WIND TRE GROUP
Consolidated interim financial statements as of and for the six-month period ended
June 30, 2017
REVIEW REPORT ON CONSOLIDATED INTERIM FINANCIAL STATEMENTS
To the Board of Directors of Wind Tre SpA
Foreword
We have reviewed the accompanying consolidated interim financial statements of Wind Tre SpA and its subsidiaries (the Wind Tre Group) as of 30 June 2017, comprising the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity and related notes. The directors of Wind Tre SpA are responsible for the preparation of the consolidated interim financial statements in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union. Our responsibility is to express a conclusion on these consolidated interim financial statements based on our review.
Scope of review
We conducted our work in accordance with the International Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the entity”.A review of consolidated interim financial statements consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than a full-scope audit conducted in accordance with International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated interim financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial statements of the Wind Tre Group as of 30 June 2017 are not prepared, in all material respects, in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union. Emphasis of matter
As an emphasis of matter, we draw your attention to the following:
as described in the introductions to the Notes (note 1), the effects of the transaction which led to the combination of the businesses of the former Wind and H3G operators in the Italian market have been reflected in the consolidated financial statements of the previous period since 31 October 2016 (the transaction date); as a result the comparative income statement data as of and for the period ended 30 June 2016 cannot be immediately compared with the correspondent income statement data as of and for the period ended 30 June 2017;
transactions exist with the parent company and with other entities belonging to the CK Hutchison Holdings Ltd. and Vimpelcom Ltd groups, the most significant of which are disclosed in the Note 25 – Related party transactions.
In our opinion the above emphasis of matters do not lead to a qualified review report.
Other aspects
The consolidated interim financial statements for the period ended 30 June 2016 have not been subject to audit or review.
Milan, 2 August 2017
PricewaterhouseCoopers SpA
Signed by
Andrea Alessandri (Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers
2 of 2
WIND TRE GROUP
Report on operations
at June 30, 2017
CONTENTS
THE WIND TRE GROUP ...... 3
COMPOSITION OF THE CORPORATE BODIES (B OARD OF DIRECTORS AND BOARD OF STATUTORY AUDITORS ) OF
WIND TRE SPA ...... 5
WIND TRE GROUP HIGHLIGHTS AT JUNE 30, 2017 ...... 6
THE ITALIAN TELECOMMUNICATIONS SERVICES MARKET ...... 8
COMMERCIAL AND OPERATING PERFORMANCE ...... 11
NETWORK ...... 28
HUMAN RESOURCES ...... 32
REGULATORY FRAMEWORK AT JUNE 30, 2017 ...... 35
OUTLOOK ...... 43
Report on operations 2 at June 30, 2017 THE WIND TRE GROUP
Wind Tre SpA (hereafter referred to as Wind Tre or the Company and together with its subsidiaries the Group or the Wind Tre Group) is a joint stock company having registered office in Via Leonardo da Vinci, 1, Trezzano sul Naviglio, Milan, Italy. Wind Tre is a leading operator in the fixed and mobile telecommunications and data services sector in Italy and is strongly oriented towards providing in-mobility data communication services and internet mobile access services in broadband and wireless mode. In addition, it accompanies its offer with a wide range of content, applications and multimedia support. Wind Tre is also active on the digital TV market.
These consolidated financial statements for the half year ended June 30, 2017 were approved by the Company’s Board of Directors on August 1, 2017. At the date of approval of these consolidated financial statements Wind Tre is controlled by Wind Tre Italia SpA (hereafter referred to as Wind Tre Italia) which in turn is controlled by the Luxembourg based entity VIP-CKH Luxembourg Sàrl (hereafter referred to as VIP-CKH or the Joint Venture). VIP- CKH is a joint venture whose share capital is owned as to 50% by CK Hutchison Holdings Limited (hereafter referred to as CK Hutchison) and by Veon Ltd. (formerly VimpelCom Ltd. and hereafter referred to as Veon), which jointly own and operate their respective telecommunications businesses in Italy. CK Hutchison is a limited liability company incorporated in the Cayman Islands and registered in the Register of Companies of the Cayman Islands (no. MC- 294.571) whose shares are listed on the Hong Kong stock exchange and whose principal place of business is located at 12th Floor, Cheung Kong Center, 2 Queen’s Road Central, Hong Kong. Veon is incorporated under Bermuda law, domiciled in Claude Debussylaan 88, 1082 MD Amsterdam, Netherlands and listed on NASDAQ.
The economic data for the first half of 2017 are not immediately comparable with those of the same period of the previous year because they refer only to the financial statements of the former H3G Group, which did not previously draw up interim financial statements under IAS 34; accordingly, the comparative figures have not been subject to review by the audit firm.
A proforma income statement is included in this Report on operations to simulate the effects of the merger from January 1, 2016 and allow the comparative commentary of some data.
On the formation of the Joint Venture at the end of last year the respective holding and operating companies of the telecommunications businesses in Italy of CK Hutchison and VimpelCom, namely Wind Tre Italia and WIND Acquisition Holdings Finance SpA, and Wind Tre and WIND Telecomunicazioni SpA, and all their subsidiaries became subsidiaries of the Joint Venture, and the Joint Venture became the new parent company of the Group holding the telecommunications businesses in Italy of CK Hutchison and VimpelCom. WIND Acquisition Holdings Finance SpA and WIND Telecomunicazioni SpA have been merged.
The following diagram sets out the structure of the Wind Tre Group at June 30, 2017.
Report on operations 3 at June 30, 2017
The entry into the market of Iliad, the fourth infrastructure mobile operator, required by the European Commission as a mandatory condition for approving the merger between Wind Telecomunicazioni SpA and H3G SpA which took place at the end of last year, is planned for the end of 2017 or the beginning of 2018. In the fixed-line market the progressive slowdown in value contraction continues following the dissemination of new generation ultra-fast fiber connections and the overall improvement in broadband services. In addition emphasis continues to be given to increasing efficiency and obtaining a further optimization of the cost structure as part of the integration program that followed the merger of the two operating companies at the end of 2016.
Report on operations 4 at June 30, 2017 COMPOSITION OF THE CORPORATE BODIES (B OARD OF DIRECTORS AND BOARD OF STATUTORY AUDITORS ) OF WIND TRE SPA
Board of Directors (1)
Chairman Christian Nicolas Roger Salbaing
Directors Jeffrey Alan Hedberg, Managing Director
Kjell Morten Johnsen
Board of Statutory Auditors (2)
Chairman Giancarlo Russo Corvace
Standing auditor Marcello Romano
Standing auditor Luca Occhetta
Substitute auditor Roberto Colussi
Substitute auditor Maurizio Paternò di Montecupo
(1) The shareholders’ meeting of the Company (formerly H3G SpA) convened on November 5, 2016 appointed the Board of Directors until the date of the shareholders’ meeting that approves the Company’s financial statements for the year ending December 31, 2018. On June 22, 2017 the shareholders’ meeting of the Company appointed Mr. Jeffrey Alan Hedberg as a board member to replace the Managing Director, Mr. Maximo Ibarra, who had resigned. At same date the Board of Directors of the Company appointed Mr. Hedberg as Managing Director of the Company and granted him powers to manage the Company. The Managing Director will hold office until the term of the current Board of Directors comes to an end.
(2) The shareholders’ meeting of the Company (formerly H3G SpA) convened on November 5, 2016 appointed the Board of Statutory Auditors until the date of the shareholders’ meeting that approves the Company’s financial statements for the year ending December 31, 2018.
Report on operations 5 at June 30, 2017 WIND TRE GROUP HIGHLIGHTS AT JUNE 30, 2017
The operating and financial data reported below are taken from the Group’s consolidated financial statements as of June 30, 2017, prepared in accordance with the IFRS endorsed by the European Union.
Below are the main indicators of the Wind Tre Group on June 30, 2017, with a comparison with the corresponding proforma figures for 2016.
At June 30, 201 7 At June 30, 201 6 Operational data (proforma)
Mobile customers (millions of SIM Cards) 30.3 31.3 Mobile ARPU (euro/month) 11.1 11.1 Fixed-line customers (millions of lines) 2.7 2.8 Fixed-line ARPU (euro/month) 27.8 27.1 Mobile network coverage (1) 99.9% 99.9% Employees (headcount) 8,399 9,625 (1) As a percentage of the Italian population.
Income statement figures (millions of euro) 201 7 201 6 6 months 6 months (proforma) Revenue 3,083 3,078 EBITDA (1) 900 964 Operating income (721) 188 Net finance expense (285) (175) Loss for the period attributable to the owners of the parent (1,050) (35) (1) Operating income before depreciation and amortization, reversal of impairment losses/impairment losses on non-current assets and gains/losses on disposal of non-current assets
Statement of financial position figures At June 30, 201 7 At December 31, 201 6 (millions of euro)
Total assets 19,210 20,887 Equity attributable to owners of the parent 3,165 4,204 non-controlling interests - - Total liabilities 16,045 16,683 Net debt 9,924 9,904 Total revenue in the six months ended June 30, 2017 reached €3,083 million, representing a rise of 0.2% over the same period of the previous year.
Telephone services contracted slightly, with a decrease of around 1% in the first half of 2017 compared to 2016, thanks to essential stability in the mobile customer base and an increase in the internet market for mobile phones.
EBITDA amounted to €900 million in the first six months of 2017, a decrease of €64 million compared to the corresponding period of 2016, while there was an operating loss of €721 million, higher by €909 million over the first six months of 2016.
Net finance expense for the first six months of 2017 amounted to €285 million, an increase of €110 million over the first six months of 2016.
Report on operations 6 at June 30, 2017 There was a loss for the period of €1,050 million for the first six months of 2017 compared to a loss of €35 million for the first six months of 2016.
Net debt totaled €9,924 million at June 30, 2017, an increase of €20 million over December 31, 2016. The following table sets out the components of net debt at June 30, 2017 and the changes which have occurred since December 31, 2016.
At June 30, At December 31, (millions of euro) 2017 2016 Change
FINANCIAL LIABILITIES
Non-current financial liabilities 12,476 12,838 (362) Bonds 9,907 10,293 (386) Financing from shareholders 1,740 1,717 23 Financing from banks 682 677 5 Financing from other lenders 127 128 (1) Derivative financial instruments 20 23 (3)
Current financial liabilities 166 176 (10) Bonds 154 160 (6) Financing from banks 8 8 - Financing from other lenders 1 1 - Derivative financial instruments 3 7 (4)
TOTAL GROSS DEBT (A) 12,642 13,014 (372)
FINANCIAL ASSETS
Non-current financial assets (2,128) (2,486) 358 Derivative financial instruments (1,054) (1,460) 406 Financial receivables (1,074) (1,026) (48)
Current financial assets (20) (21) 1 Financial receivables (20) (21) 1
Cash and cash equivalents (570) (603) 33
TOTAL FINANCIAL ASSETS (B) (2,718) (3,110) 392 NET DEBT (A-B) 9,924 9,904 20
Report on operations 7 at June 30, 2017 THE ITALIAN TELECOMMUNICATIONS SERVICES MARKET
Industry overview
Italy is Europe’s fourth largest telecommunications services market by revenue. The value of the Italian mobile market for 2017 is estimated in approximately €14 billion, confirming the pick-up already noted in 2016 due to growth in internet services and contents services. The Italian fixed-line market (voice and VAS) for 2017 is estimated to be worth approximately €5 billion, a decrease over 2016 mainly as the result of a drop in voice traffic revenues. The value of the fixed internet access industry for 2017 is estimated to be approximately €5.0 billion with the broadband segment accounting for the whole market. In 2017 Italian operators continued developing their offers of bundled voice and data services with increasingly enriched traffic packages, the addition of multimedia streaming services and fixed network connectivity. In June all the main network and virtual operators adhered to European regulations eliminating roaming charges. Offers tended to be differentiated by type of user, with tariffs including unlimited traffic, large data packages for ultra-broadband networks and value added services and offers for a less demanding population of users, with charges concentrated on voice traffic or internet. AGCOM determined that the minimum frequency for mobile offers must be 28 days, while offers that also involve the fixed-line network must have at least a monthly frequency. The competitive arena continues to evolve: following the merger of Wind and 3 Italia, Kena Mobile made its entry, a virtual operator owned by the Telecom Italia group, while the fourth operator, the Iliad network, is scheduled to arrive by the end of 2017 or at the beginning of 2018. In addition, in the MVNO segment a number of operators revised their offer structure in the second quarter. Mobile navigation on the 4G network is the cornerstone of operators’ offers and strategies for development. Quality, navigation speed and LTE network coverage continue to be at the heart of market players’ communications and towards the end of the first half year several operators launched offers with navigation on 4G+ / 4.5G networks. In certain cases options were launched that permit unlimited data traffic for certain types of application (e.g. video or audio). At the beginning of April operators announced the availability of new smartphone models in their product portfolios, and for the whole of the six-month period devices remained an integral part of the offer bundles and tariff promotions with discounts and reductions given. There were no particular changes in the business market during the six months although new offers of Machine 2 Machine services were launched and business support solutions were introduced that exploit the 4.5G and 5G networks. The offers addressed by leading operators to the consumer market developed with the aim of acquiring new customers, providing tariffs including bundles increasingly enhanced with voice-data traffic, triple and quadruple play services (for the fixed-line network and with streamed contents) and initiatives designed to win back old customers. Considerable attention was also placed on high-range devices that integrate the bundles at convenient prices and reduced monthly charges. In addition, a great deal of importance was placed on loyalty initiatives for the customer base, in particular through the use of discounts and gifts associated with certain feast days and other important moments of the year. Innovative services are always to be found in the offers made by the main operators to encourage the use of the large volumes of data included in the packets. More specifically, in the consumer world the focus remains on audio and video streaming while in the business sector the attention is focused on business digitalization services and the Internet of Things.
Report on operations 8 at June 30, 2017 The key partnerships entered into by operators in the first quarter of 2017 regarded the testing of 5G with start up to take place by the end of the year, while new initiatives were launched in the second quarter for high quality audio streaming on the 4G network and agreements for the transmission of the 2018 and 2020 Olympic games. In the first half of 2017 the market for fixed network telecommunications services continued to evolve with quadruple play offers, with digital video streaming contents for consumer customers and solutions supporting the digitalization of business processes being added to fixed and mobile network convergent services with voice and internet. All operators continued to propose optic fiber connections, continuing with the extension of the ultra-broadband network by way of direct investments and partnerships. The six months were characterized by several promotional initiatives for the consumer market with bundles distinguished by discounted monthly charges and activation fees, which include increasing speed connectivity, TV contents and convergence with mobile services, to which were added smartphones, television sets and (in one case) also fridges, payable on an instalment basis by credit card or bank transfer. Promotions of offers for business customers were essentially directed at sole traders and SMEs, with converging fixed and mobile network offers, assistance services, video-surveillance systems and Wi-Fi services made available to customers. In addition a number of partnerships were entered into to develop new projects in conjunction with the public administration (PA). The contract for the fifth edition of the PA tender for fixed telephony worth a total of €925 million was awarded at the end of March.
Mobile telecommunications
The Italian mobile telephone market is the fourth largest European market by revenue after the United Kingdom, Germany and France. There are three infrastructure operators in Italy which offer mobile telephone services to the approximately 83 million SIMs registered at June 30, 2017, equal to a penetration rate of approximately 137% of the Italian population. The penetration figure is distorted by the widespread use of more than one SIM card by many customers. It is estimated that about 85.4% of the customer base uses prepaid cards. 1 Excluding MVNOs, at June 30, 2017 Wind Tre had an estimated market share of 36.5% while Telecom Italia and Vodafone had 36.1% and 27.4%.
Fixed telephone services market
Voice The Italian fixed-line telephone services market is the fourth largest by value in Europe after Germany, the United Kingdom and France. Telecom Italia dominates this market even though it was liberalized in 1988. In addition to Telecom Italia and Wind Tre, the main players are Fastweb, Vodafone/Teletu, Tiscali and BT Italia.
Internet At June 30, 2017 access to internet and broadband had reached a penetration of 78% of the total of fixed lines in Italy. Broadband services in Italy have grown swiftly over the past few years to reach approximately 15.3 million connections or 25% of the country’s population. Despite the recent considerable rise in broadband, Italy still lags behind other European countries. In June 2017 coverage by the ultra-broadband networks in Italy had reached 65%
1 Data from AGCOM (Osservatorio sulle Comunicazioni – 2Q 2017)
Report on operations 9 at June 30, 2017 of the population, with over 2,000 urban centers able to receive the new services. In addition, private operators’ plans envisage that this coverage will reach 99% by 2019.
Report on operations 10 at June 30, 2017
COMMERCIAL AND OPERATING PERFORMANCE
Mobile Telephony
At June 30, 2017, Wind Tre had 30.3 million mobile telephone customers a decrease over June 30, 2016, and a market share (calculated by excluding MVNO operators) of 36.5%.
The following table shows the main indicators in the mobile telephone market.
Mobile telephony 2017 2016 6 M 6 M (proforma) Change Customer base (millions of SIM Cards) (1) 30.3 31.3 (3.4)% Revenue (millions of euro) (2) 2,450.5 2,473.8 (0.9)% Voice traffic (billions of minutes) (3) 49.8 52.6 (5.2)% ARPU (euro/month) 11.1 11.1 - % ARPU Data/Total ARPU 51.9% 48.4% (1) Total Customer Base: Voice+Data; Not included the M2M (2) Include TLC Revenues + CPE Revenues (3) Voice Traffic Outgoing + Incoming off net + Incoming from ITZ
Consumer offer The WIND brand The WIND brand is present on the telecommunications market with a positioning careful to provide a response to the needs of the whole family through a wide range of offers that propose the historical values of clarity, transparency and simplicity. In the first half of the year WIND distinguished itself on the market as the first brand to make the Easy Europe offer available to all of its rechargeable, subscription and small trader customers: more convenient for calling, sending messages and navigating within the countries of the European Union. Customers can also use their national offers when on holiday or travelling on business at no extra cost. WIND looks after its customers, they change their habits, with an average mobile gigabyte usage that has increased by 20%. Since April new solutions are available for navigating in mobility with the only data offers with enriched contents and these are even more competitive in the three new gigabyte denominations starting from €8. The solutions proposed for the summer are part of the orange brand’s DNA: two new hashtags have been created #thewindunlimited and #noextracosti . The All Inclusive offer has become ‘ Unlimited ’ with unlimited minutes to everyone, 500 SMSs and more full speed gigabytes for €12. The important change for all customers is ‘Internet Illimitato’ : customers can navigate on all the main social networks at a speed of 128 kbps when the gigabytes in their offer are used up. No halts in navigation and unlimited internet. For anyone looking for a solely voice offer, there are also unlimited minutes with NOI Unlimited, the offer which for only €9 provides unlimited calls to everyone. Specific offers are available for the under 30 and over 60 age group targets and for anyone who activates a fixed-line Infostrada service. The #noextracosti hashtag embodies the value of WIND, whose aim is the transparency of its offer: All Inclusive Unlimited and Noi Tutti Unlimited are renewed every month and have the SMS MY WIND service and the hotspot included. Customers may access the notification service to see who has been looking for them and can connect to other Wi-Fi devices with the gigabytes in their offer at no extra cost.
Report on operations 11 at June 30, 2017 The usage of video from mobiles has increased by 47% over 2016 and with its summer offers WIND is presenting Summer Card Now TV Edition for navigating in mobility with 20 gigabytes full speed and for watching the best TV series and shows while on holiday. In addition all WIND stores have the best smartphones/tablets available starting from €1 with the possibility of paying in easy instalments. From June all customers who buy a new smartphone or tablet with Telefono Incluso add 2 gigabytes to their offer. Using its e-commerce website WIND provides customers with the possibility of purchasing rechargeable SIM cards through exclusive offers, with the convenience of receiving everything at home. Exclusive offers are also to be found on Amazon. In the second quarter of 2017 WIND continued to strengthen its ‘closer’ positioning for non-Italians living in this country. The Call Your Country offer portfolio was renewed and enhanced with the new Call Your Country Super which for the same price increases the basket of gigabytes and international minutes. The new Call Your Country Super provides customers with 5 gigabytes, 100 minutes for calling abroad (49 countries) and in Italy unlimited calls towards WIND and 300 minutes towards everyone at a total price of €10 every 4 weeks, instead of 1 gigabyte, unlimited calls towards WIND and 50 minutes towards everyone available at a price of €2.5 a week. In addition, starting from the beginning of the year each single month is dedicated to a specific community, with customized offers, activities and communication tools: with a view to “community marketing” the most important feast days have been identified for each community and for each of these ad hoc offers have been launched that are only available to new customers coming from the country to which the specific feast day relates. The “community marketing” project was further enhanced in March with the launch of the parametric “ethnic” offers thanks to which several targeted offers can be promoted at the same time on the basis of customers’ needs: each parametric offer consists of a specific bundle of national and international minutes and gigabytes for each community. The “community marketing” tool has enabled WIND to add value to the “Call Your Country” brand which is at the top of the list for non-Italian customers and increases the competitiveness of the brand on the market. The “community marketing” project runs alongside the “territorial marketing” project which dedicates exclusive offers to sales points with a significant percentage of activations by non-Italian customers, offers such as Call Your Country Gold (300 minutes to everyone, 300 minutes to outside Italy, unlimited calls to WIND and 4GB) and the promo 20 Giga Powered (+20 gigabyte each year free of charge).
