Remuneration 2011

Report on Remuneration

Remuneration of the Board of Directors in 2011

110,000 euros gross per year for each Director (including the Chairman and excluding the Chief Executive Officer, who expressly waived this remuneration);
an additional 35,000 euros for each member of the Executive Committee (including the Chairman and excluding the Chief Executive Officer);
an additional 45,000 euros gross per year for each member of the Internal Control and Corporate Governance Committee;
an additional 20,000 euros gross per year for each member of the Nomination and Remuneration Committee;
an additional 20,000 euros gross per year for the Director appointed to the Supervisory Board;
an additional 90,000 euros gross per year for the Vice Chairman.

Remuneration of the Chairman - Mr Franco Bernabè - in 2011

fixed annual remuneration of 110,000 euros gross for the position of Director;
fixed annual remuneration of 1.4 million euros gross for the position of Chairman of the Board of Directors;
fixed annual remuneration of 35,000 euros gross for the position of member of the Executive Committee;
variable remuneration correlated with annual performance objectives, with a target value equal to the fixed component and a range of between 50% and 150%, depending on the level of achievement of the targets assigned;
one-off participation in the Long Term Incentive Plan 2011 (disclosure documentation available on the www.telecomitalia.com website, Governance section – Remuneration channel), with pay opportunity at target corresponding to 300% of the fixed annual remuneration for the position, consisting of
- by a cash bonus of 2.1 million euros (150% of the fixed annual remuneration) and
- no. 2,253,702 ordinary shares (150% of the fixed annual remuneration expressed in shares, valued according to the average of official prices between 7 June and 6 July 2011),
benefits similar to those granted to Group executives (company care, medical and accident insurance, complementary healthcare, complementary welfare) enjoyed free of any direct or indirect charges, with a corresponding increase in the remuneration for the position by the amount required to pay the tax applicable to taxed benefits. With specific reference to complementary welfare, provision is made for the Company to make an annual net payment to the Fontedir complementary welfare fund amounting to (i) 10% of the fixed remuneration and (ii) 10% of the annual bonus applicable for achievement of the target results;

Provision is also made for the payment of amounts due until the end of the period of office, including the variable component, calculated to correspond to the average of disbursements already made, in the event of early termination of the term of office (i) for objective reasons, (ii) on the company's initiative without just cause, (iii) on the initiative of Mr Bernabè with just cause.

Finally, the Company has reserved the right to enter into an annual non-competition agreement, in exchange for a one-off payment equal to a year's remuneration (fixed component and variable component calculated to correspond to the average of disbursements already made), to be implemented after termination of the employment contract.

Remuneration of the Chief Executive Officer - Mr Marco Patuano - in 2011

fixed annual remuneration of 1.0 million euros gross as the annual gross remuneration for his employment;
waiver of fixed components for the position of Director and membership of the Executive Committee;
variable remuneration for the position of Chief Executive Officer correlated with annual performance objectives, with a target value equal to the fixed component and a range of between 50% and 150%, depending on the level of achievement of the targets assigned;
one-off participation in the Long Term Incentive Plan 2011 (disclosure documentation available on the www.telecomitalia.com website, Governance section – Remuneration channel), with pay opportunity at target corresponding to 300% of the fixed annual remuneration, consisting of
- by a cash bonus of 1.5 million euros (150% of the fixed annual remuneration) and
- no. 1,609,787 ordinary shares (150% of the fixed annual remuneration expressed in shares, valued according to the average of official prices between 7 June and 6 July 2011),
benefits similar to those granted to Group executives (company car, accident and medical insurance, complementary healthcare, complementary welfare);

Provision is also made for the payment of remuneration for the special position held (MBO value, calculated as the average of the amounts received since 2011), in the event of early termination of the term of office due to (i) early withdrawal of the administration relationship by the Company without just cause, (ii) resignation by Mr Patuano at the request of the Board of Directors (iii) resignation by Mr Patuano with just cause. The procedure set forth in the collective labour agreement for company executives has been established as being applicable in the event of a termination of employment by the Company (unless there is just cause) or resignation requested by the Board of Directors.

Remuneration of key managers with strategic responsibilities in 2011

fixed remuneration, normally falling between the first quartile and the median of the market;
a short term variable component of an annual amount at target of between 40% and 50% of the fixed remuneration, with a range varying between a minimum of 80% and a maximum of 160%;
participation, with a rolling mechanism, of key managers with strategic responsibilities operating in Italy in the Long Term Incentive Plan 2011 (disclosure documentation available on the www.telecomitalia.com website, Governance section – Remuneration channel), with pay opportunity at target corresponding to 60% of the fixed annual remuneration. The bonus accrued at the end of the three-year performance period will be:
- paid in cash in the amount of 50%;
- represented, in respect of the remaining 50%, by free non-transferable two-year rights to a number of ordinary shares calculated at the time of determination of the performance conditions based on the normal value of the security at the time.
participation by key managers with strategic responsibilities operating abroad in the local long term incentive policies;
benefits similar to those granted to Group executives (company car, accident and medical insurance, complementary healthcare, complementary welfare);
application of the collective labour agreement for executives, except where more favourable agreements are reached, in the event of early termination of the employment contract (excluding cases of dismissal with just cause);
absence of general policies regarding non-competition agreements (a small number of resources are subject to agreements signed prior to 2008, for which the full consideration has already been disbursed).

No manager with strategic responsibilities received a total remuneration in 2011 that exceeded the highest total remuneration assigned to the Executive Directors.