wind tre group · veon is incorporated under bermuda law, domiciled in claude debussylaan 88, 1082...

Wind Tre Group

Consolidated interim financial statements

as of and for the three-month period ended

March 31, 2018

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 31 March 2018, 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 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 31 March 2018 are not prepared, in all material respects, in accordance with International Accounting Standard applicable to interim financial reporting (IAS 34) as adopted by the European Union.

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Emphasis of matter As an emphasis of matter, we draw your attention to the fact that transactions exist with the parent company and with other entities belonging to the CK Hutchison Holdings Ltd. and Veon Ltd. groups, the most significant of which are disclosed in the Note 23 – Related party transactions.

In our opinion the above emphasis of matters do not lead to a qualified review report. Milan, 14 May 2018 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

Wind Tre Group

Report on operations

at March 31, 2018

Report on operations Wind Tre Group

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CONTENTS

THE WIND TRE GROUP................................................................................................................................... 3

COMPOSITION OF THE CORPORATE BODIES OF WIND TRE S.P.A....................................................................... 5

WIND TRE GROUP HIGHLIGHTS AT MARCH 31, 2018 ........................................................................................ 6

THE ITALIAN TELECOMMUNICATIONS SERVICES MARKET .................................................................................... 8

COMMERCIAL AND OPERATING PERFORMANCE ................................................................................................ 10

NETWORK .................................................................................................................................................. 22

HUMAN RESOURCES ..................................................................................................................................... 25

REGULATORY FRAMEWORK AT MARCH 31, 2018 ............................................................................................. 27

OUTLOOK ................................................................................................................................................... 40

GLOSSARY ................................................................................................................................................... 41


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THE WIND TRE GROUP

Wind Tre S.p.A. (hereinafter 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, internet mobile access services in

broadband and broadband and ultra-broadband fixed-line services, as well as a convergent fixed-mobile offer. In

addition, it accompanies its offer with a wide range of content, applications and multimedia support.

These consolidated financial statements for the period ended March 31, 2018 were approved by the Company’s Board

of Directors on May 11, 2018. At the date of approval of these consolidated financial statements Wind Tre is controlled

by Wind Tre Italia S.p.A. (hereinafter referred to as Wind Tre Italia) which in turn is controlled by the Luxembourg

based entity VIP-CKH Luxembourg Sàrl (hereinafter 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 (hereinafter referred to as CK

Hutchison) and by Veon Ltd. (hereinafter referred to as Veon). The Joint Venture owns and operates

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, The Netherlands and listed on NASDAQ.

On the formation of the Joint Venture at the end of 2016 the respective holding and operating companies of the

telecommunications businesses in Italy of CK Hutchison and Veon, namely Wind Tre Italia and WIND Acquisition

Holdings Finance S.p.A., and Wind Tre and WIND Telecomunicazioni S.p.A., 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 Veon.

Following the above mentioned transaction WIND Acquisition Holdings Finance S.p.A. and WIND Telecomunicazioni

S.p.A. were merged into Wind Tre Italia and Wind Tre respectively.

The approval for the transaction obtained from the European Commission, which 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. These agreements have resulted in

the commitment of the Wind Tre Group to sell frequencies (€450 million) and sites to Iliad in the period 2017 – 2019

as well as to sign certain temporary agreements which enable Iliad to operate telecommunications services in the

Italian market while it is creating its own network. From an accounting perspective the frequencies and sites that are

expected to be transferred to Iliad by December 31, 2018 are presented and measured at each closing date as required

by IFRS 5 and discussed in the General Accounting Policies section. Conversely accelerated depreciation has been

charged on the sites that are expected to be transferred after December 31, 2018 and will still be utilized by the Group

through that date, in order to represent their new expected limited useful lives.

As a result of these agreements at the end of the 2016 the carrying amount of the assets to be sold was reviewed in

terms of impairment or by revising their useful lives. These assessments have been updated in the financial statements

at March 31, 2018 and are discussed in the explanatory notes.


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The following diagram sets out the structure of the Wind Tre Group at March 31, 2018.

As required by the European Commission as a mandatory condition for approving the merger between WIND

Telecomunicazioni S.p.A. and H3G S.p.A. which took place at the end of 2016, Iliad, the fourth infrastructure mobile

operator, is expected to enter the market during 2018.

For more information on this transaction reference should be made to the Wind Tre Group Notes to the Consolidated

Financial Statements as at December 31, 2016 and 2017.

The subsidiary Wind Tre is investing to strengthen its fixed and mobile networks, thereby accelerating the process of

network integration. Trieste and Agrigento are the first two Italian cities to benefit from the new consolidated Wind

Tre network which guarantees high performance for coverage, quality of service and connection speed and ensures a

better user experience; Bologna, Alessandria and Milan have been added in 2018. The consolidation of the mobile

network is expected to be completed by the end of 2019.


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COMPOSITION OF THE CORPORATE BODIES OF WIND TRE S.P.A.

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 held on November 5, 2016 appointed the Board of Directors for a term expiring on 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 the 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 expires.

(2) The shareholders’ meeting of the Company held on November 5, 2016 appointed the Board of Statutory Auditors for a term

expiring on the date of the shareholders’ meeting that approves the Company’s financial statements for the year ending December 31, 2018.


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WIND TRE GROUP HIGHLIGHTS AT MARCH 31, 2018

Below are the main indicators of the Wind Tre Group at March 31, 2018 with a comparison with the corresponding

period in 2017.

Operational data At March 31, 2018

At March 31, 2017

Mobile customers (millions of SIM Cards) 29.2 30.9

Mobile ARPU (euro/month) 10.8 11.0

Fixed-line customers (millions of lines) 2.7 2.7

Fixed-line ARPU (euro/month) 27.0 28.1

Mobile network coverage(1) 99.9% 99.9%

Employees (headcount) 7,076 8,981

(1) As a percentage of the Italian population.

(millions of euro)

Income statement

2018 3 months

2017 3 months

Revenue(1) 1,410 1,548

EBITDA(2) 484 458

Operating loss (69) (320)

Net finance expense (79) (144)

Loss for the period attributable to the owners of the Group (153) (496)

(1) The figures for the period ended March 31, 2017 have been disclosed differently/reclassified to ensure comparability with the figures for the period ended March 31, 2018

(2) Operating loss before depreciation and amortization, reversal of impairment losses/impairment losses on non-current assets and gains/losses on disposal of non-current assets

(millions of euro)

Statement of financial position

At March 31, 2018

At December 31, 2017

Total assets 17,151 17,637

Equity attributable to

owners of the Group 1,477 1,644

non-controlling interests - -

Total liabilities 15,674 15,993

Net debt 10,323 10,318

Total revenue in the three months ended March 31, 2018 amounted to €1,410 million, decreasing by 9%.

This was mainly due to a reduction in service revenues, especially in the mobile segment, and a contraction in revenues

from the sale of mobile telephone handsets.

EBITDA amounted to €484 million in the first three months of 2018, an increase of €26 million compared to the

corresponding period of 2017, while there was an operating loss of €69 million, a decrease of €251 million over the

first three months of 2017.

Net finance expense for the first three months of 2018 amounted to €79 million, a decrease of €65 million over the

first three months of 2017.


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There was a loss for the period of €153 million for the first three months of 2018 compared to a loss of €496 million

for the first three months of 2017.

Net debt totaled €10,323 million at March 31, 2018, an increase of €5 million over December 31, 2017. The following

table sets out the components of net debt at March 31, 2018 and the changes which have occurred since December

31, 2017.

(millions of euros) At March 31, 2018


Change

Non-current financial liabilities

Bonds 7,205 7,247 (42)

Loans from parent companies 1,777 1,764 13

Banks loans 2,962 2,960 2

Derivatives 121 57 64

Total non-current financial liabilities 12,065 12,028 37

Current financial liabilities

Bonds 99 39 60

Banks loans 25 10 15

Total current financial liabilities 124 49 75

TOTAL GROSS DEBT (A) 12,189 12,077 112

Non-current financial assets

Derivatives (1) (7) 6

Financial receivables (1,122) (1,119) (3)

Total non-current financial assets (1,123) (1,126) 3

Current financial assets

Financial receivables (42) (21) (21)

Total current financial assets (42) (21) (21)

Cash and cash equivalents (701) (612) (89)

TOTAL FINANCIAL ASSETS (B) (1,866) (1,759) (107)

NET DEBT (A+B) 10,323 10,318 5

Net debt does not include trade payables, other liabilities, other payables and guarantee deposits (included in financial

liabilities) of €4 million at March 31, 2018 and of €3 million at December 31, 2017.


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THE ITALIAN TELECOMMUNICATIONS SERVICES MARKET

Industry overview

Italy is Europe’s fourth largest telecommunications services market by revenue. The estimated value of the Italian

mobile market for 2018 is approximately €13 billion, slight decreasing over the past two years due to competitive

pressure increase.

In the first quarter of 2018 mobile network operators continued to develop their offers for voice and data services,

with packages increasingly concentrating on data traffic dedicated to private customers, for whom certain innovative

services are now being added in addition to unlimited minutes and the various discounts.

The new offers are increasingly differentiated by type of user and sales channel, with several promotions geared

towards winback and competitors’ customers.

The competitive arena will probably see Iliad take to the field by the summer of 2018 (the operator is currently

extending its authorizations for network coverage). Navigation in mobility on the 4G network is the cornerstone of the

offers of operators who are aiming at quality, navigation speed and network coverage as the basic features required

not only to get the most out of telecommunications services but also to obtain an increasingly broad range of multi-

media services. In this context testing of the 4G+ and 5G networks also continues to be at center of the main

communications strategies of the leading operators.

In the first quarter of 2018 operators announced the availability of new smartphone models in their product portfolios,

proposing purchase also by means of an initial single contribution. In addition the range of products offered in bundles

continues to widen, to the point of even including automated home equipment in one or two cases.

In the first three months of the year, major operators are mainly attempting to attract the business market with

communications activities in which companies are proposed as partners in 5G and IoT testing.

The major operators’ offer to the Consumer market developed by seeking to win over new customers, with tariffs

including increasingly extensive bundles of voice-data traffic, triple and quadruple play services, winback initiatives and

initiatives to retain acquired customers, in particular by way of discounts and gifts connected with certain festive

occasions.

In the offers of the leading operators innovative services acquired greater importance in the Consumer world.

In the first quarter of 2018 the fixed telecommunication services network continued to evolve with quadruple play

offers focused on fixed and mobile convergent services, to which were added video streaming digital contents for

Consumer profiles and solutions supporting business process digitalization, with particular focus on SMEs.

All operators continue to propose fiber optic profiles in the extension of the ultra-broadband network by way of direct

investments and partnerships.

At the beginning of March, following AGCOM’s provisions, the leading operators reformulated their offer renewals,

moving from a four-week to a monthly frequency and announcing that further reformulations will be made in

subsequent months as a result of AGCOM’s end of March provision. The quarter was characterized by promotional

initiatives for the Consumer market, with high-speed voice-data bundles, discounted fees and activation and offers

including calls to mobile phones, navigation services from mobile phones and Wi-Fi modems.

The promotions of offers for Business customers were essentially addressed to small professionals and SMEs, with

convergent offers, security services and cloud.


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Mobile telecommunications

The Italian mobile telephone market is the fourth largest European market by revenue after the United Kingdom,

Germany and France. There were three infrastructure operators in Italy which offer mobile telephone services to the

approximately 82 million SIMs registered at March 31, 2018, equal to a penetration rate of approximately 136% 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 86% of the customer base (SIM Human) uses prepaid cards.1

Excluding MVNOs, at March 31, 2018 Wind Tre had an estimated market share of 35.4% while Telecom Italia and

Vodafone had 37.6% and 27.0%.

Fixed telephone services market

Voice

The Italian fixed-line telephone services market is the fourth largest by value in Europe after the United Kingdom,

Germany 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, Tiscali and BT Italia.

Internet

At March 31, 2018 access to broadband internet had reached a penetration of 80% of all fixed lines in Italy (excluding

FWA accesses). Broadband services have grown rapidly in the country over the past few years to reach approximately

15.9 million connections, equal to 26% of the Italian population. Despite the recent rise in broadband Italy still lags

behind the other European countries. In March 2018, coverage of the ultra broadband networks (above 30 Mbps) in

Italy was approximately 75% of the population with around 2,700 urban centers enabled for the new services.

As of today Open Fiber has signed wholesale service supply agreements with 9 operators and the FTTH network is

currently available in 18 municipalities). Cabling work is currently in progress so that commercialization may also begin

in another 80 cities. The overall program for ultra-broadband envisages the development of the network in six years

in over 270 Italian cities for approximately nine and a half million property units served.

On March 29, 2018 Sky Italia and Open Fiber announced that they had signed an agreement to launch a TV service

via fiber starting in the summer of 2019, with the aim of speeding up the long-term growth of fiber and pay-TV.

In March 2018, TIM’s board of directors announced the formal start of the procedure for notifying AGCOM of the plan

for the voluntary separation of the fixed access network. The project envisages the creation of a separate legal entity

(Netco) wholly owned by TIM which will be the owner of the access network (from the exchange to the customer’s

home) and of all the infrastructure (buildings, electronic equipment and IT systems), and having the necessary

personnel to provide wholesale services independently.

1 Data from AGCOM (Communications Observatory – 4Q 2017)


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COMMERCIAL AND OPERATING PERFORMANCE

Mobile

At March 31, 2018, Wind Tre had 29 million mobile telephone customers, a decrease over March 31, 2017, and a

market share (calculated by excluding MVNO operators) of 35.4%.

The following table shows the main indicators in the mobile market.

Mobile 2018

3 months 2017

3 months Change

Customer base (millions of SIM Cards) (1) 29.2 30.9 (5.5)%

Revenue (millions of euro) (2) 1,100.3 1,233.5 (10.8)%

Voice traffic (billions of minutes) (3) 25.0 24.7 1.2%

ARPU (euro/month) 10.8 11.0 (1.8)%

% ARPU Data/Total ARPU 52.8% 51.2%

(1) Total Customer Base: Voice + Data; excluding M2M

(2) Include TLC Revenues + CPE Revenues. The figures for the period ended Mach 31, 2017 have been disclosed differently/reclassified to ensure comparability with the figures for the period ended March 31,

2018

(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 that ensures 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.

WIND as always looks after its customers, following changes in their habits, with an average usage of mobile GIGA

that continues to increase.

WIND concentrates on the transparency and generosity of its offer: All Inclusive Unlimited and Noi Tutti Unlimited have

the “SMS My Wind” and “hotspot” services included. Customers can access the notification service to see who has been

trying to reach them and can share the GIGAs in their offers with other devices in Wi-Fi at no extra cost.

The distinctive feature of the WIND offer continues to be “Unlimited Internet”: customers can continue to use the main

social networks and navigate at a speed of 128 kbps once the full-speed GIGAs available with their offer have been

used up; there is no block on navigation and unlimited internet.

The first quarter of 2018 continued to be characterized by a significant focus on the contents of offers: All Inclusive

Unlimited which remains the flagship offer with unlimited minutes, 500 SMSs and 5 full speed GIGAs to satisfy all

customers’ needs with a complete and competitive offer, and thanks to the launch of Wind Plus with the possibility of

doubling the All Inclusive offer.

WIND’s rechargeable internet world continued to follow its customers’ connectivity needs with solutions for navigating

in mobility with denominations of 5, 10, 20 and 30 GIGAs. WIND carried on placing a great deal of emphasis on the

use of video: it continued its partnership with Sky in the Giga Max Now TV offer which combines the data component

(20 GIGAs available), the best TV series and Sky’s great shows.

WIND continues to cover M2M (machine to machine), the SMS growth sector, more extensively and has moved even

closer to families and the IoT (“Internet of Things”) world with the WIND Smart Security offer, the SIM for the IoT and

safe home environment with unique features: an extended expiry date for the SIM, an annual charge and monthly

bundles studied precisely for the use of SIMs in automated home equipment.


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In addition, WIND continued to preside over the digital channels, addressing “full digital” customers with dedicated

offers only available online such as the “All Inclusive Unlimited Online Edition” and the “Celebration” offers in limited

edition.

In addition, the best smartphones and tablets are available in all WIND stores.

Through WIND’s e-commerce website customers can buy rechargeable SIMs with exclusive offers with the convenience

of receiving everything at home.

WIND continues to work from the standpoint of Community Marketing, reinforcing the concept of “closeness” to its

non-Italian customers with offers and communication dedicated to the most popular feast days and events of the

individual communities. More specifically, the Call Your Country Celebration offers for Romania, the Ukraine and

Moldavia were launched for Christmas (Catholic and Orthodox) and were available until January 21. Subsequently, up

to April 3, Call Your Country Celebration offers for China and India could be subscribed for the Chinese New Year and

the Holi Festival. These promotions offered a large bundle of GIGAs available with national and international minutes

and data included. In parallel with the Call Your Country Celebration offer the flagship Call Your Country Super offer

was strengthened with the possibility of doubling the national and international minutes and GIGAs.

Starting from the January canvass fees for subscription offers are billed on a calendar month basis for residential

customers and professionals with no extra cost for new activations.

The possibility of adding up to 3 SIMs for the family or co-workers remains with the dedicated offer providing 500

minutes, 500 SMSs and 2 GIGAs, available in the Family and Company versions, a smart device from the Home & Life

range included with Telefono Incluso and exclusive discounts for top smartphones.

The “3” Brand

During the first quarter of 2018, “3” pursued a strategy designed to confirm its name as leading operator on the market

and satisfy the needs of technical customers who are attentive to innovation while at the same time strengthening its

relationship of trust by providing constantly increasing transparency in its offers. Supported by a TV spot and social

activity, “3” covered all the communication channels, thereby creating a high level of awareness in customers.

As a means of giving the brand a new image, as well as providing the logo with a brush-up and pursuing a new

communications strategy, “3” revolutionized the telco market on March 19 by launching the first offers with unlimited

GIGAs, no caps and no restrictions. With the new Power offers, available in both the All-In and Free versions and

activated together with 3Fiber, “3” became “unlimited”, increasingly embracing the value of generosity.

To promote fixed-mobile convergence, “3” has therefore given the possibility to its 3Fiber customers to have access to

the All-In Power and Free Power offers so that they can have unlimited GIGAs and minutes on their smartphones at a

price blocked forever. Further confirmation of the path taken by “3” which is focused on technological innovation not

as an end in itself but rather in terms of accessibility and customer care.

In terms of the prepaid world, in March 2018 “3” launched its new Play 15 offer. A rechargeable offer with 900 minutes

and 15 GIGAs specifically aimed at the younger segment of customers who are seeking a convenient offer, but with all

that is needed to always stay connected. And by activating the online promo anyone who wants to can have 25 GIGAs

and a smartphone included.

For the residual credit rechargeable segment “3” abandoned its means of renewing and calculating ceilings on a weekly

basis by launching three new monthly options.

To encourage the activation of new Gross Add (GA) with payment method and to reinforce the lock-in effect, “3” gives

customers the possibility of doubling their GIGAs by selecting All-In Prime with a contractual commitment of twenty

four months and payment by credit card or bank account.