With the aim of satisfying the growing need for data traffic arriving from non-Italian users and of responding to the increasingly aggressive moves being made by its competitors, WIND has renewed its Giga International offer, reducing the cost to only €9 (it was previously €16.95) for 4 weeks and keeping the gigabytes offered unchanged (20 gigabytes of internet every 4 weeks). Customer loyalty continues to be increasingly at the heart of the Company’s objectives and to reward this WIND provides the Giga Bonus option free of charge; for customers spending more than €10 in international traffic in 30 days, 1 gigabyte is given as a bonus to be used in the following 30 days. In addition, customers with the Call Your Country offer can subscribe to the “telephone included” offer to purchase a smartphone by paying small monthly instalments or dedicated models at extremely beneficial prices. After the new initiatives seen in March 2017 the success continues of the subscription offers for consumer and professional customers. The positive trend in activations confirms the welcome given by the market to Wind Magnum, a simple but complete offer with data sharing as its distinguishing feature. During the June canvassing Wind Magnum doubled the gigabytes included in its 5 gigabyte and 10 gigabyte versions (launched in March), without though increasing the price, therefore making the offer more appealing: unlimited minutes and 10 gigabytes for €14.90/4 weeks and 20 gigabytes and €19.90/4 weeks; in addition, the Wind Magnum
Report on operations 12 at June 30, 2017 version with 30 gigabytes of internet aimed at customers with a greater need for data traffic has also been renewed at the more competitive price of €24.90. The benefit of doubled gigabytes at no extra cost had already been extended to existing customers, activated during the March canvassing. The pillars of the offer remain unchanged and therefore the possibility of adding up to 3 family SIM cards, the offer for the family that contains 500 minutes, 500 SMSs and 2 gigabytes for only €5 for 4 weeks; of having a device from the Home and Life range included, with no advance payments and no instalment charges, which during the Wind Music Awards event was the Skullcandy Wireless headphone, and the possibility of subscribing to the beneficial convergent offer, Wind Magnum Home edition, with unlimited minutes and 10 gigabytes for mobiles and for fixed- lines unlimited ADSL/fiber and calls to fixed-line and mobile numbers at €24.95 for the first year. As confirmation of its versatility WIND has also doubled the number of gigabytes in its offer to sole trader professionals, positioning Wind Magnum Pro in this way: unlimited minutes and 20 gigabytes for €19.90 + VAT and the version with 30 gigabytes at only €24.90. The Magnum Company plan continues to provide customers with the possibility of linking up to 3 additional SIM cards to Wind Magnum Pro (500 minutes, 500 SMSs and 2 gigabytes for only €5 + VAT). Sole trader customers who need to have a large number of gigabytes at their disposal for their business can choose between the new internet plans with 10, 20 or 30 gigabytes. Exclusive discounts on top smartphones are also available with Wind Magnum Pro. The increasing need for convergence in the business segment is satisfied by WIND with its Magnum Office Edition, the integrated fixed and mobile offer with unlimited minutes and 20 gigabytes for mobiles and for fixed lines unlimited ADSL/fiber and calls to fixed and mobile numbers for €29.95 (+ VAT) for the first year. After using all their gigabytes, customers with the Wind Magnum and Wind Magnum Pro offers and subscription internet plans can continue to navigate at a speed of 128 kbps. The “Night Unlimited” feature continues for the internet plans; this provides customers with the possibility of navigating between midnight and 7:59 a.m. without using the gigabytes in their offer.
The “3” brand In the second quarter of 2017 the “3” brand continued the decisive steps begun in January to make its commercial offer increasingly simple, transparent and innovative and to confirm its position on the market as a leading operator in satisfying the needs of technological customers that have a high level of data traffic usage and place constant emphasis on value for money. In this respect “3” launched the new Play option in the prepaid segment in April 2017, a rechargeable no frills offer without restrictions, with minutes and gigabytes included, dedicated to all customers in search of a convenient offer at only €8 but with all that is needed to remain connected. For customers wishing to have the comfort and tranquility of “all inclusive” offers, with minutes, SMSs and gigabytes, “3” continued to make the All-in family available with the Start, Prime and Master offers at even more convenient prices (Start: 4 gigabytes for €9; Prime: 8 gigabytes for €14; Master: 30 gigabytes for €30). And for all Infostrada and Casa3 subscription customers the All-in offers were sold with a reduction in the monthly charge. As far as offers charged to bank accounts or credit cards are concerned, geared towards the more demanding customer who wants to be free of topping up concerns, since April “3” has been proposing All-in Prime with 8 GB for €9 (instead of €14 for the rechargeable version). On the other hand All-in Start with a charge to a bank account or credit card was available with the “Special” promo for €5, combined with Casa3 Special.
Report on operations 13 at June 30, 2017 In June the “3” brand proposed a new evolution of its commercial offer. In this respect starting June 21, although keeping the same monthly charge as in previous months the brand developed the All-in Start, Prime and Master offers to consolidate the relationship of transparency and convenience it has with its customers. In this way the contractual commitment was reduced from 30 to 12 months and the gigabyte and SMS ceilings all became monthly while the minutes included remain unlimited. “3 “confirmed its attention to innovation and was the first on the Italian market to launch Giga Bank, a feature included in every All-in offer, thanks to which the gigabytes not used in any month are not lost but can be carried forward and used until the end of the following month. The new All-in offers provide unlimited minutes and 500 SMSs; the price depends on the gigabytes that customers choose: All-in Start includes 5 gigabytes and has a monthly cost of €9, All-in Prime offers 15 gigabytes for €14 a month and All-in Master includes up to 30 gigabytes for €19. As regards the untied rechargeable sector the new Play Young offer has been added to the Play option, targeted at the millennials (customers under 30) and what they love doing. At a cost of only €6 (€9 from January 2018) charged against the residual credit, Play Young offers 300 minutes and 6 gigabytes with Music by 3 included as the means by which customers can listen to their own music without using up the gigabytes in the offer and without advertising interruptions, and the Card Blu Grand Cinema 3 that can be used between Monday and Friday with 2 cinema tickets for the price of 1. Regarding offers with a telephone, “3” continued with its “Giga Days” promotion with the aim of attracting internet- driven customers, which when automatically activated for all customers until 20 June at a one-off charge of only €10 included 10 gigabytes to be used within two months, in addition to the amount already included in the chosen tariff, as a means of fully testing the benefits of 4G smartphones on 3’s 4G LTE fast network. “3” confirmed its vocation as a technological leader by launching Galaxy S8 and S8+, Samsung’s new flagship with infinity display, by including the Galaxy S8+ with the Free offers at the same price as the Galaxy S8. Free, available in both a rechargeable and subscription version, is the offer created by “3” for people mad about technology who always want to keep up with the times and have the latest technological finding available, with an all-inclusive offer, with no worries, which includes a Top Smartphone: smartphones can then be interchanged every 12 months with those available. The smartphones currently available with Free are the iPhone7 and the iPhone7 Plus, the Galaxy S8 and S8+, the Huawei P10 Plus and the LG G6. Thanks to a partnership with Huawei a TV campaign was launched in June on all the major national networks and all the main web channels to announce the new Play Limited Edition, which for €15 a month included 1,000 minutes, 10 gigabytes and the new Huawei P10, the new top smartphone of the manufacturer that is growing fast thanks to the quality and sophisticated design of its products. On the renewal of the tariff portfolio of its voice offers the “3” brand further extended its telephone-included offers in June, and as part of its new All-in plans with Giga Bank gave customers the possibility of adding any of the smartphones in its price list. Thanks to Giga Bank, the innovative service of “3” which is the only one of its kind in Italy, customers who decide to add a smartphone to the new All-in offers can use their unused gigabytes until the end of the following month: the All-in Start offer with Giga Bank + Samsung Galaxy S8 at €20 a month was the star of 3’s summer campaign on all the major national TV networks and all the main web channels, strengthening the technological positioning of the “3” brand which is geared towards the millennials, as always in search of simple offers and evolved smartphones in a value for money context. Regarding mobile broadband “3” has revolutionized its services portfolio in order to cover various market segments and has continued to improve its offers so that it can ensure greater freedom of navigation.
Report on operations 14 at June 30, 2017 “3” has made changes to its main offer (Casa3) by taking the frequency from weekly to monthly, keeping the same number of GB (30 gigabytes) and maintaining the same price of €15/month. The Casa3 offer has been joined by an even larger offer: Casa3XL, again with monthly frequency, which offers 50 gigabytes at a price of €24.95. The “3” brand has entered a partnership with Netflix, the world’s leading internet TV, to offer its customers the best of streamed entertainment. This partnership is an important step, in line with the brand’s claim of “The Future you Want”, and will allow 3’s customers to watch critically-acclaimed series, blockbuster films, documentaries, stand-up comedians and children’s programs anywhere at any time, thanks to Netflix’s on-demand streaming service. With the Casa3 offers Netflix TV is included for three months, together with a Wi-Fi WebCube7 or PocketCube router and a Google Chromecast device, with advance payments starting from zero. On the prepaid front “3” has renewed the SuperInternet family with a portfolio satisfying all connectivity needs. SuperInternet is available in a SIM-only version in denominations of 5 gigabytes for €5/month, 10 gigabytes for €10/month and 30 gigabytes for €15/ month, untied with a charge against the residual credit. The same denominations are available with a Wi-Fi device and Giga Bank included (unused internet traffic can be used until the end of the following month) with payment by credit card or bank account and a 30 months tie. For customers who want to navigate by using the residual credit on their SIM cards “3” has introduced Internet Play which is the best offer in terms of the price/GB ratio. With Super Internet Ten customers have 10 gigabytes available per month at a cost of €5/month which can be used on their tablets or on a Wi-Fi device. In addition, to meet the demands of customers who occasionally wish to navigate in internet freely and without ceilings or restrictions, “3” has confirmed the Internet Express offers which are provided in two denominations, Internet Express which offers 20 gigabytes of internet traffic that can be used in 3 months without monthly ceilings or restrictions for €20 and Internet Express 50GB with 50 gigabytes that can be used in 6 months for €40. The offer is not renewable and does not envisage any above-ceiling costs. Finally, to continue to increase the segment of convergent offers (voice + mobile broadband), “3” has extended its Special offers. These provide voice customers with the possibility of navigating freely in internet with another device at a reduced price. Within the Special offers we find: Casa3 Special that provides the same number of gigabytes as Casa3 (30 gigabytes) at a reduced price (€10 instead of €15) and Casa3 XL Special which provides 50 gigabytes of monthly traffic for €14.95 instead of €24.95. Both offers include a Wi-Fi device. In addition, as part of the project for improving the customer experience “3” has introduced two new important changes. The first regards the possibility for “3” customers to use the WIND network in roaming at no extra cost compared to their offer. And secondly, before the date set by European regulations, in May “3” launched Easy Europe, the service that allows all customers to use their national offer in other European Union countries as if they were in Italy.
Voice, internet and business services offer
Wind Tre Business Following the creation of Wind Tre SpA, currently one of the leaders in the mobile telephone sector, Wind Tre Business was set up on May 23, 2017 as the new brand dedicated to businesses and the public administration. The brand is founded on three fundamental values that establish its positioning: • Trust: clarity and simplicity in offers and customer relations; • Relations: customer support services and a constant presence of the sales force; • Value: top quality innovative solutions and offers.
Report on operations 15 at June 30, 2017 An exceptional testimonial was chosen as a means of best communicating the birth of the new brand and emphasizing its founding values: Carlo Conti. Conti is one of Italy’s leading television and stage presenters, a person who perfectly embodies Wind Tre Business’s values thanks to his closeness and professionality with respect to the Italian public over the past few years. He will therefore play a central role in communicating the brand in the various media (television, radio, the press, etc.). Wind Tre Business provides a wide range of voice and data services to its corporate customers, to small and medium-sized enterprises (SMEs) and to professionals (SOHO), with specific offers for each market segment. Larger companies are increasingly oriented towards prepaid offers and to increase their control over spending Wind Tre Business proposes an offer based on the business budget with “all-inclusive” service charges: customers establish their telephone spending at a company level, identifying packages of traffic shared amongst the SIMs, thereby keeping control of the budget at a global level rather than at the level of single SIM card. Faced with the increasing interest in mobile applications (apps) designed to take certain business processes into mobility, Wind Tre Business has additionally launched Enterprise Mobility Services through strategic partnerships and vertical system integrator agreements.
In June, Wind Tre Business launched the new rechargeable portfolio GigaShare for the small and medium-sized business market. The aim of this is to satisfy the rising demand for gigabytes by way of a flexible offer that can be formulated on the basis of business customers’ individual needs. GigaShare consists of two separate offers, each created with a specific target in mind: • MyShare is the rechargeable offer for managers and professionals for sharing gigabytes across their devices and can be combined with the purchase of a top smartphone; • SmartShare is the rechargeable offer for co-workers for sharing gigabytes across several SIM cards and can be combined with the purchase of a basic smartphone. In effect these forms of sharing enable customers to obtain efficiency, savings and flexibility. Both offers also include the Extra Giga bundle which at the end of the shared data basket allows customers to activate another one of a different denomination, allowing them to continue with their work. For the first time the new rechargeable offer for businesses is also valid in the European Union, the United States and Switzerland as well as in Italy. From June 1, 2017 not only did Wind Tre Business bring forward the economic benefits of the requirements of the new European Regulation governing traffic used in the countries of the European Union, it also added Switzerland and the United States as countries in which it is possible for customers to make calls using their national tariff plan, under the same conditions and at no extra cost, including international calls from Italy to abroad. Nevertheless to satisfy the needs of customers frequently travelling abroad to countries other than those named, GigaShare provides the possibility of completing the offer with the Top Mondo offers that provide voice and data traffic in the main business destinations. On the other hand customers who only make occasional visits abroad can activate the weekly option Mondo which provides voice and data traffic throughout the world. The foreign offer is completed by the International Aziende option for calling abroad. A further important change is represented by the Work & Life product line. This enriches the Wind Tre Business offer with smart products and solutions for a person’s free time. More specifically, Work & Life includes the following services: • Digital Kit: free of charge vouchers for the digital transformation of a business; • Smart Working: a range of products for use in the office or in mobility;
Report on operations 16 at June 30, 2017 • Smart Life: exclusive products for free time.
The Cre@sito, Pec Smart, Mobile POS, WIND Smart Control, Windlex and Servizi 4 Mobility digital services complete the mobile offer for businesses. The Cre@sito service provides customers with the possibility of creating a website on their own through a user- friendly interface and of having a level II dominion and a mailbox. Pec Smart is a certified electronic mail service, mandatory by law for professionals and businesses, which has legal value equivalent to a registered letter with return receipt. WIND Smart Control is the innovative mobile device management solution of WIND Business created for all small and medium businesses needing to make the smartphones and tablets used by their employees safe and to configure and monitor these devices in a simple, rapid and effective way. This service has a cost of only €2 a month. Thanks to the partnership with 4Mobility, new services are available to provide an optimal management of working activities in mobility: organizing the day’s work in the best possible manner and recording this by way of reports, photos and videos; managing contacts and planning visits and having digital catalogues, products and documents in mobility; digitalizing and managing expense notes in the simplest way, creating and transferring them in real time. In order to extend its portfolio of offers and services dedicated to SMEs, a partnership agreement of significant importance has been entered with Microsoft in order to be able to offer customers Office 365, the productivity suite in Microsoft’s Cloud. With Office 365 businesses have all the tools at their disposal that they need to work in mobility effectively and everywhere on any device (smartphones, tablets, laptops, PCs, Macs), so that they can manage, modify and share documents in real time while operating with the utmost safety. Wind Tre Business proposes the Microsoft Office 365 services in three packages: Basic, Plus and Top to respond to the various needs of businesses, starting from €4 a month per single account. All customers acquiring GigaShare obtain for each SIM an Office 365 Business suite with a Basic profile included for 24 months, and together with a top tier smartphone a further Office 365 Business suite with a Top profile free of charge for 24 months. In addition, thanks to the above-mentioned partnership with Microsoft the Wind Tre Business CRM Dynamics Online solution for customer relationship management is available. This provides small and medium businesses with a powerful, intuitive and easy-to-use tool, also in mobility, to assist them in the operational management of their customers, to increase the satisfaction of these customers and to make business and sales opportunities grow. This is the first pre-packaged “plug&play” solution of Microsoft CRM Dynamics Online on the market, entirely cloud-based, with no initial investment needed and with an assisted set-up. Finally, to ensure maximum support with the best technology an advanced technical assistance service is available to all Wind Tre Business customers free of charge. In combination with the mobile offer Wind Tre Business provides businesses and the public administration with a fixed-line offer, described in detail in the section “Fixed Telephony and Internet”.
Innovative Services WIND and “3” continued with their proposal offer of digital contents such as apps, games, music, films, e-books and digital magazines which customers can download from the main stores using their telephone account as a means of payment without the need for a credit card. In addition to Google Play and Windows Phone Store, which have been active for a while and are constantly growing, 2017 has seen the extension of the use of telephone credit to the whole of the Apple world (iTunes, App Store, Apple Music, iBooks). This functionality was activated in March for “3” customers and in May for WIND customers. As of today Wind Tre is the first and only Italian operator to make the
Report on operations 17 at June 30, 2017 service available on the Apple platform. The launch of Windows Store for “3” customers also took place in May (already active for WIND customers since August 2016); this has extended the digital contents perimeter and added the possibility for customers to make use of contents downloaded from a lap-top. With a view to improving customers’ digital learning, WIND has taken a key role in a series of initiatives channeled through its monobrand stores having the aim of encouraging the payment of digital items using telephone credit and creating an interconnection between the digital and physical worlds. In addition, there have been numerous communications activities on the online channels that envisage the involvement of influencers particularly well-known for their love of games. There are currently more than 60 cities where the mobile ticketing service is active and it is now possible to buy tickets with telephone credit in Florence, Genoa, Milan, Naples and several other centers. In addition, at the beginning of 2017 the mobile ticketing service was launched in 10 additional cities (Alessandria, Massa, Viareggio and Salerno to name but a few), achieving highly significant coverage in the region of Tuscany where the residents of all the provincial capitals are able to benefit from this convenient service. WIND and “3” have additionally promoted several initiatives to disseminate the service and make it known to the public, receiving positive feedback on the social channels and visibility in the main local and national press. Last year alone WIND and “3” customers enabled the mobile ticketing service to save more than almost two tonnes of paper, which makes a total of six since the service started.
International Roaming WIND customers can use their mobile telephone services in other countries, including SMS, MMS and data services (GPRS, EDGE, 3G, HSDPA) where available, by way of roaming facilities guaranteed by 509 agreements with 609 foreign networks in 220 countries, of which 209 covered by terrestrial roaming, 11 solely by satellite and 84 also by LTE. “3” customers can use their mobile telephony services in other countries through roaming facilities guaranteed by 415 agreements with 556 foreign networks in 191 countries, of which 4 satellite only and 3 also by LTE. Since April Wind Tre customers can take advantage of the benefits of Easy Europe, which also allows them to use their national offer when they travel in the European Union at no extra cost. The portfolio is completed by offers valid throughout the world, which respond to the needs of customers who only go abroad occasionally and those who travel more often.
Sales and Distribution Wind Tre continues to improve the quality of its distribution channels and strengthen its sales network, marketing its mobile products and services including SIM cards, scratch cards and handsets through a series of exclusive outlets which at June 30, 2017 consisted of 1,914 sales points, 691 WIND brand sales points and 1,223 “3” brand sales points. The non-exclusive Wind Tre sales network consists of 3,952 multibrand dealers spread throughout the country and further strengthened by a presence in electronic store chains with various distribution models (counters, “3” corners). From May 2017 WIND’s offers dedicated to prospective customers for the consumer rechargeable segment can be purchased online. Two different forms of delivery are available: direct, sent to the address named by the customer by courier, or by booking the offer and entering the customer’s details and those of the MNP online and then paying/collecting the SIM card at the sales point.
Report on operations 18 at June 30, 2017 The new www.wind.it website was inaugurated in June 2017 after being transformed through a restyling project into a responsive site aiming to optimize the existing functions of the online activation of services and offers, supporting and optimizing the business’s new e-commerce from a mobile standpoint. At the same time the partnership with Amazon continues; under this agreement customers can buy WIND products conveniently from their own home and with no delivery costs. In addition they can combine their Telfono Incluso offers with their SIM cards and manage the process for changing operator in an easy manner. The dedicated media campaign is focused on the Telefono Incluso offers. WIND was the first telecommunications company in Italy to enable its services to be bought through Amazon. The partnership continues with FreedomPop, which continues to be one of the main digital purchase channels with its portfolio of dedicated offers. In addition, customers can continue to top-up their SIM cards from the website and from apps, paying by credit card or PayPal or by charging their WIND or Infostrada telephone account. The activation of a fixed-line offer (fiber or ADSL) for a new or existing telephone number can be requested from the www.infostrada.it website. WIND and Infostrada customers can check their usage, change their offer and independently manage their lines in the website customer area and by using the apps. From the www.tre.it website customers can activate offers and services as well as buy telephones, smartphones, tablets and new mobile SIM cards. They can also make a request for the activation of an Infostrada fixed line. Customers can also top up online from the website, paying by credit card or Paypal, and can control and manage their telephone lines from the “3” customer area on the site or the app.
Fixed Telephony and Internet
WIND provides its consumer and microbusiness customers with a vast range of direct fixed network services, broadband internet and data transmission services all marketed under the Infostrada name. WIND provides broadband services to direct customers (unbundling) by renting the “last mile” of the access network from Telecom Italia, which is disconnected from Telecom Italia equipment and connected to WIND equipment at the telephone exchange. In addition, thanks to its strategic partnership with Enel Open Fiber, WIND sells ultra-broadband services in FTTH mode (Fiber to the Home) in Milan, Bologna, Turin, Perugia, Bari, Catania, Padua, Cagliari, Palermo and Naples where it markets offers in optic fiber which allow end users to reach speeds of up to 1 gigabit a second. In the other main Italian municipalities it sells ultra-broadband services in FTTC mode (Fiber to the Cabinet) with download speeds of up to 100 Mega and upload speeds of up to 10 Mega. In April 2016, WIND and Enel Open Fiber signed a strategic commercial partnership aimed at accelerating the creation and dissemination of infrastructure in ultra-broadband in Italy’s main municipalities using FTTH technology. On the sites where it is present in unbundling WIND offers an ADSL Vera service; this enables the customer’s line to be stabilized at the maximum supported speed up to a downloading peak of 20 Mega, thus providing users with the best possible performance and ensuring a constantly stable line. The latest plan that started in January 2015 for expanding the Direct Access network has led to the unbundled coverage of over 70% of the lines, further strengthening WIND’s positioning as an alternative operator to Telecom Italia in the fixed sector.
