UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 6-K

                         REPORT OF FOREIGN PRIVATE ISSUER

                        PURSUANT TO RULE 13a-16 OR 15D-16
                    UNDER THE SECURITIES EXCHANGE ACT OF 1934

                           FOR THE MONTH OF OCTOBER 2012


                              TELECOM ITALIA S.p.A.
                 (Translation of registrant's name into English)

                              Piazza degli Affari 2
				20123 Milan, Italy
                     (Address of principal executive offices)


          Indicate by check mark whether the registrant files
          or will file annual reports under cover of Form 20-F or Form 40-F:

                          FORM 20-F [X]   FORM 40-F [ ]


          Indicate by check mark if the registrant
          is submitting the Form 6-K in paper
          as permitted by Regulation S-T Rule 101(b)(1): [ ]

          Indicate by check mark if the registrant
          is submitting the Form 6-K in paper
          as permitted by Regulation S-T Rule 101(b)(7): [ ]


          Indicate by check mark whether by furnishing the information
          contained in this Form, the registrant is also thereby furnishing
          the information to the Commission pursuant to Rule 12g3-2(b)
          under the Securities Exchange Act of 1934.

                               YES [ ]     NO [X]

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

---

Contents

The Telecom Italia Group

3

Letter to the shareholders

5

Key Financial and Operating Data - Telecom Italia Group

6

Half-year 2012 Highlights

6

Consolidated Financial Performance in the First Half of 2012

7

Financial and Operating Highlights –  The Business Units of the Telecom Italia Group

13

Consolidated Financial Position and Cash Flow Performance

27

Half-year Condensed  Consolidated Financial Statements

34

Business Outlook for the Year 2012

43

Events Subsequent to June 30, 2012

43

Main Commercial Developments of the Business Units of the Group

44

Principal Changes in the Regulatory Framework

49

Corporate Boards at June 30, 2012

55

Macro-Organization Chart – Telecom Italia Group at June 30, 2012

57

Information for Investors

58

Related Party Transactions

61

Alternative Performance Measures

62

Sustainability section

64

Environment

64

Human Resources

66

Research and development

77

Telecom Italia Group Half-year Condensed Consolidated Financial Statements at June 30, 2012

82

Contents

83

Consolidated Statements of Financial Position

84

Separate Consolidated Income Statements

86

Consolidated Statements of Comprehensive Income

87

Consolidated Statements of Changes in Equity

88

Consolidated Statements of Cash Flows

90

Notes to the Half-year Condensed Consolidated Financial Statements

92

Certification of the Half-year Condensed Consolidated Financial Statements at June 30,
2012 Pursuant to art. 81-ter of Consob Regulation 11971 dated May 14, 1999, with
Amendments and Additions  171

Auditors’ Report on the Review of the Condensed Consolidated Interim Financial

Statements

172

Useful Information

174

This document has been translated into English solely for the  convenience of the readers.

In the event of a discrepancy, the Italian language version prevails.

Board of Directors

Board of Statutory Auditors

Letter to the Shareholders

To the Shareholders,

after reporting a loss in 2011 as a result of the impairment charge for goodwill, the Company returned to solid earnings in the first half of 2012 despite a worsening of the economic conditions in Italy and the slowdown of the economies in the countries of Latin America.

An even more important result comes from the reduction in debt, which fell by 800 million euros from the end of the same period last year to 30.4 billion euros at June 30, 2012, after dividend payments of over 1 billion euros.

In a scenario where most Italian companies found it extremely difficult to access credit, Telecom Italia successfully placed bonds worth 1.5 billion euros, maintaining its liquidity margin at a level sufficient to meet its repayment obligations until 2014. The Company would thus be able to cope with any temporary deterioration in the financial market panorama without placing its plans at risk. The credibility and the consistency of the debt reduction plan allow us to proceed with the project to relaunch the industrial side of the Telecom Italia Group, on which the whole management team has been working for so long.

This project breaks important new ground in terms of infrastructures. Effectively, it gives the go-ahead to build fixed and mobile ultra broadband networks in Italy. Furthermore, it will strengthen the company’s presence in Brazil by extending and upgrading the mobile network and by developing a fiber optic network starting from the infrastructure of AES – Tim Fiber, acquired in Brazil last year.

In order to generate the cash necessary to render the plan for the relaunch of investments compatible with the reduction of debt, for which we have set ourselves ambitious objectives, the role of the Italian market is of fundamental importance. In the past we have succeeded in defending our margins thanks to constant efforts to reduce costs: today defending revenues is just as important. In the first half of the year, important results have been achieved on this front. In fact, revenues from mobile telephone services record a recovery, both as a result of stabilizing the customer base and increasing revenues associated with broadband services. The recovery trend is particularly obvious in the Consumer sector, whereas the area of small and medium-size enterprises is feeling the effects of the difficult market situation, something made even worse by the fact that credit is so tight. In this segment, innovative offerings, however successful they are from a sales point of view --a prime example being Nuvola Italiana-- are not able to compensate the erosion of prices and volumes in the more traditional components of the offering.

The macroeconomic and financial scenario seems unlikely to improve in the next few months, either in Italy or in Latin America, but this must not jeopardize the aims we have set ourselves, especially with regard to reducing debt. We intend to use every bit of flexibility offered by the various operational levers that management has at its disposal.  We are fully aware that a situation of exceptional complexity, like the one we face now, requires not only coherent, rigorous management but also the capacity to find new directions to develop. This will ensure that we can proceed confidently along the path towards growth on which we have embarked with the new investment plan.

Franco Bernabè

Key Financial and Operating Data - Telecom Italia Group

Half-year 2012 Highlights

During the course of the first half of the year, the Group, thanks to geographic diversification, streamlining of its operating expenses and repositioning of the offering set out in its Business Plan, was able to combat the pressures of a recession on the domestic market and the slowdown of the economies of the Latin American countries, while confirming the profile for the growth of consolidated revenues and profit.

_•

Consolidated Revenues are up 1.7% compared to the first half of the prior year (+3.1% in organic terms) to 14.8 billion euros, while EBITDA of 5.9 billion euros fell 1.6% (-1.0% in organic terms).

_•

Operating Profit (EBIT) is 3.2 billion euros; an operating loss of 63 million euros was reported in the first half of 2011 following the Core Domestic goodwill impairment charge for 3.2 billion euros. Organic EBIT records an increase of 2.4%.

_•

Profit attributable to owners of the Parent (1.2 billion euros) increased 3.3 billion euros over the same period of the prior year. On a comparable, basis, excluding the impairment charge for 3.2 billion euros recorded in the first half of 2011, the increase is +0.1 billion euros (+9.2%).

_•

Cash flows generated during the first half more than compensated requirements, for a total of 1.3 billion euros, for the payment of dividends and taxes, bringing Adjusted Net Financial Debt at the end of the period to 30.4 billion euros, down 54 million euros compared to the end of 2011.

Financial Highlights

(1)

Starting from the first half of 2012, the Telecom Italia Group has early adopted and retrospectively applied revised IAS 19 (Employee Benefits); therefore, the comparative figures have been restated on a consistent basis. Further details and the effects on the periods presented are provided in the Note “Accounting policies” in the half-year condensed consolidated financial statements at June 30,2012.

(2)

Details are provided under “Alternative Performance Measures”.

