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Chairman's Letter

The year we have left behind us was, for Telecom Italia, a year of unswerving concentration on the operational management of the Group, aimed at re-balancing costs and revenues, reinforcing the generation of earnings and reducing indebtedness. This management effort took much energy and required great discipline in the use of resources. However, this did not push our commitment to all the stakeholders into second place. On the contrary, this was further strengthened by its closer integration with the activities of the business, and by the establishment of the Telecom Italia Foundation with regard to socially-purposive interventions.

These pages, as ever, present a thorough and detailed panorama of actions taken in support of sustainability, which encompass the entire company in its many parts.

One example is the progress we are achieving in the environmental sphere. Starting with our own activities. In 2008, the Group’s indicator of energy efficiency – which sets the service offered to the customer, expressed in terms of bits transmitted by our networks, against its impact on the environment, measured in terms of total energy consumed – was once again improved, by as much as 35%. The growth in traffic was not the only factor contributing to this result. Also very significant was the overall reduction of electricity consumption, the first in the last four years. This would not have been possible without the continuous work of rationalisation, modernisation and technological innovation of the network infrastructure, and experimentation with new systems of energy production. Optimising consumption, modernising the fleet of company cars and converting the thermal plant have, indeed, reduced the direct and indirect emission of carbon dioxide into the atmosphere by about 20,000 tons.

Indubitably, telecommunications in general, and broadband in particular, can play a very important role in the environmental cause, with significant repercussions too on social front at the national level. Just think of the passage from paper to digital form of communications between the public administration, citizens and businesses, eliminating the distances and the necessity for travel. Think of the benefits inherent in the services of telemedicine, e-learning, telepresence, tele-working and, when travel is unavoidable, infomobility services for traffic management, transport and logistics. Now think of the possibilities of using the sensors and connections within the network for the more efficient control and management of every use of energy resources.

Another sphere of great social importance in which we are working, very often in close collaboration with local public authorities, is that of reducing the digital divide, in order to avoid the creation of new forms of discrimination towards those who find it difficult or impossible to access information technology. This is an issue we are tackling both from the geographical point of view, by extending network and broadband coverage into the more marginal areas, and from the cultural point of view, by promoting a wider awareness of digital technologies among the weakest strata of society.

This year, the Telecom Italia Foundation has become an integral part of the Group’s Sustainability strategy. We have entrusted to it the task of reinforcing our commitment to the community, supporting ideas and projects in the fields of education, culture and society, targeted at improving people’s quality of life and also contributing, in this way, to the promotion of innovation and modernisation within the country, which is an objective of the whole company.

We are proud to note that the determination with which we pursue this goal led to Telecom Italia’s place being confirmed in 2008 in all the main global sustainability indexes, which only include the most deserving companies, selected through a rigorous process of evaluation. A further cause for satisfaction was the recent admission of Tim Participações to the ISE index (Índice de Sustentabilidade Empresarial), managed directly by the San Paolo stock market in Brazil. Another important acknowledgement has been the co-leadership role taken by the Group in the “laboratory” which – as part of the Alliance between the European Commission and companies launched in March, 2006, designed to make Europe a pole of excellence in corporate responsibility – is working to develop the criteria and methodology for the effective communication of non-financial performance. Still in the area of communication and reporting, it should be noted that Telecom Italia was judged by the Carbon Disclosure Project to be the best company in all Italy for the measurement and representation of information regarding the emission of greenhouse gases.

This sheaf of positive assessments represents a further stimulus in pursuing our commitment to sustainability, continuing to disseminate, in all the countries in which we operate, the principles of the Global Compact, the initiative launched by the United Nations in 2000 to promote the protection of the environment, respect for human rights and working conditions, and to fight corruption.

Ahead of us, the foreseeable future will continue to be characterised by the particularly difficult international economic situation. This will put the corporate system under strong pressure, forcing businesses to concentrate on the fundamentals of management to a much greater degree than in the recent past. Those who, like us, see sustainability as going hand in hand with the creation of value, will draw from this renewed motivation, which will certainly make a positive contribution in confronting complex circumstances. This will bring benefits for the company’s results, but, first and foremost, it will bring benefits for all those who demand from Telecom Italia that contribution of innovation and modernisation that will be the solid foundation upon which recovery and new prospects for development can be constructed.

Gabriele Galateri di Genola