tel-2023-12-31-en


Table of Contents
Directors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
The Business Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Key operating Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Consolidated financial position and cash flows performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Main commercial developments of the business units of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Main changes in the regulatory framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Events subsequent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Business outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Main risks and uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Information for investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Alternative Performance Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Corporate Governance Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Consolidated Statements of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
Equity and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28
Separate Consolidated Income Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30
Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Note 1 - Form, content and other general information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Note 2 - Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34
Note 3 - Scope of Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	47
Note 4 - Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48
Note 5 - Intangible assets with a finite useful life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	49
Note 6 - Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	50
Note 7 - Right of use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	52
Note 8 - Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	53
Note 9 - Financial assets (non-current and current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	54
Note 10 - Miscellaneous receivables and other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	56
Note 11 - Income taxes (current and deferred) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	56
Note 12 - Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	59
Note 13 - Trade and miscellaneous receivables and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . .	59

Consolidated Financial Statements 2023

Table of Contents


Telecom Italia Finance Group	1


Note 14 - Share capital issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	60
Note 15 - Financial liabilities (non-current and current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61
Note 16 - Net financial debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	62
Note 17 - Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	66
Note 18 - Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	70
Note 19 - Supplementary disclosures on financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
Note 20 - Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	76
Note 21 - Miscellaneous payables and other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	76
Note 22 - Trade and miscellaneous payables and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .	77
Note 23 - Disputes and pending legal actions, other information, commitments and guarantees . . . . . .	78
Note 24 - Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	80
Note 25 - Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81
Note 26 - Acquisition of goods and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81
Note 27 - Employee benefits expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81
Note 28 - Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	82
Note 29 - Internally generated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	82
Note 30 - Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	82
Note 31 - Gains/(losses) on disposals of non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	83
Note 33 - Finance income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	84
Note 34 - Segment reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
Note 35 - Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	87
Note 36 - Equity compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	89
Note 37 - Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	92
Note 38 - Events subsequent to December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	93
Note 39 - List of companies of the Telecom Italia Finance Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	93
Certification of the Consolidated Financial Statements pursuant to Luxembourg Transparency Law . . . .	94
Audit report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	95

Consolidated Financial Statements 2023

Table of Contents


2	Telecom Italia Finance Group

Directors’ report

The Business Units


	BRAZIL
	The Brazil Business Unit (Tim Brasil group) provides mobile telephone services using UMTS, GSM and LTE technologies. Moreover, the Tim Brasil group offers fiber optic data transmission using full IP technology, such as DWDM and MPLS and residential broadband services.		• TIM BRASIL SERVIÇOS E PARTICIPAÇÕES S.A. – TIM S.A.

	OTHER OPERATIONS
	This Business Unit provides financial assistance to TIM Group companies and the management of liquidity buffer through money market instruments. As of December 31, 2023: • The amount of notes (issued by Telecom Italia Finance and listed on Bourse of Luxembourg) is 1.015 million euros. • The amount of net financial debt is equal to -3.112 million euros.		• TELECOM ITALIA FINANCE

Key operating Financial Data

Consolidated Operating and Financial Data


(million euros)	31/12/2023	31/12/2022

Revenues	4.412	3.963
EBITDA	2.134	1.828
EBIT	827	581

Profit (loss) before tax from continuing operations	597	254
Profit (loss) for the year	511	221
Profit (loss) for the year attributable to Owners of the Parent	335	120

Capital expenditures	834	870

Consolidated Financial Position Data


(million euros)	31/12/2023	31/12/2022

Total assets	16.662	15.868

Total equity	7.581	7.911
Attributable to Owners of the Parent	5.934	6.366
Attributable to non-controlling interests	1.646	1.545
Total liabilities	9.081	7.957
Total equity and liabilities	16.662	15.868

Share capital	1.819	1.819
Net financial debt carrying amount	-133	-492

Consolidated Financial Statements 2023

Directors’ report


Telecom Italia Finance Group	3

Headcount


	31/12/2023	31/12/2022
Number in the Group at year end	9.276	9.405
Average number in the Group	8.924	8.803

Highlights

Merger of Cozani

On March 30, 2023, the TIM S.A.'s Extraordinary General Meeting approved the merger, by TIM, of Cozani RJ

Infraestrutura e Redes de Telecomunicações S.A., the special purpose company acquired from Oi S.A. – In

Judicial Reorganization on April 20, 2022.

The Board of Directors acknowledged about the obtaining of the regulatory consent and verified compliance

with the other conditions to grant full effectiveness to the Merger. Accordingly, the BoD declared that said

Merger and the consequent extinction of Cozani became effective, for all purposes and effects, on April 1, 2023.

Pursuant to the minutes and respective annexes of the Company's Meeting held on March 30, 2023, the

approved Merger did not result in a capital increase, nor in the issuance of new Company shares or in changes

in the Company's shareholders, with no need to be considered the replacement of shares or the right to

withdraw.

Agreement Regarding The Adjusted Closing Price For The Acquisition Of Oi’S Mobile Assets

On October 4, 2023, TIM S.A. communicated to the market that the Arbitration Chamber Court approved an

agreement regarding the post-closing adjustment (as defined in the contract), concluded, on one hand,

between the Company, Telefônica Brasil S.A. and Claro S.A., and on the other, Oi S.A. – In Judicial

Reorganization, as a way of putting an end to the controversy and the arbitration procedure related to the

post-closing adjustment. The final price of the portion of UPI Ativos Móveis attributed to the Company,

considering the post-closing adjustment negotiated in the agreement, was 6,68 billion reais (1,2 billion euros),

taking the closing date as reference.

Taking into account TIM's adjusted final price, the Company redeemed a portion corresponding to half of the

amount that had been deposited in court and subsequently transferred to the Arbitration Chamber (equivalent

to approximately 317 million reais (59 million euros) on the closing date, updated by the 100% variation from

the CDI until the deposit in court, plus interest and/or monetary correction, applicable until the date of the

respective redemption), and the remaining amount was redeemed by Oi S.A. – In Judicial Reorganization as

part of the purchase price of the UPI Movable Assets attributed to the Company.

Parent's activity

In 2023 the Parent’s activities continue to be segmented into two business: holding of participations and

financial assistance to Telecom Italia Group (“TIM Group”) companies.

MACROECONOMIC ENVIRONMENT

The international scenario was, for one more year, marked by many uncertainties and volatility with high

inflation rates with resistance to be reduced, led by commodity, food, and logistical and production bottleneck,

as well as a reduction in GDP growth rates in most countries. The United States showed a slowdown in the

inflation rate to 3,4%, and GDP growth of 2,5% compared to an expansion of 2,1% in 2022. The economy in

Europe shows a low pace of growth, greatly impacted by the effects of the Russian invasion of Ukraine and

more recently the conflict between Israel and Hamas, affected the pace of the resumption of the post-

pandemic economy. The GDP of the Organization for Economic Co-operation and Development (OECD)

member countries increased 0,7% in the third quarter. The International Monetary Fund (IMF) points to a

forecast of 3,0% growth for the global economy in 2023.

In Brazil, after a 2022 with the most polarized presidential election in history, the country needed to advance

important reforms and also carry out a fiscal adjustment of a specific magnitude. At the end of the year, the

approval of a tax reform was achieved, even if only a part of it, which had been discussed for 30 years, in

addition to projecting the zeroing of the primary deficit by 2024.

Another favorable fact was the decrease in the unemployment rate 7,8% in 2023, lowest number since 2014

and 7,4% in the fourth quarter continuing a series of declines over the last quarters, impacted by the process of

immunization against COVID-19 started in 2022. With this quarter's results, the absolute number of

unemployed people decreased marginally compared to the previous quarter, to 8,1 million people.

Inflation, measured by the Extended Consumer Price Index (IPCA), ended 2023 at 4,62%, above of the target

the estimated target for the year (3,25%), but inside of the margin of the target of 1,5%. Despite having the

second largest nominal increase (7,14%), the Transport group had the greatest weight in the general inflation

index, with 1,46 percentage points. Gasoline, which is part of the group, was the sub-item with the greatest

weight among the 377 that make up the IPCA. In the year, the increase was 12,09%, with an impact of 0,56 pp

Also in the group are two other sub-items that make up the podium of the most relevant price increases for

Consolidated Financial Statements 2023

Directors’ report


4	Telecom Italia Finance Group

the IPCA. Registration and licenses increased by 21,22% in the year and weighed 0,53 pp in the IPCA. Air tickets

come in third place in the ranking, as they rose 47,24% in the year and contributed 0,32 pp to the index. In the

Health and personal care group, the biggest contribution came from the health plan (11,52% increase and 0,43

pp in the index). In Housing, the main positive contribution came from residential electricity (9,52% and 0,37

pp).

In 2023, the exchange rate recorded a considerable volatility, with the Real appreciating against the US dollar

in relation to the end of the previous year. At the last closing period, the American currency ended quoted at

4,85 reais, accounting for a decrease of 8,06%. Uncertainties regarding American inflation and external factors

such as the Russian invasion of Ukraine in addition to the confrontation that began in October 2023 between

Israel and Hamas, contributed to the oscillation scenario presented by the currency. In relation to the Brazilian

Real, the American currency recorded a high of 5,45 reais against a low of 4,72 reais during the year,

accounting for a change of 15,5% in a scenario of domestic uncertainties, fiscal risks and many discussions

about, for example, the Tax Reform Proposal, in addition to the new expenditure framework. Both measures

would be approved months later and helped reduce market uncertainty. The trade balance ended the year

with a surplus of 98 billion dollars, accounting for an increase of 60,6% compared to the end of 2022. Exports

closed the year at 339,7 billion dollars and recorded a positive change of 1,7% compared to 2022. Imports

recorded 240,9 billion dollars, accounting for a decrease of 11,7% in the annual comparison. The superávit

value represent the highest record of the entire historical series.

FINANCIAL HIGHLIGHTS

In terms of economic and financial performance in 2023:

• Consolidated revenues amounted to 4,4 billion euros, up by 11,3% on 2022.

• EBITDA amounted to 2,1 billion euros, up by 16,7% on 2022.

• Operating profit (EBIT) was 0,8 billion euros, up by 42,2% compared to 2022.

• The Profit for the year attributable to Owners of the Parent amounted to 335 million euros (120

million euros for 2022).

• Capital expenditures in 2023 amounted to 834 million euros (870 million euros in 2022).

• Net financial debt amounts to -133 million euros at December 31, 2023, up of 359 million euros

compared to the end of 2022 (-492 million euros).

NON-RECURRING EVENTS

In 2023, the Group recognized non-recurring net income connected to events and transactions that by their

nature do not occur continuously in the normal course of operations and have been shown because their

amount is significant. Non-recurring charges include, among others, any goodwill impairment changes,

charges associated with corporate reorganization/restructuring, provisions for regulatory disputes and

potential liabilities related to them, liabilities with customers and/or suppliers, provisions for onerous contracts

and prior-year adjustments.

Net non-recurring income


(millions of euros)	31/12/2023

Acquisition of goods and services	-6
Employee benefits expenses	-2
Impact on EBITDA	-8
Impact on EBIT	-8
Other Income from Investments	56
Other financial Income	-5
Impact on Profit (loss) before tax from continuing operations	43
Non recurrent fiscal impact	-15
Impact on Profit (loss) from continuing operations	29

In 2023, the non-recurring events are mainly related to the acquisition of the mobile business of the Oi Group in

Brazil. In particular, the net capital gain of 56 million euros (303 million reais) arose from the refunding of the

portion corresponding to half of the amount that had been deposited in court and subsequently transferred to

the Arbitration Chamber. The remaining amount was redeemed by Oi as part of the purchase price of UPI

Ativos Móveis attributed to the Company.

Consolidated Financial Statements 2023

Directors’ report


Telecom Italia Finance Group	5

Consolidated operating performance

The operating performance of the Group is almost entirely attributable to the Brazil Business Unit.


	Consolidated		Other operations		Brazil Business Unit
	(millions of euros)		(millions of euros)		(millions of euros)		(millions of reais)
	31/12/2023	31/12/2022	31/12/2023	31/12/2022	31/12/2023	31/12/2022	31/12/2023	31/12/2022	Changes
									Amount	%
							(a)	(b)	(a-b)	(a-b)/b

Revenues	4.412	3.963	—	—	4.412	3.963	23.834	21.531	2.303	10,7

EBITDA	2.134	1.828	-6	-11	2.141	1.839	11.562	9.993	1.569	15,7
EBITDA Margin	48,4	46,1			48,5	46,4	48,5	46,4		2,1 pp

EBIT	827	581	-7	-11	833	593	4.501	3.236	1.265	39,1
EBIT Margin	18,7	14,7			18,9	15,0	18,9	15,0		3,9 pp

Headcount at year end (number)	9.276	9.405	9	10			9.267	9.395	-128	-1,4
The average exchange rates used for the translation into euro (expressed in terms of units of real per 1 Euro) were 5,40158 in 2023 and 5,43993 in 2022.


	31/12/2023	31/12/2022

Lines at period end (thousands)	61.248	62.485
ARPU (reais)	29,5	26,1

REVENUES

Revenues in 2023 were entirely related to the Brazil Business Unit and amounted to 23.834 million reais (4.412

million euros), up by 10,7% on 2022.

The acceleration has been determined by Revenues from services that totaled 23.071 million reais (4.271

million euros), an increase of 2.242 million reais (442 million euros) compared to 20.829 million reais (3.829

million euros) in 2022 (+10,8%) with mobile service revenues growing 11,2% compared to 2022. This

performance is mainly related to the continuous improvement of the pre-paid and post-paid segments,

supported by the acquisition of the mobile telephone assets of Oi (Cozani).Revenues from landline telephone

services grew by 4.6% compared to 2022, driven by Ultrafibra's pace of expansion.

Revenues from product sales totaled to 763 million reais, or 141 million euros (702 million reais, or 129 million

euros in 2022).

Total mobile lines in place at December 31, 2023 amounted to 61,2 million, a decrease of 1,3 million compared

to December 31, 2022 (62,5 million). The change is attributable to the pre-paid segment for -1,6 million and for

+0,4 million in the post-paid segment. Post-paid customers represented 45,1% of the customer base of 2023

(43,6% at December 2022).

Ultrafibra's BroadBand activities recorded, as of December 31, 2023, a positive net growth in the customer base

of 86.4 thousand units compared to December 31, 2022. In addition, the customer base continues to be

concentrated on high-speed connections, with more than 50% exceeding 100Mbps.

Consolidated Financial Statements 2023

Directors’ report


6	Telecom Italia Finance Group

Mobile Average Revenue Per User (ARPU) for 2023 was 29,5 reais (5,5 euros), up 13,0% compared to the

figure posted in 2022.


	31/12/2023	31/12/2022

(millions of reais)
Net revenues	23.834	21.531
Service revenues	23.071	20.829
Mobile services	21.780	19.594
Fixed services	1.291	1.235
Product revenues	763	702

(thousands)
Lines at period end	61.248	62.485
Average Market Lines	61.457	62.514

(reais)
Mobile ARPU (mobile services/average market lines/months)	29,5	26,1

EBITDA

EBITDA in 2023 totaled 2.134 million euros, of which 2.141 million euros attributable to the Brazil BU.

Considering Brazil BU, EBITDA for 2023 amounted to 11.562 million reais (2.141 million euros), up by 1.569

million reais (302 million euros) year-on-year (+15,7%).

EBITDA in 2023 is affected by non-recurring expenses of 42 million reais (8 million euros) mainly related to the

development of non-recurring projects and corporate reorganization processes.

EBITDA for the Brazil BU net of the non-recurring component (Organic EBITDA), grew by 14,7% and is

calculated as follows:


	(millions of euros)		(millions of reais)		Change
	31/12/2023	31/12/2022	31/12/2023	31/12/2022	Amount	%
	(a)	(b)	(c)	(d)	(c-d)	(c-d)/d

EBITDA	2.141	1.839	11.562	9.993	1.570	15,7
+/- Non recurring expenses/(income)	8	24	42	128	-86
= Organic EBITDA	2.148	1.863	11.604	10.120	1.484	14,7

The growth in EBITDA is attributable to the positive performance of service revenues strengthened by the

acquisition of the Oi-Cozani activities and the increase in prices of post-paid and TIM Controle tariff plans

The related margin on revenues stood at 48,7%, up in organic terms by 1,7% compared to 2022.

The changes in the main costs for the BU are shown below:


	(millions of euros)		(millions of reais)
	31/12/2023	31/12/2022	31/12/2023	31/12/2022	Change
	(a)	(b)	(c)	(d)	(c-d)

Acquisition of goods and services	1.687	1.562	9.111	8.490	622
Employee benefits expenses	338	311	1.823	1.690	133
Other operating expenses	384	367	2.075	1.992	83
Change in inventories	-18	-6	-96	-34	-62

Consolidated Financial Statements 2023

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Telecom Italia Finance Group	7

EBIT

EBIT totaled 827 million euros (581 million euros in 2022), an increase of 246 million euros.

Considering Brazil BU, EBIT for 2023 amounted to 4.501 million reais (833 million euros).

Organic EBIT, net of the non-recurring component, amounted to 4.543 million reais (841 million euros), with a

margin on revenues of 19,1% (15,6% in 2022), and was calculated as follows:


	(millions of euros)		(millions of reais)		Change
	31/12/2023	31/12/2022	31/12/2023	31/12/2022	Amount	%
	(a)	(b)	(c)	(d)	(c-d)	(c-d)/d

EBIT	833	593	4.501	3.236	1.265	39,1
+/- Non recurring expenses/(income)	8	23	42	128	-86
= Organic EBIT	841	616	4.543	3.364	1.179	35,0

PROFIT (LOSS) FOR THE YEAR


(million euros)	31/12/2023	31/12/2022

Profit (loss) for the year	511	221
Attributable to
Owners of the Parent	335	120
Non-controlling interests	176	102

CAPITAL EXPENDITURE

All capital expenditure is referred to the Brazil Business Unit. The BU posted capital expenditures in 2023 of

834 million euros, decreasing by 36 million euros on 2022 (870 million euros). Excluding the impact of changes

in exchange rates (+6 million euros), the capital expenditures would decrease by 42 millions euros. The

decrease is due to the reduced investments relating to the integration of Oi Group activities and the 4G

network, which was partially offset by the acceleration of investments in 5G technology and the continuous

expansion of FTTH-UltraFibra technology.

Consolidated financial position and cash flows performance

Non-current assets

Non-current assets are mainly referred to the Brazil Business Unit.

• Goodwill increased by 39 million euros as a consequence of changes in foreign exchange rates

applicable to the Group's Brazilian operations. Further details are provided in the Note "Goodwill".

• Other intangible assets decreased by 58 million euros representing the balance of the following

items:

– Capex (+184 million euros)

– Amortization charge for the year (-350 million euros)

– Disposals, exchange differences, reclassifications and other changes (for a net balance of

+108 million euros), of which +93 related to exchange rate differences.

• Tangible assets increased by 191 million euros representing the balance of the following items:

– Capex (+643 million euros)

– Depreciation charge for the year (-524 million euros)

– Disposals, exchange differences, reclassifications and other changes for a net balance of +72

million euros of which +88 related to exchange rate differences.

• Rights of use third-party assets: decreased by 68 million euros representing the balance of the

following items:

– Investments and increases in finance leasing contracts (+542 million euros)

– Amortization charge for the period (-444 million euros)

– Disposals, exchange differences and other changes (for a net balance of -165 million euros)

of which +78 related to exchange rate difference.

Consolidated Financial Statements 2023

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8	Telecom Italia Finance Group

Consolidated equity

Consolidated equity amounted to 7.581 million euros at December 31, 2023 (7.911 million euros at December

31, 2022), of which 5.934 million euros attributable to Owners of the Parent (6.366 million euros at December

31, 2022) and 1.646 million euros attributable to non-controlling interests (1.545 million euros at December 31,

2022).

Cash flows


(million euros)	31/12/2023	31/12/2022

Cash flows from (used in) operating activities	1.918	1.782
Cash flows from (used in) investing activities	-1.702	-1.614
Cash flows from (used in) financing activities	-484	-376
Aggregate cash flows	-268	-208
Net foreign exchange differences on net cash and cash equivalents	20	-45
Net cash and cash equivalents at beginning of the year	3.031	3.239
Net cash and cash equivalents at end of the year	2.763	3.031

Net financial debt

Net financial debt amounts to -133 million euros at December 31, 2023, up of 359 million euros compared to

the end of 2022 (-492 million euros).


(million euros)	Consolidated		Other operations		Brazil Business Unit
	31/12/2023	31/12/2022	31/12/2023	31/12/2022	31/12/2023	31/12/2022

Non-current financial liabilities	4.796	4.230	1.392	1.503	3.404	2.726
Current financial liabilities	2.084	1.640	1.323	936	761	704
Total gross financial debt	6.880	5.870	2.715	2.440	4.165	3.430
Non-current financial assets	-1.547	-1.706	-1.413	-1.550	-134	-156
Current financial assets	-5.466	-4.656	-4.414	-3.744	-1.053	-912
Net financial debt carrying amount	-133	-492	-3.112	-2.854	2.979	2.361

Further details are provided in the Note "Net Financial Debt".

Main commercial developments of the business units of the Group

Brazil

2023 was marked by the consolidation of TIM as the leader in coverage in the mobile segment, leading the

Network Consistency Quality Index. In the fixed sector, TIM maintained its strategy of massive migration of

FTTC to FTTH customers, increasing its UltraFibra customer base, in order to maximize customer experience

and profitability.

TIM reinforces its search for social developments and digitalization in Brazil, being selected, for the 16th

consecutive year, for the Corporate Sustainability Index – ISE B3, in addition to reaching more than 700

thousand people with educational benefits through TIM Institute. TIM's commercial partnership with

Descomplica continues to bring great results, with around 400.000 TIM customers registered on the teaching

platform, which offers products aimed at the ENEM exam, undergraduate and postgraduate courses, as well as

various free courses.

Marketing and brand positioning: we reinforced the credibility of our brand, supporting social developments

and digitalization in Brazil, while building-up the network quality attribute. We continue to position ourselves

at the forefront of society’s digital transformation. Our brand tagline “Imagine the possibilities”, invites our

customers to view the future in a positive light and demonstrates our commitment to being alongside them as

they face new challenges, opening a world of opportunities. To reinforce the positioning of our brand as a

brand that values our customers and brings advantages beyond just gigabytes of data, in 2023 TIM launched

an innovated partnership with one of the most important tech brand, Apple, being the 1st partnership in Latin

America of a telecom and Apple One services. We continued to foster our values and beliefs in Diversity in

Inclusion, by launching a Gender Equality manifest, alongside the continuous support of different activities.

Consolidated Financial Statements 2023

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Telecom Italia Finance Group	9

Mobile offers: In 2023, we continued our innovative and pioneering strategy in all consumer market segments

(prepaid, control and postpaid) continuing to push the boundaries of the market to keep TIM on the forefront of

innovation. We are the first and only ones to explore disruptive partnerships as: Amazon Prime Video with an

unique and exclusively partnership; a complimentary in-flight internet connectivity on GOL and LATAM

aircrafts; first and only operator in Brazil to embed Apple One on its plans, in addition to the partnership with

Zé Delivery, with recharges that generate cashback for the customer to use in the app. We also were the first

operator in LatAm to launch a trial offer to encourage the use of the best 5G on Brazil’s largest mobile network

(30 GB to be used for 30 days totally free), being pioneer in the use of remote e-sim activation on a large scale

within Latin American market. Through this strategy, we believe that we will sustain our relevance in the

domestic market and allow our customers to take full advantage of growing network capabilities, as we evolve

in the 5G era.

Customer Experience: We are constantly working to improve our customer experience and satisfaction using

technology. In this regard, the evolution of AI solutions and our digital channels are key. In 2023 we started

some use cases with generative AI: virtual agent assistant, real time speech and text with call summarization

and an evolved chat bot. We also implemented a strategy to position the MEU TIM app as the primary

touchpoint for our customers, focusing on a continuous journey informed by research and interviews with our

clients. Throughout this period, we consistently introduced new features to our digital channels, leveraging

these insights to enhance our ability to promptly address challenging issues that arise for our customers. In

2023, TIM was the leading company in the sector in resolution rankings from Anatel, Procon-SP and Reclame

Aqui.

Sales channels: We maintained our focus on channel productivity, segmentation, and quality of sales. In 2023,

our primary objectives centered around increasing the share of proprietary channels, advancing the

internalization process of e-commerce, and redesigning the MEU TIM app to strategically elevate customer

experience, expand the user base, and refine their digital journey. We successfully completed the initial phase

of internalizing the company's operations and e-commerce system, achieving a new sales record and elevating

unassisted sales channels. Our primary focus was on enhancing the Customer Journey by prioritizing the

optimization of conversion rates.

Residential market: In 2023, we continued focusing in the FTTC to FTTH customer migration, in order to

maximize customer experience and profitability while consolidating the asset-light model to expand our

footprint through neutral network partnerships as the one with I-Systems.

Corporate: For the purpose of shaping a new market in B2B with high growth opportunities, leveraging our

strengths in mobile, we will expand using the IoT connectivity as a steppingstone to expand towards solutions

and services, scaling up new opportunities in (a) IoT connectivity: mobile coverage, private network; (b) IoT

solutions beyond connectivity: smart lighting, precision agriculture, herd management; (c) IoT solutions beyond

connectivity (5G): autonomous operations, video surveillance & analytics. We are partnering with leading

companies in Brazil in four major verticals: agribusiness, logistics, utilities, and industry.

Main changes in the regulatory framework

Brazil

Revision of the model for the supply of telecommunications services

In 2019 Law 13.879 was approved, that came into force on October 4, 2019, establishing a new regulatory

environment for the regulation of telecommunications in Brazil. This is the most significant change in 20 years.

The new telecommunications framework allows fixed-line licensees to adapt their contracts from a concession

scheme to an authorization scheme. This transition from concession to authorization must be requested by the

licensee and requires the approval of the Anatel ("Agencia Nacional de Telecomunicações"). In return,

licensees must, among other conditions, make a commitment to investment in expanding fixed Broadband

telephony services to areas with no adequate competition for these services, in order to minimize inadequacies

and inequalities between areas of Brazil.

The change also affects the roles for authorizing the use of radio frequencies, establishing subsequent

renewals (previously limited to only one) and allows the exchange of radio frequencies between operators

(secondary spectrum market).

In June 2020, Decree 10.402 was published, which governs the procedure for adapting the concession to the

authorization regime, as well as the definition of the criteria for calculating investment commitments. The

Decree also established guidelines for the extension of radio frequency authorization, which will be held by

Anatel to guarantee greater security for investments in the sector.

Public policies applicable to telecommunications sector

Decree 9.612/2018 (“Connectivity Plan”) established another series of important rules, with a series of

guidelines for the adaptation of conduct terms, the onerous concession of spectrum authorization and

regulatory acts in general, including: (i) expansion of high capacity telecommunications transport networks; (ii)

increased coverage of mobile Broadband access networks; and (iii) broadening the coverage of fixed

Consolidated Financial Statements 2023

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10	Telecom Italia Finance Group

Broadband access network in areas with no Internet access through this type of infrastructure. This Decree

also establishes that the network resulting from the commitments must be shared from the moment it enters

into service, except where there is adequate competition in the relevant reference market.

In relation to the deadlines for the development of pipelines not compliant with current regulations,

authorizations for user licenses to radio frequencies, and the introduction of other statutory provisions

generally, planned investments will focus primarily on the expansion of mobile and fixed-line Broadband

networks and on specific areas of the country. Telecommunications networks built under the investment plan

will have shared access. The decree was amended by Decree 10.799/2021, which included public policies

priorities for the coverage of the “areas of census with public schools”; coverage of towns not served by mobile

telephone and the expansion of fixed access to Broadband in places without access. The decree was amended

by Decree 11.299/2022, which envisaged the possibility of a private federal network managed exclusively by

Telebras (Brazilian state company).

The decree also provides for the assignment of funds for the approval of projects approved by Connected Cities

and for the temporary supply of fixed or mobile Broadband. In addition, it regulates the private federal

network, which can be carried out by other public or private entities or organizations and the criteria for the

use and management of the network will be defined by the Federal Government under the terms established

in a deed of the Ministry of State for Communications.

In 2020, decree No. 10.480/2020 was published by the federal government, which regulates the antennas law

(law 13.116/2015) with the purpose of stimulating the development of the telecommunications network

infrastructure. This decree fosters development of telecom network infrastructure and is a major step towards

unlocking historical problems in the sector preventing its development (free right of way on highways and

railways, positive silence, small cells, dig once are some of the examples of such regulatory removal of

historical problems).

That same year, law 14.109/2020 authorized the use of FUST ("Fund for Universal Access to

Telecommunications Services"), including by the private sector, to expand connectivity in rural or urban areas

with a low human development Index (HDI) as well as policies for education and tech innovation of services in

rural areas. In June 15, 2021, Provisional Measure 1.018/2020 was transformed into Law No. 14.173/2021,

reducing charges for satellite internet terrestrial stations and changing some of FUST application rules. The

law reduces FUST collection between 2022 and 2026, to telecommunications operators that run

universalization programs approved by ANATEL Board of Directors with resources from the operators

themselves . The benefit will be valid for five years from January 1, 2022 and will be progressive: 10% in the first

year; 25% in the second year; 40% in the third year; and 50% from the fourth year onwards. In addition, the

new legislation removes the obligation to share towers within a distance of less than 500 meters from each

other. The elimination of this obligation is essential for the deployment of 5G in Brazil, including to ensure the

densification scenario expected for the new technology.

In the first quarter of 2022, the Federal Government signed Decree 11.004/2022, which regulates the use of

FUST and establishes directions for the use of resources by the Management Board, instituted in June 2022. At

the beginning of July, the internal regulations of the FUST Management Board were published and a budget

for 2023 was proposed for digital inclusion. In the second half of 2022, the Management Board defined, in its

Res. 02/2022, further details on the mechanisms for using the FUST, clarifying the role of the financial agent,

the accountability mechanism and the ANATEL function in the application of the reduction of the contribution

in the waiver mechanism. The Board also unveiled connectivity programs for public elementary schools and

projects to expand connectivity and grants for low-income users.

Revision of the service quality regulation

In December 2019, ANATEL approved the new RQUAL (“Regulation of Quality of Telecommunication

Services”), based on a reactive regulation. In this new model, quality is measured based on three main

indicators - a Service Quality Index, a Perceived Quality Index, and a User Complaints Index - and the results

are classified into five categories (A to E). Based on this reactive regulation, ANATEL can take measures

according to specific cases, such as consumer compensation, adoption of an action plan, or adoption of

preventive measures to ensure improvements in the quality standard.