Consolidated Financial Performance in the First Half of 2012

Revenues

Revenues amount to 14,793 million euros in the first half of 2012, increasing 1.7% compared to 14,543 million euros in the first half of 2011 (+250 million euros). In terms of the organic change, consolidated revenues grew 3.1% (+443 million euros).

Specifically, the organic change in revenues is calculated by excluding:

_•

the effect of exchange differences ⁽¹⁾ equal to -179 million euros, for the most part relating to the Brazil Business Unit (-185 million euros) and to a lesser extent to the Argentina Business Unit (-3 million euros);

_•

the effect of the change in the scope of consolidation (-5 million euros) in connection with the sale of the subsidiary Loquendo (Domestic Business Unit) on September 30, 2011;

_•

the effect of a reduction in revenues of 9 million euros due to the closing of commercial disputes with other operators.

The breakdown of revenues by operating segment is the following:

⁽⁾

The average exchange rates used for the translation to euro (expressed in terms of units of local currency per 1 euro) are: for the Brazilian real, 2.41520 in the first half of 2012 and 2.28778 in the first half of 2011 and for the Argentine peso, 5.69209 in the first half of 2012 and 5.67941 in the first half of 2011. The effect of the change in exchange rates is calculated by applying, to the period under comparison, the foreign currency translation rates used for the current period.

The Domestic Business Unit (divided into Core Domestic and International Wholesale) reports a declining trend in organic Revenues of 282 million euros compared to the first half of 2011 (-3.0%), with the main operating indicators confirming a structural improvement owing to the repositioning strategy undertaken by the Mobile business (especially in the Consumer segment) and the focus on the value of the customer base in the Fixed-line business.

In the first half of 2012, organic revenues from services total 8,714 million euros and record a contraction of 2.9% compared to the same period of the prior year. This is an improvement over the average performance for the full year 2011 (-5.2%) but a slight decline in the second quarter compared to the first quarter of 2012 (-3.6%; -2.3% in the first quarter of 2012, which benefited from one additional business day owing to the fact that 2012 was a leap year).

Revenues from services in the Mobile business record a shrinkage of 5.6% compared to the first half of 2011, with a slowdown in the second quarter (-7.5%) attributable particularly to the above calendar effect and a contraction in the Business and Top segments caused not only by competition but also by the economic climate. Performance nevertheless remains better than in the year 2011 (-8.7%), thanks always to the curtailment of revenue erosion in traditional services and the positive growth of Mobile Internet revenues.

The fixed-line area features a decline in revenues from services of 103 million euros (-1.6% compared to the first half of 2011) with a confirmation of the improving trend also in the second quarter (-1.4%; -1.8% in the first quarter of 2012; -3.4% in the year 2011) thanks to the focus on the value of the customer base which nevertheless posts a decrease of 4.6% compared to June 30, 2011.

Product revenues total 343 million euros and are 18 million euros lower compared to the first half of 2011. The growth in Mobile devices, driven by a greater commercial push on mobile internet-enabled devices, in fact, was absorbed by the sharp contraction of Fixed-line products attributable to a contraction of the market but also to a more selective commercial strategy to defend the profit base.

As for the Brazil Business Unit, organic revenues grew 12.6% in the first half of 2012 compared to the corresponding period of the prior year. Revenues from services continue to display a positive trend (+11.0% over the first half of 2011) propelled by the growth of the customer base (about 69 million lines at June 30, 2012, up 24% compared to June 30, 2011); handset revenues also show a positive trend (+27.5% compared to the first half of 2011).

With respect to the Argentina Business Unit, organic revenues gained 20.9% compared to the first half of 2011 (+315 million euros); specifically, mobile business revenues (1,318 million euros) recorded a growth of 24.4% while the fixed area grew 12.7% vs. the corresponding period of the prior year.

An in-depth analysis of revenue performance by individual Business Unit is provided under “Financial and Operating Highlights - The Business Units of the Telecom Italia Group”.

EBITDA

EBITDA is 5,859 million euros, decreasing 97 million euros (-1.6%) compared to the corresponding period of the prior year; the EBITDA margin is 39.6% (41.0% in the first half of 2011). Organic EBITDA fell 59 million euros (-1.0%) from the same period of the prior year; the organic EBITDA margin is down 1.7 percentage points (39.8% in the first half of 2012 against 41.5% in the first half of 2011) owing to a higher percentage of total revenues by South America where margins are lower than the Domestic business as well as higher sales of mobile devices, aimed at a greater penetration of data services.

Details of EBITDA and EBITDA margins by operating segment are as follows:

EBITDA was particularly impacted by the change in the line items analyzed below:

_•

Acquisition of goods and services (6,500 million euros; 6,232 million euros in the first half of 2011). The increase of 268 million euros is largely due to the surge in the commercial and technical costs of the Brazil Business Unit (+105 million euros, including a negative exchange rate effect for 113 million euros) and of the Argentina Business Unit (+222 million euros), needed to support the growth of the customer base, voice and data traffic volumes and, consequently sales in the Latin America area. Countering these changes is the domestic business which benefits from cost cutting actions which contributed to a reduction in purchases of 69 million euros compared to the first half of 2011.

_•

Employee benefits expenses (2,006 million euros; 1,986 million euros in the first half of 2011) record a net increase of 20 million euros. The change was influenced by:

–

in the foreign component, an increase in the average headcount referring to the salaried workforce of 1,446, mainly in the Brazil Business Unit and the Argentina Business Unit;

–

in the Italian component, a decrease of ordinary employee benefits expenses, mainly due to the reduction in the average headcount of the salaried workforce of 1,280 compared to the first half of 2011;

–

expenses of 16 million euros, arising from the agreements signed with the labor unions of Olivetti I-Jet and its subsidiary Olivetti Engineering S.A. aimed at dealing with the excess staff of the company put into a wind-up.

_•

Other operating expenses (897 million euros; 843 million euros in the first half of 2011). The increase of 54 million euros is primarily in reference to the Brazil Business Unit (+36 million euros, including a negative exchange rate effect of 18 million euros) and the Argentina Business Unit (+40 million euros) and is partially compensated by the Domestic Business Unit (-37 million euros). In particular:

–

writedowns and expenses in connection with credit management comprise mainly 174 million euros (177 million euros in the first half of 2011) referring to the Domestic Business Unit, 49 million euros (47 million euros in the first half of 2011) to the Brazil Business Unit and 26 million euros (15 million euros in the first half of 2011) to the Argentina Business Unit;

–

provision charges recorded for pending disputes refer mainly to the Brazil Business Unit  for 35 million euros (30 million euros in the first half of 2011), the Domestic Business Unit for 13 million euros (43 million euros in the first half of 2011) and the Argentina Business Unit for 6 million euros (5 million euros in the first half of 2011);

–

telecommunications operating fees and charges mostly refer to the Brazil Business Unit for 272 million euros (242 million euros in the first half of 2011), to the Argentina Business Unit for 35 million euros (28 million euros in the first half of 2011) and to the Domestic Business Unit for 30 million euros (29 million euros in the first half of 2011).

Depreciation and amortization

Details are as follows:

The decrease in depreciation and amortization charges is mainly in reference to the Domestic Business Unit (-219 million euros), offset by the increase in depreciation and amortization charges of the Argentina Business Unit (+44 million euros).

Net gains (losses) on disposals of non-current assets

Net gains on disposals of non-current assets principally refer to the Domestic Business Unit.

