Creating value by addressing adjacent markets: a path towards data monetization

1. Creating value by addressing adjacent markets: a path towards data monetization

2. Telecom Italia Group – differentfocuses on the ICT stake TI Group TelecomItalia Olivetti Telecom Italia Digital Solutions TI Group PaaS&SaaS Services Development Innovative Solutions IT CloudTrasformation Consulting& SI to integrate & value the ICT elements IT Consulting System Integration SaaS & PaaS Infrastructure, IaaS& Mgmt Services TLC Solutions&ICT InfrastructuralServices asthe technicalplatformto supportcustomerservicesdevelopment ICT Stake HW Vertical Solutions • Specialized HW & Services for verticalofferings TLC Services

3. Market context - mobile CAGR 2009-2013 (%) (revenue, ARPU) -10.1% -11.7% • Structurallydecliningrevenues • …and ARPUs • …and margins • Hypercompetition • Saturatedmarkets • Price wars • Quest for consolidation -8.8% -9.8% -7.0% -10.7% -3.0% -5.5% -1.3% -3.4% -4.8% -4.7% Source: analysismason, 2014

4. Market context - Italy Italy vsUE, penetration (%) (fixed/broadband; mobile) • 4 mobile operators, severalMVNOs • Hypercompetition and saturation on human • Low and declining mobile ARPU • TIM’s market share 60% of business, 40% of postpaid • Potential ARPU upside on mobile services • Focus on VAS and innovative services: m marketing and advertising, machine 2 machine, e/m payments Source: analysismason, 2014

5. AdjacentMarkets - competitors and enablers User Experience Ecosystems DigitalHome Robotics Payments Gaming 3G Regulators Location Based LTE HSPA IP NETWORKS Devices Smart Spaces WiFi E-Health xDSL Public Sector M2M/IoT Fiber Big Data Social Infomobility New networks Mobile Multi media OTT players

6. The classicTelcoinnovationframeworkdoesnot work Classic Telco Innovation Framework • “Basically an RFQ will always bring you yesterday’s technology. After integrating this technology, at launch you will be working with the day-before-yesterday’s technology while others are working on tomorrow’s technology. Launching an innovative service via an RFQ process is as such impossible. • “It takes 3 months from idea to finalizing an RFQ document. 1,5 month to get a reply. 1,5 month to do procurement. Half a year in total. Not counting the deployment time which is likely to be another 6 months. Telcos take 12 months for any new system.” Cost of adding a new feature vs. processphase • Impacts: • Verycomplex Go/No Go process • «Infinite» time to market • Long time even for customer feedback, and difficulty to incorporate that feedback • Good Money followsBad Money: tough/impossible to «reverse» a baddecision 6

7. A differentapproachisneeded Agile Open Innovation Framework • Impacts: • Easy Go/No Go process • Alfa/Beta Time to market • Short time for customer feedback, easy to incorporate that feedback • Good Money followsonlyGood Money: easy to «reverse» a baddecision • Incremental approach, low development cost barriers at the start, costs growing with penetration of the service • SeveralIdeas and Application… in a Darwinian environment 7

8. So What? Digital SolutionsBuild a new CloudBasedInnovation Framework Implications • Abstract and virtualize the control layer (std HW) • Connect network software with the Data Center/ Cloud software • APIs as a new way to create “over the Telco” services, both internally and with partners • Leverage on Big Data, both external and extracted from the network • Quickly develop incremental applications either directly or through partners (Open Innovation) Ecosystems Third Parties Open Innovation Innovation and Application Development on Cloud and API Innovation and InfrastructureInvestment SW Nwk Apps API Cloud Web&Cloud SDN VDSL, FTTH, LTE, WiFi Networks TCP/IP UBB & IP Convergence on IP networks Ultra BB Access Devices Memories batteries Computing capacity Wireless Software Evolution Screens

9. Growth in adjacentmarketsa focusedapproach Professional Services ICT Security Solutions Digital Identity Management M2M & Internet of Things Cloud & OTT Services Digital CRM Web Applications Social Network Security ICT Security Digital Identity Certification Management of Securetransactions End 2 End Solution Provider EchosystemIntegrator Digital Cloud Provider and Broker Resellinge OTT approach Main Targets: Public Sector, Utilities, Corporations, Telcos, Vertical Players Business Models: B2B2b/c 9

10. Digital Identity – Management Qualified Certificator of Firma Qualificata PEC Management(Posta Elettronica Certificata) Qualified player for Conservazione Sostitutiva 10

11. Internet of Things – E2E Solution Provider Partnership networks Business footprint Integratedapproach Value chain control Platforms Horand Verticalsmgmt

12. Cloud Market Place – CloudBrokering International Markets Digital Marketplace SaaS IaaS PaaS 1 1 3 2 1 Branded Services White label Services Direct Sales Partners ISV Resellers Domestic Market 12

13. Data Monetization - A Business Case for a Telco Playerrationals and issues • Advertising Online Marketincreasinglygrowing, driven by mobile e video advertising. • Display Advertising growthdriven by video online e on mobile audience, with advancedmetrics. • Paid-for-Searchgrowthdriven by the long taileffectand by searches in mobility. • Privacy and Customerbehaviour • Analytics and dedicatedplatforms and tools • Do wereallyknowourcustomers and knowhow to manage the information • Scope and focus • Fierce and increasingcompetition, driven by OTTs. • The big G effect, Apple, Facebook • Several TLC operators and specializedplayers, e.g. Millennial Media, InMobi, Smaato, Nexage, Madvertise e Amobee. • Industry in consolidation. • A Market opportunity to grow in an adjacent market worth more than 250 €mln/year, growing double digit. • No need for relevantupfrontinvestments. • Possiblecollaborations with specializedplayers, with revenuesharingmodels. 13

14. Data Monetization - A Business Case for a Telco Playera possiblepath • LeverageTelco’sofferings in order to increaseknowledge of customers and improvecustomer’sexperience: security in transactions, digitalidentitymgmt, e/m payments,digitalmarketplace • Diversifycustomerofferingwith bettersegmentedservicesand applications • Extract more information and obtainpermissionfrom more customersto reachthem • Create/establisha dedicatedorganizationdevoted to address the opportunity, identify an initial set of specializedpartners • Set an on field trial in order to test operational and commercial issues start to delivervalueaddedservicesbased on analytics e CB profiling • Verify and solve issuesrelated to privacy, to consumer behaviour and to market acceptance • Start commercial operations • Enrich the echosystemof web agencies and media partners • Leverage on Telco’ssalesforce • Diversify (merchant) offeringwith more profiledand tayloredservices • Redirectparentorganization in order to extract the valueembedded in the customerknowledgeand to redesign the existing and new serviceswithin the new framework 14

15. www.tidigitalsolutions.com 15

16. Creating value by addressing adjacent markets: a path towards data monetization