After a joint work of Anatel, operators, and the ESAQ (“Quality Assurance Support Authority”) to define the

objectives, criteria, and reference values of the indicators, at the end of November 2021, ANATEL Board of

Directors formalized the reference documents that support this regulation: the Operational Manual and the

Reference Values; and established the operational entry into force on March 1, 2022. Currently, the results of

the quality indicators are already being published monthly by the Agency on its website, specifically in relation

to the Quality Seal (which stimulates competition in quality). In November 2023 the Agency determined the

temporary and partial suspension of the Reference Values Document and the quality seals for the years 2022

and 2023 and granted a period of 120 days for the presentation of a new proposal of method and parameters

for the definition of the quality seals.

Consolidated Financial Statements 2023

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Telecom Italia Finance Group	11

Revision of the General Consumer Rights Regulation

In November 2023, Anatel published the Resolution No. 765/2023, the New General Consumer Rights

Regulation (“RGC”), revoking the Resolution No. 632/2014 and establishing new general rules for customer

service, billing and offers, applicable to fixed, mobile, broadband and cable TV customers.

The new RGC will come into force in nine months with regard to general rules and in 15 months with regard to

registration of offers and price adjustment rules.

Data protection

On August 14, 2018, the LGPD (“General Data Protection Law” - Law 13.709/2018) was promulgated.

In December 2018, Provisional Measure 869/2018 created the ANPD (“National Data Protection Authority”),

also extended the entry into force of the Law to 24 months (August 2020).

In June 2020, Law 14.010/2020 deferred the coming into force of the LGPD, only for the provisions related to

fines and penalties, to August 2021. The other provisions of the law took effect in September 2020. In addition,

Decree 10.474/2020 came into force in August 2020, establishing the ANPD (Brazilian National Data Protection

Authority), as responsible for, among other things: developing guidelines for the National Data Protection

Policy; supervising companies and applying sanctions; and issuing regulations and procedures on personal

data protection.

In August 2021, articles relating to supervision and sanctions by the National Authority (ANPD) came into

force.

In October 2021, the regulation (CD/ANPD no. 1 of October 2021) was approved for the supervision and

sanction administrative process, under the scope of competence of the ANPD.

In January 2022, the regulation (CD/ANPD no. 2 of January 2022) was approved implementing the LGPD for

small processing agents.

In June 2022, a Provisional Measure nº 1.124 was published, transforming the Brazilian National Data

Protection Authority (“ANPD”) into an independent agency of special nature. The Provisional Measure has an

immediate effect but must be subject to a Congressional approval to be made into law.

In October 2022, Provisional Measure 1124 was converted into Law 14.460/22, transforming the Brazilian

National Data Protection Authority (“ANPD”) into an independent agency of special nature.

In December 2022, the new incident report form was published, with the obligation to report any breach of

personal data.

In January 2023, the ANPD became a self-sufficient entity connected to the Ministry of Justice and Public

Safety.

Digital Transformation, Internet of Things and Artificial Intelligence

In March 2018, the E-Digital Decree (9.319/2018 Decree) was published, in order to identify about 100 strategic

actions to encourage competition and the country’s level of online productivity, while increasing connectivity

and digital inclusion levels. These actions seek to address the digital economy’s main strategic questions,

including connectivity infrastructure, data use and protection, the IoT and IT security.

In November 2022, the MCTI (Ministério da Ciência, Tecnologia e Inovação) published the Order (“Portaria”) no.

6.543, which approved the Brazilian digital transformation strategy (“E-Digital”) for the 2022-2026 cycle. This

regulation has established actions focused on assuring growth of the telecommunications market, industry 4.0,

education, the market and international practices, the digitization of government platforms, privacy and

security.

The Decree on the National Plan for the Internet of Things (Decree 9.854/2019) was published in June 2019, to

regulate and promote this technology in Brazil. The IoT is referred to as the “infrastructure integrating the

provision of value-added services with the ability to physically or virtually connect things using devices based

on existing information and communication technology and their evolution, with interoperability”. The Decree

lists the following topics, defining them as necessary to further support the National Plan for the Internet of

Things: (i) science, technology and innovation; (ii) international integration; (iii) education and professional

training; (iv) connectivity and interoperability infrastructure; (v) regulation, security and privacy; (vi) economic

feasibility.

In order to develop an IoT environment in the country, Law 14.108/2020 was passed. This law exempts base

stations and equipment that integrate machine-to-machine (M2M) ecosystems from FISTEL (an administrative

tax collected by Anatel) for 5 years and, in addition, extinguishes the previous license. The definition and

regulation of M2M communication systems are established by Anatel.

In April 2021, the Brazilian Strategy for Artificial Intelligence was published by MCTI with the objective of

guiding the actions in favor of the development of research and innovation in solutions with the use of Artificial

Intelligence, as well as its conscious use and ethical and ensuring innovation. In February 2022, a commission

of legal experts was founded in order to design a legislative proposal that addresses the challenges and

opportunities of IA in Brazil. In April 2022, a Public Consultation was launched by the Senate in order to discuss

the new regulatory framework for artificial intelligence in Brazil. The Public Consultation is being held by a

commission of specialized jurists that will address economic-social contexts and benefits of artificial

intelligence (AI); sustainable development and well-being; innovation; AI research and development (resource

Consolidated Financial Statements 2023

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12	Telecom Italia Finance Group

funds and public-private partnerships); public security; agriculture; industry; digital services; information

technology; and healthcare robots.

In 2023, Bill No. 2.338/2023 was introduced to the Brazilian Congress, as the result of commission of legal

experts' work. The proposal establishes principles, rules and guidelines to regulate the development and

application of AI in the country. For 2024, a new version of Bill No. 2.338 is expected from the rapporteur of the

Temporary Committee.

5G Auction

In February 2021, Anatel Board of Directors approved the public notice for the 5G Auction. After which,

Brazilian Federal Court of Auditors (TCU) assessed the matter, which was completed on August 25, 2021. The

auction returned for analysis to ANATEL, which on September 24, 2021 approved the notice. The auction

envisaged in the second half of 2021 was held in November 2021. TIM acquired 11 lots, with a total value

offered of 1,05 billion reais (0,2 million euros), in 3 frequency bandwidths: 3,5 GHz, 2,3 GHz and 26 GHz. The

bandwidths acquired have a series of obligations that must be satisfied with financial contributions or the

construction of mobile and fixed network infrastructures. Consequently, TIM guarantees the spectrum capacity

necessary to pursue its growth nationally on the mobile market, being ready to respond to its customers’

demands and to explore new applications and develop innovative solutions calling for high-speed connectivity

and capacity.

The main commitments associated with each bandwidth are:

• 2,3 GHz: 4G coverage in certain municipalities and areas (south and south-east regions);

• 3,5 GHz: 5G coverage in all municipalities with a population equal to or greater than 30.000

inhabitants until 2029, plus fiber backhaul obligations in 138 municipalities plus additional

contributions to a new entity (EAF) to carry out the following projects: clean-up 3,5 GHz, deployment

of fiber in Amazonia and building a private network for exclusive federal government use;

• 26 GHz: contributions to a new entity (EACE) to carry out connectivity schools projects.

Standards for reporting sustainability information

On October 20, 2023, Brazil's Securities and Exchange Commission (CVM) published Resolution No. 193, which

provides for the preparation and disclosure of financial information reports related to sustainability, based on

the international standard issued by the International Sustainability Standards Board (ISSB). The CVM points

out in the document that the decision took into account the recommendations of the International

Organization of Securities Commissions (IOSCO), based on the conclusion that these standards provide an

effective and proportionate global framework of information aimed at investors, serving to help global financial

markets assess the risks and opportunities related to sustainability.

The resolution establishes, on a voluntary basis, the option for publicly traded companies, investment funds

and securitization companies to prepare and disclose financial information related to sustainability, based on

the international standard issued by the ISSB, as of the fiscal years beginning on or after January 1, 2024. In

addition, it establishes for publicly traded companies the obligation to prepare and disclose financial

information related to sustainability, based on ISSB standards, as of fiscal years beginning on or after January

1, 2026.

With this resolution, Brazil became one of the pioneering countries in adopting the ISSB standards.

Competition

Brazil

In 2023 the macroeconomic scenario recorded a faster than expected recovery of all the main indicators (GDP

growth, inflation, interest rates). This recovery can increase the purchasing power of the population. The latest

inflation estimates indicate an inflation rate of 4,5% at the end of 2023, in line with the central target, which,

added to a positive political scenario, has led to S&P lowering its country risk (the lowest level in the last 12

months). The government was able to address key economic issues and the Minister of Economy committed to

fiscal responsibility, overcoming previous concerns. The tax reform has been approved, with some exceptions

that will be reviewed by Congress. The objective of eliminating the public deficit in 2024 was maintained,

despite internal differences between Lula and Haddad. The economy continues to perform well, with the

Ibovespa growing by approximately 22% in 2023 and the interest rate at 11,75% at the end of the year (from

13,75% at the end of 2022). The market's beliefs regarding the decline in interest rates have been confirmed,

despite the international context with the continuation of the war in Ukraine and the conflict in Israel, but

some concerns about inflation remain due to: i) fears that the conflict between Israel and Hamas could impact

fuel prices; ii) the increase in energy prices (greater consumption due to the warmer climate). The next planned

tax priorities are already on track: regulation of sports betting and gambling, taxation of offshore and exclusive

funds.

Forecasts for the next few years suggest a more favorable context: better economic growth prospects, with

lower interest rates, positive for companies to attract investments and improve their cash flow, a more

attractive context for the growth of foreign investments, but with the fear of a slowdown trend. Favorable

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Telecom Italia Finance Group	13

political situation for the approval of key reforms, inflation under control and falling interest rates stimulate

consumption and reduce pressure on operating and financial costs. The Brazilian stock market is back positive

with record values and the unemployment rate is at its lowest.

The new government has maintained financial support for people with lower incomes and sought to increase

the minimum wage, which, together with a lower unemployment rate, is supporting consumption, including

that of telecommunications services.

The mobile telecommunications sector consolidated in 2022 with the finalization of the sale of Oi. The buying

companies are migrating their customer base and infrastructure. With one operator fewer, the sector has seen

some rationality prevail in the market and in competition, with service providers maintaining their focus on the

development of offers that are increasingly attractive to consumers, not only in terms of price but also with

additional services, for example through partnerships with companies supplying streaming of video contents.

The great challenge consists of increasingly involving customers, offering a more convenient, more fluid end-

to-end experience with all-digital integration solutions in order to reduce the churn rate and seek to monetize

the customer base.

In the pre-paid segment in December 2023 the customer base decreased by 4,0% year-on-year. After the

disconnection of the customer base acquired from Oi, the market returned to the 2020 trend of reduction in

the pre-paid market. With the exit of Oi (the most aggressive operator in terms of price) and the consequent

decrease in competition, the market should become more rational. The main aim of market operators was to

increase the percentage use of services, leveraging the SIM card consolidation process in progress on the

market, encouraging migration towards weekly (and monthly) or hybrid (Controle postpaid) plans, offering a

range of service bundles according to the needs of customers (unlimited voice calls or data packages). This

strategy aims to improve the customer base mix and ensure greater stability (and a reduction in the churn

rate) and the growth in ARPU.

In December 2023, the post-paid mobile segment recorded an increase in the customer base of 6,3% on an

annual basis, thanks above all to the post-paid ex-M2M (+4,8 million) but also to the post-paid segment M2M

(+4,0 million). This market will likely continue to be affected by migrations from pre-paid to hybrid "control"

segments. After the exit of Oi we expect greater market rationality. This growth is based on offer segmentation

strategies, through the introduction of distinctive characteristics in the use of data services (e.g. unlimited use

of data on specific apps such as WhatsApp, Facebook, Twitter, Netflix, etc.) in pursuing a “More for More”

policy logic that aims to guarantee a greater stability of prices and an effective repositioning of the customer

base on higher value offers (voice + data + bundle with OTT contents).

Service quality is still an element of differentiation. The telecommunication suppliers that have invested more

in the development of 4G networks (coverage and capacity) and in the improvement of processes shaping

customer experiences will have a greater capacity to apply premium prices because customers increase their

expectations and assign increasing importance to the quality of data services and higher value contents. The

main mobile operators already provide 4G coverage for over 100% of the Brazilian population (up to November

2023), with the three main operators offering average 4G availability in excess of 94% (according to the July

2023 Open Signal report).

2023 was a year of growth in 5G coverage and customer base. In December 2023, 5G coverage exceeded 300

cities and the customer base reached 20.5 million (8,0% of the market). Operators' ultimate goal is to be able

to increase mobile ARPU due to the consumption of new services enabled by 5G (e.g.: latency-based rates,

additional features such as entertainment packages). The 5G is expected to bring new applications for B2B

segment in a lot of industries.

The fixed Broadband market registered a slowdown growth in the last year with growth of +4,7% in December

2023 (YoY), against +8,9% in December 2022 (YoY), maybe impacted by smaller Internet service providers

(ISPs) underreport. The growth comes primarily from ISPs (+1,8 million year-over-year in December 2023,

representing 86% of total market growth of 2.1 million), which tend to offer cheaper services and reach areas

where Traditional players have limited infrastructure, thanks to a mix of organic growth and strategic

acquisitions, which has led to the increase in the number of strong market players, each eager to expand and

strengthen their regional presence across the country. Since 2021, some significant IPOs have been finalized

(Brisanet, Unifique and Desktop) besides other investment in ISPs, which brought some capital to increase

coverage. As a result, traditional incumbents have found it difficult to grow their customer base (Oi down 5,2%

year-on-year, Claro up 2,3%, Vivo 4,0% - the exception being TIM, up 11.9%). The population penetration rate

has already reached approximately 65% of the 74 million families and a phase of maturity has begun, but with

room for growth in the medium term compared to many other countries, supported by the improvement of the

macroeconomic situation.

In this context, in 2017 TIM adopted a commercial strategy to expand coverage and its customer base, offering

Ultrabroadband Internet services, mainly through FTTH, not only in some of the largest cities of Brazil, but also

in cities where opportunities are available for a similar high-quality service. In addition, focusing on reducing

friction points to improve retention. TIM has a customer base of over 800 thousand users as of December 2023

(11,9% growth year on year). In order to achieve faster and smarter growth, the way was to carve-out fiber

assets and deployment of asset light model to accelerate footprint growth. In a recent OpenSignal report, TIM

was recognized as first place for consistent broadband quality.

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There is also competition from other services outside the telecommunications sector, such as global and local

OTT providers, who offer internet-based content and services, including voice calls and messaging, without

paying for network infrastructure. OTT applications have become so important to customers that in many

cases they are offered by mobile operators as free services. OTT communications applications have a business

model that requires increased network traffic, but it is telcos that must finance and make the network

infrastructure investments needed to handle the increased internet traffic generated by OTT applications.

Research and development

Brazil

The Architecture & Technology Evolution department is responsible for Research and Development (R&D)

activities; its main tasks are to define technological innovation for the network and information technology, to

identify evolutionary needs for new technologies and devices, converging architectonic guidelines and

strategic alliances to use the new business models and guarantee that the network infrastructure evolution is

in line with the corporate strategy.

In 2023, the Architecture & Technology Evolution department was made up of more than 50 people, including

telecommunications, electrical and electronic, IT and other specialists with professional skills and experience,

which cover all areas of network and IT knowledge, meeting the need to innovate and support research and

development activities.

TIM Lab is the multifunction environment focused on innovation, which also plays a strategic role in supporting

credibility tests and trials, as well as PoCs (proofs of concepts), collaborating with the main suppliers and

technology partners through knowledge sharing, technological infrastructure for interoperability tests, staff

assessment and the definition of technical requirements; in synergy with the R&D department, it facilitates

innovation activities and promotes collaborations with universities and research institutes.

The TIM Lab Innovation Center has moved to São Cristóvão, Rio de Janeiro, in the State of Rio de Janeiro, has a

surface area of 850 m2 and can also be used as an innovation space open to new opportunities, guiding

innovation on the Brazilian telecommunications market and acting as national point of reference for R&D.

For 2024, TIM Lab is planning its expansion through investments from strategic TIM S.A. partners. This

expansion is planned to happen in a new dimension, creating the TIM Customer Experience Center (CEC), in

order to strength the validation capacity regarding new software, features, solutions, technologies, services,

and devices, and to grow its current structure in order to carry and develop more businesses and opportunities.

The Architecture & Technology Evolution Department has continued to work on projects and initiatives for the

evolution of the business of TIM, which can be grouped into the following macro groups:

• next generation network;

• with positive impact on the environment and society;

• future Internet applications;

• Open Lab Initiatives.

Next generation network projects

The reassignment of the 1.800 MHz, 850 MHz and 2.100 MHz bands from 2G/3G to 4G, with a multilayer

distribution configuration gives TIM S.A. important competitive advantages:

• a reduction in costs for LTE implementation, the extension of the LTE coverage area and the

activation of the carrier aggregation strategy, improving the customer experience through a higher

throughput;

• the best indoor coverage. In addition to the expansion of coverage, use of the 850/1.800/2.100 MHz

bandwidths could increase the capacity in cities already covered by the LTE bandwidth at 2,6 GHz, at

limited additional cost.

In this scenario, over 99% of current LTE terminals are compatible with the 1.800 MHz, 2.600 MHz bands and

other available bands. Therefore, the implementation of the multilayer LTE continues to be an excellent

strategy that benefits from the spread of devices.

At the end of 2022, TIM S.A. covered all cities in Brazil, assuring 100% of nationwide presence. One year after,

in December 2023, all Brazilian cities had also had LTE coverage, through the B28 low band (700 MHz) which

spectrum cleaning was completed in June 2019. These initiatives have anticipated TIM’s Industrial Plan in one

year.

Also in the end of 2023, TIM S.A. deployed the n78 band (3.500 MHz) in more than 200 cities, including all the

Brazilian capitals, with a 5G SA (Standalone) approach. Beyond that, TIM has almost the sum of its

competitors’ antennas.

Projects entailing a reduction of energy consumption

The expansion of "LTE RAN Sharing", in partnership with other mobile operators in Brazil to fulfill regulatory

obligations from the 4G spectrum auction, aims to define the architectural requirements, technical

assumptions and specifications for the "LTE RAN sharing" solution, optimizing network resources and costs. At

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Telecom Italia Finance Group	15

present, this is the largest agreement for RAN sharing worldwide and it supplies 4G services to the main cities

of Brazil.

The RAN sharing agreement allows TIM S.A. to promote the spread of LTE in the Brazilian rural areas, thanks

to effective sharing of spectrum, access and backhaul. After Oi’s acquisition, the LTE RAN Sharing, between

TIM S.A. and Telefónica based on the MOCN architecture, had expanded the benefits and efficiency of this

technical model. In this case, the energy consumption recorded for the site, dependent on the access

technology and coverage conditions, showed a reduction of up to 10%.

In December 2019, TIM S.A. and Telefónica stipulated new sharing contracts aimed at increasing the network

cost efficiency through the following initiatives:

• Single network: sharing of 3G / 4G networks in cities with less than 30k inhabitants, using the MOCN

architecture, to maintain the infrastructure of only one of the operators in these cities, allowing

completely redundant sites to be turned off. At the end of 2023, 11% of the agreement perimeter has

been deployed, generating energy efficiencies around 1,0 million reais (0,2 million euros). This

perimeter can deliver additional savings around 15 million reais (2,8 million euros) in 2024 regarding

Tower Co costs (housing, rental, base fee etc.) after tower dissolutions. The rollout of the rest of the

project will continue in 2024.

• 2G Switch-off: nationwide sharing of the 2G network using GWCN technology, enabling both

operators to switch off part (approximately 50%) of their network with the same technology,

consequently saving on energy and maintenance costs.After a minimum sharing period, operators will

be able to completely shut down their remaining 2G networks. At the end of 2023, around 40% of the

agreement perimeter has been deployed, generating energy efficiencies around 6,0 million reais (1,1

million euros).

Next generation network projects, future Internet applications, positive impact on the environment and society

UX Mapping & Device Healing – TIM S.A. started in 2023 the development of an application that will be

embedded in Meu TIM Android App and will be responsible for collecting information regarding user

experience (UX) associated with network and device information, that will be used as one of the inputs for the

network planning and optimization, and for troubleshooting activities. This first phase of the project will go

under production rollout in Q1-2024. Later, the application will evolve to assess the device configuration and

execute healing routines (procedures to reconfigure the smartphone to better fit the network), if the user

consents to. This device healing will be connected to Network / IT database healing, providing an E2E process

to improve user experience. This second phase is foreseen to be delivered in Q2-2024. The total cost of the

project is evaluated in approximately 1,4 million reais (0,3 million euros).

Internet of Things - It was back in 2018 that TIM S.A. launched the very first commercial NB-IoT network in

South America, to develop innovative services, aware that the mass introduction of the IoT can change the

mobile telephony market considerably, because it leverages the creation of services and - amongst others - is a

potential tool for agricultural uses, the connection of cars, traceability solutions and social-health care. In 2023,

TIM S.A. has leveraged public services through its NB-IoT coverage, becoming the main public-private partner

through delivering solutions for efficiency energy in public lighting: TIM S.A. has 150 thousand NB-IoT smart

lighting equipment deployed (27 times more compared to the previous year).

Agribusiness - Since 2018, TIM S.A. has been focusing on agri-food potential in Brazil, offering connections in

rural areas (not only for business applications but also for the digital inclusion of agrobusiness employees and

residents of small towns). In 2020, TIM strengthened its position in relation to vertical agriculture, with the

creation of the ConnectarAgro ecosystem which brings together TIM S.A., solution providers for the agri

segment and telecommunication solution providers.

5G - Commercial launch happened in 2020 in through dynamic spectrum sharing (DSS) technology, exploiting

the legacy spectrum. In 2022, 5G Standalone (SA) was launched in all the Brazilian capitals, and in 2023 TIM

S.A. has consolidated its 5G coverage leadership in more than 200 cities. TIM S.A. was also recognized by Open

Signal with the first Consistent Quality award[9].

Connected Car - In 2021, telemetry and connectivity solutions for Connected Car user services were developed

for Stellantis, designed to support the advanced telemetry and Stellantis assistance services for its vehicles, as

well as Wi-Fi connectivity and other added value services for car owners.

5G for Automotive Sector - In 2023 TIM S.A. has joined the Conecta 2030 Project, a collaborative effort, with

partners as IPFacens (Research Institute of the Facens University Center) and Stellantis, that it has received a 3

million reais (0,6 million euros) grant from the Brazilian government and is dedicated to enhancing pedestrian,

and cyclist safety through cutting-edge technology and 5G connectivity. For TIM S.A., the main goal is

developing new product / service that could bring us new revenue through intellectual property.

Private Networks - In 2022 TIM started offering private networks, with edge core and Multi-Access Edge

Computing (MEC) capabilities on the customer premises, allowing the deployment of high throughput, low-

latency, and high availability services on 5G. Also in 2022, TIM ran a Proof of Concept with a customer in the

automotive industry, successfully demonstrating an automated quality conformance use case. The first

commercial deployments started in 2023, at customers in the agri-food and port logistics segments.

Open RAN – In 2020, TIM S.A., Telecom Infra Project (TIP) and Inatel launched the Open Field Program to

leverage open and disaggregated solutions for the Radio Access Network (RAN). The program was finished in

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2023, with field tests at Inatel campus in Santa Rita do Sapucaí – MG. During this year, it was possible to

validate two OEM (Original Equipment Manufacturer) vendors in 4G and 5G Open RAN technologies, and also

conclude that Open RAN environment is not totally mature yet. In 2024, TIM S.A. is evaluating new other Open

RAN initiatives to join to continue leveraging this technology.

Open Lab initiatives

TIM S.A. joined the Telecom Infra Project (TIP) in 2017, an initiative founded by Facebook, SK Telecom,

Deutsche Telekom, Nokia, Intel and other companies, which aims to create a new approach to building and

implementing the telecommunications network infrastructure. TIM S.A. transformed TIM Lab into the first TIP

Community Lab in Latin America, available to TIP members to create universal standards for solutions (initially

transport networks, Open Optical Packet Transport working group), to overcome the challenges related to

interoperability of different supplier products.

In 2018, TIM S.A. also joined, together with Vodafone and Telefonica, a new working group within the TIP,

called DCSG (Disaggregated Cell Site Gateway). This project was an opportunity to define a common set of

operator requirements and coordinate with companies that manufacture devices, which have wider and more

flexible capacities and are cheaper; in June 2023, the main functions of the solution were demonstrated with

the help of Facebook, core EDGE suppliers and TIP members.

In 2020, TIM S.A. and the TIP partners completed their validation of the TSS (Total Site Solution), an

inexpensive, unrestricted 4G NodeB solution, powered by solar energy and connected by satellite to the core

TIM S.A. network, to be used in remote zones with low population density.

Also in 2020, TIM also adhered to the OpenRAN initiative with the OpenField project, to validate OpenRAN 4G

and 5G solutions focused on the separation of hardware and software at RAN level.

This last initiative was finished in March 2023, when TIP has scaled down its activities in Latin America, but it

before this it was possible validate the Open RAN 5G SA TIP test plan with one 5G Open RAN vendor. In 2023, it

was also possible to conclude that Open RAN environment is not totally mature yet.

Human resources

Brazil

The Human Resources Executive Board, which has been renamed People, Culture and Organization Executive

Board as of July 2022, is structured with the purpose of ensuring the best practices related to people

management to support the evolution of the Company, aligned with technological transformations and

business challenges, the commitment to sustainability and the appreciation of diversity and inclusion. In

addition to always seeking the evolution of the work model, the construction of ecosystems for the continuous

development of skills, the promotion of care and well-being for our employees in all dimensions.

Having an engaged team is essential to overcoming challenges and achieving better results. At TIM, the

relationship of transparency and respect with all levels of the company strengthens our pride and sense of

belonging, as well as a clarity as to the direction we are heading. These factors are differentiators in the

development of our employer brand and employee experience.

In 2023, we had a 98%(+2pp) participation in the Climate and Engagement Survey, confirming the consistency

of this process as one of the most important means of listening to people and providing the opportunity to

contribute toward the evolution of our company.

We maintained the result as the previous year, with favorability of 86% (0pp), placing TIM 14pp above the

Global Telecom Market and 10pp above General Market Brazil from Mercer, a consultancy partner for the

methodology and application of the research.

In 2023, we recorded growth of 1pp in 3 research dimensions, Culture of Integrity (-1pp x P90), Engagement

(-1pp x P90) and Healthy Environment (+1pp x P90), thus being above or close to the classification of Best

Practices according to with the favorability achieved.

Among the issues with the greatest growth, those related to trust in the Ethics Channel (+2pp) and Appropriate

conditions for each work model (+2pp) stand out.

The integrity culture remains the most recognized dimension, reaching a 92% favorability, with +1pp growth

and needing a further 1pp to rank in the Best Practices market (P90). Emphasis on the promotion of an

inclusive environment with favorability of 96% (0pp) and +7pp x P90 and an environment free from harassment

and discrimination with favorability of 94% (0pp) and +2pp x P90, corroborating TIM's focus on the topic of

Diversity & Inclusion.

In 2024, we will continue implementing structured actions for the well-being of employees and readiness for

change, through actions that favor organizational agility, aiming to maintain care for people and the search for

innovation.

People

The Brazil BU ended the year 2023 with 9.267 employees across Brazil. These employees – with their histories

and knowledge – represent the Company’s intellectual capital and act as engines for business development.

Around 70% of our employees have a college degree or are currently attending college, and 9,4% have

postgraduate degrees.

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In 2023 we also achieved the ESG goals established with the market in the areas of social representation. We

have 41% of self-declared black employees in our workforce and 36% of leadership positions are held by

women. The numbers and results show that TIM has a diverse and highly qualified team of employees to meet

the challenges of the Company's future. The workforce is rounded out by 179 interns and 176 young

apprentices.

Development and Training

In 2023, we have once again evolved people development practices, connected to the new Cultural Values and

the needs of the organization, with transversal and customized actions for different audiences, to support the

achievement of the objectives of the strategic plan.

Once again, we evolved the performance management process through feedback from TIM itself, to add even

more value to eligible employees. In addition to including new elements of Cultural Values in the TIM

Competency Model, we also enhanced the role of Leadership in project evaluation.

Throughout 2023, the following were contemplated: the closing of the 2022 Performance cycle and the launch

of the 2023 Performance cycles.

At the end of cycle 22, we achieved 94,9% participation in the Assessment stage and 93,8% adherence to the

Feedforward registry.

In July, the first assessment of leadership and peers/clients by projects took place, opening the 2023 cycle with

improvements in the experience of our internal clients, reaching 97% adherence.

At the end of 2023, the main novelty was the inclusion of the Store and Call Center attendants, as newly

eligible for the process, who will be evaluated on Attitudes expected from our new cultural identity.

With these results, we continue the challenge of evolving the development and feedforward culture, with a

100% customized, agile and inclusive process.

In our people development strategy, we continue to use the same premises: customization and added value.

For leadership development, for example, we continued the E-Coaching program for first management and the

Intercompany Mentoring program for women. At the end of the year, we modeled and implemented a pilot

Leader Coach class, a program that will begin its roll-out in 2024 for the entire company leadership.

In the E-Coaching program, 4 new classes were launched, totaling 17 classes since its launch. 78 leaders - most

of whom were promoted to their first management - experienced the digital journey that was remodeled, with

individual and collective short-coaching sessions with a coach certified by the ICF (International Coaching

Federation). To date, 383 people have completed their journey since the program was launched in 2020.

At Intercompany Mentoring, in partnership with the “Positive Women” initiative, we concluded the 3rd wave of

the program with 193 women from 23 different companies participating in a 6-month journey with mentoring

sessions, lectures and peer-to-peer meetings.

Up to date, 389 women have been impacted by the program, which aims to promote reflection, awakening

empowerment and accelerating the development of women's careers.

In September, society was informed, during TIM Talks, about the continued development of mentees

participating in all previous waves, in a Hub that will be launched in 2024.

Two other initiatives launched in 2023 that contributed to people's development were the Mentoring classes

for Interns and Culture Ambassadors, involving 81 interns and 45 ambassadors respectively. In mentoring for

interns, we trained and invested in 58 internal mentors. When mentoring ambassadors, we count on renowned

professionals in the market, with experience in cultural transformations to support them in their work.

For Talent Management, in 2023 we invested in a Talent Analytics study and implemented a Talent Committee

involving executives from the company's operations area (Chief Revenue Officer) to not only map the talents of

the board, but also refine the methodology designed internally for roll-out with other areas of the company.