Impairment losses on non-current assets

In the first half of 2012, the Group, as in previous years, repeated the impairment test on goodwill. The outcome of this test did not require an impairment charge. In the first half of 2011, the impairment charge of goodwill allocated to the Core Domestic Cash-Generating Unit (CGU) in the Domestic Business Unit was 3,182 million euros. Further details are provided in the Note “Goodwill” in the half-year condensed consolidated financial statements at June 30, 2012 of the Telecom Italia Group.

EBIT

EBIT is 3,205 million euros; in the first half of 2011, a negative 63 million euros was reported which included the aforementioned impairment charge of 3,182 million euros on the goodwill allocated to the Core Domestic CGU. The organic change in EBIT is a positive 76 million euros (+2.4%) occasioned principally by the aforementioned reduction in depreciation and amortization, with a 21.7% organic EBIT margin more or less unchanged compared to the first half of 2011.

Other income (expenses) from investments

Neither income nor expenses from investments were recorded in the first half of 2012.

In the first half of 2011, the income balance of Other income (expenses) from investments was 15 million euros and referred to the gain (17 million euros) on the sale of the entire 27% investment in the Cuban operator EtecSA.

Finance income (expenses)

Finance income (expenses) is an expense balance of 917 million euros (an expense balance of 981 million euros in the first half of 2011), with an improvement of 64 million euros. The reduction, even though the net debt exposure remained basically unchanged, is due to multiple factors including the positive effects deriving from the change in finance expenses as a result of the impact of bond buybacks in the first half of 2011, as well as the capitalization of finance expenses (29 million euros) relating to the purchase of the user rights for the LTE mobile telephony frequencies by  the Domestic Business Unit.

Income tax expense

Income tax expense is 824 million euros and increased 55 million euros compared to the first half of 2011 mainly due to the higher taxable base of the Parent, Telecom Italia S.p.A., the Brazil Business Unit and also the Argentina Business Unit.

Profit (loss) for the period

The profit (loss) for the period can be analyzed as follows:

Financial and Operating Highlights –
The Business Units of the Telecom Italia Group

Starting from the first half of 2012, the Telecom Italia Group has early adopted and retrospectively applied revised IAS 19 (Employee Benefits); therefore, the comparative figures of the Business Units have been restated on a consistent basis.

Domestic

In the first half of 2012, the company Matrix was moved to Other Operations and hence is no longer part of Core Domestic in the Domestic Business Unit. The periods under comparison have been reclassified accordingly.

(*)

The 231 headcount change includes the effects resulting from the acquisition, as of January 1, 2012, of the Contact Center business and the relative 249 resources from the company Advalso in the Olivetti Business Unit.

(**)  Headcount at December 31, 2011.

Fixed

Mobile

(1)

The data refers to total lines. The churn rate represents the number of mobile customers who discontinued service during the period expressed as a percentage of the average number of customers.

(2)

National traffic excluding roaming.

(3)

The values are calculated on the basis of revenues from services (including revenues from prepaid cards) as a percentage of the average number of lines.

The financial and operating highlights of the Domestic Business Unit are reported according to two Cash-generating units (CGU):

_•

Core Domestic: includes all telecommunications activities inherent to the Italian market. Revenues are broken down according to the net contribution of each market segment to the CGU’s results, excluding infrasegment transactions. The sales market segments defined on the basis of the “customer centric” organizational model are as follows:

–

Consumer: comprises the aggregate of voice and internet services and products managed and developed for persons and families in the Fixed and Mobile telecommunications markets and also public telephony;

–

Business: is constituted by the aggregate of voice, data, internet and ICT solutions services and products managed and developed for SMEs (small and medium-size enterprises) and SOHOs (Small Office Home Office) in the Fixed and Mobile telecommunications markets;

–

Top: comprises the aggregate of voice, data, internet and ICT solutions services and products managed and developed for Top, Public Sector, Large Account and Enterprise customers in the Fixed and Mobile telecommunications markets;

–

National Wholesale: consists of the management and development of the portfolio of regulated and unregulated wholesale services for Fixed and Mobile telecommunications operators in the domestic market;

–

Other (Support Structures): includes:

−

Technology & IT: constitutes services related to the development, building and operation of network infrastructures, real estate properties and plant engineering, delivery processes and assurance regarding customer services in addition to the development and operation of information services;

−

Staff & Other: services carried out by staff functions and other support activities performed by minor companies of the Group also offered to the market and other Business Units.

_•

International Wholesale: includes the activities of the Telecom Italia Sparkle group which operates in the international voice, data and internet services market aimed at fixed and mobile telecommunications operators, ISPs/ASPs (Wholesale market) and multinational companies through its own networks in the European, Mediterranean and South American markets.

Main financial data

Key results in the first half of 2012 by the Domestic Business Unit overall and by market/business segment compared to the first half of 2011 are presented in the following tables.

Core Domestic

(*)  

Headcount at December 31, 2011.

(1)

In the first half of 2012, the company Matrix was moved to Other Operations and hence is no longer part of the Consumer segment. The periods under comparison have been reclassified accordingly.

(2)

The data of the Business and Top segments in the first half of 2011 have been reclassified for purposes of comparison with the data of the first half of 2012, which take into account the new customer classification criteria introduced at the beginning of 2012.

International Wholesale

(*) Headcount at December 31, 2011.

Revenues

In a deteriorating economic climate and in a continuing fiercely competitive market, revenues of all segments in the first half of 2012, although displaying a contraction, confirm a gradual recovery thanks to the growth of the mobile customer base, the policy focusing on ARPU (Average Revenues Per User) in the Fixed-line business and the effectiveness of new rate plan policies both in terms of slowing down the fall in prices (both Fixed-line and Mobile) and the development of new services, particularly in the Mobile Internet area.

More to the point:

_•

Consumer: the Consumer segment reports a reduction in revenues of 67 million euros (-1.5%) compared to the first half of 2011. This confirms the trend of steady recovery seen in 2011 thanks particularly to the stabilization of the erosion of voice revenues (both Fixed and Mobile), strong expansion of Browsing revenues and an increase in handset sales (+65 million euros, +52.7%), particularly Mobile Internet-enabled devices. The reduction is entirely due to revenues from services (-132 million euros, -3.0%) and can be ascribed to traditional Voice and Messaging services. Such contraction is for the most part offset by higher Mobile Internet revenues (+51 million euros, +15.9% compared to the first half of 2011) and Fixed Broadband accesses (+16 million euros, +3.4% compared to the same period of 2011).

_•

Business: the Business segment in the first half of 2012 shows a reduction in revenues of 119 million euros (-7.6%) compared to the first half of 2011. This decline is mostly in reference to service revenues, -91 million euros of which -56 million euros refers to the Fixed-line area (-5.5%), attributable entirely to the erosion of the customer base (-6.7% compared to 2011), and -38 million euros to the Mobile area (-7.6%), stemming from both a reduction in the customer base (-5.4% excluding data only lines) and a fall in the revenues and the average per unit prices particularly for voice services.

_•

Top: the Top segment reports lower revenues of 148 million euros (-8.6%) in the first half of 2012 compared to the same period of 2011. This shrinkage refers to both revenues from services (-92 million euros, -6%), and product sales (-55 million euros, -28.2%). The drop in revenues from services specifically comes from the Fixed business (Voice -48 million euros, Data -34 million euros) while the fall in the Mobile business is limited to -18 million euros (-3.9%), entirely attributable to the decrease in prices/revenues from traffic and messaging that was only partly offset by the increase in Browsing revenues.