Report on operations 19 at June 30, 2017 Voice services Wind Tre’s fixed network voice customer base could count on 2.7 million subscribers at June 30, 2017 representing a decrease of 1.8% over June 30, 2016.
The following table sets out the key fixed-line indicators.
Fixed line 2017 2016 6 M 6 M (proforma) Change Customer base (thousands of lines) 2,728 2,778 (1.8)% of which LLU (thousands) (1) 2,522.5 2,478.6 1.8% (2) Revenue (millions of euro) 550.5 536.3 2.7%
Voice traffic (billions of minutes) (3) 4.4 5.1 (14.8)% ARPU (euro/month) 27.8 27.1 2.8% (1) Including LLU, Virtual LLU and ODA (2) Including TLC and CPE revenues (3) Voice Traffic Outgoing and Incoming off net
Internet and data WIND offers a vast range of internet and data transmission services to both its consumer and business customers. At June 30, 2017, the Group had 2.4 million broadband internet customers. The following table sets out the key internet access figures.
Internet and data services 2017 2016 3 M 3 M (proforma) Change Internet customer base (thousands) 2,385 2,329 2.4% of which narrowband (thousands) 4 5 (9.1)% of which broadband (thousands) 2,380 2,324 2.4% of which LLU (thousands) 2,057 2,116 (2.8)% of which shared access (thousands) 5 6 (20.5)%
Package and convergent services WIND is one of the leading suppliers in Italy of internet, fixed-line voice and data and mobile telephone services, having an integrated infrastructure and a network coverage which extends throughout the country. In order to make the positioning of WIND and “3” in the sphere of integrated services more exclusive, the push has continued on the Powered Infostrada offer which is addressed to all prepaid mobile customers of WIND and “3” who are offered a choice of one of the fixed-line telephone products Absolute or All Inclusive Unlimited at a completely unique and exclusive price. The success of the Internet Everywhere promotion continues; this is geared towards customers who want to navigate from home with ADSL or fiber or in mobility with Mobile WiFi 4G or a tablet, thanks to the Super Tablet offer which includes a device starting from €0 every 4 weeks with 1 gigabyte of traffic included. The drive towards acquiring both fixed and mobile customers is additionally supported by the new WIND offer Magnum Home Edition which combines fixed-line telephony and ADSL and fiber connectivity with the new mobile telephone WIND Magnum offer. The sale continues in WIND stores of a vast range of solutions for the connected home starting from video-cameras and smart thermostats to arrive at the most complete solution, the SMART HOME PACK, which includes Smart Plug, Motion Sensor, Videocamera and data SIMs in the offer for only €3 every 4 weeks. The opening plan for the new Fiber offer (FTTC and FTTH technology) continues in Italy’s main municipalities. The same services are also available in the Affari version which is dedicated to microbusiness sector customers. In particular, action has been taken in
Report on operations 20 at June 30, 2017 FTTH technology for cities in terms of both communication and offers, with the aim of maximizing acquisitions and also gaining credit as far as Fiber technology is concerned.
Voice, internet and business services offer WIND provides PSTN, ISDN and VoIP fixed-line network voice services, data services, VAS and connectivity services to companies in the large business market, capitalizing on the experience gained with ENEL and using a dedicated call center. In this segment WIND is also able to tailor its offer to the specific needs expressed by customers and to the requirements set in tenders. The offers for businesses also include flat solutions with tariffs based on the number of users, which enable customers to keep complete control over their spending. Direct access to the network is assured for large-scale businesses by radio link, by direct optic fiber connections and by LLU direct access; in areas where direct access is not available, dedicated lines leased from Telecom Italia are used. In addition, WIND also extends its offer for the large business market through cloud services and its commercial proposal with ICT and managed services solutions, on both fixed and mobile networks. WIND has a partnership with the Enterprise division of Google which enables it to propose collaboration and communication solutions to businesses based on Google Cloud Apps. WIND has drawn up an offer, WIND Cloud per Aziende, consisting of a rich catalog of IaaS services and, in particular for medium-sized businesses, pre-configured bundles of data center and connectivity services which are capable of satisfying the needs of these customers and are available in an extremely short period of time. In addition, WIND has launched WIND Cloud Line, an IP PBX cloud solution that combines the mobile and fixed worlds, and Work & Life, a solution created to provide an integrated response to the requests for smart working increasingly to be found in businesses. The fixed network offer portfolio for sole traders requiring up to four lines (analogue or 2 ISDN) consists of the voice and ADSL bundle price lists (All Inclusive Business L and All Inclusive Business Unlimited), which offer unlimited calls to all national fixed and mobile numbers and unlimited ADSL, Absolute ADSL Business price lists, which offer unlimited ADSL connectivity and pay-per-use voice calls, and Noi Unlimited Affari price lists, which offer unlimited calls to all national fixed and mobile numbers, unlimited calls to all fixed and mobile numbers on the WIND- Infostrada telephone account and pay-per-use ADSL. The whole of the offering portfolio is available with WIND network coverage on lines already activated with other operators and also on new lines. For all sole trader customers, existing and new, the possibility continues of subscribing to the new second line offer, which envisages only one additional voice line that can also be used to send and receive faxes, and of using POS devices. Customers of other operators with additional numbers can now finally decide to pass over to Infostrada without losing their telephone numbers. The Absolute ADSL Business and All Inclusive Business Unlimited plans have become even more advantageous as a result of the corresponding Super versions which add mobile telephony to the bundle. To complete the offer ‘plug&play’ packs are being proposed at extremely competitive prices to respond to customers’ most common needs: the Internet Pack, consisting of a Wi-Fi router and a 3G internet key, offered in combination with a data SIM card having two months of completely free traffic included, enables customers to navigate on the mobile network while waiting for activation of the ADSL service and to have a back-up line on the mobile network once activation is completed; the Internet-&-Video Pack on the other hand contains an IP video-camera in addition to the Wi-Fi router and an internet key to enable customers to video-control their working environment, record images and obtain access from laptops or mobile devices.
Report on operations 21 at June 30, 2017 For SMEs, WIND offers a wide range of dual-play (voice + internet) products with tariff plans based on VoIP technology having unlimited traffic to national fixed and mobile numbers and to the international fixed network and unlimited ADSL up to maximum of 20 MB with a minimum guaranteed band of 300 kbps and a static IP address. The offer is available in a 2 line version (All Inclusive Aziende Smart) and in a 3 to 8 line version (All Inclusive Aziende). The VoIP offer becomes even more beneficial thanks to Super All Inclusive Aziende, if combined with the Unlimited subscription or rechargeable mobile plans using up to a maximum of 10 SIM cards, and Super Internet, if combined with the data offers. In addition the fixed offer is also available with fiber access (FTTC), allowing customers to navigate at up to 100 Mbit/s with the same monthly charge as ADSL. Another offer designed for small and medium businesses is Smart Office, which includes a virtual switchboard based on VoiP technology. Smart Office is available in two profiles: Small, which enables customers to activate up to 10 fixed and mobile extensions with 3 simultaneous calls, and Large, for businesses that need to have up to 100 extensions, of which up to 25 fixed, with 6 simultaneous calls. And with Super Smart Office customers can use discounts on connectivity if they also activate mobile offers. The Smart Office offer has been improved with the addition of the Extra Large version with fiber access for companies that require a virtual PBX and more than 6 calls from fixed internal extensions, with unlimited calls to everyone and up to 15 simultaneous calls. Another type of Smart Office is the Executive offer with SHDSL connectivity for medium or large companies that need more than 70 fixed internal extensions. In addition, Netride Smart is also available, a solution that provides considerable customization and flexibility possibilities, created to satisfy the needs of SME customers.
Sale and distribution of fixed network services WIND’s distribution strategy is based on the “ominichannel” concept (stores, web and telephone), satisfying the needs of customers who independently select the sales channel which suits them best. In terms of performance, the most important sales channel is the retail channel (monobrand and multibrand stores), which through integrated offers continues to increase in importance. Following this are the 159 call centers and the web, while the activities of the outbound call centers are by now residual and are mostly used for acquiring customers in very specific segments.
Interconnection services Wind Tre offers its wholesale services to other operators, making its network capacity available through these services, and manages incoming and outgoing call termination traffic on its network for domestic and international operators. Wind Tre is paid a fee by other operators for managing calls which terminate on its mobile or fixed network, while in the same way it is required to pay a termination charge to other operators for calls which terminate on their mobile or fixed telephone networks. Interconnection tariffs from mobile to mobile, from mobile to fixed, from fixed to mobile and from fixed to fixed are established by Wind Tre in accordance with AGCOM requirements.
Customer care service Customer care service activities for WIND and “3” are coordinated by the Customer Care Operations Department, which is organized to support the needs of the various segments in the most effective manner: rechargeable customers (mobile), subscription customers (fixed telephony, mobile telephony and internet) and business customers. WIND also has a customer assistance service in other languages in order to provide a tailored service for certain particularly important customer segments such as the ethnic communities. Call centers dedicated to residential customers are located throughout the country.
Report on operations 22 at June 30, 2017 The WIND customer care service continues to develop its operational organization, focusing not only on the service activation phase with specific measures but also on the increasing need for mobile-fixed-internet multi-service assistance. The availability of Self Care assistance is also being further developed through the use of dedicated areas on the websites, apps and IVRs and through automatic SMSs to enable customers to chose their preferred modality. In addition, the integration between customer care and the local sales network continues in order to provide a customer service spread widely through the Company’s retail outlets in local areas, making it more direct and transparent. In a saturated and continually evolving market characterized by the constant renewal and extension of the offer portfolio it is important to retain a vision which puts customers at the center of their business. Care must be taken in implementing customer management policies to ensure consistency and synergies between the various sectors, so as to create a discriminating success factor. This view has always acted as an asset for both the WIND and “3” brands, a modus operandi which involves and unites all of its business sectors, ranging from marketing to sales by way of customer care, the technical functions of the network and information technology. A detailed set of activities has been set up for monitoring the various points of contact between the customer and the Group and for assessing satisfaction with WIND and “3” and the extent to which they may be recommended to others, using NPS measurement methods. This enables customer needs to be identified promptly and specific targeted replies to be provided, and more generally allows the main areas of development to be identified, in line with the feedback provided by customers themselves. Wind Tre’s Customer Value Management department therefore sets itself the objective of understanding, anticipating and responding to the needs of current and potential customers with the aim of increasing the value of the relationship in all the segments covered, from the consumer market (mobile and fixed) to the corporate market, with an organizational structure focused by market. A success factor for the initiatives carried out by CVM, which is increasingly gaining importance, is the ability to know how to capture customers’ needs on a real-time basis during their lifecycle, and in particular in the presence of certain specific consumption behavior. This has become possible by making analysis and campaign management tools more sophisticated and evolved. Consistent with the identification of customer needs, Wind Tre’s CVM provides suitable solutions in terms of product and offer through traditional and digital relation channels. Commercial actions involving customers are also carried out through the use of the distribution network and customer care, which have developed from being acquisition and assistance channels to channels that develop value and customer loyalty. Wind Tre places a great deal of emphasis on managing digital contact points and on online customer assistance tools, ensuring high standards of quality and encouraging their use. The MyWind app had reached 15.5 million downloads at June 30, 2017 and remains extremely popular among customers for its simplicity of use and the completeness of its services, having a 4.2 rating on Android stores and 3.7 on iOS. WIND Talk, the integrated messenger service app, has reached 1.5 million downloads. This offers services, chats with stores through Customer Assistance, credit transfers and mobile ticketing. The app is available for both individual and business customers and has a rating of 4.2 on Android and 3.9 on the iOS platform. The new app Veon, active since November 2016, which provides customers with an integrated experience of assistance services combined with typical Over The Top functionalities, had reached 1.9 million downloads at June
Report on operations 23 at June 30, 2017 30, 2017. Veon is in constant evolution and version 2.0 of the app is planned for August; this will see an increase not only in assistance services but also in entertainment activities. The “3” Customer Area app remains the main contact channel for the “3” brand and has reached 15.5 million downloads, with a rating of 3.8 on Android stores and 3.4 on iOS. The social networks are an important point of contact, listening, promotion and customer management for Wind Tre. There has been a constant increase in the number of fans/followers of WIND and “3” (1.3 billion for WIND and 860 thousand for “3”) that follow all the brand’s activities on the leading social media. WIND continues to maintain levels of excellence in the special social care rankings, the “Top Brands” of Facebook and Twitter published on a monthly basis by Blogmeter (Blogmeter.com), for the speed with which it handles contacts. The results of the social campaigns, both paid (sponsored contents or paid advertising) and organic (unsponsored contents), are always among the best on the market, with conversion rates that are constantly among the highest of all the WIND digital touch points. The first IVRs were tested in support of the digital strategy; these propose downloads for non-users and allow users to view the information consulted on the IVR on the application.
Marketing and Branding
Offline advertising WIND brand In January 2017 WIND began its TV planning with a spot on Fiber, in movie format, containing the final episode of the Elves saga. In February WIND renewed its ATL format with a new creative strategy exalting the brand’s ‘tone of voice’ and confirming its positioning as a smart-fun name with the return of Fiorello, the par excellence brand ambassador. ‘I’m not changing, I’m staying with WIND’ is the claim of the new format which opened with a value-driven branding campaign and was followed between February and May by three product spots dedicated to All Inclusive, which doubled all its bundles for a year, and Wind Magnum, which is also available in combination with the new Samsung Galaxy S7/S8. The Wind Magnum Top Smartphone synergy at a special price and 2 additional gigabytes also played a leading role in a “3” national billboard campaign. Again in an OOH sphere billboard planning also concentrated on the roll-out of Fiber with a first campaign of a national character, developed in 71 different cities, followed by local campaigns with planned domination in the 9 cities reached by Fiber. WIND launched its summer offer on the basis of two key tags: #thewindunlimited and #noextracosti: all the new WIND offers have unlimited calls and internet in order to remain connected at no extra cost. WIND continued to cover music territory from June with the 11th edition of the Wind Music Awards, with the live event taking place on four evenings being framed by the surroundings of Piazza del Popolo in Rome. Radio was covered with a campaign in partnership with Huawei with the aim of supporting the sales of Wind Magnum combined with the Huawei P9 smartphone.
As far as the press was concerned, a medium as always dedicated to the ethnic target, planning continued in line with previous years and with a creative focus that exalts the idea of ‘Closer to your traditions even when you’re far away from home’. In April WIND announced its pre-eminence among telephone operators in the press and with Easy Europe enables its customers to use their national tariff plan throughout the European Union with no extra costs or activation charges.
Report on operations 24 at June 30, 2017 “3” brand In 2017 the “3” brand presented itself to its customers in new attire. In January a branding campaign centered on the new pay-off ‘the future you want’ talked about the values of technology, transparency and trust which characterize the “3” brand’s positioning, as always on the cutting edge of technological decisions. The leading role in the story is taken by a young girl who dreams up solutions to revolutionize daily life and discovers that dreams really can come true through technology. The format continued with three commercial spots: in February All-in with Top-up Always On, unlimited minutes, 30 gigabytes and a new Samsung Galaxy A for €15 a month, in March for the first time with Fibra Infostrada also available for “3” customers for only €19.95 a year and in cross-selling with the All-in at half price and in April with Free combined with the brand new Samsung Galaxy S8 from €25 a month. In line with the TV spots, All-in and Free took the star roles in national OOH campaigns in February. The “3” brand’s summer, which concentrated on the pay-off “the summer you want”, celebrated the millennial target on TV with “digital” holiday experiences and social moments shared by smartphone: Play In Limited Edition with Huawei P10, 1,000 minutes and 10 gigabytes, and All-in, also combined with the Samsung Galaxy G8, with the brand new Giga Bank, unique in the telecommunications panorama, which enables customers to use their unused gigabytes by the end of the following month.
Always close to the world of cinema with its Grande Cinema loyalty program, which offers “3” customers a free of charge entry ticket once a week, the “3” brand sponsored the launch of the film ‘Smetto Quando Voglio Masterclass’, on the big screen from February 2, with a product placement project and a national billboard campaign. It was also the main sponsor in March of the 61st ‘David di Donatello’ ceremony for prizes awarded by the Academy of Italian Cinema, which was additionally on the air on Sky with a spot and a dedicated offer: All-in Gold Edition, up to 30 gigabytes, minutes and SMSs for €30 a month.
Online advertising Significant investments were made in the digital media on a constant basis throughout the first half of 2017, aimed at ensuring continuous awareness of all the Group’s brands and online sales through the various e-commerce channels. Planning covered all the main desktop and mobile websites, with the use of standard, impact and video formats and search advertising and envisaged retargeting action. As far as the WIND brand is concerned, worthy of mention in the first half of 2017 are the Porta I Tuoi Amici, All Digital, Wind Magnum and Everything at €1 Promo campaigns, the Summer Card promotion in partnership with Now TV and the “Always on” campaigns aimed at ethnic targets, as well as performance activities supporting the Online top-up campaign. Also noted is the digital campaign aiming to bring to the public’s notice the #unlimited concept on the Mediaset channels on the occasion of the Wind Summer Festival. In addition the two e-commerce hubs were launched in March in partnership with Amazon and Freedom Pop.
February saw the online launch of Veon, WIND’s new app for chatting and making internet calls, with full-circle coverage of the web and social channels and the dual objective of creating a reputation and encouraging downloads of the app. In addition, use was made of the occasion to develop a viral video campaign and activities in partnership with influencers. Worthy of mention in the period were also the national and georeferenced campaigns aimed at supporting awareness and the online sales of the ADSL and Infostrada Fiber offers, with special focus on the cities covered by FTTH and FTTC technology.
Report on operations 25 at June 30, 2017 As far as the “3” brand is concerned an All-in campaign in co-marketing with Samsung is worthy of note; this campaign was set up to communicate the benefits of “3”/Infostrada convergence, a display focusing on the new iPhone 7 and Huawei P10 models and in the second quarter digital activities designed to support the online sales of offers from the Play family and online top-ups. In addition, in March “3” put its name to a digital campaign aimed at communicating the fact that it sponsors the 2017 David di Donatello awards on Sky properties. In terms of the B2B segment the new Wind Tre Business brand was launched in June, anticipated online by a teaser campaign. This campaign, which sees Carlo Conti in the leading role, is being developed online in several phases: the teaser was followed by an awareness phase and, starting in the middle of June, by the launch of the Gigashare offers supported by a performance plan. The social channels are constantly active, being used to give high visibility to the whole of the offering portfolio of both brands, Wind and “3”, through the use of campaigns sponsored through organic publications reinforced by influencer marketing activities. Editorial plans of pure entertainment are also channeled through the social channels, thereby creating strong empathy and virility of the contents. Of importance was the live coverage of the 2017 David di Donatello award ceremony on the social channels of “3” with updates from the red carpet and exclusive contents.
Corporate advertising and special projects In the institutional sphere WIND’s contribution to young businessmen continued with the WIND Business Factor project and the new edition of the WIND Startup Award, which in 2017 rewarded start-ups with a period of pre- incubation at the Luiss Enlabs space at Termini Station in Rome. As part of this initiative WIND launched Italian Tour, a series of events in four Italian cities organized in partnership with TAG and Luiss Enlabs and designed to promote the values of the closeness and sustainable innovation of the brand, and relaunched the Wind Green Award, directed at ideas and start-ups that foster sustainable innovation. Participation in the 2016/2017 edition was high: 74 start- ups were candidates for the award, while 34 projects were based on sustainable innovation. In January the Group put its name to the first institutional campaign as WIND and “3” combined: the number one Group in mobile telecommunications in Italy has arrived. A new entity capable of courageously and ambitiously facing the challenges of the future through its brands. One which will make innovation its mission. In line with the values of technology, transparency and trust, “3” took the decision to be the main sponsor of the 61st ceremony for the presentation of the David di Donatello awards, broadcast by Sky on 27 March. The most original and ‘visionary’ film among those in competition, Sarà, received the “3” Future Award. This action strengthened the link between the “3” brand and the world of the cinema, as always represented by the Grande Cinema 3 loyalty program. The Wind Music Awards ceremony, the event produced by WIND in conjunction with the recording sector associations AFI, FIMI and PMI and with the collaboration of SIAE and ASSOMUSICA and set up to recognize the recording achievements of the leading artists on the Italian music scene (certified by FIMI/Gfk) and, for the first time, also their live performances, was held on June 5 and 6 at the Verona Arena and was broadcast by RAI 1 in prime time. The Wind Summer Festival : leading artists in Italian and international music performed on June 22, 23, 24 and 25 in Piazza del Popolo in Rome. The event was broadcast by Channel 5 for four evenings starting on July 4. Materials supporting the launch of Home & Life branded products, in particular customized Home & Life Fit and Home & Life Cam products and the relative packs and guides, will be available in WIND stores from the middle of July and in “3” stores from the end of the year.
Report on operations 26 at June 30, 2017 In the product field various activities have been carried out in support of ultra-broadband technology in FTTH mode, with communications conducted through the double brand WIND and “3”: Guerrilla (Blitzkrieg) with posters, flyers and a parkour display in Milan, Bologna, Turin and Perugia in March and May. From June 12 to 25 guerrilla activities were extended to other cities. In addition to Milan, Turin, Perugia and Bologna these also took place in Cagliari, Catania, Padua, Bari and Venice. Local billboard planning began on June 26 to push fiber, with ad hoc positions close to the WIND and “3” stores. Simultaneous with its launch, the new Wind Tre Business brand participated as a partner at the twenty-eighth PA Forum held in Rome at the Fuksas Cloud from May 23 to 25: this is the biggest Italian appointment for debating issues on innovation in the public administration. The subjects dealt with during the event were smart working as a means of re-organizing the public sector, the policies of Industry 4.0 and the role of Wind Tre within the digital transformation process.
