Tiscali 2003 Annual Report Download - page 38

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39
Outlook
Background
The Tiscali Group is facing exciting challenges for the future: broadband has opened up new market opportunities, and has con-
firmed the validity of the Group’s access-based business model as a base on which to develop services and content.
After establishing its presence in the dial-up segment, Tiscali is now proving its growth potential on the broadband market. It is
now one of Europe’s leading players and is able to compete with former incumbents on a market offering enormous potential.
Strategic plan 2004-2006
Tiscali’s board of directors has now approved a strategic plan based on:
• broadband growth;
• an unbundling strategy;
• a sharper focus on Europe’s main markets.
Revenues are forecast to rise at a CAGR of 29% in 2004-2006, and to exceed EUR 2 billion by the end of the period. Over a
third of ADSL clients are expected to be unbundled by then, and the ADSL user base is projected at over 5 million by 2008. The
EBITDA margin is expected to expand beyond 20% in 2006, and the Group expects to make a net profit in 2005.
In 2004, the Group plans to invest EUR 75 million in unbundled services in the Netherlands, France and Italy (EUR 25 million
per country), which will extend coverage to 30-60% of ADSL lines. As well as unbundled services (already available in the
Netherlands and Denmark), Tiscali plans to offer integrated voice, data and content services, which should provide a significant
boost to both customer loyalty and ARPU.
The plan has set the following short-term objectives for 2004:
• revenue growth of more than 30% to over EUR 1.2 billion, mainly driven by broadband access and business services;
• EBITDA margin at 11% of revenues;
• over 1.6 million ADSL users;
• investment at 10% of revenues (see above);
• generation of free cash flow in the second half of 2004.
Financial outlook
By expanding its broadband business, Tiscali will no longer be a "free" Internet services provider, but a supplier of integrated
broadband services. The need to invest and attract new clients is therefore becoming increasingly important, as the market is
currently offering significant opportunities within the Group’s reach.
Meanwhile, Tiscali is facing a significant financial commitment in respect of bonds maturing in the near future. In July 2004,
the first of the outstanding bond issues, worth a total of around EUR 80 million, will reach maturity. Tiscali expects the cash
currently available to be sufficient to redeem these bonds.
Tiscali will use the remainder of its cash to finance operations and its investment plan.