Telecom Italia - FORM 6-K

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to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. YES ¨ NO x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

The present document has been translated from the document issued and filed in Italy, from the Italian into the English language solely for the convenience of international readers. Despite all the efforts devoted to this translation, certain errors, omissions or approximations may subsist. Telecom Italia, its representatives and employees decline all responsibility in this regard.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the United States Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements, which reflect management's current views with respect to certain future events, trends and financial performance. Actual results may differ materially from those projected or implied in the forward-looking statements. Such forward-looking information is based on certain key assumptions which we believe to be reasonable but forward-looking information by its nature involves risks and uncertainties, which are outside of our control, that could significantly affect expected results of future events.

The following important factors could cause actual results to differ materially from those projected or implied in any forward-looking statements:

- our ability to successfully implement our strategy over the 2011-2013 period;

- our ability to successfully achieve our debt reduction targets;

- the continuing impact of increased competition in a liberalized market, including competition from established domestic competitors and global and regional alliances formed by other telecommunications operators in our core Italian domestic fixed-line and wireless markets;

- the impact of the global recession in the principal markets in which we operate;

- our ability to utilize our relationship with Telefónica to attain synergies primarily in areas such as network, IT, purchasing and international mobile roaming;

- our ability to introduce new services to stimulate increased usage of our fixed and wireless networks to offset declines in the traditional fixed-line voice business due to the continuing impact of regulatory required price reductions, market share loss, pricing pressures generally and shifts in usage patterns;

- our ability to successfully implement our internet and broadband strategy both in Italy and abroad;

- the impact of regulatory decisions and changes in the regulatory environment in Italy and other countries in which we operate;

- the impact of economic development generally on our international business and on our foreign investments and capital expenditures;

- our services are technology-intensive and the development of new technologies could render such services non-competitive;

- the impact of political developments in Italy and other countries in which we operate;

- the impact of fluctuations in currency exchange and interest rates;

- our ability to build up our business in adjacent markets and in international markets (particularly in Brazil), due to our specialist and technical resources;

- our ability to achieve the expected return on the investments and capital expenditures we have made and continue to make (such as those in Brazil);

- the amount and timing of any future impairment charges for our licenses, goodwill or other assets; and

- the outcome of litigation, disputes and investigations in which we are involved or may become involved.

The foregoing factors should not be construed as exhaustive. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof, including, without limitation, changes in our business or acquisition strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.

For completeness, it is hereby stated that in the course of financial year 2010 (for the period 1 January – 28 April 2010), Telecom Italia S.p.A. did not confer appointments on parties connected by continuing relationships with the previous statutory auditor Reconta Ernst & Young S.p.A. and/or on companies belonging to the Ernst & Young international network.

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As is well-known, on the basis of a reasoned proposal moved by the Board of Auditors, the Shareholders’ Meeting of 29 April 2010 appointed PricewaterhouseCoopers S.p.A. as Statutory Auditor for the separate financial statements, the annual consolidated financial statements, the abbreviated half-yearly consolidated financial statements, the consolidated financial statements included in the Form 20-F and the internal controls under section 404 of the Sarbanes-Oxley Act, for the nine year period 2010-2018.

The selection of the audit firm proposed for the appointment was conducted after a comparative analysis carried out under the supervision of the Control Body – which was supported by the corporate structures – in compliance with the Guidelines for the conferment of appointments as Statutory Auditor, adopted by Telecom Italia at the end of 2009. These Guidelines apply to the following: (i) conferment of the appointment to audit the financial statements of Telecom Italia S.p.A.; (ii) conferment of the appointment to audit the financial statements/reporting packages of the subsidiaries of Telecom Italia; (iii) conferment by the Company and its subsidiaries of further appointments on the company appointed to audit the financial statements of Telecom Italia, and on the entities belonging to its network, as defined by the applicable regulations. The due diligence carried out prior to the conferment (or subsequent amendments thereto) of the appointment to audit the financial statements of Telecom Italia is coordinated by the manager responsible for the preparation the Company’s accounting documents, under the supervision of the Board of Auditors, which can draw on the support of the Person responsible for internal control to check that the candidate auditor meets the requisites for independence, and to monitor the firm during the course of the mandate.

Consistently with the Guidelines, PricewaterhouseCoopers S.p.A., as Statutory Auditor appointed by the Shareholders’ Meeting of the Company (the “Appointed Auditor”) is the principal auditor for the entire Telecom Italia Group. The conferment of auditing and correlated appointments (known as audit services and audit-related services) on entities other than the Appointed Auditor and/or the entities belonging to its network must be checked in advance with the manager responsible for the preparation of the accounting documents of the Parent Company, who will activate the necessary processes, including those involving the Board of Auditors, for approval and reporting, thus ensuring observance of the applicable regulations.

In order to safeguard the independence of the Appointed Auditor, the Guidelines lay down the principle that the conferment of further appointments on the Appointed Auditor and on the entities belonging to its network is limited to services and activities pertaining to the auditing of the financial statements. This is however without prejudice to the fact that the conferment of further appointments on the Appointed Auditor (when allowed by the reference legislation) and on the entities belonging to its network is subject to prior approval by the Board of Auditors of Telecom Italia, which expresses its opinion as the occasion arises or by type of appointment (so-called “pre-approved” appointments, as listed in Point 12 of the above-mentioned Guidelines). In urgent cases the prior opinion on the conferment of new appointments may be issued by the Chairman of the Board of Auditors (or other Auditor designated by the latter), who refers it for ratification to the Control Body as a whole at its next subsequent meeting.

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Having taken note of the appointments conferred on the auditing firm in financial year 2010, as reproduced in the tables in points 7 and 8 of this Report, the Board of Auditors has recommended to the Company that appointments should be submitted anyway for the prior approval of the Board of Auditors which, although they may be considered “pre-approved” by the Control Body as per the Guidelines, have particularly important profiles from a qualitative and quantitative point of view.

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The Board of Auditors has taken note of the request made by PricewaterhouseCoopers S.p.A. to supplement their fee on a final account basis for auditing the 2010 financial statements (in connection with the identification of the material weakness which was recognised as existing in the internal controls over financial reporting as at 31 December 2009 in the Annual Report Form 20-F 2009, and with regard to the acquisition of control of Sofora and its subsidiaries). The Board has no criticism or objection to make on this request.

The Board of Auditors has noted, furthermore, that the acquisition of control of Sofora and its subsidiaries has significantly altered the structure of the Telecom Italia Group, thus fulfilling one of the requirements for the existence of exceptional and unforeseeable circumstances which are such as to justify revising the fees originally specified in the proposal for the appointment of the statutory auditor approved by the Shareholders’ Meeting of 29 April 2010.

The Board of Auditors has therefore proposed to the Shareholders’ Meeting (with a special “Reasoned Proposal”, which should be referred to for more details), for each of the financial years 2011-2018, to increase by Euro 34,700 to Euro 146,800 the annual remuneration for the statutory audit of the consolidated financial statements of Telecom Italia S.p.A., and to increase by Euro 45,900 to Euro 704,000 the annual remuneration for the review of the internal controls which oversee the process of drafting the consolidated financial statements of Telecom Italia, for the purposes of section 404 of the Sarbanes-Oxley Act.

9. During the course of financial year 2010, the Board of Auditors issued to the Board of Directors, in accordance with Article 2389, subsection 3 of the Civil Code, an opinion on the matter of the remuneration allocated to Directors appointed to specific offices.

It is appropriate to point out that the remuneration of the Executive directors (Article 2389, subsection 3 of the Civil Code) is established by the Board of Directors after hearing the opinion of the Board of Auditors and after examination by the Nomination and Remuneration Committee, which is made up of non-executive Directors, the majority of whom are independent, including at least one Director from a minority slate, and which has, among other things, the task of formulating proposals to the Board of Directors on the remuneration of Directors who perform particular tasks, in order to ensure their alignment with the objective of creating shareholder value over time.

For further details on the remuneration of Directors, general managers and executives with strategic responsibilities, please refer to Note 44 (Other information) to the financial statements of Telecom Italia S.p.A. and to the “Report on Corporate Governance and Share Ownership”.

10. Over the course of financial year 2010, the Company’s Board of Directors and Executive Committee held, respectively, nine and five meetings, at which the Board of Auditors was always present.

The Committee for Internal Control and Corporate Governance met twelve times, and the Nomination and Remuneration Committee eight times.

The Board of Auditors held thirty-five meetings and took part in all the meetings of the Committee for Internal Control and Corporate Governance, in some cases, depending on the subjects being discussed, in joint session with the Committee itself, in other cases through the participation of its Chairman or of (at least) one Auditor designated by the Chairman.

The Board of Auditors took part in the Shareholders’ Meeting, held on 29 April 2010.

11. In accordance with its obligations, the Board of Auditors obtained information and supervised compliance with the principles of correct administration, via interviews, direct observation, investigations, the receipt of information from management, and meetings with the Person responsible for internal control, the Company Group Compliance Officer and the Committee for Internal Control and Corporate Governance. In addition, the Board of Auditors met with Statutory Auditor Reconta Ernst & Young and, from 29 April 2010, Statutory Auditor PricewaterhouseCoopers, to exchange relevant information and data pursuant to article 150, subsection three, of the CFL. Finally, the Board of Auditors held specific meetings with the Chairman and Chief Executive Officer, the General Counsel and the Chief Financial Officer of the Company.

The Board of Auditors believes that the governance arrangements and tools adopted by the Company constitute a valid supervisory framework to ensure that the principles of correct administration are respected in operational practice. In particular, in relation to the decision-making processes of the Board of Directors, the Control Body has supervised, including by attendance at board meetings, the compliance of management decisions made by the Directors with the law and the company by-laws, and checked that the related resolutions were adequately supported by information, analysis and audit processes – also involving consultation with the board subcommittees and external professionals, when necessary – regarding, primarily, the economic and financial consistency of transactions and their alignment with the interests of the Company.

12.The Board of Auditors has supervised the adequacy of the organisation structure of the Company, by collecting information from the appropriate structures, interviews with the managers of the various company departments, and meetings with those responsible for internal and external audit.

The Board of Directors plays an active role, in both the strategic guidance of the Company and in the control of operations, and the full board has the power to develop strategic policy and a responsibility to intervene directly in the most important decisions about the business made by the Company and the Group. In particular, the Board reserves to itself the right, among others:

to examine and approve the strategic, industrial and financial plans, as well as the budget;

to examine and approve strategic operations;

to verify the adequacy of the general organisational, administrative and accounting structure, with particular reference to the internal control system;

to draw up and adopt the Company rules of corporate governance and to define the Group corporate governance guidelines; to define the limits, work methods and intervals at which the delegated bodies must report on their activities;

to designate the Chairmen and Chief Executive Officers of subsidiary companies of strategic relevance;

to supervise the general trend in operations, periodically comparing the results achieved with the results planned.

The attribution (and revocation) of powers to the Directors is reserved to the Board of Directors, which defines the object, limits and methods for the exercise of these powers, and receives a continuous flow of information on the activity carried out, the general trend in operations and the transactions of major impact on the revenues, finances and assets of the Company.

On 15 April 2008 the Board of Directors appointed Gabriele Galateri di Genola as Chairman and Franco Bernabè as Chief Executive Officer.

In addition to the power to act as legal representative of the Company, the Chairman was also empowered to supervise the formulation of strategic, industrial and financial plans, and their execution and development; and to supervise the definition of the organisational structures and the economic and financial performance of the Company, and was given responsibility for supervising the process of examining and defining the internal control system guidelines. The Chairman was also given organisational responsibility for the Corporate Legal Affairs, Relations with Institutions, Relations with the Territory and Institutional Marketing Functions, and for Telecom Italia Audit & Compliance Services S.c.a.r.l.

In addition to the power to legally represent the Company and to exercise, with a single signature, all powers required to accomplish actions pertinent to the activity of the company in its various ramifications, bar none – the Chief Executive Officer was also made responsible for the overall governance of the Company and the Group. In particular, the Chief Executive Officer was assigned (i) responsibility for defining, proposing to the Board of Directors and then implementing and developing the strategic, industrial and financial plans; (ii) responsibility for defining the organisational structures; (iii) organisational responsibility to guarantee the management and development of the business, by coordinating the organisational aspects not attributed to the Chairman.

The Group’s Committee System is one of the main tools for the governance and operational integration of the Group. The aim of this system is: (i) to monitor the implementation of strategies and the development of plans (ii) to guarantee that the operations of the Group are monitored, and that market and technology management and development activities are coordinated; (iii) to strengthen the operational synergies needed between the different departments involved in technological, business and support processes.

The Group Committees are listed below, with a description of the mission assigned to each.

Management Committee: guarantees the monitoring of the operations of the Group and the coordination of market and technology management and development activities.

Business Review Operations: assures that the progress of major projects and action plans is examined, that operational processes are supervised, and that their progress and results are analysed.

Group Investments Committee: guarantees that investments of particular economic or strategic relevance are assessed and approved, and oversees the critical aspects of their progress.

Operational Investments Committee: guarantees the assessment and approval of Group operational investments, and the selection of investments that because of their particular economic or strategic relevance require the authorisation of the Group Investments Committee; it also ensures that progress made and its related commercial/technological benefit are confirmed and verified.

IT Compliance Steering Committee: guarantees that the levels of alignment of the company systems are supervised, in accordance with the regulatory framework and the provisions of the Privacy Protection Authority.

Group Risk Management Committee: guarantees the governance of the Group risk management process, coordinating the plan of preventive actions intended to assure the operational continuity of the business, and monitoring the efficacy of the countermeasures adopted.

Quality Governance Steering Committee: directs and supervises initiatives/activities focussed on achieving end to end improvement of process quality, monitoring the quality results obtained and supervising the process of quality certification and the launch of new products/services offered to customers – in particular those of greatest impact in terms of image and competitive positioning on the market – without prejudice to the specific operational responsibilities of the technical and business structures involved.

Steering Committee 231: assures that areas in which improvements/supplements need to be made to Organisational Model 231 are identified; coordinates the execution of the related implementation plans and is responsible for reports to the governance bodies on the progress of implementing Organisational Model 231.

Crisis Management Board: assures the implementation and operation of the organisational model for the prevention and management of crisis situations; provides strategic and operational policies at Group level for the resolution of emergencies and crises and assures the coordination of the related initiatives for communicating with internal and external stakeholders.

In June 2010 a “Special Committee” was created to support the Chief Financial Officer of the Company (who chairs it). This Committee is responsible for evaluating the potential liabilities arising from tax frauds for the purpose of financial disclosure. It consists of senior managers from the Administration, Finance and Control Function (meaning the Manager of Administration Account and Financial Statement Department and the Manager of the Taxation Department), the General Counsel, the Manager of the Domestic Market Operations Division and the Manager of the Technology and Operations Division, the Manager of the Corporate Finance Legal Affairs Department within Corporate Legal Affairs and the Manager of the Human Resources and Organization Function and, finally, the Chairman of TI Audit and Compliance Services S.c.a r.l..

The Special Committee, which meets at least once every three months, according to the calendar for preparing quarterly and annual financial reports: (i) has the task of defining the procedures and processes to ensure that all the information available on the cases of suspected tax fraud involving Telecom Italia and/or the companies within its perimeter of consolidation is made available promptly to the Committee itself; (ii) it has the right to ask Telecom Italia departments, and to directly ask Group companies, for any further information needed to evaluate the potential risks deriving from the cases of suspected tax fraud, issuing the necessary operational instructions for this purpose; (iii) ascertains that the information collected as described above is correctly examined and evaluated, checking – within reasonable limits – that the potential risks deriving from cases of suspected tax fraud are correctly represented in the half-yearly and annual financial reports and in the consolidated intermediate quarterly reports on operations of the Group, and in the separate financial statements of Telecom Italia S.p.A..

Again in relation to the prevention, monitoring and countering fraudulent situations, the Board of Auditors reports that a specific office called the Fraud Management & Revenue Assurance Department has been created within the Domestic Market Operations Division, with the responsibility of ensuring comprehensive oversight of the fraud management and revenue assurance processes in this area, to strengthen the prevention and countering of fraud in all the business processes managed by this Division, and to improve the efficacy of those actions that guarantee revenue assurance, working with the other competent departments of the Company.

The organisational macrostructure of Telecom Italia Sparkle has been redefined, attributing to the Chairman the organisational responsibility for the Administration and Control, Human Resources, Legal & Regulatory Affairs Functions, and for the “Anti-Fraud and 231 Referee”, recently established, while maintaining the responsibility of the Chief Executive Officer for comprehensive oversight of the business, including the Sparkle group companies.