_•

National Wholesale: the National Wholesale segment highlights a decrease in revenues in the first half of 2012 (-19 million euros, -1.8%, -0.9% in organic terms) that can be traced largely to lower carrier and interconnection revenues, only in part matched by the growth of access services to alternative operators.

International Wholesale Revenues

International Wholesale (the Telecom Italia Sparkle group) reports revenues of 709 million euros in the first half of 2012 or an increase of 67 million euros (+10.4%, +8.9% in organic terms) compared to 2011. Such performance is almost entirely due to Voice services (+15.7%) and, to a lesser extent, to the IP business/Data segment (+8.6%). All areas of business were impacted by strong pressures on prices caused by market competition as well as the continuing actions to rationalize the sector according to a more selective approach in terms of the customer portfolio and traffic strategy.

EBITDA

EBITDA of the Domestic Business Unit is 4,406 million euros in the first half of 2012, down 121 million euros compared to the first half of 2011 (-2.7%). The EBITDA margin is 48.7%, a slight improvement compared to the first half of 2011 (+0.2 percentage points). The contraction in revenues from services impacted EBITDA (-269 million euros) and was offset only in part by the reduction in the portion of revenues to be paid to other operators and the changes in efficiency obtained by selective control and containment of operating expenses.

Organic EBITDA in the first half of 2012 comes to 4,424 million euros (-150 million euros, -3.3% compared to the first half of 2011), with the organic EBITDA margin equal to 48.8%, or slightly lower than the first half of 2011 (-0.2 percentage points).

With regard to the change in the main costs, the following is noted:

In particular:

_•

acquisition of goods and services: shrunk 69 million euros (-2.1%) compared to the same period of 2011. Such contraction is mainly due to a decrease in the portion of revenues to be paid to other operators, owing principally to the reduction in Mobile termination rates;

_•

employee benefits expenses: fell 63 million euros from the first half of 2011 (-4.1%), attributable mostly to the reduction in the average headcount of the salaried workforce by 864 compared to the first half of 2011, countered by higher expenses as a result of the acquisition, as of January 1, 2012, of the Contact Center business and the relative 249 resources from the company Advalso in the Olivetti Business Unit;

_•

other operating expenses: are down 37 million euros vs. the first half of 2011, principally as a result of lower provision charges – non organic. Details are as follows:

EBIT

EBIT in the first half of 2012 is 2,605 million euros; a negative EBIT was reported in the same period of the prior year for 697 million euros and included the goodwill impairment charge of the Core Domestic CGU for 3,182 million euros. The EBIT margin is 28.8%. Organic EBIT is 2,602 million euros, up 71 million euros compared to 2,531 million euros in the first half of 2011 (+2.8%); the organic EBIT margin is 28.7% or 1.6 percentage points higher vs. the first half of 2011 (27.1%).

Brazil

(*)

Headcount at December 31, 2011.

(*)

Number at December 31, 2011.

Main financial data

Revenues

Revenues total 9,016 million reais, up 1,012 million reais compared to the same period of 2011 (+12.6%). Revenues from services in the first half of 2012 are 8,000 million reais, increasing from 7,207 million reais in the same period of 2011 (+11.0%). Revenues from the sale of products increased from 797 million reais in the first half of 2011 to 1,016 million reais in the same period of 2012 (+27.5%), reflecting a higher penetration of the customer base with high-value smartphones and webphones, serving as an important leverage for the expansion of revenues from data services.

The ARPU mobile (Average Revenue Per User) for the first six months of 2012 is 18.7 reais compared to 21.2 reais for the same period of 2011 (-11.8%). The change in ARPU and revenues from services is adversely affected by the reduction in interconnection charges to the network of mobile operators, in effect since February 2012.

Total lines at June 30, 2012 number 68.9 million, up 7.5% compared to December 31, 2011 and 24.0% compared to June 30, 2011, corresponding to a 26.9% market share of the lines.

EBITDA

EBITDA in the first half of 2012 is 2,385 million reais, or 216 million reais higher than the same period of 2011 (+10.0%). The increase in the EBITDA is supported by higher revenues mainly relating to outgoing voice traffic and VAS, offset basically by higher termination charges due to the increase in traffic volumes and to the costs strictly linked to the change in the customer base.

The EBITDA margin is 26.5%, down 0.6 percentage points compared to the same period of 2011.

The increase in the EBITDA margin of revenues from services is countered by the higher contribution of revenues from the sale of smartphones and webphones.

With regard to changes in costs, the following is noted:

_•

acquisition of goods and services: totals 5,447 million reais (4,919 million reais in the first half of 2011). The increase of 10.7% compared to the first half of 2011 (+528 million reais) can be analyzed as follows:

+170 million reais for the purchases referring primarily to product cost;

-11 million reais for external services costs;

+269 million reais for the portion of revenues to be paid to other TLC operators;

+100 million reais for rent and lease costs;

_•

employee benefits expenses amount to 427 million reais, increasing 59 million reais compared to the first half of 2011 (+16.0%). The average headcount grew from 9,053 in the first half of 2011 to 9,795 in the same period of 2012. The percentage of employee benefits expenses to revenues is 4.7%, increasing 0.1 percentage points compared to the first half of 2011;

_•

other operating expenses: come to 900 million reais, increasing 16.7% (771 million reais in the first half of 2011). Such expenses consist of the following:

EBIT

EBIT is 1,125 million reais, increasing 118 million reais compared to the first half of 2011. This increase is due to a higher contribution by EBITDA offset to a marginal degree by higher depreciation and amortization charges of 96 million reais (1,256 million reais in the first half of 2012, compared to 1,160 million reais in the same period of 2011).

Auction for the user rights to mobile telephony frequencies

In June 2012, Tim Celular, a subsidiary of TIM Brasil, took part in the auction for the acquisition of the user rights to the fourth-generation (4G) mobile telephony frequency bands.

On June 12 and 13, 2012, the Brazilian regulator, Anatel, announced the results of the bidding, awarding Tim Celular the user rights to one national 10+10MHz and six regional 10+10MHz frequencies bands, as well as 7+7MHz in 450MHz in four states. The total value of the investment is 382 million reais and allows the Tim Brasil group to use the new frequencies for 15 years (renewable for another 15 years).

The assignment of the acquired spectrum will be formalized in the third quarter of 2012.

Argentina

(*)  Includes employees with temp work contracts: 1 at 6/30/2012 and 1 at 12/31/2011.

(**) Headcount at December 31, 2011.

(° )

Data relating to the first half of 2011.

(**)  

Includes lines with a ceiling invoiced at the end of the month which can be topped-up with prepaid refills.

(***)

Includes WiMAX lines.

(****)  

The calculation method was updated in order to exclude, from the customer base, the internet sticks sold to customers who already have ADSL access.

Revenues

Revenues in the first half of 2012 amount to 10,379 million pesos, up 1,796 million pesos (+20.9%) compared to the same period of 2011 (8,583 million pesos) thanks to the growth of the broadband and mobile customer bases, in addition to the relative ARPU. The main source of revenues for the Argentina Business Unit is mobile telephony which accounted for about 72% of the consolidated revenues of the Business Unit, increasing more than 24% compared to the first half of 2011.