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The All-In offer range is completed by the Master version which enable the promotional price to be blocked, include

GIGA BANK, “3”’s exclusive service which allows customers to accumulate the GIGAs they don’t use in a single month

and use them at any other time.

FREE, available in a rechargeable version, is the offer created by “3” for customers who are mad about technology and

want to be constantly updated and have the latest technological discovery, with a no-worry all-inclusive offer that

includes a top smartphone: customers can exchange their smartphone every 12 months for any of those available and

have the Kasko service included.

As regards mobile broadband “3” has extended the range of its service portfolio to cover various market segments and

continued to improve its offers in order to ensure that customers have greater navigating freedom away from home.

For customers who want to navigate by using the residual credit on their SIM cards “3” has exceptionally introduced

Super Internet Untied with GIGA BANK to navigate anywhere with no contractual restrictions.

To continue to increase the convergent offer segment (voice + mobile broadband), “3” has confirmed its “Special”

offers with the Super Internet and 3Cube offers.

Voice, internet and business services offer

Wind Tre Business

During the first quarter of 2018 the Wind Tre Business brand continued its journey down the growth path it started

with the brand’s inauguration on May 23, 2017. The three fundamental values that establish its positioning on the B2B

market are the following:

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.

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 to increase their control over their 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 2017, 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 GIGAs 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 GIGAs across their devices and

can be combined with the purchase of a top smartphone;

SmartShare is the rechargeable offer for co-workers for sharing GIGAs across several SIM cards and can be

combined with the purchase of a basic smartphone.

The sharing of GIGAs enables customers to obtain efficiency, savings and flexibility. Both offers also include the Extra

Giga bundle which when the shared data basket has been used up allows them to activate another one of a different

denomination and continue with their work.


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A number of changes were introduced in January 2018 to add further value to the GigaShare offer while keeping prices

unchanged:

On all the price lists with unlimited international calls, those with 500 SMSs have also become valid from

Italy to the EU, the US and Switzerland;

On the 500 minute SmartShare list, unlimited minutes towards business fixed and mobile lines have been

included;

On the SmartShare offer, a new Giga package has been launched for sharing 1000 GIGAs between up to

300 SIMs at a cost of €600/month.

To satisfy the needs of customers frequently travelling to countries other than those in the European Union, the US

and Switzerland, GigaShare provides the possibility of completing the options with the Top Mondo offers that provide

voice and data traffic 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.

An additional plus of the offer 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;

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. 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


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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.

Again as part of the development of digital services in partnership, Wind Tre Business’s offer has been enhanced by a

number of important additional solutions:

Business Analytics, the web cloud offer consisting of Real Time Monitor and Expense Manager services which

implement a set of functionalities for permitting the analysis and supervision of the usage of the main

telecommunications services.

Real Time Monitor, the solution that permits the real time analysis and management of a business’s mobile

connectivity through a simple and intuitive digital interface that enables a business to analyze the

voice/SMS/data traffic generated by individual users; autonomously manage the definition of traffic ceilings;

activate an automatic alerting system that triggers on reaching specific usage values; generate automatic

device action on exceeding specific traffic ceilings; and make the most out of a standard and ad hoc reporting

system.

Expense Manager, the smart system for reporting telephone traffic which enables businesses to organize

invoice information in accordance with pre-established criteria by constructing graphic reports and statistical

aggregations that allow a detailed analysis of the business’s spending to be performed.

Mobility Pack, the solution created for businesses that want to make the best use of their devices by providing

their employees with a complete use experience in complete freedom, flexibility and security. Mobility Pack

separately manages the utilization and traffic of two different use profiles: the business profile (dedicated and

confidential utilization of business data and applications) and the personal profile (private utilization of data

and applications), keeping business and private lives apart. Mobility Pack provides:

o the separation of the business profile from the personal profile on different models of mobile devices

o a cloud Enterprise Mobile Management solution that gives the IT Manager full control of the data

and the business’s applications installed on the device

o the collection and tariffing of the traffic of the business profile by means of a private APN

o safe navigation on the internet through a firewalling/content filtering system.

Fleet Management, an innovative security, protection and satellite localization solution capable of combining

the best of the Wind Tre network with the experience of the leading business in Europe in satellite computer

systems. Fleet Management provides:

o fleet tracking functionality - through real-time viewing of vehicles and journeys

o driving style functionality – through simple and intuitive driving/consumption graphics set in relation

to the journeys made by the vehicle.

Wind Tre Business has additionally launched three new digital touch points for strengthening its proposition for

providing information and support to customers:

the www.windtrebusiness.it website dedicated to communicating offers and services for businesses and the

public administration and a further customer support tool. Created with responsive technology and with a

modern and interactive design, www.windtrebusiness.it is able to guarantee customers an involving

experience from any device (desktop, tablet or smartphone) with the aim of developing the concept of a

simple shop window of products and proposing itself as an innovative channel for acquiring and managing

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the customer. Through the new web channel businesses have the possibility of requesting customized advice

in real time, leaving their contact information in the section set aside for the purpose. Specifically

www.windtrebusiness.it is divided into four main areas: the first and the second are addressed to SMEs and

large businesses respectively; the third is an area completely dedicated to assistance; finally the fourth is

dedicated to the events and roadshows that Wind Tre Business organizes throughout the country as an

opportunity for meetings between managers, businesses and the public administration to promote a digital

innovation culture. As is the case for all of the products and services of Wind Tre Business, the new website

combines cutting edge technology with an easy-to-use facility in order to provide customers with top quality

and the support required to compete on the market successfully;

the Wind Tre Business app, the channel for effective, intuitive and free of charge self-care, available on the

App Store and the Google Play Store. The Wind Tre Business App allows customers to keep the various service

profiles constantly under control, both in Italy and abroad, without using, in Italy, the data traffic included in

the subscribed offer. With the new app they can monitor the offer and relative consumption and network

coverage, become aware of the services available for international travel, request assistance directly from

customer service and remain constantly updated about the latest things that Wind Tre Business has to offer;

social profiles @windtrebiz available on Facebook and Twitter. The new social profiles represent an important

communication and conversation channel for getting to know about the offers and changes in the Wind Tre

Business world and receiving information and assistance, thanks to the constant support of a dedicated social

care team.

Wind Tre Business develops initiatives throughout the country to promote and divulge the culture of innovation and

digital transformation for various spheres and reference models, availing itself of the support of specialist partners in

the sector.

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 line and Internet”.

Innovative Services

WIND and “3” strengthened their proposal 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, since 2017 it has also been possible to use telephone credit inside the Apple world

(iTunes, App Store, Apple Music, iBooks) and for “3” customers Windows Store (active since August 2016 for WIND

customers). As of today Wind Tre is the first and only Italian operator to make the service available on Apple platforms.

With a view to improving customers’ digital education and spreading the use of this functionality, Wind Tre has initiated

a series of communications activities with its various partners. To this end, in March 2018 Wind Tre collaborated with

Google in launching a spring promotion with discounts on in-app purchases made in the main games. In addition, there

have been numerous communications activities on the online channels that also envisage the involvement of influencers

particularly well-known for their love of games.

The Mobile Ticketing scheme has now increased its presence to over 60 cities and has been involved in the sale of 10

million tickets. Among the various cities where it is possible to buy tickets using telephonic credit the following can be


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listed: Florence, Genoa, Milan, Naples and many others. The recent inclusion of 11 additional cities (Alessandria, Massa,

Viareggio and Salerno to name but a few) has enabled highly significant coverage to be achieved in the region of

Tuscany where the residents of all the provincial capitals are able to benefit from this convenient service. In addition,

it is possible to use telephone credit to pay for parking and recharging electric vehicles at the Duferco Energia columns.

In addition, during the first few months of 2018 WIND and “3” have launched a series of initiatives to make the service

known and bring it to people’s awareness by taking action on the various digital channels. Between the end of 2017

and the beginning of 2018 Wind Tre celebrated the fact (by way of several communications activities) that it had issued

more than 10 million tickets since the start of the service, and this achievement obtained considerable visibility in the

main local and national press. The press also commented on the ecological effect of a service which has enabled over

10 tons of paper to be saved since the launch of the initiative.

Finally, and staying in the ambit of electronic ticketing paid for by telephone credit or accounts, the first few months

of 2018 saw the enactment into Italian law of the new European payment services directive (PSD2) which opens up

the way to the use of telephone credit or accounts for the payment of tickets for a whole variety of new types of service

(e.g. cinemas, theatres, museums, concerts, etc.). Wind Tre, in partnership with public and private companies, has

therefore set itself the objective of extending mobile ticketing also to those areas in the next few months.

International Roaming

Wind Tre customers have two different types of roaming coverage depending on whether they have chosen the WIND

brand or the “3” brand. The two coverages run in parallel. As things currently stand the WIND brand can count on 644

international roaming relationships under which roaming coverage is ensured in 222 countries, of which 12 with satellite

services; of these, prepaid customers have the possibility of making a “direct call” in 174 countries thanks to 417

agreements for the provision of the service. In addition, all WIND brand customers can use LTE in roaming in 63

countries thanks to agreements entered with 132 operators. “3” brand customers can on the other hand count on 493

international roaming relations which guarantee them roaming coverage in 194 countries, among which prepaid

customers have the possibility of making a “direct call” in 152 countries thanks to 343 agreements for the provision of

the service. Further all “3” brand customers can use LTE in roaming in 49 countries with 83 operators.

Wind Tre customers can take advantage of the benefits of Easy Europe, which also allows them to use their national

offer when they travel within 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 as well as 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 March 31, 2018 consisted of 1,531 sales points: 680 WIND brand sales points and 851 “3” brand sales points.

The non-exclusive Wind Tre sales network consists of 3,727 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 by courier to the address named by the

customer, or by booking the offer and entering the customer’s details and those of the MNP online and then paying

for/collecting the SIM card at the sales point.


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The www.wind.it website has been 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. 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.wind.it website. Fixed and mobile

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. In addition, the new 3Fiber offer has been available since September; this enables

“3” customers to activate fiber under dedicated conditions.

In addition, the new convergent offer, Wind Home and 3Fiber, enables WIND and “3” customers to stay connected

inside and outside their homes.

By using the www.tre.it website or the Area Clienti 3 app customers can top-up online, paying by credit card or Paypal,

and control and manage their telephone lines.

Fixed line and Internet

Wind Tre offers its consumer and microbusiness customers a vast range of direct fixed network, broadband internet

and data transmission services.

Broadband services are provided to direct customers (unbundling) by renting from Telecom Italia the “last mile” of the

access network which is disconnected from Telecom Italia equipment and connected to the WIND equipment to be

found in the telephone exchange.

In addition, thanks to its strategic partnership with Open Fiber, Wind Tre sells ultra-broadband services in FTTH (Fiber

to the Home) mode in the cities of Milan, Bologna, Turin, Perugia, Bari, Venice, Catania, Padua, Cagliari, Palermo,

Genoa and Naples, where it markets offers in fiber optic that enable the end user to reach speeds of up to 1 Gigabit a

second.

Furthermore in January 2018 it reached the Milan hinterland, taking Fiber in FTTH technology to the municipalities of

Bresso and Sesto San Giovanni. In the other major Italian municipalities Wind Tre provides ultra-broadband services

in FTTC (Fiber to the Cabinet) mode with download speeds of up to 200 Mb/s (where not available 100 Mb/s) and

upload speeds of 20 Mb/s.

At the locations where it is present in unbundling Wind Tre offers a “Real ADSL” service that enables it to stabilize the

customer’s line at the maximum supported speed, up to 20 Mb/s in download, providing the best performance possible

and guaranteeing a line that is always stable. The latest expansion plan for the direct access network, initiated in

January 2015, has led to the coverage in unbundling of over 70% of the lines, thereby strengthening Wind Tre’s

positioning as an alternative operator to Telecom Italia in the fixed environment.

http://www.tre.it/

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Voice services

Wind Tre’s fixed network voice customer base could count on 2.7 million subscribers at March 31, 2018 representing

a decrease of 0.7% over March 31, 2017.

The following table sets out the key fixed-line indicators.

Fixed line 2018

3 months 2017

3 months Change

Customer base (thousands of lines) 2,699.0 2,718.5 (0.7)%

of which LLU (thousands)(1) 2,532.4 2,497.3 1.4%

Revenue (millions of euro) (2)

289.9 276.1 5.0%

Voice traffic (billions of minutes) (3) 1.8 2.3 (21.7)%

ARPU (euro/month) 27.0 28.1 (3.9)%

(1) Including LLU, Virtual LLU and ODA

(2) Including TLC and CPE revenues. The figures for the period ended Mach 31, 2017 have been disclosed differently/reclassified to ensure comparability with the figures for the period ended March 31, 2018

(3) Voice Traffic Outgoing and Incoming off net

Internet and data

Wind Tre offers a vast range of internet and data transmission services to both its consumer and business customers.

At March 31, 2018, the Group had 2.4 million broadband internet customers representing an increase of 1.7% over

March 31, 2017.

The following table sets out the key internet access figures.

Internet and data services 2018

3 months 2017

3 months Change

Internet customer base (thousands) 2,391.7 2,354.4 1.6%

of which narrowband (thousands) 0.1 3.3 (97.0)%

of which broadband (thousands) 2,391.6 2,351.1 1.7%

of which LLU (thousands) 1,803.3 2,083.1 (13.4)%

of which shared access (thousands) 3.9 4.9 (20.4)%

Package and convergent services

Wind Tre is one of Italy’s main internet, fixed line voice and data and mobile service providers with an integrated

infrastructure and a network coverage that extends throughout the country.

To make the positioning of WIND and “3” even more exclusive in the sphere of convergent services, two WIND and

“3” brand product lines were launched in September, WindHome and 3Fiber, which target customer segments

interested in fixed and mobile integrated packages. In particular, WindHome is directed at families, including unlimited

navigation from home with Fiber up to 1000 Mb and 100 GIGAs a month as an addition to the family’s WIND SIMs. On

sale in combination is the Fixed Modem which provides the best of technology and fast navigation.

3Fiber is addressed to young and innovation-oriented customers with a dedicated offer which includes Fiber up to 1000

Mb and 15 extra GIGAs a month on the “3” SIMs of customers and those of 4 of their friends.

WindHome and 3Fiber are available in both Fiber (FTTH or FTTC) and ADSL coverage at the same price and are aimed

at residential users and small professionals. Customers activate the offer with the fastest speed possible on the basis

of their coverage, and in the case of ADSL obtain in reserve a “Fiber Pass” which enables them to migrate to Fiber at

the same price as soon as it becomes available in their area.


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In addition new WIND and “3” customers can associate new SIMs to the fixed offer under very advantageous

conditions. Customers who subscribe to WindHome can activate WindHome Magnum for €10 a month to make

unlimited calls from their smartphone sharing the 100 GIGAs. Customers who subscribe to 3Fiber can have unlimited

GIGAs and minutes with Free Power and All-In Power starting from €19 a month. WindHome can be enhanced by

means of a wide range of solutions for the smart home such as the smart thermostat, the smart cam and consoles for

playing with the whole family. In addition the WindHome & Sky Limited Edition promotion continues for customers who

want to combine Sky’s great TV with the benefits of fixed and mobile connectivity. In this way they will always be

connected, inside and outside the home, and will be able to access their favorite Sky contents anywhere thanks to the

inclusion of Sky Go.

The plan continues to provide the new offer in Fiber (FTTC and FTTH technology) in the country’s main municipalities

and cabling has begun in municipalities bordering on the larger cities. In particular, with a view to ratifying Wind Tre’s

presence in FTTH technology, special initiatives dedicated to the cities reached by Fiber have been carried out in terms

of communication and offer, in order to attack the market by offering innovative and competitive services, thus

maximizing acquisitions.

Voice, internet and business services offer

Wind Tre Business provides PSTN, ISDN and VoIP fixed-line network voice services, data services, VAS and connectivity

services to companies in the large market, capitalizing on the experience gained with ENEL and using a dedicated call

center. In this segment Wind Tre Business 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 also 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 fiber optic connections and

by LLU direct access; in areas where direct access is not available dedicated lines leased from Telecom Italia are used.

In addition, again for the large business market, Wind Tre Business extends its offer by way of cloud services and its

commercial proposal with ICT Solutions and Managed Services, on both the fixed and mobile network. Wind Tre

Business is able to propose Virtual Private Cloud solutions and Housing and Colocation services for businesses through

its data center in Rome and the SUPERNAP data center in Italy, with which it has a partnership agreement and which

represents technological excellence in the range of data centers. With its rich catalog of IaaS services, pre-configured

bundles of data center services and connectivity, WIND Cloud per Aziende is able to satisfy all the digital transformation

needs of businesses.

To these should be added solutions for fleet management and business analytics and the mobility pack service, a suite

that manages the utilization of the smartphone in its two different use profiles: the business profile, through which

data traffic is dedicated and reserved for applications in the working environment, and the personal profile, used for

applications and navigation in the private sphere. In this way an employee can keep his and personal lives separate

with consumption under control and without having to worry about data security.

The offer is completed by Microsoft’s public cloud services and the collaboration and business productivity Saas services,

Microsoft Office 365 and Microsoft CRM Dynamics, together with Google Apps.

Finally Wind Tre Business has launched WIND Cloud Line, an IP PBX cloud solution which integrates the mobile world

with the fixed world and the solution Work & Life, created to provide a response to the requests for smart working

increasingly to be found in businesses.

For SMEs, on October 1, 2017 Wind Tre Business completely renewed its fixed offer with Office, the new portfolio

created to respond in a complete way to the various needs of all business customers with an all-inclusive fee and no

extra costs and available in four offers: Office One, the ideal single-line offer for small businesses and professionals;


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Office Plus, the ideal offer for businesses that need two fixed lines; Office Maxi, for businesses that need a multi-line

solution with up to eight lines; and Office Data, the ideal offer for businesses and professionals that need a fixed line

with internet up to 200 Megabit/s and a static IP address, required to make the business applications uniquely

identifiable from the outside via internet. All the Office offers are available in ADSL, FTTC fiber and FTTH fiber, with

unlimited internet and a speed of up to 1 Gigabit/sec and unlimited calls towards fixed and mobile phones in Italy and

towards the European Union, the USA and Switzerland. With the Wind Tre Business Office offer both the activation

cost and the cost of the modem are reduced to zero if a customer remains for at least 24 months. In addition, thanks

to the new convergent offer Office Share, if an unlimited SIM from the Gigashare/MyUnlimited portfolio is combined

with a fixed Office product the monthly charge of both products is reduced.

Another offer designed for small and medium businesses is Smart Office, this too available in ADSL, FTTC fiber and

from October 1, 2017 also in FTTH fiber, 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

The Company’s distribution strategy is based on the multi-channel concept (stores, web or telephone) following the

needs of customers who automatically choose the sales channel that is the most suited to their requirements.