During 2010, to guarantee that the internal control system has integrated governance in both the audit phase and in the subsequent phase of implementing and checking improvement plans, TIAudit Latam S.A. (a Brazilian company 70% controlled by Telecom Italia Audit and Compliance Services) amended its mission, and hence changed its company name to TIAudit Compliance Latam, assuming responsibility for ensuring audit and compliance activities for the perimeter of reference and according to the directives issued by the Telecom Italia Group.

At the end of December 2010, in order to effectively coordinate the Divisions of the Parent Company and the Telecom Italia Group companies, the Functions/Divisions of Telecom Italia to which the subsidiary companies refer were reclassified: while the separate responsibilities of the different company Functions and Divisions remain, the Managers of the Functions/Divisions coordinate with the Executive Directors of the subsidiary companies in order to maximise value for the subsidiaries and the Group, ensuring that the holdings assigned to them are monitored, and coordinating with any members of the governing bodies designated by Telecom Italia, if present.

During the meeting held on 3 February 2011, the Board of Directors ascertained the new list of managers with strategic responsibilities (key managers or executive officers) resulting from the inclusion of the Telecom Argentina Group in the consolidation area of Telecom Italia S.p.A., identifying them as the Executive Directors (Chairmen and Chief Executive Officers) and the pro tempore appointees to the following roles:

The persons responsible for Domestic Market Operations and Technology and Operations, the Diretor Presidente of Tim Brasil and the Director General Ejecutivo of Telecom Argentina,

The General Counsel, and the persons responsible for Administration, Finance and Control, Human Resources and Organization and Purchasing.

13. The Board of Auditors closely supervised the internal control system adopted by the Company, evaluating its adequacy, also through periodic meetings with the Person responsible for internal control and with the audit and compliance structures, interviews with management, joint meetings or attendance at meetings of the Committee for Internal Control and Corporate Governance and by acquiring documentation.

As for the overall architecture of the internal control system, the internal audit activities of the Company and the Group have been assigned to a limited responsibility consortium, Telecom Italia Audit and Compliance Services, for some time. This organisation reports to the Chairman of Telecom Italia and its principal purpose is the impartial and independent execution of “internal auditing activities and the management of compliance activities, both direct (Organisational Model 231, article 154-bis of the CFL, Section 404 Sarbanes Oxley Act) and indirect, for consortium partners and the companies in which they own shares, directly or indirectly” . Given the activities undertaken by Telecom Italia Audit and Compliance Services, the Company (and the other consortium company in the Group, Telecom Italia Media) identified the director of the consortium company appointed by Telecom Italia as the “Person responsible for internal control”.

This Person responsible for internal control reports his activities to the Board of Auditors and the Committee for internal control and corporate governance, and also reports on the activities he has carried out to the Director responsible for the internal control system (currently the Chairman), who is responsible for executing the directives of the Board of Directors and defining the tools and arrangements for implementing the internal control system, as well as for deciding on the corrective actions to be taken.

The activity of the Person responsible for internal control is carried out primarily through an annual plan of audit and compliance operations that, from 2009, has been part of a three year programme, with the aim of covering the entire perimeter in scope, over the life of the plan, it being understood that sufficient margins of flexibility remain to satisfy any unforeseen needs; in fact, the existence of the plans does not exclude any specific unplanned interventions requested by the Company or the control bodies, or necessitated by problematic situations encountered. From 2010, the audit interventions have been categorised as “continuity” projects (projects relating to issues of relevant company interest, for which constant oversight is to be maintained), “consolidation” projects (relating to topics that have already been examined, but that need further evaluation), and “innovation” projects (concerning new areas for in-depth examination), in addition to “targeted” interventions, to guarantee full coverage of the system. Regarding the phase of reporting weaknesses encountered during audits, and the consequent identification of improvement actions (action plans), a monitoring activity (follow-up) has been formalised since 2008, and from 2010 this has been consolidated with new arrangements for the systematic and timely examination of compliance with the timing of actions, as well as of the efficacy and efficiency of the initiatives adopted to overcome the weaknesses found. The activity of the Person responsible for internal control then translates into periodic reporting on the results obtained, directly to the Senior Executives and the hierarchical managers of the structures affected by the interventions; periodic reports highlighting only issues of major interest are then submitted to the Board of Auditors and the Committee for Internal Control and Corporate Governance.

As part of its verification of the adequacy of the internal control system to meet the regulations contained in legislative decree no. 231/2001 on the administrative liability of organisations, for offences or crimes committed by employees and collaborators, the Board of Auditors reports that Telecom Italia has adopted an “Organisational Model” designed to prevent the commission of unlawful acts that might constitute liabilities for the Company. The Organisational Model, centred on the Code of Ethics and Conduct, which elucidates the general principles (transparency, correctness, fairness) that inspire the Company in the execution and conduct of its business, consists of: (i) “general principles of internal control”, that is, the set of tools designed to provide a guarantee with regard to the objectives of efficiency and operational effectiveness, reliability of financial and management information, compliance with laws and regulations, safeguarding of assets against possible fraud; (ii) “principles of conduct”, expressed as specific rules for relations with representatives of government agencies, and for all fulfilments and activities of a corporate nature, (iii) “schemes of internal control”, describing the processes, any crimes that might be perpetrated in relation to these processes, and the preventive control activities designed to avoid the related risks.

The Model is subject to periodic revisions, both to take account of elements that have emerged from how it has worked in practice, and to incorporate its extension to further criminal categories as predicate offences. During 2010 the Organisational Model 231 was updated and refined: specifically, the scheme designed to prevent the “231 risk” resulting from the inclusion in the category of relevant offences of criminal conspiracy and mafia-type conspiracy has been introduced in the list.

A specific body (the “Supervisory Body”), consisting of an Auditor, an independent Director who is a member of the Committee for Internal Control and Corporate Governance, the Person responsible for internal control and an external member (identified by the Nomination and Remuneration Committee and appointed by the Board of Directors in its meeting on 2 December 2009), supervises the operation and observance of the Model. This Body is supported in the execution of the tasks attributed to it, by the “231 Compliance” structure created inside Telecom Italia Audit and Compliance Services.

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Evaluation of the adequacy of the internal control system, with particular reference to the internal controls for the formulation of the financial statements, is based on a process defined by Telecom Italia S.p.A., also with reference to the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, which represents a reference framework that is generally accepted internationally.

With reference to the specific operational contexts analysed, and the consequent corrective actions planned and implemented, the Person responsible for the internal control considered that the internal control system as a whole is capable of reducing the risk profiles to an acceptable physiological level that will enable the processes to operate correctly.

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To develop a global approach to risk management (where risks are “possible events, the manifestation of which could preclude the achievement of its strategic objectives by the company”), the Telecom Italia Group has started a process of flexible and structured risk management, inspired by Enterprise Risk Management (ERM), based on the self-evaluation of the risk profile of company processes and strategic objectives by the management (a Top Down approach), through which the risks themselves may be identified, evaluated and managed.

The ERM process adopted by the Group (overseen by the Group Risk Management Committee, chaired and coordinated by the Administration, Finance and Control Manager) allows the following aspects to be defined:

the risk “map”, assessing the risks by impact and likelihood of occurrence, at both “inherent” level (i.e. without taking account of management actions currently underway) and at “residual” level (i.e. considering the residual risk after completion of the actions already undertaken), with a specific focus on the most significant risks (the so-called Top Risks);

the degree of maturity of the process of managing the most significant risks through a gap analysis; an index of maturity that can be tracked over time is identified for each individual Top Risk and for the Risk Management system at central level;

the treatment of risk by the company structures that “own” the risk (risk owners), by identifying and implementing specific improvement plans (action plans) devised to reduce the level of residual risk and increase the maturity index.

The mapped risks have been classified in ten groups, belonging to five classes - Management Risks, Compliance Risks, Fraud Risks, Continuity Risks and Financial Risks.

The Board of Auditors has monitored (and continues to monitor) the evolution of the project by acquiring information from Company management in specific interviews as well as in meetings held jointly with the Committee for Internal Control and Corporate Governance.

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The Board of Auditors has supervised the financial reporting process, verifying the adequacy and efficacy of the procedure through which financial information is produced and disseminated to the public, also by obtaining information from the Company management.

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With reference to the case involving Telecom Italia Sparkle and its impacts on the financial statements of the Company, in relation to which the Control Body reported in its Report to the Shareholders’ Meeting in April 2010, the Board of Auditors points out that the system of internal control was considered adequate for the purpose of the financial statements at 31 December 2009, while, as a result of the restatement of the accounts and in application of the U.S. regulations of reference, in the Form 20-F for the 2009 financial year (completed by the Company in compliance with the disclosure requirements to which it is subject as a foreign private issuer registered with the Securities & Exchange Commission – the SEC), the management of the Company has acknowledged the existence of a material weakness in its control system at 31 December 2009 in Item 15.2 of this Form – “Management’s Annual Report on Internal Control Over Financial Reporting”.

This material weakness was a shortcoming in the design and operation of the controls in relation to their capacity to identify and collect the reliable information needed to correctly assess the potential liabilities deriving from suspected fraud with tax impact and to make the corresponding postings to the accounts.

Again in relation to Item 15, a description of the “Remediation Plan” developed by the Company to “resolve” the material weakness declared was provided, which essentially consisted of the creation of a specific committee – the Special Committee – chaired by the Chief Financial Officer of the Company and consisting of senior managers from the Administration, Finance and Control Department, the General Counsel, and the Managers of the Human Resources and Organization, Domestic Market Operations and Technology & Operations Departments, and the Chairman of Telecom Italia Audit and Compliance Services, which was given the mandate detailed in the Remediation Plan item of Form 20-F 2009, and in relation to which a specific Entity Level Control has been developed to test, assess and monitor the efficacy of the Special Committee. See the information provided in point 12 of this Report for details of the duties of the Committee.

The Board of Auditors, as the Company Audit Committee, has supervised and monitored the actual adoption and efficacy of the Remediation Plan through periodic meetings with the management and with statutory auditor PricewaterhouseCoopers.

In particular, the Control Body checked that the Special Committee had been constituted, and its mandate finalised; it received a report on the adoption of a specific Guideline (“Valuation of potential liabilities deriving from suspected frauds with fiscal impacts”) which defines the general principles for the identification of the risks and potential losses generated by liabilities correlated with possible frauds with fiscal impact and which, among other things, prescribes that each Company/Division/Function of the Group activates its own action plans to identify all the information that exists relating to indicators of possible fraud with fiscal impact. The Board of Auditors was also informed that the Companies/Divisions/Functions had ensured that specific Operating Instructions and the reports to be drawn up to define the monitoring activities to be carried out and the business sectors to involve, had been drafted and issued, in their respective sectors, during the second half of 2010.

The Board of Auditors also received constant reports from PricewaterhouseCoopers on its auditing and testing of the procedures and controls established by the Company in relation to the material weakness. Given this activity, which is not as yet complete, and based on the results available so far, the material weakness that existed at 31 December 2009, according to the U.S. regulation, may be considered to have been overcome and resolved.

14. The Board of Auditors evaluated and supervised the adequacy of the administrative and accounting system of the Company and its ability to fairly represent operations, by direct observation, obtaining information from Company management, examining company documents and analysing the results of work carried out by PricewaterhouseCoopers S.p.A..

The Board of Auditors acknowledged the statements issued by the Chief Executive Officer and the Officer responsible for preparing the corporate accounting documents of Telecom Italia S.p.A. concerning the adequacy – in relation to the characteristics of the company – and the actual application during 2010 of the administrative and accounting procedures for the drawing up of the separate and consolidated financial statements.

On the question of the impairment test, the Board of Auditors reports that in Telecom Italia it is applied in a consolidated and structured way, coordinated by the Administration, Finance and Control Function, with the intervention of an independent external expert of acknowledged professional expertise, Professor Mauro Bini of Bocconi University. The implementation of the process is analysed and discussed in special meetings of the Committee for Internal Control and Corporate Governance that precede the Board of Directors meetings to approve the financial reports to which the impairment test must be applied, and which are usually joint meetings with the Board of Auditors (which acts as an Audit Committee pursuant to the U.S. regulations).

Coherently with the procedure described above, the Board of Auditors reports that the impairment test procedure was applied to the 2010 financial statements in a continuation of the process adopted the previous year, and, specifically, using the procedure approved by the Board of Directors on 25 March 2010.

The Control Body would also point out that the Board of Directors that met on 24 February 2011 approved a supplement to the impairment test as described above, to apply in mid-year impairment tests, providing for a review of the consensus among analysts after announcement of the plan to be included, in addition to any negative variances between the budget figures and the forecasts.

Finally, the Board of Auditors would clarify that the process followed to determine if the goodwill value could be recovered, and the assumptions used for this purpose, are described in detail in the notes to the financial statements, as requested by the reference accounting principles. In particular, the amounts by which the values in use exceed the carrying amounts at 31 December 2010, the “values of the key variables for estimating the value in use”, and the “changes in key variables needed to render the recoverable amount equal to the carrying amount” are indicated in the report on the consolidated financial statements (Note 4 – Goodwill).

Regarding the provisions of article 36, subsection 1, letter c, ii) of the Market Regulations (conditions for the listing of shares of controlling companies and of companies registered in and regulated by the laws of states that are not members of the European Union), the Board of Auditors has not ascertained facts and circumstances that would indicate that the administrative-accounting system of the controlled companies is inadequate to ensure that the economic, asset and financial data needed for the preparation of the consolidated financial statements regularly reaches the management and auditor of the controlling company.

15. The instructions imparted by the Company to its subsidiaries, pursuant to art. 114, section 2 of the CFL, appear to be adequate to comply with the obligations regarding communication established by the law. In this respect it should be noted that the Company regulates the flow of information it receives from its subsidiary companies on transactions of particular impact, with specific procedures.

The Company adopted a specific “Procedure for the management and public disclosure of inside information” that disciplines the management of inside information relative to the entire Telecom Italia Group, aimed at the members of the corporate bodies, employees and external collaborators of all Group companies. It also serves as an instruction to all subsidiary companies, to obtain from them without delay the information that might be necessary for the correct and prompt compliance with the Group’s obligations to communicate with the public. This Procedure also disciplines the maintenance of the register of people with access to inside information.

16. The Board of Auditors has ascertained, from information obtained from Statutory Auditor PricewaterhouseCoopers and from the management of the Company, that the IAS/IFRS principles, and the other legal and regulatory provisions that apply to the form and content of the separate financial statements, the consolidated financial statements and the accompanying report on operations are complied with.

17.The Board of Auditors has supervised the arrangements for the concrete implementation of the rules of corporate governance required by the Self-Regulatory Code drawn up by the Committee for the Corporate Governance of Listed Companies, to which the Company adheres.

As for the Board of Directors of the Company (currently composed of 14 members), there are 12 non-executive directors, 5 of whom (Paolo Baratta, Roland Berger, Elio Cosimo Catania, Jean Paoul Fitoussi and Luigi Zingales) qualify as independent members of the Board, based on their declarations. In this respect, it is pointed out that Telecom Italia has adopted the criteria established by the Self-Regulatory Code of Borsa Italiana for qualifying Directors as independent. Based on the information available to the Company and provided by the Directors themselves, the Board of Directors evaluated the subsistence of the requisites for independence during its meeting on 24 February 2011, and then announced to the market; these ascertainment activities were also monitored by the Board of Auditors, which made its own assessments, confirming that the requisites for the composition of the administrative body for collective decision making (the presence of at least two independent Directors satisfying the independence requirements established by law for Auditors) had been respected

The Board of Auditors also verified its own independence pursuant to article 148, subsection three of the CFL.

The Board of Auditors supervised the independence of Statutory Auditor PricewaterhouseCoopers, in accordance with the provisions of article 19, subsection 1 d) of legislative decree no. 39 of 27 January 2010, also acquiring the attestation specified in article 17, subsection 9 a) of said decree from the Statutory Auditor.

In conformity with the recommendations of the Self-Regulatory Code for Listed Companies, the Board of Directors created a board subcommittee, the Committee for Internal Control and Corporate Governance, composed of non-executive directors, a majority of whom independent and at least one from a minority slate, with accounting and financial experience. This Committee is entrusted with consultative and advisory functions and may also formulate proposals; in particular, it assesses the adequacy of the internal control system and the work plan prepared by the Person responsible for internal control, supervises the efficacy of the audit process and respect of the principles for executing transactions with related parties, and defines the methods and times of “board performance evaluations”.

