Tiscali 2009 Annual Report Download - page 137

Tiscali Group: Annual Report 2009
136
the summons to Wanadoo and the legal advisors from Tiscali should at least mitigate the latter’s liability.
Tiscali believes that it is in no way liable; however, given the complexity of the dispute and the number
of parties involved, a forecast on the possible outcome is complex and therefore there are negotiations
underway to reach a settlement involving payment of approximately EUR 270,000 from Tiscali. Tiscali
International BV and Tiscali S.p.A. report liabilities (already recorded in previous years) equal to the amount
of the possible settlement. No additional allocation was made in the year.
Ecotel Communication AG/Tiscali
On 19 October 2007, Ecotel Communication AG (Ecotel) - 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 Tiscali a letter
by means of which, with regards to the sale contract stipulated with Tiscali Business GmbH on 3 February
2007 and signed by Tiscali in its capacity as guarantor, it challenged the company on certain income values
pertaining to the activities acquired and claimed they were not correctly represented during the negotiations
and in purchase agreement and demanded that the Company launch an independent appraisal of these
values. Therefore, as a consequence of the alleged deviation from the real values, Ecotel assumes that it
suffered a loss during its activities, whose effective total is estimated to be at least EUR 15 million. The
Company has fully disputed all such claims.
In accordance with the arbitration clause provided in the contract for the sale of the German activities, on
21 April 2008 Ecotel initiated arbitration proceedings, summoning Tiscali Business Gmbh and Tiscali as
jointly bound. Ecotel demands compensation for the damages suffered, estimated at EUR 15.2 million plus
any additional damages and other related charges. Tiscali and Tiscali Business Gmbh have produced their
statement of action, disputing the charges. The arbitration proceedings took place in Frankfurt (Germany).
In September 2009 the dispute ended with a settlement agreed by the parties. The agreement provided
that Tiscali pay about EUR 1.65 million to Ecotel and that Ecotel release to Tiscali the portion of payment
for the purchase of the German B2B activities still block as guarantee, amounting to about EUR 2.6 million.
Talk Talk Group Limited /Tiscali
Following the disagreement between Tiscali and Talk Talk Limited (buyer of the UK activities, hereinafter:
Talk Talk) on certain figures provided when payment was released for the portion still held as guarantee. In
March 2010 the procedure provided for in the sale contract began. The parties appointed an independent
expert to determine the amount of the figures in question. In particular, among the different allegations
Tiscali claims it is entitled to be paid more than what is provided in the contract since the actual working
capital proved to be higher than what was guaranteed by contract whereas Talk Talk claims that the number
of users actually transferred was lower than guaranteed. Concerning the portion of payment still in escrow,
amounting to about 35 million pounds, Tiscali demands payment of about 30 million while Talk Talk demands
about 25 million pounds from the amount of the guarantee.
In the financial statements at 31 December 2009, though the company feels its position is completely
sound, it wrote down the escrow for 7.5 million pounds due to the uncertainty entailed in such cases
Tax Audits
The Dutch tax authorities sent a number of audit notices to World On Line International NV, and to the
direct subsidiary Tiscali International BV, for allegedly not paying withholdings on salaries and stock options
acknowledged in previous years to Group executives. The total amount of these disputes is EUR 2 million,