Fixed-line telephony service: the number of fixed lines at June 30, 2012 remained more or less the same compared to the end of 2011. Even though the fixed-line regulated services in Argentina continue to be influenced by the rate freeze imposed by the Emergency Economic Law of January 2002, ARBU rose by 5.6% compared to the first half of 2011, thanks to the sale of plans which include minutes of traffic and value-added services. ARBU also benefits from increases in the prices of both value-added services and traffic plans.

Mobile telephony service: Telecom Personal mobile lines in Argentina increased by 530 thousand compared to the end of 2011, arriving at a total of 18,723 thousand lines at June 30, 2012, 32% of which is postpaid. At the same time, thanks to high-value customer acquisitions and leadership in the smartphone segment, ARPU gained 13% reaching 54.6 pesos (48.3 pesos in the first half of 2011). A large part of this growth can be traced to Value-Added Services (including text messaging) and the Mobile Internet service which, on the whole, accounts for approximately 52% of revenues from mobile telephony services in the first half of 2012.

In Paraguay, the Núcleo customer base grew about 4% compared to December 31, 2011 and at June 30, 2012 reached 2,242 thousand lines, 18% of which is postpaid.

Broadband: Telecom Argentina’s portfolio of total broadband lines at June 30, 2012 reached 1,594 thousand accesses, with an increase of 44 thousand accesses compared to the end of 2011 and representing a gain of about 3%.

EBITDA

EBITDA is up 255 million pesos (+8.9%) over the first half of 2011, reaching 3,131 million pesos in the first half of 2012. The EBITDA margin is 30.2%, down 3.3 percentage points compared to the same period of 2011, mainly due to higher costs for the acquisition of goods and services and employee benefits expenses.

With regard to changes in costs, the following is noted:

_•

acquisition of goods and services: totals 4,773 million pesos (3,502 million pesos in the first half of 2011). The increase of 36.3% compared to the same period of the prior year (+1,271 million pesos) is mainly due to higher external service costs for 621 million pesos and higher purchases of raw materials, auxiliaries, consumables and merchandise for 560 million pesos;

_•

employee benefits expenses: stand at 1,519 million pesos, increasing 340 million pesos compared to the first half of 2011 (+28.8%). The increase comes from salary rises, as a result of periodical

revisions in union agreements and is largely connected to inflation. Moreover, an increase is recorded in the average number of employees in the mobile area. The percentage of employee benefits expenses to total revenues is 14.6%, growing 0.9 percentage points over the first half of 2011;

_•

other operating expenses: amount to 1,122 million pesos, increasing 25.5% (894 million pesos in the first half of 2011).  Such expenses consist of the following:

EBIT

EBIT fell by 10 million pesos (-0.7%) in the first half of 2012 to 1,452 million pesos, mainly as a result of higher depreciation and amortization. The EBIT margin is 14.0%, down 3.0 percentage points compared to the same period of the prior year.

Media

(*) Headcount at December 31, 2011.

Revenues

Revenues amount to 119 million euros in the first half of 2012, increasing 1 million euros compared to 118 million euros in the first half of 2011.  Specifically:

_•

revenues of TI Media – La7 in the first half of 2012, before infragroup eliminations, stand at 70 million euros, decreasing 1 million euros compared to the corresponding period of 2011. The change is due to the increase in total gross advertising revenues which in the first half of 2012 expanded by 6 million euros, or +10.1%, over the first half of 2011; this increase almost completely offset the absence of revenues from the Competence Center activities which ceased operations in September 2011 and had generated revenues of 8 million euros in the first half of the prior year. Advertising revenues particularly benefitted from channel La7’s daily average audience share which reached 3.5% in the first six months of 2012 and also from channel La7d’s net advertising revenues in the first half of 2012 which totaled 4 million euros (+38.7%);

_•

MTV group revenues came to 30 million euros, before intragroup eliminations, decreasing 6 million euros compared to the first half of 2011 (36 million euros). This reduction is principally due to lower net advertising revenues (21 million euros in the first half of 2012 compared to 25 million euros in the first half of 2011);

_•

revenues from Network Operator activities (TIMB), before intragroup eliminations, total 38 million euros, compared to 26 million euros in the first half of 2011, increasing 12 million euros. The positive change is due both to the evolution of existing contracts and to new channels put under contract at the end of 2011 for digital terrestrial TV on Multiplexes, which led to the full use of the available digital band since February 2012.

EBITDA

EBITDA is a negative 16 million euros in the first half of 2012 compared to a positive 9 million euros recorded in the first half of 2011. In particular:

_•

EBITDA of Telecom Italia Media – La7, comes to –35 million euros, with a negative change of 29 million euros compared to the first half of 2011 (-6 million euros). This result largely reflects higher operating costs connected mostly with the programming costs of channels La7 (+21 million euros) and La7d (+3 million euros), due to the launch of new programs and new faces compared to the first half of 2011, aimed at consolidating and extending the current viewing targets. The result was also adversely affected by the absence of profits from the Competence Center business (8 million euros of revenues in the first half of 2011) which ceased operations in September 2011;

_•

EBITDA of the MTV group is -3 million euros, with a negative change of 6 million euros compared to the first half of 2011 mainly as a result of the contraction in advertising revenues;

_•

EBITDA relating to network operator activities is 22 million euros, improving 10 million euros over the first half of 2011. This result was influenced by the above increase in sales while operating costs are slightly higher (1 million euros, +7.9%) compared to the first half of 2011.

EBIT

The negative EBIT in the first half of 2012 increased by 26 million euros, compared to the first half 2011, to a negative 46 million euros and generally reflects the above-described change in EBITDA.

Olivetti

Effective January 1, 2012, the contact center business and resources of Advalso S.p.A. were sold to Telecontact Center S.p.A. (a subsidiary of Telecom Italia – Domestic Business unit), under the project aimed at unitary management – under the control of Telecontact Center – of the call center activities conducted in the Telecom Italia Group.

Moreover, on June 13, 2012, the shareholders’ meeting of the subsidiary Olivetti I-Jet S.p.A. approved the wind-up of the company.

(*)

Headcount at December 31, 2011.

Revenues

Revenues amount to 130 million euros in the first half of 2012, decreasing 31 million euros compared to the first six months of the prior year. Nevertheless, organic revenues calculated on a comparable scope of consolidation basis by excluding the above transfer to Telecontact Center S.p.A., decreased 19 million euros (-12.8%). If the revenues under the agreements with the Parent, Telecom Italia S.p.A., regulating brands and patents are also excluded, the reduction is 14 million euros (-9.7%).

The decrease in revenues is largely associated with lower sales for 8 million euros in the indirect channel in Italy (SME and professional offices), the channel most exposed to the current market crisis; lower sales for 6 million euros in the international sales channel (sales to extra EU and extra Latin America customers) due to a different monthly timing compared to the prior year of the printer supply contracts with customers in the Far East and the cancellation of product supply contracts with unsatisfactory margins; and lastly, lower product supply contracts with Telecom Italia for 6 million euros. Higher sales are reported in Italy for 3 million euros in the direct channel (large customers) and an increase in sales for 2 million euros is confirmed for South America, a market with strong growth such that expectations are for a strengthening of Olivetti’s presence there, in particular in Brazil.