Other Board subcommittees have been established:

the Executive Committee, composed of the executive Directors (Chairman and Chief Executive Officer) and non-executive Directors, which is responsible for monitoring the operations of the Company and the Group, approving the organisational macrostructures as proposed by the executive Directors, formulating opinions for the Board of Directors on the budget and strategic, industrial and financial plans of the Company and the Group, and any additional tasks attributed to it by the Board of Directors that the latter may delegate.

the Nomination and Remuneration Committee, composed of non-executive Directors, a majority of whom independent (including at least one Director from a minority list), which, in addition to the formulation of proposals for the remuneration of those Directors who hold particular offices and on the criteria for the remuneration of the senior executives of the Company, is also responsible for proposing candidates to the Board if an independent Director is to be replaced during the term of office of the Board. In particular, during 2010, the Committee dealt with the subject of remuneration initiatives in the form of financial instruments, preparing a proposal for an employee share ownership plan (the “2010-2014 Broad-based Employee Share Ownership Plan”) and a long term incentive plan for the senior management (the “2010-2015 Long Term Incentive Plan”), both submitted to the Shareholders’ Meeting of 29 April 2010 for approval. Again in 2010, the Committee also started an investigation that led this year to the formulation for a long term incentive and retention plan (the “2011 Long Term Incentive Plan”, reserved to a selected part of the senior executives, top management and the soon to be appointed Executive Officers of the Company) which the Shareholders’ Meeting to be held in April 2011 will be called on to deliberate.

Again on the subject of the independent Directors, it should be noted that the Company has created the position of Lead Independent Director (currently the Chairman of the Committee for Internal Control and Corporate Governance, Director Paolo Baratta), as a point of reference and coordination for requests and contributions made by independents, who is also empowered, inter alia, to call so-called Independent Directors’ Executive Sessions, i.e. meetings for independent Directors only to examine subjects related to the operational activity or functioning of the Board.

See the specific “Report on Corporate Governance and Share Ownership” for further detailed information on the corporate governance of the Company, which the Board of Auditors evaluates positively.

18. The Board of Auditors also reports that no observations or problems have emerged from its analysis of the information flows received in relation to the activity carried out by the boards of auditors of the subsidiary companies or the representations the statutory auditor has made in its reports on said subsidiaries. Equally, no problems have emerged from the review of the reports of the Board of Auditors and the Statutory Auditor of Telecom Italia Media (a subsidiary company with shares listed on the market organised and managed by Borsa Italia S.p.A.), or Telecom Italia Sparkle (subsidiary company) pursuant to and for the purposes of article 153 of the CFL, article 2429, second paragraph, of the civil code and article 14 of legislative decree no. 39/2010. The Board of Auditors also examined the statutory auditor’s report on Tim Participações S.A. and Telecom Argentina S.A., which also contained no observations or remarks.

No facts that should be mentioned in its Report to the Shareholders’ Meeting, or that should be reported to the other supervisory and control bodies have emerged from the supervision and control activities carried out by the Board of Auditors, as described above.

19. The Board of Auditors, having acknowledged the separate financial statements at 31 December 2010, has no objections to formulate on the proposed resolutions presented by the Board of Directors on the allocation of profits and the size of the dividend to be paid.

* * *

The mandate conferred on the Board of Directors by the Meeting of the Shareholders of the Company on 14 April 2008 expires with the Shareholders’ Meeting called to approve the financial statements for the year ended 31 December 2010, and the Board of Auditors therefore invites the Shareholders to resolve on this matter.

Section Two

As stated in the introduction, this section of the Report to the Shareholders’ Meeting reports on the specific supervision and monitoring activities carried out in relation to project known as the Greenfield Project, that is, the structured internal analysis undertaken by the top management of Telecom Italia with reference to some allegedly unlawful phenomena that took place in recent years, to the detriment of the Company and the Group, which involved four separate categories of project (Telecom Italia Sparkle, Security, irregular registration of SIM cards, anomalous sales of products or services), and provides the Board of Auditors’ evaluations of the result of the Project.

The Greenfield project

In the board meeting on 25 March 2010, the Chief Executive Officer of the Company informed the Directors and Auditors that he had arranged for a high level specific work group to be created to undertake an extraordinary in-depth examination of the areas of potential criticalities and operational aspects that might constitute risks, focussing in particular on the analysis of some allegedly unlawful phenomena that occurred in recent years, to the detriment of the Company and the Group. These emerged from the investigations and orders of the Judicial Authorities, from the results of the internal control activities, or phenomena otherwise considered to be anomalous in terms of ordinary business management. The general aim of the Project was to provide support to the various business divisions:

The general aim of the Project was to provide support to the various business divisions: (i) in the implementation of all the necessary and/or opportune actions to protect the Company from any liabilities that might emerge; (ii) in the systematic analysis of some of the unlawful phenomena that involved Telecom Italia that had emerged from criminal investigations, internal control activities or were known in some other way; and (iii) in the definition, implementation and monitoring of any process improvement initiatives.

As stated, the Project started at the instigation of the management, with the assistance of legal counsel and the support of Deloitte Financial Advisory Services S.p.A. (“Deloitte). It was comprised of four separate areas of investigation, namely:

Telecom Italia Sparkle – further investigation of the traffic flows (particularly voice traffic) between the company and some of its subsidiaries (Telecom Italia Sparkle North America, Telecom Italia San Marino and Telecom Italia Sparkle of Singapore) and third party telephone operators, after the orders issued on 23 February 2010 by the judge in the preliminary investigation (GIP) of the Rome Court, at the request of the Rome Public Prosecutor’s Office, as part of the criminal proceedings for alleged tax fraud pending against some ex-directors, ex-employees and employees of Telecom Italia Sparkle S.p.A., among others;

The Security Department” of Telecom Italia S.p.A.: in-depth analyses to understand the management methods employed by this department in order to verify the business and economic impact of the pending criminal proceedings and to identify further organizational actions to prevent such situations from reoccurring and/or to identify elements to support the legal advisors in determining what legal action might be taken to protect the Company;

SIM card registration (Prepaid Cards) – in depth investigation to understand the phenomenon of the unlawfully registered prepaid cards, to evaluate the organisational actions already taken or to be taken, and to identify elements to support possible legal actions to protect the company.

The “anomalous/irregular” sales of products/services – area of investigation focussed on specific aspects that are anomalies in relation to the ordinary course of business that might constitute business criticalities, consisting of in-depth investigation of the fraudulent phenomena detrimental to the Company created through Premium (“Non Geographic Numbers”) Services, the sale of products to operators with registered offices in San Marino, customised sales of ICT services/products/projects designated for Top and Enterprise customers.

The investigations in the four areas described above were assigned to the Forensic Division of Deloitte, and focussed on the period 2005-2009, with the sole exception of the Security department, for which the investigation of the management methods in use was extended to the period 2000-2007.

The results of the analysis carried out by Deloitte into the four investigation areas identified (further detail of which is provided in the Company Report on corporate governance and the share ownership – Greenfield appendix), contained in separate summary reports, were presented by Deloitte itself to the Directors and Auditors at the board meeting held on 16 December 2010. The results of the work done by law firm Paul, Hastings, Janofsky and Walker (attorney Bruno Cova) and by Bonelli Erede Pappalardo (Professor Franco Bonelli) were also presented and analysed during this meeting. As is known (and indicated in the press release issued on the same day, 16 December 2010), after the presentation and discussion of the issues, and also based on the opinion of the legal advisors Professor Bonelli and Attorney Cova, the Board of Directors of Telecom Italia, based on the knowledge available at that date, decided not to add the possible instigation of liability proceedings against the executive directors in office at the time of the facts examined to the agenda for the next shareholders’ meeting.

Monitoring of the evolution and developments of the Greenfield Project by the Control Body

The Board of Auditors, having noted that the project areas of the Greenfield Project (whose aims it shares) included issues that have already been subject to specific supervision activities by the Control Body, monitored the evolution of the Project from the start, and followed its implementation, receiving reports through its attendance during the year at the meetings of the Board of Directors and of the Committee for internal control and corporate governance (in some cases held jointly with the Board of Auditors itself). In addition, the Board of Auditors obtained direct information on the progress of the analyses included in the Project, proceeding to specific hearings with the management responsible for their execution, and also meeting with the internal coordinators of the various areas of investigation (from whom it received detailed reports on the organisation and composition of the four specific dedicated “work groups”, and on the operating methods used in conducting investigations) receiving, on such occasions, detailed information on the preliminary results (in essentially qualitative terms) of the ongoing investigations.

With reference to the resolutions passed by the Board of Directors of the Company at its meeting on 16 December 2010 (referred to in point A above), the Board of Auditors was asked by Consob (on 22 December 2010) to disseminate to the public a press release containing information about: (i) the assessments the Board of Auditors was making in relation to the information contained in the so-called “Deloitte Report”; (ii) the time within which the Control Body intended to take any decisions; (iii) the assessments of the Board of Auditors concerning the procedures actually adopted by the Board of Directors of the Company to take its decision not to add the possible instigation of liability proceedings against the directors in office at the time of the facts examined to the agenda of the next shareholders meeting, and the actions that the Control Body intended to take.

The Board of Auditors, in a press release issued on 23 December 2010, announced: (i) that it had started, also with the assistance of its own legal advisors, its analysis of the documentation supporting the summary reports presented to the Board of Directors on 16 December 2010 concerning the Greenfield Project and the opinions of the legal advisors of the Company, for any initiatives which the Board of Auditors deemed necessary; (ii) that it intended in any event to express its own positions within the time periods provided for submitting its report to the shareholders’ meeting pursuant to article 153 of the CFL and, for any other initiative, within the legal period of time, also based on the knowledge that becomes available. In relation to the procedures followed by the Board of Directors on 16 December 2010, attended by all the Auditors, the Board of Auditors clarified (again in the body of the aforementioned press release) that the Directors were provided with copies and comments on the summary reports of the Greenfield Project and the opinions of the legal advisors of the Company, followed by an extensive discussion with a number of questions and comments. Given the debate that occurred, the Board of Directors - taking the rumours and media leaks already in the public domain – thought it necessary in the interests of the Company to express its view immediately and not postpone the subject to be dealt with by a subsequent board meeting. Director Zingales expressed his total opposition to this. The Board of Directors also established that the approach described above could be modified if new facts and/or information emerged, also as a result of the judicial procedures underway. The Board of Directors also agreed that this resolution should be made public in a press release after the meeting, and all the Directors at the meeting, including Director Zingales, approved the text of the release. The Board of Auditors found that there had been no irregularities during the meeting of the Board of Directors.

Prior vigilance and control activities by the Board of Auditors in relation to some areas of investigation of the Greenfield Project

Some of the areas analysed in the Greenfield Project have previously been the subject of information gathering and checks by the Control Body, which reported the results of the activities it had undertaken in its Reports to the Shareholders’ Meeting pursuant to article 153 of the CFL (as well as in the “Comments of the Board of Auditors on the half-yearly results at 30 June 2007”): this documentation should therefore be referred to for detailed information about the activities initiated, as summarised below.

C.1

Telecom Italia Sparkle (TIS)

Report pursuant to article 153 of the CFL for the 2009 financial year: in Section Two of this document, the Board of Auditors provided an analytical reconstruction of the facts as they had learned of them, and of the actions set in motion by the Control Body, and reported the decisions taken in this respect by the Board of Directors of the subsidiary, and by the board of controlling company Telecom Italia S.p.A., with particular reference for the decision to postpone approval of the financial statements in order to complete the examination of legal documentation, and then proceed to make a correct evaluation and representation of the situation. The Board of Auditors also provided information on the documentary investigation undertaken, its perimeter and its results, finally referring to the comments made by the Company (and the consequent action taken) with reference to the recognition that errors were present, pursuant to IAS 8, which had led to restatement of the balances, to the close examination of the possible risks of an unfavourable outcome of the criminal proceedings against TIS and the fiscal risks the subsidiary was subject to (with the consequent allocations made).

C.2

The Security case

Report pursuant to article 153 of the CFL for the 2006 financial year: in this document (particularly Section Two), the Board of Auditors illustrated the activities undertaken in relation to the legal problems that involved the ex-Manager and some executives of the group Security Department, and to the issues of network security and traffic data handling, describing the specific weaknesses encountered in Group Security sector operations and the technical and organisational inadequacies of Company management of compliance with the privacy laws. In this Report the Board of Auditors explained the corrective actions taken by the Company, in some cases at the instigation or recommendation of the Control Body, and the in-depth investigations carried out by the Board itself.

Comments on the half-yearly report at 30 June 2007: this document, too, contained an update about the further corrective actions taken by the Company and a detailed account of the supervisory activities carried out by the Board of Auditors in relation to a number of aspects of the case that involved the ex-Manager of the Security Department.

Report pursuant to article 153 of the CFL for the 2007 financial year: The Board of Auditors reported, in point 13 of its Report, that its assessment of the internal control system as a whole, taking the necessarily “evolutionary” nature of the system into account, had shown no signs of significant criticalities. In relation to the specific case that had arisen, and the supervisory activities undertaken, it made the following clarification:

“……… in late 2007 and early 2008 the Board continued to perform its supervisory activities in the field of network security and traffic data management, as well as its supervision of some other specific aspects linked to the legal issues that have seen the involvement of the ex-Manager and some executives of the Group Security Department.

In particular, the Board of Auditors ascertained that the prior specific operational weaknesses of the internal control system encountered in the Group Security sector, evidenced in the agreed audit procedures carried out by the Statutory Auditor (i.e. the external auditors in office at the time), had gradually been attenuated, and

substantially eliminated during 2007, as a result of the procedural and organisational corrective actions taken by the Company.

* * *

In its Report to the Shareholders for 2006 the Board of Auditors communicated that the Person responsible for internal control had started – for precautionary purposes and also at the request of the Board of Auditors itself - a specific audit of consultancy and professional service expenses posted to the cost centre for the Senior Management of the Company.

The Board of Auditors examined the results of the work carried out by the internal control officer, which detected only a small number of weaknesses in the application of the procedure that the Board considers to be non-significant.”

Report pursuant to article 153 of the CFL for the 2008 financial year: The Control Body reported (in Point 13 of its Report) that it had continued monitoring, sometimes jointly with the internal control and corporate governance Committee, the progress of the so-called Tavaroli affair through its judicial developments, and the specific areas of compliance that this affair had shown to be important and sensitive, particularly in relation to the protection of personal data and traffic data. The Board of Auditors also pointed out that “once the phase of exceptional measures to manage the emergency was over” it had proceeded to “focus its attention on the structural profiles of compliance and internal control”.

With specific reference to the judicial proceedings in the so-called Tavaroli affair (which, with the notice that the investigation had been concluded pursuant to article 415-bis of the Italian Code of Criminal Procedure, and after having seen the Company entered in the register of subjects under investigation in relation to egislative decree no. 231/2001, as an outcome of the charging of employees and collaborators of Telecom Italia with a scheduled offence, i.e. of corruption of public officials), the Board of Auditors reported that it had appointed two independent external professionals to assist the Control Body in its analysis of the notice that the investigation had been concluded and of the copious case documentation, requiring them to carefully scrutinise this documentation in order to report to the Board of Auditors any facts or elements that had not already been considered by the Board itself in the activities it had undertaken in relation to the affair. The Board also reported that, on completion of this activity, it had defined a methodological pathway – identified based on criteria such as the relevance of the documents, the order of priority of the various interests and the actual feasibility of further investigations – to lay the basis for further work when the mandate of the Board of Auditors had been renewed.

At the request of Consob, a specific “Supplement” was added to this Report at the Shareholders’ Meeting held on 8 April 2009, containing information about the appointment of the external professionals, the activity they had undertaken and the outcomes. Consob had also asked the Control Body to report (in the “Supplement”) its conclusive assessment of the outcomes of the investigations and, more generally, of the evolution of the “Security” issue in 2008. In relation to the investigations carried out, and given that the criminal procedure was, at the time, at an early stage, and that the examination of the documentation was still underway, the Board of Auditors expressed the view that the examination and selection of the documentation filed in the aforementioned procedure should be continued “in order to identify any operational or procedural anomalies that might contribute to the evaluation of possible initiatives to be taken, and to request further work on the organisational arrangements and Organisational Model 231”.

Report pursuant to article 153 of the CFL for the 2009 financial year: in Section Two of the document, the Board of Auditors provided a description of the preliminary investigations it had undertaken: (i) from September 2006 to April 2009 (noting how the investigations had not evidenced structural criticalities in the internal control system such as to give rise to notable irregularities, had ascertained that the original weaknesses had been corrected, and had not detected elements that might constitute the basis for specific liabilities of the directors); (ii) from April 2009 to April 2010 (this description included a detailed analysis of the specific investigations the internal control officer had been asked to undertake, of the information the statutory auditor had been asked to provide in relation to some potential criticalities concerning the financial statements – presumably those for the 2003 financial year – of Tim Brasil, of the checks on the organisational adequacy of the Security Department and the activity of the internal control officer in relation to this department, including follow up activities, and of the information obtained on the evolution of the grip of the internal control system in Latin America, particularly for the Security sector, of the checks of Organisational Model 231, also in relation to the Security Department. . None of the checks and information acquired evidenced the emergence of new weaknesses or criticalities in the organisational, administrative and accounting system, the internal control system, or in Organisational Model 231). The Board of Auditors then reported its “Conclusive evaluations” in the document, which maintained that at that time none of the necessary elements on which a liability action against previous directors could be based had been identified.

