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Telecom Italia's CEO Discusses Q3 2011 Results - Earnings Call Transcript

In the third quarter, year-on-year performance turned positive, as we continued to benefit from TIM Brazil and Telecom Argentina’s contribution, as well as from ongoing operational efficiency at domestic level.

We will focus later on net income performance. The nine-month Group operating free cash flow was up EUR684 million. That is equivalent to 17.8% year-on-year, excluding the Sparkle settlement of EUR389 million paid out in the third quarter of 2010. Net debt visibly decreased from year end 2010 by EUR1.52 billion. In the last quarter of 2011, we will book the cost of the spectrum auction for an amount of EUR1.2 billion.

During the fourth quarter, we will also have a cash-out of around EUR700 million for the AES Atimus acquisition, which as we already anticipated, will have no impact on the Group net financial position, due to the better overall Group performance and to the free float contribution of TIM Participações recent capital increase.

In this framework, given the third quarter results, I will further comment on – we can confirm our main targets for 2011, including the pre-auction debt target of EUR29.5 billion for the full year. Including the auction of course, the full debt target is now EUR30.7 billion.

Operating free cash flow generation in the first nine months of 2011 totaled EUR4.524 million. Net cash flow was EUR2.846 billion, a 45.3% increase compared with the same period of last year. This important nine month net cash generation continues to allow the group to strengthen the core business within its geographic footprint and to reduce debt without deviating from our shareholders remuneration policy.

Investing in our core business, of course, remains a priority. Year-to-date, CapEx totaled EUR3.19 billion, up 8.6% year-on-year. In the first nine months of 2011, we increased our economic interest in Telecom Argentina from 18.3% to 21.1%. This gradual approach does not and will not make us deviate from our deleveraging priorities. Also, thanks to divestments from non-core assets such as EtecSA or Loquendo. More recently, at the end of the quarter, we raised this percentage to 22.6% with a further disbursement of about EUR50 million.

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