Tiscali 2003 Annual Report Download - page 50

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5252
bents, Tiscali invoices end users directly). Active narrowband users now number around 1.6 million (against 1.4 million at end-
2002), although traffic minutes fell from 9.2 billion in 2002 to 8.7 billion in 2003. However, the fall in traffic minutes is due to
higher ADSL user numbers (mostly consisting of more affluent consumers), from 28,000 at end-2002 to over 108,000 at end-
2003, boosting Tiscali’s share of the broadband market.
ADSL revenues soared by 130% to EUR 16 million, from EUR 7 million in 2002.
Portal
The contribution of portal revenues (advertising and e-commerce) fell from 14.4% of the total in 2002 to 7.7% in 2003, or from
EUR 20 million to EUR 14 million. The decrease was due to the cancellation of reciprocal advertising agreements providing ad
space to promote Tiscali services, and the ending of agreements under which the parent Company acted as an agency for Group
companies in other European countries.
However, Tiscali remained a market leader on the online advertising market.
Business services
Revenues from business services were up 29% versus the previous year, at EUR 8.4 million. The increase was largely due to a
number of projects carried out in conjunction with the public sector.
Voice
Voice revenues jumped 43% versus 2002 to EUR 29 million, driven by sales of services to other operators and the relaunch of
retail voice services.
Operating costs
Operating costs totalled EUR 187.9 million, a 10% increase on 2002 (EUR 171 million), compared with a 28% rise in value of
production. As a result, costs fell as a proportion of revenues from 121% in 2002 to 104% in 2003.
In particular, line and port rental costs rose by 40% versus 2002, while traffic acquisition costs shot up by 190%. Against these
increases, narrowband and voice revenues went up by 44% and 43% respectively.
These costs also rose as a proportion of revenues, from 26% in 2002 to 40% in 2003, because of migration from dial-up con-
nections using local phone numbers to the national 702 number, as well as the growth in ADSL and voice services.
Sales and marketing costs fell substantially due to a drop in advertising expenses, as the parent Company no longer acts as an
agency for the other subsidiaries. Spending on advertising for the launch of the new ADSL services was substantial, totalling EUR
3 million in the first half of the year alone (these are capitalised costs).
Personnel costs (18% of revenues, versus 20% in 2002) rose by EUR 5.4 million to EUR 33 million (+20%), as the headcount
increased from 755 at 31 December 2002 to 861 as of 31 December 2003 (+14%). This item also includes staff employed in
holding Company activities. Apart from the rise in headcount, these costs expanded because of salary increases and the ending
of a special rate for social security contributions, which rose by 38% as a result.
Depreciation, amortisation and provisions edged up slightly from EUR 65 million in 2002 to EUR 66 million in 2003. As of 31
December 2003, this item related to depreciation of tangible assets and amortisation of intangible assets totalling around EUR
29 million, write-downs of receivables listed under current assets of EUR 22.5 million and risk provisions of EUR 14.4 million.