New Players, Nerw Services: New Wholesale Challenges

Telecom Italia Sparkle: Proprietary & Confidential Information

Francesco ArmatoTI Sparkle, Senior Vice President, South and Central

America RegionCEO, Latin American Nautilus

TI SPARKLE

New Players, New Services: New Wholesale Challenges

Telecom Italia Sparkle: Proprietary & Confidential Information2

AGENDA

Company Background► Telecom Italia International

TI Sparkle: International Core Network Operator► Network► Credentials► Company Key Figures► Presence Worldwide

New Players, New Services, New products► New customer needs► New scenario► Evolution of the fixed and mobile retail network offers► New drivers: the post convergence► New challenges

TI Sparkle Challenge / Our Answer

BACKGROUND


Telecom Italia: a Top Company leader in ICT

TOP ICT company leader in innovation

Operations in Europe, South America and the Mediterranean

Over 27 million fixed lines in Italy and internationally

57.8 million mobile lines, 32.4 of which in Italy

8.7 million broadband access in Europe, 6.8 of which in Italy

Number of employees: 83.209

Revenues: 31.3 Billion Euros (29.9 in 2005)

EBITDA: 12.9 Billion Euros (12.5 in 2005)

Industrial Investments: 5.1 Billion Euros ( 5.2 in 2005)Results at December 31, 2006

Key areas of growth come from International activities


TELECOM ITALIA INTERNATIONAL FOOTPRINT

LANautilus Backbone

Med Nautilus Backbone

Pan European Backbone

ETECSA (Cuba)

Entel Bolivia

Telecom Argentina

TIM Brasil

Avea (Turkey)*

Hansenet (Germany)

BBNed (NL)

TI France

Key operations in European Broadband (France, Germany and NL), Brazilian mobile and

International Services (TI Sparkle)

Global Services Offering

* Asset held for sale

BACKGROUND


TELECOM ITALIA SPARKLE

Wholly owned subsidiary of Telecom Italia with the objective of developing TI Group’s international business.

Full international service provider, offering a complete range of solutions spanning Voice, IP, Bandwidth and Managed Data services for fixed-line and mobile operators, ISPs and multinational corporations.

TIS, through its Consulting Services Team, makes available to international operators Telecom Italia technological & commercial Know-How and ability to innovate

TIS means networks, technological platforms and a worldwide commercial presence, in order to provide the best cost, top performance services to the main players of the international telecommunications market.

INTERNATIONAL CORE NETWORK OPERATOR


Leading global service provider, offering Voice, IP and Data solutions for fixed-line and mobile operators, ISPs and multinational corporations (MNCs)

Wholly owned subsidiary of Telecom Italia created in 2003 with the objective of developing the international wholesale and MNCs business and of supporting TI Group business units for the provisioning of international Services

TI Sparkle overview

Headcount

TI Sparkle

Subsidiaries

~880

~220

Main Offices abroad 21

Network coverage

# Cities

# POPs (incl. Telehouses, Datacenters, proprietary facilities)

~ 45

~ 110

Virtual PoPs through partners

> 1000

Company Data

189EBIT14%% margin277EBITDA

2,044Revenues2005(€M)

(Minutes Bn)13.7

Voice traffic(Gbps)

488IP/Data traffic

(# Circuits)2.248MNCs

214

13%307

2,2962006

13,7

824

2.810

Key Figures

104

15%147

1,0041H07

7,8

955

3.020

128

12%214

1,8012004

12.9

158

1.625


11,5%10,6%

10,0%

8,3%

5,3%4,7%

11,9%

Europe – Market share on International WholesaleEurope – Market share on International Wholesale

Source: OVUM 2005 (based on 2004 revenues)

Top 1

Top 1

Wholesale Business: Top 1 in Europe (Ovum), with +300.000 Km fiber networks in 4 continents

Wholesale Mobile: Leader in signaling, roaming and hubbing services:

+ 475 GSM Roaming Agreements, + 240 GPRS Roaming Agreements, + 50 3G Roaming Agreements + 150 CAMEL Roaming Agreements + 165 SMS Interworking Agreements, + 175 MMS Hub destinations, Signalling connectivity to +700 MNOs