C.3

SIM cards

Report pursuant to article 153 of the CFL for the 2008 financial year: In a specific paragraph of Point 13 of this document, the Control Body had pointed out that phenomena of unlawfully registered cards had emerged and it had therefore extended its monitoring to SIM cards. It acknowledged the current results of the audit activities undertaken by the Audit Department of Telecom Italia Audit & Compliance Services and the Security Department in their respective areas of competence, and the initiatives adopted to further strengthen supervision to prevent the phenomenon and to repress conduct and procedures that were not coherent with the ethical principles the Telecom Italia Group had adopted. The Board of Auditors also acknowledged the decisions made by the Company to pursue those collaborators responsible with determination, including the application of severe penalties.

Report pursuant to article 153 of the CFL for the 2009 financial year: in Section Two of the document, the Board of Auditors provided a description of the activities it had undertaken and its evaluation of these activities, in the following terms:

The audit of prepaid SIM cards incorrectly associated to customer ID documents continued in 2009. In particular, the Board of Auditors noted the cessation of approximately 2.9 million SIM cards and the regularisation of a further 760 thousand cards in 2009 alone. Moreover, during the year the prepaid card activation procedures were reviewed, to optimise the process of associating a copy of an identity document with a SIM card: IT solutions were implemented to activate the new mobile phone line only in the presence of the required documentation, and to optimise the quality of the documentation in the acquisition and archiving phase. Finally, the sales network incentive system was revised, introducing remuneration criteria correlated with the traffic actually produced by the customer, and the compliance of the acquisitions with the regulations in force.

The Board of Auditors believes that the activities carried out in 2009 have had a positive effect on the SIM card activation process, substantially eliminating the phenomenon of activations without documentation in the system”.

The activity of monitoring the phenomenon still continued in 2010, by means of the assumption of information by the management, which allowed the Board of Auditors to confirm the conclusions it had reached in 2009.

The results of the Deloitte investigation and the assessments of the Control Body

The Board of Auditors, also with the assistance of its own legal advisors, completed its analysis (i) of the summary reports on the Greenfield Project presented by Deloitte to the Board of Directors on 16 December 2010 (the so-called “Deloitte Report”; (ii) of the documentation supporting the summary reports, and (iii) the opinions of the Company’s legal advisors.¹

The Board of Auditors then obtained the opinions of its own legal advisors – Professor Paolo Montalenti, for the civil law aspects, and Professor Alberto Alessandri, for the criminal law aspects.

On the basis of the above, the Board of Auditors then made its own assessment of the state of play, which may be summarised as follows.

D.1.

The Sparkle case

So far as the Sparkle case is concerned, the Greenfield Project represents an important source of knowledge, which must necessarily be complemented by whatever emerges from future developments in the legal proceedings. The Board of Auditors therefore believes that it must suspend its opinion on this question for the moment, and in any case the period within which criminal proceedings may be brought against the executive directors in office at the time expires on 3 December 2012. In any event, the gravity of the issue and the extent of the damage require the Board of Auditors to take particular care.

D.2.

The Security Department

As mentioned in point C.2., the Board of Auditors, in its report pursuant to article 153 of the CFL on the financial statements at 31 December 2009, had concluded on this subject that “the state of the documentation in the proceedings (at April 2010), the documentation examined, the complexity of the analysis of any breaches of the obligations of directors and, if such breaches have occurred, their relevance in causing prejudice to the company in the absence of an involvement of the ex-directors in the criminal proceedings, not even in terms of non-prevention of a crime, lead us to conclude that currently none of the necessary elements on which a liability action against previous directors could be based has been identified. In any event the Board of Auditors reiterates that it will follow the developments in the Security affair legal proceedings with the greatest attention, as well as the emergence of any relevant finding, so as to be able to promptly review or update its assessment if this should be necessary”.

The findings of the Deloitte Report confirm the shortcomings in the organisational structure of the company (non-compliance), in particular in the internal control system and above all in the operational and control procedures of the Security department.

It also emerged from the investigations carried out in the Greenfield project that the internal control system was updated over time. With reference to the question of the feasibility of a liability action against the previous senior executives of the company, the following considerations apply.

Considering the many shortcomings reported in an area that is intrinsically delicate, the entity of the increase in costs, even if only budgeted costs, and the gravity of the episodes reported, it might be concluded that the preceding senior executives behaved in a negligent way, in the lateness of the start of interventions to correct the shortcomings in the internal control system after the emergence of anomaly indicators; however, given the extremely complex structure of the company, taking the circumstance that the internal control systems in a complex enterprise are subject to an essentially permanent “tuning” process into account, considering that reaction times can never be instantaneous, and that knowledge not so much of the system anomalies but of the underlying unlawful acts has not been proven, then the time that elapsed between the alarm signals and the start of the intervention process might not appear unreasonable. Considering all the elements indicated, and in particular the circumstance that in the light of the criminal proceedings – currently – it has not been proven that the senior executives were aware of the unlawful acts that underlay the organisational shortcomings, it may indeed be hypothesised that non-compliances imputable to the executive directors - i.e. their negligent conduct - subsist, but since the issue is not an absence of corrective action to remedy the shortcomings in the internal control system but rather possible delays in this, then the question is open to considerable debate.

Identifying the legal causal nexus between damages and non-compliances is also uncertain, since whether or not prompter corrective action would have led to the discovery of the unlawful activities is debatable.

Furthermore, the analysis of the costs led to the emergence of a not always clearly identifiable linkage between the various “cost” items and the technical concept of the damages payable.

Finally, the Board of Auditors again asserts that the absence of information about criminal investigations to determine the positions of the senior executives means that – at present – no relevant elements have been found to demonstrate their involvement in the alleged facts.

In conclusion, the Board of Auditors considers that while liability proceedings against the prior senior executives of the company could be based on some elements, such action would be very uncertain in terms of the capacity to impute the shortcomings in the internal control system to them, or in terms of a causal nexus and, to a certain extent, to identify and quantity the damage payable and for these reasons pursuing such action is – at present - inadvisable.

Since the criminal proceedings in relation to this affair do not in any event appear to have been concluded, the Board of Auditors will monitor the developments in the case, as well as the emergence of any relevant finding, so as to be able to promptly review or update its assessment if this should be necessary.

In any event, it emphasised that, for those executive directors hypothetically involved, the legal period within which proceedings may be started, five years after the director concerned ceased to hold office, has not yet expired (a period of time emphasised in the detail by the Company in the report on the Greenfield Project) and the Board of Auditors confirmed that it will not allow any period within which proceedings may be started to expire without having carefully evaluated any opportunity to take action that might arise in the meantime that could suspend this.

* * *

Moreover, significant elements have emerged from the documents filed by the Prosecutors and the Greenfield Project, confirming that the activities carried out by the Security department were carried out to the benefit of interests other than those of Telecom Italia, even considering their interests in the broadest sense of the word. In this sense, the Board of Auditors reports that, with the senior executives of the company, it is attempting to examine and explore in depth the feasibility of legal action by the Company against third parties for compensation for the damages caused by activities extraneous to the interests of the company, over and above any liability action against the preceding senior executives.

D.3.

Prepaid Cards

The results of the Greenfield Project indicate that it is possible to hypothesise breaches by the Telecom Italia senior executives in office at the time of their obligation to equip the Company with adequate organisational structures and of the obligation to intervene to remove any shortcomings encountered. Currently no elements have emerged on which liability proceedings could be based, also because criminal investigations are ongoing, and in any event, since the period after which action against the previous senior executives expires on 3 December 2012, any initiative would be premature. In this case too, the Board of Auditors will monitor the evolution of the situation with due attention, also to take account of the developments of the investigation by the judicial authorities recently announced in the press.

D.4.

Anomalous/irregular sales

With reference to the institution of liability proceedings against the directors, no elements have emerged to date.

* * *

In conclusion, in relation to the content of the Greenfield Project, the Board of Auditors will monitor the evolution of the specific actions taken by the Company to (i) eliminate certain anomalies, (ii) protect its own interests, and (iii) further improve the internal control system.

Milan, 18 March 2011

For the Board of Auditors

The Chairman

This translation is merely for the purposes of comprehension by non – Italian readers, in the evento f dispute the Italian text shall prevail.

Motions for resolutions

►

Shareholders’ Meeting of Telecom Italia S.p.A.

April 9, 2011: ordinary and extraordinary shareholders’ meeting on first call

April 11, 2011: extraordinary shareholders’ meeting on second call

April 12, 2011: ordinary shareholders’ meeting on second call; extraordinary shareholders’ meeting on third

Medium

Ordinary meeting

Financial statements for the year ended 31 December 2010 - related and consequent resolutions

Appointment of the Board of Directors - related and consequent resolutions

Adjustment of the fees due to external auditors for the period 2011-2018 - related and consequent resolutions

Authorisation for share buy-back and subsequent acts of disposal

Long Term Incentive Plan 2011 - related and consequent resolutions

Amendment to the Regulations governing Shareholders’ Meetings - related and consequent resolutions

Extraordinary meeting

Amendment of Articles 15, 18 and 19 of the Bylaws - related and consequent resolutions.

Authorisations to increase the share capital for cash and free of charge, by a total amount of Euro 15,500,000 to service the Long Term Incentive Plan 2011 - related and consequent resolutions

►

Financial statements for the year ended 31 December 2010 - related and consequent resolutions

Dear Shareholders,

The draft financial statements which are being submitted for the approval of the Shareholders’ Meeting show a net profit of Euro 3,512,580,577.

This result, in the light of the outlook for the 2011-2013 plan, enables us to propose to Shareholders the distribution of a dividend of Euro 0.058 per ordinary share and Euro 0.069 per savings share.

The amount of the total dividend distributed, without prejudice to the unit amount just indicated, will vary depending on the number of treasury shares in the Company’s portfolio (as of today 37,672,014 ordinary shares).

Besides the allocation to the legal reserve (up to one fifth of the capital issued), the proposed allocation for the profit for the period provides for the transfer to a special profits reserve (designated “Plans pursuant to Article 2349 of the Civil Code”) of:

Euro 4,960,292.15 to service the capital increase to be resolved upon, by the allocation of a corresponding maximum amount of profits in accordance with Article 2349 of the Civil Code, with the issue of new ordinary shares in the number necessary for assigning one free share for each three shares subscribed for cash by employees who have signed up to the “2010-2014 Broad-based Employee Share Ownership Plan”, approved by the Shareholders’ Meeting of 19 April 2010, subject to the terms and conditions and by the methods specified therein;

Euro 5,000,000.00 to service the capital increase to be resolved upon, by the allocation of a corresponding maximum amount of profits in accordance with Article 2349 of the Civil Code, with the issue of new ordinary shares in the number necessary for assigning one free share for each share subscribed for cash by employees who are beneficiaries of the “2010-2015 Long Term Incentive Plan”, approved by the Shareholders’ Meeting of 29 April 2010, subject to the terms and conditions and by the methods specified therein;

The amounts for dividends will be payable as of this coming 21 April 2011, while the coupon date will be 18 April 2011.

In view of all this, the Board of Directors submits for your approval the following

Proposed Resolution

The Shareholders’ Meeting of Telecom Italia S.p.A.,

having examined the 2010 annual financial report;

having taken note of the reports by the Board of Auditors and by the audit firm PricewaterhouseCoopers S.p.A.;

having considered that the overall number of shares with regular entitlement on the proposed coupon date will be a maximum of 13,407,963,078 ordinary shares and 6,026,120,661 savings shares;

having taken account of the current amount of the legal reserve;

in view of the authority given to the Board of Directors to increase the share capital by allocating profits, as stated in Article 5.4 of the Bylaws;

resolves

to approve the annual accounts of Telecom Italia S.p.A. for the period ending 31 December 2010, showing an annual net profit of Euro 3,512,580,577;

as regards the profit for the year,

to allocate to the legal reserve profits of 2,976,175.29, the sum required for the legal reserve to reach the amount of one fifth of the share capital at the time this resolution is adopted;

to allocate to a special reserve (designated “Plans pursuant to Article 2349 of the Civil Code” the amounts of (i) Euro 4,960,292.15 to service the gratis increase in share capital, by the allocation of profits, as provided in the “2010-2014 Broad-based Employee Share Ownership Plan”, approved by the Shareholders’ Meeting of 29 April 2010 and (ii) Euro 5,000,000 to service the gratis increase in share capital, by the allocation of profits, as provided in the “Long Term Incentive Plan 2010-2015” approved by the Shareholders’ Meeting of 29 April 2010.

to pay the Shareholders a total dividend calculated on the basis of the following amounts, which will be applied to the number of ordinary and savings shares that they own (thus excluding the treasury shares in the Company’s portfolio) on the coupon date of said dividend:

Euro 0.058 for each ordinary share,

Euro 0.069 for each savings share,

gross of the withholdings required by law. It remains understood that the profits not distributed as dividends shall be carried forward;

to carry forward the residual profits;

to authorise the Board of Directors - and on its behalf its Chairman - to ascertain in due course, on the basis of the actual number of shares for which dividends are paid, the amount of profit distributed to shareholders and the amount carried forward;

to make the dividend payable starting on 21 April 2011, with a coupon date of 18 April 2011.

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Appointment of the Board of Directors - related and consequent resolutions

Dear Shareholders,

You are called upon to renew the Company’s Board of Directors, appointed by the Shareholders’ Meeting of 14 April 2008, whose term of office expires with the approval of the financial statements for the 2010 financial year.

Specifically, the Shareholders’ Meeting is called upon:

to determine the number of Directors (under the Bylaws, between seven and nineteen), to establish the term of office of the new Board (up to a maximum of three financial years), and to determine its remuneration;

to appoint the Directors (using a slate voting system).

Regarding the above, in accordance with established practice, the Board of Directors will not formulate its own proposals, inviting shareholders to do so. In this connection, you are reminded that – under the current regulations – renewal takes place on the basis of slates filed at the Company’s offices at least twenty-five days before the date fixed for the Shareholders’ Meeting on first call, submitted by holders of voting rights who own a total of at least 0.5% of the ordinary shares, or other proportion required by Consob. By Resolution no. 17633 of 26 January 2011, Consob fixed this percentage for Telecom Italia at 1%. The procedures for exercising these voting rights are explained in detail in the notice convening the Shareholders’ Meeting.

This having been said by way of introduction, the Board of Directors, taking note of the provisions of law and of the Bylaws in the matter of the composition, term of office, remuneration and appointment procedure for the Board of Directors,

invites the Shareholders’ Meeting

to take the decisions within its competence on the appointment of the Board of Directors, as provided by the law and the Bylaws.

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Adjustment of the fees due to external auditors for the period 2011-2018 - related and consequent resolutions

Dear Shareholders,

The Shareholders’ Meeting of 29 April 2010 appointed the auditing firm PricewaterhouseCoopers S.p.A., for each year of the nine-year period 2010-2018, to the tasks of:

auditing the individual and consolidated financial statements of the Company;

verifying the regular corporate bookkeeping and correct recording of management actions in the accounting entries;

verifying the consistency of the management report with the individual and consolidated financial statements;

limited auditing of the abbreviated half-yearly consolidated financial statements for each of the nine interim periods ending from 30 June 2010 to 30 June 2018;

verification activities for the purpose of signing the Tax Returns (Modello Unico and Simplified and Ordinary 770 forms) for the 2010 - 2018 tax years;

auditing the consolidated financial statements included in Form 20-F, prepared in accordance with SEC rules;

auditing the internal controls pursuant to Section 404 of the Sarbanes-Oxley Act.

On 15 February 2011 the Company received a request to adjust the financial remuneration for the office of external auditors, in view of the occurrence of circumstances allowed for in the current provisions, and as indicated in the contract proposal formulated at the time by the auditing firm.

The request was transferred for action to the Board of Auditors which, on the basis of a special investigation conducted with the support of the Company departments, formulated the following proposal which the Board of Directors

invites the Shareholders’ Meeting

to approve.

