Tiscali 2009 Annual Report Download - page 112

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With regard to the economic/financial objectives, the main assumptions concern:
• Explicit forecast period equating to the remaining plan duration (4 years);
• EBITDA emerging from market and business development;
• Investments to maintain expected development of the business and the pre-established level of
profitability;
• Determination of the terminal value calculated as perpetuity based on the projection of the last year of
the plan;
• The WACC rate determined based on market valuations of the cost of money and specific risks related
to the company’s core business;
• Terminal growth rate (Long-Term Growth – LTG) amounting to 2%, in line with analysts’ forecasts.
The cost of the capital was estimated considering the calculation criteria provided by the CAPM (Capital
Asset Pricing Model). In particular in the determination of the WACC:
a) the beta coefficient was valued considering both the value of Tiscali over various timescales for a period
of more than twelve months, and a panel of various telecommunications operators in Europe adjusted to
take into account Tiscali’s financial structure;
b) the spread of the credit on the risk free element was valued in line with the conditions of current debt;
c) the risk premium was valued within a prudent range with respect to the current conditions of financial
markets.
Based on these parameters the WACC used for the impairment tests was estimated at 8.80% both for the
CGU Italy and for the valuation of the entire Group.
The result of the impairment test, both for CGU Italy and the Group, shows a considerably positive difference
between the recoverable value and book value, thus the company feels that it is not necessary to write down
any of its assets.
(i) Sensitivity of the impairment test result
In consideration of the current scenario and the results of the impairment tests performed in 2009,
an analysis was made on the sensitivity of the recoverable value estimated using the discounted cash
flow method. The discount rate is considered a key parameter in the estimate of recoverable value.
An increase of 1% would lower the positive difference between estimated recoverable value and book
value. This difference would continue to be considerably positive.
(ii) Considerations on the presence of external impairment indicators
Considering the current market situation, certain considerations on the presence of external impairment
indicators were made especially with regard to evidence from the financial market. For that purpose,
market capitalization of Tiscali Group does not give rise to elements departing from the results of the
impairment tests.
Consolidated Financial Statements and Explanatory Notes