For senior leadership, we continue to map the executives who will guarantee the long-term continuity of the

business. Another wave of a Top Executive Assessment in partnership with an external Leadership Advisory

consultancy helped us map and accelerate the development of senior executives who will feed the company's

succession plan.

TIM also continued personalized learning journeys for the different areas based on the different needs related

to the activity.

To support and evolve with the learning process, we prioritize cultural education, upskilling and reskilling

programs and actions, as part of our TIM Mais Knowledge Learning Hub, which consolidates individual and

collective journeys for employee learning on strategic business topics, such as digital mindset and skills,

innovation, governance, customer experience, change management, among others.

TIM + Knowledge is made up of three fronts: You + TIM, which brings together everything an employee needs

to know about our TIM: information about the organization, strategy and evolution of our business, ESG

commitments, values and guidelines; You at the Front, which brings together everything an employee needs to

be the professional of the future and boost the development of their career; Você + Tech, which brings

together everything an employee needs to develop the necessary skills and act with technical excellence in

their area, promoting digital acceleration.

From the perspective of education and learning initiatives, in 2023, TIM's strategy and focus was to support the

evolution and transformation of the business through the development of new digital skills through the Onda

Digital Learning Program (soft and hard skills)

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In total, there were 8 skills that included learning initiatives, totaling the participation of more than 3.000

people impacted in different business areas.

For professionals mapped in JAS, more than 700 people were prioritized in upskilling and reskilling journeys

and certifications in new capabilities.

Furthermore, we strengthened Plural, an internal multiplication program that aims to support the process of

developing essential technical and behavioral skills for the business. The program provides multiplier

collaborators with a leading role in the creation of content and connects people in a learning network where

knowledge sharing happens in a strategic, democratic, customized and flexible way on topics such as Excel,

Power BI, Storytelling in Data, Cloud, Agile, among others. Through a recognition program, multipliers can

score and exchange their points for educational actions and benefits, thus valuing their contribution to the

business in sharing their knowledge and supporting the retention of these specialists in the company.

TIM also offered transversal initiatives such as:

• Conecta: Onboarding program, to integrate new employees and instill pride in being part of the

company. With a dynamic and structured journey, it offers welcoming, collaborative and learning

activities, with topics such as ethical conduct, combating corruption, the company's sectoral context

and competitive scenario, among others.

• TIM Talks: TIM’s annual Training, Development and Communication Program, available to employees

and society as a whole. In 2023, we will address how we enable technology and innovation in a

sustainable way in favor of ESG and how we use our purpose and culture as a lever to enhance our

deliveries and create value for employees, customers and society. Therefore, our central theme was

“Purpose that Transforms Futures”. The event took place from 10/17/2023 to 11/01/2023, with a hybrid

opening ceremony, which addressed how ESG permeates an organization's strategy and practice.

Subsequently, 27 actions were carried out, in different formats (online and hybrid), with the

participation of partners from the Positive Women Ecosystem and TIM commercials. The panels were

broadcast on TIM's YouTube channel, open to all of society, reinforcing our commitment to the

democratization of knowledge and inclusion. with 3.551 live appearances and over 240.000 post-event

views.

• Bem + Estar Week: In September 2023, Bem + Estar Week had a reflective and innovative approach,

through the theme “What is important to you?”. We promote the union of the pillars of Environment,

Health, Safety and Diversity and Inclusion, in order to provoke reflections on individual well-being,

based on self-care, collective well-being, by awakening social awareness and the well-being of the our

planet, that is, the legacy that will be left for future generations. Following the approach, we opted for

leaner actions and directly connected to the themes in order to not overload our collaborators. We

carried out a campaign to publicize the initiatives, which ranged from lives with experts on the topics

to reinforcement on the importance of collecting electronic waste in offices and stores, in order to

engage our collaborators to dispose of their equipment at collection points. available at our facilities.

The Wellbeing Week also addressed topics such as Harassment Prevention, reinforcing the

company's Reporting Channel, and Suicide Prevention, reinforcing the Continuous Care Program that

the company offers to its employees.

• Cybersecurity Actions: Throughout 2023, we promoted a series of actions that support the company's

acculturation to the importance of cybersecurity practices, in order to disseminate them. We

continued the Security Champions Program, which aims to support the dissemination of the topic at

TIM by training employees in the Technology and Business areas in the main security concepts to

increase the company's level of maturity. We launched the mandatory Phishing Prevention course for

all employees, in order to support the identification of messages and emails with risks associated with

personal and corporate security. Furthermore, to strengthen the topic throughout the organization,

we promoted CyberDay with the aim of disseminating information to generate engagement and

knowledge on topics involving CyberSecurity. The event had the participation of 20 speakers, 1.871

participants, reaching over 6.000 online participations.

Talent Attraction and Acquisition

Based on the strategic plan and on the innovation targets, TIM reinforced the employer brand positioning and

launched initiatives to promote the development of digital and technological skills to people in society,

improve talent attraction and increase the effectiveness in professional acquisition.

In 2023, we continued to hire professionals who adhere to the new capabilities to fill 71% of the vacancies

worked on in recruitment, reinforcing our commitment to acquiring new skills to ensure continued business

evolution.

We also work to evolve in hiring professionals in accordance with the company's Diversity and Inclusion

corporate strategy and goals. For the leadership vacancies worked on in recruitment, we hired 44% of women

to occupy these positions, contributing on this front to achieving the corporate target of women in leadership

at 36,2% in 2023. On the People with disabilities front, we hired in 2023 around 200 professionals in different

areas of the company to reach the level of 85% of the hiring target for this group.

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Furthermore, we designed our talent attraction strategy for entry programs, always focused on attracting and

developing people, based on requirements related to soft skills and with a focus on meeting the diversity pillars

established by TIM:

Internship Program: In august 2023, we announced the most recent wave of the TIM Internship Program,

offering 122 vacancies, distributed across 7 Brazilian states and strategically aimed at acquiring talent in

various areas, with a predominant focus on skills related to digital innovation and business evolution. We

implemented promotional strategies on social media that, in collaborations with influencers, generated more

than 99 thousand views, in addition to live streams with more than 2 thousand simultaneous viewers. We also

held in-person and online events at universities, exceeding 25.000 interactions with university students and we

also had internal communication actions so that all employees could publicize the Internship Program

opportunities. All these practices resulted in 13.301 applications, a 10% increase compared to the 2022

program and a record number of applications for TIM Internship Programs.

The selection process included an initial stage of gamified assessment, incorporating engagement, cultural fit

and logical reasoning modules, deepening the understanding of TIM’s organizational culture, its curiosities and

innovations. In line with digital skills, the next phase involved an interactive group experience, through a virtual

Escape Room, providing candidates with an immersion in TIM’s various environments, such as the Concept

Store, the People, Culture & Organization area and the Technology Laboratory. This phase allowed participants

to demonstrate skills such as logical reasoning, team collaboration, decision making, communication and

leadership.

The Internship Program continues to play a vital role in strengthening TIM's culture of diversity and inclusion.

This year, we overcame the challenge of attracting a diverse audience, reflecting a representation of more

than 80% of interns identified in at least one of the diversity pillars. With regard to commitment to the racial

pillar, we reached a milestone, with 57% of hires being self-declared black and brown people. Of the people

hired, 47% are women, and when segmenting black and brown women, this rate rises to 56%. Within the scope

of the LGBT+ pillar, we achieved a notable achievement, with 27% of interns hired, reaffirming the diversity

awards received by TIM throughout the year.

Furthermore, the program not only attracts young talent, but also welcomes 6,6% of interns aged 30 and over.

During the program, interns participate in a diverse and personalized development journey, consisting of online

courses, mentoring and business challenges, providing the opportunity to improve and develop essential skills

to achieve new results. The Internship Program solidifies TIM's ongoing commitment to excellence, diversity

and innovation.

Young Apprentice Program: in 2023, we started a talent pool at Gupy that has already accumulated more

than 5k applicants for TIM's Young Apprentice opportunities. An additional challenge was the internalization of

the selection process for these vacancies, which generated savings of more than 80 thousand reais for the

company, in addition to ensuring a selection process that was more aligned with the company's culture. We

hired 180 people between 18 and 24 years old across the country, who started their professional careers at

TIM. Of this number, 64% are women and 46% declared themselves black or mixed race. The program has a

strong social impact and is aimed mainly at people in socially vulnerable situations. We form partnerships with

third sector institutions that reinforce this premise, such as PROA and the consolidation of the Employability

Pact Between Heaven and Favela. This group's journey involves theory and practice, with vacancies available

in administrative areas and stores.

During the development journey, apprentices have the opportunity to learn basic skills that will help them

launch their professional career and prepare for future challenges. This year, 19 young people had the

opportunity to take on other positions in different areas.

In recruitment practices, in 2023 we completed the implementation of the new ATS (Applicant Tracking

System) for Store and Call Center vacancies, which brought more intelligent resources based on data and

artificial intelligence to increase agility and assertiveness in recruitment processes, in addition to better

usability and more positive experience for candidates and managers during the Recruitment and Selection

journey. We had more than 1,1 MM views on talent attraction platforms (LinkedIn, Vagas.com; Gupy and

Success Factors).

Diversity and Inclusive Culture

In 2019, a management team dedicated to the topic of Diversity and Inclusion was established, as part of the

People, Culture & Organization board. The area, recently renamed Cultural Education & Inclusion

Management, has the mission of ensuring the evolution of the company's inclusive culture, through the

construction, implementation and management of specific policies, projects and programs, as well as

promoting initiatives that contribute to the appreciation of diversity and promoting inclusion, at TIM and in

society.

Since its creation, the area has implemented a consistent governance program on the topic in the company,

which includes continuous communication and training actions, based on an annual diversity and inclusion

calendar (with reference to UN international dates and national dates), creation and/or review of policies and

processes aimed at inclusive culture, monitoring of indicators, and the creation and implementation of specific

projects and initiatives to promote inclusion in the pillars of diversity. At the executive level, in 2020, a Diversity

and Inclusion Committee was created led by the CEO of TIM, and with the participation of all his direct reports,

Consolidated Financial Statements 2023

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20	Telecom Italia Finance Group

which monitors the evolution of processes and opportunities to advance the company's agenda.

Understanding that people's involvement is fundamental to the evolution of culture, in 2020 we launched 5

Affinity Groups, one for each pillar detailed on the next page, which today have approximately more than 500

employees.

TIM believes in the diversity of its workforce as a fundamental pillar in promoting a positive experience for

people. The Company maintains efforts to disseminate a culture of respect and inclusion among employees

and in Brazilian society and reinforces its commitment through its ESG Plan goals. In line with these strategies,

in 2023, TIM maintained its focus on the D&I pillars it works on:

Gender: We work towards gender equity by empowering women, increasing female representation in

leadership positions and in technology areas and promoting policies and initiatives in favor of employability,

development and career evolution. Furthermore, in 2023, we had a strong presence in the fight against

violence against women, through partnerships and strategic programs on the topic.

• People with disabilities: We combat ableism through employability, accessibility and inclusion programs and

actions for this public.

• LGBTI+ people: We promote a safe environment that combats LGBTphobia through employability programs

and awareness initiatives that guarantee equal treatment for people regardless of their affective-sexual

orientation, gender identity and expression.

• Race/Ethnicity: We guarantee equity of opportunities through employability and career development

initiatives, thus increasing the representation and retention of black people at TIM.

• Generations: We value an intergenerational culture, which combats ageism through an environment of

mutual exchange, which qualifies, integrates and includes young and senior people.

• Social Inclusion: This is not a specific pillar of the Diversity and Inclusion Department, however, TIM has a

strong commitment to social inclusion. With this in mind, in 2022, we began a partnership with the NGO

Gerando Falcões in favor of the social and economic transformation of peripheral communities spread across

the country, with initiatives to promote productive inclusion, bringing more technology to communities,

employability, training and donating resources to social projects carried out by the NGO. Two classes were held

during the months of August and September 2023, in the cities of Rio de Janeiro and São Paulo, training 30

people, of which 8 were hired to work in our own stores. In August, a Pact for the Employability of Pedra Lisa,

located in the Morro da Providência region of Rio de Janeiro, was signed with Gerando Falcões, which is served

by Gerando Falcões through the Favela 3D Program. In the document, TIM made a commitment to building a

fairer and more inclusive society, by combating unemployment in the locality.

Furthermore, the “Respect generates respect” program, launched in November 2021, had its actions

intensified. Created with the aim of preventing and curbing moral and sexual harassment and bullying, the

program-maintained communication activities and continuous training for TIM leadership and professionals

throughout the year, in order to promote a safer and freer culture and work environment of any type of

discrimination. As part of support and reception, a specific social assistance service on the topic was made

available to employees.

To support the process of acculturation and learning about topics related to Diversity and Inclusion, TIM carries

out initiatives to combat unconscious biases through training for the professional public and leadership. In

addition, it has the Conscious Keyboard, which works to eliminate expressions and words from everyday life

that carry racist, sexist, ageist, ableist and LGBTphobic connotations. The application alerts users about the

use of discriminatory words, explains the origin of the terms and proposes replacements. In addition, TIM also

has diversity guides on the company's website that cover topics such as inclusive leadership, inclusive and

respectful attitudes on the pillars of LGBTI+, PWD, ethnicity, gender and generations.

Throughout 2022 and 2023, TIM developed initiatives such as educational and communication campaigns, in

alignment with the annual Diversity & Inclusion calendar, which includes the main global dates according to

the UN calendar and highly representative national dates. In addition to topics related to the 5 representative

pillars, we work on other topics of great relevance, such as fatphobia, HIV/AIDS and religious intolerance.

Another action was TIM Convida, a series of digital events, open to the whole of society, with the aim of

discussing current issues related to D&I, with speakers recognized for their work on the topic. In addition, the

“Chama pro TIMe” Project was continued in all pillars worked at TIM Brasil, in which collaborators are invited to

nominate candidates from minority groups for opportunities at TIM. We carry out specific training for leaders

on the pillars and themes of D&I, in addition to having mandatory training on Diversity and Inclusion in our

onboarding.

During the year, we also continued with our LGBTI+, People with Disabilities, Black People, People 45+, Tech

Women and Women Leaders talent banks, available to the whole of society, publicized through our campaigns

throughout the year and on the external website.

On the ecosystems and strategic partnerships front, TIM continues to participate in some of the most

important movements in the D&I ecosystem: UN Women; Business Coalition to End Violence Against Women;

Business Coalition for Racial and Gender Equity, focusing on the black population; Business and LGBTI+ Rights

Forum, focusing on the LGBTI+ community, Generations Forum, focusing on people aged 45 and over, and

Business Network for Social Inclusion (REIS), focusing on people with disabilities.

Consolidated Financial Statements 2023

Directors’ report


Telecom Italia Finance Group	21

As a result of our continuous effort, in 2023 TIM was recognized with several diversity awards and rankings:

• Corporate ESG Awards 2023: We won the silver medal in the Best Company in Diversity, Equity and

Inclusion and Best Company in Sustainability Report categories at the Corporate ESG Awards 2023,

which brings together the publicly traded companies with the best performance in ESG areas in the

world.

• Top Employers: In the 2023 edition of the award, we were recognized as one of the best employers in

Brazil, highlighting our purposes and values, talent acquisition, encouraging the sharing of knowledge,

encouraging connection within our work environment, our diversity and inclusion programs and our

ethics and integrity policies.

• Refinitiv: For the third consecutive year, we appear in the Refinitiv ranking, an LSEG business Diversity &

Inclusion Index, this time with an expressive result: number 1 globally in the telecommunications

sector and among companies in Brazil and number 4 in the general list worldwide that evaluates the

performance of more than 15 thousand publicly traded companies on topics of diversity, inclusion and

career development.

• IDiversa B3: TIM is the only telco listed in the new B3 index, the first in Latin America to consider gender

and race criteria and recognizes companies that promote greater representation of groups such as

women, black and indigenous people in the market.

• BR Equity Seal: TIM was recognized by the Human Rights Campaign Foundation for ensuring an inclusive

work experience for LGBTQIA+ employees. The company was the only one in the telecommunications

sector named among the best environments for LGBTQIA+ people to work, receiving the Equity BR

seal, promoted in Brazil by the +Diversity Institute and the Business and LGBTI+ Rights Forum.

• Bloomberg (GEI): 1st place in Latin America in the Bloomberg Gender Equality Index and 7th place

among the 484 recognized companies.

• Ethos/Época Diversity and Inclusion Survey: TIM is among the companies recognized by the Ethos

Institute Diversity Survey in partnership with Época Negócios Magazine as one of the 72 companies

with the best performance in D&I. In addition, it is highlighted in the silver category in the

Telecommunications sector.

• GPTW B3 Index:becomes part of the index of companies with the best working environment and whose

shares are traded on the Brazilian stock exchange.

Environmental, Social & Governance

According to art 1730-4 of Luxembourg law of 10 August 1915, as modified, Telecom Italia Finance Group is

exempted from reporting the non financial information (the “NFRD Report”) requested by art 1730 -1 of the

same law. Indeed, all reportable undertakings under such report are covered by the NFRD report of TIM S.p.A.,

which fully controls Telecom Italia Finance.

Brazil

Solid ESG Path

TIM is a pioneer in ESG (Environmental, Social & Governance) topics in the Telecommunications sector in

Brazil. The Company has been part of the B3 Sustainability Index Portfolio (ISE-B3) for 16 years, being the

company in the sector that has been part of the Index for the longest time. In February 2023, TIM was once

again recognized as one of the most sustainable companies in the world by S&P Global ESG, the organization

responsible for the Dow Jones Sustainability Index (DJSI) and was included in the Sustainability Yearbook.

Since 2011, TIM has voluntarily been part of the Novo Mercado, the highest level of corporate governance on

the Brazilian Stock Exchange, in addition to being the first and only telecommunications operator named as a

Pro-Ethics company by the General Comptroller of the Federal Government (CGU) for three editions

consecutive.

As a signatory of the UN Global Compact since 2008 and UN Women since 2021, TIM develops projects

connected to the Sustainable Development Goals (SDGs) and recognizes the rights to data privacy, secure

internet, access to information and freedom of speech as essential and non-negotiable.

TIM has become a reference in promoting diversity and inclusion at national and international level, with goals,

commitments and implementation of various initiatives on the topics of gender, race, LGBTI+ people,

generations, people with disabilities, among others. In 2021, the Company became the first Brazilian operator

to be included in the Refinitiv Diversity & Inclusion Index, occupying the 1st position in Telecom globally, a

highlight that it also maintained in 2022 and 2023. TIM was also the first operator to win the GSMA’s Diversity

in Tech international award, which recognizes organizations worldwide with practices in favor of equality,

diversity and human rights in the technology sector. In 2023, TIM was selected as the only operator to be part

of B3’s IDIVERSA portfolio, a new index that assesses racial and gender representation at the various

hierarchical levels of companies. Furthermore, it continued to be included in the Bloomberg Gender Equality

Index, which brings together 600 companies from 45 countries, only 16 of which are from Brazil.

Consolidated Financial Statements 2023

Directors’ report


22	Telecom Italia Finance Group

Recognized with the Top Employers certification seal for the second consecutive year, TIM is also consolidated

as one of the companies with the best HR practices. The certification is the result of an independent audit by

the Top Employer Institute, an international institute with 30 years of experience in 120 countries. In January

2023, the Company also joined B3’s GPTW Index, which considers companies certified by the Great Place to

Work (GPTW) as the best work environments in Brazil.

TIM responds to the Carbon Disclosure Project (CDP) – the world’s largest database on Greenhouse Gases

related to Climate Change – since 2010 and records its emissions in the Public Emissions Registry of the

Brazilian GHG Protocol Program.

For further information on TIM's actions to mitigate and adapt to climate change issues, see our Task Force on

Climate-Related Financial Disclosures (TCFD) report, published in 2022 and updated in 2023.

Since 2004, TIM has been presenting its performance through sustainability indicators and since 2018 it has

been publishing reports in accordance with the guidelines of the Global Reporting Initiative (GRI). As of 2021,

the Company started calling this publication the ESG Report and continues with its commitment to

transparency and accountability to its stakeholders, organizing the report in the three pillars: Environmental,

Social and Governance. The Report is also assured by an independent third party.

Our Policies on Social Responsibility, Human Rights, Diversity, Environment, Climate Change Management,

Corporate Risk Management, Anti-Corruption, Relationship with Suppliers, Occupational Health and Safety,

Privacy, among others, are publicly available for free consultation by our stakeholders.

In compliance with the General Data Protection Law, in force in Brazil since 2020, TIM works to ensure

customer privacy, protect their personal data and maintain an increasingly transparent relationship. For

further information, please consult the Privacy Center on the TIM website.

In 2013, TIM founded the TIM Institute with the mission of democratizing access to science, technology, and

innovation to foster human development in Brazil. Over 700.000 people from all states and the Federal District

have already benefited from the Institute’s education and inclusion projects, including internationally awarded

prizes (Governorte Award – IDB 2015).

Due to its solid performance in ESG, TIM is included in national and international indices and ratings, such as

the Corporate Sustainability Index (ISE B3), Efficient Carbon Index (ICO2 B3), Brasil ESG Index (S&P/B3), S&P

Global LargeMidCap ESG Indices , B3 GPTW Index (IGPTW B3), B3 Diversity Index (IDIVERSA B3), CDP Brazil

Climate Resilience Index (ICDPR-70), Refinitiv Diversity & Inclusion, Bloomberg Gender Equality Index (GEI),

FTSE4GOOD Emerging Markets, FTSE4GOOD Latin America, MSCI ACWI ESG Leaders, MSCI Emerging Markets

ESG Leaders, Teva Women in Leadership Index, Women on Board seal, among others, in addition to being

certified by ISO 9001 (since 2000), ISO 14001 (since 2010), ISO 37001 (since 2021) and ISO 27001 (since 2022).

Events subsequent to December 31, 2023

Payment of Interest on Equity

In January 2024, TIM S.A paid Interest on Capital (IOC) related to the fiscal year ending on December 31, 2023

and approved on December 06, 2023 according to the following schedule:


Payment Date	Reais per share
23/01/2024	0,270594175

For others details of subsequent events, see the specific Note "Events Subsequent to December 31, 2023".

Business outlook for the year 2024

The Group project for the coming years a sustainable growth in Service Revenue above inflation and an

expansion of EBITDA with positive evolution in the margin. This dynamic combined with maintaining the level

of investments that benefit from the efficiency of new technologies, such as 5G, should promote an

improvement in our operating free cash flow. All of this will enable us to continue evolving TIM SA shareholder

remuneration strategy and reinvest in growth avenues such as B2B and Broadband.

Main risks and uncertainties

The majority of risks and uncertainty that impact financial markets and industrial arena are beyond the

Group’s control, therefore risk governance is considered a strategic tool for value creation.

In addition, there have been several major shifts, including, but not limited to, the change in the market

environment, the entry of potential new competitors, the start of proceedings by Authorities, and the

implementation of new business strategies in the multimedia segment. These risk factors may have

unforeseeable repercussions in terms of the strategic choices adopted by the Group and could have an impact

on the evolution model adopted in the multimedia market.

Consolidated Financial Statements 2023

Directors’ report


Telecom Italia Finance Group	23

The main risks affecting the business activities of the TIF Group are presented below.

Strategic risks

Risks related to macro-economic factors

The Group's economic and financial situation, including its capacity to support the expected level of cash flows

and business margins, depends on the influence of numerous macroeconomic factors such as economic

growth, consumer confidence, interest rates, inflation rate and exchange rates in the markets where it

operates.

These factors come in addition to the uncertainties tied to the evolution of the war in Ukraine, the recent

Israeli-Palestinian conflict and the structural transformation of the energy markets.

As regards Brazil, growth is affected by the slowdown in the global economy, in particular in the USA and

China. Also following a restrictive monetary policy that helped somewhat restore the credibility and stability of

the Brazilian currency and limit inflation, a slowing of growth is expected for the Brazilian economy in 2023,

which should settle at around 2,9%. The reduction in growth and the need to maintain subsidies for the poorer

portion of the population, who are experiencing difficulty in coping with the rise in the cost of petrol and food

products, coupled with the growing public and private debt are the main risks and challenges the country is

facing following the presidential elections at the end of the year.

Risks related to competition

Competitive risks in the Brazilian market lie in the rapid transition of the business model tied to both traditional

services and the more innovative ones. As the consumption patterns of the customer base change (migration

from voice to data services), service providers need to act swiftly in upgrading their infrastructure and

modernizing their portfolios of products and services. In this context, the TIM Brasil group could be impacted by

the need for rapid development of technologies and infrastructures.

Operational risks

Operational risks inherent in our business relate, on one hand, to possible inadequacies in internal processes,

external factors, frauds, employee errors, errors in properly documenting transactions, loss of critical or

commercially sensitive data and failures in systems and/or network platforms; and on the other hand, to the

possibility of implementing strategies for value creation through the optimization of costs and capital

expenditure, which in part could depend on factors beyond the control of the Group, such as the cooperation of

external counterparties (suppliers, trade unions, industry associations) and laws and regulations.

Cybersecurity risks

Cyber risk is on the increase worldwide and as such requires continual monitoring by the Group, given the

sheer amount of IT assets managed in terms of own TLC infrastructure and assets necessary to deliver services

to customers. In view of these considerations, considerable attention was paid to protecting networks from

main threats (e.g. viruses, malware, hackers, data theft). With a wide range of attackers (Cyber-Criminals,

Cyber-Terrorists, Insiders, etc.), the Group carries out activities not only to safeguard its infrastructure but also

– with a strong sense of responsibility – to protect customers' information assets, that are a priority target.

As regards prevention, the Group monitors cyber risk analyses, defining security plans for the company's IT

assets, to identify the actions necessary to mitigate cyber risk in advance and guarantee a security by design

approach, also monitoring the plans of these actions and controls on actual adoption in the field.

TIM has also implemented an insurance program to cover cyber risks.

Risks related to business continuity

The TIF Group's success depends heavily on the ability to ensure continuous and uninterrupted delivery of the

products and services we provide through the availability of processes and the relating supporting assets. In

particular, the Network Infrastructure and the Information Systems are sensitive to various internal and

external threats: power outage, floods, storms, human errors, system failures, hardware and software failures,

software bugs, cyber-attacks, earthquakes, facility failures, strikes, fraud, vandalism, terrorism, etc.

TIF, as part of the TIM Group, has adopted a “Business Continuity Model System” framework in line with

international standards, to analyze and prevent these risks.

Risks related to the development of fixed and mobile networks

To maintain and expand our customer portfolio in the Brazilian market it is necessary to maintain, update and

improve existing networks in a timely manner. A reliable and high-quality network is necessary to maintain the

customer base and minimize terminations to protect the Group's revenues from erosion. The maintenance and

improvement of existing installations depend on our ability to:

• deliver network development plans within the time-frames contemplated by business development

plans and with the necessary level of effectiveness/efficiency;

• upgrade the capabilities of the networks to provide customers with services that are closer to their

needs.

Consolidated Financial Statements 2023

Directors’ report


24	Telecom Italia Finance Group

Risks of internal/external fraud

TIF Group, as part of the TIM Group, has an organizational model in place to prevent fraud. The organization is

designed to ensure higher risk mitigation levels against illegal acts committed by people inside and outside the

organization, which could adversely affect the Group's operating performance, financial position and image.

Risks related to disputes and litigation

TIF Group has to deal with disputes and litigation with tax authorities and government agencies, regulators,

competition authorities, other telecommunications operators and other entities. The possible impacts of such

proceedings are generally uncertain. In the event of unfavorable settlement for the Group, these issues may,

individually or as whole, have an adverse effect, which may even be significant, on its operating results,

financial position and cash flows.

Financial risks

TIF Group may be exposed to financial risks, such as risks arising from fluctuations in interest rates and

exchange rates, credit risk, liquidity risk and risks related to the performance of the equity markets in general,

and, more specifically, risks related to the performance of the share price of the Brazilian companies.

Generally, the TIF Group hedges exposure in foreign currencies but not the risk of transfer relating to its foreign

subsidiaries. However, the hedges may not manage to effectively protect the Group from adverse changes in

the exchange rates. With regard to translation risk, the performance of the euro exchange rates with respect

to the Brazilian real may have a negative impact on the consolidated results. Appreciation of the euro with

respect to the currencies of certain countries in which the TIF Group operates or has made investments, will

reduce the related value of the revenues or assets, of the transactions implemented in such countries and,

therefore, may have a negative impact on the operating profit or financial position.

These risks may adversely impact the earnings and the financial structure of the Group. Accordingly, to

manage those risks, the TIF Group has embedded guidelines defined at central level by TIM Group, which must

be followed for operational management, identification of the most suitable financial instruments to meet set

goals, and monitoring the results achieved.

For further details of financial risks, see the specific Note "Financial risks management" .

Regulatory and compliance risks

Regulatory risks

The telecommunications industry is highly regulated. In this context, new decisions by Anatel may lead to

changes in the regulatory framework that may affect the expected results of the Group.

Compliance risks

The TIF Group may be exposed to risks of non-compliance due to non-observance/breach of internal (self-

regulation, such as, for example, bylaws, code of ethics) and external rules (laws, regulations, new accounting

standards and Authority orders), with consequent judicial or administrative penalties, financial losses or

reputational damage.

The TIF Group aims to ensure that processes, and, therefore, the procedures and systems governing them, and

corporate conduct comply with legal requirements. The risk is associated with potential time lags in making

the processes compliant with regulatory changes or whenever non-conformities are identified.

Group internal control and risk management

TIF Group adheres to the principles and criteria of the TIM Group Corporate Governance Code. Its Internal

Control and Risk Management System consists of the set of rules, procedures and organizational structures

applied to the entire TIM Group, which TIF Group is part of. This set allows the sound, fair and consistent

operation of the Group in line with the pre-established objectives. At TIM Group level, the Internal Control and

Risk Management System involves several components acting in a coordinated way accordingly to their

respective responsibilities: the Board of Directors, with the responsibility to direct and provide strategic

supervision; the Executive Directors and Management with the responsibility to control and manage; the

Control and Risk Committee and the Head of the Group Audit Department, with the responsibility to monitor,

control and provide support to the Board of Directors.

Information for investors

Brazil – shares

Regarding the trading of shares issued by Group companies on regulated markets, the ordinary shares of TIM

S.A. are listed in Brazil on B3 (formerly BM&F/Bovespa).

Ordinary shares of TIM S.A. were also listed on the NYSE (New York Stock Exchange); share prices are set

through ADS (American Depositary Shares) representing 5 ordinary shares of TIM S.A.

Consolidated Financial Statements 2023

Directors’ report


Telecom Italia Finance Group	25

Waiver of the obligation to present activities in one report only

The Board of Directors of Telecom Italia Finance waived the provisions of art. 1720-1 (3) of the Luxembourg law

dated as September 10, 2015, as modified by time to time, which allows the Board to present one report only

where Consolidated Annual Report is prepared.

