very intriguing question. I like it very much. Probably, I can surprise you a little bit. I think that the decrease of VULA will make a more rational environment for investment. So the VULA price that the commission is setting will make investor or potential investor think well if they can have a better return buying VULA from us, because we will invest, we will invest for sure or to buy an alternative network. Now you heard yesterday our Prime Minister saying, the money is there, now what we want is operator investing. Let me say again, we are there, we will be there, we will invest. With this VULA price, I'm not that sure that it would be convenient for many other operators to replicate further networks because the return on investment can be comparable, much more comparable with a wholesale VULA offer, which goes again in the direction of we need to have a wholesale-quiet environment. Because if we wanted to serve our clients named alternative operators, with VULA we have to serve them well. So this is - for me I think that the VULA price setting is very interesting and it will make more rational environment of the fixed investors. Enel, we said very clearly that we are interested. We are interested not only to wholesale, but also to whole buy. So if somebody makes investment and puts fiber, and they can do it easily and cheaper, et cetera, we are extremely interested. We have already communicated 100 cities that we wanted to create in FTTH, so I think that it could be very much interesting if Enel, or whoever wants to serve us with infrastructures, it could be interesting to start making other offers. If they make us offers, we will evaluate immediately, and we can eventually start immediately. Is it okay?

Yes, thank you. Thanks a lot.

Thank you very much.

Thank you, Luigi. Next question, please.

Next come from Mr. Paul Marsch from Berenberg. Mr. Marsch, please.

Yeah, thank you. I wonder if I can be cheeky, as well, and maybe squeeze two questions in. I just wonder, what was actually new out of the government announcement yesterday? Because I was under the impression there's been talk of a government contribution of 6 billion or 7 billion for some time now, so wasn't this just a confirmation? Or was there something actually new out of the announcement yesterday? And then secondly, it's just a point of clarification on your underlying EBITDA. I wonder if you could actually tell us what are the labor cost discontinuities? The 18 million in the quarter, what actually are they? Is that not just higher labor cost from increased salaries? And are you still expecting the pace of domestic EBITDA decline to improve again into Q3, and again into Q4, as you outlined in your first quarter presentation? Thank you.

Thank you very much, Paul. So Marco is going to take the first one and Piergiorgio the second one on labor.

Well, in general, the big numbers are just confirmed. So the government said that big numbers were 7 billion, blah, blah, and so it's a confirmation. But there is a big news, which is 2.2 billion out of the 7 billion are going to be available in quite a short time. And it will be referred to the less controversial part of them, which are white areas, where all the regions are loudly asking to do the same we did in the south. In the south, we have been able to make available funds from the European Union. And we, as Telecom Italia, we have been the ones who won all the auctions that have been made for those funds. So we announced yesterday a plan of - the completion of the plan of 750 million only for the regions of the south. So the news, and the very good part is that number one, money is there; number two, it will be for clusters where it is very safe and so we don't expect any negative feedback from Europe, or from whoever wants to slow it down. So we will not expect any and slowdown. And we are interested. So a lot of good news.

Great. Thank you.

Yeah. Thank you, Marco. On the second part, in the labor cost, in 2015 we have two different, let's say, non-recurring costs. The first one is the employee reduction plan for 24 million, which is related to the voluntary retirement of employees. This is calculated only considering the executives. And this is provided by the Italian law, where when you have a certain executive that has reached retirement age and/or certain requirements the company could implement a procedure in order to look for voluntary/early retirement. This accounts for 24 million accounted in the first half and that we have a potential financial disbursement in the future, as soon as this voluntary retirement becomes effective. On the underlying, between the - let's say, we have 18 million of labor cost discontinuities. These are, let's say, organic costs, and are much more related to a different comparison between this quarter and the same quarter in 2014, particularly as related to two main items. The first one is the labor contract. Last year, we have signed a new labor contract which provides in February and October, if I remember well, certain increases in the wage system. And, of course, part of these discontinuities is basically a comparison between the two contracts, considering as if we are considering the same labor contract. And the second extraordinary of non-recurring item is related to the stock option plan, which, of course, has an impact on labor cost that was not included in 2014 numbers.

