Tiscali 2007 Annual Report Download - page 144

the receivership of the company KPNQWest Bankruptcy, a
joint venture formed between the Dutch KPN and the US
Qwest, currently in liquidation. The dispute, which arose in
previous years, concerns a 5-year IRU agreement entered into
between Tiscali International Network BV and KPNQWest,
which envisaged the payment by the former of an amount of
EUR 3.1 million for the performance of services by the latter.
Following the liquidation of KPNQWest, the provision of serv-
ices was interrupted after only 5 months and Tiscali Interna-
tional Network BV received and recognised invoices for the
sum of EUR 1.5 million. KPNQWest has demanded payment
of the entire amount stipulated in the agreement.
Tiscali in turn objected to a demand for payment of this
amount given the damages sustained from interruption of the
service. On 17 March 2006, Citybank (acting as liquidator of
KPNQwest) filed a precautionary attachment request for a
value of around EUR 5 million on the bank current accounts
of Tiscali International Network BV which did not bring about
any significant result.
The dispute, which is not expected to be concluded over the
short-term, is still underway, but it is not envisaged that signif-
icant liabilities may emerge from the same. On the basis of the
information available, considering the level of risk and on a
consistent basis with the progress of the lawsuit, the provision,
previously made for EUR 4.2 million, was considerably cur-
tailed in the Tiscali 2006 consolidated financial statements.
The remaining liabilities in relation to this dispute present in
the consolidated financial statements refer to the payables re-
lating to Tinet BV amounting to around EUR 1.5 million.
Mobistar dispute
The indirect subsidiary, Tiscali International BV, is involved in
a dispute furthered by the company Mobistar NV (a Wanadoo
Group company) in June 2006. The dispute concerns the ter-
mination 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 ad-
visors.
Mobistar however opposed this early termination.
Subsequently ,Tiscali Belgium sold Wanadoo Belgium to Scar-
let. On the basis of the contract for the sale of the Wanadoo
Belgium shares by Tiscali Belgium to Scarlet, Tiscali is respon-
sible 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 ad-
visors 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 EUR 4 million, nevertheless the Is-
suer believes that the same should be reduced (i) by around
EUR 1 million 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 minimize the profile of responsibility of the latter. Dur-
ing 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 re-
gards 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 approxi-
mately EUR 400.000, Tiscali intends to hold out in the court
case, unless the negotiations currently underway conclude
favourably. In the financial statements at 30 September 2007,
Tiscali International BV had not set aside provisions.
Ecotel Communication AG/Tiscali
On 19 October 2007, Ecotel Communication AG - the com-
pany to which the Tiscali Group during the first half of 2007
transferred its German B2B activities for around EUR 18.5
million, sent Tiscali 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 capac-
ity as guarantor – it challenged the company that certain in-
come values pertaining to the activities acquired were not
correctly represented during the negotiations and in the re-
lated purchase agreement and requested the Company to
launch an independent appraisal into these values. Therefore,
as a consequence of the alleged deviation from the real val-
ues, Ecotel Communication AG assumes that it has suffered a
loss during its activities, whose effective total it estimates as
coming to at least EUR 15 million.
The Company believes that Ecotel Communication AG’s de-
mands are groundless, not only with regards to the merit of
the case, but also in consideration of the settlement agree-
ment reached on 24 August 2007 between Tiscali Group com-
panies and the Group heading up the same Ecotel
Communication AG, in accordance 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.
32.2 Tax assessments
The Dutch tax authorities forwarded World On Line Internatio-
nal NV (and the direct subsidiary Tiscali International BV) a
number of notices of assessment concerning the alleged non-
payment of withholdings on remuneration and stock options
acknowledged in previous years to Group executives. The total
TISCALI S.P.A. – SINANCIAL STATEMENTS AT 31 DECEMBER 2007
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