Tiscali 2007 Annual Report Download - page 105

Mobistar dispute
The subsidiary, Tiscali International BV, is involved in a dispute
furthered by the company Mobistar NV (a Wanadoo Group com-
pany) in June 2006. The dispute concerns the termination by
Wanadoo Belgium of a
dial-in traffic termination agreement (the
“Contract”) with Mobistar NV, following the acquisition in Spring
2003 by Tiscali Belgium of 100% of Wanadoo Belgium’s shares.
The contract for the sale of the Wanadoo Belgium shares between
Wanadoo SA and Tiscali Belgium envisaged the possibility of early
termination of the Contract, a circumstance also confirmed by
Tiscali’s legal advisors.
Mobistar however opposed this early termination.
Subsequently, Tiscali Belgium sold Wanadoo Belgium to Scarlet.
On the basis of the contract for the sale of the Wanadoo Belgium
shares by Tiscali Belgium to Scarlet, Tiscali is responsible vis-à-
vis Scarlet for Mobistar claims with reference to the termination
of the Contract.
Tiscali has brought before the courts (i) Wanadoo SA – respon-
sible in accordance with the contract for the sale of the Wanadoo
Belgium shares to Tiscali Belgium, (ii) the legal
advisors for the
purchase transaction – who issued an erroneous opinion on the
possibility of terminating the Contract - and (iii) the respective
insurance company.
The
petitum amounts to 4 million, nevertheless the Issuer
believes that the same should be reduced (i) by around 1 mil-
lion on the basis of the correct interpretation of the Contract, (ii)
by a further amount, since the summons before the court of
Wanadoo and the legal
advisors for Tiscali should at least mini-
mize the profile of responsibility of the latter. During this initial
stage of the proceedings, Tiscali believes that it is in no way
responsible; however, given the complexity of the dispute and
the number of parties involved, a forecast with regards to the
possible outcome emerges as complex. Despite the fact that the
possibility of reaching an agreement on the dispute has been
outlined, involving the payment of approximately EUR 400.000,
Tiscali intends to hold out in the court case, unless the negotia-
tions currently underway conclude favourably. In the financial
statements at 31 December 2007, Tiscali International BV had
not set aside provisions.
Ecotel Communication AG/Tiscali
On 19 October 2007, Ecotel Communication AG - the company
to which the Tiscali Group during the first half of 2007 transferred
its German B2B activities for around EUR 18.5 million, sent Tis-
cali a letter by means of which – in relation to the purchase/sale
contracts stipulated with Tiscali Business GmbH on 3 February
2007 and signed by Tiscali in its capacity as guarantor – it chal-
lenged the company that certain income values pertaining to the
activities acquired were not correctly represented during the nego-
tiations and in the related purchase agreement and requested
the Company to launch an independent appraisal into these val-
ues. Therefore, as a consequence of the alleged deviation from
the real values, Ecotel Communication AG assumes that it has
suffered a loss during its activities, whose effective total it esti-
mates as coming to at least EUR 15 million.
The Company believes that Ecotel Communication AG’s demands
are groundless, not only with regards to the merit of the case,
but also in consideration of the settlement agreement reached
on 24 August 2007 between Tiscali Group companies and the
Group heading up the same Ecotel Communication AG, in accor-
dance with which the parties had agreed the entity of the income
values pertaining to the assets sold. Therefore, the Company has
not made any provision in the financial statements in relation to
this dispute and has challenged the reasoning argued by Ecotel
in its own letters.
42.2 Tax assessments
The Dutch tax authorities forwarded World On Line Internation-
al NV (and the direct subsidiary Tiscali International BV) a num-
ber of notices of assessment concerning the alleged non-pay-
ment of withholdings on remuneration and stock options acknowl-
edged in previous years to Group executives. The total amount
of these disputes comes to EUR 2 million, against which Tiscali
International BV has made payments totalling around EUR 0.3
million. The residual amount mainly refers to stock options which
are alleged to have been granted to Mr. Landefeld (a party what
is more resident for tax purposes in Germany) and, in the opin-
ion of Tiscali’s tax advisors, not subject to taxation on the Nether-
lands. In consideration of this circumstance and taking into
account the preliminary stage in which the dispute in question
finds itself, it is not believed that the liability could be considered
as probable and, consequently, no provision has been made.
During 2006, a tax assessment was started up relating to VAT
and direct taxation regarding the German subsidiaries of the Tis-
cali Group for the tax periods 2000-2004.
The tax assessments for VAT purposes, still underway, have so
far indicated assessed liabilities for the tax periods 2000-2003
for the purposes of indirect taxation totalling EUR 726 thou-
sand, plus interest, already paid in 2007. At the moment, it
is not believed that any tangible risk of sanctions exists for the
2004 tax period.
With regard to the tax assessments relating to direct taxation in
Germany (Corporate and Trade Tax), the assessment procedures
have concluded. The assessment reports received disclose tax
liabilities payable solely by the parent company Tiscali Deutsch-
land GmbH for a total of approximately EUR 400 thousand, plus
interest, already paid in 2007.
42.3 Commitments and other guarantees
Commitments
The Tiscali Group has not undertaken any commitments still to
be met which do not fall within the normal operating cycle.
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES AT 31 DECEMBER 2007
104