Alternative Performance Measures

In this Directors’ Report and in the Consolidated Financial Statements of the Group for the year ended

December 31, 2023, in addition to the conventional financial performance measures established by IFRS,

certain alternative performance measures are presented for a better understanding of the trend of operations

and financial condition. Such measures, which are also presented in interim financial reports, should, however,

not be considered as a substitute for those required by IFRS.

• EBITDA/EBIT: these financial measures represent a useful unit of measurement for assessing the

operating performance of the Group (considering in particular Brazil BU level). In order to get a more

complete and effective understanding, they are also presented in terms of organic changes (amount

and/or percentage), excluding, where applicable, the effects of non recurring items. EBITDA/EBIT are

calculated as follows:



Profit (loss) before tax from continuing operations
+	Finance expenses
-	Finance income
+/-	Other expenses (income) from investments
+/-	Share of profits (losses) of associates accounted for using the equity method
EBIT – operating profit (loss)
+/-	Impairment losses (reversals) on non-current assets
+/-	Losses (gains)on disposals of non-current assets
+	Depreciation and amortization
EBITDA – Operating profit(loss) before depreciation and amortization, Capital gains (losses) and impairment reversal (losses) on non-current assets

• EBITDA margin and EBIT margin: Telecom Italia Finance believes that these margins represent useful

indicators of the ability of the Group (and in particular the Brazil BU) to generate profits from its

revenues. In fact, EBITDA margin and EBIT margin measure the operating performance of an entity by

analysing the percentage of revenues that are converted, respectively, into EBITDA and EBIT.

• Capital Expenditures (“Capex”): Telecom Italia Finance considers Capex as relevant measures to

understand the Group investments in intangible and tangible nun-current assets. The amount

presented corresponds to the sum of columns “addition” in Note “Intangible assets with a finite useful

life” and Note “Tangible assets”.

• Net financial debt: Telecom Italia Finance believes that Net Financial Debt represents an accurate

indicator of its ability to meet its financial obligations. It is represented by Gross Financial Debt less

Cash and Cash Equivalents and other Financial Assets. The Directors’ Report includes a table showing

the amounts taken from the statements of financial position and used to calculate the Net Financial

Debt of the Group, divided by operating segment. In addition, Note “Net Financial Debt” details the

calculation for the Group.

• ARPU: The Group uses Average Revenue Per User (ARPU) as metric to understand the revenue

generation capability and growth at the per-customer level. It is equivalent to the total revenue

divided by average users number during a period.

Corporate Governance Statement

A description of the Parent Corporate Governance is provided within the statutory accounts of Telecom Italia

Finance, available at www.tifinance.lu.

Consolidated Financial Statements 2023

Directors’ report


26	Telecom Italia Finance Group

Consolidated Statements of Financial Position

Assets


(millions of euros)	Note	31/12/2023	31/12/2022

Non-current assets

Intangible assets		3.293	3.312
Goodwill	[4]	1.017	977
Intangible assets with a finite useful life	[5]	2.277	2.334

Tangible assets	[6]	2.338	2.147
Property, plant and equipment		2.338	2.147

Right of use assets	[7]	1.913	1.981

Other non-current assets		2.464	2.759
Investments in associates accounted for using the equity method and other investments	[8]	312	277
Non-current financial receivables for lease contracts	[9]	39	37
Other non-current financial assets	[9]	1.508	1.669
Miscellaneous receivables and other non-current assets	[10]	371	531
Deferred tax assets	[11]	235	246

Total Non-current assets		10.009	10.199

Current assets

Inventories	[12]	62	42
Trade and miscellaneous receivables and other current assets	[13]	985	865
Current income tax receivables	[11]	139	105

Current financial assets	[9]	5.466	4.656
Current financial receivables arising from lease contracts		6	6
Securities other than investments, financial receivables and other current financial assets		2.631	1.609
Cash and cash equivalents		2.830	3.042

Total Current Assets		6.652	5.669

TOTAL ASSETS		16.662	15.868

The accompanying notes are an integral part of these annual Consolidated Financial Statements.

Consolidated Financial Statements 2023

Consolidated Statements of Financial Position


Telecom Italia Finance Group	27

Equity and Liabilities


(million euros)	Note	31/12/2023	31/12/2022

Equity

Share capital issued	[14]	1.819	1.819
Other reserves and retained earnings (accumulated losses), including profit (loss) for the year		4.116	4.547
Equity attributable to owners of the Parent		5.934	6.366

Non-controlling interests	[3]	1.646	1.545

TOTAL EQUITY		7.581	7.911

Non-current liabilities

Non-current financial liabilities for financing contracts and others	[15]	2.843	2.330
Non-current financial liabilities for lease contracts	[15]	1.953	1.900
Deferred tax liabilities	[11]	—	—
Provisions	[20]	288	252
Miscellaneous payables and other non-current liabilities	[21]	140	179

Total Non-current liabilities		5.225	4.661

Current liabilities

Current financial liabilities for financing contracts and others	[15]	1.746	1.235
Current financial liabilities for lease contracts	[15]	338	406
Trade and miscellaneous payables and other current liabilities	[22]	1.754	1.641
Current income tax payables	[11]	18	14

Total Current Liabilities		3.856	3.296

TOTAL LIABILITIES		9.081	7.957

TOTAL EQUITY AND LIABILITIES		16.662	15.868

The accompanying notes are an integral part of these annual Consolidated Financial Statements.

Consolidated Financial Statements 2023

Consolidated Statements of Financial Position


28	Telecom Italia Finance Group

Separate Consolidated Income Statements


(million euros)	Note	31/12/2023	31/12/2022

Revenues	[24]	4.412	3.963
Other operating income	[25]	17	17
Total operating revenues and other income		4.429	3.980

Acquisition of goods and services	[26]	-1.688	-1.568
Employee benefits expenses	[27]	-339	-312
Other operating expenses	[28]	-388	-372
Change in inventories		18	6
Internally generated assets	[29]	102	93
Operating profit before depreciation and amortization, capital gains (losses) and impairment reversals (losses) on non-current assets (EBITDA)		2.134	1.828

Depreciation and amortization	[30]	-1.318	-1.260
Gains/(losses) on disposals of non-current assets	[31]	10	13
Operating profit (loss) (EBIT)		827	581

Share of profits (losses) of equity investments valued using equity method		-17	-11
Other income (expenses) from investments	[32]	56	-3
Finance income	[33]	810	920
Finance expenses	[33]	-1.079	-1.233
Profit (loss) before tax from continuing operations		597	254

Income tax expenses	[11]	-86	-32

PROFIT (LOSS) FOR THE YEAR		511	221
Attributable to
Owners of the Parent		335	120
Non-controlling interests		176	102

The accompanying notes are an integral part of these annual Consolidated Financial Statements.

Consolidated Financial Statements 2023

Separate Consolidated Income Statements


Telecom Italia Finance Group	29

Consolidated Statements of Comprehensive Income


(millions of euros)		Note	31/12/2023	31/12/2022

Profit (loss) for the year	(a)		511	221

Other components that subsequently will not be reclassified to the Separate Consolidated Income Statements	(b=c)		—	—
Financial assets measured at fair value through other comprehensive income:	(c)		—	—
Profit (loss) from fair value adjustments			—	—
Other components that subsequently will be reclassified to the Separate Consolidated Income Statements	(d=e+f+g)		253	542
Financial assets measured at fair value through other comprehensive income:	(e)		59	-50
Profit (loss) from fair value adjustments			69	-70
Loss (profit) transferred to the Separate Consolidated Income Statements			-9	20
Hedging derivative instruments:	(f)		-1	—
Profit (loss) from fair value adjustments			-1	—
Loss (profit) transferred to the Separate Consolidated Income Statements			—	—
Exchange rate differences on translating foreign operations:	(g)		194	592
Profit (loss) on translating foreign operations			194	592
Other components of the Consolidated Statements of Comprehensive Income	(h=b+d)		253	542

Total comprehensive income (loss) for the year	(i=a+h)		764	763
Attributable to
Owners of the Parent			526	479
Non-controlling interests			238	284

The accompanying notes are an integral part of these annual Consolidated Financial Statements.

Consolidated Financial Statements 2023

Consolidated Statements of Comprehensive Income


30	Telecom Italia Finance Group

Consolidated Statements of Changes in Equity

Changes from January 1, 2023 to December 31, 2023


(millions of euros)	Share capital	Additiona l paid in capital	Reserve for financial assets measure d at fair value through other compreh ensive income	Reserve for hedging instruments	Reserve for exchange differences on translating foreign operations	Reserve for remeasure ments of employee defined benefit plans (IAS 19)	Share of other profits (losses) of associates and joint ventures accounted for using the equity method	Other reserves and retained earnings (accumulated losses), including profit (loss) for the period	Total Equity attributable to owners of the Parent	Non- controlling interests	Total equity
Balance at January 01, 2023	1.819	3.148	-56	2	-2.114	—	—	3.568	6.366	1.545	7.911
Changes in equity during the period:
Dividends approved	—	—	—	—	—	—	—	-988	-988	-136	-1.123
Total comprehensive income (loss) for the period	—	—	59	-1	131	—	—	335	526	238	764
Other changes	—	—	—	—	—	—	—	31	31	-2	29
Balance at December 31, 2023	1.819	3.148	4	1	-1.983	—	—	2.946	5.934	1.646	7.581

Changes from January 1, 2022 to December 31, 2022


(millions of euros)	Share capital	Additiona l paid in capital	Reserve for financial assets measure d at fair value through other compreh ensive income	Reserve for hedging instruments	Reserve for exchange differences on translating foreign operations	Reserve for remeasure ments of employee defined benefit plans (IAS 19)	Share of other profits (losses) of associates and joint ventures accounted for using the equity method	Other reserves and retained earnings (accumulated losses), including profit (loss) for the period	Total Equity attributable to owners of the Parent	Non- controlling interests	Total equity
Balance at January 01, 2022	1.819	3.148	-6	2	-2.523	—	—	3.498	5.937	1.345	7.282
Changes in equity during the period:
Dividends approved	—	—	—	—	—	—	—	-54	-54	-85	-140
Total comprehensive income (loss) for the period	—	—	-50	—	409	—	—	120	479	284	763
Other changes	—	—	—	—	—	—	—	4	4	2	6
Balance at December 31, 2022	1.819	3.148	-56	2	-2.114	—	—	3.568	6.366	1.545	7.911

The accompanying notes are an integral part of these annual Consolidated Financial Statements.

Consolidated Financial Statements 2023

Consolidated Statements of Changes in Equity


Telecom Italia Finance Group	31

Consolidated Statements of Cash Flows


(million euros)	Note	31/12/2023	31/12/2022

Cash Flows from operating activities:
Profit (loss) from continuing operations		511	221
Adjustments for:
Depreciation and amortization	[30]	1.318	1.260
Impairment losses(reversals) of assets (including investments)		-6	7
Net change in deferred tax assets and liabilities	[11]	49	-24
Losses (gains) realized on disposal of non-current assets (including investments)	[31] [32]	-66	-13
Share of losses (profits) of associates accounted for using the equity method		17	11
Change in inventories		-18	-6
Change in trade receivables and other net receivables	[13]	-46	-6
Change in trade payables		94	130
Net change in current income tax receivables/payables	[11]	-30	-95
Net changes in miscellaneous receivables/payables and other assets/liabilities		96	296
Cash flows from (used In ) operating activities		1.918	1.782

Cash Flows from investing activities:
Purchase of intangible, tangible and right of use on a cash basis		-897	-1.166
Acquisition of control of companies or other businesses, net of cash acquired		51	-1.316
Acquisitions/disposals of other investments	[8]	-10	—
Change in financial receivables and other financial assets (excluding hedging and non-hedging derivatives under financial assets)	[9]	-849	867
Proceed from sale/repayment of intangible, tangible and other non-current assets		3	2
Cash flows from (used In ) investing activities		-1.702	-1.614

Cash Flows from financing activities:
Changes in current financial liabilities and other	[15] [16]	291	-292
Proceeds from non-current financial liabilities (including current portion)	[15] [16]	926	474
Repayments of non-current financial liabilities (including current portion)	[15] [16]	-557	-406
Changes in derivatives		-23	-29
Dividends paid		-1.115	-122
Changes in ownership interests in consolidated subsidiaries		-6	—
Cash flows from (used In ) financing activities		-484	-376

Aggregate Cash flows		-268	-208
Net foreign exchange differences on net cash and cash equivalents		20	-45
Net cash and cash equivalents at the beginning of the year	[9]	3.031	3.239
Net cash and cash equivalents at the end of the year	[9]	2.763	3.031

Additional Cash Flow Information


(million euros)	31/12/2023	31/12/2022

Income taxes (paid) received	-60	-17
Interest expense paid	-701	-523
Interest income received	466	349
Dividends received	—	—

The accompanying notes are an integral part of these annual Consolidated Financial Statements.

Consolidated Financial Statements 2023

Consolidated Statements of Cash Flows


32	Telecom Italia Finance Group

Notes to the Consolidated Financial Statements

Note 1 - Form, content and other general information

FORM AND CONTENT

Telecom Italia Finance S.A. (the “Parent” or “TIF”) is established in Luxembourg as Société Anonyme under the

laws of the Grand Duchy of Luxembourg. The registered office is located at 12, rue Eugène Ruppert,

Luxembourg. Parent and its subsidiaries are collectively referred to as the “Group” or “TIF Group”.

The immediate and ultimate Parent of the Group is TIM S.p.A.

The Group, through its Brazilian’s subsidiaries, is principally engaged in providing fixed-line and telephony

services to the public. The Parent is also involved in providing financial assistance and loans to the ultimate

Parent of the Group and its subsidiaries.

The Consolidated Financial Statements 2023 of the Group have been prepared concern basis (further details

are provided in the Note “Accounting Policies”) and in accordance with the recognition and measurement

criteria of the International Financial Reporting Standards issued by the International Accounting Standards

Board and endorsed by the European Union (designated as “IFRS”), as well and were authorized for issue with

a resolution of the Board of Directors on March 05, 2024. The Consolidated Financial Statements 2023 are

subject to approval by the shareholders meeting.

The consolidated financial statements have been prepared under the historical cost convention, except for

financial assets measured at fair value through other comprehensive income, financial assets measured at fair

value through profit and loss, and derivative financial instruments, which have been measured at fair value.

In accordance with IAS 1 (Presentation of Financial Statements) comparative information included in the

consolidated financial statements refers, unless otherwise indicated, to the previous year.

The Consolidated Financial Statements 2023 have been prepared on a going concern basis (for further details

see Note "Accounting policies").

The Consolidated Financial Statements 2023 are expressed in euro (rounded to the nearest million, unless

otherwise indicated).

FINANCIAL STATEMENT FORMATS

The financial statement formats adopted are consistent with those indicated in IAS 1. More specifically:

• the Consolidated Statement of Financial Position has been prepared by classifying assets and

liabilities according to the "current and non-current" criterion;

• the Separate Consolidated Income Statement has been prepared by classifying operating costs by

nature of expense as this form of presentation is considered more appropriate and representative of

the specific business of the Group, conforms to internal reporting and is in line with the Group's

industrial sector;

• the Consolidated Statement of Comprehensive Income includes the profit or loss for the year as

shown in the Separate Consolidated Income Statement and all other changes in equity related to

non-controlling interests;

• the Consolidated Statement of Cash Flows has been prepared by presenting cash flows from

operating activities according to the "indirect method", as permitted by IAS 7 (Statement of Cash

Flows).

Furthermore, according to IAS 1 (paragraphs 97 and 98), certain expense and income items that are material in

terms of nature and amount are separately disclosed in the notes to the separate consolidated income

statement. Specifically, such items include, for instance: income/expenses arising from the sale of property,

plant and equipment, business segments and investments; expenses stemming from company reorganization

and streamlining processes and projects, also in connection with corporate transactions (mergers, spin-offs,

etc.); expenses resulting from litigation and regulatory sanctions and related liabilities; other provisions for

risks and charges and related reversals; costs for the settlement of disputes other than regulatory disputes;

adjustments, realignments and other non-recurring items, also relating to previous years; impairment losses

on goodwill and/or other intangible and tangible assets.

The official version of the consolidated financial statements is the ESEF version available at the Officially

Appointed Mechanism (OAM) at the bourse of Luxembourg (https://www.bourse.lu/oam).

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	33

SEGMENT REPORTING

An operating segment is a component of an entity:

• that engages in business activities from which it may earn revenues and incur expenses (including

revenues and expenses relating to transactions with other components of the same entity);

• whose operating results are regularly reviewed by the entity's chief operating decision maker to make

decisions about resources to be allocated to the segment and assess its performance; and

• for which separate financial information is available.

In particular, the operating segments of the Group are organized according to the specific businesses.

The term operating segment is considered synonymous with Business Unit.

The operating segments of the Group are as follows:

• Telecommunications (or Brazil Business Unit): includes mobile and fixed telecommunications

operations in Brazil;

• Other Operations: includes TI Finance, that provides financial assistance to TIM Group companies.

For these Business Units, the Group has identified Chief Operating Decision Makers (CODMs) within the

directors for each segment.

Note 2 - Accounting Policies

GOING CONCERN

The Consolidated Financial Statements 2023 have been prepared on a going concern basis as there is the

reasonable expectation that the Group will continue conducting its business in the foreseeable future (and in

any event over a period of at least twelve months).

In particular, the following factors have been taken into consideration:

• the main risks and uncertainties (that are for the most part of an external nature) to which the Group

and the various activities of the Group are exposed:

– variations in business conditions, also related to competition;

– financial risks (interest rate and/or exchange rate trends, changes in the Group's credit rating

by rating agencies);

– macroeconomic changes in the Italian, European and Brazilian markets and financial market

volatility due to recessionary and inflationary risks. In particular, these risks relate to the

increasing costs of raw materials and energy, including as a result of the Russian invasion of

Ukraine;

– changes in the legislative and regulatory context (changes in prices and tariffs or decisions

that may influence technological choices); and

– the outcome of the legal and regulatory authority proceedings.

• the optimal mix between risk capital and debt capital;

• the policy for financial risk management (market risk, credit risk and liquidity risk), as described in the

Note "Financial risk management" .

Based on these factors, the Management believes that, at the present time, there are no elements of

uncertainty regarding the Group’s ability to continue as a going concern.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of all subsidiaries from the date on

which control over such subsidiaries commences until the date on which control ceases.

The date of all the subsidiaries’ financial statements coincides with that of the Parent.

Control exists when the Parent has all the following:

• decision-making power over the investee, which includes the ability to direct the relevant activities of

the investee, i.e. the activities that significantly affect the investee’s returns;

• entitlement to the variable profits or losses commensurate with its shareholding in the investee;

• the ability to use its decision-making to determine the amount of the returns relating to its

shareholding in the entity.

The Parent assesses whether it controls an investee if facts and circumstances indicate that there are changes

in one or more of the three control elements.

In the preparation of the Consolidated Financial Statements,the global amounts of the assets, liabilities, costs

and revenues of the consolidated companies are recognized on a line-by-line basis, while the share of equity

and the year's result of non-controlling interest is recognized and is disclosed separately under appropriate

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


34	Telecom Italia Finance Group

items in the Consolidated Statements of Financial Position, in the Separate Consolidated Income Statement

and in the Consolidated Statements of Comprehensive Income.

Under IFRS 10 (Consolidated financial statements), the comprehensive loss (including the profit or loss for the

year) is attributed to the owners of the parent and to non-controlling interests even when the equity of non-

controlling interest has a deficit balance.

All intragroup balances and transactions and any gains and losses arising from intragroup transactions are

eliminated in consolidation.

The carrying amount of the investment in each subsidiary is eliminated against the corresponding share of

equity in each subsidiary, after adjustment, if any, to fair value at the date of acquisition of control. At that

date, goodwill is recorded as an intangible asset, as described below, whereas any profit from a bargain

purchase (or negative goodwill) is recognized in the separate consolidated income statement.

All the assets and liabilities expressed in currencies other than euro of foreign consolidated entities that are

included in the consolidation are translated using the exchange rates in effect at the reporting date (the

current exchange rate method), while the related revenues and costs are translated at the average exchange

rates for the year. Exchange differences resulting from the application of this method are classified as equity

until the entire disposal of the investment or upon loss of control of the foreign subsidiary. Upon partial

disposal, without losing control, the proportionate share of the cumulative amount of exchange differences

related to the disposed interest is recognized in non-controlling interests.

The cash flows of foreign consolidated subsidiaries expressed in currencies other than euro included in the

consolidated statement of cash flows are translated into euro at the average exchange rates for the year.

Goodwill and fair value adjustments arising from the allocation of the purchase price of a foreign entity are

recorded in the relevant foreign currency and are translated using the year-end exchange rate.

Under IFRS 10, changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control

are accounted for as equity transactions. In such circumstances the carrying amounts of controlling and non-

controlling interests shall be adjusted to reflect the changes in their related interests in the subsidiary. Any

difference between the amount by which the non-controlling interest is adjusted and the fair value of the

consideration paid or received shall be recognized directly in equity and attributed to the owners of the Parent.

Under IFRS 10, the parent company in case of loss of control of a subsidiary:

• derecognizes:

• the assets (including any goodwill) and the liabilities;

• the carrying amount of any non-controlling interest;

• recognizes:

• the fair value of any consideration received;

• the fair value of any residual investment retained in the former subsidiary;

• any profit or loss resulting from the transaction, in the separate consolidated income

statement;

• the reclassification to the separate consolidated income statement of the amounts

previously recognized in other comprehensive income in relation to the subsidiary.

In the Consolidated Financial Statements, investments in associates are accounted for using the equity

method, as provided by IAS 28 (Investments in Associates and Joint Ventures).

Associates are enterprises in which the Group holds at least 20% of the voting rights or exercises significant

influence, but no control or joint control over their financial and operating policies.

Associates are included in the Consolidated Financial Statements from the date on which significant influence

commences until the date on which significant influence ceases. Under the equity method, on initial

recognition the investment in an associate is recognized at cost, and the carrying amount is increased or

decreased to recognize the investor's share of the profit or loss of the investee after the date of acquisition.

The investor's share of the investee's profit or loss is recognized in the separate consolidated income

statement. Dividends received from an investee reduce the carrying amount of the investment.

After application of the equity method, the Group determines whether it is necessary to recognize an

impairment loss on its investment. At each reporting date, the Group determines whether there is objective

evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the

amount of impairment as the difference between the recoverable amount of the associate and its carrying

value, and then recognizes the loss within Separate Consolidated Income Statement .

Adjustments to the carrying amount may also be necessary for changes in the investee's other comprehensive

income (i.e. those arising from foreign exchange translation differences). The investor's share of those changes

is recognized in the investor's other comprehensive income.

If an investor's share of losses of an associate equals or exceeds its interest in the associate, the investor

discontinues recognizing its share of further losses. After the investor's interest is reduced to zero, additional

losses are provided for, and a liability is recognized, only to the extent that the investor has incurred legal or

constructive obligations or made payments on behalf of the associate. If the associate subsequently reports

profits, the investor resumes recognizing its share of those profits only after its share of the profits equals the

share of losses not recognized.

Any other long-term interests (some types of preference shares and long-term loans) in an associate are

measured in accordance with IFRS 9.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	35

Gains and losses resulting from "upstream" and "downstream" transactions between an investor (including its

consolidated subsidiaries) and its associate are recognized in the investor's financial statements only to the

extent of unrelated investors' interests in the associate.

The investor's share of profits and losses of the associate arising from said transactions is eliminated.

INTANGIBLE ASSETS

Goodwill

The goodwill recorded in the Consolidated Financial Statements of the Group refers to the goodwill which was

generated in connection with the acquisition of the Brazilian Business Unit.

In accordance with IFRS 3 (Business Combinations), goodwill is recognized in the financial statements at the

date of acquisition of control of a business and is determined as the excess of (a) over (b), as follows:

a) the aggregate of:

• the consideration transferred (measured in accordance with IFRS 3; it is generally recognized on

the basis of the fair value at the acquisition date);

• the amount of any non-controlling interest in the acquiree measured proportionally to the non-

controlling interest share of the acquiree's identifiable net assets shown at the related fair value;

• in a business combination achieved in stages, the acquisition date fair value of the acquirer's

previously held equity interest in the acquiree;

b) the fair value of the identifiable assets acquired net of the identifiable liabilities assumed measured at

the date of acquisition of control.

IFRS 3 requires, inter alia, the following:

• incidental costs incurred in connection with a business combination to be charged to the Separate

Consolidated Income Statement;

• in a business combination achieved in stages, the acquirer to remeasure its previously held equity

interest in the acquiree at its fair value at the acquisition date of control and recognize the resulting

gain or loss, if any, in the Separate Consolidated Income Statement.

Goodwill is classified in the statement of financial position as an intangible asset with an indefinite useful life.

Goodwill initially recognized is subsequently reduced only by cumulative impairment losses (for more details,

see the section "Impairment of intangible assets, tangible assets and rights of use assets - Goodwill", below). In

case of loss of control of a subsidiary, the related amount of goodwill is taken into account in calculating the

gain or loss on disposal.

Development costs

Costs incurred internally for the development of new products and services represent either intangible assets

(mainly costs for software development) or tangible assets. These costs are capitalized only when all the

following conditions are satisfied: i) the cost attributable to the development phase of the asset can be

measured reliably, ii) there is the intention, the availability of financial resources and the technical ability to

complete the asset and make it available for use or sale and iii) it can be demonstrated that the asset will be

able to generate future economic benefits. Capitalized development costs comprise only incurred expenditures

that can be attributed directly to the development process for new products and services.

Capitalized development costs are amortized systematically over the estimated product or service life so that

the amortization method reflects the way in which the asset's future economic benefits are expected to be

consumed by the entity.

Other intangible assets with a finite useful life

Other purchased or internally-generated intangible assets with a finite useful life are recognized as assets, in

accordance with IAS 38 (Intangible Assets), when the use of the asset is likely to generate future economic

benefits and when the cost of the asset can be reliably measured.

Such assets are recorded at purchase or production cost and amortized on a straight-line basis over their

estimated useful lives; the amortization rates are reviewed annually and revised if the current estimated useful

life is different from that estimated previously. The effect of such changes is recognized prospectively in the

Separate Consolidated Income Statement.

TANGIBLE ASSETS

Property, plant and equipment

Property, plant and equipment are recognized at purchase or production cost. Subsequent expenditures are

capitalized only if they increase the future economic benefits embodied in the related item of property, plant

and equipment. All other expenditures are recognized in the Separate Consolidated Income Statement as

incurred.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


36	Telecom Italia Finance Group

The cost of these assets also includes the expected costs of dismantling the asset and restoring the site, if a

legal or constructive obligation exists. The corresponding liability is recognized at its present value in a

provision for risks and charges in the liabilities. The recognition in the separate consolidated income statement

of the capitalized expenditure is done over the useful life of the related tangible assets through their

depreciation.

The calculation of estimates for dismantling costs, discount rates and the dates in which such costs are

expected to be incurred is reviewed annually at each financial year-end. Changes in the above liability must be

recognized as an increase or decrease of the cost of the related asset; the amount deducted from the cost of

the asset must not exceed its carrying amount. The excess, if any, is recorded immediately in the Separate

Consolidated Income Statement, conventionally under the line item "Depreciation".

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets.

Depreciation rates are reviewed annually and revised if the current estimated useful life is different from that

estimated previously. The effect of such changes is recognized prospectively in the Separate Consolidated

Income Statement.

Land, including land pertaining to buildings, is not depreciated.

RIGHT OF USE ASSETS

In accordance with IFRS 16, lease liabilities are presented through the recognition of a financial liability in the

statement of financial position consisting in the present value of future lease payments, against the

recognition of the right of use of the leased asset.

On the commencement date of the lease, the right of use is recognized at cost including: the amount of the

initial measurement of the lease liability, any lease payments made at or before the commencement date,

initial direct costs incurred for the signature of the lease and the present value of the estimated restoration

and dismantling costs set out in the lease, less any incentives.

Subsequently, the right of use is amortized over the term of the lease (or the useful life of the asset, if lower),

subject to impairment and adjusted for any remeasurement of the lease liability.

The Group attracts, under the scope of application of IFRS 16, if the criteria and the requirements laid down by

the standard are met, the contract types concerning cloud software resources and the spectrum of

transmission frequencies on optic fiber carriers. This approach is functional to the very innovative specificity of

these types of contract, concerning hardware infrastructure and optical transmission as well as

technologically-advanced software services.

CAPITALIZED BORROWING COSTS

Under IAS 23 (Borrowing Costs), the Group capitalizes borrowing costs only if they are directly attributable to

the acquisition, construction or production of an asset that takes a substantial period of time (conventionally

more than 12 months) to get ready for its intended use or sale.

Capitalized borrowing costs are recorded in the Separate Consolidated Income Statement and deducted

directly from the "finance expense" line item to which they relate.

IMPAIRMENT OF INTANGIBLE, TANGIBLE AND RIGHT OF USE ASSETS

Goodwill

Goodwill is tested for impairment at least annually or more frequently whenever events or changes in

circumstances indicate that goodwill may be impaired, as set forth in IAS 36 (Impairment of Assets); however,

when the conditions that gave rise to an impairment loss no longer exist, the original amount of goodwill is not

reinstated.

The test is generally conducted at the end of every year, so the date of testing is the year-end closing date of

the financial statements. Goodwill acquired and allocated during the year is tested for impairment at the end

of the year in which the acquisition and allocation took place.

For the purpose of verifying its recoverability, goodwill is allocated, from the acquisition date, to each of the

cash-generating units, or groups of cash-generating units, that is expected to benefit from the combination.

If the carrying amount of the cash-generating unit (or group of cash-generating units) exceeds the recoverable

amount, an impairment loss is recognized in the Separate Consolidated Income Statement. The impairment

loss is first recognized as a deduction of the carrying amount of goodwill allocated to the cash-generating unit

(or group of cash-generating units) and only subsequently applied to the other assets of the cash-generating

unit in proportion to their carrying amount, up to the recoverable amount of the assets with a finite useful life.

The recoverable amount of a cash-generating unit (or group of cash-generating units) to which goodwill is

allocated is the higher between the fair value less costs to sell and its value in use.

The fair value net of disposal costs is estimated on the basis of the income approach, insofar as this allows for

the reflection of the benefits deriving from a new, different business structure in the future. In particular, the

fair value net of disposal costs is based on the current value of the forecast cash flow, applying a discounting

rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	37

The future cash flows are those arising from an explicit time horizon between three and five years, as well as

those extrapolated to estimate the terminal value.