Wholesale Voice: Top 1 in Europe (Ovum) and Top 3 worldwide (Telegeography), +500 direct voice I/C (+80 with MNOs)

Wholesale IP&Data: “Seabone” among the fastest IP backbone in the world and ranked TOP 10 worldwide, 2° in Europe, 1° in the Mediterranean (Renesys)

Multinational Customers services: Top 1 in Italy (SIRMI) and emerging player in the global market

OUR CREDENTIALS

OUR CREDENTIALS


Europe: TI Sparkle positioning in the Market

Alice - the leading European BB brand outside domestic market thanks to a

European plug & play integrated triple-play approach

Seabone is already the unique provider for the

fastest growing Broadband European

community

France

TI France: 4th player

~ 0.85M BB customers Italy

Germany:

Hansenet+AOL: 3rd player

~ 2.2M BB customers

(2nd considering NB + BB)

The Netherlands

BBNED: 1s t challenger on wholesale ~ 0.2M BB customers

TI: Market leader

~ 7.3M BB customers (Retail + Wholesale)

June 2007


TI Sparkle Cross Border Network

55.000 km/fibre Pan European Backbone

► 30.000 km Latin American Nautilus

► 8.000 km MEDiterranean Nautilus ► 3.500 km Italian Network► 375.000 km submarines cables

► Optical fibre network with DWDM technology ► Integrated Architecture for Voice/IP/Multimedia

services. Complete decommissioning of TDM switches achieved in Nov. ‘05

► Scalable POP architecture► Automatic protection on fibre / equipment► Surveillance and management 24h x7d basis► 2 Network Operation Centres + 2 Regional NOC

Palo Alto

Americas Europe Asia

Mediterranean

LIMA

Ashburn

Singapore

Il Cairo

Athens

Warsaw

Prague

Chicago

AtlantaSMW-3, 4

LosAngelesDallas

12 new IP/MBW/MNCs

PoPs in 2007


TIS Latin American Backbone

SAC Cable System • Cable length: 20,000 km in a

ring topology• Capacity: 1 fiber pair per ring,

32 lambda @ 10 Gbps per fibre pair

MAC Cable System• Cable length: 10,000 km ring

topology• Capacity: 16 lambda @ 10 Gbps

Rio de Janeiro

New York

Miami

St. Croix

Fortaleza

Buenos Aires

La Paz

Santiago

Lurìn

Panama City

Sao Paulo

Caracas

MACMAC

SACSACSACSAC

Lima

TIS SUBMARINE CABLE SYSTEMS & BACKBONE

TIS PoPLANDING STATION

Mexico City

2007 Achievements• RFS additional 20 Gbit/s

capacity• Implementation of additional

60 Gbit/s started in June ‘07• Implementation of core/edge

architecture for the S. Paolo, Buenos Aires, Santiago del Chile PoPs

Telecom Italia Sparkle: Proprietary & Confidential Information

Voice

Data & IP

Mobile

Corporate Networks

Consulting

TOP 2 in Europe and TOP 4 for worldwide traffic collected on a pure international wholesale basis (home market excluded) - Telegeography

Leading positioning on Signaling, Roaming and Hubbing solutions (+450 GSM Roaming Agreements, Signaling to 600 MNOs)

TOP 1 in Italy (SIRMI) and emerging player on global market. Business launched in 2003. Key customers: Shell, AFP, EU Central Banks

Focus on strategic regions, leveraging on wide TI Group know-how and skills

“Seabone” ranked TOP1 in the Mediterranean, TOP3 in Europe, TOP 14 worldwide – Renesys (Sept 2007)

TI Sparkle market positioning


New Players, New Services, New Products

The retailers set the pace for the wholesalers

The new players and products come from the outskirts of the telecommunications market:

► Entertainment (music, TV and film contents)► Consumer electronics

Telecom Italia as a leading TLC operator is constantly looking for new areas of growth developing products to integrate in its offer the latest market demands

Telecom Italia’s retail cutting-edge product development define TI Sparkle wholesale product challenges.

