Tiscali 2007 Annual Report Download - page 40

Launch of the new marketing campaign in Italy and choice
of a testimonial
In November 2007, Tiscali launched a new marketing cam-
paign in Italy choosing a testimonial for the first time, the actor
Ezio Greggio, with the aim of promoting the Tiscali Italia dual
play option, comprising joint voice and ADSL products, and
of representing the brand image by means of an entirely new
communications format. The market response has been
extremely positive, permitting Tiscali to significantly increase
the number of new customers signing up for its services.
Subscription by Management & Capitali of a convertible bond
issue
On 27 December 2007, the company Management & Capi-
tali subscribed a bond for EUR 60 million convertible into
newly-issued Tiscali S.p.A. shares. On 21 December 2007,
Tiscali’s extraordinary shareholders’ meeting approved a share
capital increase with exclusion of the purchase option pur-
suant to Article 2441.4.2 of the Italian Civil Code, for up to a
maximum of 42,441,316 Tiscali shares, reserved for the con-
version of this bond.
The convertible bonds, which have a five-year duration as of
the date of the shareholders’ meeting, bear interest at 6.75%,
which will be paid on maturity or before maturity if the bond
is converted, partially or otherwise. The issuer has the facul-
ty to opt for the payment of the interest in cash instead of
shares, in observance of the limits of the above senior loans.
The conversion price was originally established as EUR 2.7
per share, subsequently adjusted in order to take into account
the dilution of the share capital to EUR 2.42 per share. The
bonds will not be converted within the first year of their issue,
without prejudice to the mandatory conversion clause
described below. The instrument also envisages the faculty of
early repayment by the issuer in the first two years and in cer-
tain cases (such as, for example, the change of control), M&C
has the right to request the early reimbursement of the instru-
ment at par for the entire duration of the loan.
The number of shares serving the principal of the bond issue,
in the event of conversion, by M&C before maturity and sub-
sequent to the adjustment of the conversion price, amounts
in total to approximately EUR 24.8 million (around 4% of the
Company’s capital before the execution of the share capital
increase under option). In the event the bonds are not con-
verted over the duration of the bond issue, M&C will receive
a number of Tiscali shares on maturity – valued on the basis
of the simple average of the official price of the same in the
20 days prior to maturity – so that it can repay the value of
the capital at par plus the accrued interest, but in any event
no higher than the current 10% of Tiscali’s share capital (cor-
responding to around 42.4 million shares).
The bond issue regulations also envisaged that if, before the
maturity of the bonds, the average of the Official Prices (cal-
culated with reference to the 20 days beforehand) is equal to
or lower than the value of the capital plus the accrued inter-
est divided by 42.4 million shares for five consecutive stock
market days, the loan will be automatically and by way of obli-
gation converted into the entire amount of shares indicated
above, in the event the issuer does not opt for the payment
of the interest in cash.
Agreement with Telecom Italia for the supply of mobile tele-
phone services and for virtual unbundling
On 27 July 2007, Tiscali and Telecom Italia entered into a pre-
liminary agreement which will permit Tiscali to become a mobile
virtual network operator. Thanks to this agreement, Tiscali aims
to complete its package of telecommunication services in a per-
spective of Quadruple Play with the further aim of integrating its
own fixed network data services (mail, portal, contents and added
value services) with a mobile telephony product.
As part of the plan for expanding the network, the sale was
launched as from November 2007 of VULL (Virtual Unbundling
Local Loop) services; this is a service which applies to newly
activated lines under unbundling pending the physical cre-
ation of location sites. Tendentially, the VULL will be replaced
as soon as possible by physical unbundling.
As a result of an agreement with Telecom Italia, Tiscali has
been able to start up the marketing of its services on more
than 1,000 sites – equating to around 13 million lines, or cov-
erage of around 50% - , from as early as the end of 2007. On
a parallel, the creation of the physical network was started
with the aim of directly reaching approximately 800 sites at
the end of 2008 and, if economically advantageous, around
1,000 sites in 2009.
REPORT ON OPERATIONS
39