Reasoned proposal by the Board of Auditors on the adjustment of the fees for the task of the legal auditing of the consolidated annual financial statements and internal controls, pursuant to the Sarbanes-Oxley Act, for each financial year in the nine-year period 2010-2018

The Board of Auditors of Telecom Italia S.p.A.

whereas

the ordinary Shareholders’ Meeting of Telecom Italia S.p.A., held on 29 April 2010, resolved to confer the appointment of legal auditors (formerly accounts auditors)² for the period 2010 – 2018 on PricewaterhouseCoopers S.p.A. with a total annual honorarium of Euro 1,811,300;

the proposal for the appointment of legal auditors approved by the Shareholders’ Meeting specifies that the times and the fees for the appointment can be reviewed in the event of the occurrence of the cases provided for in the current provisions and as indicated in the proposal itself³, in accordance with the applicable authorisation procedures;

in the course of the 2010 financial year, following the acquisition of control of Sofora Telecomunicaciones SA and its subsidiaries, the structure of the Telecom Italia Group significantly changed, a circumstance which constitutes one of the conditions referred to in the previous paragraph;

this alteration will entail increased effort on the part of PricewaterhouseCoopers S.p.A. for the legal auditing of the consolidated financial statements and for the coordination and supervision of the auditing of the internal controls which govern the process of drafting the consolidated financial statements, pursuant to section 104 of the Sarbanes-Oxley Act;

due to the increased activity which the auditing firm is required to perform for Telecom Italia S.p.A. for the legal auditing of the consolidated financial statements and the internal controls pursuant to section 404 of the Sarbanes Oxley Act, PricewaterhouseCoopers S.p.A., in a letter dated 15 February 2011, has asked for the adjustment of its remuneration for each of the financial years 2010-2018, observing that the case comes under the heading of exceptional and unforeseeable circumstances which justify reviewing the fees originally agreed for legal auditing services;

observing that

the proposal by PricewaterhouseCoopers S.p.A. for adjustment of its remuneration contains information relating to (i) the hours which are estimated to be necessary for performing the above increased activity; (ii) the diverse professional categories of the individuals involved in the performance of the activity; (iii) the respective remuneration;

the increase requested by PricewaterhouseCoopers S.p.A. amounts to Euro 34,700 per annum for auditing the Company’s consolidated financial statements and Euro 45,900 per annum for coordination and supervision in relation to the auditing of the internal controls which govern the process of drafting the consolidated financial statements, pursuant to section 104 of the Sarbanes-Oxley Act;

therefore, the hours and the remuneration for the auditing of the consolidated financial statements of Telecom Italia S.p.A. will be respectively increased from 1,900 hours to 2,360 hours and from Euro 112,100 to Euro 146,800, while the hours and the remuneration provided for the auditing of the internal controls which govern the process of drafting the consolidated financial statements of Telecom Italia, pursuant to section 104 of the Sarbanes-Oxley Act, will be respectively increased from 12,000 hours to 12,510 hours and from Euro 658,100 to Euro 704,000, all in addition to VAT (where applicable) and out-of-pocket expenses, to be invoiced on the terms and conditions agreed upon the conferment of the original appointment;

considering that

with reference to the above proposal, the Board of Auditors has received the positive assessments made by the competent bodies within Telecom Italia which, in their turn, have discussed with the executives of the external auditing firm the terms, including the economic terms, of the proposal, and the latter has also been examined, without comment, by the Company’s Internal Control and Corporate Governance Committee;

in formulating the proposal for increasing the remuneration, PricewaterhouseCoopers S.p.A. has provided suitable assessment considerations concerning, in particular, the economic conditions envisaged in the proposal;

the remuneration appears appropriate, substantially in line with the proposed appointment approved by the Shareholders’ Meeting of 29 April 2010, and also consistent with the use of professional resources required for the auditing activities described above.

The Board of Auditors, as a result of the assessments referred to above and of checks which it has made directly

proposes

to this Shareholders’ Meeting

for each of the financial years 2011-2018, to increase to Euro 146,800 the annual remuneration for the legal auditing of the consolidated financial statements of Telecom Italia S.p.A., and to Euro 704,000 the annual remuneration provided for the auditing of the internal controls which govern the process of drafting the consolidated financial statements of Telecom Italia, pursuant to section 404 of the Sarbanes-Oxley Act, in addition to VAT (where applicable) and out-of-pocket expenses, to be invoiced on the terms and conditions agreed upon the conferment of the original appointment and, consequently,

to increase, for each of the financial years 2011-2018, to Euro 1,891,900 the total annual honorarium to be paid to PricewaterhouseCoopers S.p.A.

all the other terms of the appointment conferred by the Shareholders’ Meeting of 29 April 2010 to remain unaltered.

THE BOARD OF AUDITORS

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Authorisation for savings share buy-back and subsequent acts of disposal

Dear Shareholders,

we submit for your approval the request for authorisation to buy-back and dispose of savings treasury shares, in the light of the reasons, according to the procedures, and on the terms set forth below.

Reasons for which this authorisation is requested

The principal objectives which the Board of Directors intends to pursue by means of the transactions for which authorisation is being proposed are as follows:

to intervene, in compliance with the current dispositions and accepted market practices, over the Company's savings shares in relation to contingent market situations, in order to promote liquidity and the orderly transaction of share dealings;

to offer savings shareholders an additional tool for converting their investment into cash;

to use savings treasury shares as a form of investment for efficient use of the corporate liquidity generated by the Company’s ordinary activity.

Any repurchasing would be carried out consistently with the corporate objectives of reducing indebtedness. The proposal, if approved, would not imply any obligation to buy-back.

We declare that the request for authorisation for buying-back treasury shares is not currently a preliminary to operations to reduce the share capital by cancelling the treasury shares purchased. As regards the disposal of treasury shares, the Board considers it advisable to be able to dispose of them in order to take opportunities for the maximisation of value that market conditions may present, in pursuance, therefore, of trading objectives.

Maximum number, category and par value of the shares to which the authorisation refers

At the date of formulating this proposal, the certified share capital of Telecom Italia S.p.A. is represented by 19,434,083,739 shares, of which 13,407,963,078 are ordinary shares and 6,026,120,661 are savings shares, all with a par value of Euro 0.55 per share. Currently the Company directly holds 37,672,014 ordinary treasury shares, and through subsidiaries a further 124,544,373 ordinary shares, which represent altogether about 0.835% of the share capital; there are no savings shares in the Company’s portfolio nor in those of its subsidiaries.

We ask you to authorise the buy-back of savings shares within the maximum limits permitted by law, fixing Euro 800,000,000 as the maximum spending limit for the purchase of savings treasury shares, on the understanding that purchases cannot be made for amounts for which there is no capacity in the available reserves as stated in the Company’s latest approved financial statements. The draft financial statements for the year ended 31 December 2010, submitted for the approval of the same Shareholders’ Meeting as is called for the approval of this proposal for authorisation, show available reserves of a total of approximately Euro 8,628,695,000.

In the event of disposals of treasury shares, it shall be possible, until the expiry of the authorisation by the Shareholders’ Meeting, to carry out subsequent buy-back transactions, provided always that the quantitative limits laid down by law (including in relation to the number of treasury shares that may be held by the Company at any one time) are not exceeded, and provided also that the spending limits and other conditions laid down by the Shareholders’ Meeting are not breached.

In the event of buy-backs or disposals of shares, the appropriate accounts postings must be made, in accordance with the provisions of law and applicable accounting principles. In particular, in accordance with IAS 32 (Financial instruments: presentation in accounts) the equivalent of the buy-back price of the treasury shares must be shown in the balance sheet as reducing the share capital by an amount corresponding to their par value, and as reducing the other net asset reserves by the difference; in the event of subsequent disposal the corresponding amounts of capital and reserves must be reinstated in the balance sheet.

Duration of authorisation

The duration of the authorisation requested is 18 months from the date that the Shareholders’ Meeting adopts the corresponding resolution. The Board may proceed with the authorised transactions in one or more tranches and at any time.

Minimum and maximum prices

The Board proposes that, subject to the maximum spending limit specified above, the purchase price of the shares should be set on each occasion in compliance with any regulatory prescriptions and accepted market practices, between a minimum and a maximum to be determined according to the following criteria:

the minimum purchase price must not in any event be lower than the weighted average of the official prices of the savings shares recorded by Borsa Italiana S.p.A. in the last ten business days before the date of purchase or of fixing the price, less 20%;

the maximum purchase price must not in any event be more than the weighted average of the official prices of the savings shares recorded by Borsa Italiana S.p.A. in the last ten business days before the date of purchase or of fixing the price, plus 20%;

As regards the disposal of the Company’s own treasury shares, the Board will establish the criteria on each occasion for determining the relative price, having regard to the procedures used for achieving this, the behaviour of prices of the shares in the period preceding the transaction, and the best interests of the Company.

In terms of daily volumes, the purchasing transactions would in any event be conducted in compliance with regulatory prescriptions and accepted market practices.

Method of carrying out the transactions

In consideration of the various purposes achievable by means of transactions on treasury shares, the Board proposes that authorisation be granted for making purchases on regulated markets, according to the operative procedures laid down by Borsa Italiana S.p.A., under Article 132 of Legislative Decree no. 58 of 24 February 1998 and Article 144-bis, paragraph 1, letters b) and c) of Consob Regulation 11971/1999 (purchases on regulated markets according to operative procedures laid down in the organisation and management regulations of the markets themselves, which do not permit direct matching of purchase dealing orders with predetermined selling orders; purchase and sale of derivative instruments negotiated in regulated markets which require the physical delivery of the underlying shares, on the conditions and with the characteristics specified by the said regulations).

As regards disposal transactions, the Board proposes that the authorisation should allow the adoption of any procedure which appears appropriate for achieving the desired objective.

Possible cancellation of the treasury shares bought-back

As we have said, the buy-back of treasury shares is not, at the present time, a preliminary to operations to reduce the share capital by cancellation of the treasury shares purchased.

In view of all this, the Board of Directors submits for your approval the following

Proposed Resolution

The Ordinary Shareholders’ Meeting of Telecom Italia S.p.A.,

having examined the explanatory report of the Board of Directors,

having examined the financial statements for the period ending 31 December 2010

resolves

to authorise, for a period of 18 months starting from the date of this resolution of the Shareholders’ Meeting, the purchase, in one or more tranches and at any time, of savings shares in Telecom Italia S.p.A., within the quantitative limits laid down by law and in any event within a maximum expenditure limit of Euro 800,000,000.

The purchase price must lie – in compliance with regulatory prescriptions or accepted market practices – between a minimum and a maximum corresponding to the weighted average of the official prices of the savings shares recorded by Borsa Italiana S.p.A. in the last ten business days before the date of purchase or of fixing the price, respectively minus or plus 20%. The purchase of the treasury shares must in any event take place within the limits of the available reserves, as appearing in the latest financial statements approved at the time of effecting the transaction. The purchases may be effected on regulated markets, according to the procedures laid down by Borsa Italiana S.p.A., in accordance with Article 132 of Legislative Decree no. 58 of 24 February 1998 and Article 144-bis, paragraph 1, letters b) and c) of Consob Regulation 11971/1999;

to authorise, for the same period of 18 months starting from the date of this resolution of the Shareholders’ Meeting, the disposal, in one or more tranches and at any time, of the Telecom Italia S.p.A. savings shares in the Company’s portfolio, with the power, in the event of disposals, to carry out subsequent buy-back transactions until the expiry of the authorisation by the Shareholders’ Meeting, provided always that the limits laid down by law as to the number of treasury shares that may be held by the Company at any one time are not exceeded, and provided also that the spending limits and other conditions as laid down above by these resolutions are not breached.

The disposals may be effected in accordance with the procedures permitted by the current legal and regulatory rules, at the discretion of Board of Directors;

to mandate the Board of Directors to arrange for the appropriate accounts postings to be made, following transactions to buy back or dispose of treasury shares, in accordance with the provisions of law and the accounting principles applicable at the time;

to mandate the Chairman of the Board of Directors and the Chief Executive Officer, jointly and severally and by means of agents, to undertake the transactions that are the subject of this resolution.

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Long Term Incentive Plan 2011 - related and consequent resolutions

Dear Shareholders,

Pursuant to Art. 114-bis of Legislative Decree no. 58/1998, we are submitting for your approval the “Long Term Incentive Plan 2011” (hereinafter the “Plan”).

The Plan consists in a long-term incentivisation initiative which, for the first time in Telecom Italia, unites the Senior Executives, the Top Management and a selected part of the management (“the Selected Management”) with regard to the achievement of specific predetermined triennial performance objectives, identical for the three categories of beneficiary.

This opportunity follows from:

the renewal, by the forthcoming Shareholders’ Meeting, of the Board of Directors, with the resulting appointment – to follow – of the new Senior Executives;

the expiry during the course of the 2011 financial year of the Performance Share Granting Plan 2008-2011, approved by the ordinary Shareholders’ Meeting of 16 April 2007 and aimed at the time at strategic resources of Telecom Italia or its subsidiaries (so-called Top Management), who as such did not have access to the “Long Term Incentive Plan 2010-2015” approved by the ordinary Shareholders’ Meeting of 29 April 2010.

The new initiative replicates the fundamental logic of the LTI Plan of last year, but involves in addition a broader swathe of management and has a rolling aspect to it, that is to say, it is designed in such a way that – normally, and subject to approval on each occasion by the Shareholders’ Meeting, on motions proposed by the Board – each year a new incentivisation cycle will be triggered, tailored to fit the timescale of the Company’s strategic planning. The incentivisation of the Senior Executives is an exception to this: it is set up as a one-off scheme, consistently with the standard duration of their term of office.

The objective is to reinforce the link between the remuneration of the management and, on the one hand, the Company’s performance as defined in the 2011-2013 industrial plan in terms of cumulative Free Cash Flow (so-called absolute performance: weight 35%), on the other hand, increase in value relative to a group of peers (so-called relative performance: weight 65%).

The level of performance over the three-year incentive period affects the level of the benefit that, at the end of the period,

for Selected Executives, is represented by a cash bonus commensurate (at target level) with up to 30% of current gross annual remuneration, with the option of investing 50% of the accrued bonus in ordinary shares of the Company at market price (and in any case not below par value), and the free assignment of matching shares by the issuer after two years, applying a ratio of one free share for each paid share, provided ownership of the subscribed shares, and the employment, have beenmaintained;

for the Top Management, is represented by a bonus commensurate (at target level) with up to 60% of current gross annual remuneration, 50% in cash and 50% in non transferable rights to the free assignment of shares of equivalent market value (based on the price at the moment the three year performance was assessed, and it being understood that – if the market value should be lower than the par value, the par value will be used), provided that the employment with the Group has continued;

for the Senior Executives (to whom this single incentive measure applies for the entire three-years of their term of office), is represented, at target level by: (i) a bonus of up to 150% of their fixed annual remuneration, as established by the Board of Directors, at the recommendation of the Nomination and Remuneration Committee, pursuant to article 2389, subsection 3, of the Italian Civil Code, and (ii) a number of shares of market value (at the moment the right is assigned, i.e. at the moment the Senior Executive becomes eligible for the Plan) equal to the bonus payable in cash.

To service the Plan, the scheme provides for mandates to increase the share capital for cash and/or free of charge, proposed to the Shareholders’ Meeting in extraordinary session and, residually, with regard to beneficiaries who do not have an employment relationship with Telecom Italia or one of its subsidiaries, the use of the treasury shares in the Company’s portfolio (always with the possibility of satisfying the assigned rights by payment of an equivalent, in the event of the non-availability of shares). The Board of Directors therefore asks the Shareholders’ Meeting for authorisation to use the aforesaid treasury shares, reserving the option to ask later for authorisation to purchase more shares, but only in the event that there is found to be an insufficiency in the above portfolio.

The Board of Directors invites you to see the information document analytically explaining the schemes, and submits for your approval the following

Proposed Resolution

The Shareholders’ Meeting of Telecom Italia S.p.A.,

having examined the information document made available to the public in accordance with the applicable regulations,

resolves

to approve the “2011 Long-Term Incentive Plan” in the terms appearing in the information document published in accordance with the applicable regulations;

to confer on the Board of Directors any power necessary or expedient for implementing the 2011 Long-Term Incentive Plan, making any changes and/or additions to it that prove necessary for the implementation of what has been resolved, including for purposes of compliance with any applicable regulatory provision; in particular, and merely by way of example, the Board of Directors shall have the power: (i) to identify the beneficiaries and determine for each of them the limitations and terms of the long-term incentive initiative; (ii) to prepare and approve the regulations for the initiative, to amend them and/or add to them; (iii) to make any changes to the terms and conditions of the 2011 Long-Term Incentive Plan in the event of changes to the applicable regulations or of extraordinary events liable to affect the said Plan;

to authorise the performance of actions to dispose of the Company’s ordinary treasury shares that are in its possession, on terms and according to procedures functional to the execution of the 2011 Long Term Incentive Plan, conferring a mandate (i) on the Chairman of the Board of Directors and the CEO, jointly and severally and by means of agents, to effect the transfer transactions and (ii) on the Board of Directors to arrange for the appropriate accounts postings to be made, in accordance with the provisions of law and the accounting principles applicable at the time.