That's very clear. Thank you very much.

Thank you.

Thank you. Next question, please.

Next come from Mr. Giles Thorne from Jefferies. Mr. Thorne, please.

Thank you. I just wanted to come back to the topic of wholesale fiber, and specifically the contingent style deal that you've struck in the past with various parties. It would just be interesting to get an update on how, perhaps, new agreements have been signed, or whether the scope of existing agreements has been expanded, and whether some of the litigation that's currently ongoing is impacting any of those commercial terms. Thanks.

Yes. The so-called open fiber is in place. Today, we have more or less - let me say more or less 100,000 customers on open fiber contracts. There is one OLO who is particularly active on this, so the almost 100,000 has been used, more than any other, by one specific OLO. But we signed at least three big contracts with large OLOs, and what is interesting is that now also the smaller ones are looking with interest. The real question now is, with the evolution of the VULA price, is this contingent model-like scheme is, or will be something interesting for the future? Because I see that the decrease in VULA price requires less and less open fiber approach. But in any case, of course, we are extremely open-minded also to enlarge with the ones who are using it in the moment.

Okay. Thanks very much.

Thank you.

We are now moving on to the final question.

The last question come from Mr. James Ratzer from New Street Research. Mr. Ratzer, please.

Yes, thank you very much. Quick questions, please. Just going back to the regulatory - sorry, litigation charge you took of EUR369 million, can I just confirm, does this reflect that you have reached out-of-court settlements now with all of the parties, and that's how you calculated that figure? You suggested you wanted to have a more kind of benign environment between the operators going forward? Or is there a chance that figure could go up if those aren't settled? I believe they were trying to reach up to EUR4 billion of potential claims. And can I talk about the guidance you've given as well, please, on cost cutting in the domestic business, because you've given some new number today around lease cash savings. Is that included in your previous guidance to take EUR300 million out of OpEx next year, and a further 100 million again in 2017? Thank you.

Yes. So the first question will be answered by Marco Patuano, the second by Piergiorgio Peluso.

Well, you are right when you say that there is a quite an interesting bid-ask difference. So our nice competitors have asked for something like 4 billion, which I don't want to use words that could have been inappropriate, but I think that in the reality what's happened in previous cases is that the amount be settled, the petit [indiscernible] so the request was a tiny percentage of the original request. I ask myself every time why we should ask a trillion on a gazillion in order to have a few millions. But anyway, if it is - if this is a litigation style, you understand why I'm even more convinced that we have to litigate less, because we just create uncertainty. So is it 4 billion or some tens of millions? So the difference is so wide. Then, when you see the table and start negotiating there is a sort of role game in which everybody tried to defend something we really do not believe. But just to give you is in the past we settled for something that was in the region of a single-digit amount, of a low single-digit amount. There is my lawyer who says low single-digit amount of the request. So why don't we litigate less and we do invest more. There is a lot of fiber to do, so I want to make more fiber. And, Piergiorgio, the second?

Can I just - just to quickly - just to confirm on that, all those outstanding claims have now been settled? Is that correct?

We settled something in the first half that has already been accounted. With some operators we already reached the agreement we already settled. And now, what we are making the provision is in order to - this is our best estimate in what is the potential total charge of what is currently in our hands.

Okay.

Thank you, Marco. Yes, of course, the impact of our real estate project was included in the plan presented to the financial community in February. So the impact, both on net financial position and on cash savings, is part of the objective on process-driven efficiency plan committed to the market. Of course, in February we were considering a certain evolution of this project. Honestly, on the real estate, we are progressing more quickly than we had expected. And we have already commented the impact on the financial position in the second half. But, yes, the answer is yes, it is, of course, included in the overall target.

Great. Thank you very much.

Thank you.

So thanks everybody for attending our call. And we wish you a very good afternoon.

Ladies and gentlemen, the conference is over. Thank you for calling Telecom Italia.