EBITDA

The organic change in EBITDA is a positive 3 million euros (+12%) thanks to the reduction in costs for 4 million euros (lower fixed and labor costs) which more than offset the lower margins caused by a drop in sales. Organic growth was calculated by excluding the provision charge for restructuring expenses of 16.5 million euros, recorded following the start of the process for the wind-up of Olivetti I-Jet S.p.A., consistently with the process to reposition of the business unit’s activities in keeping with the shift towards a paperless world and mobile applications. The change in the scope of consolidation had no impact on EBITDA.

EBIT

The organic change in EBIT is a positive 2 million euros (+7.4%) and was impacted by the same variables that affected EBITDA performance. The first half was also hurt by higher amortization of 1 million euros compared to the same period of 2011, following the conferral against a future capital increase of brands and patents from Telecom Italia S.p.A. to Olivetti S.p.A. during the previous year.

Consolidated Financial Position and Cash Flows Performance

Non-current assets

_•

Goodwill: decreased 95 million euros, from 36,957 million euros at the end of 2011 to 36,862 million euros at June 30, 2012 due to the exchange rate effect of the Brazilian and Argentine companies.

_•

Other intangible assets:  decreased 205 million euros, from 8,600 million euros at the end of 2011 to 8,395 million euros at June 30, 2012, being the balance of the following:

–

additions (+917 million euros);

–

amortization charge for the period (-1,073 million euros);

–

capitalization of borrowing costs relating to the acquisition of the user rights for the LTE mobile telephony frequencies (+29 million euros); the interest rate used is between 5.2% and 6%;

–

disposals, exchange differences, reclassifications and other movements (for a net balance of -78 million euros).

_•

Tangible assets: decreased 410 million euros from 15,948 million euros at the end of 2011 to 15,538 million euros at June 30, 2012, being the balance of the following:

–

additions (+1,352 million euros);

–

depreciation charge for the period (-1,597 million euros);

–

disposals, exchange differences, reclassifications and other movements (for a net balance of -165 million euros).

Consolidated equity

Consolidated equity is 26,828 million euros (26,695 million euros at December 31, 2011), of which 22,918 million euros is attributable to owners of the Parent (22,791 million euros at December 31, 2011) and 3,910 million euros is attributable to Non-controlling interests (3,904 million euros at December 31, 2011).

In greater detail, the changes in equity are the following:

(*)

Includes the change in trade payables for amounts due to fixed asset suppliers.

In addition to what has already been described with reference to EBITDA, net financial debt during the first half of 2012 has been particularly impacted by the following items:

Capital expenditures on an accrual basis

The breakdown of capital expenditures by operating segment is as follows:

Capital expenditures total 2,269 million euros in the first half of 2012, increasing 232 million euros (+11.4%) compared to the first half of 2011. In particular:

_•

the Domestic Business Unit records a reduction of 19 million euros particularly because of less need to accept deliveries for new plant due to a slowdown and contraction of the commercial dynamics of the fixed-line access business;

_•

the Brazil Business Unit posts an increase of 218 million euros (including a negative exchange effect of 23 million euros) mainly for expenditures dedicated to the expansion of the network infrastructure;

_•

the Argentina Business Unit increased capital expenditures by 31 million euros. Besides the increase in subscriber acquisition costs, capitalized on binding contracts, investments were aimed at extending and upgrading broadband services in order to improve transmission capacity and increase access speeds offered to customers. Moreover, Telecom Personal invested mainly to increase capacity and extend the 3G network to sustain internet mobile growth.

Change in net operating working capital

The change during the period, from 1,381 million euros in the first half of 2011 to 1,329 million euros in the first half of 2012 generated a reduction in overall requirements of 52 million euros.

In the first half of 2012, certain disputes were settled with another operator which basically had a nil effect on the change in net operating working capital and on operating cash flows. This settlement led to a reduction in trade accounts receivable for 350 million euros, trade accounts payable for 432 million euros and a net reduction in other net operating receivables/payables for 83 million euros.

Sale of investments and other disposals flow

Sale of investments and other disposals flow totals 25 million euros in the first half of 2012 and principally refers to the collection of the installments on the sale of the investment in EtecSA Cuba which took place at the end of January 2011.

In the first half of 2011, the flow was equal to 392 million euros, of which 386 million euros was the amount already collected, net of the related incidental costs, on the sale of EtecSA Cuba.

Financial investments flow

Financial investments flow refer mainly to the payment of incidental costs and other payables in connection with the acquisition of investments during the last part of the year. In the first half of 2011, the amount was 156 million euros, mainly referring to the increase in the interest held in the Sofora - Telecom Argentina group.

Finance expenses, income taxes and other net non-operating requirements flow

Finance expenses, income taxes and other net non-operating requirements flow mainly includes the payment, during the first half of 2012, of net finance expenses (1,148 million euros) and income taxes (241 million euros), as well as the change in non-operating receivables and payables.

Net financial debt

Net financial debt is composed as follows:

The financial risk management policies of the Telecom Italia Group are directed towards diversifying market risks, hedging exchange rate risk in full and optimizing interest rate exposure by an appropriate diversification of the portfolio, which is also achieved by using carefully selected derivative financial instruments. Such instruments, it should be stressed, are not used for speculative purposes and all have an underlying.

Furthermore, in order to determine its exposure to interest rates, the Group defines an optimum composition for the fixed-rate and variable-rate debt structure and uses derivative financial instruments to achieve that prefixed composition. Taking into account the Group’s operating activities, the optimum mix of medium/long-term non-current financial liabilities has been established, on the basis of the nominal amount, in a range of 65% - 75% for the fixed-rate component and 25% - 35% for the variable-rate component.

In managing market risks, the Group has adopted a “Guideline policy for debt management using derivative instruments” and mainly uses IRS and CCIRS derivative financial instruments.

The volatility of interest rates and exchange rates, featuring prominently in the financial markets since the fourth quarter of 2008, has significantly impacted the fair value measurement of derivative positions and the related financial assets and liabilities. Having said this and in order to present a more realistic analysis of net financial debt, starting from the Half-year Financial Report at June 30, 2009, in addition to the usual indicator (renamed “Accounting net financial debt”), a new indicator was also presented denominated “Adjusted net financial debt” which excludes effects that are purely accounting and non-monetary in nature deriving from the fair value measurement of derivatives and related financial assets and liabilities. The measurement of derivative financial instruments, which also has the objective of pre-setting the exchange rate and the interest rate of future variable contractual flows, does not, in fact, require an actual financial settlement.

Sales of receivables to factoring companies

The sales of receivables to factoring companies finalized during the first half of 2012 resulted in a positive effect on net financial debt at June 30, 2012 of 882 million euros (1,334 million euros at December 31, 2011 and 815 million euros at June 30, 2011).

Gross financial debt

Bonds

Bonds at June 30, 2012 are recorded for 27,587 million euros (28,373 million euros at December 31, 2011). Their nominal repayment amount is 26,594 million euros, decreasing 381 million euros compared to December 31, 2011 (26,975 million euros).

With regard to the change in bonds during the first half of 2012, is as follows:

(1)

Net of buybacks by the Company for 27.5 million euros during 2011.

(2)

Net of buybacks by the Company for 210 million euros during 2011 and 2012.

As occurred in past years, during the first half of 2012, the Telecom Italia Group bought back bonds with the aim of:

_•

giving investors a further possibility of monetizing their positions;

_•

partially repaying some debt securities before maturity, increasing the overall return on the Group’s liquidity without inviting any additional risks.