Sparkle, as the wholly owned subsidiary of Telecom Italia with the objective of developing TI Group’s international business, has the challenge to develop a product mix to extend the services abroad


New Players, New Services, New products: New Customer Needs

The evolution of the user profile

Growth of VAS Mobile drived by Person to Person applications (SMS-MMS)

Use of non TLS applications on the mobile terminal (Radio, Photo, MP3 player…) Growth of broadband penetration pushed by “all over IP” services:

”VoIP Only Players”(Skype-like) and Web content players (Google Talk, …) not only in consumer but also in corporate market (security and equiment cost barriers are already broken)

The video component appears and it will transform the TLC operator in a “Content aggregator” sooner or later. Not to substitute the content providers but to facilitate the distribution of the contents through all possible channels.

Gaming and on-line music growth thanks to the change from “off-line media devices” to “broadband-enabled media devices”.

Phone alternative use

Internet Use enrichment

In this context the customer is more sensible to easyness of use, interoperability and QoS


New Players, New Services, New products: New Scenario

Fixed and Mobile Netwoek operators are already looking for new opportunities to grow outside the traditional TLC services:

IPTV, Entertainment, Film, Concerts, and also ITC applications for Small & Medium Corps.

The barriers between the differnt TLC networks have dissapear thanks to solutions using high integration technologies.

Migration of voice and data from traditional networks to a unique IP network layer.

Introduction of “FixedWireless”technologies ( WiFi, WiMax, WiBro…)

Evolution towards service platforms base on homogeneous standards (IMS)

Consolidation of TLC terminals with consumer electronics functionalities (photo, music, TV…)


Evolution of Mobile and Fixed Network Retail Offers

Evolution of Fixed Network Offer:

Triple Play, the digital convergence of voice, data and TV

Broadband & IPTV► Evolution of ADSL to ADSL2+, speeds up web surfing with downlinks up to 20Mbps plus a

enhanced quality for IPTV.► TI launched IPTV service Alice Home TV” (two years ago - december 2005) “, now works

on adding more contents every day: not only live contents (concertss, realityshows) but also TV Channels (Cinema channles and public broadcasters)

Mobility also at home► TI already offers the possibility to move in a broadband wired and wireless multiterminal

environment► Alice Home TV gives access to voice & data networks and also to contents and VAS

services


Evolution of Movile and Fixed Network Retail Offers

Innovation, Segmentation and Community► The offers suffers more and more segmentation by groups of customers► At the same time within each segment new community services are created► The commercial offers also leverage on pakaging the terminals to be used indoors and

outdoors that will soon be substitued by UMA cellular terminals

Broadband access and TV on Mobile Terminals► WiBro (Wireless Broadcasting ) technology aims to wide range wireless access (its an

alternative for. Wi-Max)

• Born in South Corea as a standard for Samsung.• Succesfully tested for the first time by TI at Torino 2006 Winter Olympic Games.• Its main difference with Wi-Max is the need of a licence but is a technological

advantage to assure QoS (facilitates EMI control)• Interference is the main problem for Wi-Fi and could be also for Wi-Max.

► In May 2006 TI launched the commercial offer of DVBH(Digital Video Broadcasting Handled)

• Also tested in Torino 2006 Winter Games, DVBH enables TV-watching on mobile phones

• It will also commercially available bundled with IPTV offers as “Alice Home TV” and “Rosso Alice”


The New Drivers: The Post Convergence

Evolution of the fixed offerings► Broadband and IPTV► Telecom Italia launched Triple-Play Services on December 2005 (Alice Home TV)► TV Set Top Boxes► Fixed Full IP videotelephones

Evolution of the mobile offerings► Innovation, market segmentation and community targeted► Broadband: Wi-Bro, Wi-Max, Wi-Fi (with Dual Smartphones GSM-WiFi)► Mobile TV: DVBH, Wi-Fi Videophones

New Fix-Mobile convergent services► Mobile calls originated on selected sited with fixed tariffs► Fixed-Mobile Videocalls (fixed videophones adn UMTS)► Bi-Pack fixed and mobile phone bundle