Report on operations 27 at June 30, 2017 NETWORK
The WIND network WIND has developed an integrated network infrastructure providing high capacity transmission capabilities and extensive coverage throughout Italy for both fixed and mobile services. As of June 30, 2017, WIND’s fixed access network covered 70% of the Italian population with ADSL broadband+ direct services while mobile network population coverage reached 99.9%. In particular, WIND UMTS/HSPA and LTE are available to 98.6% and 80.1% of the Italian population respectively. The following chart shows WIND mobile’s coverage at June 30, 2017.
As of June 30, 2017 WIND’s mobile and fixed-line access networks are supported by 22,873 kilometers of fiber-optic cable backbone in Italy and 5,203 kilometers of fiber-optic cable MANs. WIND’s network uses a common transport, core and system platform, which is referred to as the “smart network”, for both WIND’s mobile and fixed-line access networks. WIND’s transport and routing network has been upgraded to provide a uniform and scalable IP network platform, which provides additional capacity. The geographical scope of its network and the integrated nature of its operations allow WIND to offer its subscribers mobile, fixed-line and internet product bundles and VAS. As of June 30, 2017, WIND also had 509 roaming agreements with international telecommunications operators around the world. Starting from May 2, 2017, roaming on 2G and 3G Wind’s network was gradually opened all around Italy for 3 Italia customers, who, now can use Wind’s network with the same prices and services of the home network; by September 2017 roaming will also be initiated progressively on the 4G network. This project allows for significant savings to be achieved from TIM’s roaming switch off (active for 3 Italia customers up to now) and moves together with modernization and following the consolidation of two existing networks, started in April 2017 and to continue until 2019, with positive effects for customers in terms of connectivity and quality of service.
Fixed-line Network WIND’s fixed-line network consists of an extensive fiber-optic transport network with over 22,873 kilometers of transmission backbone and 5,203 kilometers of fiber-optic cable MANs linking all the capitals of Italian provinces and other major cities in Italy and a radio transmission network with 16,736 radio links in operation. The national voice switching network consists of an NGN/IMS network comprising 4 call control nodes, 4 media gateway controllers and 42 trunking gateways. The national network is supported by NGNs (Next Generation Networks) dedicated to interconnection with international operators consisting of 4 media gateway controllers and 12
Report on operations 28 at June 30, 2017 trunking gateways. WIND is able to handle all the traffic on proprietary backbone infrastructure, with little need to rent additional capacity from third parties. As of June 30, 2017, WIND’s fixed-line access network had 1,957 LLU sites for direct subscriber connections with a capacity of approximately 3.474 million lines, and had interconnections with 32 GW IPs which allow it to provide carrier selection access for indirect subscribers throughout Italy, as well as WLR services. Since 2015 WIND has made investments in fiber activating the ultra-broadband services for almost 42% of the population, using mainly Fiber to the Cabinet and Fiber to the Home technologies. During 2016, the FTTH service was extended from Milan to Turin, Bologna and Perugia and in the first half of the year, leveraging on the agreement signed with Open Fiber (OF), this service was further extended to an additional 7 cities: Venice, Padua, Naples, Bari, Catania, Cagliari and Palermo. WIND’s internet network access is implemented by an all IP network, with over 50 PoPs (Point of Presence), for direct (xDSL) and indirect internet access services, as well as virtual private networks (xDSL, Fiber Optics). The IP nodes access network consist of 61 BRAS for consumer services and 84 Edge Routers for business application, located in PoP to ensure optimal coverage of the national territory.
Mobile Network WIND offers mobile services through its three network layers 2G, 3G and 4G. The first layer, developed in 1998 with GSM technology, provides voice and data services with EDGE enhancement. The second layer, 3G, provides voice service and data services with HSPA+ technology. By 2015 WIND had already completed a massive roll-out of the UMTS refarming at 900MHz, changing the use of the part of its spectrum previously used for the GSM service (one block of 5MHz) in order to foster and enhance the indoor coverage of 3G services, due to the better propagation of the low spectrum frequencies. WIND is also continuing with its intensive plan to deploy the latest mobile generation network based on LTE (long term evolution), also known as “4G” technology, to provide broadband mobile connections.
Report on operations 29 at June 30, 2017 The following table provides an analysis of WIND’s GSM/GPRS, UMTS/HSDPA and LTE networks as of June 30, 2017.
GSM/GPRS Radiating sites 14,795 BSC (Base Station Controllers) 220 MSC (Mobile Switching Centers)* 0 HLR (Home Location Register)* 10 SGSN (Service GPRS Support Node)/MME* 6 GGSN (Gateway GPRS Support Node)/PGW/SGW* 6
UMTS Node B 14,532 RNC (Radio Network Controller) 131 MSC-Server* 20 MGW (Mediagateway) 27
LTE Enodeb 5,592 HSS FE 2 HSS CUDB 2
*Shared with UMTS/LTE
The “3” network 3 Italia has developed an integrated network infrastructure providing high capacity transmission capabilities and extensive coverage throughout Italy for mobile services. In particular, UMTS/HSPA and LTE are available to 97.5% and 79% of the Italian population respectively. The following chart shows 3 Italia’s mobile coverage at June 30, 2017:
As of June 30, 2017 mobile line access networks are supported by 12,494 kilometers of fiber optic cables backbone in Italy and 1,505 kilometers of fiber-optic cable MANs. The transport of data traffic is carried on a BB IP/MPLS infrastructure consisting of 140 PoPs connected with 10/100Gbps links, interconnected to Big Internet through agreements with IP Transit providers and 3 International Peering Points. As of June 30, 2017, 3 Italia also had 415 roaming agreements with international telecommunications operators around the world. Starting from May 2, 2017 the roaming service provided to 3 Italia
Report on operations 30 at June 30, 2017 customers by TIM on the 2G network was gradually initiated across Italy on WIND’s 2G and 3G networks, with the possibility of accessing 4G connections by September 2017. This allows access to the mobile service even if 3 Italia’s network is not available and will also allow TIM’s roaming to be switched off by the end of August 2017.
Mobile Network 3 Italia offers mobile services through its two network layers 3G and 4G. The High Speed network HSPA/HSPA+ (High Speed Packet Access) of 3 Italia allows the use of internet services in mobile broadband on smartphones, tablets and other mobile devices, including to subscribers living in digital divide areas meaning areas not reached yet by fixed broadband but covered by "3". On January 1, 2014 the Ministry of Economic Development released the availability of one block of 5MHz in the 900 MHz frequency band. These frequencies - used only by other mobile operators until then - are available in the national territory for 3 Italia. Thanks to this, "3" has been using 900 MHz in order to strengthen indoor coverage in urban and rural areas as well as to further increase the capacity of its high speed network. Through 4G-LTE services (Long Term Evolution) 3 Italia subscribers can experience download speeds of up to 100 Mbps and upload speeds of up to 50 Mbps. At the end of June, 3 Italia released the LTE 2600 MHz frequencies in accordance with Ministerial directives; starting from this date, 4G services are provided only in the 1800 MHz frequency band.
The following table provides an analysis of 3 Italia’s UMTS/HSDPA and LTE networks as of June 30, 2017.
UMTS/LTE Node B 11,482 Enodeb 4,780 RNC (Radio Network Controller) 113 MSC-Server 11 MGW (Mediagateway) 22 SGSN /MME 9 GGSN/EPG 4 HSS 2 HLR-FE 4 HLR-CUDB 3
Report on operations 31 at June 30, 2017
HUMAN RESOURCES
At June 30, 2017 the Wind Tre Group had a workforce of 8,399 employees structured as follows.
Average no. of employees No. of employees at in the period
06/30/2016 06 /30/2016 06/30/2017 06/30/2017 (proforma) (proforma) Senior managers 183 240 195 242
Middle managers 816 904 833 906
Office staff 7,400 8,481 7,812 8,496
Total Wind Tre Group 8,399 9,625 8,840 9,644
During the first half of 2017 the Group hired 21 employees while 958 left.
The following table shows the geographical allocation of Wind Tre personnel.
Sites 06/30/2017 Wind Tre 06/30/2016 ex Wind 06/30/2016 ex H3g Rome 31% 33% 23% Milan 18% 13% 31% Naples 14% 18% 1% Palermo 7% 6% 11% Ivrea 7% 9% -% Cagliari 4% -% 18% Genoa 3% 1% 11% Other 16% 20% 5% Total 100% 100% 100%
(*)The Rho site is included in Milan and the Pozzuoli site is included in Naples.
Organization The Group’s new organizational structure was introduced during the first quarter of the year by setting up the two business units dedicated to covering the business and consumer market segments and a technology department dedicated to covering all network technologies and information technology with a view to achieving an effective integration of the systems. In addition, a department was set up within corporate staff dedicated specifically to controlling the plan for the integration between the two merged groups. At the same time the process for communicating the new organizational responsibilities was carried out.
Detailed descriptions of all operational responsibilities were established during the second quarter of the year and the allocation of human resources was carried out, following a precise documentation of the activities and processes previously performed by the two merged groups, consistent with the business’s rightsizing plans. In addition, with the aim of improving business control, a commercial responsibility structure was set up at the same time having increased specialization on the consumer, digital and business customer segments and a specific focus on the services offered (mobile and home) functional to the Company’s brands.
Report on operations 32 at June 30, 2017 Training A total of 3,487 man-days of training were given in the first half of 2017. These mainly involved specialized technical training for the technology department, with particular reference to training courses on the implementation of the ZTE network. These initiatives will continue to involve Technology Operations, Access Deployment and Network Engineering up to the end of the year.
Development Work took place on two development initiatives during the first half of 2017. Wind Tre’s new performance and conduct appraisal model was drawn up in terms of content, processes and tools. Implementation activities are currently in progress in order to be able to carry out an appraisal of the whole of the Company’s workforce. The new leadership model that will act as a basis for all the Company’s managers is also currently being established by determining the associated conduct. The whole of senior management was interviewed and a focus group set up with a number of managers with the aim of arriving at an agreed construction of the model, which will then be communicated through disclosure workshops.
Industrial relations Following the consolidation of the merger of WIND into H3G a company agreement was drawn up in February harmonizing the various contractual and legislative provisions. This includes among other things the flexibility of working hours, work-life balance, welfare and remuneration; in particular it will also be possible to convert productivity bonuses into welfare services, allowing employees who select this option to obtain the fiscal benefits envisaged by current legislation.
Again as part of the need to integrate the two groups agreements were reached with the trade unions on the transfer of personnel between the various sites, starting with Rho and Trezzano.
As provided by the national collective bargaining agreement for the telecommunications sector a meeting was held with the trade unions in May to present the latest business plan, at which in order to concentrate more on certain business objectives the Company announced the sale of the “133 Call center” business pursuant to article 2112 of the Italian civil code.
The trade union procedure provided by law was initiated in June together with the company Comdata (identified as the partner in the sales operation), during which the reasons for the transfer, the economic, legal and social consequences and the measures envisaged with respect to employees were set out.
On June 27, Wind Tre and Comdata entered an agreement with the trade unions establishing the remuneration to be paid to the transferred employees in addition to that provided by law.
Given the particular commercial and operational relevance of the contract with Comdata, a number of important occupational guarantees were agreed with the unions for the workers involved in the transfer, including the application of the clauses provided by the national collective bargaining agreement for the telecommunications sector in the case of a change in contractor.
Report on operations 33 at June 30, 2017 In addition to the national strike called to bring attention to the need to renew the national collective bargaining agreement for the telecommunications sector, the first half of the year also saw the initiative taken by the trade unions in June against the Company’s plan to sell the “133 Call Center”. Despite this, no critical matters regarding the provision of services to the end customer or repercussions on operations in general were noted during the strike action.
Safety in the workplace In accordance with the agreement reached between the state and the regions on training a total of 696 workers were given safety in the workplace training during the first six months of 2017 for a total of 639 man-days. The following table provides details of this by area and sector.
Staff and Area Technology IT commercial CC area Total entities by area
Nord west 95 1 6 10 112
North east 136 1 18 155
Centre 97 44 5 146
South 142 15 15 111 283
Total trained workers 696
A total of 2,957 health inspection examinations were carried out during the first half of 2017 in accordance with business roles, the health protocols allocated and the relative deadlines.
Report on operations 34 at June 30, 2017 REGULATORY FRAMEWORK AT JUNE 30, 2017
Mobile Networks and Services
EU Net Neutrality Regulation
In application of European Regulation 2015/2120 in March AGCOM notified Wind Tre by way of Resolution 123/17/CONS as to a number of aspects relating to the applications “Veon” and “Music by 3” which the Authority believed to be in contrast with article 3, paragraph 3 of the Regulation, under the interpretation provided by BEREC 2. In April, Wind Tre notified the Authority of the measures it had adopted to ensure full compliance with the order and the European Regulation. In May the Authority send Wind Tre a further communication concerning adherence to the requirements of Resolution 123/17/CONS, noting the requirement to implement additional measures.
Mobile Termination
In September 2015 AGCOM extended 3 the validity of the mobile termination rate of €0.98 per minute established in 2011 4 through to the conclusion of its market analysis at the end of 2017. This rate is the maximum price cap for all SMP notified operators when they provide mobile termination services to their customers, MVNOs included. In the same decision, given that operators of countries outside the European Union (EU) or the European Economic Area (EEA) apply mobile termination rates on their networks higher than those regulated at a European level (for example Italian operators at €0.98 per minute), AGCOM allowed Italian mobile operators to establish from a commercial standpoint their own fair and reasonable mobile termination rates for calls originating from non EU/EEA operators. Both WIND and H3G took advantage of this opportunity setting prices depending on the origin of the call. In January 2017 AGCOM initiated a new cycle of market analyses for mobile termination, for which the information collecting phase has just been completed. The publication of the consultation documents is currently awaited.
EU Roaming Regulation
In November 2015 European legislation was issued 5 amending the previous regulation 6 on roaming, having as its objective the elimination of the difference between roaming tariffs and domestic tariffs for occasional travel (Roaming Like At Home) throughout the European Union starting from June 15, 2017. The same regulation established a transitional period from April 2016 to June 2017 during which mobile operators were allowed to apply a surcharge. To complete the above mentioned regulation, in December 2016 the European Commission also published the implementing regulation 7 designed to define criteria for the fair use policy and for the evaluation of the sustainability of RLAH and a further regulation 8 on the maximum tariffs applicable until June 15, 2017 for voice calls received by European customers when roaming in one of the European Union countries.
2 BEREC Guidelines on the Implementation by National Regulators of European Net Neutrality Rules. 3 Resolution 497/15/CONS 4 Resolution 621/11/CONS 5 Regulation (EU) 2015/2120 6 Regulation (EU) 2012/531 7 Implementing Regulation (EU) 2016/2286 8 Implementing Regulation (EU) 2016/2292
Report on operations 35 at June 30, 2017 The publication of Regulation 2017/920 in the European Official Journal on June 9, 2017, which amends rules for wholesale roaming markets, completed the regulatory framework required for the new EEA roaming regulation based on “Roaming Like At Home” to become effective from June 15, 2017. In accordance with that principle Wind Tre adapted the offers of the two brands in advance of the deadline, namely on April 24, 2017 for the WIND brand and on May 8, 2017 for the “3” brand.
Spectrum
In December 2016, AGCOM announced the start of a fact-finding survey 9 on prospects for the development of mobile and wireless systems towards the fifth generation (5G) and the utilization of new portions of the spectrum above 6GHz. In March 2017 AGCOM published a document on the fact-finding survey and the deadline for responses which was initially set as June 26, 2017 was subsequently postponed to July 5, 2017.
During 2016 H3G completed the coverage obligations set for the spectrum in the 2600 MHz band in advance with respect to the deadline set at the time of the assignment of the rights of use (LTE auction).
Again during 2016 the former Wind Telecommunicazioni S.p.A. carried out a change of technology (refarming) from GSM to UMTS (3G) on a 2x5 MHz block in the 900 MHz band on a specific portion of the national territory.
Pursuant to and in accordance with article 1, paragraphs 568-575 of Law no. 232 of December 11, 2016 and article 25, paragraph 6 of the Electronic Communications Code, Wind Tre S.p.A. requested authorization, with effect from July 1, 2017, to change the technology on the entire allocated 900 and 1800 MHz band with expiry date June 30, 2018 and at the same time to extend the term for the above-mentioned rights of use to the new technical conditions at December 31, 2029.
In addition, the technical and financial plan for the extension to December 31, 2029 of the rights to use the frequencies in the 2100 MHz band has been filed with the Ministry for Economic Development as required by the provision of that ministry dated October 24, 2016 and protocolled with no. 67608.
In accordance with the requirements of the Ministry for Economic Development’s provision Wind Tre notified that the initial issue of frequencies in favor of Iliad SpA, in the 2600 MHz band, had taken place on June 30, 2017.
In conclusion, in order to implement European Commission Communication no. 2016/588, the “5G Action Plan”, by 2020, by way of a notice published on March 16, 2017 the Ministry for Economic Development initiated a procedure for acquiring planning proposals for carrying out pre-commercial testing within radio spectrum 3.6 – 3.8 Ghz. The closing date for submitting applications for participation which was originally set as May 15, 2017 was subsequently postponed to June 12, 2017.
Wind Tre has submitted a draft proposal for participation in the testing proposed by the Ministry for Economic Development, as stated in the above-mentioned public notice. The classification is expected to be published sometime in the period between the beginning of August and September 15; in the event of the allocation of a better valuation for the area of interest a “negotiated procedure” will follow for the possible refinement of the project, which will be followed by the issue of a temporary authorization for pre-commercial 5G testing in the 3.7 – 3.8 GHz frequency band.
9 Resolution 557/16/CONS
Report on operations 36 at June 30, 2017 National Numbering Plan and SMS/MMS Alias
In July 2016, AGCOM set up a public consultation 10 on modifications and additions to the “Numbering plan in the telecommunication sector and implementation regulations” in relation to the use of alphanumeric identification codes. The proceeding is still in progress. In December 2016, AGCOM initiated public consultation no. 561/16/CONS on modifications and additions to the National Numbering Plan for the use of the 455 codes utilized by non-profit organizations for fund raising. In May 2017 AGCOM published Resolution 17/17/CIR which updates the discipline for managing 455 numbers, requiring operators to adopt a new self-regulation code within 90 days of the publication of the provision.
In April 2017, by way of Resolution 18/17/CIR, AGCOM extended the term for the alias testing in progress to March 31, 2018.
Database of all internet access networks
In December 2016 AGCOM completed the proceeding 11 initiated in 2015 to draw up innovative solutions to fill the digital gap between broad and ultra-broad band and map the internet access network. Wind Tre provided the information requested by the Authority by the set deadline.
Fixed-line network
TIM reference offers
During 2016 the Authority started several proceedings for assessing the TIM Reference Offers for 2015 and 2016 relating to: a) wholesale fixed-line services for unbundled access services; b) dedicated capacity transmission services 12 ; c) copper and NGA based bitstream services, VULA and related ancillary services; d) WLR services; e) fixed network interconnection services; f) NGA infrastructure. In December 2016 13 AGCOM approved the TIM reference offers for 2015 and 2016 relating to dedicated capacity transmission services (point b) above). In January, February and March 2017 AGCOM approved the reference offers for 2015 and 2016 relating to LLU, bitstream copper and NGA and WLR services (points a), c) and d) above) as well as the corresponding reference offers for the fixed network interconnection services (point e). The decision on the reference offers for point f) is currently awaited.
In December 2016 AGCOM initiated 14 a public consultation relating to the economic and technical conditions of the 2013 Reference Offers of TIM for copper bitstream services, wholesale unbundled services for access to metal networks and sub-networks and co-location services. This proceeding was initiated in execution of sentence no. 3143/2016 of the Council of State relating to AGCOM Resolutions 746/13/CONS, 747/13/CONS and 155/14/CONS. The proceeding is in progress.
10 Resolution 158/16/CIR 11 Determination 1/16/DSD 12 Terminating circuits, interconnection links, kit deliveries and internal cabling within TIM premises. 13 Resolution 596/16/CONS 14 Resolution 627/16/CONS
Report on operations 37 at June 30, 2017 Market analyses
In January 2017 by way of Resolution 43/17/CONS, AGCOM initiated a new cycle of market analyses relating to fixed-line access. These markets comprise the main wholesale fixed access services and include i) unbundling and subloop unbundling (LLU and SLU); ii) bitstream copper; iii) bitstream NGA and VULA (FTTH and FTTC); iv) FTTH P2P and GPON; v) WLR; vi) NGA access services (dark fiber, cable ducts, verticals); vii) end to end; viii) backhauling services.
On May 29, 2017 AGCOM sent operators qualitative and quantitative questionnaires that must be completed by July 14, 2017.
Again in January by way of Resolution 44/17/CONS, AGCOM initiated a new cycle of market analyses relating to fixed position high quality wholesale access services – terminating circuits (market no. 4 of European Commission Recommendation 2014/710/EU).
In the case of the second analysis information from AGCOM and the publication of the consulting documents are awaited.
Technical working groups
In 2016 the Authority set up a number of working groups designed to address the technical issues relating to wholesale services. In particular the following matters were the subject of discussion by the workgroups: a) the new assurance process for unsuccessful intervention on WLR and asymmetric bitstream lines; b) the technical specifications of street cabinets within the provision of wholesale FTTCab and subloop unbundling services; c) the technical specifications required for implementing Multi Operator Vectoring (MOV); d) procedures to be used in the case of the switch-off of the copper network by TIM. In 2017 AGCOM set up workgroups relating to e) the passage to direct routing in the fixed-line sphere; f) migration to TIM’s new delivery chain in the fixed-line sphere; g) the methodology for determining the overbooking factor for regulatory purposes; h) the updating of the fixed migration procedures of users utilizing TI’s fiber offer or that of other operators. Discussions are in progress.