In calculating the value in use, the estimated future cash flows are discounted to present value using a

discount rate that reflects current market assessments of the time value of money and the risks specific to the

asset. The future cash flows are those arising from an explicit time horizon between three and five years as

well as those extrapolated to estimate the terminal value. The long-term growth rate used to estimate the

terminal value of the cash-generating unit (or group of cash-generating units) is assumed not to be higher

than the average long-term growth rate of the segment, country or market in which the cash-generating unit

(or group of cash-generating units) operates.

The value in use of cash-generating units denominated in foreign currency is estimated in the local currency by

discounting cash flows to present value on the basis of an appropriate rate for that currency. The present value

obtained is translated to euro at the spot rate on the date of the impairment test (in the case of the Group, the

closing date of the financial statements).

Future cash flows are estimated by referring to the current operating conditions of the cash generating unit (or

group of cash-generating units) and, therefore, do not include either benefits originating from future

restructuring for which the entity is not yet committed, or future investments for the improvement or

optimization of the cash-generating unit.

For the purpose of calculating impairment, the carrying amount of the cash-generating unit is established

based on the same criteria used to determine the recoverable amount of the cash generating unit, excluding

surplus assets (that is, financial assets, deferred tax assets and net non-current assets held for sale) and

includes the goodwill attributable to non-controlling interests.

After conducting the goodwill impairment test for the cash-generating unit (or groups of cash-generating

units), a second level of impairment testing is carried out which includes the corporate assets which do not

generate positive cash flows and which cannot be allocated by a reasonable and consistent criterion to the

single units. At this second level, the total recoverable amount of all cash-generating units (or groups of cash-

generating units) is compared to the carrying amount of all cash-generating units (or groups of cash-

generating units), including also those cash-generating units to which no goodwill was allocated, and the

corporate assets.

Intangible and tangible assets with finite useful lives and right of use assets

At the end of each reporting period, the Group assesses whether there is any indication that an asset –

whether tangible or intangible with finite useful lives or a right-of-use – may be impaired. Both internal and

external sources of information are used for this purpose. Internal sources include obsolescence or physical

deterioration, and significant changes in the use of the asset and the operating performance of the asset

compared to estimated performance. External sources include the market value of the asset, any changes in

technology, markets or laws, trends in market interest rates and the cost of capital used to evaluate

investments, and an excess of the carrying amount of the net assets of the Group over market capitalization.

If there is any indication that an asset – whether tangible or intangible with finite useful lives or a right of use

has been impaired, then its carrying amount is reduced to its recoverable amount. The recoverable amount is

the higher of an asset's fair value less costs to sell, and its value in use. In calculating the value in use, the

estimated future cash flows are discounted to present value using a discount rate that reflects current market

assessments of the time value of money and the risks specific to the asset or right. If it is not possible to

estimate the recoverable amount, the Group estimates the recoverable amount of the cash-generating unit to

which the asset belongs. Impairment losses are recognized in the Separate Consolidated Income Statement.

When the reasons for the impairment subsequently cease to exist, the carrying value of the asset/right of use

or of the cash generating unit is increased up to the new estimate of the recoverable amount which, however,

cannot exceed the amount that would have been determined had no impairment loss been recognized. The

reversal of an impairment loss is recognized as income in the Separate Consolidated Income Statement.

FINANCIAL LEASES ASSETS

Leases in which the Group, as lessor, substantially transfers the risks and benefits of the ownership to the other

party (the lessee) are classified as financial leases. These lease values are transferred from the intangible and

tangible assets of the Group and are recognized as a lease receivable at the lower of the fair value of the

leased item and/or the present value of the receipts provided for in the agreement. Interest related to the lease

is taken to income statement as financial revenue over the contractual term.

FINANCIAL INSTRUMENTS

Business models for financial assets management

For the management of trade receivables, the Group Management has identified the business model “Hold to

Collect”. These receivables are financial assets measured at amortized cost, and refer to accounts receivable

from users of telecommunications services, from network use (interconnection) and from sales of handsets

and accessories. Accounts receivable are recorded at the price charged at the time of the transaction. The

balances of accounts receivable also include services provided and not billed (“unbilled”) up to the balance

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


38	Telecom Italia Finance Group

sheet date. Accounts receivable from clients are initially recognized at fair value and subsequently measured

at amortized cost using the effective interest rate method less the provision for expected credit losses

("impairment").

As part of managing financial assets other than trade receivables, the Group Management has identified its

business models on the basis of how the financial instruments are managed and how their cash flows are

used. This is done to ensure an adequate level of financial flexibility and to best manage, in terms of risks and

returns, the financial resources immediately available through the treasuries of Group companies and in

accordance with the strategies set forth by the Ultimate Parent TIM.

The business models adopted are:

• Hold to Collect: financial instruments used to absorb temporary cash surpluses; such instruments are

low risk and mostly held to maturity; they are measured at amortized cost;

• Hold to Collect and Sell: monetary or debt instruments used to absorb short/medium-term cash

surpluses; such instruments are low risk and generally held to maturity, or otherwise sold to cover

specific cash requirements; they are measured at fair value through other consolidated

comprehensive income (FVTOCI);

• Hold to Sell: monetary, debt and equity trading instruments used to dynamically manage cash

surpluses not managed under the business models identified above; such instruments are higher risk

and traded repeatedly over time; they are measured at fair value through consolidated profit or loss

(FVTPL).

In order for a financial asset to be classified and measured at amortised cost or FVTOCI, it needs to give rise to

cash flows that are “solely payments of principal and interest (SPPI)” on the principal amount outstanding. This

assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash

flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the

business model.

At initial recognition, those financial asset are measured at fair value plus or minus, in the case of a financial

asset not at FVTPL, transaction costs that are directly attributable to the acquisition or issue of the financial

asset. Transaction costs include fees and commission paid to agents (including employees acting as selling

agents), advisers, brokers and dealers, levies by regulatory agencies and security exchanges, and transfer taxes

and duties. They do not include debt premiums or discounts, financing costs or internal administrative or

holding costs.

Subsequent measurement changes according to category of financial assets:

• Amortised cost: Interest income from these financial assets is included in finance income using the

effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit

or loss and presented in other gains/(losses), together with foreign exchange gains and losses.

Impairment losses are presented as a separate line item in the Consolidated Statement of Income.

• FVTOCI: Movements in the carrying amount are taken through OCI, except for the recognition of

impairment gains or losses, interest revenue and foreign exchange gains and losses which are

recognized in profit or loss. When the financial asset is derecognised, the cumulative gain or loss

previously recognized in OCI is reclassified from equity to profit or loss and recognized in “Finance

income and expenses”.

• FVTPL: A gain or loss on those investments is recognized in profit or loss and presented net within

“Finance income and expenses” in the period in which it arises.

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire,

or they are transferred and the transfer qualifies for derecognition (therefore, the entity transfers substantially

all the risks and rewards of ownership of the financial asset).

Other investments

Other investments (equity investments other than those in subsidiaries and associates) are classified as non-

current or current assets if they will be kept in the Group's portfolio for a period of more or not more than 12

months, respectively.

Other investments are classified as “financial assets measured at fair value through consolidated profit or

loss” (FVTPL), as current assets.

At the purchase time of each investment, IFRS 9 provides for the irrevocable option to recognize these

investments in "financial assets measured at fair value through other consolidated comprehensive

income" (FVTOCI) as non-current or current assets. In the Consolidated Financial Statements 2023 the Group

has not applied this option for any material other investment.

The other investments classified as “financial assets measured at fair value through other comprehensive

income” are measured at fair value; changes in the fair value of these investments are recognized in a special

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	39

equity reserve under the other components of the statements of comprehensive income (Reserve for financial

assets measured at fair value through other comprehensive income), without reclassification to the separate

income statement when the financial asset is disposed of or impaired. Dividends are recognized in the

separate consolidated income statement.

Changes in the value of other investments classified as "financial assets at fair value through profit or loss" are

recognized directly in the separate consolidated income statement.

Securities other than investments

Securities other than equity investments included among non-current or current assets, depending on the

business model adopted and the contractual flows envisaged, fall among financial assets measured at

amortized cost, or measured at fair value through other comprehensive income or at fair value though profit or

loss.

Securities other than investments classified as current assets are those that, by decision of the directors, are

intended to be kept in the Group's portfolio for a period of not more than 12 months, and are classified:

• as "financial assets measured at amortized cost" (AC) when held to maturity (originally more than 3

months but less than 12 months, or, with an original maturity of more than 12 months but the

remaining maturity at the date of purchase is more than 3 months but less than 12 months);

• as "financial assets measured at fair value through other consolidated comprehensive

income" (FVTOCI) when held in the scope of a business model whose objective is to sell the financial

asset and/or collect the contractual flows. The "Reserve for financial assets measured at fair value

through other consolidated comprehensive income" is reversed to the Separate Consoldiated Income

Statement when the financial asset is disposed of or impaired;

• as “financial assets measured at fair value through consolidated profit or loss" (FVTPL) in the other

cases or when their cash flows are not SPPI.

Cash and cash equivalents

Cash and cash equivalents are recorded at amortized cost.

Cash equivalents are short-term and highly liquid investments that are readily convertible to known amounts

of cash, subject to an insignificant risk of change in value and their original maturity or the remaining maturity

at the date of purchase does not exceed 3 months.

Impairment of financial assets

At every closing date, assessments are made as to whether there is any objective evidence that a financial

asset or a group of financial assets has been impaired.

The impairment of financial assets is based on the expected credit loss model.

In particular:

• impairment on trade receivables assets is carried out using the simplified approach that involves

estimating the loss expected over the life of the receivable at the time of initial recognition and on

subsequent measurements. It is recognized as a reduction in accounts receivable based on the profile

of the subscriber portfolio, the aging of overdue accounts receivable, the economic situation, the risks

involved in each case and the collection curve, at an amount deemed sufficient by Management, as

adjusted to reflect current and prospective information on macroeconomic factors that affect the

customers’ ability to settle the receivables.

• impairment on financial assets other than trade receivables is calculated on the basis of a general

model which estimates expected credit losses over the following 12 months, or over the residual life of

the asset in the event of a substantial worsening of its credit risk.

Derivative financial instruments

As allowed by IFRS 9, the Group decided to continue to apply the hedge accounting provisions contained in IAS

39, instead of those of IFRS 9.

Derivatives are used by the Group to manage its exposure to exchange rate and interest rate risks and to

diversify the parameters of debt so that costs and volatility can be reduced within pre-established operational

limits.

In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when:

• at the inception of the hedge, the hedging relationship is formally designated and documented;

• the hedge is expected to be highly effective;

• its effectiveness can be reliably measured;

• the hedge is highly effective throughout the financial reporting periods for which it is designated.

All derivative financial instruments are measured at fair value in accordance with IAS 39.

When derivative financial instruments qualify for hedge accounting, the following accounting treatment

applies:

• Fair value hedge – Where a derivative financial instrument is designated as a hedge of the exposure

to changes in fair value of an asset or liability due to a particular risk, the profit or loss from re-

measuring the hedging instrument at fair value is recognized in the Separate Consolidated Income

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


40	Telecom Italia Finance Group

Statement. The profit or loss on the hedged item attributable to the hedged risk adjusts the carrying

amount of the hedged item and is recognized in the Separate Consolidated Income Statement.

• Cash flow hedge – Where a derivative financial instrument is designated as a hedge of the exposure

to variability in cash flows of an asset or liability or a highly probable expected transaction, the

effective portion of any gain or loss arising from the fair value adjustment of the derivative financial

instrument is recognized directly in a specific equity reserve (Reserve for fair value adjustment of

hedging derivative instruments). The cumulative profit or loss is removed from equity and recognized

in the Separate Consolidated Income Statement during the same business years in which the hedged

transaction is recognized in the Separate Consolidated Income Statement. The profit or loss

associated with the ineffective portion of a hedge is recognized in the Separate Consolidated Income

Statement immediately. If the hedged transaction is no longer considered to be probable, the gains or

losses not yet realized included in the equity reserve are immediately recognized in the Separate

Consolidated Income Statement.

For derivatives for which a hedging relationship has not been designated, changes in value compared to initial

recognition are recognized directly in the separate consolidated income statement

Financial liabilities

Financial liabilities include financial payables, including payables for advances on assignments of receivables

where the assignment does not transfer substantially all the risks and rewards, as well as other financial

liabilities, including derivative financial instruments and liabilities in respect of assets recognized under finance

leases recognized in accordance with IFRS 16.

In accordance with IFRS 9, they also include trade and other payables.

Financial liabilities other than derivatives are initially recognized at fair value and subsequently measured at

amortized cost.

Financial liabilities hedged by derivative instruments designed to manage exposure to changes in the fair value

of liabilities (fair value hedge derivatives) are measured at fair value in accordance with the hedge accounting

principles of IAS 39: the profits and losses deriving from subsequent fair value adjustments, only as regards the

covered component, are recognized in the separate consolidated income statement and counterbalanced by

the effective portion of the profit or loss deriving from the corresponding fair value measurements of the hedge

instrument.

Financial liabilities hedged by derivative instruments designed to manage exposure to variability in cash flows

(cash flow hedge derivatives) are measured at amortized cost in accordance with the hedge accounting

principles of IAS 39.

Financial liabilities are derecognized when they are extinguished, i.e. when the obligation specified in the

contract is discharged or cancelled or expires.

INVENTORIES

Inventories are measured at the lower of purchase or production cost and estimated realizable value; the cost

is determined using the weighted average cost formula for each movement, while the estimated realizable

value is determined by observing general prices at the end of the year. Provision is made for obsolete and slow-

moving inventories based on their expected future use and estimated realizable value.

EMPLOYEE BENEFITS

Equity compensation plans

The companies of the Group provide additional benefits to certain managers of the Group through equity

compensation plans (for example stock options and long-term incentive plans). The above plans are

recognized in accordance with IFRS 2 (Share-Based Payment).

In accordance with IFRS 2, such plans represent a component of the beneficiaries' compensation. Therefore, for

the plans that provide for compensation in equity instruments, the cost is represented by the fair value of such

instruments at the grant date and is recognized in the Separate Consolidated Income Statement in "Employee

benefits expenses" over the period between the grant date and vesting date with a contra-entry to an equity

reserve denominated "Other equity instruments". Changes in the fair value subsequent to the grant date do

not affect the initial measurement. At the end of each year, adjustments are made to the estimate of the

number of rights that will vest up to expiry. The impact of the change in estimate is recorded as an adjustment

to "Other equity instruments" with a contra-entry to "Employee benefits expenses".

The portion of the plans that specifies the payment of compensation in cash is recognized in liabilities as a

contra-entry to "Employee benefits expenses"; at the end of each year said liability is measured at fair value.

PROVISIONS

The Group records provisions for risks and charges when having a current legal or constructive obligation to a

third party, as a result of a past event, an outflow of Group resources is likely to be required to meet that

obligation and when the amount of the obligation can be estimated reliably.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	41

Provisions for risks and charges also include those established in the event that the company should stipulate

contracts that thereafter became onerous, the non-discretionary costs of which necessary to fulfill the

commitments made, exceeding the economic benefits expected from such contracts.

If the effect of the time value is material, and the payment date of the obligations can be reasonably

estimated, provisions to be accrued are the present value of the expected cash flows, taking into account the

risks associated with the obligation. The increase in the provision due to the passage of time is recognized in

the separate consolidated income statements as "Finance expenses".

FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the date of the

transaction. Monetary assets and liabilities denominated in foreign currencies are converted at the foreign

exchange rate prevailing at the statement of financial position date. Exchange differences arising from the

settlement of monetary items or from their conversion at rates different from those at which they were initially

recorded during the year or at the end of the prior year, are recognized in the Separate Consolidated Income

Statement.

REVENUES

Revenues are the gross inflows of economic benefits during the period arising in the course of the ordinary

activities of an entity. Amounts collected on behalf of third parties such as sales taxes, goods and services

taxes and value added taxes are not economic benefits which flow to the entity and do not result in increases

in equity. Therefore, they are excluded from revenues.

The process underlying the recognition of revenues follows the steps set out in IFRS 15:

• identification of the contract: takes place when the parties approve the contract (with commercial

substance), identify the respective rights and obligations, this means that: the contract must be

legally enforceable, the rights to receive goods and/or services and the terms of payment can be

clearly identified and the Group deems receipt of payment as probable;

• identification of the performance obligations: based on the review of its contracts, the Group

identified the existence of two performance obligations:(i)sale of equipment and (ii) provision of

mobile, fixed and internet telephony services. Revenues recognition starts when, or as, the

performance obligation is met when transferring the good or service promised to the customer; the

asset is considered transferred when or as the customer obtains control of this asset;

• determination of the transaction price and allocation of the transaction price to the performance

obligations: the Group sell commercial packages that combine services and sale of cellular handsets

with discounts. In accordance with IFRS 15, the Group is required to perform the discount allocation

and recognize revenues related to each performance obligation based on their standalone selling

prices.

• recognition of revenues: revenues are stated net of discounts, allowances, and returns in connection

with the characteristics of the type of revenue:

▪ Revenues from services rendered

The principal service revenue derives from monthly subscription, the provision of separate

voice, SMS and data services, and user packages combining these services, roaming charges

and interconnection revenue. The revenue is recognized as the services are used, net of sales

taxes and discounts granted on services. This revenue is recognized only when the amount of

services rendered can be estimated reliably.

Revenues are recognized monthly, through billing, and revenues to be billed between the

billing date and the end of the month (unbilled) are identified, processed, and recognized in

the month in which the service was provided. These non-billed revenues are recorded on an

estimated basis, which takes into account consumption data, number of days elapsed since

the last billing date.

Interconnection traffic and roaming revenue are recorded separately, without offsetting the

amounts owed to other telecom operators (the latter are accounted for as operating costs).

The minutes not used by customers and/or reload credits in the possession of commercial

partners regarding the prepaid service system are recorded as deferred revenue and

allocated to income when these services are actually used by customers.

▪ Revenues from product sales

Revenues from product sales (telephones, mini-modems, tablets and other equipment) are

recognized when the performance obligations associated with the contract are transferred to

the buyer. Revenues from sales of devices to trading partners are accounted for at the time

of their physical delivery to the partner, net of discounts, and not at the time of sale to the

end customer, since the Company has no control over the product sold.

The recognition of revenues can generate the recognition of an asset or liability deriving from

contracts. In particular:

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


42	Telecom Italia Finance Group

▪ Contract assets are the rights to a consideration in exchange for goods or services that have

been transferred to the customer, when the rights is conditioned on something other than

the passage of time and are recognised as Other Receivable.

▪ Contract liabilities are the obligation to transfer goods or services to the customer for which

the Group has received (or for which it is due) a consideration from the customer.

All incremental costs related to obtaining a contract (sales commissions and other costs of acquisition from

third parties) are recorded as prepaid expenses and amortized over the same period as the revenue associated

with this asset. Similarly, certain contract compliance costs are also deferred to the extent that they relate to

performance obligations under the customer agreement, i.e. when the customer obtains control over the asset.

RESEARCH COSTS AND ADVERTISING EXPENSES

Research and advertising costs are directly expensed to the Separate Consolidated Income Statement in the

year in which they are incurred.

FINANCE INCOME AND EXPENSES

Finance income and expenses are recognized on an accrual basis and include: interest accrued on the related

financial assets and liabilities using the effective interest rate method; changes in the fair value of derivatives

and other financial instruments measured at fair value through the income statements; gains and losses on

foreign exchange and financial instruments (including derivatives).

DIVIDENDS

Dividends received from companies other than subsidiaries and associates are recognized in the Separate

Consolidated Income Statement on an accrual basis, i.e. in the year in which they become receivable following

the resolution by the shareholders' meeting for the distribution of dividends of the investee companies.

Dividends payable to third parties are reported as a change in equity in the year in which they are approved by

the shareholders' meeting.

INCOME TAXES EXPENSE (CURRENT AND DEFERRED)

Income taxes include all taxes calculated on the basis of the taxable income of the companies of the Group.

Current and deferred income taxes are calculated using all the elements and information available at the

reporting date, taking into account current laws and considering all the elements that could give rise to

uncertainties in the determination of the amounts due to the tax authorities, as provided for in IFRIC 23.

Income taxes are recognized in the Separate Consolidated Income Statement, except to the extent that they

relate to items directly charged or credited to equity, in which case the related tax effect is recognized in the

relevant equity reserves.The amount of the income tax expense relating to each item included as "Other

components of the Consolidated Statements of Comprehensive income" is indicated in the Statement of

comprehensive income.

The provisions for taxes that could arise from the remittance of the undistributed earnings of subsidiaries are

made only where there is the actual intention to remit such earnings.

Deferred tax liabilities / assets are recognized using the "Balance sheet liability method". They are calculated

on all the temporary differences that arise between the taxable base of assets and liabilities and the related

carrying amounts in the consolidated financial statements, except for differences arising from investments in

subsidiaries that are not expected to reverse in the foreseeable future. Deferred tax assets relating to unused

tax loss carryforwards are recognized to the extent that it is probable that future taxable income will be

available against which they can be utilized. Tax assets and liabilities are offset, separately for current and

deferred taxes, when income taxes are levied by the same tax authority and when there is a legally

enforceable offsetting right. Deferred tax assets and deferred tax liabilities are determined by adopting the tax

rates expected to be applicable in the respective jurisdictions of the countries in which the Group companies

operate, in the years in which those temporary differences are expected to be recovered or settled.

The other taxes, not related to income, are included in "Other operating expenses".

USE OF ESTIMATES

The preparation of Consolidated Financial Statements and related notes in conformity with IFRS requires

management to make estimates and assumptions based also on subjective judgments, past experience and

assumptions considered reasonable and realistic in relation to the information known at the time of the

estimate. Such estimates have an effect on the reported amount of assets and liabilities and disclosure of

contingent assets and liabilities at the date of the financial statements, as well as on the amount of revenues

and costs during the year. Actual results could differ, even significantly, from those estimates owing to possible

changes in the factors considered in the determination of such estimates. Estimates are reviewed periodically.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	43

The most significant accounting estimates that involve a high level of subjective assumptions and judgments

are detailed below.


Financial statement line item/area	Accounting estimates
Impairment of goodwill	The impairment test on goodwill is carried out by comparing the carrying amount of cash-generating units and their recoverable amount. The recoverable amount of a cash-generating unit is the higher of fair value, less costs to sell, and its value in use. If the market capitalization, taking in account the volatility, is sufficiently high, it is considered as the recoverable value. Otherwise, the valuation process entails the use of methods such as the discounted cash flow method, which uses assumptions to estimate cash flows. The fair value net of disposal costs is based on the current value of forecast cash flow, calculated using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The recoverable amount depends significantly on the discount rate used in the discounted cash flow model as well as the expected future cash flows and the growth rate used for the extrapolation. The key assumptions used to determine the recoverable amount for the different cash generating units, including a sensitivity analysis, are detailed in the Note "Goodwill".
Impairment of intangible and tangible assets with finite useful lives and right of use assets	At the end of each reporting period, the Group assesses whether there is any indication that an asset – whether tangible or intangible with finite useful lives or a right-of-use – has been impaired. Both internal and external sources of information are used for this purpose. Identifying the impairment indicators, estimating future cash flows and calculating the fair value of each asset requires the Management to make significant estimates and assumptions in calculating the discount rate to be used, and the useful life and residual value of the assets. These estimates can have a significant impact on the fair value of the assets and on the amount of any impairment write-down.
Business combinations	The recognition of business combinations requires that assets and liabilities of the acquiree be recorded at their fair value at the control acquisition date, as well as the possible recognition of goodwill. These values are determined through a complex estimation process
Expected Credit Loss	Impairment on trade receivables assets is carried out using the simplified approach that involves estimating the loss expected over the life of the receivable at the time of initial recognition and on subsequent measurements. It is recognized as a reduction in accounts receivable based on the profile of the subscriber portfolio, the aging of overdue accounts receivable, the economic situation, the risks involved in each case and the collection curve, at an amount deemed sufficient by Management, as adjusted to reflect current and prospective information on macroeconomic factors that affect the customers’ ability to settle the receivables. Impairment on financial assets other than trade receivables is calculated on the basis of a general model which estimates expected credit losses over the following 12 months, or over the residual life of the asset in the event of a substantial worsening of its credit risk. Details are provided in the Note "Financial Risk Management".
Provision for legal and administrative proceedings	The legal and administrative proceedings are analyzed by the Management along with its legal advisors (internal and external). The Group considers factors in its analysis such as hierarchy of laws, precedents available, recent court judgments, their relevance in the legal system and payment history. These assessments involve Management’s judgment. Further detail are provided in the Note "Disputes and pending legal actions, other information, commitments and guarantees".
Unbilled revenues	Since some cut dates for billing occur at intermediate dates within the months of the year, as the end of each month there are revenues earned by the Group, but not actually invoiced to its customers. These unbilled revenues are recorded based on estimate that takes into consideration historical consumption data, number of days elapsed since the last billing date, among others.
Income tax and social contribution (current and deferred)	Income tax and social contribution (current and deferred) are calculated according to interpretations of current legislation and IAS 12. This process typically involves complex estimates to determine taxable income and temporary differences. In particular, the deferred assets on tax losses, negative basis of social contribution and temporary differences is recognized in proportion to the probability that future taxable income is available and can be used. The measurement of the recoverability of deferred income tax on tax losses, negative basis of social contribution and temporary differences takes the history of taxable income into account, as well as the estimate of future taxable income. Further detail are provided in the Note "Income taxes (current and deferred)".

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


44	Telecom Italia Finance Group


Financial statement line item/area	Accounting estimates
Derivative instruments and equity instruments	The fair value of derivative instruments and equity instruments is determined both using valuation models which also take into account subjective measurements such as, for example, cash flow estimates, expected volatility of prices, etc., and on the basis of prices existing in regulated markets or quotations provided by financial counterparts. For further details, please also see the Note "Supplementary disclosures on financial instruments".
Leasing	The Group has a significant number of lease agreements in which it is the lessee, whereby with the adoption of accounting standard IFRS 16, the Group Management made certain judgments when measuring the lease liability and the right of use assets, such as: (i) an estimation of the lease term, considering a non-cancellable period and the periods covered by options to extend the lease term, where such exercise depends only on the Group and is reasonably certain; (ii) use of certain assumptions to calculate the discount rate. According to paragraph 18 of IFRS 16, an entity shall determine the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease (if the lessee is reasonably certain to exercise that option) and periods covered by an option to terminate the lease (if the lessee is reasonably certain not to exercise that option). During the non-cancellable lease period, the contract must be enforceable. A lease is no longer enforceable when the lessee and the lessor each has the right to terminate the lease without permission of the other party with no more than an insignificant penalty. The Group is not able to readily determine the interest rate implicit on the lease and, therefore, considers its incremental rate on loans to measure lease liabilities. Incremental rate on the lessee´s borrowing is the interest rate that the lessee would have to pay when borrowing, for a similar term and with a similar guarantee, the resources necessary to obtain the asset with a value similar to the right of use asset in a similar economic environment. Thus, this assessment of lease, considering non- cancellable period and the period covered by options to extend the contract term. The Group estimates the incremental rate using observable data (such as market interest rates) when available and considers aspects that are specific to the Company (such as the cost of debt) in this estimate. The Group´s average incremental rate is 13,24% for an average lease term.

NEW STANDARDS AND INTERPRETATIONS ENDORSED BY THE EU AND IN FORCE FROM JANUARY 1, 2023

As required by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), the following is a brief

description of the IFRS in force as from January 1, 2023.

Amendments to IFRS 17 - Insurance contracts: initial application of IFRS 17 and IFRS 9 - Comparative

information

IFRS 17 Insurance Contracts is a comprehensive new accounting standard for insurance contracts covering

recognition and measurement, presentation and disclosure. IFRS 17 replaces IFRS 4 Insurance Contracts.

IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance),

regardless of the type of entities that issue them as well as to certain guarantees and financial instruments

with discretionary participation features; a few scope exceptions will apply. The overall objective of IFRS 17 is to

provide a comprehensive accounting model for insurance contracts that is more useful and consistent for

insurers, covering all relevant accounting aspects. IFRS 17 is based on a general model, supplemented by:

• A specific adaptation for contracts with direct participation features (the variable fee approach).

• A simplified approach (the premium allocation approach) mainly for short-duration contracts.

•

The adoption of these amendments had no effect on the Consolidated Financial Statements 2023.

Amendments to IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors

The amendments to IAS 8 clarify the distinction between changes in accounting estimates, changes in

accounting policies and the correction of errors. They also clarify how entities use measurement techniques

and inputs to develop accounting estimates.

The adoption of these amendments had no effect on the Consolidated Financial Statements 2023.

Amendments to IAS 12 Income Taxes: Deferred tax related to assets and liabilities arising from a single

transaction

On August 11, 2022, Regulation (EU) 2022/1392 was issued, incorporating certain amendments to IAS 12

Income Taxes.

The amendments clarify how companies are to account for deferred taxes on leases and decommissioning/

restoration costs.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	45

IAS 12 specifies how companies are to account for income taxes, including deferred taxes, which are the

amounts of taxes payable or recoverable in the future.

These amendments require entities to recognise deferred taxes on certain transactions (such as leases and

decommissioning and restoration charges) that give rise to taxable and deductible temporary differences of

the same amount at the time of initial recognition.

IAS 12 provides that, under certain circumstances, companies are exempt from reporting deferred taxes when

they recognise assets or liabilities for the first time.

The IASB has issued these limited amendments on account of the uncertainty arising through the fact that the

exemption applies to leases and decommissioning/restoration obligations.

These amendments mean that the exemption granted in the principle will not now apply to leases and

decommissioning/restoration obligations, with companies now required to recognise deferred tax assets and

liabilities in these areas.

The changes came into effect on January 1, 2023.

The adoption of these amendments had no effect on the Consolidated Financial Statements 2023.

Amendments to IAS 1 - Presentation of Financial Statements

On March 2, 2022, Regulation (EU) 2022/357 was issued, incorporating certain amendments to IAS 1

Presentation of Financial Statements in which guidelines and examples are provided to help entities carry out

materiality assessments for the purposes of disclosing accounting policies.

The IASB has also issued amendments to "IFRS Practice Statement 2 - Making Materiality Judgements (the

PS)" to support the amendments to IAS 1, which explain and demonstrate how the "4 step materiality process"

applies to disclosures of accounting policies.

In particular, the amendments aim to help entities provide more useful disclosures of accounting policies by:

• replacing the provision for the entities to disclose their “significant” accounting policies with the

provision for them to disclose their “material” accounting policies; and

• the addition of guidelines on how the entities apply the concept of “materiality” in deciding on the

disclosure on the accounting policies.