NEW CHALLENGES: DELIVER THESE NEW SERVICES ABROAD

FACT: we are living in a Post-Convergence market► New players enter the market to offer new services from the TLC market

outskirts► Traditional networks and services have already converged► Convergent services are already in evolution► Domestic operators need to extend their offers abroad as their customers

demands ubiquitous services

CONSEQUENCE: International Wholesale Service Providers role’s redefinition

The new challenge is to develop a wholesale product set to extend these new services abroad

TI Sparkle is prepared to follow this trends with its new service portfolio


TI SPARKLE ANSWER:

A GLOBAL PORTFOLIO FOR OPERATORS AND CORPORATES’ NEEDS

Voice

Data & IP

Mobile

Corporate

Consulting

Global termination Wholesale VOIP Prepaid cards Premium Services

Global IP connectivity Managed Bandwidth

on bilateral and proprietary networks

SeaMeWe4 and Palermo Gateway

Restoration and Protected Solutions

Innovative security services

Network, NGN, Technology

Marketing & VAS Management &

Organization

Voice Signaling, GRX MMS, SMS Hubbing Mobile VAS←Roaming Enhanced

Services

Managed Bandwidth, Frame Relay

MPLS IP-VPN VOIP, Internet access and

Multimedia Mobility solutions ICT vertical solutions B-end access solutions


provided by an IP based integrated multiservices network which guarantees the requested QoS level

Voice Wholesale

Integr. Multimedia Services for

MNcs

IP & BandwidthWholesale

TI Sparkle: The Post Convergence Intl. Wholesale Carrier

1.Bandwidth Man. Bandwidth/IPLC Hard-Patched Transit FE / GE access

2.IP Transit IPv6 LAN-to-LAN DDOS mitigation (S@fe) Virtual NAP

1.Bandwidth Man. Bandwidth/IPLC Hard-Patched Transit FE / GE access

2.IP Transit IPv6 LAN-to-LAN DDOS mitigation (S@fe) Virtual NAP

1.IP-VPN / MPLS Intranet + Internet

data Data + Voice (on-

net, off-net) Multicast capability VPN access on LL /

X-DSL VPN access via dial-

up ed Internet CPE Provisioning

and Management Security Features

2.Frame Relay

3.International Leased Circuits

1.IP-VPN / MPLS Intranet + Internet

data Data + Voice (on-

net, off-net) Multicast capability VPN access on LL /

X-DSL VPN access via dial-

up ed Internet CPE Provisioning

and Management Security Features

2.Frame Relay

3.International Leased Circuits

1.Int. Termination IDD and ISDN HCD - ITFS

2.Voice over IP H.323, SIP based Multiple voice coding

scheme White Label VoIP Class

5 services

3. VoIP Peering Services

4. Transit Traffic Hubbing Traditional transit

5. Int. Prepaid calling cards

1.Int. Termination IDD and ISDN HCD - ITFS

2.Voice over IP H.323, SIP based Multiple voice coding

scheme White Label VoIP Class

5 services

3. VoIP Peering Services

4. Transit Traffic Hubbing Traditional transit

5. Int. Prepaid calling cards

Services for mobile Operators

International Roaming

Enhanced signalling capabilities

SMS Antifraud GPRS roaming

(GRX) SMS Transit MMS Hubbing SMS Hubbing Mobile VAS Services Int’l Roaming VAS

Roaming Traffic Redirector

Outbound VHEmVAS Content Sol.

IPX/IPI

Services for mobile Operators

International Roaming

Enhanced signalling capabilities

SMS Antifraud GPRS roaming

(GRX) SMS Transit MMS Hubbing SMS Hubbing Mobile VAS Services Int’l Roaming VAS

Roaming Traffic Redirector

Outbound VHEmVAS Content Sol.

IPX/IPI

MobileWholesale

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Next Challenge: The Virtual Home Environment

Increase mobility of users

Every service needs a roaming feature or an extension abroad

The market is already asking not only to use abroad the same services but also begins to ask for the same QoS and same price as home

The International Operators will need to develop its portfolio to provide its customers a virtual home

environment, wherever the customers are.

TI Sparkle is ready.

New Players, Nerw Services: New Wholesale Challenges

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