Universal service
By way of Resolution 113/16/CONS of March 24, 2016 AGCOM carried out a preliminary investigation to review the sphere of application of universal service obligations regarding internet access and the related quality objectives; while waiting for the final decision, on March 6, 2017 AGCOM initiated an enquiry into the adoption rate of fixed-line broadband in Italy analyzed by specific speed.
Replicability testing of TIM’s fixed-line offers
By way of Resolution 584/16/CONS, AGCOM approved the guidelines for assessing the replicability of the retail offers of the notified operator for fixed network access services (TIM); as required by that resolution, on March 31, 2017, following specific checks carried out by the Authority, AGCOM determined the “production mix”, meaning the weights to be allocated to the cost of each system-based solution as part of verifying the replicability of TIM’s retail ultra- broadband fiber-optic offers.
Report on operations 38 at June 30, 2017 Equal treatment and unbundling of provisioning and assurance services for LLU and SLU services
In May 2016 AGCOM started a proceeding 15 to assess TIM’s proposal for the unbundling and outsourcing of provisioning and assurance activities for LLU and SLU services and the measures required to provide greater assurance as to equal treatment in the provision of regulated fixed wholesale access services. The proceeding is in progress.
Proceeding for the revision of SLAs and penalties pursuant to Resolution 623/15/CONS
On the basis of Resolution 623/15/CONS relating to wholesale markets for fixed access services, AGCOM has initiated a proceeding for the review of the current framework for SLA and penalties in order to improve the “Equivalence of Output” model to which TIM, the dominant operator, is required to adhere in providing wholesale access services. The proceeding is in progress and AGCOM has asked operators to provide their initial observations.
Review of non-discrimination key performance indicators as per Resolution 623/15/CONS
Following its approval of Resolution 623/15/CONS relating to wholesale markets for fixed access services, AGCOM has initiated a review proceeding on non-discrimination key performance indicators in order to ensure compliance with equality of treatment between TIM and alternative operators. In this respect AGCOM requested operators to provide their observations at two distinct times, in April and November 2016. The proceeding is in progress.
Fact-finding survey into digital platforms and electronic communications services
By way of Resolution 357/15/CONS, AGCOM initiated a fact-finding survey into digital platforms, addressed to all parties who operate along the value chain of the new digital services provided through the internet platform. The survey aims i) to understand the business models employed by these entities; ii) to determine the means to protect users and the market as a whole; iii) to evaluate the opportunity of defining rules to establish a "level playing field" between new and traditional subjects; iv) to understand the functioning of platforms for distributing the apps and their underlying technologies; v) to understand the role played in the new digital ecosystem by the social communication apps (e.g. WhatsApp, Viber, WeChat, Facebook Messenger, Skype).
On June 28, 2016, by way of Resolution 165/16/CONS, AGCOM published the main findings of the fact-finding survey for the consumer section.
Again with respect to Resolution 357/15/CONS, in November 2016 AGCOM put a series of questions to the above parties on Big Data, to which Wind Tre promptly responded. These represented an anticipation of a fact-finding survey specifically dedicated to the subject, initiated by way of Resolution 217/17/CONS, to be carried out jointly with AGCM and the personal data protection authority. The objective of the survey is among others “ to identify any critical matters connected with big data, to establish of a set of rules designed to foster and protect competition in the digital economy markets and to safeguard privacy and the consumer ”. The publication of the questions relating to the fact-finding survey is currently awaited.
15 Resolution 122/16/CONS
Report on operations 39 at June 30, 2017 Fixed termination
In September 2016 AGCOM adopted its final decision 16 on fixed public telephone network interconnection services. The decision confirmed AGCOM’s previous decisions on the matter that established symmetric termination rates between TIM and other operators.
As envisaged by this decision the Authority has set up a technical workgroup to assess the most suitable means, and the related critical matters, with which operators must modify the routing technology used in the fixed-line telephone networks, moving from the current onward routing technique to direct routing. The group’s work is currently in progress.
Migration procedures and pure number portability
In October 2015 AGCOM submitted for consultation 17 a review of the timing underlying the fixed pure number portability procedure. The consultation ended in April with Resolution 40/16/CIR setting up a technical workgroup to review current fixed number portability procedures.
At the same time the Authority set up a technical workgroup to amend the current procedures for user transfer in order to adapt these in the case of optic fiber access services provided by wholesale operators other than Telecom Italia Wholesale.
Television frequencies and networks Article 1 of the decree issued by the Ministry of Economic Development on August 4, 2016 established that the fees for spectrum rights of use for 2014, 2015 and 2016 should be paid by December 31, 2016. This annual contribution is due for the use of spectra with national coverage for terrestrial television bands and amounts to €1,966,990 for each network (multiplex). This is reduced by 60% for sales of capacity between 75% and 100%.
By way of the decree issued by the Ministry of Economic Development on April 13, 2017 the ministry indicated the reference amount for 2017 for the annual fee due for the use of spectra with national coverage for terrestrial television bands. This fee has been set as €2,042,058 for each network (multiplex) applying a contribution rate of 7.5% and keeping unchanged the reductions envisaged for the sale of capacity established by the previous decree.
Antitrust issues
Proceeding A428C
On July 15, 2015 AGCM initiated a proceeding against TIM for alleged infringement pursuant to article 15, paragraph 2 of Law no. 287/90 for failing to comply with letters a) and c) of the Authority’s Provision 24339 of May 9, 2013 (a provision issued at the end of proceeding A428). This proceeding, which had been subject to a series of postponements, was brought to an end on December 21, 2016 by way of Provision 26310 under which the Authority resolved: a) that there is no presupposition for the sanction, b) that Telecom Italia S.p.A. should continue with the implementation of the project for the reorganization of the business model ensuring equality of treatment up to
16 Resolution 425/16/CONS 17 Resolution 119/15/CIR
Report on operations 40 at June 30, 2017 planned completion and that it should inform the Authority as to the performance levels of the access service supply systems and the stage of completion of the reorganization project by way of written documentation within thirty days of the date indicated by the Party for completing the implementation stage of the project stated at letter b).
Proceedings A500 A and B
In November 2016 AGCM initiated investigation proceedings against TIM and Vodafone for two separate but similar alleged violations of article 102 of the TFUE (abuse of dominant position) against the two companies operating in the national bulk SMS market. On December 19, 2016 WIND and H3G each sent a formal request to the Authority to participate in the proceedings and both requests were upheld. On April 6, 2017 AGCM notified Wind Tre that the commitments submitted separately by TIM and Vodafone had been rejected. In this case the Authority maintained that these commitments were insufficient to eliminate the charge of anti-competitive conduct.
Proceeding I799
This proceeding has been initiated against Telecom Italia and Fastweb for an alleged understanding to restrict competition (article 101 of the TFUE) deriving from the agreement that led to the creation of Flash Fiber for implementing FTTH solutions in certain specific cities.
This proceeding, in which Wind Tre was authorized to participate, which was also set up on the basis of a report made by WIND on July 29, 2016 and then subsequent reports made by Vodafone and Enel, is expected to be concluded by December 31, 2017.
On June 28, 2017 the Authority published TIM’s commitments (provision no. 26654) and those of Fastweb (provision no. 26655) in order to submit them to market testing. Observations on the submitted commitments must be received by the Authority no later than August 3, 2017.
Proceeding I757 – WIND commitment compliance
The annual compliance report on the commitments accepted by AGCM as part of proceeding I757 for an alleged vertical agreement between WIND and its multibrand sales chain was submitted to the Authority in March 2017.
At its meeting of May 17, 2017 the Authority acknowledged the compliance report and agreed that it had been prepared in accordance with the commitments undertaken in provision no. 25230 of December 11, 2014. This report must be submitted in March of each year for the commitments to hold.
Proceeding A514
A proceeding against Telecom Italia SpA (TI) was initiated on June 28, 2017 to ascertain whether there had been a violation of article 102 of the TFUE (abuse of a dominant position) on the basis of reports submitted by Infratel, Vodafone Italia, Enel SpA, Open Fiber SpA and Wind Tre SpA.
On the basis of the information received by the Authority TI allegedly conducted itself in a series of different ways with the aim of achieving two objectives harmful to competition:
Report on operations 41 at June 30, 2017 • obstructing tenders called by Infratel Italia for the coverage of the white areas with FTTH networks in order to maintain the monopoly position it has historically held in those areas and avoid the entry of new competing operators;
• capturing customers by providing the new segment of retail ultra-broadband telecommunications services in advance, including by way of anti-competitive commercial policies (unrepeatable prices, lock-ins). In this way TI would allegedly achieve two objectives: on the retail market to make it harder to take over its customer base on migration to the ultra-broadband offers; and on the wholesale market to discourage investment in the new networks and make these less profitable.
Personal data protection
On April 15, 2016 the European Parliament approved the Data Protection Reform Package, consisting in particular of a General Regulation which from May 25, 2018 will replace Privacy Directive 95/46/EC and as a consequence all related national legislation such as for example the Italian Data Protection Code (Legislative Decree no. 196 of June 30, 2003). The Guarantor has carried out certain inspections with regard to the brand “3” whose results are not yet known.
On March 20, 2017 a violation in the Selfcare tre.it computer system was identified by one of the Group’s foreign suppliers (notified to the Data Protection Authority on March 21) with the resulting illegal viewing and acquisition of credentials included in a file containing the personal data of 5,118 customers (of whom 683 no longer active). On March 23, 2017 Wind Tre contacted the 402 customers whose personal area had been accessed. On March 26, 2017 a provision was notified under which the Data Protection Authority required Wind Tre to advise all those concerned who had not received the March 23 communication, in writing and within 15 days of receipt of the provision, and Wind Tre duly complied.
Consumer protection
Regarding the proceedings of the Italian Competition Authority (AGCM) on consumer protection matters, one proceeding concerning the Consumer Code regulation and relating to the right of withdrawal as part of remote selling is still pending for the WIND/Infostrada brand (PS10685); this proceeding is expected to be concluded by May 6, 2017 and a fine is possible. A proceeding involving the Infostrada brand (PS10571) relating to the charge for the fee due for the modem in the case of remodulation is pending. A proceeding (PS 10702) involving the “3” brand has been initiated for alleged lack of adequate information relating to the phrase “without limits” used commercially and involving the WIND brand for alleged lack of adequate information concerning the cost of early withdrawal from fixed network offers.
Two consultations were initiated in 2016 on the activities carried out by AGCOM in the field of consumer protection: the first, on the subject of provisions concerning special economic conditions reserved for certain categories of customer (Resolution 378/16/CONS), was recently concluded by way of Resolution 46/17/CONS, while the second on the partial modification of Resolution 252/16/CONS was concluded by way of final decision 121/17/CONS. In addition, a public consultation has been set up on measures following seismic events (Resolution 84/17/CONS). A proceeding initiated in 2016 against the WIND brand on the provision of international roaming services in Europe (Resolution 31/17/CONS) has been brought to an end, as has a proceeding on the submission of claims by telephone
Report on operations 42 at June 30, 2017 (21/16/DTC) and a proceeding initiated in 2016 on migration procedures. As far as the “3” brand is concerned the proceeding on the provision of roaming services in Europe (32/17/CONS) has been concluded, as have been the activities for compliance with Decision 579/16 (on the involuntary use of the answering service). A proceeding initiated against the “3” brand (1/17/DTC) regarding LTE remodulation activities carried out in 2016 is still pending. A proceeding has been recently initiated in relation to four repricing information campaigns (3/17/CTC).
With the participation of the Ugo Bordoni Foundation the technical workgroups in AGCOM are continuing their work on Resolutions 580/15/CONS (on provisions on quality and mobile and personal communications service charters) and 244/08/CSP as amended (on quality and service charters for access to internet from a fixed workstation).
Disputes between operators before AGCOM By way of Resolution 449/16/CONS changes and additions were made to the “Regulation on the resolution of disputes between operators” as per attachment A of Resolution 226/15/CONS, adapting the requirements of the previous regulation to those of article 9 of Legislative Decree no. 33/2016 with identifies the Communications Authority as the body coampetent for the resolution of disputes between network operators and physical infrastructure managers or between owners of real estate property, or condominia where established by law, and network operators, in relation to the rights and responsibilities envisaged by articles 3, 4, 5, 6 and 8 of such decree.
OUTLOOK
After the first signs of stabilization in 2016, the 2017 market is expected to recover slightly in the mobile segment, driven by an increasing demand for data in mobility. In 2017 is expected the entry into the market of Iliad, a fourth infrastructured mobile operator, required by the European Commission as a mandatory condition for approving the merger between WIND and H3G which took place on December 30, 2016. In the last quarter there was an increase in competitive pressure with other operators expected also for the next quarters. In the fixed-line market the expectation is of a progressive slowdown in value contraction due to the upcoming arrival of fiber on a larger scale and an overall quality improvement in broadband. In 2017, Wind Tre will explore the opportunities arising from the combination of new technologies and new demands expressed by the market, in particular strengthening digital channels in terms of new services, customer interaction and process efficiencies. The company will contribute to the country’s digitalization through planned investments of €7 billion in the telecommunications network, innovation and new technologies over the next few years. Wind Tre has the aim of becoming the most innovative digital telecommunications operator in Italy with the largest and most extensive mobile broadband network in the country. Additionally it is also the Group’s intention to seek new growth opportunities in the business segment of the market. Wind Tre will continue to strengthen its position in the mobile, fixed-line voice and internet segments as well as enhancing its convergent business model. Considerable emphasis will be placed on increasing efficiency and obtaining a further optimization of the cost structure as part of the integration program for the two operating companies.
Report on operations 43 at June 30, 2017
WIND TRE GROUP
Consolidated interim financial statements as of and for the six-month period ended June 30, 2017
FINANCIAL STATEMENTS AND NOTES THERETO
COMPOSITION OF THE CORPORATE BODIES (BOARD OF DIRECTORS AND BOARD OF STATUTORY AUDITORS) OF WIND TRE SPA
Board of Directors (1)
Chairman Christian Nicolas Roger Salbaing
Directors Jeffrey Alan Hedberg, Managing Director
Kjell Morten Johnsen
Board of Statutory Auditors (2)
Chairman Giancarlo Russo Corvace
Standing auditor Marcello Romano
Standing auditor Luca Occhetta
Substitute auditor Roberto Colussi
Substitute auditor Maurizio Paternò di Montecupo
(1) The shareholders’ meeting of the Company (formerly H3G S.p.A.) convened on November 5, 2016, appointed the Board of Directors until the date of the shareholders’ meeting that will meet for the approval of the Company’s financial statements as at December 31, 2018. On June 22, 2017 the shareholders’ meeting of the Company appointed Mr. Jeffrey Alan Hedberg as new board member of the Company in replacement of the resigned Managing Director Mr. Maximo Ibarra. On same date the Board of Directors of the Company appointed Mr. Hedberg as Managing Director of the Company and granted this latter with the relevant powers to manage the Company. The Managing Director will hold the office until the expiration of the mandate of the current Board of Directors.
Consolidated interim financial statements 45 as of and for the period ended June 30, 2017
CONTENTS
COMPOSITION OF THE CORPORATE BODIES (BOARD OF DIRECTORS AND BOARD OF STATUTORY AUDITORS) OF WIND TRE SPA ...... 45 CONSOLIDATED INCOME STATEMENT ...... 47 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ...... 48 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...... 49 CONSOLIDATED STATEMENT OF CASH FLOWS ...... 50 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...... 51 1 INTRODUCTION ...... 52 2 GENERAL ACCOUNTING POLICIES ...... 53 3 BASIS OF CONSOLIDATION ...... 57 4 ACQUISITIONS AND DISPOSALS ...... 60 5 REVENUE ...... 60 6 OTHER REVENUE ...... 60 7 PURCHASES AND SERVICES ...... 61 8 OTHER OPERATING COSTS ...... 61 9 PERSONNEL EXPENSES ...... 61 10 RESTRUCTURING COSTS ...... 62 11 DEPRECIATION AND AMORTIZATION ...... 62 12 GAINS (LOSSES) ON DISPOSAL OF NON-CURRENT ASSETS ...... 62 13 FINANCE INCOME AND EXPENSE ...... 62 14 INCOME TAX ...... 63 15 PROPERTY, PLANT AND EQUIPMENT ...... 64 16 INTANGIBLE ASSETS ...... 65 17 FINANCIAL ASSETS ...... 66 18 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD ...... 67 19 DEFERRED TAX ASSETS AND LIABILITIES ...... 67 20 EQUITY ...... 68 21 PROVISIONS ...... 69 22 FINANCIAL LIABILITIES ...... 70 23 DERIVATIVE FINANCIAL INSTRUMENTS ...... 71 24 NET DEBT ...... 73 25 RELATED PARTY TRANSACTIONS ...... 73 26 OTHER INFORMATION ...... 76 27 SUBSEQUENT EVENTS ...... 79
Consolidated interim financial statements 46 as of and for the period ended June 30, 2017
CONSOLIDATED INCOME STATEMENT
2017 2016 2017 2016 (millions of euro) Note 6 months 6 months II quarter II quarter
Revenue 5 3,001 963 1,491 491 Other revenue 6 82 22 44 12 Total revenue 3,083 985 1,535 503
Purchases and services 7 (1,689) (663) (844) (340) Other operating costs 8 (145) (58) (73) (29) Personnel expenses 9 (209) (80) (95) (39) Restructuring costs 10 (140) - (81) - Operating income before depreciation and amortization, reversal of impairment 900 184 442 95 losses/impairment losses on non-current assets and gains/losses on disposal of non-current assets
Depreciation and amortization 11 (1,616) (201) (838) (103) Reversal of impairment losses/(impairment losses) on non - current assets - - - - Gains/(losses) on disposal of non-current assets 12 (5) - (5) - Operating income (721) (17) (401) (8)
Finance income 13 54 - 26 - Finance expense 13 (339) (25) (167) (12) Foreign exchange gains/(losses), net (2) - - - Profit/(Loss) before tax (1,008) (42) (542) (20)
Income tax 14 (42) - (12) - Profit/(Loss) for the period (1,050) (42) (554) (20)
Consolidated interim financial statements 47 as of and for the period ended June 30, 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2017 2016 2017 2016 (millions of euro) Note 6 months 6 months II quarter II quarter
Profit / (Loss) for the period (1,050) (42) (554) (20) Other comprehensive income that will be reclassified subsequently to profit or loss - Gains/(losses) on cash flow hedging instruments 11 - - -
Total Other comprehensive income that will be 11 - - reclassified subsequently to profit or loss - Total comprehensive income /(loss) for the 20 (1,039) (42) (554) (20) period
Consolidated interim financial statements 48 as of and for the period ended June 30, 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At June 30, At December 31, (millions of euro) Note 2017 2016
Assets Property, plant and equipment 15 4,518 5,618 Intangible assets 16 9,882 10,001 Financial assets 17 2,137 2,494 Other assets 245 244 Investments accounted for using the equity method 18 - 77 Deferred tax assets 19 101 125 Total non-current assets 16,883 18,559
Inventories 110 72 Trade receivables 1,138 1,287 Financial assets 17 23 24 Current tax assets 29 27 Other receivables 294 265 Cash and cash equivalents 570 603 Assets held for sale 163 50 Total current assets 2,327 2,328 TOTAL ASSETS 19,210 20,887
Equity and Liabilities Equity Issued capital 474 474 Share premium reserve 3,119 3,119 Other reserves 11,307 11,650 Retained earnings (11,735) (11,039) Total equity 20 3,165 4,204
Liabilities Financial liabilities 22 12,476 12,838 Employee benefits 75 79 Provisions 21 135 140 Other non-current liabilities 91 110 Deferred tax liabilities 19 371 368 Total non-current liabilities 13,148 13,535
Financial liabilities 22 166 176 Trade payables 1,914 2,272 Other payables 753 648 Income tax payables 64 52 Total current liabilities 2,897 3,148 Total liabilities 16,045 16,683 TOTAL EQUITY AND LIABILITIES 19,210 20,887
Consolidated interim financial statements 49 as of and for the period ended June 30, 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
2017 2016 (millions of euro) 6 months 6 months
Cash flows from operating activities Profit/(Loss) for the period (1,050) (42) Net financial costs 286 25 Income taxes 42 - Profit/(Loss) for the period before taxes, interest and profit/losses on disposal assets (722) (17) Adjustments to reconcile the loss for the period with the cash flows from/(used in) operating activities Depreciation, amortization and (reversal of impairment losses)/impairment losses on non-current assets 1,616 201 Net changes in provisions and employee benefits 11 1 Impairment of trade receivables 93 41 Changes in inventories (38) 25 Changes in current assets/liabilities (250) 179 Interest paid (287) (1) Taxes paid (8) (6) Net cash flows from operating activities 415 423
Cash flows from investing activities Acquisition of property, plant and equipment (268) (150) Acquisition of intangible assets (238) (138) Assets disposal 65 - Net cash flows used in investing activities (441) (288)
Cash flows from financing activities Banks financing borrowing: Repayments (7) (50) Parent company and fellow subsidiaries borrowings: Proceeds - 34 Repayments - (1) Net cash flows from/(used in) financing activities (7) (17)
Net cash flows for the period (33) 118
Cash and cash equivalents at the beginning of the period 603 89
Cash and cash equivalents at the end of the period 570 207
Consolidated interim financial statements 50 as of and for the period ended June 30, 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to the owners of the parent
Retained Share premium earnings/(losses (millions of euro) Issued capital reserve Other reserves carried forward) Equity
Balances at January 1, 2016 474 3,119 9,488 (9,032) 4,049
Total comprehensive income for period
- Profit/(Loss) for the period - - - (42) (42)
Transactions with equity holders
Balances at June 30, 2016 474 3,119 9,488 (9,074) 4,007
Balances at January 1, 2017 474 3,119 11,650 (11,039) 4,204
Total comprehensive income for the period
- Profit/(Loss) for the period - - - (1,050) (1,050)
- Cash flow hedges - - 11 - 11
- Other movements - - (354) 354 -
Balances at June 30, 2017 474 3,119 11,307 (11,735) 3,165
Consolidated interim financial statements 51 as of and for the period ended June 30, 2017
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE WIND TRE GROUP AS OF AND FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2017
1 INTRODUCTION
Wind Tre SpA (hereafter referred to as Wind Tre or the Company and together with its subsidiaries the Group or the Wind Tre Group) is a joint stock company having registered office in Via Leonardo da Vinci, 1, Trezzano sul Naviglio, Milan, Italy. Wind Tre is a leading operator in the fixed and mobile telecommunications and data services sector in Italy and is strongly oriented towards providing in mobility data communication services and internet mobile access services in broadband and wireless mode. In addition, it accompanies its offer with a wide range of content, applications and multimedia support. Wind Tre is also active on the digital TV market.