The changes come into force for financial years starting after January 1, 2023.

The adoption of these amendments had no effect on the Consolidated Financial Statements 2023.

Amendments to IAS 12 Income taxes: International Tax Reform – Pillar Two model rules

On November 8, 2023, Regulation (EU) 2023/2468 was issued, incorporating certain amendments to IAS 12

Income Taxes: International Tax Reform – 'Pillar Two model' rules. The amendments introduce:

• a temporary exception from the obligation to account for deferred taxes arising from the

implementation of the Pillar Two model rules; and

• targeted disclosure requirements for affected entities to help users of financial statements

understand an entity's exposure to Pillar Two income taxes arising from that legislation.

The amendments clarify that IAS 12 applies to income taxes arising from tax legislation implementing the

OECD’s Pillar Two model rules, which address the tax issues arising from the digitalization of the global

economy (Base Erosion and Profit Shifting - BEPS). These rules apply to multinational enterprises (MNEs) with

consolidated annual revenues of more than 750 million euros). The tax legislation in question and the income

taxes resulting from it are referred to as “Pillar Two legislation” and “Pillar Two income taxes” respectively. The

amendments introduce a mandatory exception to IAS 12 when it comes to recognising and disclosing deferred

Pillar Two income tax assets and liabilities.

This temporary exception exempts entities from accounting for deferred tax under the new and complex Pillar

Two tax legislation, giving affected parties time to assess the implications.

The temporary exception to recognising and disclosing deferred taxes and the obligation to disclose that this

exception is being used applies immediately and retroactively with respect to the issue date of the

amendments.

The disclosure of the current Pillar Two income tax liability and disclosures relating to periods before the entry

into force of the legislation is required for tax years that began on or after January 1, 2023, but is not required

for interim periods ending on or before December 31, 2023.

The Group has applied the exception to the recognition and disclosure of deferred tax assets and liabilities,

therefore, the adoption of these changes had no impact on the Consolidated Financial Statements 2023.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


46	Telecom Italia Finance Group

NEW STANDARDS AND INTERPRETATIONS ISSUED BY IASB BUT NOT YET APPLICABLE

At the reporting date of these Consolidated Financial Statements 2023, the IASB had issued the following new

Standards and Interpretations which have not yet come into force and have not yet been endorsed by the EU.


	Mandatory application starting from
New Standards and Interpretations not yet endorsed by the EU
Amendments to IAS 7: Statements of Cash Flows and IFRS 7 Financial instruments: Supplementary disclosures	1 January, 2024
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates	1 January, 2025
New Standards and Interpretations endorsed by the EU
Amendments to IAS 1 Presentation of Financial Statements: non-current liabilities with covenants	1 January, 2024
Amendments to IAS 1 Presentation of Financial Statements: classification of liabilities as current or non-current	1 January, 2024
Amendments to IFRS 16: Lease liabilities in a sale and lease-back	1 January, 2024

Any impacts on the Group's consolidated financial statements resulting from the application of these new

Standards/Interpretations are currently being assessed; However, it is considered that they are not significant

with respect to financial and economic results.

Note 3 - Scope of Consolidation

INVESTMENTS IN CONSOLIDATED SUBSIDIARIES

Composition of the Group

The Group holds a majority of the voting rights in all the subsidiaries included in the scope of consolidation.

A complete list of consolidated subsidiaries is provided in the Note "List of companies of the Telecom Italia

Finance Group".

SCOPE OF CONSOLIDATION

The changes in the scope of consolidation at December 31, 2023 compared to December 31, 2022 are listed

below.


Company	Event	Business Unit	Month
Cozani RJ Infraestrutura e Rede de Telecomunicações S.A.	Merged into TIM S.A.	Brazil	April 2023

Further details are provided in the Note "List of companies of the Telecom Italia Finance Group".

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	47

SUBSIDIARIES WITH SIGNIFICANT NON-CONTROLLING INTERESTS

At December 31, 2023, the Group held equity investments in subsidiaries with significant non-controlling

interests in TIM Brasil Group.

The figures provided below, stated before the netting and elimination of intragroup accounts, comply with IFRS

and reflect adjustments made at the acquisition date to align the assets and liabilities acquired to their fair

value.

TIM Brasil Group – Brazil Business Unit

Non-controlling interests accounted at December 31, 2023 amounted to 33,4% of the capital of TIM S.A.,

coinciding with the corresponding voting rights.

Financial Position Data TIM Brasil Group


(million euros)	31/12/2023	31/12/2022
Non-current assets	8.596	8.649
Current assets	2.238	1.924
Total Assets	10.834	10.574
Non-current liabilities	3.832	3.157
Current liabilities	2.565	2.420
Total Liabilities	6.397	5.577
Equity	4.437	4.997
of which Non-controlling interests	1.646	1.545

Income statement Data TIM Brasil Group


(million euros)	31/12/2023	31/12/2022
Revenues	4.412	3.963
Profit (loss) for the year	448	289
of which Non-controlling interests	175	102

Financial Data TIM Brasil Group

In 2023, aggregate cash flows generated a positive amount of 167 million euros, including a positive exchange

rate effect of 20 million euros, without which cash flow would have generated a positive amount of 147 million

euros.

In 2022, aggregate cash flows generated a negative amount of 369 million euros, partially due to a negative

exchange rate effect of 45 million euros, without which cash flow would have generated a negative amount of

(324) million euros.

Lastly, again with reference to the TIM Brasil Group, the main risk factors that could, even significantly, restrict

the operations of the TIM Brasil Group are listed below:

• strategic risks (risks related to macroeconomic and political factors, as well as risks associated with

foreign exchange restrictions and competition);

• operational risks (risks related to business continuity and development of the fixed and mobile

networks, as well as risks related with disputes and litigation);

• financial risks;

• regulatory and compliance risks.

Note 4 - Goodwill

Goodwill is only referred to Brazil Cash Generating unit (“CGU”) and shows the following changes during 2023

and 2022:


(million euros)	31/12/2022	Increase	Decrease	Impairments	Exchange differences	31/12/2023
Brazil	977	—	—	—	39	1.017


(million euros)	31/12/2021	Increase	Decrease	Impairments	Exchange differences	31/12/2022
Brazil	443	502	—	—	32	977

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


48	Telecom Italia Finance Group

The gross carrying amounts of goodwill and the relative accumulated impairment losses can be summarized

as follows:


(million euros)	31/12/2023			31/12/2022
	Gross carrying amount	Accumulated impairment losses	Net carrying amount	Gross carrying amount	Accumulated impairment losses	Net carrying amount
Brazil	1.190	173	1.017	1.144	167	977

The figures for the Brazil CGU are stated in euros, converted at the spot exchange rate at the closing date of

the financial statements; the carrying amount of goodwill for the CGU corresponds at December 31, 2023 to

5.439 million reais (1.190 million euros, 5.439 million reais at December 31, 2022).

With reference to the Brazil Cash Generating Unit, Goodwill recorded net exchange gains for 39 million euros.

In particular, the exchange rate used to convert Brazilian reais into euros (expressed in terms of local currency

units per 1 euro) went from 5,56520 as of December 31, 2022 to 5,34964 as of December 31, 2023.

In 2022 the Goodwill increased of 502 million euros (2.636 million reais) following the recognition of goodwill

connected with the acquisition of some of the mobile telephone assets of Oi Móvel S.A.

In accordance with IAS 36, goodwill is not subject to amortization, but is tested for impairment on at least an

annual basis, when preparing the company’s consolidated financial statements. Accordingly, the Group

conducted impairment tests on the recoverability of the CGU. The results showed that the recoverable amount

of the assets at December 31, 2023 was higher than the net carrying amount for the Brazil CGU (+3.484 million

of euros).

The value used to measure the recoverable amount of the Cash Generating Unit to which goodwill has been

allocated is the fair value, based on market capitalisation as of the end of the reporting period. The recoverable

amount of the assets was denominated in the functional currency and subsequently translated at the spot

exchange rate at the reporting date. In estimating the recoverable amounts, simulations were conducted on

the results with respect to changes in the relevant parameters. The change in the price per share, compared to

the reference quotation considered for the purposes of the financial statements, which would make the

recoverable value equal to the carrying amount is equal to -43%.

Considering that the recoverable amount has been based on the market capitalization, the Group did not

made assumptions for estimating cash flows, including evaluation of the climate change impact.

Note 5 - Intangible assets with a finite useful life

All intangible assets with a finite useful life in the 2023 and 2022 are referred to Brazil Business Unit.


(millions of euros)	31/12/2022	Investments	Amortizatio n	Disposals	Exchange differences	Capitalized borrowing costs	Other Changes	31/12/2023
Industrial patents and intellectual property rights	438	155	-179	—	18	—	14	445
Concessions, licenses, trademarks and similar rights	1.323	8	-163	—	57	—	530	1.755
Other intangible assets	44	1	-8	—	2	—	—	39
Work in progress and advance payments	530	20	—	—	16	18	-546	38
Total	2.334	184	-350	—	93	18	-2	2.277


(millions of euros)	31/12/2021	Investment s	Amortizatio n	Disposals	Exchange differences	Capitalized borrowing costs	Other Changes	31/12/2022
Industrial patents and intellectual property rights	392	177	-186	—	53	—	1	438
Concessions, licenses, trademarks and similar rights	753	14	-147	—	70	—	633	1.323
Other intangible assets	1	1	-4	—	-2	—	48	44
Work in progress and advance payments	406	23	—	—	54	48	—	530
Total	1.552	215	-338	—	175	48	682	2.334

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	49

Investments in 2023 amounted to 184 million euros (215 million euros in 2022) and included 34 million euros in

internally generated assets (29 million euros in 2022).

Further details are provided in the Note “Internally generated assets”.

Industrial patents and intellectual property rights at December 31, 2023 consisted mainly of software

licenses.

Concessions, licenses, trademarks and similar rights at December 31, 2023 mainly related to the residual cost

of telephone licenses and similar rights for 1.705 million of euros (1.268 million euros at December 31, 2022).

During the 2023 financial year, in particular, the rights of use of the 3,5 GHz (5G) frequencies of the Brazil

Business Unit were considered available for use by the Group, thus the transfer of goods in progress to the line

of authorizations in service was carried out.

The residual amount of telephone licenses and similar rights in operation and their useful lives are detailed

below:


Type	Residual value at 31/12/2023 (million euros)	Useful life in years	Amortization expense for 2023 (million euros)
800 MHz, 900 MHz and 1800 MHz band	345	From 2 to 20	31
1900 MHz and 2100 MHz band	101	From 2 to 20	9
700 MHz, 2500 MHz and 2.5 GHz band (4G)	550	From 2 to 20	82
2.3 GHz, 3.5 GHz, and 26 GHz band (5G)	709	From 10 to 20	33

Work in progress and advance payments relate to Brazil Business Unit and refer mainly to software

developments. The reduction in 2023 is mainly related to operating revenues, including the rights of use of the

3,5 GHz (5G) frequencies of the Brazil Business Unit (530 million euros). For the latter, as the time period

required for the assets to be ready for use is more than 12 months, in 2023, the related finance expenses of 18

million euros were capitalized, based on the Selic rate. The capitalized finance expenses have been deducted

directly from "finance expense".

Amortization have been reported in the income statement as components of the operating result.

No impairment losses have been recorded during the year 2023 and 2022.

The gross carrying amount, accumulated impairment losses and accumulated amortization at December 31,

2023 and 2022 can be summarized as follows:


	31/12/2023
(million euros)	Gross carrying amount	Accumulated amortization	Net carrying amount
Industrial patents and intellectual property rights	4.322	3.877	445
Concessions, licenses, trademarks and similar rights	3.556	1.801	1.755
Other intangible assets with a finite useful life	499	460	39
Work in progress and advance payments	38	—	38
Total intangible assets with a finite useful life	8.415	6.138	2.277


	31/12/2022
(million euros)	Gross carrying amount	Accumulated amortization	Net carrying amount
Industrial patents and intellectual property rights	3.989	3.551	438
Concessions, licenses, trademarks and similar rights	2.896	1.573	1.323
Other intangible assets with a finite useful life	479	435	44
Work in progress and advance payments	530	—	530
Total intangible assets with a finite useful life	7.894	5.560	2.334

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	50

Note 6 - Tangible assets

All tangible assets in the 2023 and 2022 are referred to Brazil Business Unit.

PROPERTY, PLANT AND EQUIPMENT OWNED


(million euros)	31/12/2022	Investments	Depreciation	Disposals	Exchange differences	Other Changes	31/12/2023
Land	7	—	—	—	—	—	7
Buildings (civil and industrial)	10	—	-1	—	—	—	9
Plant and equipment	1.927	499	-470	-1	79	81	2.114
Other	110	59	-53	-1	5	4	123
Construction in progress and advance payments	94	84	—	—	4	-97	85
Total	2.147	643	-524	-3	88	-12	2.338


(million euros)	31/12/2021	Investments	Depreciation	Disposals	Exchange differences	Other Changes	31/12/2022
Land	6	—	—	—	1	—	7
Buildings (civil and industrial)	10	—	-1	—	1	—	10
Plant and equipment	1.501	510	-465	—	196	185	1.927
Other	95	44	-48	-1	13	7	110
Construction in progress and advance payments	79	96	—	—	11	-91	94
Total	1.691	650	-514	-2	221	101	2.147

Investments in 2023 amounted to 643 million euros (650 million euros in 2022) and included 69 million euros in

internally generated assets (64 million euros in 2022 ).

Further details are provided in the Note “Internally generated assets”.

Land comprises both built-up land and available land and is not subject to depreciation.

Buildings (civil and industrial) mainly includes buildings for industrial use hosting telephone exchanges or for

office use, and light constructions.

Plant and equipment includes the aggregate of all the structures used for the functioning of voice and data

telephone traffic.

The item Other mainly consists of hardware for work stations, furniture and fixtures and, to a minimal extent,

transport vehicles and office machines.

Construction in progress and advance payments refers to the internal and external costs incurred for the

acquisition and internal production of tangible assets, which are not yet in use.

Depreciation have been reported in the income statement as components of the operating result.

No impairment losses have been recorded during the year 2023 and 2022.

Depreciation for the years 2023 and 2022 was calculated on a straight-line basis over the estimated useful lives

of the assets according to the following minimum and maximum rates:


Buildings (civil and industrial)	4%
Plant and equipment	4% - 33%
Other	10% - 50%

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	51

The gross carrying amount, accumulated impairment losses and accumulated depreciation at December 31,

2023 and 2022 can be summarized as follows:


	31/12/2023
(million euros)	Gross carrying amount	Accumulated depreciation	Net carrying amount
Land	7	—	7
Buildings (civil and industrial)	25	15	9
Plant and equipment	8.420	6.306	2.114
Other	1.273	1.150	123
Construction in progress and advance payments	85	—	85
Total	9.810	7.471	2.338


	31/12/2022
(million euros)	Gross carrying amount	Accumulated depreciation	Net carrying amount
Land	7	—	7
Buildings (civil and industrial)	24	14	10
Plant and equipment	7.549	5.622	1.927
Other	1.167	1.057	110
Construction in progress and advance payments	94	—	94
Total	8.840	6.693	2.147

Note 7 - Right of use assets

At December 31, 2023 right of use assets amounted to 1.913 million euros and are referred to Brazil Business

Unit. The breakdown and movements during the 2023 and 2022 are shown below.


(millions of euros)	31/12/2022	Investments	Increase in lease contracts	Depreciation and amortization	Disposals	Exchange differences	Other Changes	31/12/2023
Property	545	—	259	-121	-107	22	-3	595
Plant and equipment	1.436	8	275	-323	-115	56	-19	1.318
Other	—	—	—	—	—	—	—	—
Total	1.981	8	534	-444	-222	78	-22	1.913


(millions of euros)	31/12/2021	Investments	Increase in lease contracts	Depreciation and amortization	Disposals	Exchange differences	Other Changes	31/12/2022
Property	324	—	154	-94	-16	35	142	545
Plant and equipment	928	5	330	-314	-21	105	402	1.436
Other	1	—	—	-1	—	—	—	—
Total	1.253	5	484	-409	-36	140	544	1.981

The increases in financial leasing contracts in 2023 , equal to 534 million euros (484 million euros at December

31, 2022), include the higher value of the rights of use recorded as a result of new leases, increases of lease

payments and renegotiation of agreements existing related both to land and buildings for office use and

industrial relationship over time, to infrastructure sites for the mobile telephone network infrastructure and

network.

The disposals are representative of the carrying amount of the assets from lease agreements that terminated

early.

The item Property includes buildings under passive leases and related building adaptations.

The item Plant and equipment mainly includes the rights of use on the infrastructures for telecommunications

services. This includes, among others, the recognition of the value of the telecommunications towers sold by

the TIM Brasil group to American Tower do Brasil and subsequently repurchased in the form of finance lease.

Further details on the operation are provided in the Note "Miscellaneous payables and other non-current

liabilities".

Further details on finance lease are provided in the Note "Financial liabilities (non-current and current)".

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


52	Telecom Italia Finance Group

Amortization have been recorded in the income statement as components of EBIT.

No impairment losses have been recorded during the year 2023 and 2022.

The gross carrying amount, accumulated impairment losses and accumulated depreciation at December 31,

2023 and 2022 can be summarized as follows:


	31/12/2023
(million euros)	Gross carrying amount	Accumulated amortization	Net carrying amount
Property	924	329	595
Plant and equipment	2.356	1.038	1.318
Total	3.281	1.367	1.913


	31/12/2022
(million euros)	Gross carrying amount	Accumulated amortization	Net carrying amount
Property	775	230	545
Plant and equipment	2.248	813	1.436
Other	8	8	—
Total	3.031	1.050	1.981

Note 8 - Investments

INVESTMENTS IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD

In November 2021, as a result of the spin-off of net assets from the broadband business and creation of I-

Systems, TIM S.A. disposed of 51% of its equity interest on behalf of IHS. As a result of this transaction, a loss of

control took place and the Group no longer consolidates the company.


(million euros)	31/12/2023	31/12/2022
I-Systems S.A.	271	277
Total	271	277

The changes to the item during the year are due to equity method accounting for -17 million euros and

exchange rate difference for 11 million euros.

The following table represents summarized financial information about the investment of I-Systems:


(millions of euros)	31/12/2023	31/12/2022

Assets	384	327
Current and non-current assets	66	52
Tangible and intangible assets	318	275

Liabilities and shareholders’ equity	384	327
Current and non-current liabilities	125	72
Shareholders’ equity	259	256

Net loss for the year	-34	-23

Group’s proportional interest	49%	49%

Group’s interest in the associated company’s income (loss)	-17	-11

The Groups' proportional share of the shareholders' equity in I-Systems S.A. corresponds to 127 million euros.

The difference with the value of the investment is due to the higher fair value attributed at the acquisition of

the associate.

INVESTMENTS IN STRUCTURED ENTITIES

The Group does not hold investments in structured entities.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	53

OTHER INVESTMENTS

Other investments refer mainly to the following:


(million euros)	31/12/2023	31/12/2022
Banco C6 S.A.	30	—
Upload Ventures Growth	10	—
Total	40	—

The investment in Banco C6 S.A. represents 1,44% of the company's share capital resulting from the exercise

by TIM S.A. (Brazil Business Unit) of the option to purchase C6 shares as part of the partnership entered into

between the parties in 2020. After the exercise of the option, TIM S.A. holds a minority position and has no

position of control or significant influence in the management of C6. Further details are also provided in the

Note “Disputes and Pending Legal Actions, other information, commitments and guarantees”.

Furthermore, during 2023, TIM S.A. (Brazil Business Unit) has invested 10 million euros in the investment fund

focused on 5G solutions called Upload Ventures Growth. As at December 31, 2023, TIM S.A. (Brazil Business

Unit) does not control the management of the fund or exercise significant influence.

Further details on Financial Instruments are provided in Note "Supplementary disclosure on financial

instruments".

Note 9 - Financial assets (non-current and current)


(millions of euros)	31/12/2023	31/12/2022

Non-current financial assets	1.547	1.706

Financial receivables for lease contracts	39	37
Hedging derivatives relating to hedged items classified as non-current assets/ liabilities of a financial nature	1	2
Non-hedging derivatives	379	503
Loans and other financial receivables	1.128	1.164

Current financial assets	5.466	4.656

Securities other than investments	1.882	1.446
Fair value through other comprehensive income (FVTOCI)	1.516	1.040
Fair value through profit or loss (FVTPL)	366	406

Financial receivables and other current financial assets	755	168
Financial receivables arising from lease contracts	6	6
Non-hedging derivatives	127	71
Loans and other financial receivables	622	91

Cash and cash equivalents	2.830	3.042

Total non-current and current financial assets	7.013	6.362

Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial

instruments".

Financial receivables for lease contracts refers to finance leases on rights of use (Brazil Business Unit).

Hedging derivatives relating to hedged items classified as non-current assets/liabilities of a financial

nature refers mainly to the mark-to-market component of the hedging derivatives.

Non-hedging derivatives relating to items classified as current and non-current financial assets totaled 505

million euros (574 million euros at December 31, 2022). These include the measurement of derivatives which,

although put into place for hedging purposes, do not possess the formal requisites to be considered as such

under IFRS and derivatives put in place in the framework of the activity of centralizing all the banking

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	Investments \| 54

exposures of the TIM Group (further details are provided in the Note “Derivatives”). At December 31, 2023 the

mark-to-market component of the non-hedging derivatives of the Brazil Business Unit is equal to 94 million

euros (112 million euros at December 31, 2022) in relation to the option to subscribe shares of C6 Bank with

which TIM S.A. entertains commercial relations.

Loans and receivables both in current and non-current financial assets amounts to 1.750 million euros (1.256

million euros at December 31, 2022) and refers to loans granted by the Parent to the ultimate Parent and other

TIM Group companies. Regarding the loans granted to the ultimate Parent company, the credit risk is

considered low based on the financial capability of TIM S.p.A. Other loans are considered fully recoverable by

the management.

Securities other than investments included in current assets relates to:

• listed securities, classified as FVTOCI - Fair value through other comprehensive income, due beyond

three months. They consist of 1.007 million euros (368 million euros at December 31, 2022) of treasury

bonds and 509 million euros (672 million euros at December 31, 2022) of bonds purchased by the

Parent with different maturities, all with an active market and consequently readily convertible into

cash. The above government bonds represent investments in "Sovereign debt securities”.

• securities, classified as FVTPL - Fair value through profit or loss, due beyond three months. They are

related to the investment made by the Brazil Business Unit for an equivalent value of 366 million

euros (406 million euros at December 31, 2022) in monetary funds.

At December 31, 2023, Telecom Italia Finance S.A raised short-term capital (note "Financial liabilities (non-

current and current)") with government and corporate bonds serving as collateral for a total value of 847

million euros by entering in repurchase agreements (“Repo”) expiring in short term.

At December 31, 2023, the Parent has contracts of security lending with TIM S.p.A. for a total of 171,0 million

euros of government bonds.

On February 14, 2023, Telecom Italia Finance agreed to grant a pledge over securities in favor of the European

Investment Bank (“BEI”) as security for the performance of TIM S.p.A. obligations under three loans granted by

BEI to TIM S.p.A. during 2019 and 2021. The value of the guarantee provided by TI Finance is 360,5 million

euros.

As per IFRS9, the assets have not been derecognized, being Telecom Italia Finance S.A. the Company which

retains the risks and benefits associated with the position.

Cash and cash equivalents:


(millions of euros)	31/12/2023	31/12/2022
Liquid assets with banks, financial institutions and post offices	1.485	1.241
Other financial receivables (due within 3 months)	727	868
Securities other than investments (due within 3 months)	618	932
Total	2.830	3.042

For the purpose of the statement of cash flows, cash and cash equivalents comprise the following:


(millions of euros)	31/12/2023	31/12/2022
Liquid assets with banks, financial institutions and post offices	1.485	1.241
Other financial receivables (due within 3 months)	727	868
Securities other than investments (due within 3 months)	618	932
	2.830	3.042
Financial payables (due within 3 months)	-67	-11
Total	2.763	3.030

The different technical forms of investing available cash at December 31, 2023 had the following

characteristics:

• maturities: all deposits have a maximum maturity date of three months;

• counterparty risk: deposits have been made with leading high-credit-quality banks and financial

institutions with a rating class of at least BBB and non non-negative outlook with regard to Europe,

and with leading local counterparts with regard to investments in South America;

• country risk: deposits have been made mainly by the Parent company in major European financial

markets.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	55

Other financial receivables (due within 3 months) refers to loans granted by the Parent to the Ultimate

Parent and other TIM Group companies. All loans are considered fully recoverable by the management.

Securities other than investments (due within 3 months) included 618 million euros (447 million euros at

December 31, 2022) of Brazilian bank certificates of deposit (Certificado de Depósito Bancário) held by the Brazil

Business Unit with premier local banking and financial institutions.

Note 10 - Miscellaneous receivables and other non-current assets


(million euros)	31/12/2023	Of which Financial Instruments	31/12/2022	Of which Financial Instruments

Miscellaneous receivables	345	140	516	262

Other non-current assets	26	—	14	—
Prepaid expenses from customer contracts (contract assets)	6	—	5	—
Other prepaid expenses	20	—	9	—

Total	371	140	531	262

As at December 31, 2023 Miscellaneous receivables relate to the Brazil Business Unit for an amount of 345

million euros (516 million euros at December 31, 2022). They include:

• receivables for judicial deposits of 129 million euros (245 million euros at December 31, 2022). The

reduction in judicial deposit compared to December 31, 2022 is mainly attributable to the release of

the judicial deposit established in October 2022 against the litigation related to the acquisition of the

mobile telephony assets of the Oi group and concluded in October 2023. Further details are provided

in the Note “Disputes and Pending Legal Actions, other information, commitments and guarantees”;

• non-current income tax receivables of 41 million euros (93 million euros at December 31, 2022);

• receivables for indirect taxes totaling 147 million euros (152 million euros at December 31, 2022).

Other non-current assets include prepaid expenses related to the Brazil BU for 26 million euros (14 million

euros at December 31, 2022) and is mainly represented by incremental costs related to sales commissions paid

to partners for obtaining customer contracts arising from the adoption of IFRS 15, which are deferred to the

result in accordance with the term of the contract and/or economic benefit, usually from 1 to 2 years.

Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial

instruments".

Note 11 - Income taxes (current and deferred)

INCOME TAX RECEIVABLES

Non-current and current income tax receivables at December 31, 2023 amounted to 180 million euros (198

million euros at December 31, 2022) and related to the Brazil Business Unit.

Specifically, they consisted of:

• non-current receivables of 41 million euros (93 million at December 31, 2022). In September 2021,

following the Brazilian Supreme Federal Court's decision on the non-collection of corporate income

tax and social contribution on the monetary restatement using the SELIC rate in cases of undue

payment, TIM S.A. had recorded its best estimate (approximately 535 million reais) in non-current

receivables. In the third quarter of 2023, following the final favourable and unappealable decision that

resulted in the approval of the receivable by the Brazilian Federal Tax Agency, TIM S.A. reclassified it

to the current portion (approximately 470 million reais);

• current income tax receivables of 139 million euros (105 million euros at December 31, 2022). They

include TIM S.A.'s receivables relating to the positive outcome of the above-mentioned decision of the

Brazilian Supreme Federal Court.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


56	Telecom Italia Finance Group

DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

The net balance of 235 million euros at December 31, 2023 (246 million euros at December 31, 2022) was

broken down as follows:


(million euros)	31/12/2023	31/12/2022
Deferred tax assets	235	246
Deferred tax liabilities	—	—
Total	235	246

Deferred taxes are all attributable to Brazil BU.

Since the presentation of deferred tax assets and liabilities in the financial statements takes into account the

offsets by legal entity when applicable, the composition of the gross amounts before offsets is presented

below:


(million euros)	31/12/2023	31/12/2022
Deferred tax assets	599	511
Deferred tax liabilities	-364	-265
Total	235	246

The temporary differences that made up this line item at December 31, 2023 and 2022, as well as the

movements during 2023 were as follows:


(million euros)	31/12/2022	Recognized in profit or loss	Recognized in equity	Change in scope of consolidatiom, exchange differences and other changes	31/12/2023

Deferred tax assets	511	39	—	50	599
Tax loss carryforwards	17	-9	—	30	38
Provision for bad debts	36	6	—	2	43
Provisions	199	45	—	99	344
Other deferred tax assets	258	-3	—	-81	175

Deferred tax liabilities	-265	-88	—	-12	-364
Derivatives	-29	-14	—	-1	-44
Business combinations - for step- up of net assets in excess of tax basis	-57	-41	—	-3	-101
Accelerated depreciation	-128	-33	—	-5	-167
Other deferred tax liabilities	-51	—	—	-2	-53

Total Net deferred tax assets (liabilities)	246	-49	—	39	235

At December 31, 2023, the Group had unused tax loss carryforwards of 790 million euros with the following

expiration dates:


Year of expiration	(million euros)
2024	—
2025	—
2026	—
2027	—
2028	—
Expiration after 2028	28
Without expiration	762
Total unused tax loss carryforwards	790

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	57

Unused tax loss carryforwards considered in the calculation of deferred tax assets amounted to 136 million

euros at December 31, 2023 (65 million euros at December 31, 2022) and referred to the Brazil Business Unit.

Deferred tax assets are recognized when it is considered probable that taxable income will be available in the

future against which the tax losses can be utilized. On the other hand, deferred tax assets of 148 million euros

(198 million euros at December 31, 2022) have not been recognized by the Parent on 593 million euros (794

million euros at December 31, 2022) of tax loss carryforwards since, at this time, their recoverability is not

considered probable.

At December 31, 2023, deferred tax liabilities have not been recognized on approximately 1,2 billion euros (0,2

billion euros at December 31, 2022) of tax-suspended reserves and undistributed earnings, because the Group

is in a position to control the timing of the distribution of those reserves and it is probable that those

accumulated earnings will not be distributed in the foreseeable future.

INCOME TAX PAYABLES

Income tax payables amounted to 18 million euros (14 million euros at December 31, 2022) and are mainly

related to Brazil Business Unit. They were broken down as follows:


(million euros)	31/12/2023	31/12/2022
Non-Current	—	—
Current	18	14
Total	18	14

INCOME TAX INCOME (EXPENSE)

Details are as follows:


(million euros)	Year 2023	Year 2022
Current taxes for the year	37	56
Net difference in prior year estimates	—	—
Total current taxes	37	56
Deferred taxes	49	-24
Total income tax for the year	86	32

The reconciliation between the theoretical tax expense, and the effective tax expense for the years ended

December 31, 2023 and 2022 is the following:


(million euros)	Year 2023	Year 2022

Profit (loss) before tax	597	254
Theoretical income tax	149	63

Income tax effect on increases (decreases) in variations
Tax losses of the year not considered recoverable	-53	-15
Different rate compared to theoretical rate in force in Luxembourg and other changes	34	13
Brazil: incentive on investments	-44	-29

Total effective income tax recognized in income statement	86	32

During the year 2023 tax losses of 53 million euros have been considered not recoverable in relation to tax loss

carryforwards whose recoverability is not considered probable.

