Tiscali 2008 Annual Report Download - page 81

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valued in line with the conditions of the current debt;
c) the risk premium was valued within a prudent range with
respect to the current conditions of the financial markets;
The final WACC values, checked with the Company’s advisors
and used for the value checks, are indicated in the following
table.
%WACC
Italy 9,88
UK 9,79
Tiscali Group 9,86
The terminal growth rate has been set at 2%, in line with the
forecasts of the analysts, also following the announcement
of the stand-still request (
See note Assessment of the business
as a going-concern and business outlook and prospects
on
page 39).
Increases of a percentage point in the WACC and reductions
of a percentage point in the LTG do not disclose a loss in value.
Other changes amounting to EUR 76.2 million reflect the exchange
effect between GBP and EUR.
Verification of impairment of goodwill
The recoverable amount of the Cash Generating Units (CGU) has
been determined on the basis of the value in use calculated using
the projection of the cash flows deriving from the new 2009/2013
Business Plan drawn up according to the assumptions indicated
in the note
Assessment of the business as a going-concern and
business outlook and prospects
on page 39.
The Business Plan is based on the guidelines aspiring to the
maximization of the operating efficiency, the reduction of costs and
investments and the generation of short/medium-term cash. The
structure of the guidelines is differentiated for each operating unit
in relation to the particular features of the related context/market.
With regard to the economic/financial objectives, the main
assumptions differentiated by CGU concern:
•Explicit forecast period equating to the plan duration (five
years);
•EBITDA/EBITDA percentage, emerging from the
hypotheses of market and business development in the
first five years of the plan (2009-2013);
•Investments for maintaining the envisaged evolution of the
business and the pre-established level of profitability, in
particular for activation of customers vis-à-vis the incumbent,
for the supply of modems to end customer and for
maintaining the company assets;
•Exchange rate between EUR and GBP;
•Cost of Capital;
•Determination of the terminal value calculated as the
perpetuity based on the projection of the last year of the plan;
•Terminal growth rate (Long Term Growth - LTG) beyond
the five years of the Plan;
The cost of the capital has been estimated considering the
calculation criteria envisaged by the CAPM (Capital Asset Pricing
Model). In particular in the determination of the WACC:
a) the beta factor has been valued considering both the value
of Tiscali over various timescales for a period of more than
twelve months, and a panel of alternative telecommunications
operators in Europe adjusted to take into account Tiscali’s
financial structure;
b) the spread of the credit on the risk free element has been
80
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES