Tiscali 2003 Annual Report Download - page 88

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9090
A breakdown of costs for the provision of services is shown below.
The most important cost elements for the provision of services are described below.
Line rental. This is a standard cost item in the sector that applies to all subsidiaries. In 2003, it rose to 31% as a proportion
of total services costs as a result of growth in broadband and FRIACO dial-up user numbers. However, it fell to 21% of total
revenues, compared to the previous year, thanks to the extension of the proprietary network. In addition, the Group’s restruc-
turing has already delivered significant savings, with no change in transmission capacity. The weighting of these costs is expec-
ted to fall further as revenues increase.
Purchase of traffic. This cost item jumped 62% versus the previous year to EUR 173.8 million, because of growth in the num-
ber of traffic minutes and dial-up connections.
Installation. Installation costs, at EUR 5.8 million, were up on the previous year. This cost is closely connected to installation
revenues, a component of broadband revenues, which grew significantly in 2003.
Advertising and promotional costs. These costs were higher than in the previous year, at EUR 139.9 million, accounting for
22.6% of total costs and 15.5% of revenues. The increase is due to the Group’s strong focus on access products, which requi-
res investment in advertising to support new commercial ventures and, specifically, new broadband products. As already com-
mented on in the section on changes in intangible assets, the Group has treated advertising and promotional costs of around
EUR 19 million (relating to the launch of new broadband products on the international market) as capitalised costs.
Maintenance. This item came to around EUR 21.5 million, and was largely spent on maintenance agreements for network
equipment and software. Maintenance costs accounted for 3% of total costs and 2% of revenues. The increase in maintenan-
ce costs relative to the previous year is a direct consequence of the Group’s increased investment in this area.
Personnel costs. Personnel costs came to EUR 142.1 million in 2003, largely unchanged versus the previous year (EUR 140
million). However, these costs fell as a percentage of revenues, from 19% in 2002, to 16%. This followed the Group restruc-
turing, which mainly took place in 2001 and 2002. Specifically, in the fourth quarter of 2003, the Group completed the ratio-
nalisation of staff at its French businesses, following the acquisition of Cable & Wireless.
SERVICE COSTS 31.12.2003 31.12.2002 CHANGE
Line rental 192,892 150,356 42,536
Purchase of traffic 173,814 107,375 66,439
Installation 5,815 345 5,470
Content 2,544 13,086 (10,542)
Portal services 7,250 7,795 (545)
Call centres 27,716 20,462 7,254
Other direct costs 31,621 67,183 (35,562)
Advertising and promotional expenses 138,372 118,356 20,016
Maintenance 21,504 19,930 1,574
Selling costs 1,561 2,671 (1,110)
Utilities 3,573 4,119 (546)
Bank and postal charges 11 2,458 (2,447)
Transport -74 (74)
Business travel 7,778 8,617 (839)
Insurance 1,286 1,492 (206)
Other services 25,662 47,853 (22,191)
Total 641,399 572,172 69,227