In terms of performance, retail is the most important channel (monobrand and multibrand stores), which through

integrated and convergent offers continues to grow in strength. The other channels that supplement the performance

of the FIX are the 159 call center, the web and the outbound call centers, the latter being mostly used for managing

the WIND and “3” customer base.

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 fee 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

Wind Tre’s Customer Value Management department (CVM) 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


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all the segments covered, from the consumer market (mobile and fixed) to the business market, with an organizational

structure focused by market.

A success factor for the initiatives carried out by CVM 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.

Customer care service activities for WIND, “3” and Infostrada 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 line, mobile and internet) and business customers. Call

centers dedicated to residential customers are located throughout the country and in addition in order to provide a

tailored service for certain particularly important customer segments such as the ethnic communities Wind Tre also

provides a customer assistance service in languages other than Italian.

The Wind Tre 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. In this sense moves are being taken to develop business processes and architectural investments to

strengthen the integrated management of customers with different services and brands.

An addition has been made to customer satisfaction measurement methods by making it possible to observe the various

points of contact between the customer and the Company. NPS methodology has been adopted which represents the

benchmark approach in the service market. This methodology makes it possible to understand the customer’s needs

better and accordingly to provide targeted replies, and more generally to identify the main areas for development.

In a market characterized by a high dynamicity and by a constant renewal and enlargement of the offer and services

portfolio a multi-channel approach to assistance has to be extended by diversifying the possibilities available to the

customer. As a result the availability of “self-care” assistance through dedicated website areas, dedicated apps and

chats, IVRs and services with automatic SMSs has accordingly been further developed to allow customers to select

their preferred modality. In addition, testing on the use of Virtual Agents and Chat Bots has started with the aim of

increasing the automation of the management of customers’ habitual and repetitive needs with the objective of

providing a constantly improving experience by ensuring “the same answer to the same question”.

This vision represents a cultural asset for both the WIND and the “3” brands and an approach that involves and

combines all business sectors.

At March 31, 2018 the MyWind App had reached over 19.6 million downloads. It confirmed itself to be much appreciated

and simple to use, posting a rating of 4.2 on the Android store and 3.7 on iOS.

The new Veon app, which went live in November 2016 to provide customers with the typical functionalities of Over the

Tops, had reached 2.7 million downloads at March 31, 2018.

The 3 Customer Area app has confirmed itself as the main contact channel for the “3” brand and has reached almost

17 million downloads, posting a rating of 3.8 on the Android store and 3.4 on iOS.


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Marketing and Branding

Corporate advertising and special projects

Wind Tre

The Corporate projects linked to the network continued, in particular with the study of the 5G logo for the testing

project on 5G technology in the city of L’Aquila and the municipality of Prato, in conjunction with Open Fiber.

In an institutional context Wind Tre’s contribution to young businessmen continued with the Wind Tre Business Factor

project and the 2017 edition of the Wind Start-up Awards, which during an Investor Day held at the Luiss Enlabs

premises at Termini Station in Rome in January 2018 rewarded the most innovative start-up with a training course

consisting of an advanced masters in Digital Marketing and a masters in Front-End and Back-End Developing organized

by the Dolab School, a training institute for professionals in the digital sector.

NETWORK

The Wind Tre network

Wind Tre currently owns two mobile networks, each of which arriving from the original companies, and a fixed network

belonging to WIND. Following the merger the infrastructures of these two networks are being gradually integrated with

positive effects for customers, giving better connectivity both in terms of covered areas and the quality of the indoor

signal.

As of March 31, 2018, Wind Tre’s fixed access network covered 70% of the Italian population with ADSL broadband

technology + direct services while mobile network population coverage had reached 99.9%.

The following chart shows Wind Tre mobile’s coverage at March 31, 2018.

The integration between the transmission networks owned by the former WIND and the former H3G is almost complete

with links in all provinces and major cities in Italy, resulting in a single infrastructure with 36,085 kilometers of fiber

optic cable as backbone and 6,786 kilometers of fiber optic cable for MANs as of March, 2018. The wireline transmission

network is completed by 30,120 radio links.


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Fixed-line Network

As of March 31, 2018, Wind Tre ’s fixed-line access network had 1,958 LLU sites for direct subscriber connections, with

a capacity of approximately 3,470 million lines, and had interconnections with 32 GW IPs which enable it to offer carrier

selection access for indirect subscribers throughout Italy, as well as WLR services.

Since 2015 Wind Tre has been making investments in fiber activating the ultra-broadband services for almost 53.1%

of the Italian population using Fiber to the Cabinet and Fiber to the Home technologies. During previous years, the

FTTH service was gradually extended to the following 12 cities: Milan, Turin, Bologna, Perugia, Venice, Padua, Naples,

Bari, Catania, Cagliari, Genoa and Palermo. Thanks to a new agreement with Open Fiber in the upcoming years the

ultra-broadband plan will be extended to a further 258 cities in the most populous areas of Italy; more specifically, a

number of areas of Milan’s and Turin’s hinterland were already reached by FTTH, as of March 31, 2018. This service

provides fiber optic connections which allow end user to reach download speeds of up to 1000 Mbps and is designed

to meet the needs of “Home-Family” customers.

The national voice switching network consists of:

an IMS network with 4 call control nodes,

a legacy network with 38 TDM exchanges,

a transit NGN network made of 4 media gateway controllers and 42 trunking gateways.

This national network, used to manage TDM / VoIP interconnections, is completed by:

a network dedicated to interconnection with international operators consisting of 4 media gateway controllers

and 12 trunking gateways,

an I-SBC layer for the connection with other national network operators.

Wind Tre’s infrastructure for data traffic is 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 access nodes

network consist of 68 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 Tre offers mobile services through 2G, 3G and 4G technologies. Following the merger and in accordance with

ministerial directives requiring the transfer of certain frequency blocks previously owned by the two original companies,

Wind Tre’s frequency spectrum will change in future years and will have the following configuration by the end of

2019:

System Current Spectrum Blocks

GSM 2x5 MHz – 900 MHz

2x5 MHz – 1800 MHz

UMTS 2x5 MHz – 900 MHz

2x20 MHz – 2100 MHz

10 MHz – 2100 MHz TDD

LTE 2x10 MHz – 800 MHz

2x15 MHz – 1800 MHz

2x20 MHz – 2600 MHz

30 MHz – 2600 MHz TDD


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To meet the considerable increase in data traffic demand Wind

Tre mainly concentrated its commitment in the last years on the

extension of LTE (long-term evolution) coverage to provide

broadband mobile services. The Company has decided to invest

in this solution to improve the quality of the mobile network and

to obtain benefits in terms of a reduction in energy consumption.

As a first step towards the consolidation of the two mobile

networks since May 2, 2017 roaming on 2G and 3G WIND’s

network has been gradually opened throughout Italy for 3 Italia

customers, who can now use WIND’s network at the same price

and with the same services as the home network; since August

2017 roaming is also available on the 4G network. All these

activities have enabled access to the mobile service to be

achieved even if “3”’s network is not available and have also

permitted TIM’s roaming switch-off to go ahead; this was

concluded in August 2017 and will result in future savings.

Starting from a pilot cluster in Bologna the consolidation of two

existing mobile networks began at the end of August 2017; this

process will be gradually extended to other areas of Italy with

the intention of reaching full integration into a single

infrastructure in 2019, with positive effects for customers who will have better connectivity and quality of service. As

of March 31, 2018 consolidation activities involved 29 Italian provinces including Rome and Milan, and additional 9

provinces were fully consolidated and optimized among which Trieste, Agrigento and Bologna. As a result of this activity

certain technical facilities for signal repetition will exceed the Company’s needs: these will be dismantled or transferred

to another operator between the end of 2017 and the end of 2019.

Wind Tre also has roaming agreements with international telecommunications operators around the world which allow

Wind Tre customers to use their mobile services in other countries.

The following table provides an analysis of Wind Tre’s GSM/GPRS, UMTS/HSDPA and LTE networks as of March 31,

2018.

GSM/GPRS (units)

Radiating sites (ON AIR) 14,729

BSC (Base Station Controllers) 255

MSC (Mobile Switching Centers)* 29

HLR (Home Location Register, FE, CUDB)* 22

SGSN (Service GPRS Support Node)/MME** 15

GGSN (Gateway GPRS Support Node)/PGW/SGW** 16


at March 31, 2018

25

* Share with GSM/UMTS ** Shared with UMTS/LTE

HUMAN RESOURCES

At March 31, 2018 the Wind Tre Group had a workforce of 7,076 employees structured as follows.

No. of employees at

Average no. of employees

in 03/31/2018 03/31/2017 03/31/2018 03/31/2017

Senior managers 166 200 167 204

Middle managers 704 836 705 843

Office staff 6,206 7,945 6,222 8,010

Total Wind Tre Group 7,076 8,981 7,094 9,057

During the first three months of 2018 the Group hired 44 employees while 53 left.

The following table shows the geographical allocation of Wind Tre personnel.

Sites 03/31/2018 03/31/2017

Rome 32% 31%

Milan (*) 19% 18%

Naples (*) 17% 13%

Palermo 5% 7%

Ivrea 8% 7%

Cagliari 1% 5%

Genoa 1% 4%

Other 17% 15%

Total 100% 100%

(*)The Rho site is included in Milan and the Pozzuoli site is included in Naples.

Organization

With the aim of maximizing focus on service from a customer standpoint Technology Operations responsibilities were

revised in the first quarter with the setting up of a new function, Service & Quality Assurance, dedicated to presiding

over service quality and availability, which works closely with the sales areas. This new structure represents the first

step in a program to transform and digitalize the operational technical areas which is designed to increase predictive

UMTS

Node B (ON AIR) 24,173

RNC (Radio Network Controller) 273

MGW (Mediagateway) 46

LTE

Enodeb(ON AIR) 13,967

HSS (FE, CUDB, Monolitici) 8


at March 31, 2018

26

maintenance and introduce automation and artificial intelligence processes that are able to improve the performance

of the network and business systems.

Training

A total of 1,351 man-days of training were given in the first quarter of 2018.

These mainly involved training in the deployment of Wind Tre’s leadership model and specialized technical and

technological evolution training.

Continuing with the activity that started in 2017, the Company’s executives and managers are currently involved in

training days aiming to spread knowledge of the leadership model, in order to foster debate and the activation of

consistent conduct within the management team as a whole.

Also continuing on from 2017, work picked up again in the first quarter of 2018 on the design and planning of technical

training on new technological scenarios: training is being allocated on the basis of the Agile and Lean 6Sigma models

and certifications, while courses on ITIL/e-TOM certifications and future network developments (4G/5G and NFV) and

new operating models in Technology Management, with particular reference to Digital Operations Transformation, will

begin shortly.

Initiatives and projects

Various development initiatives got under way in the first few months of 2018.

At the conclusion of the establishment of Wind Tre’s new performance and conduct appraisal model, the process

initiated saw almost 100% of the Company’s workforce appraised. The phase for feedback and the assignment of 2018

objectives is currently in progress.

On the other hand the projects launched by the Wind Tre Community are currently at the design and implementation

phase. This community is a group consisting of 36 employees having the objective of collecting new ideas and different

points of view as to how the Company’s new business culture can best be developed. The projects drawn up by the

community principally regard the development of people, such as for example Myknowhow, the platform for managing

employees’ professional profiles, and the full circle feedback in which assessments are requested of supervisors,

collaborators and colleagues.

Industrial relations

An agreement was signed with the trade unions in March 2018 providing for an increase in the employer’s and

employee’s contribution to the Wind Tre Solidarity Fund.

Meetings continued during the quarter with the welfare and network joint committees aimed at sharing the Smart

Working and Digital Operations Transformation projects with the unions.

Meetings at Asstel began in March for the upcoming renewal of the national collective bargaining

agreement/telecommunications for 2018/2021.


at March 31, 2018

27

Safety in the workplace

In accordance with the agreement reached between the state and the regions on training, 558 people attended safety

in the workplace courses during the first three months of 2018. The following table provides details of this by area and

sector.

Area Technology IT Staff and

commercial entities

Call center area Total

by area

Nord west 67 46 76 - 189

North east 16 - - - 16

Centre 2 118 75 - 195

South 114 39 - 5 158

Total trained workers 558

A total of 938 periodic health check-ups were carried out during the same period (864 in Wind Tre and 74 in Wind

Retail) in accordance with business roles, the allocated health protocols and the relative deadlines.

There were 18 accidents in Wind Tre the first three months of 2018 (15 during travel to and from work and 3 at work)

and only 1 in Wind Retail (during travel to and from work).

REGULATORY FRAMEWORK AT MARCH 31, 2018

Mobile Networks and Services

EU Net Neutrality Regulation

In application of European Regulation 2015/2120 in March 2017 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 Body of

European Regulators for Electronic Communications (BEREC)2. In April 2017, Wind Tre notified the Authority of the

measures it had adopted to ensure full compliance with the order and the European Regulation. In May 2017 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. On July 3, 2017 Wind Tre provided AGCOM

with additional information following an AGCOM request of June 12, 2017 and on August 8, 2017 Wind Tre informed

the Authority that it had implemented the technical measures adopted to avoid a possible fine pending an appeal

lodged with the Regional Administrative Court (TAR) which was heard on November 20, 2017. AGCOM took the decision

to fine Wind Tre for its delay in adopting the legislation and the Company settled the reduced penalty within the period

required (10/17/DTC).

In the period in question AGCOM continued its process of monitoring the adoption of the legislation by sending

operators periodical questionnaires on specific issues such as traffic management and the use of tethering mobile

devices.

In February 2018 AGCOM initiated a public consultation on possible measures to facilitate the freedom of choice in the

selection of terminal equipment for consumers and end users of public communications network connection services

2 BEREC Guidelines on the Implementation by National Regulators of European Net Neutrality Rules.


at March 31, 2018

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and Internet access services. Wind Tre sent AGCOM its contribution on March 8, 2018, emphasizing that in the case of

fixed offers if the ISP supplies the terminal for VoIP services this translates into greater protection for the end customer

from both a performance and a security standpoint.

On March 8, 2018 BEREC initiated a public consultation for the revision of the guidelines issued in August 2016 in

accordance with Regulation (EU) 2015/2120. Wind Tre is assessing how it should participate in this consultation both

directly and through the positioning of its stakeholders.

Mobile Termination

In September 2015 AGCOM extended3 the validity of the mobile termination rate of €0.98 per minute established in

20114 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 their own fair and

reasonable mobile termination rates from a commercial standpoint for calls originating from non EU/EEA operators.

Wind Tre took advantage of this opportunity setting prices that depend on the origin of the call. In January 2017, by

way of Resolution 45/17/CONS, AGCOM initiated a new cycle of market analyses on mobile termination.

Following the completion of the information-gathering phase in July 2017, by way of Resolution 481/17/CONS AGCOM

initiated a public consultation in December 2017 containing the Authority’s orientation on the termination rates to be

applied in the upcoming years (2018/2021), proposing to keep €0.98 per minute for 2018.

AGCOM completed the process of collecting observations from operators in March 2018.

As things currently stand the final decision on this matter is expected to be reached in August/October 2018 after

submission to the European Commission for its observations.

EU Roaming Regulation

In November 2015 European legislation was issued5 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, the so

called Roaming Like At Home (RLAH), throughout the European Union starting from June 15, 2017. The same regulation

provided a transitional period from April 2016 to June 2017 during which mobile operators were allowed to apply a

surcharge.

The proceedings initiated by AGCOM in 2016 concerning the transitional period for implementing RLAH were concluded

in 2017 for both brands, WIND and “3”, with a fine.

To complete the above mentioned regulation, in December 2016 the European Commission also published the

implementing regulation7 designed to define criteria for the fair use policy and for the evaluation of the sustainability

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


at March 31, 2018

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of RLAH and a further regulation8 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.

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 RLAH 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. AGCOM had no observations with respect to Wind Tre about the means by which the regulation on international

roaming will be implemented within the European Union.

A conceptually similar measure has been proposed as an amendment by the European Parliament as part of the

initiatives to revise the European Electronic Communications Code, directed towards an assessment similar to that

carried out at a domestic level for calls from Italy towards EU member states. Under instruction from BEREC, in

December 2017 AGCOM began collecting data for an analysis of the effects of a measure of this nature.

At the end of February 2018 AGCOM initiated the twenty first round of data collection for the International Roaming

Benchmark Report drawn up on the basis of Regulations (EU) 531/2012 and 2120/2015. As always Wind Tre will

provide its contribution within the specified time period.

Spectrum

During 2017 Wind Tre completed its change of technology from GSM to UMTS (3G) (refarming) on a block of 2x5 MHz

in the 900 MHz band in a specific portion of the country.

Pursuant to and by effect of 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 has requested authorization to change with effect from

July 1, 2017 the technology on the entire allocated band 900 MHz and 1800 MHz expiring on June 30, 2018 and at the

same time authorization to extend the term for the above-mentioned rights of use to the new technical conditions at

December 31, 2029. Wind Tre has additionally paid the fee stated in the Ministerial Provision of July 26, 2017 within

the period and by the means indicated therein. Wind Tre is waiting for the relative interministerial decree that concludes

the above-mentioned proceeding.

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 of Economic Development (MISE) as required by the provision

of that ministry dated October 24, 2016 and protocolled with no. 67608.

As far as the above is concerned in March 2018 Wind Tre obtained authorization from the Ministry of Economic

Development for a partial refarming in the 1800 MHz and 2100 MHz bands and progressively in specific areas

throughout the country.

In accordance with the requirements of the Ministry of Economic Development’s provision, protocol no. 67608 of

October 24, 2016, Wind Tre notified the ministry that the frequencies in the 2600 MHz and 1800 MHz bands had been

released to Iliad Italia S.p.A. on June 30, 2017 and March 31, 2018 respectively.

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 MISE initiated a procedure for acquiring planning proposals

8 Implementing Regulation (EU) 2016/2292


at March 31, 2018

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for carrying out pre-commercial testing in radio spectrum 3.6 – 3.8 GHz in the following three national areas: Area 1 –

Milan metropolitan area, Area 2 – Prato and L’Aquila and Area 3 – Bari and Matera.

Together with Open Fiber S.p.A., Wind Tre submitted a planning proposal for taking part in the testing proposed by

the Ministry of Economic Development (MISE) as stated in the above-mentioned public notice. MISE published a

classification on August 2 and the proposal for Area 2 (Prato and L’Aquila) submitted by Wind Tre together with Open

Fiber S.p.A. was ranked first.

On September 20, 2017 the final phase of the “negotiated procedure” between the MISE and the group consisting of

Wind Tre and Open Fiber S.p.A. was concluded, and on September 22, 2017 confirmation was given of the award to

Wind Tre and Open Fiber S.p.A., with the MISE issuing a temporary authorization for pre-commercial 5G testing in the

3.6 – 3.8 GHz portion of the spectrum for Area 2 Prato and L’Aquila. On December 15, 2017 the first report on the

state of progress of the activities planned in the project was sent to the MISE in accordance with the requirements of

the authorization.