These consolidated financial statements for the half year ended June 30, 2017 were approved by the Company’s Board of Directors on August 1, 2017. At the date of approval of these consolidated financial statements Wind Tre is controlled by Wind Tre Italia SpA (hereafter referred to as Wind Tre Italia) which in turn is controlled by the Luxembourg based entity VIP-CKH Luxembourg Sàrl (hereafter referred to as VIP-CKH or the Joint Venture). VIP- CKH is a joint venture whose share capital is owned as to 50% by CK Hutchison Holdings Limited (hereafter referred to as CK Hutchison) and by Veon Ltd. (formerly VimpelCom Ltd. and hereafter referred to as Veon), which jointly own and operate their respective telecommunications businesses in Italy. CK Hutchison is a limited liability company incorporated in the Cayman Islands and registered in the Register of Companies of the Cayman Islands (no. MC- 294.571) whose shares are listed on the Hong Kong stock exchange and whose principal place of business is located at 12th Floor, Cheung Kong Center, 2 Queen’s Road Central, Hong Kong. Veon is incorporated under Bermuda law, domiciled in Claude Debussylaan 88, 1082 MD Amsterdam, Netherlands and listed on NASDAQ.
The economic data for the first half of 2017 are not immediately comparable with those of the same period of the previous year because they refer only to the financial statements of the former H3G Group, which did not previously draw up interim financial statements under IAS 34; accordingly the comparative figures have not been subject to review by the audit firm.
A proforma income statement is included in the Report on operation to simulate the effects of the merger from January 1, 2016 and allow the comparative commentary of some data.
On the formation of the Joint Venture at the end of last year the respective holding and operating companies of the telecommunications businesses in Italy of CK Hutchison and VimpelCom, namely Wind Tre Italia and WIND Acquisition Holdings Finance SpA, and Wind Tre and WIND Telecomunicazioni SpA, and all their subsidiaries became subsidiaries of the Joint Venture, and the Joint Venture became the new parent company of the Group holding the telecommunications businesses in Italy of CK Hutchison and VimpelCom.
Following the above mentioned transaction WIND Acquisition Holdings Finance SpA and WIND Telecomunicazioni SpA have been merged in Wind Tre Italia and in Wind Tre respectively.
The approval of the transaction obtained from the European Commission, that led to the formation of the Joint Venture, required the implementation of a number of remedies which included the signing of certain agreements with Iliad, a French telecom operator, aiming to allow Iliad to enter the Italian market. The agreements have resulted in the commitment of the Wind Tre Group to sell to Iliad frequencies and sites in the period 2017 – 2019 as well as
Consolidated interim financial statements 52 as of and for the period ended June 30, 2017
to sign certain temporary agreements which enable Iliad to operate telecommunications services in the Italian market while Iliad is creating its own network. As a result of these agreements the carrying amount of the assets to be sold have been reviewed in terms of impairment or by revising their useful lives. In addition, where the sale is expected to occur within 12 months from the closing date the assets in question have been recognized and measured in accordance with the requirements of IFRS 5 for assets held for sale. These valuations were updated in the interim financial statements as of June 30, 2017.
The following diagram sets out the structure of the Wind Tre Group at June 30, 2017.
The entry into the market of Iliad, the fourth infrastructure mobile operator, required by the European Commission as a mandatory condition for approving the merger between Wind Telecomunicazioni SpA and H3G SpA which took place at the end of last year, is planned for the end of 2017 or the beginning of 2018. For more information on the above transaction please refer to the Wind Tre Group Notes to the Consolidated Financial Statements as of December 31, 2016. In the fixed-line market the progressive slowdown in value contraction continues following the dissemination of new generation ultra-fast fiber connections and the overall improvement in broadband services. In addition emphasis continues to be given to increasing efficiency and obtaining a further optimization of the cost structure as part of the integration program that followed the merger of the two operating companies at the end of 2016.
2 GENERAL ACCOUNTING POLICIES 2.1 Basis of preparation
The consolidated financial statements for the period ended June 30, 2017 have been prepared on a going concern basis in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board (IASB) and with all the SIC/IFRIC interpretations, as endorsed by the European Union and contained in EU Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002.
The statement of financial position is prepared using an analysis of assets and liabilities into current and non-current. The income statement is prepared in accordance with IAS 1 "Presentation of Financial Statements" with a
Consolidated interim financial statements 53 as of and for the period ended June 30, 2017
classification of expenses by nature that is believed to provide more relevant information than a classification by function.
The structure and content of these consolidated interim financial statements comply with the disclosure requirements of IAS 34 Interim Financial Reporting. The consolidated interim financial statements have been prepared in accordance with IAS 1, while the notes thereto have been drawn up in a condensed format, as permitted by IAS 34. Accordingly, these consolidated interim financial statements do not include all the disclosures required for annual financial statements and should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2016. The consolidated financial statements as of and for the year ended December 31, 2016 and for the interim financial statement as of June 30, 2017 are available on request at the registered office of the Parent and on the website www.windtre.it . The income statement and statement of comprehensive income figures provided relate to the six months ended June 30, 2017. As described in the foregoing, comparative data refer only to the H3G group and therefore the comparability of data must take into account this distinction. The accounting standards adopted by the Group are the same as those used for the preparation of the consolidated financial statements as of and for the year ended December 31, 2016 with the exception of the calculation of income taxes that is based on the best estimate of the tax rate that will be applied for the entire period. Amounts set aside for income taxes are therefore subject to variation in the next interim periods as the annual tax rate is revised. In preparing these consolidated financial statements the Group adopted historical cost as the basis of measurement except for certain financial instruments for which, in accordance with IAS 39, measurement at fair value has been used. These consolidated financial statements are expressed in euros, the currency of the economy in which the Group operates. Unless otherwise stated, all amounts shown in the tables and in these notes are expressed in millions of euros. The preparation of these notes required management to apply accounting policies and methodologies that are occasionally based on complex, subjective judgments, estimates based on past experience and assumptions determined to be reasonable and realistic based on the related circumstances and on the available information. The application of these estimates and assumptions affects the reported amounts in the income statement, the statement of comprehensive income, the statement of financial position, the cash flow statement and the accompanying notes. The closing amounts of items in the consolidated annual financial statements that were initially determined for the purposes of the consolidated interim financial statements by using the above estimates and assumptions may differ from those based on such estimates and assumptions, given the uncertainty surrounding the assumptions and conditions upon which these estimates are based. Management’s significant judgments on the application of Group accounting policies and the main causes of uncertainty of these estimates are the same as those applied in the preparation of the consolidated financial statements as of and for the year ended December 31, 2016.
For the purposes of comparison, balances in the statement of financial position have been reclassified where necessary. These reclassifications do not affect the Group’s profit for the year or equity.
In this regard in order to ensure a representation in line with sector practice management has changed the presentation in the financial statements of customer acquisition costs (mainly represented by commissions paid to the sales network) which are capitalized as intangible assets where the criteria provided by the applicable standards
Consolidated interim financial statements 54 as of and for the period ended June 30, 2017
for recognition as fixed assets are met and amortized over the minimum contractual life. In previous years these costs were deferred over the minimum contractual life and presented as "Financial assets" in the non-current section; this presentation has no effect on the opening balance of shareholders' equity and results of prior years.
2.2 Accounting standards and interpretations
The Group has adopted all the newly issued and amended standards of the IASB and interpretations of the IFRIC, endorsed by the European Union, applicable to its transactions and effective for financial statements for years beginning January 1, 2017 and thereafter.
° New accounting standards and interpretations
Standards effective in 2017
In the first half of 2017, no standards or interpretations that have already been endorsed by the EU have become officially applicable.
Accounting standards and interpretations issued by IASB/IFRIC – not yet effective
Set out below is the information required to assess the possible impact arising from the application of new accounting standards and interpretations that have already been issued but have not yet become effective or have not been adopted by the EU and thus cannot be applied to the interim financial statements as of June 30, 2017.
Unless otherwise indicated, the Company does not believe that the application of these standards will have any significant impact on its economic results, except for the need for further possible disclosures.
Standard, amendment or interpretation Status
Amendment to IAS 7 “Statement of Cash Flows” under the Expected endorsement in H2 2017. disclosure initiative.
Amendment to IAS 12 “Income Taxes”: Recognition of Deferred Expected endorsement in H2 2017. Tax Assets for Unrealised Losses.
Table 1 - IFRSs whose effective date is expected for accounting periods beginning on or after January 1, 2017 (the effective date determined by the IASB may differ from the effective date for the EU.
Amendment to IAS 7 “Statement of Cash flows” under the disclosure initiative - The amendment introduces an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB’s Disclosure Initiative, aimed at understanding how financial statement disclosures can be improved.
Amendment to IAS 12 “Income Taxes” – This amendment regarding the “Recognition of Deferred Tax Assets for Unrealised Losses” clarifies how to account for deferred tax assets arising from debt instruments measured at fair value.
Consolidated interim financial statements 55 as of and for the period ended June 30, 2017
Standard, amendment or interpretation Status
IFRS 15 “Revenue from Contracts with Customers” (issued on Endorsed: September 22, 2016. May 28, 2014) including amendments to IFRS 15. Effective date Effective (EU): January 1, 2018. of IFRS 15 (issued on September 11, 2015).
Endorsed: November 19, 2016. IFRS 9 “Financial Instruments”. Effective (EU): January 1, 2018. Amendment to IAS 40 “Investment Property” relating to Expected endorsement in H2 2017. transfers of investment property.
Annual improvements 2014–2016 relating to: IFRS 1 “First-time Adoption of IFRS” Expected endorsement in H2 2017. IFRS 12 ”Disclosure of Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures”
IFRIC 22 “Foreign Currency Transactions and Advance Expected endorsement in H2 2017. Consideration”.
Table 2 - IFRSs whose effective date is expected for accounting periods beginning on or after January 1, 2018 (the effective date determined by the IASB may differ from the effective date for the EU.
IFRS 15 “Revenue from Contracts with Customers” – This replaces IAS 18 “Revenues” and IAS 11 “Construction Contracts” and the interpretations IFRIC 13 “Customer Loyalty Programs”, IFRIC 15 “Agreements for the Construction of Real Estate”, IFRIC 18 “Transfer of Assets from Customers” and SIC 31 “Barter Transactions Involving Advertising Services”. It applies to all contracts with customers except from those included in the scope of IAS 17 “Leases”, IFRS 4 “Insurance Contracts” or IAS 39/IFRS 9 “Financial Instruments”.
IFRS 15 paragraphs relating to the recognition and measurement of revenue introduce a 5-step model: i) identification of the contract with the customer; ii) identification of “performance obligations”, that is to say the separable components that are part of a sole contract but that have to be separated for accounting purposes; iii) determination of the selling price; iv) price allocation for the various “performance obligations” and v) revenue recognition when performance obligations are satisfied. IFRS 15 completes the financial statement disclosures to be presented with the nature, amount, timing and uncertainties of revenues and their cash flows.
The Group has started up the activities deemed necessary to assess the effect of the application of IFRS 15 and to apply the standard with effect from 2018 when the standard becomes effective, with retrospective application to all contracts not completed at January 1, 2018. The various effects on the performance obligations identification and the consequent price allocation, especially in the context of bundle deals, are currently being analyzed and quantified.
IFRS 9 “Financial Instruments” – This replaces IAS 39 “Financial Instruments” and contains a model to evaluate financial instruments based on three categories: amortized cost, fair value through profit or loss and fair value through other comprehensive income”. The standard envisages a new impairment model that is different from that currently included in IAS 39 and is more focused on expected credit losses. The Group has started up the activities deemed necessary to assess the effect of the application of IFRS 9.
Amendment to IAS 40 “Investment Property”; this amendment clarifies that there must be a change in use to transfer assets to, or from, investment properties. To determine that an asset has changed use there should be an assessment of whether the property meets the definition. This change must be supported by suitable evidence.
Changes in annual improvements 2014–2016 possibly affecting the Group in the future are:
Consolidated interim financial statements 56 as of and for the period ended June 30, 2017
IFRS 12 ”Disclosure of Interests in Other Entities”; clarification of the scope of the standard.
IAS 28 ”Investments in Associates and Joint ventures”; clarification of measuring at fair value of an associate or joint venture.
IFRIC 22 “Foreign Currency Transactions and Advance Consideration”; this IFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidance aims to reduce diversity in practice.
Standard, amendment or interpretation Status
IFRS 16 “Leases” Expected endorsement in H2 2017
IFRIC 23 Uncertainty over Tax Treatments Expected endorsement by the end of 2018
Table 3 - IFRSs whose effective date is expected for accounting periods beginning on or after January 1, 2019 (the effective date determined by the IASB may differ from the effective date for the EU.
IFRS 16 “Leases” – This replaces IAS 17 “Leases” and interpretations IFRIC 4 “Determining Whether an Arrangement Contains a Lease”, SIC 15 “Operating Leases—Incentives” and SIC 27 “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”. IFRS 16 eliminates the classification of leases as either operating leases or finance leases for a lessee; instead all leases are treated in a similar way to finance leases applying IAS 17. Leases are to be recognized as right-of-use assets with the corresponding recognition of a financial liability. Partial exemptions to this rule are allowed for short-term leases (i.e. leases of 12 months or less) and leases of low-value assets (for example, the lease of a personal computer). The Group has started up the activities deemed necessary to assess the effect of the application of IFRS 16.
IFRIC 23 “Uncertainty over income tax treatments” – explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment (or where there is uncertainty over whether that treatment will be accepted by the tax authority).
3 BASIS OF CONSOLIDATION The companies controlled by the Group ("subsidiaries") are consolidated on a line-by-line basis. Control exists when the Company has simultaneously: • decisional power, that is the power to govern the financial and operating policies of the entity, meaning those activities that have a significant influence on the results of the company; • the right to the variable results (positive or negative) arising from its investment in the entity; • the ability to use its decision-making power to determine the amount of the results arising from its investment in the entity. The existence of control is checked whenever facts and circumstances indicate a change in one or more of the three qualifying elements of the control. Subsidiaries are consolidated from the date of acquisition and deconsolidated when such control ceases.
Consolidated interim financial statements 57 as of and for the period ended June 30, 2017
Where there is an acquisition or loss of control of a company included in the consolidation perimeter, the consolidated financial statements include the net income of the company for the period in which the parent company has control. The financial statements used in the consolidation process are those prepared by the individual Group entities as of and for the period ended June 30, 2017 in accordance with the IFRS adopted by the European Union (EU) in drawing up these statements and approved by the respective Boards of Directors.
The consolidation procedures used are as follows: ‹ the assets and liabilities and income and expenses of consolidated subsidiaries are included on a line-by-line basis, allocating to non-controlling interests, where applicable, the share of equity and profit or loss for the year that is attributable to them. The resulting balances are presented separately in consolidated equity and the consolidated income statement; ‹ except for business combinations under common control as noted below the purchase method of accounting is used to account for business combinations in which control of an entity is acquired. The cost of an acquisition is measured as the fair value of the assets acquired, liabilities incurred or assumed and equity instruments issued at the acquisition date. Any excess of the cost of acquisition over the fair value of the assets and liabilities acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in profit or loss after first verifying that the fair values attributed to the acquired assets and liabilities and the cost of the acquisition have been measured correctly; ‹ business combinations in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination are considered business combinations involving entities under common control. In the absence of an accounting standard guiding the accounting treatment of these operations the Group applies IAS 8, consolidating the carrying amounts of the transferred entity and reporting any gains arising from the transfer directly in equity; ‹ the purchase of investments from minority holders in entities where control is already exercised is not considered a purchase but an equity transaction. Therefore, the difference between the cost incurred for the acquisition and the respective share of the accounting equity acquired is recognized directly in equity; ‹ unrealized gains and losses arising from transactions carried out between companies consolidated on a line- by-line basis and the respective tax effects are eliminated if material, as are corresponding balances of receivables and payables, income and expense, and finance income and expense; ‹ gains and losses arising from the sale of investments in consolidated subsidiaries are recognized in income as the difference between the selling price and the corresponding portion of the consolidated equity sold.
Consolidated interim financial statements 58 as of and for the period ended June 30, 2017
The following table provides a summary of the Group’s investments showing the criteria used for consolidation and measurement.
Share/quota Basis of consolidation Registered office % holding capital / measurement
Euro 06.30.2017 06.30.2017 Subsidiaries WIND Retail Srl Italy 1,026,957 100 Line-by-line WIND Acquisition Finance SA Luxembourg 60,031,000 100 Line-by-line 3lettronica Industriale SpA Italy 16,000,000 100 Line-by-line Associates Galata SpA Italy 1,000,000 10 Equity Others MIX Srl Italy 99,000 9.75 Cost Consel Italy 51,000 1 Cost Janna Scarl Italy 13,717,365 17 Cost QXN Italy 500,000 10 Cost Dono per…Scarl Italy 30,000 In liquidation Cost
Participation in Galata SpA has been reclassified as “Assets held for sale” consistent with IFRS 5. For further details see note 18.
Business combinations under common control
A business combination involving entities or businesses “under common control” is a business combination in which all the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. These transactions are not contemplated by IFRS 3, which outlines the accounting method for business combinations, or by any other IFRS. In the absence of an accounting standard of reference, it is believed that the selection of the accounting principle most suitable is the general objective set out in IAS 8 in order to provide relevant and reliable information about a transaction. In this context, some guidance in the Italian context can be found in OPI 1 (Assirevi preliminary guidelines on IFRS) relating to accounting for business combinations under common control in “Separate and Consolidated Financial Statements”. Taking into account the OPI 1 guidance, which is applicable to all reorganizational transactions (mergers) completed in Italy after the major transaction completed at a higher level which created the joint venture, the Group has decided to select the predecessor accounting method (based on continuity of values and not on IFRS 3 principles) as an accounting policy for this kind of transaction. Use of the predecessor accounting method is also in line with certain other generally accepted accounting principles that permit, or require, this accounting to be used for other common control transactions or similar circumstances.
The concept of continuing values requires the recognition in the financial statements of the acquirer of the same values as those recorded in the books of the companies / business segments acquired before the transaction or, if available, the values in the consolidated financial statements of the common parent (the “predecessor accounting” principle). Where the values transferred are higher than these historical values, both the acquirer and the seller must eliminate the excess by reducing equity.
In relation to the date from which a transaction under common control can be considered, OPI 1 and predecessor accounting allow the backdating of the accounting consequences if the aim of the transaction is to reorganize a
Consolidated interim financial statements 59 as of and for the period ended June 30, 2017
Group after a major transaction has occurred at a higher level. The backdating can be applied up to the date of when the major transaction occurred.
The economic data for the first half 2017 are not immediately comparable with those of the same period of the previous year as a result of the different contribution to the consolidated income statement of the former H3G SpA and the former WIND Telecomunicazioni SpA involved in the merger that took place in 2016. A proforma income statement is included in the Report on operations to simulate the effects of the merger since January 1, 2016.
4 ACQUISITIONS AND DISPOSALS During the second quarter, in the context of the licensing agreement with the French operator Iliad, €50 million were collected from licenses classified as “Assets held for sale" at the end of last year as foreseen in the contractual plan.
5 REVENUE The following table provides an analysis of Revenue for the six months and for the second quarter of 2017 compared with the corresponding periods of 2016.
(millions of euro) 2017 2016 2017 2016 6 months 6 months Change II quarter II quarter Change Revenue from sales 377 198 179 181 106 75
- Telephone services 2,240 624 1,616 1,113 313 800 - Interconnection traffic 273 108 165 138 55 83 - International roaming 31 18 13 18 9 9 - Judicial authority services 3 - 3 1 - 1 - Other revenue from services 77 15 62 40 8 32 Revenue from services 2,624 765 1,859 1,310 385 925 Total 3,001 963 2,038 1,491 491 1,000
Revenue from sales mainly refers to the sale of mobile telephone handsets and accessories.
The Telephone services mainly refer to revenues from voice fixed and mobile services and internet services mobile data transmission.
Interconnection traffic includes revenue from other telecommunications operators for the termination of traffic to the Company’s customers.
Other revenue from services mainly refer to business spaces, sites and network sublease and revenue from MVNO.
6 OTHER REVENUE Other revenue amounts in total to €82 million in the six months of 2017 and refers principally to release to income statement of capital contribution for the period and other non recurring revenues.
Consolidated interim financial statements 60 as of and for the period ended June 30, 2017
7 PURCHASES AND SERVICES
The following table provides an analysis of Purchases and services for the six months and for the second quarter of 2017 compared with the corresponding periods of 2016.