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Amendment to the Regulations governing Shareholders’ Meetings - related and consequent resolutions

Dear Shareholders,

with regard to the amendments to the reference regulatory framework, which are essentially made necessary by the incorporation into the Italian legal system of the so-called Shareholders’ Rights Directive (Legislative Decree no. 27/2010), you are called upon to update the regulations governing Shareholders’ Meetings, as approved by the Shareholders’ Meeting of 6 May 2004 and subsequently amended in April 2007.

The current text does not give special consideration to the matter of questions formulated before the Shareholders’ Meeting (articles 10.2 and 13.2), nor to the possibility of exercising the right to vote by electronic means (which it is proposed to the Shareholders’ Meeting to introduce: Article 15.1). On the other hand, it makes reference to a regulation in the Bylaws on the right to add to the agenda at the request of shareholders, which has now fallen into disuse, because it has been superseded by the legal requirement (Article 12.1), and considers scrutinising procedures in the course of the voting which are now obsolete, in view of the adoption some time ago of the instrument called the televoter (Articles 6.2 and 16.1).

It is therefore considered that giving shareholders the right to ask questions before the meeting justifies a review of the regulatory provision on the power given to the Chairman of the meeting to impose a maximum length on speeches during the debate. In view of the new opportunity granted to shareholders by the legislation to ask their own questions, it is now proposed to leave the determination of the time available for speeches and replies to the prudent judgement of the Chairman, without predefined limits (Articles 10.2 and 11.2).

The amendment proposed to Article 4.1, finally, serves to clarify the possibility that representatives of the external auditors should be present at proceeding in the Shareholders’ Meeting, while in Article 11.1 the intention is to overcome excessive rigidity in the mechanisms for conducting the proceedings, deferring the matter of the procedures for pre-booking speeches to a decision to be taken at the time.

In view of all this, the Board of Directors submits for your approval the following

Proposed Resolution

The Ordinary Shareholders’ Meeting of Telecom Italia S.p.A.,

having examined the explanatory report of the Board of Directors,

having considered Article 20 of the Company Bylaws;

resolves

to amend the present Articles 4, 6, 10, 11, 12, 13, 15 and 16 of the Regulations governing Shareholders’ Meetings in the terms appearing in the text reproduced below, showing the amendments introduced:

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Amendment of Articles 15, 18 and 19 of the Bylaws - related and consequent resolutions.

Dear Shareholders,

in this Extraordinary Meeting, you are called on to examine a series of proposals to make changes to the Bylaws, completing the work done directly by the Board of Directors on 30 September 2010 last, to adapt the text of the bylaws to the regulations introduced with the implementation of the so-called Shareholders’ Rights Directive into Italian law (legislative decree no. 27/2010), and to legislative decree no. 39/2010 on the legal auditing of company accounts.

On that occasion the Board made minimal amendments necessitated by the coming into force of the legal provisions mentioned above, which on the one hand replaced the concept of “external auditor” with that of “legal auditor” (legislative decree no. 39/2010), and on the other introduced a series of important novelties concerning – for our purposes on this occasion – the process of appointing boards of auditors, the right of shareholders to request additions to the agenda of the shareholders’ meeting, the arrangements for establishing entitlement to vote in the shareholders’ meeting and electronic notification of proxies (legislative decree no. 27/2010). Today’s proposals are for some amendments relating to the exercising of options delegated by the lawmakers to be dealt with independently by the bylaws of the issuer, specifically regarding:

the possibility of calling the ordinary and extraordinary meeting of the shareholders in a single call, with the application of the quorums specified, respectively, for the ordinary meeting on second call, and for the extraordinary meeting on third call;

the possibility, for those companies required to prepare consolidated financial statements, to hold the shareholders’ meeting to approve the financial statements within 180 days of the end of the financial year, without prejudice to the 120 day limit within which the related documentation must be made available to the public;

the possibility of allowing electronic voting (in addition to postal voting);

the possibility of waiving the obligation to designate, for each shareholders’ meeting, a representative on whom those entitled might confer a proxy free of charge, with the application of the specific Consob regulations.

These are all options to be welcomed, where they take the form of faculties that are referred on each occasion to the prudent evaluation of the Board of Directors, which may exercise them, as appropriate, at individual shareholders’ meetings, taking the actual circumstances into account, particularly regarding developments in the regulatory and operational context. As regards the role of a representative designated by the company, a further intention of the proposed clause is to make the concept flexible, in the light, among other things, of the differing requirements of the diverse categories of shareholders. These might be best satisfied by designating several people to offer shareholders a service that matches their individual needs.

The interventions described affect articles 18 and 19, and it is further proposed to amend them as follows:

to modify the competencies of the shareholders’ meeting, consistently with the provisions in the Procedure for undertaking transactions with related parties adopted by the Board of Directors in its meeting of 4 November 2010, pursuant to Consob Regulation no. 17221/2010 (authorisation of transactions of great importance with related parties, in the absence of the approval of the independent directors). The Telecom Italia procedure in fact provides a mechanism for authorisation of transactions of major importance to be escalated to the ordinary shareholders’ meeting, where the transactions have not been approved by the independent directors (paragraph 37, letter b of the Procedure, which may be consulted on the company website www.telecomitalia.com - Corporate section of the Governance area). A resolution on this matter (in the form of an authorisation to proceed, subject to the need to obtain the favourable vote of a majority of the shareholders who are not related parties, pursuant to article 11, subsection 3 of Consob Regulation no. 17221/2010, a so-called whitewash) would be assigned to the shareholders’ meeting, pursuant to article 2364, subsection 1, no. 5, of the Italian Civil Code;

to add uploading in a specific section of the website to electronic mail as a tool for the electronic notification of a proxy. In this case too, the spirit of the intervention is to give the Board of Directors the greatest operational flexibility in the calling and organisation of the shareholders’ meeting;

to update the language of article 19, which contains references to the institution (now obsolete) of proxy collection by shareholders’ associations.

Finally, to take the opportunity presented by this extraordinary meeting called to update the bylaws to add a second section to article 15, merely for the purpose of clarifying – insofar as it might be necessary and possible – the fact that legal representatives may in turn confer their powers of representation of the Company, including in legal proceedings and with the right to subdelegate.

Shareholders who do not agree with the proposal to approve the modifications do not have the right of withdrawal.

The proposed resolution of the shareholders’ meeting is reproduced below, with a comparison of the relevant articles of the bylaws in their current form and after incorporation of the proposed amendments.

In view of all this, the Board of Directors submits for your approval the following

Proposed Resolution

The Shareholders’ Meeting of Telecom Italia S.p.A.,

having examined the explanatory report of the Board of Directors;

resolves

to amend articles 15, 18 and 19 of the Bylaws of Telecom Italia S.p.A. in the text reproduced below, with indications of the amendments made.


CURRENT TEXT	PROPOSED AMENDMENT
Article 15	Article 15
Art. 15.1 The representation of the Company vis-à-vis third parties and in legal proceedings shall pertain to the Chairman or if he/she is absent or unable to act, the Deputy Chairman, if one is appointed; it shall also pertain severally to each of the Chief Executive Officers.	Unchanged.
	15.2 – The legal representatives mentioned in the previous subsection have the right to confer powers of representation of the Company, including in legal proceedings, with the right to issue sub-proxies.


CURRENT TEXT	PROPOSED AMENDMENT
Article 18	Article 18
18.1 - An Extraordinary Shareholders’ Meeting shall be called whenever it is deemed desirable by the Board of Directors and when it is required in accordance with the law. If the quorum is not reached at the second call, there may be a third call.	18.1 - An ~~Extraordinary~~ Shareholders’ Meeting shall be called whenever it is deemed desirable by the Board of Directors and when it is required in accordance with the law. If the quorum is not reached at the second call, there may be a third call. It is, moreover, the right of the Board of Directors to call an ordinary or extraordinary Shareholders’ Meeting in a single call, as provided by law.
	18.2 - An ordinary shareholders’ meeting must be called at least once a year, no later than 180 days after the end of the company financial year. It shall resolve on the matters specified by law and authorise the execution of transactions with parties related to the Company, in those cases and by those methods provided in the pertinent procedure adopted by the Board of Directors pursuant to current law.
18.2 - Special meetings of savings shareholders shall be called by the common representative of the savings shareholders or by the Company’s Board of Directors whenever they deem this to be desirable or when requested in accordance with the law.	Renumbered
18.3 - Ordinary and Extraordinary Shareholders’ Meetings and special meetings of savings shareholders may be held in a place other than the registered office, provided it is in Italy.	Renumbered


CURRENT TEXT	PROPOSED AMENDMENT
Article 19	Article 19
19.1 - Those entitled to vote in the Ordinary Shareholders’ Meeting may exercise their right by mail in accordance with the applicable law.	19.1 – In accordance with the current regulations, those ~~Those~~ entitled to vote in the Ordinary Shareholders’ Meeting may exercise their right before the Shareholders’ Meeting by mail or, if specified in the call notice and in the ways specified therein, electronically. ~~in accordance with the applicable law.~~
19.2 - Every person entitled to vote may be represented at the Shareholders’ Meeting by giving a proxy to an individual or legal entity, subject to the restrictions established by law.	19.2 - Every person entitled to vote may be represented at the Shareholders’ Meeting by giving a proxy to an individual or legal entity, subject to the restrictions established by law. The company has the right to designate, for each shareholders’ meeting, one or more persons on whom those entitled to vote may confer a proxy, pursuant to current law. Any persons so designated, and the necessary operating instructions, shall be stated in the notice calling the meeting.
19.3 - Electronic notification of the proxy may be carried out by electronic mail, following the procedures indicated in the notice calling the Shareholders’ Meeting.	19.3 - Electronic notification of the proxy may be carried out by using the specific section of the Company internet site or by electronic mail, following the procedures indicated in the notice calling the Shareholders’ Meeting.
19.4 - In order to facilitate the collection of proxies among employees of the Company or its subsidiaries who hold ordinary shares of the Company and belong to shareholder associations satisfying the requirements established by law, special areas shall be made available in accordance with the procedures and time limits established by the Board of Directors either directly or through its agents where information can be provided and proxy forms collected.	19.4 - In order to facilitate ~~the collection of proxies~~ the expression of voting among employees of the Company or its subsidiaries who hold ordinary shares of the Company and belong to shareholder associations satisfying the requirements established by law, special areas shall be made available to those associations requesting them in accordance with the procedures and time limits established by the Board of Directors either directly or through its agents where information can be provided ~~and proxy forms collected~~.

2. to separately confer on the legal representatives pro tempore of the Company the powers necessary to fulfil all formalities needed for the resolutions adopted to be entered in the Business Register, accepting and introducing the amendments, additions or non-substantial deletions that may be required by the competent Authorities.

►

Authorisation to increase share capital for payment and free of charge by a total sum of euro 15,500,000 to service the Long Term Incentive Plan 2011 - related and consequent resolutions

Dear Shareholders,

A remuneration plan based on financial instruments was placed before the ordinary Shareholders’ meeting; it proposed that the beneficiaries of the plan would have the right to subscribe ordinary Telecom Italia shares for cash and/or receive ordinary Telecom Italia shares free of charge, according to their category.

In particular, the “Long Term Incentive Plan 2011” provides

for one category of employees, the offer of subscribing to ordinary shares in the Company, for cash, for a maximum total sum of Euro 5,000,000 (including share premium) reserved to the employees who are beneficiaries of the initiative, with subsequent free assignment of ordinary shares to those subscribing to the reserved increase in capital according to a pre-established ratio (one free share for each share subscribed for cash), provided that certain pre-established conditions are met;

for a different category of employees, the free assignment of ordinary shares for a total maximum of Euro 5,500,000.

To service the incentive and retention plan for the employees specified above, we therefore ask you to approve the assignment to the Board of Directors of powers to increase the share capital as indicated below, pursuant to article 2443 of the Italian Civil Code for a period of five years from the date of your resolution today:

power to increase the share capital, (i) for cash, by the issue of new ordinary shares of Euro 0.55 par value each, with dividend entitlement, by a maximum amount of Euro 5,000,000, excluding the right of pre-emption pursuant to article 2441, subsection 8, of the Italian Civil Code, and of article 134, subsection 2, of legislative decree no. 58/1998, to be reserved to some of the employees who are beneficiaries of the “Long Term Incentive Plan 2011” as previously identified by the Board of Directors of the Company, and then, subsequently (ii) for a maximum amount of Euro 5,000,000 by assignment of the corresponding maximum amount of profits or retained profits pursuant to article 2349 of the Italian Civil Code, with the issue of a sufficient number of ordinary shares for the assignment of one free share for every paid share subscribed, as above, subject to the terms and conditions and by the methods specified in the “Long Term Incentive Plan 2011”.

power to increase the share capital by a maximum amount of Euro 5,500,000 by assignment of the corresponding maximum amount of profits or retained profits pursuant to article 2349 of the Italian Civil Code, with the issue of ordinary shares reserved to some of the employees who are beneficiaries of the “Long Term Incentive Plan 2011” as previously identified by the Board of Directors of the Company, subject to the terms and conditions and by the methods specified for the initiative.

In relation to the aforementioned increase in capital for cash, the right to determine the amount of share premium for the new shares, in compliance with the applicable regulations, shall be attributed to the Board of Directors. Regarding the share issues to be carried out by allocation of the profits, the power to identify, in due

course, the profits and/or retained profits to be used for this purpose, shall be assigned to the Board of Directors, with a mandate to make the appropriate changes to the accounts consequent on the issue operations, in accordance with the legal provisions and the accounting principles that are applicable in each case.

It should be noted that shareholders who do not agree with the proposals do not have the right of withdrawal.

The proposed resolution for the shareholders’ meeting is reproduced below, with a comparison of the current form of article 5 and the revised version incorporating the proposed amendments.

The Board of Directors therefore submits for your approval the following further

Proposed Resolution

The Shareholders’ Meeting of Telecom Italia S.p.A.,

having examined the explanatory report of the Board of Directors,

given the statement by the Board of Auditors that the current share capital has been fully paid in

resolves

to attribute to the Board of Directors, pursuant to article 2443 of the Italian Civil Code, the right to increase the share capital as follows, for a period of five years from the date of this resolution:

(i) for cash, by the issue of new ordinary shares of Euro 0.55 par value each, with regular dividend entitlement, up to a maximum amount of Euro 5,000,000, excluding the right of pre-emption pursuant to article 2441, subsection 8, of the Italian Civil Code, and of article 134, subsection 2, of legislative decree no. 58/1998, to be reserved for some of the employees who are beneficiaries of the “Long Term Incentive Plan 2011” as previously identified by the Board of Directors of the Company, and then, subsequently (ii) for a maximum amount of Euro 5,000,000 by allocation of the corresponding maximum amount of profits or retained profits pursuant to article 2349 of the Italian Civil Code, by the issue of a sufficient number of ordinary shares for the allocation of one free share for every paid share subscribed, as above, subject to the terms and conditions and by the methods specified in the “Long Term Incentive Plan 2011”.

by a maximum amount of Euro 5,500,000 by allocation of the corresponding maximum amount of profits or retained profits pursuant to article 2349 of the Italian Civil Code, with the issue of ordinary shares reserved to some of the employees who are beneficiaries of the “Long Term Incentive Plan 2011” as previously identified by the Board of Directors of the Company, subject to the terms and conditions and by the methods specified in the “Long Term Incentive Plan 2011”.