On November 15, 2017 by way of a press release AGCOM announced that it had ordered the start of the proceeding

and relative public consultation on the requests for an extension of the rights of use in the 3.5 GHz band (pursuant to

article 25, paragraph 6 of the Electronic Communications Code) made by ARIA, Go Internet S.p.A., Linkem S.p.A. and

Telecom Italia S.p.A..

Subsequently, on January 22, 2018, by way of Resolution 503/17/Cons, AGCOM initiated a public consultation which

is currently in progress.

On March 5, 2018, by way of Resolution 89/18/CONS, AGCOM initiated the public consultation on the procedures for

the allocation and rules for the use of the available frequencies in the 694-790 MHz, 3600-3800 MHz and 26.5-27.5

GHz bands for electronic terrestrial communications systems in order to foster the transition towards 5G technology

pursuant to Law no. 205 of December 27, 2017. The consultation is currently in progress and is expected by be

concluded on May 11, 2018.

National Numbering Plan and SMS/MMS Alias

In July 2016, AGCOM set up a public consultation9 on modifications and additions to the “Numbering plan in the

telecommunication sector and implementation regulations” in relation to the use of alphanumeric identification codes.

On September 28, 2017, AGCOM published its Final Decision 132/17/CIR, concluding the proceeding without making

any changes to the existing NNP on the subject.

In April 2017, by way of Resolution 18/17/CIR, AGCOM ordered the extension of the alias testing in progress to March

31, 2018.

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. At the beginning of August 2017,

within the time period established by Resolution 17/17/CIR, operators submitted the new version of the self-regulation

code to AGCOM.

The self-regulation code was subsequently approved by AGCOM and signed by the operators adhering to the code.

9 Resolution 158/16/CIR


at March 31, 2018

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During July and September 2017, AGCOM organized talks with operators as a means of identifying any developments

connected with the way by which IINs (Issue Identification Numbers) are allocated for eSIM purposes.

In October 2017 AGCOM set up a public consultation on the subject concerning possible changes/additions to the

numbering plan as per Resolution 8/15/CIR in relation to the numbering needed to develop the eSIMs. Wind Tre has

already sent its proposal. The proceeding is in progress.

In March 2018, by way of Resolution 196/17/CIR, AGCOM initiated a public consultation on “An Amendment to the

Numbering Plan” as per Resolution 8/15/CIR, implementing the annual law for the market and competition no.

124/2017 regarding the “urban tariff” and the criterion for initiating the taxing of non-geographic numbering in the

case of services for a fee. The consultation is in progress.

Database of all internet access networks

In December AGCOM completed the proceeding10 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. In the meantime AGCOM has

published the application on its website enabling the information contained in its data banks (Broadband Map) to be

viewed. An app for the mobile devices has also been developed.

Wind Tre continues to send AGCOM the data requested for the functioning of the tool with the frequency and by the

means prescribed in Determination 1/16/DSD.

Fixed-line network

Renewal of fixed licenses expiring in 2018

Pursuant to and by effect of the Electronic Telecommunications Code, in December 2017 Wind Tre filed a request with

the Ministry of Economic Development for the renewal for a further 20 years of the individual Fixed Licenses previously

assigned to Infostrada and WIND Telecomunicazioni expiring in 2018. The two licenses were renewed by way of a

provision protocolled as no. 2249 of January 12, 2018.

TIM reference offers

In August 2017 proceedings started for the approval of the 2017 Telecom Reference offers for the following wholesale

services: a) wholesale fixed-line services for unbundled access services; b) dedicated capacity transmission services;

c) copper and NGA based bitstream services, VULA and related ancillary services; d) WLR services. The proceedings

are in progress. Wind Tre has replied to all of these consultations.

In December 2017 AGCOM initiated consultations relating to the 2017 reference offers “termination and transit

collection” (made by TIM) and “NGAN and End to End access services and backhaul services for 2017”. The proceedings

are in progress.

In March 2018, by way of Resolution 34/18/CIR, AGCOM approved Telecom Italia’s reference offer for wholesale

unbundled access services to the metal networks and sub-networks and for co-location services for 2017.

10 Determination 1/16/DSD


at March 31, 2018

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In February 2018, by way of Resolution 33/18/CONS, AGCOM published a “Public consultation on the determination of

the technical characteristics and corresponding denominations of the various types of physical infrastructure used in

the provision of telephony, television network and electronic communications services” pursuant to article 19

quinquiesdecies of Decree Law no. 148 of October 16, 2017. The consultation is in progress.

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. Wind Tre sent in its replies to the

questionnaires and publication of the public consultation by AGCOM is currently awaited.

Again in January 2017 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 June 2017 AGCOM sent operators qualitative and quantitative questionnaires.

With the information-gathering phase over, by way of Resolution 507/18/CONS in January 2018 AGCOM initiated a

public consultation containing the Authority’s orientation.

The final decision on this matter is expected after the end of the consultation phase and will be submitted to the

European Commission for its observations.

Technical workgroups

In 2016 the Authority set up a number of workgroups designed to address the technical issues relating to wholesale

services. In particular the following matters were and still are the subject of discussion by these groups: 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) the 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 TIM’s fiber offer or that of other operators. Discussions are in progress.

In particular in July and September 2017 meetings were held by the workgroups relating to i) the procedures for the

switch-off of the copper network by TIM and ii) migration to TIM’s new delivery chain in the fixed-line sphere (with

respect to the latter the start of migration, initially planned for July 1, was then postponed to October, compatible with

the results of the tests in progress). At the present time the migration to the new delivery chain originally planned to

be completed by the end of 2017 is still in progress. The issue of the switch-off of the TIM copper network, theme of

a specific technical workgroup, may also form part of the new cycle of market analyses of fixed access, for which

consultation is expected in the second half of 2018.


at March 31, 2018

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Universal service

By way of Resolution 113/16/CONS of March 24, 2016, AGCOM submitted for consultation a review of the scope of

application of the universal service obligations in relation to internet access and the relative quality objectives.

In this respect by way of Final Resolution 253/17/CONS of June 27, 2017, AGCOM concluded that:

Once the ultra-broadband (BUL) tenders have been allocated together with the relative coverage, the cost of the

universal service extended to connectivity services with a speed of at least 2 Mbps should remain restricted to

residual areas excluded from broadband and ultra-broadband coverage;

When revising universal service obligations, as a means of supplementing fixed network access, the qualitative

requirements may be set for fixed wireless, satellite or mobile connections that must guarantee a speed of at least

2 Mbps.

By way of Resolution 133/17/CIR of September 26, 2017, AGCOM set up a public consultation on the results of the

activities to calculate the net cost of the universal service for 2008 and 2009. The Authority has not yet approved the

provision with the final results of this proceeding.

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 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.

In February 2018 a proposal for making additions to Resolution 584/16/CONS on guidelines for assessing the

replicability of the retail offers of the notified operator for fixed network access services was submitted for review to

the AGCOM Board; the relative public consultation is expected to begin in April 2018.

Equal treatment and unbundling of provisioning and assurance services for LLU and SLU services

In May 2016 AGCOM started a proceeding11 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 for equal

treatment in the provision of regulated fixed wholesale access services.

With the publication of Resolution 321/17/CONS in August 2017 the procedure was completed and AGCOM issued its

decision on the subject of unbundling. The decision, for which an effective date of September 1 was set, provides for

a series of interactive meetings over the next few months between TIM, alternative fixed operators, system businesses

and authorities. At the present time meetings are taking place of the unbundling monitoring unit set up by AGCOM and

meetings between operators for the purpose of establishing the main contractual and implementation aspects of the

unbundling.

11 Resolution 122/16/CONS


at March 31, 2018

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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.

The deadline for the conclusion of the proceeding was then extended by way of a communication of September 11,

2017 to take account of the need to understand more about the potential effects that the unbundling measure

introduced by Resolution 321/17/CONS may have on the definition of the KPIs and the workgroup’s activities. At the

present time, by way of Resolution 27/18/CONS published at the end of February 2018 AGCOM has initiated a public

consultation on an overhaul of the Key Performance Indicator non-discrimination system which contains a proposal for

assessment. The consultation 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 a means of protecting 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.


at March 31, 2018

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Fixed termination

In September 2016 AGCOM adopted its final decision12 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 consultation13 a review of the timing underlying the fixed pure number portability

procedure. The consultation ended in April 2016 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 fiber optic access services provided by wholesale operators other than Telecom Italia

Wholesale. The technical workgroup is in progress. Wind Tre has prepared a proposal for a procedure and this is

currently being reviewed by the workgroup.

Television frequencies and networks

Article 1 of the decree issued by the MISE 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. These fees are 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 MISE 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 was 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.

In April 2018 the MISE published a public consultation on the national timetable on its institutional website (as per Law

no. 205 of December 27, 2017) for freeing-up the 700 MHz band and rearranging the under-694 MHz band. The public

consultation regards the national timetable that sets out the deadlines for the implementation of the objectives of

Decision (EU) 2017/899 of May 17, 2017, as per subsection n.1026, given the need to establish a transitional period,

from January 1, 2020 to June 30, 2022, to ensure the release of the frequencies by all operators holding the relative

rights of use at an Italian national and local level and the restructuring of the multiplex containing the regional

information by the concessionaire of the public radio, television and multi-media service. The roadmap has been drawn

up by taking into account both the international agreements entered into by Italy with its neighboring countries and

the contents of the national frequency allocation plan to be used for the PNAF 2018 digital terrestrial television service

12 Resolution 425/16/CONS 13 Resolution 119/15/CIR


at March 31, 2018

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issued by AGCOM on March 29, 2018 (24006). Observations and comments on the consultation by the parties

concerned should be sent by May 6, 2018.

Antitrust issues

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.

The proceeding has been extended to apply also to Telecom Italia Sparkle. As reported in Provision 26716 (published

by AGCM on August 2, 2017) on July 28, 2017 the results of the investigations were sent to the parties. In addition,

the deadline for concluding the two proceedings was extended to December 31, 2017, as AGCM considered the need

to guarantee the full right to reply regarding the requests of Vodafone, Telecom Italia and Telecom Italia Sparkle to

be justified.

On December 13, 2017, the Authority concluded the two separate investigation proceedings. In particular, the Authority

established that:

Vodafone Italia S.p.A. had abused its dominant position by internal and external discriminating behavior of a

technical and economic nature such as to determine a squeezing of the margins of its downstream market

competitors who purchase SMS termination towards the Vodafone Italia mobile network;

Telecom Italia S.p.A, also with the aid of Telecom Italia Sparkle S.p.A., had abused its dominant position by

squeezing the margins of an equally efficient competitor in the downstream market that purchases SMS

termination towards the TIM mobile network.

In both cases the operators, dominant in the respective upstream SMS termination markets on their own network and

vertically integrated, applied tariffs on both the upstream and downstream markets for the mass dispatch of SMSs that

make the potential margin for competitors in the retail market insufficient for covering the specific costs for providing

the services to end customers. This conduct is liable to jeopardize the competitive ability of competitors active in such

market. The duration of the abuse:

Vodafone: margin squeezing resulting from internal and external discrimination is noted to have taken place

at least during the period between May 7, 2015 and January 8, 2017;

TIM: margin squeezing is noted to have taken place at least during the period between October 20, 2015

and January 15, 2017.

Due to the seriousness of the conduct the Authority accordingly decided to fine Vodafone Italia S.p.A. and Telecom

Italia S.p.A. amounts of €5,843,814 and €3,717,988 respectively.


at March 31, 2018

37

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 and 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, was expected to be

concluded by December 31, 2017.

On June 28, 2017 the Authority published TIM’s commitments (Provision 26654) and those of Fastweb (Provision

26655) in order to submit them to market testing. By way of Provision 26911 the Authority resolved:

to extend the completion of Proceeding I799 to July 31, 2018;

to continue with the assessment of the proposed commitments submitted by the parties up to February 28,

2018, except for any procedural suspensions (e.g. the request for an opinion from AGCOM).

On April 9, 2018 the AGCM published a provision by which it approved the commitments submitted by TIM and Fastweb,

deeming them suitable for overcoming the concerns regarding competition.

Proceeding I820

On February 7, 2018 an investigative proceeding was initiated against Assotelecomunicazioni – Asstel, Fastweb S.p.A.,

TIM, Vodafone Italia S.p.A. and Wind Tre to determine whether article 101 of the TFEU (agreements between

undertakings) had been breached.

At the end of the information-gathering procedure the AGCM concluded that TIM, Vodafone, Fastweb and Wind Tre

had coordinated a sales strategy between them relating to the frequency of renewals and billing.

In the light of the documents analyzed on March 21, 2018 the AGCM stated that while waiting for the proceeding a

precautionary procedure should be adopted suspending the implementation of the alleged understanding to which the

proceeding refers, and as the effect of this each operator should establish the terms of its service offer independently

from its competitors.

Within seven days of the notification of the proceeding the parties involved submitted written statements and

documents and asked to be heard before the AGCM Board. The Authority will assess the items acquired.

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 Tre and its multibrand sales chain was submitted to the Authority in March 2018.

Proceeding A514

A proceeding against Telecom Italia S.p.A. (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 S.p.A., Open Fiber S.p.A. and Wind Tre.


at March 31, 2018

38

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:

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. The proceeding is expected to be concluded by October 31, 2018.

On February 14, 2018 the Authority resolved to objectively extend the proceeding to the other conduct relating to

TIM’s wholesale price strategy on the wholesale broadband and ultra-broadband access service market and the use of

inside information concerning the customers alternative to TIM on the broadband and ultra-broadband retail

telecommunications service market. This also on the basis of reports made by Wind Tre October 6, 2017 and October

24, 2017.

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).

All the activities regarding both technical and organizational implementation required by the above regulation are in

progress. In particular Wind Tre appointed a Data Protection Officer in February 2018.

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 access to 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 to which

Wind Tre duly complied.

On July 28, 2017 the Data Protection Authority notified a new provision which prescribes the need to inform all the

other concerned parties whose numbers were included in the file. Wind Tre satisfied the requirement in August 2017.

The proceeding is still pending. An additional inspection took place at Wind Tre in November 2017 into the data breach

matter; as things currently stand the proceeding is still in progress and the final pronouncements are awaited.

The Data Protection Authority has carried out a number of inspections whose results are not yet known. In particular:

Inspection of the WIND brand in August 2016 arising from a contact campaign sent to certain customers to obtain

their consent. Following the inspection, the Data Protection Authority notified a prescriptive provision which has

been satisfied by Wind Tre, although the Company has filed an appeal that is still pending (on January 16, 2017


at March 31, 2018

39

Wind Tre filed three defense briefs opposing the fine issued by the Authority and a verbal request has also been

made for a hearing before the Authority) and will be heard on May 8, 2018.

Following the above inspection two fines have been issued, one for an amount of €20 thousand and another whose

amount has yet to be established; as of today the Authority has not yet expressed its opinion on the matter and a

pronouncement is awaited.

Three inspections have been carried out into the "3" brand (one in November 2016, one in January 2017 and one

in February 2018 ) whose results are not yet known.

In addition, on January 11, 2018 Law no. 5 was issued on new dispositions regarding registration in the “opposition

register” and how such register should work, together with the establishment of national prefixes for telephone calls

made for statistical, promotional and market research purposes. The Company is implementing the measures resulting

from this legislation.

Consumer protection

In respect of the proceedings of the Italian Competition Authority (AGCM) on consumer protection matters one

proceeding (PS 10702) concerning the WIND/Infostrada brand is currently pending which involves the “3” brand for

alleged lack of adequate information relating to the phrase “without limits” used commercially and the WIND brand for

alleged lack of adequate information concerning the cost of early withdrawal from fixed network offers and technical

and economic details relating to the publication of fiber offers. Another proceeding (PS 10967) is also pending regarding

the “3” brand which concerns the All-In offers marketed between 2013 and 2017 and guaranteed “forever”, meaning

with beneficial economic conditions for a minimum contractual term, which were then subjected to reformulation and

specific charges in the event of withdrawal. A new proceeding was initiated by the AGCM in the first quarter of 2018

that is looking into certain information campaigns directed at “3” brand customers which were carried out in 2016 and

in the first half of 2017 and regard the SIMOITEL data bank.

In terms of the activities performed by AGCOM on consumer protection a dispute was raised against Wind Tre in 2017

(6/17/DTC) concerning breaches of Resolution 121/17/CONS, which was concluded at the end of 2017 with a fine of

€1.16 million and an order to reverse certain amounts not used by the user in terms of service. The dispute relating to

the four repricing information campaigns (3/17/DTC) concerning the All-In offers of the “3” brand was concluded at

the end of 2017 with the issue of an injunction of €2.32 million. Recently, following an appeal, AGCOM recently issued

Decision 115/18/CONS. In conclusion, AGCOM served a cautionary notice (40/18/CONS) on the Company’s decision to

pass to a monthly billing on the basis of Law no. 172/17 as well as to make contractual changes, in respect of which

the Company promptly took action by implementing the requested amendments.

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). AGCOM

Proceeding 1/17/DTC relating to LTE reformulation that was initiated in 2016 against the “3” brand was concluded in

2017 with a fine of €580 thousand.


at March 31, 2018

40

Trading Practices

Proceedings PS10702 and PS10967, initiated by AGCM, and proceeding PS11043, as discussed above, are currently in

progress. The following proceedings on unfair trading practices were brought to an end in 2017: i) PS10685 (WIND

brand) relating to 2016 breaches of consumer code regulations on rights for withdrawal and a cooling off period and

consumer-related rights regarding the WIND brand (ending with a fine of €2.1 million), ii) PS 10571 (Infostrada brand)

relating to payment by instalment of the terminal payment in the 2016 fixed reformulation (ending with a fine of

€500,000), iii) PS10026 (WIND brand) relating to Teleselling 2016 (ending with a fine of €450,000).

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 which identifies the Communications Authority as the

body competent 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

The extremely high level of competition in the telecommunications market already to be seen in the second half of

2017 has also been a future of the first few months of this year, especially in the mobile segment, also because a

fourth infrastructured mobile operator, Iliad, is expected to make its entry in 2018 as 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 fixed-line market there is the expectation of a gradual slowdown in value contraction due to the upcoming arrival

of fiber on a larger scale and an overall quality improvement in broadband.

In 2018, 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 €6

billion in the telecommunications network, innovation and new technologies over a five-year period (2017-2021).

Wind Tre’s objective is to create the best and most extensive broadband mobile network in Italy; in addition, the

Company intends to pursue new growth opportunities in the Business segment and will continue to strengthen its

position in the mobile, fixed-voice and internet segments by enhancing the value of its convergent business model.