(millions of euro) 2017 2016 2017 2016 6 months 6 months Change II quarter II quarter Change Purchases of raw materials, consumables, supplies and goods 378 182 196 163 95 68 Interconnection traffic 280 112 168 141 56 85 Outsourcing costs for other services 189 27 162 96 13 83 Rental of local network and circuits 188 8 180 90 4 86 Lease of civil/technical sites and use of third party assets 174 91 83 88 46 42 Customer acquisition costs 152 88 64 79 45 34 Maintenance and repair 87 60 27 43 27 16 Power consumption and other utilities 69 24 45 35 13 22 Advertising and promotional services 56 24 32 22 14 8 National and international roaming 23 15 8 12 8 4 Consultancies and professional services 19 7 12 8 4 4 Change in inventories (22) - (22) 10 - 10 Other services 96 25 71 57 15 42 Total purchases and services 1,689 663 1,026 844 340 504
8 OTHER OPERATING COSTS
The following table provides an analysis of Other operating costs for the six months and for the second quarter of 2017 compared with the corresponding periods of 2016.
(millions of euro) 2017 2016 2017 2016 6 months 6 months Change II quarter II quarter Change Impairment losses on trade receivables and current assets 93 41 52 50 21 29 Annual license and frequency fees 32 11 21 16 6 10 Accruals to provision for risks and charges 6 1 5 - - - Other operating costs 14 5 9 7 2 5 Total other operating costs 145 58 87 73 29 44
9 PERSONNEL EXPENSES
The following table provides an analysis of Personnel expenses for the six months and for the second quarter of 2017 compared with the corresponding periods of 2016.
(millions of euro) 2017 2016 2017 2016 6 months 6 months Change II quarter II quarter Change Wages and salaries 189 64 125 89 32 57 Social security charges 51 16 35 25 8 17 Post-employment benefits 12 4 8 6 2 4 Other personnel expenses 8 3 5 4 1 3 (Costs capitalized for internal works) (51) (7) (44) (29) (4) (25) Total personnel expenses 209 80 129 95 39 56
Consolidated interim financial statements 61 as of and for the period ended June 30, 2017
On February 24, 2017, an agreement was reached to harmonize the various contractual and regulatory disciplines following the merger at the end of last year. For more information, see the Report on Operations.
10 RESTRUCTURING COSTS The item, amounting €140 million at June 30, 2017, is mainly due to costs already incurred or related to implementing the business’s restructuring and reorganization plan, drawn up with the objective of the incorporation.
11 DEPRECIATION AND AMORTIZATION
The following table provides an analysis of Depreciation and amortization for the six months and for the second quarter of 2017 compared with the corresponding periods of 2016.
(millions of euro) 2017 2016 2017 2016 6 months 6 months Change II quarter II quarter Change Depreciation of property, plant and equipment - Plant and machinery 1,319 96 1,223 688 49 639 - Industrial and commercial equipment 12 1 11 7 1 6 - Other assets 10 4 6 4 2 2
Amortization of intangible assets with finite lives - Industrial patents and similar rights 67 30 37 33 15 18 - Concessions, licenses, trademarks and similar rights 28 12 16 14 6 8 - Other intangible assets 180 58 122 92 30 62 Total depreciation and amortization 1,616 201 1,415 838 103 735
The item includes the effect of the acceleration of the amortization on part of the network infrastructure and on some IT systems in order to align the remaining useful life following an optimization plan and the construction of a new generation integrated network as well as of some sites as a result of agreements with Iliad.
12 GAINS (LOSSES) ON DISPOSAL OF NON-CURRENT ASSETS
The item “Gains (losses) on disposal of non-current assets” mainly refers to losses for disposal of plant and equipment for the modernization of the network
13 FINANCE INCOME AND EXPENSE
The following table provides an analysis of Finance income for the six months and for the second quarter of 2017 compared with the corresponding periods of 2016.
(millions of euro) 2017 2016 2017 2016 6 months 6 months Change II quarter II quarter Change Cash flow hedges reversed from equity 3 - 3 1 - 1 Fair value measurement of non-hedging derivatives 2 - 2 - - - Other 49 - 49 25 - 25 Total finance income 54 - 54 26 - 26
Consolidated interim financial statements 62 as of and for the period ended June 30, 2017
Other financial income at June 30, 2017 consists mainly of the interest of €47 million arising on the receivable from the parent Wind Tre Italia SpA under the intercompany agreements entered in April 23, 2014 and in August 4, 2014, for which details may be found in note 17.
The following table provides an analysis of Finance expense for the six months and for the second quarter of 2017 compared with the corresponding periods of 2016.
(millions of euro) 2017 2016 2017 2016 6 months 6 months Change II quarter II quarter Change Interest expense on: Bond issues 294 - 294 146 - 146 Shareholders loans 23 23 - 11 11 - Bank loans 25 - 25 12 - 12 Cash flow hedges, reversed from equity (62) - (62) (32) - (32) Fair value measurement of derivatives 33 - 33 16 - 16
Other 26 2 24 14 1 13 Total finance expense 339 25 314 167 12 155
Finance expense consists mostly of accrued interest on financial liabilities outstanding at June 30, 2017, for which further details may be found in note 22.
The item also includes the positive effect of hedge accounting of €62 million, the negative effects related to the fair value measurement of the embedded derivatives on bonds of €26 million and the ineffectiveness recorded on hedging derivatives of €7 million.
14 INCOME TAX
The following table provides an analysis of Income tax for the six months and for the second quarter of 2017 compared with the corresponding periods of 2016.
(millions of euro) 2017 2016 2017 2016 6 months 6 months Change II quarter II quarter Change Current tax 16 - 16 6 - 6 Deferred tax 26 - 26 6 - 6 Total income taxes 42 - 42 12 - 12
The net charge for the period is made up of the following: • current income taxes expense of €16 million (of which €6 million for tax of the subsidiary WIND Acquisition Finance SA and €10 million for IRAP tax) charged on the consolidated taxable income for the period and estimated against the effective tax rate on the entire exercise; • net deferred tax income of €26 million, arising from the release of deferred tax assets.
Consolidated interim financial statements 63 as of and for the period ended June 30, 2017
15 PROPERTY, PLANT AND EQUIPMENT
The following table sets out the changes in Property, Plant and Equipment during the first six months of 2017.
(millions of euro) Carrying Carrying amount at amount at Additions Depreciation Disposals Others December June 30, 31, 2016 2017 Land and buildings 1 - - - - 1 Plant and machinery 5,503 256 (1.319) (13) (11) 4.416 Equipment 43 3 (12) - 2 36 Other 71 9 (10) - (5) 65 Total 5,618 268 (1.341) (13) (14) 4.518
The cost, accumulated impairment losses and accumulated depreciation at June 30, 2017 can be summarized as follows.
(millions of euro) At June 30, 2017 Accumulated Accumulated Carrying Cost impairment losses depreciation Amount Land and buildings 1 - - 1 Plant and machinery 16.434 (2) (12.016) 4.416 Equipment 560 - (524) 36 Other 526 - (461) 65 Total 17.521 (2) (13.001) 4.518
Plant and machinery presents a net increase of €256 million mainly due to the purchases and operations of radio links and high frequency equipment for the expansion of the mobile access network, exchanges and electronic installations and plant and machinery under construction (IT infrastructures and 3G and LTE technologies). Disposals amounted €13 million and relate to disposals and value adjustments of equipment, infrastructure and transmission systems, which are no longer usable. At June 30, 2017, transmission equipment, telephone systems and commutation switchboards owned by the Parent company and having a carrying amount of €101 million (€98 million at December 31, 2016) were held by customers for use. Transmission equipment for direct access through “unbundling of the local loop” having a carrying amount of €2 million at June 30, 2017 (€2 million at December 31, 2016) was held on deposit by Telecom Italia SpA. Plant and machinery additionally includes the expenditure incurred to acquire the exclusive rights for the use of cable products and optic fiber for a total of €74 million at June 30, 2017 (€78 million at December 31, 2016).
The item “Others” includes a negative amount of €14 million related to the reclassification of the assets that will be transferred to Iliad in the next twelve months, under “Assets held for sale”.
Consolidated interim financial statements 64 as of and for the period ended June 30, 2017
16 INTANGIBLE ASSETS The following table sets out the changes in Intangible assets during the first six months of 2017.
(millions of euro) Carrying Transfer to Carrying amount at other amount at Additions Amortization Disposals December natural June 30, 31, 2016 account 2017
Industrial patents and intellectual property rights 316 53 (67) - - 302
Concessions, licenses, trademarks and similar rights 5,364 45 (28) - (73) 5.308
Other intangible assets 718 140 (180) (8) (1) 669
Goodwill 3,603 - - - - 3.603
Total 10,001 238 (275) (8) (74) 9.882
The cost, accumulated impairment losses and accumulated amortization at June 30, 2017 can be summarized as follows.
(millions of euro)) At June 30, 2017 Accumulated Accumulated Carrying Cost impairment losses amortization amount
Industrial patents and intellectual property rights 2.044 - (1.742) 302
Concessions, licenses, trademarks and similar rights 10.521 (1.518) (3.695) 5.308
Other intangible assets 3.655 (93) (2.893) 669
Goodwill 4.027 (75) (349) 3.603 Total 20.247 (1.686) (8.679) 9.882
Industrial patents and intellectual property rights consist of the cost for the outright purchase of application software licenses or the right to use such licenses for an unlimited period and the capitalized costs relating to the time spent by Parent personnel in designing, developing and implementing information systems, which at June 30, 2017 amounted to €12 million. Concessions, licenses, trademarks and similar rights include individual licenses for the installation of networks and concessions to operate in the regulated activities of the telecommunications sector granted to the Group’s companies by the relevant authorities, as detailed below.
Individual Licenses or General Authorizations or Use of Frequencies Date of issue Date of expiry (1) Wind Tre Group Installation of network and provision of voice telephony services on the Italian national territory (2) February 1998 February 2018 Installation and provision of public telecommunications networks on the Italian national territory April 1998 April 2018 (2)
Provision of public digital mobile communications services using DCS 1800 technology, including June 1998 June 2018 (3) the possibility of operating in frequencies in the 900 MHz band using GSM technology on the Italian national territory
Provision of third generation mobile communications services adopting the UMTS standard (IMT- January 2001 December 2029 (5) 2000 family) and the installation of the related network on the Italian national territory (4)
Use of frequencies for broadband point-multipoint radio networks in the 24.5-26.5 GHz band for July 2002 July 2022 the geographical area corresponding to the specified Italian region/autonomous province (6)
Use of frequencies for providing terrestrial publicly available broadband mobile services in the 800, January 2012 December 2029 1800 and 2600 MHz bands (LTE technology) (7)
Consolidated interim financial statements 65 as of and for the period ended June 30, 2017
Individual Licenses or General Authorizations or Use of Frequencies Date of issue Date of expiry (1) (1) Under the current rules, individual licenses are subject to renewal upon request be submitted at least sixty days before the deadline (art .25 paragraph 6, of Legislative Decree no. 259/03) or application for extension. (2) The Group is the assignee of additional licenses valid for the installation of the network and provision of fixed telephony services also following the previous merger of Infostrada SpA in WIND Telecomunicazioni SpA and the merger of WIND Telecomunicazioni SpA in H3G SpA.
(3) In accordance with art. 1, paragraphs 568 to 575, of Law no. 232 of December 11, 2016 and art . 25, paragraph 6, of Legislative Decree no. 259/03 and subsequent amendments a refarming application was submitted on February 15, 2017 to the MISE with effect from July 1, 2017 and the relative extension until 2029 of the right to use the 900 and 1800 MHz frequencies having an original expiry date of June 30, 2018.
(4) The Group is the assignee of two valid individual licenses and the related rights of use of frequencies in the 2100 MHz band, already issued to WIND Telecomunicazioni SpA and H3G SpA respectively with effect from 1 January 2002. It also holds the rights of use on a national basis of a coupled block of 2x5 MHz at 900 MHz, with the allocation decision dated May 19, 2010 having effect from June 1, 2010 and expiring on December 31, 2021.
(5) The extension to 2029 is subject to compliance with the provisions of Ministry of Economic Development with order issued in October 2016, and to the payment of the contributions due for the years 2022 to 2029 pursuant to art. 35 of the Electronic Communications Code pursuant to Legislative Decree no . 259/03 and subsequent amendments.
(6) Overall 21 multiple point individual licenses have been allocated .
(7) Following the participation respectively by WIND Telecomunicazioni SpA and H3G SpA to tender for the allocation of rights to use frequencies in the bands 800, 1800, 2000 and 2600 MHz for terrestrial services to the public at large electronic communication band, published in the OJ of the Italian Republic no . 75 of 27 June 2011, the Group holds the rights to use frequencies in the bands 800, 1800 and 2600 (FDD and TDD) MHz, respectively, issued in January and February 2012. It also holds the rights of use on a national basis of a coupled block of 2x5 MHz in the 1800 MHz band following the exercise of subscription rights on the preferential allocation of these frequencies, by order of allocation of 12 April 2012 having effect from 1 June 2012 and expiring on 31 December 2029.
Transfer to other natural account for €74 million includes the reclassification of the licenses, which will be transferred to Iliad in the next twelve months, to “Assets held for sale” for €72 million. In addition, Concessions, licenses, trademarks and similar rights for €1,300 million refer to trademarks, which have an indefinite useful life. Similar rights consist of rights of way and the right to use assets owned by third parties for a predetermined period of time and are initially recognized at their one-off purchase price, including any accessory costs. This item relates for the most part to the costs incurred by Infostrada SpA, now merged, for the purchase in 1998 of the right of way on the Italian railway network and the purchase of the right to use the existing optic fiber on the network and, commencing in 2013, to the capitalization of expenditure for the backbone rights of way of TERNA/TELAT, with a net value of €109 million at June 30, 2017. Other intangible assets mainly relate to the residual value of the customer list, amounting to €184 million, identified upon allocating the goodwill at December 31, 2006 that arose from the merger of the former parent WIND Acquisition Finance SA and to customer acquisition costs amounting to €240 million. Goodwill pertains to the legal entity WIND Retail Srl for €23 million and to the parent Wind Tre SpA for €3,580 million, both of which are, however, part of a single Cash Generating Unit for the purposes of IAS 36.
17 FINANCIAL ASSETS The following table sets out Financial assets at June 30, 2017 and at December 31, 2016.
(millions of euro) At June 30, 2017 At December 31, 2016
Non-current Current Total Non-current Current Total Financial assets measured at cost 2 - 2 2 - 2
Derivative financial instruments 1,054 - 1,054 1,460 - 1,460
Financial receivables 1,081 23 1,104 1,032 24 1,056
Total 2,137 23 2,160 2,494 24 2,518
Consolidated interim financial statements 66 as of and for the period ended June 30, 2017
Financial assets measured at cost consist of non-controlling interests in companies and consortia for €2 million and mainly refer to an investment of 17% in Janna Scarl.
Derivative financial instruments include the positive fair value of derivative financial instruments, detailed as follows: i) embedded derivatives on bond issues amounting to €373 million; and ii) cross currency swap hedging derivatives on financial liabilities amounting to €681 million. Additional details on the composition of the balance and respective changes are to be found in note 23.
Financial receivables, amounting to €1,104 million at June 30, 2017, mainly include the loans granted by Wind Tre to Wind Tre Italia SpA for €1,090 million (of which €47 million related to accrued interest), resulting from the two intercompany agreements signed on April 23, 2014 and August 4, 2014 respectively. In particular, the first loan, with a nominal value of €925 million (with repayment date in April 2024 and an annual fixed interest rate of 9%) was fully disbursed at June 30, 2017. The second loan for up to a nominal value of €75 million (with reimbursement in August 2024 and annual fixed interest rate of 8.5%) was drawn down in the amount of €67 million at June 30, 2017.
The increase in Financial receivables over December 31, 2016 is mainly due to the capitalization of accrued interest made during the first half 2017.
18 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
The item at June 30, 2017 shows a balance equal to zero compared to €77 million in the previous year. On July 4, 2017, the parent company handed over n. 100,000 shares representing 10% of the holding in Galata SpA and therefore, at the date of this interim report, the reclassification of the entire amount to "Assets held for sale" was carried out.
19 DEFERRED TAX ASSETS AND LIABILITIES
The following tables provide the variation of Deferred tax assets and Deferred tax liabilities by origin at June 30, 2017 and at December 31, 2016.
(millions of euro) At December 31, At June 30, Decrease Increase 2016 2017 Measurement of financial assets/liabilities 125 24 - 101
Deferred tax assets 125 24 - 101
Employee benefits 2 2 - -
Accelerated depreciation and amortization 8 1 - 7
Fair value of Property, plant, and equipment 19 - 163 182
Depreciation of Purchase Price Allocation 491 31 - 460
Allowance for doubtful accounts (53) - (56) (109)
Amortization and depreciation of non-current assets (44) - (97) (141)
Losses carryforward for offset (34) (34) - -
Provisions for risks and charges (taxed) (21) - (7) (28)
Deferred tax liabilities 368 - 3 371
Consolidated interim financial statements 67 as of and for the period ended June 30, 2017
The decrease during the period of €24 million in deferred tax assets is mainly referable to change in tax rates applicable to subsidiaries. Deferred tax liabilities at June 30, 2017 are mainly due to temporary differences on Depreciation of Purchase Price Allocation.
The following table provides an analysis of Deferred tax assets and Deferred tax liabilities at June 30, 2017 and December 31, 2016, between those falling due within 12 months and those falling due after 12 months.
(millions of euro) At June 30, At December 31, 2017 2016
-within 12 months - 5
-after 12 months 101 120
Total 101 125
(millions of euro) At June 30, At December 31, 2017 2016
-within 12 months - 25
-after 12 months 371 343
Total 371 368
Deferred tax assets of €1,376 million were not recognized on temporary differences that can be carried forward indefinitely due to the lack of reasonable certainty as to their recoverability (€1,173 million at December 31, 2016). These arise from previous years losses carried forward and from finance expenses which due to legislative limits are currently non-deductible.
20 EQUITY The following table sets out the composition of Shareholders’ Equity at June 30, 2017 and December 31, 2016.
(millions of euro) At June 30, At December 31, 2017 2016
Issued capital 474 474
Share premium reserve 3,119 3,119 Other reserves and retained earnings (accumulated losses), including profit/(Loss) for the year (428) 611
- Reserve for remeasurement of employee defined benefit plans (IAS19) (11) (11)
- Cash flow hedge reserve (70) (81)
- Parent company legal reserve 10 10
- Sundry reserves and retained earnings (accumulated losses), including loss for the period (357) 693
Total Equity 3,165 4,204
The Parent Company's share capital amounts to €474,303,795.00, fully paid, consisting of 94,860,759 shares each of nominal value €5.00 wholly owned by the sole shareholder Wind Tre Italia. The number of the Parent Company’s shares has not changed during the year. Following the confirmation and extension of the pledge on the shares of the Parent Company it is noted that, derogating from article 2352, paragraph 1 of the Italian Civil Code and by express contractual stipulation, entitlement
Consolidated interim financial statements 68 as of and for the period ended June 30, 2017
to vote at shareholders’ meetings of the Parent Company remains with the direct parent Wind Tre Italia, despite such pledge.
Changes in equity attributable to the owners of the Company during the first half 2017 as well as the loss for the period mainly arose from the following:
• a decrease in the cash flow hedge reserve as the effect of the income and the expense recognized among other components of the Consolidated Statement of Comprehensive Income for the period that relate entirely to the transactions on hedging derivatives on cash flows, as described in further detail in note 23. The Company obtains the capital needed to fund its requirements for business development and operations; sources of funds are found in a balanced mix of equity and debt. Debt is structured on the basis of different maturities and currencies to ensure adequate diversification of funding sources and efficient access to external financing sources.
21 PROVISIONS
The following table sets out changes in Provisions during the first six months of 2017.
(millions of euro) At December 31, At June 30, Increases (Utilization) (Release) 2016 2017 Litigation 56 10 (13) (1) 52 Universal service contribution 5 - - - 5 Handset assistance 1 - - - 1 Dismantling and removal 30 - (1) - 29 Other provisions 48 3 (3) 48 Total 140 135
The timing of payments in respect of non-current provisions is, with few exceptions, not contractually fixed and cannot be estimated with certainty.
Litigation The provision at the respective dates is based on estimates using the best information available of the total charge that the Group expects to incur upon settlement of all outstanding legal proceedings (for details on the main proceedings in progress, reference should be made to the paragraph on the main pending legal proceedings in note 26).
Universal service contribution Article 3, paragraph 6, of Presidential Decree no. 318 of September 19, 1997 regarding the “Implementation of European Union Directives” establishes a mechanism designed to distribute the net cost of providing the universal service throughout the country whenever the related obligations represent an unfair cost for the entity or entities assigned the responsibility for supplying the service.
Handset assistance The provision represents an estimate of the costs that the Group may incur for assistance for handsets sold under warranty.
Consolidated interim financial statements 69 as of and for the period ended June 30, 2017
Dismantling and removal The item consists of the estimate of the dismantling and removal costs which may be incurred as a result of contractual obligations which require the asset to be returned to its original state and condition.
Other provisions This item consists of the measurement of certain liabilities arising from obligations assumed by the Group for which an estimate is made at the date of these financial statements of the amount to be settled upon due date. The balance at June 30, 2017 includes €34 million for liabilities for termination benefits arising from agency contracts in existence at the reporting date and €2 million relating to compensation plans for the long-term retention and incentive of management.
22 FINANCIAL LIABILITIES
The following table sets out an analysis of Financial liabilities at June 30, 2017 and at December 31, 2016.
(millions of euro) At June 30, 2017 At December 31, 2016 Non-current Current Total Non-current Current Total
Bond issues 9,907 154 10,061 10,293 160 10,453
Loans from shareholders 1,740 - 1,740 1,717 - 1,717
Bank loans 682 8 690 677 8 685
Loans from others 127 1 128 128 1 129
Derivative financial instruments 20 3 23 23 7 30
Total financial liabilities 12,476 166 12,642 12,838 176 13,014
The following tables provide the most important information regarding bank loans and bond issues outstanding at June 30, 2017.
