TIM Posts 2002 Profit

www.unstrung.com 03.10.03

ROME -- The Board of Directors of TIM (Telecom Italia Group), chaired by the Chief Executive Officer Marco De Benedetti, has today examined the results for fiscal year 2002.

TIM Group

It should be noted that the income and financial aggregate values of the former company Blu S.p.A. (merged by incorporation into TIM S.p.A in January 2002 for accounting and fiscal purposes) are only included in the consolidated results of the TIM Group as of the date of acquisition (October 7, 2002).

In the 2002 fiscal year the consolidated revenues of the TIM Group amounted to euro 10,867 million representing a 6% growth with respect to the 2001 fiscal year (euro 10,250 million). This growth actually reached 11.9% if cleaned off of the effect of exchange rate devaluations in 2002 mainly in Brazil and Venezuela.

Gross operating profit amounted to euro 5,039 million, representing a 5.9% increase with respect to the preceding fiscal year (euro 4,760 million). Net of the foregoing exchange rates devaluation, the increase in the gross operating profit stands at 8.6%. The gross operating profit/revenues ratio, at 46.4%, is in line with the figure recorded in 2001.

Operating income amounting to euro 3,358 million grew by 7.1% compared to the 2001 fiscal year (euro 3,136 million). The gross operating profit/revenues ratio has improved to 30.9% against 30.6% recorded for the 2001 fiscal year.

Consolidated net income pertaining to the parent company TIM amounted to euro 1,165 million and recorded a 22.6% increase with respect to the 2001 fiscal year (euro 950 million). This result reflects non-recurrent earnings for euro 1,182 million relative to extraordinary capital gains produced from the disposal of minority shareholdings in the operators Bouygues Telecom, Mobilkom Austria and Auna, mainly for tax benefits equal to euro 337 million deriving from prepaid taxes and the tax deductibility of the losses posted by the former Blu S.p.A. in the fiscal year 2002 Non-recurring charges net of the relative tax benefits, amount to euro 1,424 million of which approximately euro 1,410 million are due to the write-off of the balance sheet value and allocations to provisions for risks and charges for the associate company Aria - IS TIM while the remaining amount is ascribed to the write-down of Digitel Venezuela, Maxitel Brasil and other adjustments.

Comparing the 2002 fiscal year results before extraordinaries and taxes to the corresponding result posted in 2001, an improvement of euro 483 million (+19.3%) can be observed.

TIM Group's investments amounted to euro 2,359 million with respect to euro 5,154 million for the 2001 fiscal year. The 2001 results reflected significant investments made for the acquisition of licences by foreign subsidiaries. In the 2002 fiscal year investments mainly referred to technology and improvements to the network; industrial investments amounted to euro 1,715 million while financial investments and investments in goodwill amounted to euro 644 million.

Operating free cash flow (Operating income+Amortization/Depreciation- Industrial Investments- Variations in working capital), at euro 2,932 million, has shown an improvement of euro 639 million with respect to the 2001 fiscal year as a result of the increase in operating income (+7.1%) and a reduction in industrial investments made in 2002 with respect to 2001. Net borrowings amounted to euro 1,922 million (euro 1,532 as of 31.12.2001) following the payment dividends for euro 3,617 million, inclusive of the anticipated payment made in December 2002. The number of mobile lines of the TIM Group stood at about 39.1 million representing a 12.2% increase on a like for like comparison with December 31, 2001 (34.9 million) excluding the mobile lines of Bouygues Télécom, the Mobilkom Austria Group and Amena. (Auna's subsidiary mobile operator).

The TIM Group's personnel amounts to 18,702 units, an increase of 1,981 units with respect to December 31, 2001.

TIM S.p.A.

It should be noted that the results posted in the financial statements of TIM S.p.A.. .f.or the 2002 fiscal year include, in conformity to law, the income and financial results of the entire 2002 fiscal year of the former company Blu S.p.A..

In the 2002 fiscal year revenues stood at euro 8,915 million (euro 9,022 million including the contribution of the former Blu S.p.A.), compared to euro 8,357 million posted in the 2001 fiscal year, representing a 6.7% growth. Value-added service (VAS) revenues amounting to euro 752 million, are 41% higher than in 2001.

ARPU (Average Revenue per User)in 2002 stood at euro 28, an increase of 1% with respect to the same indicator in 2001.

Gross operating profit reached euro 4,529 million (euro 4,404 million considering the contribution of the former Blu SpA) representing a 7.2% growth with respect to the preceding year (euro 4,225 million). The gross operating profit/ revenues ratio stands at 50.8%, (50.6% in 2001).

Operating income amounted to euro 3,323 million (euro 3,153 million including the contribution of the former Blu S.p.A.) representing a 2.8% increase (euro 3,231 million in 2001), while as a ratio to revenues it reached 37.3% (38.7% in 2001).

These results are net of the fiscal amortisation of the UMTS licence, which began in January 2002 (euro 121 million).

Net income stated in the statutory financial statements amounted to euro 264 million (euro 1,907 million in 2001) after deduction of non-recurrent charges for euro 1,733 million, net of the relative tax benefits. Such charges mainly refer to the write-downs of the subsidiary TIM International N.V. and to the allocations to provisions for risks and charges made in respect of the associate company Aria IS-TIM.

The net income reflects tax benefits from the incorporation of the former Blu SpA relative to the use of prepaid taxes and to the deductibility of carried forward losses from preceding years for a net gain of euro 283 million in 2002 statutory accounts.

Investments in the period (net of variations in fixed assets following the incorporation of former Blu S.p.A.'s balance sheet totalled euro 1,842 million, of which euro 1,065 million for industrial investments and euro 777 million for financial investments in subsidiaries.

Net borrowings as of 31.12.2002, net of the effects of the former Blu S.p.A. amounted to euro 1,492 million. TIM, confirms its position as domestic market leader with about 25.3 million lines as of December 31, 2002 (+5.7% with respect to December 31, 2001)

TIM S.p.A.'s personnel as of December 31, 2002 following the incorporation of former Blu S.p.A. totalled 10,261 units

Telecom Italia Mobile SpA