Putting significant emphasis on a rise in efficiency and a further optimization of cost structures continues to be a key

point in the integration of the two operating companies. In the first quarter of 2018, Wind Tre achieved opex savings

from synergies amounting to a total of €204 million. These savings are expected to reach around €270 million when

the synergies are fully operational, which is already over half of the total stated target (an opex run-rate of €490 million

by 2020). Following the approval of the country’s finance law Italy’s telecommunications regulator AGCOM is now

establishing procedures for allocating the rights of use of the radio frequencies for bi-directional terrestrial wireless

broadband electronic communications services through the use of the 694-790 MHz band and the pioneer spectrum

bands 3.6-3.8 GHz and 26.5-27.5 GHz, with these to be completed during the next meeting.


at March 31, 2018

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GLOSSARY

ADSL (Asymmetric Digital Subscriber Line): a technology which via a modem uses normal twisted-pair telephone lines and converts the traditional telephone line into a high-speed digital link for transferring multimedia data into asymmetric mode. AGCM: Italian Authority for Market Competition AGCOM: Italian Authority for Competition in Communication ATM (Asynchronous Transfer Mode): a switching technology that permits the transmission of different kinds of information such as voice, data and video. Backbone: the telecommunications network portion with the highest traffic intensity and from which the connections for services in the local areas depart. Base Station Controller (BSC): an interface with the MSC switching exchange. It has the task of supervising and controlling radio resources, both during the phase when a call is being set up and during the maintenance phase. Base Transceiver Station (BTS): a radio signal transmitter which sends out the GSM radio signal via antenna to cover an area (a cell). Bitstream: a service consisting in the supply by the incumbent to the alternative operator of the transmission capacity between the final customer’s workstation and the interconnection point or PoP (Point of Presence) of an alternative operator which wants to offer broadband services to its final customers. B Node: a term which in UMTS technology denotes the radio base station which creates the coverage of the cell. Broadband: services characterized by a transmission speed of 2 Mbit/s or more. Cloud Computing: represents the emerging development model, implementation of ICT infrastructures which support the provision of the services and the distribution of Cloud Services, meaning services where the “intangible” asset may be acquired and used in real time through the internet. Crowdsourcing: a neologism which specifies a model in which a business or an institution delegates an activity which is usually assigned to employees of a group, generally containing a large number of members who have not been determined in advance, in “open call” mode using the internet (through outsourcing). EDGE (Enhanced Data rates for GSM Evolution): an evolution of the GPRS standard that increases the data transmission rate on the GSM network. EIR (Equipment Identity Register): a database which contains the data to validate access to the network by a mobile phone through its IMEI code. ESP (Enhanced Service Provider): an operator which provides telecommunications services to the public availing of an agreement with a mobile network licensee. FEMTO Cell: low power indoor cellular base station. FEMTO Cells allow mobile operators to connect standard mobile devices to their networks through the customers’ home DSL or cable broadband network.

FNR: (Flexible Numbering Register): a table in which the telephone numbers of a single customer under the old and the new operator are listed.

FR (Frame Relay): a packet switching transmission technique. Gateway: a network node which allows interfacing with another network using different protocols. GGSN (Gateway GPRS Support Node): a node which acts as a gateway between a GPRS wireless network and an Internet or private network. GPON (Gigabit Passive Optical Network): optical access network.


at March 31, 2018

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GPRS (General Packet Radio Service): a packet-switching based system of transmitting data over the GSM network at medium speed. GSM (Global System for Mobile Communications): standard architecture for digital cellular communications working on 900MHz and 1800MHz bands. This is currently the most widespread mobile standard in the world. HLR (Home Location Register): a centralized database containing the details of each mobile telephone customer authorized to access the GSM network. HSDPA (High Speed Downlink Packet Access): a protocol which allows UMTS networks to improve their performance by increasing capacity and band width. Internet: a global computer network accessible to the public. The Internet is an interface for networks based on different technologies but which use the TCP/IP protocol platform. IoT: The Internet of things is the network of physical devices, vehicles, home appliances and other items embedded with electronics, software, sensors, actuators, and connectivity which enables these objects to connect and exchange data. Each thing is uniquely identifiable through its embedded computing system but is able to inter-operate within the existing Internet infrastructure. IP (Internet Protocol): a packet-switching network protocol which enables networks with heterogeneous technologies to be inter-connected. IPTV (Internet Protocol Television): a system which transmits digital audiovisual content via a broadband Internet connection. ISDN (Integrated Services Digital Network): a circuit-switching technology which allows the transmission of voice and data over traditional telephone lines. ISP (Internet Service Provider): a vendor who provides access to the Internet. LLU (Local Loop Unbundling): it indicates unbundled access to the local network, meaning the possibility for alternative operators, on the payment of a fee, to make use of the incumbent’s infrastructure to offer services to its own customers. MAN (Metropolitan Area Network): a computer network infrastructure within a town or city. MGW (Media Gateway): it connects different types of networks (such as PSTN, Next Generation Networks, 2G and 3G); one of its main functions is to convert between the different transmission and coding techniques. MMS (Mobile Multimedia Services): multimedia messaging services for mobile phones. MNP/FNR Node: (Mobile Number Portability/Flexible Numbering Register) Node - see FNR. Modem: a device that modulates and demodulates signals containing the information to enable digital data to be transmitted on analog channels. MSC (Mobile Switching Center): a part of the GSM mobile telephone network which in addition to acting as a network interface executes functions such as controlling calls, switching traffic and issuing data cards (used for tariffing traffic). MSC-Server: a 3G core network element. MVNO (Mobile Virtual Network Operator): a company which provides mobile phone services but which does not own a telephone network or have its own frequencies and which uses the infrastructure and frequencies of other mobile telephone operators to offer mobile telephone services. NGN/IMS: (Next Generation Network/IP Multimedia Subsystem): these allow all types of information and services (voice, data and all sorts of media) to be transported by encapsulating them into packets: NGN type networks are based on the Internet Protocol. Node: a topological network junction, commonly a switching center or station.


at March 31, 2018

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Packet Switching: method of transmitting information by which each message is divided into different packets that are then sent to their specified destination, even by different routes. PoP (Point of Presence): a point of access to the network provided by an ISP to route traffic to the final users connected to it. RNC (Radio Network Controller): an element of the UMTS network with supervisory and control functions over the B Nodes. Roaming: a service by which mobile telephone operators allow their customers to make connections by using a network not owned by them. This service is activated when the phone is used in a foreign country (if the operators of the other country belong to the GSM network) or when the customer is in the home country of an operator which does not have LLU coverage in that country. SGSN (Serving GPRS Support Node): the SGSN is responsible for the delivery of data packets from and to the mobile stations within its geographical service area. SGSN: (Serving GPRS Support Node): the SGSN is responsible for the delivery of data packets from and to the mobile stations within its geographical service area. Shared Access: indicates the sharing of access to the user’s twisted-pair telephone lines by the incumbent and another LLU service provider. Short Message Service Center: a network element in the mobile telephone network which delivers SMS messages. SIM (Subscriber Identity Module): a chip to which a serial number is associated that enables a telephone operator to identify on its computer system a specific mobile telephone subscriber, and which enables the subscriber to gain access to its services. SME: small and medium-sized enterprises. SMS: short text messages that can be received and sent through GSM network connected mobile phones. Softswitch: a central device in a telephone network which routes calls from one phone line to another entirely by means of software (instead of by physical switchboards). Switching Center: network nodes which handle the set-up and routing of the signal towards the required destination. TDM (Time-Division Multiplexing): a technique for sharing a communication channel in which two or more signals are apparently transferred simultaneously within the channel, but where in reality each in turn has the exclusive use of the channel for a short period of time. Trunking Gateway: an interface between the VoIP network and the traditional telephone network. UMTS (Universal Mobile Telecommunications System): a third generation mobile phone technology (3G), the successor to GSM, consisting of a broadband transmission system in which data travels at 2Mbit/s. Unbundling: see LLU. VAS: Value Added Services. VDSL2: (Very High Digital Subscriber Loop): Transmission system at high speeds over copper wire.

Virtual Unbundling: VLLU, meaning "virtual LLU”, is the complete unbundling of the old operator’s line for administrative purposes only. Telephony services continue to be provided by the old operator while data and internet services are provided by the new operator. VMS (Voicemail System): a centralized system for managing telephone messages. VoIP: a technology which makes it possible to hold a telephone conversation over the Internet or another dedicated network using the IP protocol instead of passing through the traditional telephone network. WAP (Wireless Application Protocol): a protocol allowing access to the Internet from a mobile phone.


at March 31, 2018

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Web 2.0: a general term describing an evolution of the World Wide Web and referring to the set of online applications characterized by a high level of interaction between the website and the user. Webmail: an application which enables an electronic mail account to be managed via a web browser. WiMax (Worldwide Interoperability for Microwave Access): a technology that allows wireless access to broadband telecommunications networks. Wholesale Line Rental (WLR): a service in which a telecommunications operator other than the incumbent may set up an exclusive commercial relationship with its customers, also outside the LLU service coverage areas, leasing the customer’s lines from the incumbent under wholesale terms and conditions.

The Board of Directors

WIND TRE GROUP

Consolidated interim financial statements

as of and for the three-month period ended

March 31, 2018

FINANCIAL STATEMENTS AND NOTES THERETO

Consolidated interim financial statements as of and for the period ended March 31, 2018

46

CONTENTS

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

COMPOSITION OF THE CORPORATE BODIES OF WIND TRE S.P.A. ................................................................. 52

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE WIND TRE GROUP AS OF AND FOR THE

THREE-MONTH PERIOD ENDED MARCH 31, 2017 ............................................................................. 53

1 INTRODUCTION ............................................................................................................................ 53

2 GENERAL ACCOUNTING POLICIES .................................................................................................. 54

3 BASIS OF CONSOLIDATION ............................................................................................................ 61

4 REVENUE ...................................................................................................................................... 64

5 OTHER REVENUE ........................................................................................................................... 65

6 PURCHASES AND SERVICES ........................................................................................................... 65

7 OTHER OPERATING COSTS ............................................................................................................ 66

8 PERSONNEL EXPENSES .................................................................................................................. 66

9 RESTRUCTURING COSTS ................................................................................................................ 67

10 DEPRECIATION AND AMORTIZATION .............................................................................................. 67

11 FINANCE INCOME AND EXPENSE .................................................................................................... 68

12 INCOME TAXES ............................................................................................................................. 69

13 TANGIBLE ASSETS ......................................................................................................................... 69

14 INTANGIBLE ASSETS ..................................................................................................................... 70

15 FINANCIAL ASSETS ........................................................................................................................ 72

16 OTHER NON CURRENT ASSETS ....................................................................................................... 72

17 DEFERRED TAX LIABILITIES ........................................................................................................... 73

18 SHAREHOLDERS’ EQUITY ............................................................................................................... 73

19 PROVISIONS ................................................................................................................................. 74

20 FINANCIAL LIABILITIES ................................................................................................................. 75

21 DERIVATIVE FINANCIAL INSTRUMENTS .......................................................................................... 77

22 NET DEBT ..................................................................................................................................... 79

23 RELATED PARTIES TRANSACTIONS ................................................................................................. 79

24 OTHER INFORMATION ................................................................................................................... 81

25 SUBSEQUENT EVENTS ................................................................................................................... 86


47

CONSOLIDATED INCOME STATEMENT

(millions of euro) 2018 2017

Note 3 months 3 months(1)

Revenue 4 1,390 1,510

Other revenue 5 20 38

Total revenue 1,410 1,548

Purchases and services 6 (748) (845)

Other operating costs 7 (67) (72)

Personnel expenses 8 (86) (114)

Restructuring costs 9 (25) (59)

Operating income before depreciation and amortization 484 458

Depreciation and amortization 10 (553) (778)

Operating income (69) (320)

Finance income 11 25 28

Finance expense 11 (104) (172)

Foreign exchange gains / (losses), net 1 (2)

Profit before tax (147) (466)

Income taxes 12 (6) (30)

Loss for the period (153) (496)

(1) The figures for the period ended March 31, 2017 have been disclosed differently/reclassified to ensure comparability with the figures for the period

ended March 31, 2018

The accompanying notes are an integral part of these consolidated financial statements.


48

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(millions of euro) 2018 2017

Note 3 months 3 months


Other comprehensive income that will be reclassified subsequently to profit or loss

Gains on cash flow hedging instruments net of tax effect (19) 11

Total Other comprehensive income that will be reclassified subsequently to profit or loss

18 (19) 11

Total comprehensive loss for the period 18 (172) (485)



49

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(millions of euro) At March 31, 2018

At December 31, 2017 Note

Assets

Tangible assets 13 3,239 3,528

Intangible assets 14 9,778 9,742

Financial assets 15 1,125 1,128

Other assets 16 623 653

Total non-current assets 14,765 15,051

Inventories 104 127

Trade receivables 953 1,251

Financial assets 15 46 24

Current income tax assets 31 28

Other receivables 297 303

Cash and cash equivalents 701 612

Assets held for sale 254 241

Total current assets 2,386 2,586

TOTAL ASSETS 17,151 17,637

Equity and Liabilities

Equity

Issued capital 474 474

Share premium reserve 3,119 3,119

Other reserves 11,335 11,354

Retained earnings (13,451) (13,303)

Total equity 18 1,477 1,644

Liabilities

Financial liabilities 20 12,065 12,028

Employee benefits 65 67

Provisions 19 196 195

Other liabilities 401 418

Deferred tax liabilities 17 174 174

Total non-current liabilities 12,901 12,882

Financial liabilities 20 124 49

Trade payables 1,974 2,343

Other payables 640 694

Income tax payables 25 19

Liabilities associated to assets held for sale 10 6

Total current liabilities 2,773 3,111

Total liabilities 15,674 15,993

TOTAL EQUITY AND LIABILITIES 17,151 17,637



50

CONSOLIDATED STATEMENT OF CASH FLOWS

(millions of euro) 2018 3 months

2017 3 months

Cash flows from operating activities


Net financial costs 79 144

Income taxes 6 30

Loss for the period before taxes, interest, gains/losses on disposal of assets

(68) (322)

Adjustments to reconcile the loss for the period with the cash flows from/(used in) operating activities

Depreciation and amortization 553 778

Net changes in provisions and employee benefits 4 7

Impairment of trade receivables 52 43

Changes in inventories 22 (43)

Net changes in current assets/liabilities (235) (114)

Interest paid (10) (130)

Taxes paid (5) -

Net cash flows from operating activities 313 219

Cash flows from investing activities

Acquisition of tangible assets (116) (149)

Acquisition of intangible assets (108) (91)

Assets disposal - 13

Net cash flows used in investing activities (224) (227)

Cash flows from financing activities

Parent company and fellow subsidiaries borrowings:

Proceeds - 171

Repayments - (144)

Net cash flows from financing activities - 27

Net cash flows for the period 89 19

Cash and cash equivalents at the beginning of the period 612 603

Cash and cash equivalents at the end of the period 701 622



51

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(millions of euro) Equity attributable to the owners of the parent

Equity Issued capital Share premium

reserve Other reserves

Retained earnings/(losses carried forward)

Balances at January 1, 2017 474 3,119 11,650 (11,039) 4,204

Total comprehensive income for the

period

- Loss for the period - - - (496) (496)

- Cash flow hedges - - 11 - 11

Other movements - - (328) 328 -

Balances at March 31, 2017 474 3,119 11,333 (11,207) 3,719

Balances at December 31, 2017 474 3,119 11,354 (13,303) 1,644

IFRS 15 effect - - - 63 63

IFRS 9 effect - - - (58) (58)

Balances adjusted at January 1, 2018 474 3,119 11,354 (13,298) 1,649

Total comprehensive income for the

period

- Loss for the period - - - (153) (153)

- Cash flow hedges - - (19) - (19)

Balances at March 31, 2018 474 3,119 11,335 (13,451) 1,477



52

COMPOSITION OF THE CORPORATE BODIES OF WIND TRE S.P.A.

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 held on November 5, 2016 appointed the Board of Directors for a term expiring on

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 the 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 expires.

(2) The shareholders’ meeting of the Company held on November 5, 2016 appointed the Board of Statutory Auditors for a term expiring on the date of the shareholders’ meeting that approves the Company’s financial statements for the year ending December 31, 2018.


53

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE WIND TRE

GROUP AS OF AND FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2017

1 INTRODUCTION

Wind Tre S.p.A. (hereinafter 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, internet mobile

access services in broadband and broadband and ultra-broadband fixed-line services, as well as a convergent fixed-

mobile offer. In addition, it accompanies its offer with a wide range of content, applications and multimedia support.

These consolidated financial statements for the period ended March 31, 2018 were approved by the Company’s

Board of Directors on May 11, 2018. At the date of approval of these consolidated financial statements Wind Tre is

controlled by Wind Tre Italia S.p.A. (hereinafter referred to as Wind Tre Italia) which in turn is controlled by the

Luxembourg based entity VIP-CKH Luxembourg Sàrl (hereinafter 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 (hereinafter

referred to as CK Hutchison) and by Veon Ltd. (hereinafter referred to as Veon). The Joint Venture owns and

operates 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, The Netherlands and listed on NASDAQ.

On the formation of the Joint Venture at the end of 2016 the respective holding and operating companies of the

telecommunications businesses in Italy of CK Hutchison and Veon, namely Wind Tre Italia and WIND Acquisition

Holdings Finance S.p.A., and Wind Tre and WIND Telecomunicazioni S.p.A., 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 Veon.

Following the above mentioned transaction WIND Acquisition Holdings Finance S.p.A. and WIND Telecomunicazioni

S.p.A. were merged into Wind Tre Italia and Wind Tre respectively.

The approval for the transaction obtained from the European Commission, which 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. These agreements have

resulted in the commitment of the Wind Tre Group to sell frequencies for €450 million and sites to Iliad in the period

2017 – 2019 as well as to sign certain temporary agreements which enable Iliad to operate telecommunications

services in the Italian market while it is creating its own network. From an accounting perspective the frequencies

and sites that are expected to be transferred to Iliad by March 31, 2019 are presented and measured at each closing

date as required by IFRS 5 and discussed in the General Accounting Policies section. Conversely accelerated

depreciation has been charged on the sites that are expected to be transferred after March 31, 2019 and will still be

utilized by the Group through that date, in order to represent their new expected limited useful lives.


54

As a result of these agreements at the end of the 2016 the carrying amount of the assets to be sold was reviewed in

terms of impairment or by revising their useful lives. These assessments have been updated in the financial

statements at March 31, 2018 as discussed in the explanatory notes.

The following diagram sets out the structure of the Wind Tre Group at March 31, 2018.

As required by the European Commission as a mandatory condition for approving the merger between WIND

Telecomunicazioni S.p.A. and H3G S.p.A. which took place at the end of 2016, Iliad, the fourth infrastructure mobile

operator, is expected to enter the market during 2018.

For more information on this transaction reference should be made to the Wind Tre Group Notes to the Consolidated

Financial Statements as at December 31, 2016 and 2017.

The subsidiary Wind Tre is investing to strengthen its fixed and mobile networks, thereby accelerating the process of

network integration. Trieste and Agrigento are the first two Italian cities to benefit from the new consolidated Wind

Tre network which guarantees high performance for coverage, quality of service and connection speed and ensures a

better user experience; Bologna, Alessandria and Milan have been added in 2018. The consolidation of the mobile

network is expected to be completed by the end of 2019.