The tax rate in force in Luxembourg as at December 31, 2023 and 2022 is 24,94%.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


58	Telecom Italia Finance Group

Note 12 - Inventories


(million euros)	31/12/2023	31/12/2022
Finished goods	62	42
Total	62	42

The inventories mainly consist of cell phones and tablets, accessories and prepaid cards and are related to

Brazil Business Unit.

Note 13 - Trade and miscellaneous receivables and other current assets


(million euros)	31/12/2023	Of which Financial Instruments	31/12/2022	Of which Financial Instruments

Trade receivables	727	727	654	654
Receivables from customers	610	610	575	575
Receivables from other telecommunications operators	117	117	79	79

Miscellaneous receivables	209	3	157	4

Other current assets	49	4	54	4
Prepaid expenses from customer contracts (contract assets)	34	4	31	4
Other prepaid expenses	15	—	23	—

Total	985	734	865	662

The aging of financial instruments included in "Trade and miscellaneous receivables and other current assets"

at December 31, 2023 and 2022 was as follows:


					overdue:
(million euros)	31/12/2023	Total non- overdue	Total overdue	0-90 days	91-180 days	181-365 days	More than 365 days
Net trade and miscellaneous receivables and other current assets	734	586	148	85	25	38	—


					overdue:
(million euros)	31/12/2022	Total non - overdue	Total overdue	0-90 days	91-180 days	181-365 days	More than 365 days
Net trade and miscellaneous receivables and other current assets	662	567	95	68	6	21	—

The increase in the non-overdue portion (18 million euros) includes a negative exchange adjustment of

approximately 21 million euros.

Overdue receivables increased of 53 million of euros compared to December 31, 2022, including a positive

exchange difference of around 5 million euros.

As at December 31, 2023 Trade receivables related to the Brazil Business Unit amounted to 727 million euros

(654 million euros at December 31, 2022) and are stated net of the provision for expected credit losses of 118

million euros (105 million euros at December 31, 2022).

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	59

Movements in the provision for expected credit losses were as follows:


(million euros)	2023	2022
At January 01	105	118
Provision charges to the income statement	118	115
Utilization and decreases	-110	-152
Change in scope	—	7
Exchange differences and other changes	4	17
At December 31	118	105

As at December 31, 2023 Miscellaneous receivables amounted to 209 million euros (157 million euros at

December 31, 2022) and did not include provisions for bad debts (same as at December 31, 2022).

Details are as follows:


(million euros)	31/12/2023	31/12/2022
Advances to suppliers	12	6
Tax receivables	153	120
Sundry receivables	44	32
Total	209	157

As at December 31, 2023 Tax receivables included 153 million euros (120 million euros at December 31, 2022)

referring to the Brazil Business Unit and related to local indirect taxes.

Other current assets include the current portion of prepaid expenses related to the Brazil BU and is mainly

represented by incremental costs related to sales commissions paid to partners for obtaining customer

contracts arising from the adoption of IFRS 15, which are deferred to the result in accordance with the term of

the contract and/or economic benefit, usually from 1 to 2 years.

Other prepaid expenses refers to the Brazil BU and are essentially related to the deferral of service costs.

Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial

instruments".

Note 14 - Share capital issued

As at December 31, 2023 the authorized, issued and fully paid capital of 1.818.691.978,50 euros

(1.818.691.978,50 euros at December 31, 2022) is represented by 185.960.325 ordinary shares (185.960.325 at

December 31, 2022) with a nominal value of EUR 9,78 per share.

As at December 31, 2023 and 2022 the Parent is 100% held by TIM S.p.A.

There has not been any movement in Share Capital in the 2023.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


60	Telecom Italia Finance Group

Note 15 - Financial liabilities (non-current and current)

Non-current and current financial liabilities (gross financial debt) were broken down as follows:


(million euros)	31/12/2023	31/12/2022

Non-current financial liabilities	4.796	4.230

Financial payables (medium/long-term):	2.591	1.972
Bonds	2.176	1.331
Amounts due to banks	120	348
Other financial payables	295	294

Finance lease liabilities (medium/long-term)	1.953	1.900

Other financial liabilities (medium/long-term):	252	358
Non-hedging derivatives	252	358

Current financial liabilities	2.084	1.640

Financial payables (short-term):	1.632	1.143
Bonds	204	73
Amounts due to banks	1.348	1.048
Other financial payables	80	23

Finance lease liabilities (short-term)	338	406

Other financial liabilities (short-term):	114	91
Hedging derivatives	—	—
Non-hedging derivatives	114	91

Total financial liabilities (gross financial debt)	6.880	5.870

Further details on Financial Instruments are provided in the Note “Supplementary disclosure on financial

instruments”.

The breakdown of gross financial debt by effective interest rate bracket, excluding the effect of any derivative

instruments, is provided below:


(million euros)	31/12/2023	31/12/2022
Up to 2,5%	187	740
From 2,5% to 5%	1.334	246
From 5% to 7,5%	221	552
From 7,5% to 10%	1.264	1.012
Over 10%	3.385	2.744
Accruals/deferrals, MTM and derivatives	489	575
Total	6.880	5.870

Following the use of derivative instruments[*], on the other hand, the gross financial debt by nominal interest

rate bracket is:


(million euros)	31/12/2023	31/12/2022
Up to 2,5%	128	640
From 2,5% to 5%	913	7
From 5% to 7,5%	—	320
From 7,5% to 10%	1.338	1.111
Over 10%	4.012	3.216
Accruals/deferrals, MTM and derivatives	489	575
Total	6.880	5.870

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	61

[*] These include the measurement of derivatives which, although put into place for hedging purposes, do not possess the

formal requisites to be considered as such under IFRS. Further details on derivative instruments are provided in the Note

"Derivatives".

The following table lists the changes in bonds during 2023:

New issues


(millions of original currency)	Currency	Amount	Issue date
TIM Brasil Serviços e Participações SA 5,000 million BRL	BRL	5.000	31/07/2023

The following tables list the bonds issued by the Group, expressed at the nominal repayment amount, net of

bond repurchases, and also at market value as at December 31, 2023:


Currency	Amount (millions)	Nominal repayment amount at 31/12/2023 (millions of euros)	Coupon	Issue date	Maturity date	Issue price (%)	Market price at 31/12/2023 (%)	Market value at 31/12/2023 (millions of euros)
Bonds issued by Telecom Italia Finance and guaranteed by TIM S.p.A.
Euro	1.015	1.015	7,750%	24/01/2003	24/01/2033	109,646[*]	117,027	1.188
Bonds issued by TIM S.A.
BRL	1.600	299	IPCA+4,1682%	15/06/2021	15/06/2028	100	113,295	339
Bonds issued by TIM Brasil Serviços e Participações S.A. [**]
BRL	5.000	935	CDI+2,3%	31/07/2023	25/07/2028	100	103,963	972
Total								2.499

[*]Weighted average issue price for bonds issued with more than one tranche.

[**] The issuance is guaranteed by the economic rights on TIM S.A. shares.

Amounts due to banks (medium/long term) of 120 million euros (348 million euros at December 31, 2022)

decreased by 228 million euros, mainly as net result of new loans and the transfer to the current portion.

As at December 31, 2023 Other financial payables (medium/long-term) amounted to 295 million euros (294

million euros at December 31, 2022) corresponding to Telecom Italia Finance loan of 20.000 million Japanese

yens expiring in 2029.

Finance lease liabilities (medium/long-term) totalled 1.953 million euros at December 31, 2023 (1.900 million

euros at December 31, 2022). With reference to the financial lease liabilities recognized, in 2023 and 2022 the

following is noted:


(million euros)	31/12/2023	31/12/2022
Principal reimbursements	339	295
Cash out interest portion	263	224
Total	602	519

The lease amounts considered low-value or short-term (less than 12 months) were recognized as rental

expenses and totaled 6 million euros in 2023 (7 million euros in 2022).

Non-hedging derivatives relating to items classified as current and non-current financial liabilities totaled 365

million euros (449 million euros at December 31, 2022). These include the measurement of derivatives which,

although put into place for hedging purposes, do not possess the formal requisites to be considered as such

under IFRS and derivatives put in place in the framework of the activity of centralizing all the banking

exposures of the TIM Group (further details are provided in the Note “Derivatives”).

Short-term amounts due to banks totaled 1.348 million euros (1.048 million euros at December 31, 2022) and

included 237 million euros of the current portion of medium/long-term amounts due to banks. As at December

31, 2023 the item includes 847 million euros of short-term capital raised by entering in repurchase agreements

(“Repo”).

Further details on Financial Instruments are provided in the Note “Supplementary disclosure on financial

instruments”.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


62	Telecom Italia Finance Group

Note 16 - Net financial debt

The following table shows the net financial debt at December 31, 2023 and December 31, 2022, determined in

accordance with the provisions of the “Guidelines on disclosure requirements under the Prospectus

Regulation” issued by the ESMA (European Securities & Markets Authority) on March 4, 2021

(ESMA32-382-1138).


(million euros)		31/12/2023	31/12/2022

Liquid assets with banks, financial institutions and post offices	a)	1.485	1.241
Other cash and cash equivalents	b)	618	932
Securities other than investments	c)	1.521	1.446
Liquidity	d=a+b+c	3.624	3.620

Current financial debt (including debt instruments, but excluding the current portion of non-current financial debt)	e)	1.178	831
Current portion of non-current financial debt	f)	779	738
Current financial debt	g=e+f	1.957	1.569

Net current financial debt	h=g-d	-1.667	-2.051

Non-current financial debt (excluding the current part and debt instruments)	i)	2.240	2.395
Debt instruments	j)	2.176	1.331
Trade payables and other non-current debt	k)	65	116
Non-current financial debt	l=i+j+k	4.481	3.842

Total net financial debt as per ESMA guidelines 32-382-1138	m=h+l	2.815	1.790

Trade payables and other non-current debt		-65	-116
Loans and other non-current financial receivables		-1.128	-1.164
Non-current financial receivables arising from lease contracts		-39	-37
Loans and other current financial receivables		-1.710	-959
Current financial receivables arising from lease contracts		-6	-6
Subtotal	n)	-2.948	-2.283

Net financial debt carrying amount[*]	o=m+n	-133	-492

[*] For details of the effects of related party transactions on net financial debt, see the specific table in the Note "Related

party transactions".

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	63

The following additional disclosures are provided in accordance with IAS 7:


(million euros)		Cash movements		Non-cash movements
	31/12/2022	Receipts and/or issues	Payments and/or reimbursem ents	Differences exchange rates	Fair value changes	Other changes	31/12/2023
Financial payables (medium/long-term):	2.284	926	-222	14	—	43	3.045
Bonds	1.404	926	—	22	—	28	2.380
Amounts due to banks	576	—	-222	—	—	4	357
Other financial payables	305	—	—	-8	—	11	308

of which short-term portion	312	—	-222	-6	—	369	454

Finance lease liabilities (medium/long-term):	2.306	335	-336	-143	—	129	2.291

of which short-term portion	406	—	-336	-219	—	487	338

Other financial liabilities (medium/long-term):	445	—	—	-30	-47	-2	366
Hedging derivatives relating to hedged items classified as non-current assets/liabilities of a financial nature	—	—	—	—	—	—	—
Non-hedging derivatives	445	—	—	-30	-47	-2	365

of which short-term portion	88	—	—	-1	-28	55	114

Financial payables (short- term):	835	340	-5	—	1	7	1.178
Amounts due to banks	820	284	—	—	—	7	1.111
Non-hedging derivatives	4	—	-5	—	1	—	—
Other financial payables	11	56	—	—	—	—	67

Total financial liabilities (gross financial debt)	5.870	1.600	-563	-159	-46	177	6.880
	—						—
Positive hedging derivatives (current and non-current)	2	—	—	—	—	—	2

Positive non-hedging derivatives (current and non-current)	574	—	-3	-41	-43	18	505

Total	5.294	1.600	-560	-118	-3	159	6.373

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


64	Telecom Italia Finance Group


(million euros)		Cash movements		Non-cash movements
	31/12/2021	Receipts and/or issues	Payments and/or reimbursem ents	Differences exchange rates	Fair value changes	Other changes	31/12/2022
Financial payables (medium/long-term):	1.983	288	-104	81	—	36	2.284
Bonds	1.350	—	—	35	—	18	1.404
Amounts due to banks	345	288	-104	39	—	8	576
Other financial payables	289	—	—	7	—	10	305

of which short-term portion	168	—	-104	7	—	241	312

Finance lease liabilities (medium/long-term):	1.434	184	-301	168	—	820	2.306

of which short-term portion	201	—	-301	12	—	493	406

Other financial liabilities (medium/long-term):	635	—	—	91	-285	5	445
Hedging derivatives relating to hedged items classified as non-current assets/liabilities of a financial nature	—	—	—	—	—	—	—
Non-hedging derivatives	634	—	—	91	-285	5	445

of which short-term portion	53	—	—	8	16	11	88

Financial payables (short- term):	1.122	7	-296	—	-2	3	835
Amounts due to banks	1.112	—	-296	—	—	3	820
Non-hedging derivatives	1	4	—	—	-2	—
Other financial payables	8	3	—	—	—	—	11

Total financial liabilities (gross financial debt)	5.174	480	-701	340	-287	864	5.870

Positive hedging derivatives (current and non-current)	2	—	—	—	—	—	2

Positive non-hedging derivatives (current and non-current)	753	3	—	89	-288	17	574

Total	4.419	476	-701	251	1	847	5.294

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	65

Note 17 - Financial risk management

Financial risk management objectives and policies of the Group

The Group is exposed to the following financial risks in the ordinary course of its business operations:

• market risk: stemming from changes in interest rates and exchange rates in connection with financial

assets that have been originated and financial liabilities that have been assumed;

• credit risk: representing the risk of non-fulfilment of obligations undertaken by the counterparty with

regard to the liquidity investments of the Group;

• liquidity risk: connected with the need to meet short-term financial commitments.

These financial risks are managed by:

• the establishment, at TIM Group level, of guidelines for directing operations;

• the work of a TIM Group committee that monitors the level of exposure to market risks in accordance

with pre-established general objectives;

• the identification of the most suitable financial instruments, including derivatives, to reach pre-

established objectives;

• the monitoring of the results achieved;

• the exclusion of the use of financial instruments for speculative purposes.

The policies for the management and the sensitivity analyses of the above financial risks by the Group are

described below.

Identification of risks and analysis

The Group is exposed to market risks as a result of changes in interest rates and exchange rates in the markets

in which it operates, or has bond issues, principally Europe and Latin America.

The financial risk management policies of the Group are directed towards diversifying market risks, hedging

exchange rate risk and minimizing interest rate exposure by an appropriate diversification of the portfolio,

which is also achieved by using carefully selected derivative financial instruments.

At TIM Group level is defined an optimum composition of its debt structure by balancing fixed and variable-

rates and uses derivative financial instruments to achieve that debt composition. In consideration of the

Group's operating activities, the optimum combination of medium/long-term non-current financial liabilities

has been identified, on the basis of the nominal value, in the 65%-85% range for the fixed-rate component and

in the 15%-35% range for the variable-rate component.

In managing market risk, the Group mainly uses the following financial derivatives:

• Interest Rate Swaps (IRSs), to modify the profile of the original exposure to interest rate risks on loans

and bonds, both fixed and variable;

• Cross Currency and Interest Rate Swaps (CCIRSs) and Currency Forwards, to convert loans and bonds

issued in currencies other than the functional currencies of the operating companies to the functional

currencies of the operating companies.

Derivative financial instruments may be designated as fair value hedges for managing exchange rate and

interest rate risk on instruments denominated in currencies other than euro and for managing interest rate risk

on fixed-rate loans. Derivative financial instruments are designated as cash flow hedges when the objective is

to pre-set the exchange rate of future transactions and the interest rate.

All derivative financial instruments are entered into with banking and financial counterparties with at least a

"BBB-" rating from Standard & Poor's or an equivalent rating and a non-negative outlook. The exposure to the

various market risks can be measured by sensitivity analyses, as set forth in IFRS 7. This analysis illustrates the

effects produced by a given and assumed change in the levels of the relevant variables in the various reference

markets (exchange rates, interest rates and prices) on finance income and expenses and, at times, directly on

equity. The sensitivity analysis was performed based on the suppositions and assumptions indicated below:

• sensitivity analyses were performed by applying reasonably likely changes in the relevant risk

variables to the amounts in the Consolidated Financial Statements at December 31, 2023;

• changes in value of fixed-rate financial instruments, other than derivatives, produced by changes in

the reference interest rates, generate an impact on profit only when, in accordance with IAS 39 and

IFRS 9, they are accounted for at their fair value through profit and loss. All fixed-rate instruments,

which are accounted for at amortized cost, are not subject to interest rate risk as defined by IFRS 7;

• in the case of fair value hedge relationships, fair value changes of the underlying hedged item and of

the derivative instrument, due to changes in the reference interest rates, offset each other almost

entirely in the income statement for the year. As a result, these financial instruments are not exposed

to interest rate risk. The Group has not applied fair value hedge accounting for the year ended 31

December 2023;

• changes in the value of designated financial instruments in a cash flow hedge relationship, produced

by changes in interest rates, generate an impact on the debt level and on equity; accordingly, they are

included in this analysis;

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


66	Telecom Italia Finance Group

• the changes in value, produced by changes in the reference interest rates, of variable-rate financial

instruments, other than derivatives, which are not part of a cash flow hedge relationship, generate an

impact on the finance income and expenses for the year; accordingly, they are included in this

analysis.

Exchange rate risk – Sensitivity analysis

At December 31, 2023 (and also at December 31, 2022), the exchange rate risk of the Group's positions

denominated in currencies other than the functional currency of the single companies' Financial Statements

was hedged. Accordingly, a sensitivity analysis was not performed on the exchange rate risk.

Interest rate risk – Sensitivity analysis

The change in interest rates on the variable component of payables and liquidity may lead to higher or lower

finance income and expenses, while changes in the level of the expected interest rate affect the fair value

measurement of the Group's derivatives. In particular:

• with regard to derivatives that convert the liabilities contracted by the Group to fixed rates (cash flow

hedging), in line with international accounting standards that regulate hedge accounting, the fair

value (mark-to-market) measurement of such instruments is set aside in a specific unavailable Equity

reserve. The combined change of the numerous market variables to which the mark-to-market

calculation is subject between the transaction inception date and the measurement date renders any

assumption about the trend of the variables of little significance. As the contract expiration date

approaches, the accounting effects described will gradually be absorbed until they cease to exist;

• if at December 31, 2023 the interest rates in the various markets in which the Group operates had

been 100 basis points higher/lower compared to the actual rates, then higher/lower finance expenses,

before the income tax effect, would have been recognized in the Consolidated income statement of

12 million euros (2 million euros at December 31, 2022).

Credit risk

Exposure to credit risk for the Group consists of possible losses that could arise from the failure of either

commercial or financial counterparties to fulfill their assumed obligations. To measure this risk over time for

impairment of financial assets (trade receivables due from customers included), the Group uses the expected

credit loss model. Such exposure mainly stems from general economic and financial factors, the potential

occurrence of specific insolvency situations of some borrowers and other more strictly technical-commercial or

administrative factors. The Group's maximum theoretical exposure to credit risk is represented by the carrying

amount of the financial assets and trade receivables recorded in the financial statements.

Risk related to trade receivables is managed using customer scoring and analysis systems. For specific

categories of trade receivables, the Group also makes use of factoring, mainly on a "non-recourse" basis.

Provision charges for bad debts are recorded for specific credit positions that have an element of individual

risk. On credit positions that do not have such characteristics, provision charges are recorded by customer

segment according to the average uncollectibility estimated on the basis of statistical indicators. Further

details are provided in the Note "Trade and miscellaneous receivables and other current assets".

Financial assets other than trade receivables are written down for impairment on the basis of a general model

which recognizes expected credit losses over the following 12 months, or over the residual life of the asset in

the event of a substantial worsening of its credit risk. The expected credit loss is calculated based on the

default probability and the percentage of credit that cannot be recovered in the event of a default (the loss

given default). The model adopted to calculate the expected credit loss is based on the Bloomberg Credit Risk

Model, a model developed by Bloomberg which, starting from Merton's distance-to-default (“DD”) concept,

estimates the probability of default together with the recovery rate. At the same time, the loss given default is

defined as the non-recoverable component of the post-default financial asset. In particular, the DD - based on

balance sheet data - is enriched with a series of additional information by country (macroeconomic, risk),

business sector and individual company, as well as accounting adjustments aimed at ensuring uniformity of

the model's outputs; finally, through a non-linear function of the DD, the default probability is obtained.

Moreover, as regards credit risk relating to the asset components which contribute to the determination of

"Net financial debt", it should be noted that the management of the Group's liquidity is guided by conservative

criteria and is principally based on the following:

• money market management: the investment of temporary excess cash resources;

• bond portfolio management: the investment of medium-term liquidity, as well as the improvement of

the average yield of the assets.

In order to mitigate the risk of the non-fulfillment of the obligations undertaken by the counterparty, deposits

of the European companies are made with leading banking and financial institutions rated no lower than

investment grade and with a non-negative outlook, and investments by the companies in South America are

made with leading local counterparties. Moreover, deposits are made generally for periods of less than three

months. With regard to other temporary investments of liquidity, there is a bond portfolio in which the

investments have a low risk level. All investments have been carried out in compliance with the Guidelines on

"Management and control of financial risk" established by the ultimate Parent entity TIM S.p.A.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	67

In order to minimize credit risk, the Group also pursues a diversification policy for its investments of liquidity

and allocation of its credit positions among different banking counterparties. Consequently, there are no

significant positions with any one single counterparty.

Liquidity risk

The Group pursues the objective of achieving an "adequate level of financial flexibility" which is expressed by

maintaining a current treasury margin to cover the refinancing requirements at least for the next 12 months

with irrevocable bank lines and liquidity.

Current financial assets at December 31, 2023, together with unused committed bank lines, are sufficient to

fully cover the Group’s financial liabilities due at least for the next 24 months.

The following tables report the contractual cash flows, not discounted to present value, related to gross

financial debt at nominal repayment amounts and the interest flows, determined using the terms and the

interest and exchange rates in place at December 31, 2023 and December 31, 2022. The portions of principal

and interest of the hedged liabilities includes both the disbursements and the receipts of the related hedging

derivatives.

Financial liabilities – Maturities of contractually expected disbursements as at December 31, 2023:


	maturing by 31/12 of the year:
(million euros)	2024	2025	2026	2027	2028	After 2028	Total
Bonds
Principal	110	220	220	220	464	1.015	2.249
Interest Portion	212	183	151	117	86	393	1.141
Loans and other financial liabilities
Principal	233	49	31	31	23	281	648
Interest Portion	37	22	19	17	15	16	125
Finance lease liabilities							—
Principal	331	225	202	193	186	1.147	2.284
Interest Portion	228	205	183	161	140	522	1.438
Non-current financial liabilities
Principal	674	494	453	444	673	2.443	5.181
Interest Portion	477	409	352	295	240	932	2.705

Current financial liabilities
Principal	1.165	—	—	—	—	—	1.165
Interest Portion	45	—	—	—	—	—	45

Total Financial liabilities
Principal	1.839	494	453	444	673	2.443	6.346
Interest Portion	521	409	352	295	240	932	2.749

Derivatives on financial liabilities – Contractually expected interest flows as at December 31, 2023:


	maturing by 31/12 of the year:
(million euros)	2024	2025	2026	2027	2028	After 2028	Total
Disbursements	1	1	1	1	1	1	6
Receipts	-1	-1	-1	-1	-1	-1	-8
Hedging derivatives – net disbursements (receipts)	—	—	—	—	—	—	-2
Disbursements	332	194	283	272	253	621	1.956
Receipts	-294	-181	-290	-284	-272	-626	-1.946
Non-Hedging derivatives – net disbursements (receipts)	39	13	-6	-12	-19	-5	10
Total net disbursements (receipts)	39	12	-7	-12	-19	-5	8

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


68	Telecom Italia Finance Group

Financial liabilities – Maturities of contractually expected disbursements as at December 31, 2022:


	maturing by 31/12 of the year:
(million euros)	2023	2024	2025	2026	2027	After 2027	Total
Bonds
Principal	—	—	—	—	—	1.303	1.303
Interest Portion	86	86	87	85	83	473	901
Loans and other financial liabilities
Principal	222	241	47	28	28	297	864
Interest Portion	45	41	23	20	18	28	176
Finance lease liabilities							—
Principal	366	790	217	132	105	657	2.266
Interest Portion	265	218	176	138	122	563	1.481
Non-current financial liabilities
Principal	588	1.031	264	160	134	2.256	4.432
Interest Portion	396	346	285	243	223	1.064	2.558

Current financial liabilities
Principal	826	—	—	—	—	—	826
Interest Portion	23	—	—	—	—	—	23

Total Financial liabilities
Principal	1.414	1.031	264	160	134	2.256	5.258
Interest Portion	419	346	285	243	223	1.064	2.581

Derivatives on financial liabilities – Contractually expected interest flows as at December 31, 2022:


	maturing by 31/12 of the year:
(million euros)	2023	2024	2025	2026	2027	After 2027	Total
Disbursements	1	1	1	1	1	2	7
Receipts	-1	-1	-1	-1	-1	-3	-9
Hedging derivatives – net disbursements (receipts)	—	—	—	—	—	-1	-2
Disbursements	444	311	183	266	252	930	2.385
Receipts	-385	-276	-161	-260	-255	-946	-2.283
Non-Hedging derivatives – net disbursements (receipts)	59	35	22	7	-3	-17	102
Total net disbursements (receipts)	58	35	22	6	-3	-18	100

Market value of derivative instruments

In order to determine the fair value of derivatives, the Group uses various valuation models.

The mark-to-market calculation is determined by the present value discounting of the interest and notional

future contractual flows using market interest rates and exchange rates.

The notional amount of IRSs does not represent the amount exchanged between the parties and therefore is

not a measurement of credit risk exposure which, instead, is limited to the amount of the difference between

the interest rates paid/received.

The market value of CCIRSs, on the other hand, also depends on the differential between the reference

exchange rate at the date of signing the contract and the exchange rate at the date of measurement, since

CCIRSs involve the exchange of the reference interest and principal, in the respective denomination currencies.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	69

Note 18 - Derivatives

The hedge accounting rules provided by IAS 39 continued to be applied for derivatives.

Derivative financial instruments are used by the Group to hedge its exposure to foreign exchange rate risk, to

manage interest rate risk and to diversify the parameters of debt so that costs and volatility can be reduced to

within predetermined operational limits.

Derivative financial instruments existing at December 31, 2023 are principally used to manage debt positions.

They include interest rate swaps (IRSs) used to reduce the interest rate exposure of fixed-rate bank loans and

bonds, as well as cross currency and interest rate swaps (CCIRSs), currency forwards and foreign exchange

options to convert the loans/receivables secured in currencies different from the functional currencies of the

various Group companies.

IRSs transactions provide for or may entail, at specified maturity dates, the exchange of flows of interest,

calculated on the notional amount, at the agreed fixed or variable rates.

The same also applies to CCIRSs transactions which, in addition to the settlement of periodic interest flows,

may provide for the exchange of principal, in the respective currencies of denomination, at maturity and

possibly spot.

In carrying out its role of providing financial assistance to TIM Group companies, Telecom Italia Finance

aggregates all the exposure with some banking counterparties in just one entity. As a consequence, the Group

has derivative contracts signed with banks and analogous intercompany derivative contracts with other TIM

Group companies for a notional amount of 3.048 million euros (3.478 million euros at December 31, 2022).

The balance of asset and liability measurements of these contracts is equal to zero.

The following tables show the derivative financial instruments of the Group at December 31, 2023 and

December 31, 2022, by type. For CCIRS, the notional amount refers to the contractual value in euros, for IRS in

a currency other than the euro, the value is indicated at the market exchange rate.


Type(million euros)	Hedged risk	Notional amount at 31/12/2023	Notional amount at 31/12/2022	Spot Mark-to- Market (Clean Price) at 31/12/2023	Spot Mark-to- Market (Clean Price) at 31/12/2022
Cross Currency and Interest Rate Swap [*]	Interest rate risk and currency exchange rate risk	139	139	1	2
Total Cash Flow Hedge Derivative [**]		139	139	1	2

Total Non-Hedge Accounting Derivatives [***]		3.852	4.712	92	99

Total Telecom Italia Finance Group Derivatives		3.990	4.850	93	100

[*] For this instrument contracts no exchange of notional amounts has been agreed with the counterparties.

[**] On the liability expiring on 2029, derivatives are both accounted in CFH and non-hedge; accordingly, although it is a

single issue, the notional amount of derivatives is included in both the CFH and non-hedging groupings.

[***] Telecom Italia Finance Group entered into some derivatives on other TIM Group companies request. Since TIF Group has

a contract with an external counterparty and the opposite contract with an affiliated company (outside the perimeter of

consolidation), the MTM exposure on these positions is neutral and there is no risk connected. The notional amounts are

exposed for all these positions.

The MTM of Non-Hedge Accounting Derivatives is mainly related to the value of the right held by TIM Brasil to

subscribe shares of the Brazilian C6 Bank of 94 million euros on the basis of a commercial agreement signed by

the two companies in March 2020.

The hedging of cash flows by cash flow hedges was considered highly effective and at December 31, 2023 led

to recognition in equity of unrealized result of -0,5 million euros (0,3 million euros as at December 31, 2022).

The transactions hedged by cash flow hedges will generate cash flows and produce economic effects in the

income statement in the periods indicated in the following table:


Currency of denomination	Notional amount in currency of denomination (million)	Start of period	End of period	Rate applied	Interest period
USD	186	Jan-23	Oct-29	0,75%	Semiannually

For hedge accounting purposes, the Volatility Risk Reduction (VRR) Test was chosen to test the retrospective

and prospective effectiveness of all hedges. This test assesses the ratio between the portfolio risk (meaning the

derivative and the item hedged) and the risk of the hedged item taken individually. In essence, the portfolio risk

must be significantly lower than the risk of the hedged item.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


70	Telecom Italia Finance Group

No material ineffective portion has been recognized in the income statement from designated cash flow hedge

derivatives during 2023.

