Tiscali 2001 Annual Report Download - page 31

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Report on Operating Performance
Access
Internet access revenues, accounting for 64% of total turnover, were up 523% on the
previous year, owing to generalised growth in user numbers and the enlargement of the
Group's consolidation scope.
At end-2001, Tiscali had about 7.3mn active users (ie users who in the previous 30 days
had made at least one Internet connection via Tiscali). In percentage terms, the user base
was up 386% on December 31, 2000.
The growth in the user base was reflected in an increase in dial-up traffic, which shot up by
381% on the 6.9bn minutes recorded in 2000. Average revenues per minute also increased
by 27%, from EUR 0.95 cents in 2000 to EUR 1.2 cents in 2001.
Other reasons for the rise in revenues were price increases in Germany and France, and the
launch of new services like pre-paid access packages. The introduction of these new
services has led to an increase in the proportion of customers having a direct billing
relationship with Tiscali. At end-2001, Tiscali had a direct billing relationship with 30% of
its active user base.
2001 also saw the launch of broadband access services using DSL (Digital Subscriber Line)
technology, both through wholesale agreements and via Tiscali's own access equipment.
In order to enter the DSL services business, Tiscali bought a 20% share in Netchemya, an
Italian XDSL provider, and signed an agreement with German Company QSC, which
provides broadband services.
Another broadband Internet access service using a bi-directional satellite system was also
launched following an agreement with Gilat, a leading provider of telecommunications
solutions based on satellite networks.
These operations are part of Tiscali's strategy to develop broadband access services, both
through its own investment and through network-sharing agreements aimed at
maximising infrastructure efficiency and minimising technical investment.
Total broadband revenues for 2001 stood at EUR 10.4mn.
The industrial margin from access services grew steadily, from 12% in the first quarter of
2001 to 42% in the fourth quarter. This was mainly because Internet traffic generated by
the customers of the newly acquired Companies was transferred onto the Tiscali network,
and as a consequence of the several interconnection and bandwidth purchase agreements
thanks to its increased bargaining power.
Portal
Portal revenues amounted to 10% of the total, and were up 789% on 2000. This result is all
the more remarkable in the light of the crisis that affected the on-line advertising market,
and the slowdown of e-commerce growth in 2001.
The best performances in this sector came from Italy, France (where Tiscali has its own
dedicated advertising sales department for each country), and the UK.
At an operating level the portal business has benefited from the Group's enlargement, as
the better market position of Tiscali portals, shown by their increased "reach" and pan-
European spread, has enabled Tiscali to secure content and service provision agreements