2 GENERAL ACCOUNTING POLICIES

2.1 Basis of preparation

The consolidated financial statements for the period ended March 31, 2018 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 adopted by the European Union

(EU) 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

classification of expenses by nature that is believed to provide more relevant information than a classification by

function.


55

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, 2017.

The consolidated financial statements as of and for the year ended December 31, 2017 is available on request at the

registered office of the Parent and on the website www.windtre.it.

The income statement, statement of comprehensive income and statement of changes in equity figures provided

relate to the three-month period ended March 31, 2018.

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, 2017 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.

Starting from January 1, 2018 become effective the new international accounting standards IFRS 15 "Revenue from

contracts with customers" and IFRS 9 "Financial instruments" for which was used as a transition method the so-

called "simplified approach". The comparative data are presented with the accounting standards used in the previous

year and the impacts of these new principles are reported in paragraph 2.2, Accounting standards and

interpretations.

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, 2017.

http://www.windtre.it/


56

2.2 Accounting standards and interpretations

New accounting standards and interpretations

The Group has adopted all the newly issued and amended standards of the IASB and interpretations of the IFRIC,

adopted by EU, applicable to its transactions and effective for financial statements for years beginning January 1,

2018 and thereafter.

Standard effective in 2018

With reference to the application of accounting standards that became effective from January 1, 2018 are reported in

particular the following standards and amendments which, despite not having a significant impact on the interim

financial statements at March 31, 2018, have been applied by the Group's core business and have relevance also

with respect to future transactions.

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 introduces a model based on the following steps: (i) Identify the contract with a customer; (ii) Identify the

performance obligations in the contract, the separable elements that are part of the contract but which, for

accounting purposes, must be separated; (iii) Determine the transaction price; (iv) Allocate the transaction price to

the performance obligations in the contract; (v) Recognize revenue when (or as) the entity satisfies a performance

obligation.

In 2017, the Group started the necessary activities for the assessment of the expected impacts from the application

of IFRS 15. In particular, the impacts from IFRS 15 are mainly driven by both the business model applied by an

entity and by the complexity of the contracts offered to the end-customers. The main considerations around the

application of IFRS 15 and related effects to the Group can be summarized as follow:

The Group has utilized as transition method the so-called “simplified approach” which means that IFRS 15 will be

applied to all contracts that are not completed by January 1, 2018. The cumulative effect of the transition has

been then treated as an adjustment to the opening equity at January 1, 2018, making the comparison with the

previous year not immediate. Consequently, the following paragraphs provide additional disclosure required by

the same accounting standard for the application of the simplified approach, aimed to evaluate the impact of

IFRS 15 on the income statements and balance sheet for the current period despite the comparative figures are

presented based on the accounting following the previously applicable IAS 18;

The Group sells “bundle” / multiple arrangements offers to the end-customers. However, considering the

business model applied by the Group (mainly through indirect channel, thus generating a separation of the

obligation related to the handset sell from the service provision), and the pricing strategy of the Group in


57

relation to the embedded discounts in bundles, IFRS 15 did not generate significant impacts on revenues as of

January 1, 2018;

The above conclusions are mainly linked to the actual business model applied by the Group. Changes in the

business model, including for example (i) changes in the distribution strategy; (ii) inclusion in the offers of

significant options to activate future services at discounted price (material rights); (iii) the inclusion in the offers

of services provided by third parties at discount; (iv) significant increase of the discount offered for “bundle”

arrangements; and (v) changes to the average length of the contracts may lead to impacts in the future;

One-off contributions deriving from post-paid and pre-paid mobile activation with restrictions, as these revenues

are not considered "separate performance obligations", are always considered part of the transaction price

allocated to other performance obligations The pre-tax impact of this adjustment at January 1, 2018 is a

decrease in shareholders' equity of approximately €7 million, gross of the related tax effect, while for the first

quarter of 2018 there are no significant impacts (€0.1 million);

Customer acquisition costs (mainly commissions for the Group) are now always capitalized for all types of

commercial offers and amortized on the basis of the average customer life. The pre-tax impact on Equity of this

adjustment at January 1, 2018 is equal to an increase in Equity of about €95 million while for the first quarter of

2018 there is a net effect on the income statement of around €8 million. This net effect is made up of

capitalization of customer acquisition costs for around €19 million and amortization for the period of

approximately €27 million. In terms of presenting, the Group considers these costs, by nature, similar to the

acquisition of customer relations. Therefore, the relative release to the income statement is presented in the

amortization line.

The following tables summarizes the effects of the application of the new accounting standard on equity at January

1, 2018 and on the first quarter of 2018.

Effects on Consolidated Statement of Financial Position IAS 18 Adjustment IFRS 15 IFRS 15

(milions of euro) At March 31, At March 31, At March 31,

2018 2018 2018

Assets

Non-current assets 14,678 87 14,765

Of which:

Intangible assets 9,691 87 9,778

Current assets 2,386 - 2,386

TOTAL ASSETS 17,064 87 17,151

Equity and Liabilities

Equity 1,420 57 1,477

Of which:

Retained earnings (13,509) 57 (13,452)

Non-current liabilities 12,878 23 12,901

Of which:

Deferred tax liabilities 151 23 174

Current liabilities 2,766 7 2,773

Of which:

Other payables 633 7 640

TOTAL EQUITY AND LIABILITIES 17,064 87 17,151


58

Effects on Consolidated Income Statement IAS 18 Adjustment

IFRS 15 IFRS 15

(milions of euro) 2018 2018 2018

3 months 3 months 3 months

Total Revenue 1,410 - 1,410

Purchases and services (767) 19 (748)

Other operating costs (67) - (67)

Personal expenses (86) - (86)

Restructuring costs (25) - (25)

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

465 19 484

Depreciation and amortization (526) (27) (553)

Operating Income (61) (8) (69)

Finance income and expenses (78) - (78)

Loss before tax (139) (8) (147)

Income taxes (8) 2 (6)

Loss for the period attributable to the group (147) (6) (153)

Clarifications to IFRS 15 “Revenue from Contracts with Customers” – integrate the principles by providing

clarifications on how to identify a “performance obligation” to the considerations related to the “principal/agent” and

to the “licensing”.

IFRS 9 “Financial Instruments” – This replaces IAS 39 “Financial Instruments” and contains a model to evaluate

financial instruments (based on a business model assessment of different portfolios of financial assets and the cash

flow characteristics of each single financial asset) in three categories: amortized cost (“hold to collect” business

model), fair value through profit or loss (“hold to collect and sale” business model) and fair value through other

comprehensive income (“hold to sell” business model). The standard also envisages a new impairment model that is

different from the model currently included in IAS 39 and is more focused on expected credit losses. Finally, the

standard also simplifies the requirements for hedge accounting generally aligning management strategy with hedge

accounting requirements. The Group started and finalized in 2017 the activities deemed necessary to assess the

effect of the application of IFRS 9. The main considerations around the application of IFRS 9 and the related effects

on the Group can be summarized as follow:

Concerning the classification of financial assets, no impacts have been identified in relation to the vast majority

of financial assets which are generally managed through a “hold to collect” business model. The only main

exception is related to receivables connected with handset sale, which are mainly managed instead through an

“hold to sell” business model. The fair value measurement of these assets generates a pre-tax impact on Equity

of about €54 million of decrease at January 1, 2018. The following table summarize the reclasses made on

January 1, 2018, first time adoption of IFRS 9:


59

Financial assets at January 1, 2018 Fair Value

through Profit & Loss

Fair Value through Other Comprehensive

Income (Available-for-sale 2017)

Held to maturity

Amortized cost (Receivables

2017) (millions of euro)

Balance at December 31, 2017 (50) - - 1,522

Reclass of receivables for handset sale according with “Hold to sell” business model

429 - - (429)

Balance at January 1, 2018 379 - - 1,093

By an impairment perspective the modification of the credit impairment model, it should be noted that the

Group mainly has financial assets consisting of receivables from customers and contract assets related to

measurements in accordance with IFRS 15. Therefore, the Group has applied the simplified method for

estimating expected losses as required by IFRS 9, paragraph 5.5.15. The review of the impairment for these

types of instruments now based on the expected losses methodology, has led to an increase at January 1,

2018 of about €22 million in the allowance for doubtful accounts and, therefore, to a corresponding

decrease of pre-tax equity;

Future changes in business model or in the expected credit loss may lead to additional impacts in the

future;

From the analysis carried out by the Group, there are no significant impacts on the valuation of hedging

derivatives. The interest rate swaps and cross currency swaps outstanding as at 31 December 2017 follow

the cash flow hedge accounting under IFRS 9.

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 IASB effective date did not have significant effects.

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 financial statements as of March 31, 2018.

Unless otherwise indicated, the Group 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


60

Standard, amendment or interpretation Status

IFRS 16 “Leases” (issued on January 13, 2016)

IASB Effective date: January 1, 2019

Endorsed by EU: October 31, 2017

Effective (EU): January 1, 2019

Amendment to IFRS 9 “Financial Instruments” relating to the

valuation of certain financial instruments denominated

“negative compensation”


Endorsed by EU: March 22, 2018

Effective (EU): January 1, 2019

Amendment to IAS 28 “Investments in Associates and Joint

ventures” (issued on October 12, 2017)


Expected EU endorsement in 2018

Annual improvements 2015-2017 (issued on December 12,

2017)


Expected EU endorsement in 2018

Amendment to IAS 19 “Amendments, curtailments or

settlements of the Defined Benefit Plan for Employee” (issued

on February 7, 2018)


Expected endorsement in 2018

IFRIC 23 “Uncertainty over income tax treatments” IASB Effective date: January 1, 2019

Expected EU endorsement in Q3 2018

Table 1 - 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). By some preliminary considerations several types of assets at

present held under operating leases by the Group might be affected by the implementation of this standard (physical

sites in particular but potentially additional assets). This may lead to the recognition in the statement of financial

position of significant right of use assets, and corresponding significant financial liabilities, from January 1, 2019.

Ultimately, this may lead to an increase in both future EBITDA (due to the change in the nature from lease operating

expense to depreciation and interest of the income statement impact) and future net financial positions of the Group.

The Group has started up and will complete within 2018 the activities deemed necessary to assess the effect of the

application of IFRS 16.

Amendment to the IFRS 9 “Financial Instruments” – This amendment confirms that when a financial liability

measured at amortised cost is modified without this resulting in de-recognition, a gain or loss should be recognised

immediately in profit or loss.

Amendment to IAS 28 “Investments in Associates and Joint ventures” – clarifies that an entity must apply IFRS 9

“Financial Instruments”, including impairment considerations, to long term interests in an associate or joint ventures

for which the equity method is not applied.

Annual improvements 2015-2017 - affecting IFRS 3 “Business Combinations”, IFRS 11 “Joint Arrangements”, IAS 12

“Income taxes” and IAS 23 “Borrowing Costs”. The main parts of these changes applicable to the Group are as

follows:


61

IFRS 3 “Business Combinations” and IFRS 11 “Joint Arrangements” – the amendments propose changes to the

definition of business and the accounting of investments already held in a business in which control or joint

control is subsequently acquired.

IAS 12 “Income taxes” – the amendment clarifies that all income tax consequences of dividends should be

recognised in profit or loss, regardless of how the tax arises.

IAS 23 “Borrowing Costs” - the amendment clarifies that if any specific borrowing remains outstanding after the

related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity

borrows generally when calculating the capitalization rate on general borrowings.

Amendment to IAS 19 “Amendments, curtailments or settlements of the Defined Benefit Plan for Employee” – the

amendments require an entity to use updated assumptions to determine current service cost and net interest for the

remainder of the period after a plan amendment, curtailment or settlement.

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 investments in the entity;

the ability to use its decision-making power to determine the amount of the results arising from its

investments in the entity.

The existence of control is verified whenever facts and circumstances indicate a change in one or more of the three

qualifying elements of control.

Subsidiaries are consolidated from the date of acquisition and deconsolidated when such control ceases.

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 March 31, 2018.

The consolidation procedures used are as follows:

the assets and liabilities and income and expenses of consolidated subsidiaries are included at 100% in the

Group Financial Statements, 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;


62

except for business combinations under common control as noted below the purchase method of accounting

is used to account for business combination 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/losses 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, 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.

The following table provides a summary of the Group’s investments showing the criteria used for consolidation and

measurement.

% holding

12/31/2017 % holding

03/31/2018

Basis of consolidation /

measurement 03/31/2018

Subsidiaries

WIND Retail S.r.l. 100 100 Line-by-line

WIND Acquisition Finance S.A. 100 100 Line-by-line

3lettronica Industriale S.p.A. 100 100 Line-by-line

Others

MIX Srl 9.75 9.75 Cost

Consel – Consorzio Elis per la formazione professionale superiore a r.l. 1 1 Cost

Janna Scarl 17 17 Cost

QXN Società consortile per azioni 10 10 Cost

Dono per…Scarl in liquidazione 33.33 33.33 Cost


63

The following table sets out investments in subsidiaries at March 31, 2018.

(thousands of euro)

Registered office

Share/quota capital as of 03/31/2018

Share/quota

holders' equity as of

03/31/2018

Profit (loss) for

the period ended

03/31/2018

Holding % as of March 31,

2018

Carrying amount as of 03/31/2018 Name

WIND Retail S.r.l. Rome - Via Cesare Giulio

Viola, 48 1,027 35,236 (1,079) 100% 31,103

WIND Acquisition Finance S.A. 1, Route d’Esch L-1470

Luxembourg 60,031 108,190 (483) 100% 61,797

3lettronica Industriale S.p.A. Trezzano sul Naviglio, Via Leonardo da Vinci, 1

16,000 32,083 (1,569) 100% 48,859

The following table sets out non-controlling interests in companies and consortia at December 31, 2017.

(thousands of euro)

Registered office

Share/quota

capital as of 12/31/2017

Share/quota holders' equity

as of 12/31/2017

Profit (loss) for

the year ended 12/31/2017

Holding % as

of December 31, 2017

Carrying

amount as of 12/31/2017 Name

Consel - Consorzio Elis per

la formazione professionale superiore a r.l.(**)

Rome - Via Sandro

Sandri, 45 51 52 - 1% 1

QXN Società consortile per

azioni

Rome – Piazzale Don

Luigi Sturzo n.23 500 758 7 10% 50

Janna Scarl(*) Cagliari - Loc. Sa

Illetta, Strada Statale 195 Km 2.3

13,717 9,382 (1,459) 17% 2,072

MIX S.r.l. Milan - Via Caldera, 21

99 1,649 293 9.75% 10

(*) Data of the company are related to December 31, 2016. The company is also owned by the Sardinia region, owner of the submarine cables that

connect it with the rest of Italy.

(**) Data of the company are related to September 30, 2017.

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 – Italian Association of auditing -

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”


64

principle). Where the values transferred are higher than these historical values, both the acquirer and the seller must

eliminate the excess by reducing equity.

Segment reporting

The Board of Directors of Wind Tre, consisting of the chief executive officer, the chief financial and officer, examines

the Group’s performance mainly from geographic perspective and has identified one reportable segment of its

business.

The Board of Directors of Wind Tre primarily uses a measure of “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” (EBITDA), of the revenue and tangible assets to assess the performance of the operating

segment. Information about segment EBITDA and Revenue are disclosed in “consolidated income statement”, further

information related to Revenue is disclosed in Note 4 and information about segment tangible assets are disclosed in

note 13.

The information related to the revenue divided by group of services are disclosed in note 4.

All the revenues, non-current assets other than financial instruments, deferred tax assets and post-employment

benefit assets are related to the single geographical segment concerning Italy country.

There are no revenue from transactions with a single external customer amount to 10 per cent or more.

4 REVENUE

The following table provides an analysis of Revenue for the three months of 2018 compared with the corresponding

period of 2017.

(millions of euro) 2018

3 months 2017

3 months

Change

Amount %

Revenue from sales 170 196 (26) (13.3)%

- Telephone services 1,032 1,137 (105) (9.2)%

- Interconnection traffic 119 123 (4) (3.3)%

- International roaming 15 15 - -

- Judicial authority services 1 2 (1) (50.0)%

- Other revenue from services 53 37 16 43.2%

Revenue from services 1,220 1,314 (94) (7.2)%

Total 1,390 1,510 (120) (7.9)%

Revenue from sales mainly refers to the sale of mobile telephone handsets, accessories and other enabling terminals

(Smart Home products, modems, etc.).

Revenues from telephone services mainly refer to 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 network sublease and revenue from MVNO.


65

Total revenues in the first three months of 2018 amounted to 1,390 million euros, a decrease of 7.9% compared to

the same period of the previous year. This effect is mainly due to: (i) a decrease in revenues from telephone services

that are affected by the macroeconomic environment and the market still slightly down, showing a decrease of 9.2%

in the first three months of 2018 compared to the same period of 2017; (ii) a decrease in revenues from sales of

13.3% (€170 million at March 31, 2018 compared to €196 million at March 31, 2017) reflecting the change in

commercial policy, more focused on the value that on the increase in volumes sold; (iii) a partial compensation due

to the increase in Other revenues from services of 43.2% (€53 million euros at March 31, 2018 compared to €37

million euros at March 31, 2017) due to a new network sharing agreement (MOCN) with another MNO.

There were no significant impacts on the first quarter of 2018 (€0.1 million at March 31, 2018) deriving from the

adoption of the new standard IFRS 15 related to revenues for one-off contribution deriving from the activation of

mobile offers.

5 OTHER REVENUE

Other revenue amounts in total to €20 million in the first three months of 2018, a decrease of €18 million over the

corresponding period of the previous year, and refers principally to release to income statement of capital

contribution for the period and to estimates review.

6 PURCHASES AND SERVICES

The following table provides an analysis of Purchases and services for the three months of 2018 compared with

the corresponding period of 2017.


3 months

2017

3 months

Change

Amount %

Purchases of raw materials, consumables, supplies and goods 137 215 (78) (36.3)%

Interconnection traffic 130 139 (9) (6.5)%

Outsourcing costs for other services 98 93 5 5.4%

Rental of local network and circuits 97 98 (1) (1.0)%

Lease of civil/technical sites and use of third party assets 88 86 2 2.3%

Customer acquisition costs 38 73 (35) (47.9)%

Power consumption and other utilities 34 34 - -

Maintenance and repair 26 44 (18) (40.9)%

Advertising and promotional services 25 34 (9) (26.5)%

National and international roaming 11 11 - -

Consultancies and professional services 11 11 - -

Change in inventories 9 (32) 41 <(100.0)%

Other services 44 39 5 12.8%

Total purchases and services 748 845 (97) (11.5)%

The change compared to March 31, 2017 in Purchases and services is mainly due to the combined effect of the

following increases and decreases:

a net decrease of €37 million in costs for Purchases of raw materials, consumables, supplies and goods and

Change in inventories mainly due to a decrease in mobile telephony terminals sales;


66

a decrease of €35 million in Customer acquisition costs mainly due to the application of the new accounting

standard IFRS 15, on which base the customers acquisition costs (mainly consisting in commissions for the

Group) are always capitalized for all commercial offers and amortized on the customer's average life bases

and a decrease in commissions on activations, mobile traffic, sale of telephone top-up and on commission

to contents provider;

a decrease of €18 million in Maintenance and repair costs, essentially due to the optimization of network

maintenance and IT systems contracts;

decrease of €9 million in Advertising and promotional services costs mainly due to a better strategy in terms

of efficiency in the purchase of advertising media such as TV, radio, billboards and reduction of sponsorship

costs.