Note 19 - Supplementary disclosures on financial instruments

Measurement at fair value

For the purposes of the comparative information between the carrying amounts and fair value of financial

instruments, required by IFRS 7, the majority of the non-current financial liabilities of the Group consist of

bonds, whose fair value is directly observable in the financial markets, as they are financial instruments that

due to their size and diffusion among investors, are commonly traded on the relevant markets (see the Note

"Non-current and current financial liabilities"). For other types of financing, however, the following

assumptions have been made in determining fair value:

• for variable-rate loans, the nominal repayment amount has been assumed;

• for fixed-rate loans, the present value of future cash flows at the market interest rates of December

31, 2023 has been assumed.

For the majority of financial assets, their carrying amount is a reasonable approximation of their fair value,

since these are short-term investments that are readily convertible into cash. For long term loans towards the

Ultimate Parent Company, the present value of future cash flows at the market interest rates of December 31,

2023 has been used. Lastly, the fair value of trade accounts receivable is close to the book value recorded on

December 31, 2023.

The fair value measurement of the financial instruments of the Group is classified according to the three levels

set out in IFRS 7. In particular, the fair value hierarchy introduces three levels of input:

• Level 1: quoted prices in active market;

• Level 2: prices calculated using observable market inputs;

• Level 3: prices calculated using inputs that are not based on observable market data.

Further details on Level 2 inputs are provided in the Note "Derivatives".

The tables below provide additional information on the financial instruments, including the hierarchy level for

each class of financial asset/liability measured at fair value at December 31, 2023.

The assets and liabilities at December 31, 2023 are presented based on the categories established by IFRS 9.

Key for IFRS 9 categories


	Acronym
Financial assets measured at:
Amortized Cost	AC
Fair Value Through Other Comprehensive Income	FVTOCI
Fair Value Through Profit or Loss	FVTPL
Financial liabilities measured at:
Amortized Cost	AC
Fair Value Through Profit or Loss	FVTPL
Hedge Derivatives	HD
Not applicable	n/a

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	71

Classification and fair value hierarchy of financial instruments measured at fair value as at December 31, 2023:


					Levels of hierarchy
(millions of euros)		IFRS 9 Categories	Note	Value at 31/12/2023	Level1	Level2

ASSETS
Non-current Assets	a)			421	10	410
Other investments		FVTPL	[8]	41	10	30
Other non-current financial assets:
Hedging derivatives		HD[*]	[9]	1	—	1
Non-hedging derivatives		FVTPL	[9]	379	—	379

Current Assets	b)			2.009	1.882	127
Securities other than investments, measured at:
Fair value through other comprehensive income		FVTOCI	[9]	1.516	1.516	—
Fair value through profit or loss		FVTPL	[9]	366	366	—
Other current financial assets:
Non-hedging derivatives		FVTPL	[9]	127	—	127

Total (a+b)				2.429	1.892	537

LIABILITIES
Non-current liabilities	c)			252	—	252
Non-hedging derivatives		FVTPL	[15]	252	—	252

Current liabilities	d)			114	—	114
Hedging derivatives		HD[*]	[15]	—	—	—
Non-hedging derivatives		FVTPL	[15]	114	—	114

Total (c+d)				366	—	366

[*] Derivative measured at fair value through other comprehensive income.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


72	Telecom Italia Finance Group

Classification and fair value hierarchy of financial instruments measured at fair value as at December 31, 2022:


					Levels of hierarchy
(millions of euros)		IFRS 9 Categories	Note	Value at 31/12/2022	Level1	Level2

ASSETS
Non-current Assets	a)			504	—	504
Other non-current financial assets:
Hedging derivatives		HD[*]	[10]	2	—	2
Non-hedging derivatives		FVTPL	[10]	503	—	503

Current Assets	b)			1.518	1.446	72
Securities other than investments, measured at:
Fair value through other comprehensive income		FVTOCI	[10]	1.040	1.040	—
Fair value through profit or loss		FVTPL	[10]	406	406	—
Other current financial assets:
Non-hedging derivatives		FVTPL	[10]	71	—	71

Total (a+b)				2.022	1.446	576

LIABILITIES
Non-current liabilities	c)			358	—	358
Non-hedging derivatives		FVTPL	[16]	358	—	358

Current liabilities	d)			91	—	91
Non-hedging derivatives		FVTPL	[16]	91	—	91

Total (c+d)				449	—	449

[*] Derivative measured at fair value through other comprehensive income.

For financial assets measured at FVTOCI, the profit/(loss) recognized in Other components of the Consolidated

Statements of Comprehensive Income were recognized within the scope of the Reserve for financial assets

measured at fair value through other comprehensive income.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	73

Carrying amount and fair value of financial instruments not measured at fair value as at December 31, 2023:


						Levels of hierarchy
(millions of euros)		IFRS 9 Categories	Note	Value at 31/12/2023	Fair Value at 31/12/2023	Level1	Level2	Level3	Amounts recognized in the financial statement s pursuant to IFRS 16

ASSETS
Non-current Assets	a)			1.307	1.510	—	1.203	268	39
Other financial receivables		AC	[9]	1.128	1.331	—	1.203	128	—
Miscellaneous receivables		AC	[10]	140	140	—	—	140	—
Financial receivables for lease contracts		n/a	[9]	39	39			—	39

Current Assets	b)			4.192	4.192	—	—	4.186	6
Other short-term financial receivables		AC	[9]	622	622	—	—	622	—
Cash and cash equivalents		AC	[9]	2.830	2.830	—	—	2.830	—
Trade and miscellaneous receivables		AC	[13]	734	734	—	—	734	—
Financial receivables for lease contracts		n/a	[9]	6	6	—	—	—	6

Total (a+b)				5.499	5.701	—	1.203	4.454	44

LIABILITIES
Non-current liabilities	c)			4.544	4.751	2.384	—	414	1.953
Financial payables		AC	[15]	2.591	2.798	2.384	—	414	—
Finance lease liabilities		n/a	[15]	1.953	1.953	—	—	—	1.953

Current liabilities	d)			2.997	2.997	—	—	2.659	338
Financial payables		AC	[15]	1.632	1.632	—	—	1.632	—
Trade and miscellaneous payables and other current liabilities		AC	[22]	1.027	1.027	—	—	1.027	—
Finance lease liabilities		n/a	[15]	338	338	—	—	—	338

Total (c+d)				7.542	7.749	2.384	—	3.074	2.291

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


74	Telecom Italia Finance Group

Carrying amount and fair value of financial instruments not measured at fair value as at December 31, 2022:


					Levels of hierarchy
(millions of euros)	IFRS 9 Categories	Note	Value at 31/12/2022	Fair Value at 31/12/2022	Level1	Level3	Amounts recognized in the financial statements pursuant to IFRS 16

ASSETS
Non-current assets			1.464	1.464	—	1.426	37
Other financial receivables	AC	[10]	1.164	1.164	—	1.164	—
Miscellaneous receivables	AC	[11]	262	262	—	262	—
Financial receivables for lease contracts	n/a	[10]	37	37		—	37
(a)
Current assets			3.800	3.800	—	3.795	6
Other short-term financial receivables	AC	[10]	91	91	—	91	—
Cash and cash equivalents	AC	[10]	3.042	3.042	—	3.042	—
Trade and miscellaneous receivables	AC	[14]	662	662	—	662	—
Financial receivables for lease contracts	n/a	[10]	6	6	—	—	6
(b)
Total (a+b)			5.264	5.264	—	5.221	43

LIABILITIES
Non-current liabilities			3.872	3.903	1.073	929	1.900
Financial payables	AC	[16]	1.972	2.003	1.073	929	—
Finance lease liabilities	n/a	[16]	1.900	1.900	—	—	1.900
(c)
Current liabilities			2.639	2.639	—	2.233	406
Financial payables	AC	[16]	1.143	1.143	—	1.143	—
Trade and miscellaneous payables and other current liabilities	AC	[23]	1.090	1.090	—	1.090	—
Finance lease liabilities	n/a	[16]	406	406	—	—	406
(d)
Total (c+d)			6.511	6.542	1.073	3.163	2.306

Gains and losses by IFRS 9 category - Year 2023


(million euros)	IFRS 9 Categories	Net gains/(losses) 31/12/2023	of which interest
Amortized Cost	AC	-65	88
Fair Value Through Profit or Loss	FVTPL	-45	-240
Fair Value Through Other Comprehensive Income	FVTOCI	16	—
Total		-93	-152

Gains and losses by IFRS 9 category - Year 2022


(million euros)	IFRS 9 Categories	Net gains/(losses) 31/12/2022	of which interest
Amortized Cost	AC	-89	63
Fair Value Through Profit or Loss	FVTPL	-46	-44
Fair Value Through Other Comprehensive Income	FVTOCI	3	17
Total		-132	36

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	75

Note 20 - Provisions


(million euros)	31/12/2022	Increase	Taken to income	Used directly	Exchange differences and other changes	31/12/2023
Provision for taxation and tax risks	86	17	—	-3	25	125
Provision for restoration costs	52	—	—	—	-28	24
Provision for legal disputes	115	61	—	-41	5	139
Other provisions	1	—	—	—	—	1
Total	253	78	—	-44	2	289
of which:
non-current portion	252	78	—	-43	2	288
current portion	1	—	—	—	—	1

Provision for taxation and tax risks Increased by 39 million euros compared to December 31, 2022, due to the

exchange rate effect of the period for 4 million euros. The other movements of the year include restatements

of provisions previously made and recognition of new provisions on charge on subscription fees and charge of

special credit amount made by the Brazil Business Unit.

The provision for restoration costs refers to the provision for the costs expected to be incurred for the

restoration of leased properties and sites used in the mobile sector and for the dismantling of assets; it entirely

refers to the Brazil Business Unit.

Provision for legal disputes includes the provision for litigation with employees and other counterparties and

refers to the Brazil Business Unit. The uses consisted of 41 million euros and resulted from settlement

agreements reached.

So far, Management has not identified nor considered any material impacts of climate change on assumptions

used (e.g. for impairment tests, fair value measurement, etc.) and on the Group's financial reporting (e.g.

provisions, fixed assets, etc.).

Note 21 - Miscellaneous payables and other non-current liabilities


(million euros)	31/12/2023	31/12/2022
Deferred revenues from customer contracts (Contract liabilities)	3	—
Other deferred income	113	120
Other	24	59
Total	140	179

Other deferred income includes the non-current portion of approximately 107 million euros as at December

31, 2023 (113 million euros as at December 31, 2022) of deferred gain on the sale and lease back of the

telecommunication towers of the Brazil Business Unit.

In particular, TM S.A. entered into two Sales Agreements with American Tower do Brasil Cessão de

Infraestruturas Ltda. (“ATC”) in November 2014 and January 2015 for up to 6.481 telecommunications towers

then owned by TIM Celular, for an amount of approximately 3 billion reais (0,6 billion euros), and a Master

Lease Agreement (“MLA”) for part of the space on these towers for a period of 20 years from the date of

transfer of each tower, under a sale and leaseback transaction, with a provision for monthly rental amounts

depending on the type of tower (greenfield or rooftop). The sales agreements provided for the towers to be

transferred in tranches to ATC, due to the need to meet certain conditions precedent.

In total, 5.873 towers were transferred. This transaction resulted in a sales amount of 2.651.247 reais, of which

1.088.390 reais was booked as deferred revenue and will be amortized over the period of the contract.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


76	Telecom Italia Finance Group

Note 22 - Trade and miscellaneous payables and other current liabilities


(million euros)	31/12/2023	Of which Financial Instruments	31/12/2022	Of which Financial Instruments

Trade payables	972	972	904	904
Payables to suppliers	894	894	864	864
Payables to other telecommunication operators	78	78	41	41

Tax payables	109	—	102	—

Miscellaneous payables	599	52	565	48
Payables for employee compensation	54	—	45	—
Payables to social security agencies	14	—	14	—
Payables for TLC operating fee	478	—	323	—
Dividends approved, but not yet paid to shareholders	52	52	48	48
Other	—	—	134	134
Provisions for risks and charges for the current portion expected to be settled within 1 year	1	—	1	—

Other current liabilities	74	4	70	4
Deferred revenues from customer contracts (Contract liabilities)	10	3	5	3
Customer-related items	32	—	32	—
Other deferred income	11	—	11	—
Advances received	5	—	2	—
Other current liabilities	16	—	20	—

Total	1.754	1.027	1.641	955

Trade payables amounting to 972 million euros as at December 31, 2023 (904 million euros at December 31,

2022) are mainly referred to the Brazil Business Unit.

According to IAS 1, trade payables are part of the working capital used in the entity’s normal operating cycle

and are classified as current liabilities even if they are due to be settled more than twelve months after the

reporting period. At December 31, 2023, trade payables due beyond 12 months totaled 42 million euros (58

million euros at December 31, 2022) and are mainly represented by payables of the Brazil Business Unit for the

renewal of telecommunications licenses.

Tax payables amounting to 109 million euros as at December 31, 2023 are entirely referred to the Brazil

Business Unit (102 million euros at December 31, 2022).

Miscellaneous payables included in 2022 the debt position of the Brazil Business Unit connected with the

contractual obligations linked to the acquisition of the mobile assets of the Oi Group (134 million euros).

It should be noted that in October 2023, the Adjusted Closing Price (Adjusted Closing Price) was finalized

related to the acquisition by the Brazilian subsidiary TIM S.A. of part of the mobile telephony assets of the Oi

group with the consequent extinction of the debt position of the buyer. Further details are provided in the Note

“Disputes and pending legal actions, other information, commitments and guarantees”.

Other current liabilities includes current contract liabilities, recognized when the client has paid the

consideration or when the Company has the right to a consideration amount that is unconditional, before the

Company has complied with the performance obligation, whether through the sale of equipment/devices or

the provision of services to the client and customer-related items, that include trade payables following

contractual relationships, such as the payable for prepaid traffic and the subscription charges charged in

advance.

Further details on Financial Instruments are provided in the Note “Supplementary disclosure on financial

instruments”.

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	77

Note 23 - Disputes and pending legal actions, other information, commitments and guarantees

A description is provided below of the most significant judicial, arbitration and tax disputes in which the Group

companies are involved as at December 31, 2023, as well as those that came to an end during the financial

year.

SIGNIFICANT DISPUTES AND PENDING LEGAL ACTIONS

International tax and regulatory disputes

As of December 31, 2023, the companies belonging to the Brazil Business Unit were involved in tax or

regulatory disputes, the outcome of which is estimated as a possible loss totalling around 19,2 billion reais

(around 3,6 billion euros, 18,2 billion reais at December 31, 2022). The main types of litigation are listed below,

classified according to the tax to which they refer.

Federal taxes

In relation to the federal level of taxation, the following disputes should be noted:

• disallowance of the tax effects of the merger between the companies of the TIM Brasil Group;

• denial of the SUDENE regional tax benefit, due to alleged irregularities in the management and

reporting of the benefit itself;

• challenges regarding offsetting against previous tax losses;

• further challenges regarding the tax deductibility of the amortization of goodwill;

• imposition of income tax on certain types of exchange rate differences;

• imposition of withholding taxes on certain types of payments to foreign entities (for example,

payments for international roaming);

• further challenges regarding offsets made between taxes payable and group company credit

positions.

Overall, the risk for these cases, considered to be possible, amounts to 3,1 billion reais (about 0,6 billion euros,

3,3 billion reais at December 31, 2022).

State taxes

Within the scope of the state levy, there are numerous challenges regarding ICMS, and in particular:

• challenges concerning the reduction of the tax base due to discounts granted to customers, as well as

challenges regarding the use of tax credits declared by group companies, with respect to the return of

loaned telephone handset, and following the detection of contract frauds to the detriment of the

companies;

• subjection of some fees owed to group companies and classified by them as fees for services other

than telecommunications to ICMS;

• challenges over the use of the "PRO-DF" tax benefit originally granted by some States, and

subsequently declared unconstitutional (the challenge refers to the actual credit due to ICMS,

declared by the TIM Cellular on the basis of the aforementioned tax benefits);

• challenges relating to the use of ICMS credits claimed by Group Companies as a result of the

acquisition of tangible assets, and in relation to the supply of electricity to the Companies, as well as

in application of the provisions on acting as a withholding agent;

• fines imposed on group companies for irregularities in tax return compliance;

• challenges of ICMS credits in relation to acting as a withholding agent, applicable when equipment is

bought and distributed in different States;

• challenges of ICMS credits deriving from the “special credit” recognized by the company to its prepaid

customers, against subsequent top-ups.

Overall, the risk for these cases, considered to be possible, amounts to 10,4 billion reais (about 1,9 billion euros,

9,6 billion reais at December 31, 2022).

Municipal taxes

Among disputes classified with a "possible" degree of risk, there are some relating to municipal taxes for a

total amounting to around 1,7 billion reais (about 0,3 billion euros, 1,6 billion reais at December 31, 2022).

FUST and FUNTTEL

The main challenges about contributions to the regulatory body (Anatel), and in particular in terms of FUST

and FUNTTEL, concern whether or not interconnection revenues should be subject to these contributions.

Overall, the risk for these cases, considered to be possible, amounts to 4,0 billion reais (around 0,7 billion euros,

3,7 billion reais at December 31, 2022).

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


78	Telecom Italia Finance Group

Opportunity Arbitration

In May 2012, TIM and Telecom Italia International N.V. (now merged in Telecom Italia Finance) were served

with a notice of arbitration proceedings brought by the Opportunity group, claiming compensation for

damages allegedly suffered for presumed breach of a settlement agreement signed in 2005. Based on the

claimant’s allegations, the damages relate to circumstances that emerged in the criminal proceedings pending

before the Milan Court regarding, inter alia, unlawful activities engaged in by former employees of TIM.

The investigatory phase having been completed, the hearing for oral discussion took place in November 2014,

after which the parties filed their concluding arguments in preparation for the decision on the case.

In September 2015, the Board of Arbitration declared the proceedings closed, as the award was going to be

filed.

In September 2016 the ICC Court notified the parties of its judgment, based on which the Court of Arbitration

rejected all the claims made by the Opportunity group and decided that the legal costs, administrative costs

and costs for expert witnesses should be split between the parties (the “2016 Arbitration Award”).

In April 2017 the Opportunity group filed an appeal against the 2016 Arbitration Award before the Paris Court

of Appeal.

In November 2017, TIM and Telecom Italia Finance received from the Secretariat of the ICC’s International

Court of Arbitration notice of a Request for Revision of the 2016 Arbitration Award, filed by the Opportunity

group, asking for a new award. A Board of Arbitration was subsequently established.

In October 2018, TIM and Telecom Italia Finance requested proceedings with the Paris Court of Appeal to be

suspended, in the light of proceedings pending with the Court of Arbitration of the International Chamber of

Commerce to review the same 2016 Arbitration Award. In November 2018, the Paris Court of Appeal

suspended the proceedings until the decision is taken by the Court of Arbitration in the review proceedings.

As regards the proceedings to review the 2016 Arbitration Award, in October 2019 the ICC held the discussion

hearing in Paris. In August 2020, the Arbitration Court issued the award rejecting the Request for Revision

presented by the Opportunity Group (the “2020 Arbitration Award”). In December 2020, the Opportunity group

filed an appeal against the 2020 Arbitration Award before the Paris Court of Appeal. In May 2021 the

Opportunity group asked the Paris Court of Appeal to summarize the proceedings brought against the 2016

Arbitration Award. Thereafter, the Opportunity Group, TIM and Telecom Italia Finance filed their briefs in the

two proceedings pending before the Paris Court of Appeal, respectively against the 2016 Award and the 2020

Award. On January 8, 2024, both appeal proceedings were heard before the Paris Court of Appeal. A decision is

pending in both cases.

TIM S.A. Arbitration proceedings no. 28/2021/SEC8

In March 2020, TIM S.A. concluded negotiations with C6 bank and, in April 2020, launched exclusive offers for

TIM customers who had opened C6 bank accounts and used their services. As compensation for this contract,

TIM S.A. receives commission for each account activated, as well as the option of obtaining an investment in

the bank upon achieving certain targets connected to the number of active accounts.

The number of shares received for each target achieved varies throughout the contract term, with the initial

percentages being more advantageous for TIM due to the greater effort required for a new digital company to

take off.

Even with the project’s success, differences between the partners resulted in the initiation of arbitration

proceedings in 2021.

Arbitration proceedings no. 28/2021/SEC8 were filed with the Arbitration and Mediation Center of the Brazil-

Canada Chamber of Commerce, by TIM S.A. against Banco C6 S.A., Carbon Holding Financeira S.A. and Carbon

Holding S.A. through which the interpretation will be discussed of certain clauses of the contracts governing

the partnership. In the event of losing, the partnership may be dissolved.

On February 1, 2021, TIM S.A. announced that as part of this partnership it had obtained the right to exercise a

Subscription Bonus to an indirect investment of approximately 1,44% in the share capital of Banco C6 S.A. due

to the fulfillment of the 1st tier of agreed objectives in December 2020. This was to be exercised whenever

deemed appropriate by the Company's management. If exercised, this subscription bonus will give TIM S.A. a

non-controlling position, thereby not placing it in a position of significant control or influence over the

management of Banco C6 S.A..

The Company subsequently exercised its option to purchase and convert C6 shares, representing 1,44% of the

share capital, equal to 163 million reais (30,5 million euros).

TIM S.A. - Arbitration proceedings connected with the acquisition of the Oi Group mobile telephone assets

On September 19, 2022, TIM S.A. announced that the Buyers (TIM S.A., Telefônica Brasil S.A. and Claro S.A.) of

the mobile telephone assets of Oi Móvel S.A. (the “Seller”) had identified differences in the assumptions and

calculation criteria that, under the terms of the Share Purchase Agreement and Other Covenants (“SPA”),

justify a proposal to change the Adjusted Closing Price (“ACP”) by TIM S.A. of approximately 1,4 billion reais

(0,3 billion euros). In addition to differences relating to the Adjusted Closing Price, others have also been

identified relating to the contracts of Cozani (the company into which TIM S.A.’s share of the assets, rights and

obligations of the Oi Móvel mobile telephone business, flowed) with companies supplying mobile infrastructure

services (site/tower rental), which, under the terms of the SPA, give rise to indemnity by the Seller in TIM S.A.’s

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	79

favor, of approximately 231 million reais (43 million euros). As a result of the differences found, TIM S.A.

retained an amount of 634 million reais (119 million euros, 671 million reais at December 31, 2022).

On October 3, 2022, considering the Seller’s express violation of the dispute resolution mechanisms provided

for in the SPA, TIM S.A. communicated that the Buyers had no other alternative but to file an arbitration

procedure with the Market Arbitration Chamber (Câmara de Arbitragem do Mercado) of B3 S.A. - Brasil, Bolsa,

Balcão against the Seller to determine the effective amount of the adjustment to the Adjusted Closing Price, in

accordance with the SPA.

On October 4, 2022, TIM S.A. was surprised by news published by the press and by a Material Fact released by

the Seller that a preliminary decision had been handed down by the 7th Business Court of the Judicial District

of Rio de Janeiro determining the deposit in court by the Buyers of approximately 1,53 billion reais (0,3 billion

euros – of which approximately 670 million reais by TIM S.A. – in an account linked to the court-ordered

reorganization process of Oi, where it will be safeguarded until a later decision by the arbitration court. Said

deposit was made into an account linked to the Court ahead of the installation of the Court of Arbitration.

TIM S.A. appealed the decision and on October 17, 2022, the Superior Court of Justice, by monocratic judgment,

rejected TIM S.A.’s appeal and that of the other Buyers. Therefore, on October 19, 2022, TIM S.A. paid the 7th

Business Court of the Judicial District of Rio de Janeiro, the amount of 670 million reais (125 million euros) by

way of guarantee.

On October 4, 2023, TIM S.A. reported that the Court of Arbitration had approved an agreement stipulated

between the Company, Telefônica Brasil S.A. and Claro S.A. (the "Buyers") and Oi S.A. - Em Recuperação

Judicial (the "Seller") to put an end to the dispute and arbitration proceedings relating to the post-closing

adjustment of the purchase price assigned to Oi’s mobile telephone assets. The final price for the portion of the

mobile telephone assets attributed to TIM S.A., considering the post-closing adjustment negotiated in the

agreement, was 6,68 billion reais (1,25 billion euros), taking the closing date as reference (“TIM Adjusted Final

Price”).

Considering the TIM Adjusted Final Price, TIM S.A. has therefore redeemed a portion equal to half the amount

that had been deposited in court and subsequently transferred to the Court of Arbitration, which was initially

equivalent to approximately 317 million reais (59 million euros). The amount of the proceeds, redetermined at

the closing date, will be updated with the 100% change in the CDI index until deposit in court, interest and/or

monetary update applicable until the date on which the respective reimbursement is paid. The remaining

amount has been collected by the Seller as part of the purchase price of the mobile telephone assets

attributed to TIM S.A.. Following the agreement, all matters and disputes pending between TIM S.A. and Oi S.A.

in connection with the acquisition of the mobile telephone assets, have been settled.

COMMITMENTS AND GUARANTEES

TIM S.p.A. has provided to the Group the following guarantees:


(million euros)	31/12/2023	31/12/2022
Guarantee on bonds and other debts issued by the Group	1.143	1.157
Guarantee on derivatives financial instruments	29	26
Total	1.172	1.183

There are also surety bonds on the telecommunication services in Brazil for 668 million euros.

ASSETS GUARANTEEING FINANCIAL LIABILITIES

The special rate loan contracts granted by the Brazilian Development Bank BNDES (Banco Nacional de

Desenvolvimento Econômico e Social) to TIM S.A. for a total value of 108 million euros are covered by specific

covenants. Financial indices are: (1) Shareholders' equity over total assets; (2) EBITDA on net financial

expenses; (3) Total financial debt on EBITDA and (4) Short-term net financial debt to EBITDA. In the event of

non-compliance with the covenant obligations, BNDES will have a right to the income which transits on the

bank accounts of the company. TIM S.A. has been complying with all the established ratios.

Note 24 - Revenues


(million euros)	31/12/2023	31/12/2022
Equipment sales	141	129
Services	4.271	3.834
Total	4.412	3.963

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


80	Telecom Italia Finance Group

Revenues only relates to the Brazil Business Unit.

Revenues from telecommunications services are presented gross of amounts due to other TLC operators,

equal to 206 million euros in 2023 (164 million euros in 2022, 25,2% change), included in the costs of services.

For a breakdown of revenues by operating segment, reference should be made to the Note "Segment

Reporting".

Note 25 - Other operating income


(million euros)	Year 2023	Year 2022
Late payment fees charged for telephone services	14	13
Other income	2	4
Total	17	17

Other operating income only relates to the Brazil Business Unit.

Note 26 - Acquisition of goods and services


(million euros)	Year 2023	Year 2022

Purchase of raw materials and merchandise	214	171

Costs of services	1.180	1.109
Revenues due to other TLC operators	206	164
Commissions, sales commissions and other selling expenses	406	370
Advertising and promotion expenses	111	104
Professional and consulting services	140	173
Utilities	78	75
Maintenance	90	76
Outsourcing costs for other services	81	77
Mailing and delivery expenses for telephone bills, directories and other materials to customers	6	9
Other service expenses	61	60

Lease and rental costs	294	289
Rent of properties	80	78
TLC circuit lease rents and rents for use of satellite systems	190	191
Other lease and rental costs	23	20

Total	1.688	1.568

Note 27 - Employee benefits expenses


(million euros)	Year 2023	Year 2022
Wages and salaries	229	210
Social security expenses	64	59
Other employee benefits	45	43
Total	339	312

The employee benefits expenses are mainly related to the Brazil Business Unit for 338 million euros (311

million euros in 2022).

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	Revenues \| 81

Note 28 - Other operating expenses


(million euros)	Year 2023	Year 2022
Write-downs and expenses in connection with credit management	118	115
Provision charges	46	31
TLC operating fees and charges	195	199
Indirect duties and taxes	10	10
Association dues and fees, donations, scholarships and traineeships	2	2
Sundry expenses	17	15
Total	388	372
of which, included in the supplementary disclosure on financial instruments	118	115

Further details on Financial Instruments are provided in the Note "Supplementary disclosure on financial

instruments".

Note 29 - Internally generated assets


(million euros)	Year 2023	Year 2022
Intangible assets with a finite useful life	34	29
Tangible assets owned	69	64
Total	102	93

Internally generated assets mainly include labor costs of dedicated technical staff for software development

and work in connection with the executive design, construction and testing of network installations.

Note 30 - Depreciation and amortization


(million euros)	Year 2023	Year 2022

Amortization of intangible assets with a finite useful life	350	338
Industrial patents and intellectual property rights	179	186
Concessions, licenses, trademarks and similar rights	163	147
Other intangible assets	8	4

Depreciation of tangible assets owned	524	514
Buildings (civil and industrial)	1	1
Plant and equipment	470	465
Other	53	48

Depreciation of right of use assets	444	409
Property	121	94
Plant and equipment	323	314
Other	—	1

Total	1.318	1.260

For further details refer to the Notes "Intangible assets with finite useful lives", "Tangible assets" and "Rights of

use assets".

For a breakdown of depreciation and amortization by operating segment, reference should be made to the

Note "Segment Reporting".

Consolidated Financial Statements 2023

Notes to the Consolidated Financial Statements


Telecom Italia Finance Group	Revenues \| 82

Note 31 - Gains/(losses) on disposals of non-current assets


(million euros)	Year 2023	Year 2022

Gains on disposals of non-current assets	10	13
Gains on the retirement/disposal of intangible and tangible assets	10	13

Total	10	13

In 2023, the item posted a net gain of 10 million euros, connected with the ordinary asset renewal process.

Note 32 - Other income (expenses) from investments


(million euros)	Year 2023	Year 2022
Sundry income (expense)	—	-3
Net gains on investments	56	—
Total	56	-3

The balance for the 2023 financial year mainly includes the income connected to the definition, in October

2023, of the Adjusted Closing Price relating to the acquisition by the Brazilian subsidiary TIM SA of part of the

Oi group's mobile telephony assets (56 million euros). More in detail, on October 4, 2023, TIM S.A. reported that

the Court of Arbitration had approved an agreement stipulated between the Company, Telefônica Brasil S.A.

and Claro S.A. (the "Buyers") and Oi S.A. - Em Recuperação Judicial (the "Seller") to put an end to the dispute

and arbitration proceedings relating to the post-closing adjustment of the purchase price assigned to Oi’s

mobile telephone assets. The final price for the portion of the mobile telephone assets attributed to TIM S.A.,

considering the post-closing adjustment negotiated in the agreement, was 6,68 billion reais (1,25 billion euros),

taking the closing date as reference (“TIM Adjusted Final Price”).