In particular, the following bonds were repurchased:

(*)

Buybacks of the above bonds during 2011 amounted to 290 million euros (199 million euros on the bonds maturing April 2012 and 91 million euros on the bonds maturing January 2013). Therefore the total amount bought back is 382 million euros.

In July 2012, Telecom Italia S.p.A. proceeded, through a tender offer, to repurchase four of its bond issues, with maturities between March 2013 and May 2014, for an overall nominal amount of 777.3 million euros. Further details are provided in the Note “Events subsequent to June 30, 2012” to the half-year condensed consolidated financial statements at June 30, 2012 of the Telecom Italia Group.

In reference to the Telecom Italia S.p.A. 2002-2022 bonds, reserved for subscription by employees of the Group, at June 30, 2012, the nominal amount is equal to 241 million euros and decreased by 25 million euros compared to December 31, 2011 (266 million euros).

Revolving Credit Facility and term loan

The following table shows the composition and the drawdown of the committed credit lines available at June 30, 2012:

On May 24, 2012, Telecom Italia signed a new contract to extend half of the Revolving Credit Facility (RCF) of 8 billion euros expiring August 2014. The extension was obtained through a Forward Start Facility of 4 billion euros which will come into force in August 2014 (or at a prior date in the event Telecom Italia decides to early cancel the commitments under the current RCF 2014) and will expire in May 2017.

Telecom Italia also has a bilateral stand-by credit line expiring August 3, 2016 for 100 million euros from Banca Regionale Europea, drawn down for the full amount.

Maturities of financial liabilities and average cost of debt

The average maturity of non-current financial liabilities (including the portion of medium/long-term financial liabilities due within 12 months) is 7.24 years.

The average cost of the Group’s debt, considered as the cost for the period calculated on an annual basis and resulting from the ratio of debt-related expenses to average exposure, is about 5.4%.

For details of the maturities of financial liabilities in terms of expected nominal repayment amounts, as contractually agreed, reference should be made to the Notes “Financial liabilities (non-current and current)” and “Financial risk management” in the Telecom Italia Group first-half condensed consolidated financial statements at June 30, 2012.

Current financial assets and liquidity margin

The Telecom Italia Group’s available liquidity margin, calculated as the sum of Cash and cash equivalents and current Securities other than investments, amounts to 6,642 million euros at June 30,

2012 (7,721 million euros at December 31, 2011) which, together with its unused committed credit lines for 7 billion euros above, allows the Group to amply meet its repayment obligations over the next 24 months.

In particular:

Cash and cash equivalents come to 6,029 million euros (6,714 million euros at December 31, 2011). The different technical forms of investing available cash at June 30, 2012, which include Euro Commercial Paper for 109 million euros, can be analyzed as follows:

_•

Maturities: investments have a maximum maturity of three months;

_•

Counterpart risk: investments by the European companies are made with leading banking, financial and industrial institutions with high-credit-quality. Investments by the companies in South America are made with leading local counterparts;

_•

Country risk: investments are made mainly in major European financial markets.

Securities other than investments amount to 613 million euros (1,007 million euros at December 31, 2011). Such forms of investment represent alternatives to the investment of liquidity with the aim of raising the return. These consist of 445.5 million euros of Italian treasury bonds purchased by Telecom Italia S.p.A. (which, pursuant to Consob Communication DEM/11070007 of August 5, 2011, represent investments in “Sovereign debt securities” and have been made in accordance with the “Guideline for investments of liquidity using financial instruments” adopted by the Telecom Italia Group in July 2009) and also 167 million euros of bonds with different maturities, but all with an active market, that is, readily convertible into cash.

In the second quarter of 2012, adjusted net financial debt remained basically stable at the end of March level: the payment of dividends absorbed the positive effects from positive operating changes.

Half-year Condensed
Consolidated Financial Statements

The Half-year Financial Report at June 30, 2012 of the Telecom Italia Group has been prepared as set out in art. 154-ter (Financial Reports) of Legislative Decree 58/1998 (Consolidated Law on Finance – TUF), with subsequent amendments and additions, and drawn up in accordance with international accounting standards issued by the International Accounting Standards Board and endorsed by the European Union (denominated “IFRS”), as well as the measures enacted implementing art. 9 of Legislative Decree 38/2005.

The Half-year Financial Report includes:

_•

the Interim Management Report;

_•

the Half-year Condensed Consolidated Financial Statements;

_•

the Certification of the Half-year Condensed Consolidated Financial Statements pursuant to art. 81-ter of Consob Regulation 11971 dated May 14, 1999, with amendments and additions.

The accounting principles and consolidation principles adopted in the preparation of the half-year condensed consolidated financial statements at June 30, 2012 have been applied on a basis consistent with those adopted in the annual consolidated financial statements at December 31, 2011, to which reference can be made, except for new standards and interpretations adopted by the Group. Such new standards and interpretations did not have any impact on the half-year condensed consolidated financial statements at June 30, 2012 – with the exception of the early adoption and retrospective application of revised IAS 19 (Employee Benefits). Due to the application of this standard, the periods under comparison have been restated on a consistent basis. Further details are provided in the Note “Accounting policies” to the half-year condensed consolidated financial statements at June 30, 2012.

The Telecom Italia Group, in addition to the conventional financial performance measures established by IFRS, uses certain alternative performance measures in order to present a better understanding of the trend of operations and financial condition. Specifically, these alternative performance measures refer to: EBITDA, EBIT, the organic change in Revenues, EBITDA and EBIT, accounting net financial debt and adjusted net financial debt. Further details on such measures are presented under “Alternative performance measures”.

Moreover, the part entitled “Business Outlook for the Year 2012” contains forward-looking statements in relation to the Group’s intentions, beliefs or current expectations regarding financial performance and other aspects of the Group’s operations and strategies. Readers of the present Half-year Financial Report are reminded not to place undue reliance on forward-looking statements; actual results may differ significantly from forecasts owing to numerous factors, the majority of which is beyond the scope of the Group’s control.

Principal changes in the scope of consolidation

In the first half of 2012, there were no significant changes in the scope of consolidation. During 2011, the following changes had occurred:

_•

Tim Fiber – Brazil: on October 31, 2011, ownership interests were acquired for a 100% stake in the company Eletropaulo Telecomunicações Ltda and a 98.3% stake in AES Communications Rio de Janeiro S.A., both telecommunications infrastructure operators in the states of San Paolo and Rio de Janeiro, now renamed Tim Fiber SP and Tim Fiber RJ, respectively. The original ownership interest in Tim Fiber RJ was subsequently increased to 99.1% and the remaining 0.9% was the object of a tender offer which was concluded at the end of February 2012 and brought the percentage interest to 99.7%. The acquisitions were carried out through the subsidiary Tim Celular S.A.

_•

4GH group - Domestic: on July 27, 2011, the 4G Holding group entered the scope of consolidation (retail sale of telephony products) following the acquisition of 71% of the ordinary shares of 4G Holding S.p.A. which in turn holds 100% of 4G Retail S.r.l.

_•

Loquendo – Domestic: on September 30, 2011, Loquendo S.p.A. was sold and consequently exited the scope of consolidation.

Separate Consolidated Income Statements

Consolidated Statements of Comprehensive Income

In accordance with IAS 1 (Presentation of Financial Statements), the following statements of comprehensive income include the profit (loss) for the period as shown in the separate consolidated income statements and all non-owner changes in equity.