The effect on the first quarter of 2018 deriving from the application of the new standard IFRS 15 approximately

amounts to €19 million and is related to the capitalization of acquisition costs.

7 OTHER OPERATING COSTS

The following table provides an analysis of Other operating costs for the three months of 2018 compared with the

corresponding period of 2017.


3 months

2017

3 months

Change

Amount %

Impairment losses on trade receivables and current assets 52 43 9 20.9%

Annual license and frequency fees 10 16 (6) (37.5)%

Accruals to provision for risks and charges 5 6 (1) (16.7)%

Other operating costs - 7 (7) (100.0)%

Total other operating costs 67 72 (5) (6.9)%

8 PERSONNEL EXPENSES

The following table provides an analysis of Personnel expenses for the three months of 2018 compared with the



3 months

2017

3 months

Change

Amount %

Wages and salaries 83 100 (17) (17.0)%

Social security charges 20 26 (6) (23.1)%

Post-employment benefits 5 6 (1) (16.7)%

Other personnel expenses 4 4 - -

(Costs capitalized for internal works) (26) (22) (4) 18.2%

Total personnel expenses 86 114 (28) (24.6)%


67

Personnel Costs as at March 31, 2018 amounted to €86 million, a decrease of €28 million compared to the same

period of the previous year (€114 million at March 31, 2017). The decrease in ordinary personnel costs is

attributable, among other things, to the contraction of the average paid level (7,094 average units).

9 RESTRUCTURING COSTS

The item, amounting to €25 million at March 31, 2018, a decrease of €34 million over the corresponding period of

the previous year, is mainly due to the accrued costs for implementing the business’s restructuring and

reorganization plan, drawn up with the objective of the incorporation.

10 DEPRECIATION AND AMORTIZATION

The following table provides an analysis of Depreciation and amortization for the three months of 2018

compared with the corresponding period of 2017.


3 months

2017

3 months

Change

Amount %

Depreciation of tangible assets

- Plant and machinery 378 631 (253) (40.1)%

- Industrial and commercial equipment 3 5 (2) (40.0)%

- Other assets 5 6 (1) (16.7)%

Amortization of intangible assets with finite lives

- Industrial patents and similar rights 55 56 (1) (1.8)%

- Concessions, licenses, trademarks and similar rights 12 12 - -

- Other intangible assets 14 14 - -

- Customer acquisition costs 86 54 32 59.3%

Total depreciation and amortization 553 778 225 28.9%

The item includes the effect of the acceleration of some amortization on the network infrastructure following an

optimization plan and the construction of a new generation network that is being launched as a result of the merger

of the two operating companies. The item also includes acceleration of depreciation on some sites as a result of

agreements with Iliad for its shortest use in the light of group expectations.

Depreciation and amortization decreased by €225 million compared to the three months of 2017 mainly due to i)

lower amortization of plant and machinery following the conclusion of the accelerated depreciation on some sites ii)

partially offset by the effect of higher depreciation relative to customer acquisition costs deriving from the application

of the new standard IFRS 15 approximately amounts to €27 million.


68

11 FINANCE INCOME AND EXPENSE

Financial management generated a negative net finance expense of €79 million in the first three months of 2018

(€144 million first three months of 2017).

The following table provides an analysis of Finance income for the three months of 2018 compared with the



3 months 2017

3 months

Change

Amount %

Cash flow hedges reversed from equity - 2 (2) (100.0)%

Fair value measurement of non-hedging derivatives - 2 (2) (100.0)%

Other 25 24 1 4.2%

Total finance income 25 28 (3) (10.7)%

Other financial income at March 31, 2018 consists mainly of the interest of €25 million arising on the receivable from

the parent Wind Tre Italia under the intercompany agreements entered in April 23, 2014 and in August 4, 2014, for

which details may be found in note 15 (€23 million at March 31, 2017).

The following table provides an analysis of Finance expense for the three months of 2018 compared with the



3 months

2017

3 months

Change

Amount %

Interest expense on:

Bond issues 62 148 (86) (58.1)%

Shareholders loans 12 12 - -

Bank loans 15 13 2 15.4%

Cash flow hedges, reversed from equity (5) (30) 25 (83.3)%

Fair value measurement of derivatives 6 17 (11) (64.7)%

Other 14 12 2 16.7%

Total finance expense 104 172 (68) (39.5)%

Finance expense consists mostly of accrued interest on financial liabilities outstanding at March 31, 2018, for which

further details may be found in note 20.

Interest expense on shareholders loans refers to costs incurred during the first quarter 2018 for interest and fees on

loans due to the other CK Hutchison Group companies.

The item also includes the positive effect of hedge accounting of €5 million and the negative effect of fair value

revaluation of financial derivatives by €6 million.

Finance expenses related to bond issues, bank loans, cash flow hedges and fair value measurement of derivatives

have considerably decreased due to the refinancing process ended in November 2017 which substantially changed

terms and conditions of the Group capital structure.


69

12 INCOME TAXES

The following table provides an analysis of Income tax for the three months of 2018 compared with the



3 months 2017

3 months

Change

Amount %

Current tax 7 10 (3) (30.0)%

Deferred tax (1) 20 (21) <(100.0)%

Total income taxes 6 30 (24) (80.0)%

The net charge for the period is made up of the following:

current income taxes expense of €7 million (of which 6 million for IRAP tax of Wind Tre). The change is due to

tax decrease of the subsidiary WIND Acquisition Finance SA;

net deferred tax income of €1 million related to temporary period differences. The change is due to deferred tax

of the subsidiary WIND Acquisition Finance SA released in 2017.

13 TANGIBLE ASSETS

The following table sets out the changes in Tangible assets during the first three months of 2018.

(millions of euro) Net book value as

at December 31, 2017

Addition Depreciation Reclass.

Net book value as

at March 31, 2018

Land and buildings 1 - - - 1

Plant and machinery 3,418 108 (378) (19) 3,129

Equipment 54 1 (3) (22) 30

Other 55 7 (5) 22 79

Total 3,528 116 (386) (19) 3,239

The cost, accumulated impairment losses and accumulated depreciation at March 31, 2018 can be summarized as

follows.


Cost

Accumulated impairment losses

Accumulated depreciation

Carrying Amount

Land and buildings 1 - - 1

Plant and machinery 16,817 - (13,688) 3,129

Equipment 395 - (365) 30

Other 717 - (638) 79

Total 17,930 - (14,691) 3,239

The change in Plant and machinery is mainly related to the effect of the acceleration of the depreciation on part of

the network infrastructure (the Group is replacing the old network with a new generation one. The old network will

only be used up end of 2019 or early 2020, see note 10 for details) only partially offset by the purchases mainly

related to radio links and high frequency equipment for the expansion and consolidation of the mobile access

network, exchanges and electronic installations (IT infrastructures and 3G and LTE technologies).

At March 31, 2018, transmission equipment, telephone systems and commutation switchboards owned by the Parent

company and having a carrying amount of €95 million (€97 million at December 31, 2017) were held by customers


70

for use. Transmission equipment for direct access through “unbundling of the local loop” having a carrying amount of

€2 million at March 31, 2018 (€2 million at December 31, 2017) was held on deposit by Telecom Italia S.p.A..

Plant and machinery additionally includes the expenditure incurred to acquire the exclusive rights for the use, under

IAS 17, of cable and optic fiber for a total of €67 million at March 31, 2018 (€70 million at December 31, 2017).

In the first quarter of 2018, “Reclass” includes a negative amount of €19 million related to the Assets held for sale

that will be transferred to Iliad in the twelve months, ending March 31, 2019.

14 INTANGIBLE ASSETS

The following table sets out the changes in Intangible assets during the first three months of 2018.

(millions of euro) Net book value as at December

31, 2017

IFRS 15 effect at

January1,

2018

Net book value as at January 1,

2018

Addition Amortiz. Reclass.

Net book value as at March 31,

2017

Industrial patents and intellectual

property rights 270 - 270 29 (55) 341 585

Concessions, licenses, trademarks

and similar rights 5,195 - 5,195 - (12) (83) 5,100

Other intangible assets 425 - 425 - (14) (258) 153

Customer acquision costs 249 95 344 79 (86) - 337

Goodwill 3,603 - 3,603 - - - 3,603

Total 9,742 95 9,837 108 (167) - 9,778

The cost, accumulated impairment losses and accumulated amortization at March 31, 2018 can be summarized as

follows.

(millions of euro)) At March 31, 2018

Cost Accumulated

impairment losses Accumulated amortization

Carrying amount

Industrial patents and intellectual property rights 3,609 - (3,024) 585

Concessions, licenses, trademarks and similar rights 10,238 (1,593) (3,545) 5,100

Other intangible assets 1,137 - (984) 153

Customer acquision costs 1,640 - (1,303) 337

Goodwill 3,684 (81) - 3,603

Total 20,308 (1,674) (8,856) 9,778

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 March 31, 2018

amounted to €8 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.


71

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 December 2038

Installation and provision of public telecommunications networks on the Italian national territory (2) April 1998 December 2038

Provision of public digital mobile communications services using DCS 1800 technology, including the

possibility of operating in frequencies in the 900 MHz band using GSM technology on the Italian national territory

June 1998

December 2029 (3)

Provision of third generation mobile communications services adopting the UMTS standard (IMT-2000 family) and the installation of the related network on the Italian national territory (4)

January 2001

December 2029 (5)

Use of frequencies for broadband point-multipoint radio networks in the 24.5-26.5 GHz band for the

geographical area corresponding to the specified Italian region/autonomous province (6)

July 2002

July 2022

Use of frequencies for providing terrestrial publicly available broadband mobile services in the 800, 1800 and

2600 MHz bands (LTE technology) (7)

January 2012

December 2029

(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 S.p.A. in WIND Telecomunicazioni S.p.A. and the merger of WIND Telecomunicazioni S.p.A. in H3G S.p.A.. In December 2017, Wind Tre filed with MISE an application to renew for a further 20 years the individual Fixed Licenses previously granted to

Infostrada and WIND Telecomunicazioni, expiring in 2018. On January 12, 2018 Wind Tre obtained from MISE the renewal of the licenses (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. Moreover,

Wind Tre has already paid the contribution due according to Ministry Decree of 26 July 2017. Wind Tre is currently awaiting the relevant interministerial decree which concludes the proceedings referred to in the aforementioned Law.

(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 S.p.A. and H3G S.p.A. respectively with effect from 1 January 2002.

(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 S.p.A. and H3G S.p.A. 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, publ ished 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.

On September 22, 2017, the Ministry of the Economic Development (MISE) formalized the award to Wind Tre and

Open Fiber S.p.A. of a provisional authorization, for a four year duration, to carry out the 5G pre-commercial trials in

the spectrum portion 3.6 – 3.8 GHz in area 2 – Prato and L’Aquila.

In addition, Concessions, licenses, trademarks and similar rights includes €1,300 million related 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 right of way on the Italian railway network and the purchase of the right to use the existing

optic fiber on the network with a net value of €121 million at March 31, 2018 and to the backbone rights of way of

TERNA/TELAT with a net value of €104 million at March 31, 2018.

Other intangible assets mainly relate to the customer list amounting to €145 million.

Goodwill pertains to the legal entity WIND Retail S.r.l. for €23 million and to the parent Wind Tre for €3,580 million,

both of which are, however, part of a single Cash Generating Unit for the purposes of IAS 36.


72

15 FINANCIAL ASSETS

The following table sets out Financial assets at March 31, 2018 and at December 31, 2017.

(millions of euro) At March 31, 2018 At December 31, 2017

Non-current Current Total Non-current Current Total

Financial assets measured at cost 2 - 2 2 - 2

Derivative financial instruments 1 - 1 7 - 7

Financial receivables 1,122 46 1,168 1,119 24 1,143

Total 1,125 46 1,171 1,128 24 1,152

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, in which the Sardinia region participates, owner of the

submarine cables that connect it with the rest of Italy.

Derivative financial instruments include the positive fair value of embedded derivatives on bond issued amounting to

€1 million. Additional details on the composition of the balance and respective changes can be found in note 21.

Financial receivables, amounting to €1,168 million at March 31, 2017, mainly include the loans granted by Wind Tre

to Wind Tre Italia for €1,165 million (of which €42 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 €1,040 million (with repayment date in April 2024 and an annual fixed interest rate of 9%) was

fully disbursed at March 31, 2018. The second loan for up to a nominal value of €82 million (with reimbursement in

August 2024 and annual fixed interest rate of 8.5%) was drawn down in the amount of €67 million at March 31,

2017.

The increase in Financial receivables over December 31, 2017 is mainly due to the capitalization of accrued interest

made during the period.

16 OTHER NON CURRENT ASSETS

The item at March 31, 2018 shows a balance of €623 million mainly due to: i) €385 million for the non-current

portion of the charges incurred with the Ministry of the Economic Development, paid in September 2017, for the

extension, until 2029, of the frequency right of use with due date in 2018 and ii) for €227 million for trade

receivables with maturity beyond twelve months.


73

17 DEFERRED TAX LIABILITIES

The following table provide the variation of Deferred tax liabilities by origin at March 31, 2018 and at December

31, 2017.

(millions of euro) At December 31,

2017 Decrease Increase

At March 31,

2018

Accelerated depreciation and amortization 4 (1) - 3

Fair value of tangible assets 270 - 30 300

Depreciation of Purchase Price Allocation 448 (6) - 442

Allowance for doubtful accounts (115) - (22) (137)

Amortization and depreciation of non-current assets (212) 19 (13) (206)

Fair value financial assets/liabilities (8) - (6) (14)

Revenues - - (1) (1)

Losses carryforward considered for offsetting purposes (186) - - (186)

Provisions for risks and charges (taxed) (27) - - (27)

Deferred tax liabilities 174 12 (12) 174

Deferred tax liabilities at March 31, 2018 are mainly due to temporary differences on balances of fixed assets.

The following table provides an analysis of Deferred tax liabilities at March 31, 2018 and at December 31, 2017,

between those expected to reverse within 12 months and those expected to reverse after 12 months.



-within 12 months - -

-after 12 months 174 174

Total Deferred tax liabilities 174 174

At March 31, 2018, deferred tax assets on temporary differences that can be carried forward for an aggregate

amount of € 1,554 million (€ 1,356 million at December 31, 2017), attributable to previous years tax losses carried

forward and to financial charges not deductible for the limits established by current legislation, are still unrecognized.

18 SHAREHOLDERS’ EQUITY

The following table sets out the composition of Shareholders’ Equity at March 31, 2018 and December 31, 2017.

(millions of euro) At March 31,

2018

At December 31,

2017

Issued capital 474 474

Share premium reserve 3,119 3,119

Other reserves and retained earnings/(accumulated losses), including profit/(loss) for the year

(2,116) (1,949)

- Remeasurement of defined benefit plans (IAS19) (11) (11)

- Cash flow hedge reserve (40) (21)

- Parent company legal reserve 8 8

- IFRS 15 AND IFRS 9 opening effect on shareholders’ equity 5 -

- Sundry reserves and retained earnings/(accumulated losses), including loss for the year

(2,078) (1,925)

Total 1,477 1,644


74

The Parent Company's share capital amounts to €474,303,795, fully paid, consisting of 94,860,759 shares each of

nominal value €5 wholly owned by the sole shareholder Wind Tre Italia. The number of the Parent Company’s shares

has not changed during the year.

As a guarantee for loan agreements and bond issues the Company’s shares have been pledged; it is noted that,

derogating from article 2352, paragraph 1 of the Italian Civil Code and by express contractual stipulation, entitlement

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 three months of 2018 as well as the

loss for the year mainly arose from 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 year

that relate entirely to the transactions on hedging derivatives on cash flows, as described in further detail in note 21.

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.

The Group has utilized as transition method for the application of the new accounting standards IFRS 15 and IFRS 9

the so-called “simplified approach”. The cumulative effect of the transition has been then treated as an adjustment to

the opening equity at January 1, 2018 amounting to €5 million of which: i) IFRS 15 impact amounting to €63 million

net of the positive tax effect ii) offset by a negative effect amounting to €58 million net of tax for the IFRS 9

application.

19 PROVISIONS

The following table sets out changes in Provisions for the period ended March 31, 2018.

(millions of euro)

At December

31, 2017 Increases (Utilization) (Release)

At March 31,

2018

Litigation 45 6 (2) - 49

Universal service contribution 5 - - - 5

Handset assistance 1 - - - 1

Dismantling and removal 96 - - - 96

Other provisions 61 2 (5) - 58

Total 208 8 (7) - 209

Current 13 13

Non current 195 196

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 contingent assets and liabilities in note

24).


75

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.

Dismantling and removal

The item consists of the estimate of the dismantling, restoration and removal costs of tangible assets which may be

incurred as a result of contractual obligations which require the asset to be returned to its original state and

condition. The current portion amounting to €13 million is reclassified to other payables.

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 March 31, 2018 includes €33 million for liabilities for termination benefits arising from agency contracts in

existence at the reporting date and €3 million relating to compensation plans for the long-term retention and

incentive of management.

20 FINANCIAL LIABILITIES

The following table sets out an analysis of Financial liabilities at March 31, 2018 and changes with respect to

December 31, 2017.


Non-current current Total Non-current Current Total

Bond issues 7,205 99 7,304 7,247 39 7,286

Loans from parent companies 1,777 - 1,777 1,764 - 1,764

Bank loans 2,962 25 2,987 2,960 10 2,970

Derivative financial instruments 121 - 121 57 - 57

Total 12,065 124 12,189 12,028 49 12,077


76

The following tables provide the most important information regarding bond issues and bank loans outstanding at

March 31, 2018.

(millions of euro) Carrying

amount at March 31,

2018

Carrying amount at

December 31, 2017

Nominal

amount at March 31,

2018

Issue price

Currency Due date Interest

rate Price

Bond Issues

Senior Secured Fixed Rate Notes 2023 € 1,630 1,619 1,625 100.00 EUR 01/20/2023 2.625% 90.00

Senior Secured Floating Rate Notes 2024 € 2,258 2,242 2,250 100.00 EUR 01/20/2024 Euribor 3M +

2.750% 92.25

Senior Secured Fixed Rate Notes 2025 € 1,774 1,760 1,750 100.00 EUR 01/20/2025 3.125% 88.00

Senior Secured Fixed Rate Notes 2026 $ 1,642 1,665 2,000 100.00 USD 01/20/2026 5.000% 85.50

Total 7,304 7,286

(millions of euro) Carrying

amount at

March 31, 2018

Carrying

amount at December

31, 2017

Nominal amount at

March 31, 2018

Residual

commitment Currency Due date Interest rate

Bank Loans

Senior Facility Agreement

Term loan A 2,987 2,970 3,000 3,000 EUR 11/03/2022 Euribor +

2,00%

Revolving - - - 400 EUR 11/03/2022 Euribor +

1,75%

Total 2,987 2,970 3,000 3,400

The following table provides an analysis by effective interest rate and lending currency, excluding derivative financial

instruments, intercompany debt and loans at March 31, 2018.