Regarding the increase in capital for cash, the Board of Directors shall establish the share issue price (inclusive of the share premium) in accordance with the provisions of the “Long Term Incentive Plan 2011”, and shall also set the period of time within which they may be subscribed, providing that, if the resolved increase should not be fully subscribed within said period of time, the share capital shall be understood to have been increased by an amount equal to the subscriptions received up until that date. Regarding the increases in capital to be made available by allocation of the profits, the Board of Directors shall have the right to proceed to properly identify the profits and/or retained profits according to the last properly approved financial statements to be used for this purpose, with a mandate to make the appropriate changes to the accounts consequent on the issue operations, in accordance with the legal provisions and the accounting principles that are applicable in each case.

to amend article 5 of the bylaws as follows:


CURRENT TEXT	PROPOSED TEXT
5.1 - The subscribed and fully paid-up share capital shall be equal to Euro 10,688,746,056.45, divided into 13,407,963,078 ordinary shares with a par value of Euro 0.55 each and 6,026,120,661 savings shares with a par value of Euro 0.55 each.	Unchanged.
5.2 - In resolutions to increase the share capital by issuing shares for cash, the right of pre-emption may be excluded for up to a maximum of ten per cent of the previously existing capital, provided the issue price corresponds to the market value of the shares and this is confirmed in a report prepared by the firm appointed as accounts auditor .	Unchanged.
5.3 - The extraordinary Shareholders’ Meeting may resolve to allocate profits to employees of the Company or subsidiaries, by the issue of shares, including those of special categories, in accordance with paragraph one of Art. 2349 of the Civil Code.	Unchanged.
5.4 - For five years starting from 29 April 2010 the Directors may increase the share capital as follows: to service the “2010-2014 Broad-based Employee Share Ownership Plan,” as approved by the Company Shareholders’ Meeting of 29 April 2010, up to a maximum amount of Euro 4,960,292.15 by the allocation of the corresponding maximum amount of profits pursuant to Art. 2349 of the Civil Code, by the issue of new ordinary shares with a par value of Euro 0.55 each, with regular dividend entitlement, in the number necessary for the allocation of one free share for every three shares subscribed for cash by employee beneficiaries of the “2010-2014 Broad-based Employee Share Ownership Plan,” within the time periods and under the terms and conditions provided for therein; to service the “2010-2015 Long-Term Incentive Plan,” as approved by the Company Shareholders’ Meeting of 29 April 2010 (i) by the issue for cash of new ordinary shares with a par value of Euro 0.55 each, with regular dividend entitlement, in the maximum amount of Euro 5,000,000, excluding the right of pre-emption pursuant to Art. 2441, paragraph 8, of the Civil Code, and Art. 134, paragraph 2, of Legislative Decree no. 58/1998, to be offered by subscription to employee beneficiaries of the “2010-2015 Long-Term Incentive Plan”, and subsequently (ii) up to a maximum amount of Euro 5,000,000 by the allocation of the corresponding maximum amount of profits pursuant to Art. 2349 of the Civil Code, by the issue of new ordinary shares with a par value of Euro 0.55 each, with dividend entitlement, in the number necessary for the allocation of one free share for every share subscribed for cash, as described above, by employee beneficiaries of the “2010-2015 Long-Term Incentive Plan,” subject to the terms and conditions and by the methods specified therein. With respect to the capital increase for cash, the Board of Directors shall set the subscription price (including any premium) in accordance with the “2010-2015 Long-Term Incentive Plan,” respectively, and it shall also set suitable time limits for its subscription, providing that if the increase resolved is not fully subscribed within that time limit, the capital will be increased by an amount equal to the subscriptions received up to such time.	Unchanged.
	5.5 - For five years starting from [●] April 2011 the Directors may increase the share capital to service the “Long Term Incentive Plan 2011” as follows, as approved by the Company Shareholders’ Meeting of that date: (i) for cash, by the issue of new ordinary shares of Euro 0.55 par value each, with regular dividend entitlement, up to a maximum amount of Euro 5,000,000, excluding the right of pre-emption pursuant to article 2441, subsection 8, of the Italian Civil Code, and of article 134, subsection 2, of legislative decree no. 58/1998, to be reserved for some of the employees who are beneficiaries of the “Long Term Incentive Plan 2011” as previously identified by the Board of Directors of the Company, and then, subsequently (ii) for a maximum amount of Euro 5,000,000 by allocation of the corresponding maximum amount of profits or retained profits pursuant to article 2349 of the Italian Civil Code, by the issue of a sufficient number of ordinary shares for the allocation of one free share for every paid share subscribed, as above, subject to the terms and conditions and by the methods specified in the “Long Term Incentive Plan 2011”. up to a maximum amount of Euro 5,500,000 by allocation of the corresponding maximum amount of profits or retained profits pursuant to article 2349 of the Italian Civil Code, with the issue of ordinary shares reserved to some of the employees who are beneficiaries of the “Long Term Incentive Plan 2011” as previously identified by the Board of Directors of the Company, subject to the terms and conditions and by the methods specified in the “Long Term Incentive Plan 2011”. Regarding the increase in capital for cash, the Board of Directors shall establish the share issue price (inclusive of the share premium) in accordance with the provisions of the “Long Term Incentive Plan 2011”, and shall also set the period of time within which they may be subscribed, providing that, if the resolved increase should not be fully subscribed within said period of time, the share capital shall be understood to have been increased by an amount equal to the subscriptions received up until that date.
5.5 - For five years starting from 8 April 2009 the Directors may increase the share capital in one or more tranches by up to a maximum total amount of Euro 880,000,000 by means of cash issues, with or without a share premium, of up to a maximum of 1,600,000,000 ordinary shares with a par value of Euro 0.55 each (i) to be offered with the right of pre-emption to persons having entitlement, even if only for some of the shares, (ii) to be offered by subscription to employees of Telecom Italia S.p.A. and its subsidiaries with the exclusion of the right of pre-emption, pursuant to the combined effects of the last paragraph of Article 2441 of the Civil Code and Article 134(2) of Legislative Decree 58/1998.	Renumbered
5.6 - Resolutions to increase the share capital adopted by the Board of Directors in exercising the powers assigned above shall set the subscription price (including any premium) and a time limit for the subscription of the shares; they may also provide, in the event that the increase approved is not fully subscribed within the time limit established for each issue, for the capital to be increased by an amount equal to the subscriptions received up to such time.	Renumbered
5.7 - The Board of Directors may issue, in one or more tranches and for up to a maximum of five years from 8 April 2009, bonds convertible into ordinary shares to be offered with the right of pre-emption to persons having entitlement, up to a maximum nominal amount of Euro 1,000,000,000.	Renumbered

to confer on the Board of Directors, and, on behalf thereof, on the legal representatives pro tempore of the company, jointly or severally, all powers necessary to:

make the variations required on a case by case basis to article 5 of the Company Bylaws that are consequent on the resolutions, execution and completion of the increases in share capital described above, and to that end to make provision for all the advertising and other matters required by the regulations;.

to complete all the necessary formalities for the adopted resolutions to be entered in the Business Register, accepting and introducing into said resolutions the modifications added or suppression of non-substantial parts that might be requested by the competent authorities, as well as all powers necessary for the legal and regulatory compliances deriving from the resolutions adopted.

Useful information

Free copies of this report and of Annual report on corporate governance can be obtained by:


Revenues and EBITDA	In this year 2010, the Telecom Italia Group’s commitment is stronger as it follows a path towards the transformation of its business in both Italy and Brazil. Revenue performance in the fourth quarter confirms the trend of continuing improvement, aided by both the consolidation of the Argentina Business Unit and the appreciation of the real/euro exchange rate. In terms of organic revenues, the fourth quarter confirms this improvement over the previous quarters (-0.8% in the fourth quarter of 2010, -4.4% in third quarter of 2010, -5.3% in the second quarter of 2010 and -4.9% in the first quarter of 2010) thanks to the positive results achieved by Brazil and better performance by the Domestic area over last year. Careful control over costs combined with the benefits obtained from the Efficiency Projects begun under the Business Plan 2009-2011 have allowed the Group to reach EBITDA in 2010 of 11,412 million euros and an EBITDA margin of 41.4% and ensure stability in terms of both reported and organic figures.
Profit attributable to owners of the Parent	Profit attributable to owners of the Parent is 3,121 million euros in 2010. This profit figure was reached partly as a result of the above net positive impact connected with the acquisition of control of Sofora and also because of the tax benefit of more the 600 million euros recognized by Brazil for deferred tax assets. Excluding these factors and other non-recurring items, net profit would be 18.4% higher than in the year 2009 (2,608 million euros in 2010 compared to 2,203 million euros in 2009) thanks to better operating results and positive effects from financial management and investment management.
Financial discipline and debt reduction	Adjusted net financial debt is 2,481 million euros lower than at December 31, 2009 and 1,517 million euros lower compared to September 30, 2010. Disposals of investments and rigorous financial discipline led to this improvement and also neutralized the impact of distributing dividends, the payment of a total of 418 million euros to the Revenue Agency over the Telecom Italia Sparkle case and the payment 1.4 billion euros of income taxes.


*Consolidated Operating and Financial Data^()**

(millions of euros)		2010		2009			2008			2007			2006

Revenues		27,571		26,894			28,746			29,554			29,575
EBITDA⁽¹⁾		11,412		11,115			11,090			11,295			12,498
EBIT⁽¹⁾		5,813		5,493			5,437			5,738			7,269
Profit before tax from continuing operations		4,127		3,339			2,894			4,120			5,366
Profit from continuing operations		3,579		2,218			2,217			2,459			2,855
Profit (loss) from Discontinued operations/Non-current assets held for sale		(7)		(622)			(39)			(99)			(159)
Profit for the year		3,572		1,596			2,178			2,360			2,696
Profit for the year attributable to owners of the Parent		3,121		1,581			2,177			2,353			2,707

Capital expenditures		4,583		4,543			5,040			5,031			4,698

*Consolidated Financial Position Data^()**

(millions of euros)		12/31/2010		12/31/2009			12/31/2008			12/31/2007				12/31/2006

Total assets		89,131		86,267			86,223			88,593				90,322
Total equity		32,610		27,120			26,328			26,494				26,702
- attributable to owners of the Parent		28,819		25,952			25,598			25,431				25,622
- attributable to non-controlling interests		3,791		1,168			730			1,063				1,080
Total liabilities		56,521		59,147			59,895			62,099				63,620
Total equity and liabilities		89,131		86,267			86,223			88,593				90,322
Share capital		10,600		10,585			10,591			10,605				10,605
Net financial debt carrying amount ⁽¹⁾		32,087		34,747			34,039			35,701				37,301
Adjusted net financial debt ⁽¹⁾		31,468		33,949			34,526			35,873				37,200
Adjusted net invested capital ⁽²⁾		64,078		61,069			60,854			62,367				63,902
Debt Ratio (Adjusted net financial debt /Adjusted net invested capital)		49.1%		55.6%			56.7%			57.5%				58.2%

Headcount, number in the Group at year-end⁽³⁾

(number)		12/31/2010			12/31/2009			12/31/2008			12/31/2007			12/31/2006

Headcount (excluding headcount of Discontinued operations/Non-current assets held for sale)		84,200			71,384			75,320			79,238			80,373
Headcount of Discontinued operations/Non-current assets held for sale		-			2,205			2,505			4,191			2,836

Headcount, average number in the Group ⁽³⁾

(equivalent number)		2010		2009			2008			2007					2006

Headcount (excluding headcount of Discontinued operations/Non-current assets held for sale)		70,150		69,964			73,508			75,735					77,374
Headcount of Discontinued operations/Non-current assets held for sale		-		2,168			3,277			3,893					2,898
*Consolidated Profit Ratios^()**

	2010		2009			2008			2007			2006

EBITDA⁽¹⁾ / Revenues	41.4%		41.3%			38.6%			38.2%			42.3%
EBIT⁽¹⁾ / Revenues (ROS)	21.1%		20.4%			18.9%			19.4%			24.6%
Adjusted net financial debt /EBITDA⁽¹⁾	2.8		3.1			3.1			3.2			3.0


Operating Data

	12/31/2010	12/31/2009	12/31/2008	12/31/2007	12/31/2006

Fixed-line network connections Domestic BU at year-end (thousands)	17,609	18,525	20,031	22,124	23,698
Physical accesses at year-end (Consumer + Business) (thousands)	15,351	16,097	17,352	19,221	20,540
Fixed-line network connections BU Argentina at year-end (thousands)	4,107	4,060	4,010	3,918	3,821
Mobile lines at year-end (thousands)	100,244	71,958	71,199	67,585	57,860
Mobile lines Domestic BU (thousands)	31,018	30,856	34,797	36,331	32,450
Mobile lines Brazil BU (thousands)	51,015	41,102	36,402	31,254	25,410
Mobile lines Argentina BU (thousands)	18,211	16,281	14,390	12,292	9,589
Broadband accesses Domestic BU at year-end (thousands)	9,058	8,741	8,134	7,590	6,770
of which retail broadband accesses (thousands)	7,175	7,000	6,754	6,427	5,600
Broadband accesses Argentina BU at year-end (thousands)	1,380	1,214	1,032	768	448



(millions of euros)	2010	2009	2008	2007	2006

Income taxes and other income of the companies in Brazil (PIS and COFINS)	(334)	(271)	(282)	(266)	(221)


Chairman		Gabriele Galateri di Genola
Chief Executive Officer		Franco Bernabè
Directors		César Alierta Izuel
		Paolo Baratta (independent)
		Tarak Ben Ammar
		Roland Berger (independent)
		Elio Cosimo Catania (independent)
		Jean Paul Fitoussi (independent)
		Julio Linares López
		Gaetano Micciché
		Aldo Minucci
		Renato Pagliaro
		Mauro Sentinelli
		Luigi Zingales (independent)
Secretary to the Board		Antonino Cusimano

Footnotes

Footnotes


Chairman		Enrico Maria Bignami
Acting Auditors		Gianluca Ponzellini
		Lorenzo Pozza
		Salvatore Spiniello
		Ferdinando Superti Furga

Alternate Auditors		Silvano Corbella
		Maurizio Lauri
		Vittorio Giacomo Mariani
		Ugo Rock


Share capital (in euros)	10,688,746,056.45
Number of ordinary shares (par value 0.55 euros each)	13,407,963,078
Number of savings shares (par value 0.55 euros each)	6,026,120,661
Number of Telecom Italia ordinary treasury shares	37,672,014
Number of Telecom Italia ordinary shares held by Telecom Italia Finance S.A.	124,544,373
Percentage of ordinary treasury shares held by the Group to total share capital	0.83%
Market capitalization (based on December 2010 average prices)	18,020 million euros


Holder	Type of ownership	% stake in ordinary share capital

Telco S.p.A.	Direct	22.40%
Findim group S.A.	Direct	4.99%


	Rating	Outlook

STANDARD & POOR'S	BBB	Stable
MOODY'S	Baa2	Stable
FITCH RATINGS	BBB	Stable


(euros)	2010	2009	2008

Share prices (December average)
- Ordinary	0.98	1.08	1.09
- Savings	0.81	0.76	0.73
Dividends per share (1)
- Ordinary	0.058	0.050	0.050
- Savings	0.069	0.061	0.061
Pay Out Ratio(1) (*)	34%	74%	70%
Market to Book Value (**)	0.76	0.83	0.82
Dividend Yield (based on December average) (1) (***)
- Ordinary	5.93%	4.63%	4.59%
- Savings	8.47%	8.03%	8.36%


	2010	2009	Change (a-b)
(millions of euros)	(a)	(b)	amount	%	% organic

REVENUES	27,571	26,894	677	2.5	(3.8)
EBITDA	11,412	11,115	297	2.7	0.1
EBITDA MARGIN	41.4%	41.3%	0.1pp
ORGANIC EBITDA MARGIN	42.8%	41.1%	1.7pp
EBIT	5,813	5,493	320	5.8	5.3
EBIT MARGIN	21.1%	20.4%	0.7pp
ORGANIC EBIT MARGIN	22.6%	20.6%	2.0pp
PROFIT BEFORE TAX FROM CONTINUING OPERATIONS	4,127	3,339	788	23.6
PROFIT FROM CONTINUING OPERATIONS	3,579	2,218	1,361	61.4
PROFIT (LOSS) FROM DISCONTINUED OPERATIONS/NON-CURRENT ASSETS HELD FOR SALE	(7)	(622)	615	98,9
PROFIT FOR THE YEAR	3,572	1,596	1,976	123.8
PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT	3,121	1,581	1,540	97.4


	2010		2009		Change
(millions of euros)		% of total		% of total	amount	%	% organic

Domestic	20,068	72.8	21,663	80.5	(1,595)	(7.4)	(7.4)
- Core Domestic	19,065	69.1	20,580	76.5	(1,515)	(7.4)	(7.4)
- International Wholesale	1,569	5.7	1,710	6.4	(141)	(8.2)	(8.4)
Brazil	6,199	22.5	4,753	17.7	1,446	30.4	5.1
Media, Olivetti and Other Operations	713	2.6	670	2.5	43	6.4
Adjustments and Eliminations	(199)	(0.8)	(192)	(0.7)	(7)	(3.6)
Total consolidated revenues (excluding Argentina)	26,781	97.1	26,894	100.0	(113)	(0.4)	(4.4)
Argentina	798	2.9	-	-	798	-	24.3
Adjustments and Eliminations	(8)	-			(8)
Total consolidated revenues	27,571	100.0	26,894	100.0	677	2.5	(3.8)


Financial position structure

(millions of euros)	12/31/2010	12/31/2009	Change
	(a)	(b)	(a-b)