Consolidated Statements of Financial Position

(millions of euros)		6/30/2012 (a)	12/31/2011 (b)	Change (a-b)
Assets
Non-current assets
Intangible assets
Goodwill		36,862	36,957	(95)
Other intangible assets		8,395	8,600	(205)
		45,257	45,557	(300)
Tangible assets
Property, plant and equipment owned		14,492	14,854	(362)
Assets held under finance leases		1,046	1,094	(48)
		15,538	15,948	(410)
Other non-current assets
Investments in associates and joint ventures accounted for using the equity method		67	47	20
Other investments		35	38	(3)
Non-current financial assets		3,218	2,949	269
Miscellaneous receivables and other non-current assets		1,241	1,128	113
Deferred tax assets		1,021	1,637	(616)
		5,582	5,799	(217)
Total Non-current assets	(a)	66,377	67,304	(927)
Current assets
Inventories		504	447	57
Trade and miscellaneous receivables and other current assets		7,768	7,770	(2)
Current income tax receivables		25	155	(130)
Current financial assets
Securities other than investments, financial receivables and other current financial assets		977	1,469	(492)
Cash and cash equivalents		6,029	6,714	(685)
		7,006	8,183	(1,177)
Current assets sub-total		15,303	16,555	(1,252)
Discontinued operations/Non-current assets held for sale
of a financial nature		-	-	-
of a non-financial nature		-	-	-
Total Current assets	(b)	15,303	16,555	(1,252)
Total Assets	(a+b)	81,680	83,859	(2,179)

(millions of euros)		6/30/2012 (a)	12/31/2011 (b)	Change (a-b)
Equity and Liabilities
Equity
Equity attributable to owners of the Parent		22,918	22,791	127
Equity attributable to  non-controlling interests		3,910	3,904	6
Total Equity	(c)	26,828	26,695	133
Non-current liabilities
Non-current financial liabilities		35,448	35,860	(412)
Employee benefits		870	850	20
Deferred tax liabilities		1,068	1,056	12
Provisions		843	831	12
Miscellaneous payables and other non-current liabilities		1,128	1,156	(28)
Total Non-current liabilities	(d)	39,357	39,753	(396)
Current liabilities
Current financial liabilities		5,561	6,091	(530)
Trade and miscellaneous payables and other current liabilities		9,784	10,984	(1,200)
Current income tax payables		150	336	(186)
Current liabilities sub-total		15,495	17,411	(1,916)
Liabilities directly associated with discontinued operations/Non-current assets held for sale
of a financial nature		-	-	-
of a non-financial nature		-	-	-
Total Current Liabilities	(e)	15,495	17,411	(1,916)
Total Liabilities	(f=d+e)	54,852	57,164	(2,312)
Total Equity and Liabilities	(c+f)	81,680	83,859	(2,179)

Consolidated Statements of Cash Flows

(millions of euros)		1st Half 2012	1st Half 2011 (Restated)
Cash flows from operating activities:
Profit (loss) from continuing operations		1,460	(1,810)
Adjustments for:
Depreciation and amortization		2,670	2,834
Impairment losses (reversals) on non-current assets (including investments)		1	3,189
Net change in deferred tax assets and liabilities		630	504
Losses (gains) realized on disposals of non-current assets (including investments)		(16)	(11)
Share of losses (profits) of associates and joint ventures accounted for using the equity method		4	12
Change in employee benefits		(6)	(34)
Change in inventories		(57)	(73)
Change in trade receivables and net amounts due from customers on construction contracts		235	(278)
Change in trade payables		(695)	(258)
Net change in current income tax receivables/payables		(54)	(53)
Net change in miscellaneous receivables/payables and other assets/liabilities		(193)	19
Cash flows from (used in) operating activities	(a)	3,979	4,041
Cash flows from investing activities:
Purchase of intangible assets on an accrual basis		(917)	(853)
Purchase of tangible assets on an accrual basis		(1,352)	(1,184)
Total purchase of intangible and tangible assets on an accrual basis		(2,269)	(2,037)
Change in amounts due to fixed asset suppliers		(641)	(585)
Total purchase of intangible and tangible assets on a cash basis		(2,910)	(2,622)
Acquisition of control of subsidiaries or other businesses, net of cash acquired		(7)	-
Acquisitions/disposals of other investments		-	(1)
Change in financial receivables and other financial assets		236	516
Proceeds from sale that result in a loss of control of subsidiaries or other businesses,  net of cash disposed of		(5)	(2)
Proceeds from sale/repayment of intangible, tangible and other non-current assets		30	394
Cash flows from (used in) investing activities	(b)	(2,656)	(1,715)
Cash flows from financing activities:
Change in current financial liabilities and other		(100)	(874)
Proceeds from non-current financial liabilities (including current portion)		1,846	2,058
Repayments of non-current financial liabilities (including current portion)		(2,687)	(3,514)
Share capital proceeds/reimbursements (including subsidiaries)		(2)	-
Dividends paid		(1,027)	(1,325)
Changes in ownership interests in consolidated subsidiaries		-	(155)
Cash flows from (used in) financing activities	(c)	(1,970)	(3,810)
Cash flows from (used in) Discontinued operations/Non-current assets held for sale	(d)	-	-
Aggregate cash flows	(e=a+b+c+d)	(647)	(1,484)
Net cash and cash equivalents at beginning of the period	(f)	6,670	5,282
Net foreign exchange differences on net cash and cash equivalents	(g)	(28)	(54)
Net cash and cash equivalents at end of the period	(h=e+f+g)	5,995	3,744

Additional Cash Flow Information

(millions of euros)	1st Half  2012	1st Half  2011 (Restated)
Income taxes (paid)/received	(241)	(208)
Interest expense paid	(1,875)	(1,792)
Interest income received	727	632
Dividends received	-	1

Analysis of Net Cash and Cash Equivalents

(millions of euros)	1st Half  2012	1st Half  2011 (Restated)
Net cash and cash equivalents at beginning of the period:
Cash and cash equivalents - from continuing operations	6,714	5,526
Bank overdrafts repayable on demand – from continuing operations	(44)	(244)
Cash and cash equivalents - from Discontinued operations/Non-current assets held for sale	-	-
Bank overdrafts repayable on demand – from Discontinued operations/Non-current assets held for sale	-	-
	6,670	5,282
Net cash and cash equivalents at end of the period:
Cash and cash equivalents - from continuing operations	6,029	3,760
Bank overdrafts repayable on demand – from continuing operations	(34)	(16)
Cash and cash equivalents - from Discontinued operations/Non-current assets held for sale	-	-
Bank overdrafts repayable on demand – from Discontinued operations/Non-current assets held for sale	-	-
	5,995	3,744

Analysis of the main consolidated financial and operating items

Acquisition of goods and services

Employee benefits expenses

Average headcount of the salaried workforce

 (1)

Includes headcount with temp work contracts: 55 average headcount in the first half of 2012 (53 in Italy and 2 outside Italy). In the first half of 2011, the average headcount was 97 (79 in Italy and 18 outside Italy).

Headcount at period-end

(1) Includes headcount with temp work contracts: 64 at June 30, 2012 and 42 at December 31, 2011.

Headcount at period-end – Breakdown by Business Unit

Other income

Other operating expenses

Reconciliation between reported data and organic data

EBITDA – reconciliation of organic data

EBIT – reconciliation of organic data