<5% 5%<x<7.5% 7.5%<x<10% 10%<x<12.5% 12.5%<x<15% Total

Euro 8,649 - - - - 8,649

US dollars - 1,642 - - - 1,642

Total 8,649 1,642 - - - 10,291

Changes in balances of bonds at March 31, 2018 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 (“Financial Covenants”).

An analysis of the Derivative financial instruments balance and of the respective changes is found in note 21.


77

21 DERIVATIVE FINANCIAL INSTRUMENTS

The following table provides details of the outstanding Derivative financial instruments at March 31, 2018 and

changes over December 31, 2017, analyzed by the type of risk hedged.


Fair Value (+) Fair Value (-) Fair Value (+) Fair Value (-)

- Exchange rate risk - 113 - 53

- Interest rate risk - 8 - 4

Total cash flow hedges - 121 - 57

- Exchange rate risk - - - -

Total fair value hedges - - - -

- Embedded derivatives in bonds 1 - 7 -

Total Derivatives non Hedge Accounting 1 - 7 -

Total 1 121 7 57

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.

The following table shows the detail of current and non-current derivative instruments.


Fair Value (+) Fair Value (+) Fair Value (+) Fair Value (-)

Current - - - -

Non current 1 121 7 57

Total 1 121 7 57

At March 31, 2018 the Group used cash flow hedge accounting to hedge the risk on future foreign currency cash

flows and floating interest rate cash flows.

The fair value of financial instruments listed on active markets is determined as the market quotation at the reporting

date. In the absence of an active market, which is the case for the above instruments, fair value was determined by

referring to prices and data provided by external operators and using valuation models based mostly on objective

financial variables, as well as by taking into account, where possible, the prices used in recent transactions and the

quotations of similar financial instruments.

The following were outstanding at March 31, 2018:

cross currency swaps hedging the interest rate and currency risks relating to the tranches of bonds denominated

in US dollars, for which reference should be made to note 20, having a notional amount of $2,000 million and

having a negative fair value of €113 million;

interest rate swaps hedging the interest rate risk of bank loans, having a notional amount of €3,000 million and

a negative fair value of €8 million;

embedded derivatives of €1 million relating to the fair value of the early repayment options provided for on issue

of the bonds, for which details may be found in note 20.

The fair value of cross currency swap and interest rate swaps is determined through directly observable inputs such

as interest rates curves (Level 2 in the fair value hierarchy).


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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 following tables provide an analysis of financial assets and liabilities measured at fair value by hierarchy at March

31, 2018 and at December 31, 2017.

At March 31, 2018 (millions of euro)

Level 1 Level 2 Level 3 Total

Assets at fair value

Derivative financial instruments - - 1 1

Total assets - - 1 1

Liabilities at fair value

Derivative financial instruments - 121 - 121

Total liabilities - 121 - 121


(millions of euro) Level 1 Level 2 Level 3 Total

Assets at fair value

Derivative financial instruments - - 7 7

Total assets - - 7 7

Liabilities at fair value

Derivative financial instruments - 57 - 57

Total liabilities - 57 - 57

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 the first three months of 2018 there were no transfers either from

Level 1 to Level 2 or vice versa or from Level 3 to other levels or vice versa.

The following table summarizes the movements in level 3 fair value embedded options:

(millions of euro)


Change in FV

reported in income

statement

(a)

Settlement /

extinguishment reported in

income

statement (b)

Change in FV

reported in other

comprehensive

income

Purchase (new) (c)

At March 31, 2018

Fair value of embedded repayment options 7 (6) - - - 1

Total 7 (6) - - - 1

(a) movement in mark to market of fair value of embedded options (b) exercise of early repayment options on November 3, 2017 and extinguishment of embedded derivatives options on old bonds (c) measurement at inception of fair value of new early repayment options embedded in some of the new bonds issued on October 24, 2017

It should also be noted that at March 31, 2018 there are no additional financial instruments measured at fair value

other than those indicated in the tables above.


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22 NET DEBT

The following statement shows the Group’s net debt analyzed into its principal components, as described in notes 6,

18 and 19 relating to financial items (in the customary definition of financial position which does not correspond to

IAS 32 and IAS 39 definitions of financial assets and financial liabilities) in the statement of financial position.


2018

At December 31,

2017

Bond issues 7,205 7,247

Loans from parent companies 1,777 1,764

Bank loans 2,962 2,960

Derivative financial instruments 121 57

Non-current financial liabilities 12,065 12,028

Bond issues 99 39

Bank loans 25 10

Current financial liabilities 124 49

TOTAL GROSS FINANCIAL DEBT 12,189 12,077

Cash and cash equivalents (701) (612)

Financial receivables (42) (21)

Current financial assets (42) (21)

Derivative financial instruments (1) (7)

Financial receivables (1,122) (1,119)

Non-current financial assets (1,123) (1,126)

TOTAL FINANCIAL ASSETS (1,866) (1,759)

NET FINANCIAL DEBT 10.323 10,318

Net debt does not include trade payables, other liabilities, other payables and guarantee deposits (included in

financial liabilities) of €4 million at March 31, 2018 and of €3 million at December 31, 2017.

23 RELATED PARTIES TRANSACTIONS

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.

At March 31, 2018, the Group 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 S.à r.l..

The table below provides a summary of the main effects on the consolidated income statement and consolidated

statement of financial position following transactions during the year with related parties, all companies of the Veon

and CK Hutchison groups, joint venturers at 50% in the parent company VIP-CKH Luxembourg S.à r.l..

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 15 and 20.


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(thousands of euro) At March 31, 2018

Reven

ue

Financial

income/ (expenses)

Expenses

Trade

receivables

Other

receivables

Financial receivables

Trade

payables

Financial payables

Other

payables

Armenija Telefon Kompani 2 - - - - - 17 - -

KaR-Tel 3 - - - - - 11 - -

Kievstar 206 - 3,460 - - - 2,877 - -

Mobitel LLC Georgia - - 1 - - - 11 - -

Orascom Telecom Algeria SpA 6 - 10 2,017 - - - - -

Banglalink Digital Communications Limited

- - - 967 - - - - -

Pakistan Mobile Communications

Ltd. - - - 449 - - - - -

SKY MOBILE LLC - - - - - - 1 - -

VIP-CKH LUXEMBOURG S.a r.l. - (4,850) 40 - 213 - 25 308,084 -

Unitel - - - 2 - - - - -

Vimpelcom ltd 3 - - - 115 - - - -

Vympel-Kommunikacii 202 - 763 - - - 671 - -

Vimpelcom International services - - - - 22 - - - -

Wind Tre Italia 18 17,984 442 - 1,380 1,165,036 442 1,468,046 10

Vodafone Hutchison Australia Pty Ltd.

3 - 1 100 - - 2 - -

Hutchison Telecommunications

Lanka (Private) Limited - - 3 - - - - - -

PT. Hutchison 3 Indonesia - - 1 - - - - - -

Hutchison 3G UK Limited 297 - 18 390 - - - - -

Telefonica Ireland Limited 1 - 3 17 - - - - -

Hutchison Drei Austria GmbH 51 - 24 539 - - - - -

HI3G Access AB 11 - 2 106 - - - - -

Hutchison Whampoa Europe Investments S.à r.l.

- - 283 - - - 733 - -

HI3G Denmark ApS 17 - 2 - - - 17 - -

Hutchison 3G Ireland Limited 19 - 2 47 - - - - -

Hutchison Global Enabling Services Limited

- - - 14 - - - - -

Hutchison Telephone Company

Limited 44 - - 1,102 - - - - -

Hutchison Telephone (Macau)

Company Limited - - - 25 - - - - -

Hutchison 3G Enterprises S.à r.l. 224 - - - - - 1 - -

Hutchison Whampoa 3G Content S.à r.l.

- - - - - - 1 - -

Hutchison Whampoa 3G IP S.à r.l. 53 - 840 - 109 - 17,440 - -

Hutchison Whampoa 3G Procurement S.à r.l.

31 - - - - - 203 - -

Hutchison Telecommunications

(Vietnam) S.à r.l.-BCC - - 2 - - - - - -

Total 1,191 13,134 5,897 5,775 1,839 1,165,036 22,452 1,776,130 10


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24 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 six months’ notice for the termination of cell site leases and three

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:


2018

At December 31,

2017

Cell sites 188 206

Offices 35 38

Outlets 20 23

Motor vehicles 3 2

Total 246 269

The data included in the above table only reflects uncancellable costs for one year. The same data will be

reconsidered in light of IFRS 16 application starting from 2019. Please also refer to paragraph “New accounting

standards and interpretations” for further considerations on IFRS 16.

Contingent assets and liabilities

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 March 31, 2018, 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

As at March 31, 2018, certain proceedings relating to the termination of agency agreements were pending at

different stages of judgment. The agent dealers in these proceedings are seeking typically payment from Wind Tre 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. The company has filed an appeal with the Lazio

Administrative Court (Lazio TAR) against these fines and the related administrative litigations are currently pending.

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, third and fourth proceeding have been closed with the payment of a fine amounting respectively to €455


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thousand, €450 thousand and €2.1 million (for these last both fines Wind Tre has filed an appeal before the Lazio

TAR).

In 2017 AGCM initiated three new proceedings against Wind Tre for alleged unfair commercial practice; the first one

has been closed with the payment of a fine of €500 thousand which Wind Tre appealed before the Lazio TAR, the

second one has been closed with the payment of a fine of € 4.25 million which Wind Tre is going to appeal before

the Lazio TAR while the second and the third one is currently pending.

In 2018 AGCM initiated one new proceeding against Wind Tre for alleged unfair commercial practice which is still

pending.

Other Proceedings (AGCOM)

The decision by AGCOM number 494/17/CONS has been appealed before the Tar Lazio during February 2018.

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 the

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 assessments.

On 2012, WIND Telecomunicazioni S.p.A. (now Wind Tre) appealed against the payment injunction n.

2012/ORA00014 requesting the payment of €2,536,254.25 as additional registration tax due on transfer deed of May

3, 2011 between WIND Telecomunicazioni S.p.A. (seller) and Veon Ltd (buyer) concerning the sale of shares in

company Libero S.r.l.. The Tax Court of first and second instance rejected the appeal. After rejection ADE notified a

request of payment of €3,625,872.08 including penalties and interests. Terms to appeal against decisions, to the

Supreme Court, are still pending.

Proceedings concerning electromagnetic radiation

There are certain pending proceedings regarding the installation of radio base stations. These proceedings concern

the emission of electromagnetic radiation. As at March 31, 2018 four proceedings for electromagnetic emissions were

pending as a consequence of BTS installations. The Group doesn’t think that these proceedings will result in

additional liabilities to those already booked in the balance sheet’s item Provision.

Audit of dealers’ fees

In 2001 WIND Telecomunicazioni S.p.A. (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 favor

of Wind Tre.


83

Wind Tre / Crest One S.p.A.

On October 9, 2009, Crest One S.p.A. (‘‘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. At the hearing of July

18, 2017, the Court reserved its decision and granted to parties terms to file final briefs; judgment is awaited.

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

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 ordered the continuation of the proceedings which is still pending and decided to appoint an expert asking for

a technical support to verify whether damages have been suffered by Fastweb for the following claimed period

notwithstanding that the Antitrust Authority itself in its A/357 decision found that the abusive conduct by WIND

ceased following this period On May 16, 2017, Fastweb challenged the ruling on time barring/ limitation 2002-2007

before the Court of Appeal and Wind Tre is opposing, defending the ruling. The related hearing has been set on

February 2018 and the Judge has scheduled the terms for briefs and reply.

Proceedings concerning transition to monthly billing

1. Proceedings concerning the period before the Law n. 172/2017

With decision n. 121/17/CONS, AGCOM imposed to all the operators to modify the billing cycle and renewals of all

the fixed (or convergent fixed and mobile) offers from 28 days to month (or its multiples). The decision has been

appealed by Wind Tre before Lazio TAR which, after the hearing set on 7 February 2018, rejected the appeal.

With Decision n. 497/17/CONS, on December 19, 2017, AGCOM fined W3 (€ 1.16 million) for not compliance to the

previous decision n. 121/17/CONS and imposed to restore the customers for the amount corresponding to the

difference between the monthly and 28 days billing period invoices. Wind Tre appealed this AGCOM decision with

interim measure request before TAR Lazio which suspended the restoration order and set the merit hearing on

October 31, 2018.

On March 8, 2018, AGCOM issued the decision n. 115/18/CONS imposing a new restoration mechanism based on the

postponement of the invoicing issue for a number of days equal to what the customers have paid for the services

with 28 days invoices (de facto imposing, for this period, to provide free services). On March, 16 2018, Wind Tre

appealed before TAR Lazio this decision with urgency interim measures decree. The President of TAR Lazio


84

suspended the AGCOM decision and set the panel hearing on April 11, 2018. In the meanwhile, AGCOM issued the

decision n. 9/18/PRES which canceled the date related to the execution of the obligation to make the cancellation (on

the occasion of the first useful invoicing) and invited the operators to have further discussions on the reimbursement

measures. For this reason, the company's lawyers due to the lack of interest of Wind Tre, renounced to discuss the

suspension of the resolution in the aforementioned hearing on 11 April 2018; Wind Tre has therefore renounced the

suspension and has reserved the right to assess the possible appeal of the provision adopted by AGCOM following

the table held on April 19, 2018.

2. Proceedings concerning the period after the Law n. 172/2017

On December, 4, 2017 the new law on monthly billing came into force imposing all operators the monthly billing

cycles both for fixed and mobile services within April 5, 2018.

On December, 19, 2018 AGCOM issued the decisions n. 495/17/CONS and n. 496/17/CONS (guidelines about the

new law provision) which have been appealed before TAR Lazio on February 2018 by Wind Tre. The appeal is still

pending.

On February 16, 2018 AGCOM issued the decision n. 40/18/CONS i.e. the order to comply with the informative

provisions set by AGCOM with the previous guidelines on monthly billing modification. On April 17, 2018 Wind Tre

appealed this decision before TAR Lazio and the related appeal is pending.

On February 15, 2018 AGCM started the proceeding n. I-820 to evaluate a possible anticompetitive agreement

between TLC operators about the commercial strategy related to the monthly billing of the fixed and mobile offers,

as stated by the new regulatory/legislative framework. On March 21, 2018, AGCM issued temporary interim measures

for the suspension of the alleged agreement. On March 27, 2018, Wind Tre filed an appeal with urgency decree

inaudita altera parte against this interim measure decision before TAR Lazio which rejected the Wind Tre request and

set the panel hearing on April 11, 2018. At this hearing, since the AGCM final interim measure decision was expected

shortly (as effectively issued on April 13, 2018), Wind Tre declared its lack of interest to pursue the suspension of the

temporary AGCM interim measure decision and reserved to appeal the final interim measure decision.

AMC/ Wind Tre: Proceeding concerning transition to monthly billing

On 24 November 2017, Associazione Movimento Consumatori (AMC) filed a precautionary injunction against Wind

Tre before the Court of Milan requesting to the judge to declare the illicit application on the fixed line of the billing

cycle every 28 days instead of monthly billing. The plaintiffs are asking the Court to order to Wind Tre the immediate

modification of the billing cycle and to order the publication of judge’s decision on Company’s website and on 3

national periodic newspaper. The claimants are also asking to the judge to order to the Company to send a formal

communication to each consumer informing about the illicit application of the billing cycle every 28 days and about

their right to present request in order to be refunded of the major amount paid. At the hearing of 7 March 2018 the

judge after discussion, reserved the case and with decision of 13 March 2018, also due to the decision of TAR Lazio

on Decision 121/17/CONS, the Court of Milan accepted a petition by a consumer association body (AMC) against

Wind Tre and other operators ordering an immediate modification of the billing cycle (already partially done by Wind

Tre) and publication of the order in two national newspapers and the operators’ websites of the order.


85

W3 filed an appeal against the ruling issued before Court of Milan. The Court accepted W3 claim and on 22 March

2018 suspended totally the order, setting the hearing of 5 April 2018 for parties discussion on the merit of the

request.

At the hearing of 5 April 2018 the Court reserved its decision.

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.

Relevant AGCOM proceedings challenged on TIM 2013 reference offers

Recently both TIM and FW have challenged AGCOM decision 424/17/CONS that complied with the decision of the

Council of State no. 3143 of 14 July 2016. In Resolution 424/17/CONS AGCOM confirmed the results already

established in its decision 746/13/CONS (TIM Bitstream 2013) and 747/13/CONS (TIM OR LLU 2013). An eventual

acceptance of the appeal by TIM and Fasweb could lead AGCOM to issue a new provision characterized by a

significant increase in the prices of the LLU and Bitstream services, with potential unfavorable impacts on Wind Tre.

Guarantees

The collateral pledged by Group companies at March 31, 2018 as a security for liabilities may be summarized as

follows:

a pledge on the shares representing 100% of the corporate capital of the subsidiary WIND Acquisition Finance

owned by Wind Tre in favor of a pool of banks under the Senior Facility Agreement and in favor of the holders of

the notes issued by Wind Tre pursuant to the related share pledge agreement;

a pledge on the shares representing 100% of the corporate capital of Wind Tre in favor of a pool of banks under

the Senior Facility Agreement and in favor of the holders of the notes issued by Wind Tre pursuant to the related

share pledge agreement;

a pledge under Italian law on two bank accounts of Wind Tre in favor of the lenders under the Senior Facility

Agreement and in favor of the holders of the notes.

The subsidiary Wind Acquistion Finance is one of the guarantors of the Senior Facility Agreement dated October 24,

2017, between, among others, Wind Tre and Banca IMI S.p.A.. As of March 31, 2018, the total commitment

amounted to €3,400 million.


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The subsidiary Wind Acquistion Finance has granted a guarantee on the: (i) €2,250 million Senior Secured Floating

Rate due 2024; (ii) €1,625 million Senior Secured Notes due 2023; (iii) €1,750 million Senior Secured Notes due

2025; and (iv) $2,000 million Senior Secured Notes due 2026, issued by Wind Tre pursuant to an indenture dated

November 3, 2017.

The above arrangements are subject to intercreditor arrangements between the parties, and the shares of the WIND

Acquisition Finance have been pledged in favor of the creditors.

A description is provided below of 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 €134 million at March 31 2018 includes:

sureties totaling €16 million issued by insurance companies, mainly relating to participation in tenders;

sureties totaling €118 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.

25 SUBSEQUENT EVENTS

No significant events took place after the closing of these consolidated interim financial statements as of and for the

period ended March 31, 2018 that would require adjustments or additional disclosures in the consolidated financial

statements.

The Board of Directors

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