ASSETS
Non-current assets	73,153	68,611	4,542
Goodwill	43,912	43,615	297
Intangible assets with a finite useful life	7,903	6,284	1,619
Tangible assets	16,550	15,013	1,537
Other non-current assets	4,788	3,699	1,089
Current assets	15,589	16,423	(834)
Inventories, Trade and miscellaneous receivables and other current assets	8,177	7,855	322
Current income tax receivables	132	79	53
Investments	-	39	(39)
Securities other than investments, Financial receivables and other current financial assets, Cash and cash equivalents	7,280	8,450	(1,170)
Discontinued operations/Non-current assets held for sale	389	1233	(844)
of a financial nature	-	81	(81)
of a non-financial nature	389	1,152	(763)
	89,131	86,267	2,864
EQUITY AND LIABILITIES
Equity	32,610	27,120	5,490
Non-current liabilities	38,450	39,936	(1,486)
Current liabilities	18,071	18,244	(173)
Liabilities directly associated with Discontinued operations/Non-current assets held for sale	-	967	(967)
of a financial nature	-	659	(659)
of a non-financial nature	-	308	(308)
	89,131	86,267	2,864


Net financial debt

(millions of euros)	12/31/2010	12/31/2009	Change

	(a)	(b)	(a-b)
NON-CURRENT FINANCIAL LIABILITIES
Bonds	24,589	26,369	(1,780)
Amounts due to banks, other financial payables and liabilities	8,317	8,863	(546)
Finance lease liabilities	1,442	1,565	(123)
	34,348	36,797	(2,449)
CURRENT FINANCIAL LIABILITIES *^()**
Bonds	4,989	3,667	1,322
Amounts due to banks, other financial payables and liabilities	1,661	3,024	(1,363)
Finance lease liabilities	232	250	(18)
	6,882	6,941	(59)
Financial liabilities relating to Discontinued operations/Non-current assets held for sale	-	659	(659)
TOTAL GROSS FINANCIAL DEBT	41,230	44,397	(3,167)

NON-CURRENT FINANCIAL ASSETS
Securities other than investments	(13)	(15)	2
Financial receivables and other non-current financial assets	(1,850)	(1,104)	(746)
	(1,863)	(1,119)	(744)
CURRENT FINANCIAL ASSETS
Securities other than investments	(1,316)	(1,843)	527
Financial receivables and other current financial assets	(438)	(1,103)	665
Cash and cash equivalents	(5,526)	(5,504)	(22)
	(7,280)	(8,450)	1,170
Financial assets relating to Discontinued operations/Non-current assets held for sale	-	(81)	81
TOTAL FINANCIAL ASSETS	(9,143)	(9,650)	507

NET FINANCIAL DEBT CARRYING AMOUNT	32,087	34,747	(2,660)
Reversal of fair value measurement of derivatives and related financial assets/liabilities	(619)	(798)	179
ADJUSTED NET FINANCIAL DEBT	31,468	33,949	(2,481)
*Detailed as follows:*
*TOTAL ADJUSTED GROSS FINANCIAL DEBT*	39,383	42,980	(3,597)
*TOTAL ADJUSTED FINANCIAL ASSETS*	(7,915)	(9,031)	1,116

^()of which current portion of medium/long-term debt:*
Bonds	4,989	3,667	1,322
Amounts due to banks, other financial payables and liabilities	919	2,576	(1,657)
Finance lease liabilities	232	250	(18)


Net operating free cash flow

(millions of euros)	2010	2009	Change

EBITDA	11,412	11,115	297
Capital expenditures on an accrual basis	(4,583)	(4,543)	(40)

Change in net operating working capital:	(223)	(185)	(38)
Change in inventories	96	(30)	126
Change in trade receivables and net amounts due on construction contracts	13	336	(323)
Change in trade payables ^()*	(175)	(376)	201
Other changes in operating receivables/payables	(157)	(115)	(42)
Change in provisions for employees benefits	73	(173)	246
Change in operating provisions and Other changes	(466)	84	(550)
Net operating free cash flow	6,213	6,298	(85)
% of Revenues	22.5	23.4	(0.9) pp


Letter to the Shareholders	4
Report on Operations	6


	2010		2009		Change
(millions of euros)		% of total		% of total	amount	%	% organic

Domestic	9,393	82.3	9,883	88.9	(490)	(5.0)	(2.9)
EBITDA margin	46.8		45.6		1.2 pp		2.3 pp
Brazil	1,801	15.8	1,255	11.3	546	43.5	16.6
EBITDA margin	29.1		26.4		2.7 pp		2.9 pp
Media, Olivetti and Other Operations	(27)	(0.2)	(26)	(0.2)	(1)	3.8
Adjustments and Eliminations	1	-	3	-	(2)	-
Total consolidated EBITDA (excluding Argentina)	11,168	97.9	11,115	100.0	53	0.5	(0.2)
EBITDA margin	41.7		41.3		0.4 pp		1.7 pp
Argentina	245	2.1	-	-	245		16.2
EBITDA margin	30.7
Adjustments and Eliminations	(1)	-	-	-	(1)	-
Total consolidated EBITDA	11,412	100.0	11,115	100.0	297	2.7	0.1
EBITDA margin	41.4		41.3		0.1 pp		1.7 pp


(millions of euros)	2010	2009	Change

Purchases of goods	1,568	1,852	(284)
Portion of revenues to paid to other operators and interconnection costs	4,275	4,282	(7)
Commercial and advertising costs	2,100	2,012	88
Power, maintenance and outsourced services	1,258	1,254	4
Rent and leases	594	572	22
Other service expenses	1,588	1,508	80
Total acquisition of goods and services	11,383	11,480	(97)
% of Revenues	41.3	42.7	(1.4) pp


(equivalent number)	2010	2009	Change

Average salaried workforce – Italy	57,087	60,324	(3,237)
Average salaried workforce – Foreign	13,063	9,640	3,423
Total average salaried workforce ⁽¹⁾	70,150	69,964	186
Discontinued operations⁽²⁾– Foreign	-	2,168	(2,168)
Total average salaried workforce – including Discontinued operations	70,150	72,132	(1,982)


(millions of original currency)	Currency	Amount	Issue date

Telecom Italia Finance S.A. 107.7 million euros Floating Rate Notes Euribor 3 months + 1.3% maturing 3/14/2012 ⁽¹⁾	Euro	107.715	3/12/2010
Telecom Italia S.p.A. 1,250 million euros 5.25% maturing 2/10/2022	Euro	1,250	2/10/2010
⁽¹⁾ These bonds were issued as a result of the contract terms established by the current bonds denominated “Telecom Italia Finance S.A. Euro 118,830,000 Guaranteed Floating Rate Extendable Notes due 2010”, net of 20 million euros repurchased by the Company in 2009. In fact, under the Terms and Conditions, the holders of the bonds for a nominal amount of 31,115,000 euros waived their right to extend the bonds’ maturity to 2012 and were reimbursed for that amount on June 14, 2010. For the remaining amount of 107,715,000 euros, bonds were issued on March 12, 2010 denominated “Telecom Italia Finance S.A. Euro 107,715,000 Guaranteed Floating Rate Extendable Notes due 2012” maturing on March 14, 2012.


	12/31/2010		12/31/2009
(billions of euros)	Agreed	Drawn down	Agreed	Drawn down

Term Loan – expiring 2010	--	--	1.5	1.5
Revolving Credit Facility – expiring 2013	1.25	--	--	--
Revolving Credit Facility – expiring 2014	8.0	1.5	8.0	1.5
Total	9.25	1.5	9.5	3.0


	(millions of euros)		(millions of Brazilian reais)
	2010	2009	2010	2009	Change
	(a)	(b)	(c)	(d)	Amount (c-d)	% (c-d)/d	% organic

Revenues	6,199	4,753	14,457	13,161	1,296	9.8	5.1
EBITDA	1,801	1,255	4,201	3,476	725	20.9	16.6
EBITDA margin	29.1	26.4	29.1	26.4		2.7pp	2.9pp
EBIT	685	209	1.597	580	1,017	°	°
EBIT margin	11.0	4.4	11.0	4.4		6.6pp	6.5pp
Capital expenditures	1.216	964	2.836	2,671	165	°
Headcount at year-end (number)			10,114	9,783	331	3.4


		Period from October 13, 2010 to December 31, 2010
	(millions of euros)		(millions of Argentine pesos)

Revenues	798		4,142
EBITDA	245		1,269
EBITDA margin	30.6		30.6
EBIT	105		542
EBIT margin	13.1		13.1
Capital expenditures	188		975
Headcount at year-end (number)(*)			15,650


(millions of euros)	1/1 –4/30 /2009

Revenues	3
EBITDA	(2)
EBIT	(2)


BBNed group

(millions of euros)	1/1 – 9/30/2010	2009


Revenues	62	87
EBITDA	11	15
EBITDA margin	17.7	17.2
EBIT	(3)	(5)
EBIT margin	(4.8)	(5.7)
Capital expenditures	4	6
Headcount at period-end (number)	320	347



			Change (a-b)
(millions of euros)	2010 (a)	2009 (b)	amount	%	% organic

Revenues	18,985	20,474	(1,489)	(7.3)	(7.3)
EBITDA	9,089	9,508	(419)	(4.4)	(2.4)
EBITDA margin	47.9%	46.4%	1.5
Organic EBITDA margin	49.8%	47.3%	2.5
EBIT	4,969	5,161	(192)	(3.7)	(0.8)
EBIT margin	26.2%	25.2%	1.0
Organic EBIT margin	28.1%	26.3%	1.8
Profit before tax	4,610	2,456	2,154	°
Profit for the year	3,513	1,399	2,114	°
Capital expenditures	3,018	3,406	(388)
net financial debt	36,586	39,695	(3,109)
*headcount at year end () (number)**	49,636	54,236	(4,600)


	Profit for the year		Equity at 12/31
(millions of euros)	2010	2009	2010	2009

Equity and Profit for the year of Telecom Italia S.p.A.	3,513	1,399	25,564	23,068

Equity and profit for the year of consolidated companies net of the share attributable of Non-controlling interests	1,274	(170)	19,026	18,641

Consolidation adjustments:
- elimination of carrying amount of the consolidated investments			(31,384)	(30,587)
- losses and impairment losses on consolidated companies included in the results of parent companies	519	486	10,931	10,732
- elimination of goodwill recognized in Parent financial statements			(40,013)	(40,013)
- recognition of positive differences arising from purchase of investments			43,763	43,501
- effect of elimination of carrying amount of Parent’s shares held by Telecom Italia Finance	1	42	(121)	(136)
- valuation of investments using the equity method, net of dividends	99	67	123	101
- intragroup dividends	(2,645)	(229)	-	-
- losses (gains) on disposals of investments	46	-	-	-
- elimination of internal profits included in tangible and intangible assets	6	8	(26)	(33)
- change in ownership percentage of consolidated companies during the year	-	-	-	(5)
- derivatives	4	8	383	221
- Sofora group (Argentina): revaluation to fair value of the 50% interest held before the business combination and effects arising from the business combination	278	-	230	-
- other adjustments	26	(30)	343	462

Equity and Profit for the year attributable to owners of the Parent	3,121	1,581	28,819	25,952
Equity and Profit attributable to Non-controlling interests	451	15	3,791	1,168
Equity and Profit for the year in the consolidated financial statements	3,572	1,596	32,610	27,120


TELECOM ITALIA GROUP – ADDED VALUE GENERATED AND DISTRIBUTED

(million euros)	2010	2009

Direct economic value generated
a) Total revenue and operating income	27,826	27,174
b) Interest payable and dividends paid	117	104
c) Capital grains (capital losses) from disposals on non-current activities	11	(59)
d) Direct economic value generated (a+b+c)	27,954	27,219
Economic value distributed
e) Operating costs	12,204	11,929
f) Employee costs	4,021	3,734
g) Shareholders and providers of capital	3,207	3,183
c) Taxes and duties	1,446	1,277
i) Economic value distributed (e+f+g+h)	20,878	20,123
Economic value retained (d-i)	7,076	7,096


Customer segment	2010	2009

Consumer	70.92	69.86
Business	64.43	63.42
Top Clients (TC e PS⁽*⁾)	69.97	70.30
Total	69.39	68.60


	Customer segment	*Satisfaction with access service^()**		*Satisfaction with billing^()**
		2010	2009	2010	2009

Fixed telephony	Consumer	8.19	8.18	7.30	7.27
Fixed telephony	Business	7.86	7.80	6.83	6.73


	Customer segment	*Satisfaction with network coverage^()**		*Satisfaction with billing^()**
		2010	2009	2010	2009

Mobile telephony	Consumer	8.41	8.36	8.03	7.79
Mobile telephony	Business	8.14	8.15	6.85	6.83


Type of customer	CUSTOMER CARE		*Overall satisfaction^()**		*Courtesy and kindness^()**		*Ability to understand and satisfy needs and requests()**
Type of customer	CUSTOMER CARE		2010	2009	2010	2009	2010	2009

Consumer	187	Fixed telephony⁽¹⁾	7.39	7.19	8.73	8.47	8.31	8.01
Consumer	119	Mobile telephony⁽²⁾	8.33	7.81	9.19	8.81	8.90	8.46
Business	191	Fixed⁽³⁾	6.72	6.39	8.39	8.14	7.83	7.47
Business	191	Mobile⁽³⁾	6.47	6.67	8.30	8.27	7.60	7.49


HEATING SYSTEMS

			% Changes
		Telecom Italia S.p.A. 2010	2010 vs 2009	2010 vs 2008

Energy generated by heating oil	MJ	116,538,657	3.15%	(18.30%)
Energy generated by natural oil	MJ	436,186,064	(36.70%)	(36.28%)
Total energy for heating	MJ	552,724,721	(31.08%)	(33.18%)


HEATING SYSTEMS

			TI Group breakdown by Business Unit (%)
		TI Group 2010	Domestic	Brazil	Media	Olivetti

Total energy for heating	MJ	651,831,799	90.84%	0.00%	0.49%	8.67%


VEHICLES

			% Changes
		Telecom Italia S.p.A. 2010	2010 vs 2009	2010 vs 2009

Unleaded petrol consumption	l.	3,855,832	(27.73%)	(62.07%)
Diesel consumption	l.	17,953,949	1.56%	23.74%
*Total energy consumption for vehicles^()**	MJ	764,340,305	(4.71%)	(9.50%)


NUMBER OF VEHICLES AND DISTANCE TRAVELLED

			% Changes
		Telecom Italia S.p.A. 2010	2010 vs 2009	2010 vs 2008

Total numer of company vehicles	no.	19,905	(5.52%)	(7.19%)
Number of low emission vehicles^(*)	no.	19,624	(5.59%)	(6.98%)
Total distance travelled	km	320,016,025	3.67%	1.93%


ELECTRICITY PROCURED AND PRODUCED

			% Changes
		Telecom Italia S.p.A. 2010	2010 vs 2009	2010 vs 2008

Electricity from mixed sources^(*)	kWh	2,023,676,446	(3.33%)	(3.33%)
Electricity from renewable sources	kWh	40,211,687	(6.39%)	8.04%
Total electricity	kWh	2,063,888,133	(3.39%)	(3.13%)


ATMOSPHERIC EMISSIONS

			% Changes
		Telecom Italia S.p.A. 2010	2010 vs 2009	2010 vs 2008

CO₂emissions from vehicles	kg	43,723,046	(8.29%)	(12.28%)
CO₂emissions from heating	kg	36,961,112	(30.32%)	(32.77%)
Equivalent CO₂ emissions from the dispersal of HCFC/HFC ^(*)	kg	26,820,860	(8.73%)	(34.09%)
CO₂ emissions from electricity generation by cogeneration	kg	24,010,060	130.44%	370.79%
CO₂ emissions from electricity generation using diesel	kg	2,670,955	(26.61%)	(26.60%)
Total of other indirect emissions of CO₂ - under Scope1 GRI	kg	134,186,033	(6.92%)	(13.01%)
CO₂ emissions from purchases of electricity generated by mixed sources	kg	789,849,200	(5.18%)	(5.75%)
Total of other indirect emissions of CO₂ - under Scope2 GRI	kg	789,849,200	(5.18%)	(5.75%)
CO₂ emissions from work-home commuting ^(**)	kg	59,925,224	(8.48%)	(12.38%)
CO₂ emissions from air travel ^(***)	kg	10,003,995	(15.62%)	(39.40%)
Total of other indirect emissions of CO₂ - under Scope3 GRI	kg	69,929,219	(9.58%)	(17.64%)
Total CO₂ emissions	kg	993,964,452	(5.74%)	(7.73%)


WATER CONSUMPTION

			% Changes
		Telecom Italia S.p.A. 2010	2010 vs 2009	2010 vs 2008

Consumption of water drawn from artesian wells	m³	67,750	(20.50%)	(*)
Consumption of water provided by water supply companies	m³	4,341,947	(0.65%)	(4.42%)
Total water consumption	m³	4,409,697	(1.03%)	()**