(millions of euro) Carrying Carrying Nominal amount at amount at amount at June 30, December June 30, Issue Interest Bond issues 2017 31, 2016 2017 price Currency Due date rate Price Euribor 3m Frn PURPLE III 2020 Eur 400 400 400 100% EUR 07/15/2020 100.3% + 4.125% SSN PURPLE II 2020 B EUR 383 383 375 100% EUR 07/15/2020 4.00% 101.6% Euribor 3m Senior Secured Floating Rate Notes 2019 € (DOVE) 150 150 150 100% EUR 04/30/2019 100.8% + 5.25% Senior Secured Fixed Rate Notes 2020 $ (DOVE) 483 524 481 100% USD 04/30/2020 6.50% 103.4% Senior Notes 2021 € (PURPLE I) 1,759 1,758 1,750 100% EUR 04/23/2021 7.00% 103.6% Senior Notes 2021 $ (PURPLE I) 2,479 2,690 2,451 100% USD 04/23/2021 7.38% 104.0% Senior Secured Notes 2020 € (PURPLE II) 2,129 2,127 2,100 100% EUR 07/15/2020 4.00% 101.6% Senior Secured Notes 2020 $ (PURPLE II) 1,703 1,847 1,663 100% USD 07/15/2020 4.75% 101.5% Euribor 3m Senior Secured Floating Rate Notes 2020 € (PURPLE II) 575 574 575 100% EUR 07/15/2020 100.1% + 4.00% Totale 10,061 10,453 9,945
Consolidated interim financial statements 70 as of and for the period ended June 30, 2017
(millions of euro) Carrying Carrying Nominal amount at amount at amount at June 30 December June 30 , Residual Bank loans 2017 31, 2016 2017 Commitment Currency Due date Interest rate Senior Facility Agreement - Term Loan B1 690 685 700 700 Eur 11/26/2019 Euribor +4,25% - RCF R1 - - - 400 Eur 11/26/2019 Euribor +4,25% Total 690 685 700 1,100
The following table provides the breakdown of effective interest rates and lending currency, net of derivative financial instruments, of loans at June 30, 2017.
(millions of euro) At June 30, 2017
<5% 5% US dollars 1,692 483 2,468 - - 4,643 Total 5,179 3,092 2,480 127 - 10,878 Changes in balances of bonds at June 30, 2017 is due mainly to the change in the period of the euro/USD exchange rate on financial liabilities in foreign currency. The Senior Facility Agreement contains financial covenants which the Group must test if the amount drawn down from the Revolving Credit Facility (“RCF”) exceeds 35% of the total. No amounts had been drawn down from the RCF at June 30, 2017. An analysis of the derivative financial instruments balance and of the respective changes is found in note 23. 23 DERIVATIVE FINANCIAL INSTRUMENTS The following table provides details of the outstanding Derivative financial instruments at June 30, 2017 and changes over December 31, 2016, analyzed by the type of risk hedged. (millions of euro) At June 30, 2017 At December 31, 2016 Fair Value (+) Fair Value (-) Fair Value (+) Fair Value (-) - Exchange rate risk 471 - 744 - - Interest rate risk - 21 - 27 Total cash flow hedges 471 21 744 27 - Exchange rate risk 210 - 317 - Total fair value hedges 210 - 317 - Non-hedge accounting derivatives 373 2 399 3 Total non Hedge Accounting Derivatives 373 2 399 3 Total 1,054 23 1,460 30 Changes in the fair value of derivatives arise mainly from variations in the interest rate curve and movements in the euro/USD exchange rate over the period. Consolidated interim financial statements 71 as of and for the period ended June 30, 2017 The following table shows the detail of current and non-current derivative instruments. (millions of euro) At June 30, 2017 At December 31, 2016 Fair Value (+) Fair Value (-) Fair Value (+) Fair Value (-) Current - 3 - 7 Non current 1,054 20 1,460 23 Total derivatives 1,054 23 1,460 30 The fair value of cross currency swap and plain vanilla interest rate swaps is determined through directly observable inputs such as interest rates curves (Level 2 in the fair value hierarchy). The fair value of embedded derivatives is determined by comparing the fair value of the total bond with the fair value of comparable bonds that do not incorporate this option. The fair value of loans is calculated using the DCF model (Level 3 in the fair value hierarchy). With respect to the latter, the entire change in the period is due solely to movements in the fair value of the instrument as a whole and therefore not to the sale or purchase of the underlying. The following tables provide an analysis of financial assets and liabilities measured at fair value by hierarchy at June 30, 2017 and at December 31, 2016. (millions of Euro) Level 1 Level 2 Level 3 Total Assets at fair value Derivative financial instruments - 681 373 1,054 Total assets - 681 373 1,054 Liabilities at fair value Derivative financial instruments - 23 - 23 Total liabilities - 23 - 23 (millions of Euro) Level 1 Level 2 Level 3 Total Assets at fair value Derivative financial instruments - 1,061 399 1,460 Total assets - 1,061 399 1,460 Liabilities at fair value Derivative financial instruments - 30 - 30 Total liabilities - 30 - 30 Level 3 includes the embedded derivative fair value on loans and relates to the early repayment option while Level 2 includes the fair value of other derivatives. In 2017 and 2016 there were no transfers either from Level 1 to Level 2 or vice versa or from Level 3 to other levels or vice versa. It should also be noted that at June 30, 2017 there no additional financial instruments measured at fair value other than those indicated in the tables above. Consolidated interim financial statements 72 as of and for the period ended June 30, 2017 24 NET DEBT The following statement shows the Group’s net financial debt analyzed into its principal components, as described in notes 17, 22 and 23 relating to financial items in the statement of financial position. At June 30, At December 31, (millions of euro) 2017 2016 Bond issues 9,907 10,293 Shareholders loans 1,740 1,717 Bank loans 682 677 Loans from others 127 128 Derivative financial instruments 20 23 Non-current financial liabilities 12,476 12,838 Bond issues 154 160 Bank loans 8 8 Loans from others 1 1 Derivative financial instruments 3 7 Current financial liabilities 166 176 TOTAL GROSS FINANCIAL DEBT 12,642 13,014 Cash and cash equivalents (570) (603) Financial receivables (20) (21) Current financial assets (20) (21) Derivative financial instruments (1,054) (1,460) Financial receivables (1,074) (1,026) Non-current financial assets (2,128) (2,486) TOTAL FINANCIAL ASSETS (2,718) (3,110) NET FINANCIAL DEBT 9,924 9,904 Net debt does not include guarantee deposits of €7 million at June 30, 2017 and of €5 million at December 31, 2016. 25 RELATED PARTY TRANSACTIONS Transactions with related parties Related party transactions are part of normal operations which are conducted on an arm's length basis from an economic standpoint and formalized in agreements, and mainly relate to transactions with telephone operators. Transactions with the associate Galata SpA arise from the service agreement signed with Wind Tre SpA for the provision of a wide range of services on technological sites that host Wind Tre equipment. During the first half of 2017, Group companies did not hold treasury shares of the parent Wind Tre Italia, either directly or through trustees, or hold shares of the indirect parent VIP-CKH Luxembourg Sàrl. Consolidated interim financial statements 73 as of and for the period ended June 30, 2017 The table below provides a summary of the main effects on the income statement and statement of financial position following transactions during the year with related parties, all companies of the VimpelCom and CK Hutchison groups, joint venturers at 50% in the parent company VIP-CKH. With reference to the transactions with the parents, Wind Tre has an outstanding loan with both Wind Tre Italia and VIP-CKH, for which details may be found in notes 17 and 22. Consolidated interim financial statements 74 as of and for the period ended June 30, 2017 (thousa nds of euro) Financial income/ Trade Other Financial Financial Trade Other Revenue (expenses) Expenses receivables receivables receivables payables payables payables Parent companies Vimpelcom ltd 3 - - - 115 - - - - VIP-CKH LUXEMBOURG Sàrl 5 - - 6 - - 293,841 - - Wind Tre Italia S.p.A. 35 32,845 1,008 - 228 1,089,962 1,446,425 3,025 - Total Parent companies 43 32,845 1,008 6 343 1,089,962 1,740,266 3,025 - Associates companies Galata 2,631 - 95,117 2,373 1,202 - - 60,311 - Total Associates companies 2,631 - 95,117 2,373 1,202 - - 60,311 - Other related companies Armenija Telefon Kompani 3 - - 2 - - - 21 - DiGi (Malaysia) 2 - - 8 - - - 2 - DTAC/UCOM (Thailand) - - 3 23 - - - 5 - GrameenPhone (Bangladesh) 14 - 14 - - - - 74 - KaR-Tel 7 - 1 10 - - - - - Kievstar 382 - 9,688 4 - - - 6,087 - Telenor Maritime - - 237 - - - - 238 - Mobitel LLC Georgia 1 - 2 - - - - 8 - Orascom Telecom Algeria SpA 17 - 53 326 - - - 49 - Banglalink Digital Communications Limited - - 1 773 - - - 2 - Pakistan Mobile Communications Ltd. - - 5 302 - - - - - SKY MOBILE LLC ------1 - Telenor Magyarorszag KFT (Hungary) 102 - 32 70 - - - 226 - Telenor Mobile Communications AS (Norway) 184 - 16 130 - - - 741 - Telenor Pakistan (Pakistan) - - 2 - - - - 4 - Telenor Serbia (Serbia) 143 - 21 251 - - - 10 - Unitel - - 1 4 - - - - - VimpelCom Lao Co, Ltd ------Vympel-Kommunikacii 541 - 1,965 14 - - - 1,202 - Wind Telecom SpA 85 - - - 271 - - - 411 Vimpelcom International services - - - - 22 - - - - Tacom LLC (Tajikistan) ------1 - Telenor Sverige AB 3 ------32 - Weather Capital Special Purposes I SA - - 16 - - - - 10 - Klarolux Investments Sarl - - 4 ------Global Luxembourg SARL - - 4 ------Global Telecom SARL - - 4 ------Global Telecom Finance SCA - - 4 ------Global Luxembourg Finance SCA - - 4 ------Global Telecom Acquisition - - 4 ------Global Telecom One Sarl - - 4 ------Global Telecom Oscar - - 6 ------Telenor Bulgaria EAD 33 - 6 14 - - - 101 - DTAC TriNet Co., Ltd. 153 - 2 153 - - - - - Telenor A/S 15 - 8 8 - - - 22 - Telenor Montenegro 8 - 22 - - - - 152 - Vodafone Hutchison Australia Pty Ltd. 9 - 2 57 - - - - - PT. Hutchison 3 Indonesia ------Hutchison 3G UK Limited 41 - 23 168 - - - 1,315 - Telefonica Ireland Limited 4 - 4 - - - - 41 - Hutchison Drei Austria GmbH 16 - 25 102 - - - 266 - HI3G Access AB 2 - 1 84 - - - 13 - Hutchison Whampoa Europe Investments S.a.r.l ------164 HI3G Denmark ApS 4 - 1 - - - - 51 - Hutchison 3G Ireland Limited - - 2 7 - - - 2 - Hutchison Global Enabling Services Limited - - - 24 - - - - - Hutchison Telephone Company Limited 112 - 11 422 - - - 8 - Hutchison Telephone (Macau) Company Limited - - 1 8 - - - 3 - Hutchison Global Communications Limited 572 - 1,385 335 - - - 130 - New Millennium Corp. ------Hutchison 3G Italy Investments S.a.r.l. ------Hutchison Whampoa 3G Content S.a.r.l. - - - 1 - - - - 1 Hutchison Whampoa 3G IP S.a.r.l. 32 - 1,594 - 27 - - 8,253 5,038 Hutchison Whampoa 3G Procurement S.a.r.l. - - 31 1 - - - - 33 Hutchison Telecommunications (Vietnam) S.à r.l. - - - 1 - - - - 1 - BCC Hutchison Telecommunications Lanka (Private) - - 1 ------Limited H3G Procurement Services S.a.r.l. - - - 4 - - - - - Hutchison 3G Enterprises S.a.r.l. - - - 1 - - - - 2 Hutchison Digital Solution S.r.l. 5 - - 6 - - - - - Total Other related companies 2,490 - 15,211 3,312 320 - - 19,071 5,649 Total Related companies 5,164 32,845 111,336 5,691 1,865 1,089,962 1,740,266 82,407 5,649 Consolidated interim financial statements 75 as of and for the period ended June 30, 2017 26 OTHER INFORMATION Operating Leases The Group leases various cell sites, offices, outlets and motor vehicles under operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. Cell site leases are negotiated for an average term of 6 years. Offices are negotiated for an average term of 6 years and motor vehicles leases are negotiated for an average term of 2.5 years. The Group is required to give 3 months’ notice for the termination of cell site leases and 6 months for the termination of offices leases. The future aggregated minimum lease payments under operating leases with a due date of less than one year are as follows: (millions of euro) At 30 June At 31 December 2017 2016 Cell sites 208 149 Offices 45 34 Outlets 24 16 Motor vehicles 4 2 Total 281 201 Main pending legal proceedings The Wind Tre Group is subject to various legal proceedings arising in the ordinary course of business. Below is a description of all material pending legal proceedings as at June 30, 2017, excluding those situations in which the cost arising from a negative outcome of the proceedings cannot be estimated or for which a negative outcome is not considered probable. Proceedings with agents and retail dealers At June 30, 2017, a number of proceedings relating to the termination of agency agreements were pending at different stages of judgment. The agents dealers in these proceedings are seeking typically payment from the former WIND Telecomunicazioni SpA of damages and indemnities, including a termination indemnity pursuant to article 1751 of the Italian Civil Code. Proceedings concerning misleading advertising and unfair commercial practices Under Legislative Decree No.146/2007, the Italian Antitrust Authority (AGCM) has the power to initiate proceedings concerning unfair commercial practices and misleading advertising and issue fines up to €5 million for each proceeding (amount redefined by Law N°. 135/12 dated August 2012). During 2015, four proceedings initiated by the AGCM against Wind Tre for unfair commercial practice were closed with the payment of fines totalling €1.55 million and the order to cease the alleged unfair practices (one of these proceedings relates to Wind Tre’s non- compliance with the AGCM’s order to stop the alleged underlying unfair practice). The company has filed an appeal with the Lazio Administrative Court (Lazio TAR) against these fines and the related administrative litigations is pending. Consolidated interim financial statements 76 as of and for the period ended June 30, 2017 In 2016 AGCM initiated four new proceedings (respectively on February, April, July and December) against Wind Tre for alleged unfair commercial practices: the first proceeding has been closed without ascertaining any unfair practice; the second and the third one have been closed with the payment respectively of a fine of €455 thousand and a fine of €450 thousand (for both fines Wind Tre has filed an appeal before the Lazio TAR). The Group is still waiting for the AGCM’s final decision in the fourth proceedings. In 2017 AGCM initiated a new proceedings against Wind Tre for alleged unfair commercial practice which is still pending. Audit by the Italian tax authorities The Agenzia delle Entrate (“ADE”) (the Italian tax authorities) conducted a tax audit on the senior lenders under the senior facility agreement of 24 November 2010 (“SFA”), raising an objection to the non-application of substitute tax on the SFA. Each senior lender is liable for the substitute tax disputed on its own portion of the SFA, but may claim indemnification from Wind Tre. The indemnification right has already been exercised. It should be noted that appeals against the assessments have been filed by the senior lenders in coordination with Wind Tre. ADE has withdrawn two assessments raised with certain senior lenders concluding that no substitute tax is due. As a consequence the ADE has requested the courts to withdraw its claim in respect of these two assessments. Other contingent assets and liabilities The Wind Tre Group had the following contingent liabilities at June 30, 2017. Proceedings concerning electromagnetic radiation There are pending proceedings regarding the installation of base radio stations. The proceedings typically concern the emission of electromagnetic radiation. At June 30, 2017 five proceedings for electromagnetic emissions were pending as a consequence of BTS installations. Audit of dealers’ fees In 2001 WIND Telecomunicazioni SpA, now Wind Tre, received a dispute notice from the tax authorities regarding the tax treatment adopted in 1999, 2000 and 2001 for certain fees paid to dealers. With respect to the tax disputes for 1999, 2000 and 2001 Wind Tre obtained a positive outcome in the supreme court proceedings. For 2000 the Supreme Court has remitted the dispute to the Commission of Second Instance that has given a judgement in favour of Wind Tre. Wind Tre / Crest One SpA On October 9, 2009, Crest One SpA (‘‘Crest One’’) initiated proceedings against Wind Tre for: (i) the refund of an amount of approximately €16 million previously paid to Wind Tre by Crest One as value added tax under a distribution agreement entered into between Crest One and Wind Tre, and (ii) the compensation of damages alleged to have been suffered by Crest One pursuant to the payment of such value added tax by Crest One to Wind Tre. The Court of Rome has rejected the claims of Crest One which has filed with the Court of Appeal. The date of the next hearing, originally scheduled for January 30, 2018, has been brought forward to July 18, 2017. Fastweb / Wind Tre On January 2, 2014, Fastweb served a claim on Wind Tre based on antitrust proceedings no. A/357, which in August 2007 convicted Wind Tre and Telecom Italia for abuse of their dominant positions in the wholesale termination Consolidated interim financial statements 77 as of and for the period ended June 30, 2017 market in favour of their respective internal commercial divisions and to the detriment of the competitors in the fixed market (i.e. internal-external discriminatory application of economic and technical conditions for fixed-to-mobile on net and intercom calls to business clients). Amongst other issues Wind Tre has argued that the claim is time barred because it was filed outside the statute of limitations. On December 10, 2015, the presiding judge decided to defer to the panel of the tribunal to deliberate on Wind Tre’s time-bar argument, scheduling the next hearing for March 30, 2016 (then postponed to April 6, 2016). At this hearing the parties filed their conclusions and, at the end of June 2016, filed their final memoranda. A partial ruling on the time-bar argument was issued on November 23, 2016, rejecting Fastweb’s request for damages relating to 2002-2007 as it is definitely time-barred. In the same ruling, the judge decided to appoint an expert asking for a technical support to verify whether damages have been suffered by Fastweb for the following claimed period or not. The technical verification is ongoing. On May 16, 2017, Fastweb challenged the ruling on time barring/ limitation 2002-2007 before the Court of Appeal. Other disputes During the second quarter of 2017 the Group continued with the credit collection actions started in December 2012 against a company specialising in selling prepaid traffic, VAS and broadband services. On December 22, 2014 the Court of Rome declared the company bankrupt. The Group took part in the bankruptcy procedure for credit collection, formally approved by the Judge on June 26, 2015, and is currently awaiting payment. During 2017 credit recovery actions were also continued against a communications services company (wholesale), active in services for MVNO. Proceedings against this company have been directly handled by AGCom. On December 16, 2014, the Court declared the company bankrupt. The Group took part in the bankruptcy procedure for credit collection, formally approved by the Judge on June 9, 2015, and is currently awaiting payment. The contingent liabilities arising from these proceedings will be recognized as provisions in the balance sheet if management believes that the risk of a loss is probable. Guarantees No Group company has granted any security or guarantee, either directly or indirectly, in favor of parent companies or companies controlled by the latter. The collateral pledged by Group companies at June 30, 2017 as a security for liabilities may be summarized as follows: ‹ a special lien pursuant to article 46 of the Consolidated Banking Law on certain assets, present and future, belonging to the Parent as specified in the relevant deed, in favor of the lenders under the Senior Facility Agreement, as from time to time amended and restated, and other creditors specified in the relevant deed; ‹ a pledge on the Parent’s trademarks and intellectual property rights, as specified in the relevant deed, pledged in favor of the lenders under the Senior Facility Agreement, as from time to time amended and restated, and other creditors specified in the relevant deed; ‹ a pledge on the shares representing 100% of the corporate capital of the subsidiary WIND Acquisition Finance SA owned by the Parent in favor of a pool of banks pursuant to the related share pledge agreement; ‹ a pledge under English law on a bank account of the Parent in favor of the lenders under the Senior Facility Agreement and the other creditors specified in the related deed of pledge; Consolidated interim financial statements 78 as of and for the period ended June 30, 2017 ‹ an assignment under English law of receivables arising from hedging contracts of the Parent in favor of the lenders under the Senior Facility Agreement, as from time to time amended and restated, and the other creditors specified in the related deed of assignment. Finally, in order to provide a security for its obligations, the Parent has assigned by way of security its trade receivables, receivables arising from intercompany loans and receivables relating to insurance policies, present and future, as described in the specific instrument, to the lenders under the Senior Facility Agreement, as amended and supplemented from time to time, the hedge counterparties of the hedging agreements entered into by Wind Tre SpA and WIND Acquisition Finance SA and the other secured creditors specified in the confirmation deed related to the assignment of receivables, including in favor of the holders of the notes issued by WIND Acquisition Finance SA. Moreover, Wind Tre SpA has assigned by way of security its receivables arising from the put and call option dated May 26, 2005 and from the agreement for the purchase of the interest in the corporate capital of Wind Tre SpA dated May 26, 2005, as described in the relevant deed, to the lenders under the Senior Facility Agreement, as amended and supplemented from time to time. A description is provided below of personal guarantees (sureties) issued mainly by banks and insurance companies on behalf of the Group and in favor of third parties in respect of commitments of various kinds. The total of these, amounting to €130 million at June 30, 2017 includes: • sureties totaling €18 million issued by insurance companies, mainly relating to participation in tenders; • sureties totaling €112 million issued by banks, relating to participation in tenders, of which €43 million in favor of the Minister for Economic Development for the participation in the tender procedure it had been awarded for the frequency use rights in the 800, 1800, 2000 and 2600 MHz bands, to sponsorships, property leases, operations regarding prize competitions, events and excavation licenses. 27 SUBSEQUENT EVENTS On July 4, 2017, the sale of the whole 10% of the shares of Galata - held by the Group has been sold for a book value of €77 million - to Cellnex for a total of approximately €87 million. On July 6, 2017 the sale contract of the branch "Call Center 133" has been signed with the Comdata company, as explained in the Human Resources section of the annual report attached to this financial statement. Consolidated interim financial statements 79 as of and for the period ended June 30, 2017