Tiscali 2012 Annual Report Download - page 59

Annual financial report as at 31 December 2012
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Date File Name Status Page
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Annual Report as at 31
December 2012 59
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Group had a gross financial debt of EUR 206.6 million and current liabilities greater than current
assets (non-financial) for EUR 109.6 million.
As from 2009, the Group, after having completed the disposal of Tinet and the UK subsidiaries,
allocating the proceeds of the sale to the repayment of part of the debt, implemented action with the
aim of achieving economic, equity and financial balance over the long term, and launching a phase of
recovery for the sales activities, which has been reflected in the business and financial plan.
In a recessionary context, the following events took place emphasising the transformation underway
for some years on the telecommunications market, leading to greater competitiveness and erosion of
the margin for the operators:
• progressive saturation for the broadband market and, thanks to the possibility for customers to
migrate from one operator to another with minimum inconvenience and costs, greater
acceptance by customers of promotions;
• increase in the local loop access tariffs for all the alternative operators who use the copper
infrastructure of Telecom Italia, in addition to the reduction in the revenue for incoming traffic
and the drop in narrowband traffic, factors which have eroded the margins of alternative
operators such as Tiscali.
In the presence of such factors (and other collateral ones such as the progressive replacement of the
fixed lines with mobile ones, the increasing weight of the costs linked to customer service, the
establishment of the so-called Over the Top), Tiscali, like the other operators in the sector, has
rationalised its internal processes implementing rigorous cost cutting programmes to preserve margins
and maintain the competitive position.
During 2012, from an operational point of view, action by the Group continued aimed at improving
efficiency via the rationalisation of the operating and commercial costs and overheads, in particular:
• industrial costs were positively affected by the savings deriving from agreements entered into
as from 1 August 2011 with the main network and traffic suppliers, which made it possible in
2012 to obtain savings of around EUR 10 million. It is envisaged that these savings will be
consolidated also in the years to come;
• payroll and related costs were positively affected by the decrease deriving from the application
of the Solidarity Agreement with the employees (pursuant to Italian Law No. 863 dated 1984)
entered into during the second half of 2011, with a duration of 24 months. The reduction in
staff costs with respect to 2011 amounts to around EUR 4.3 million; The Solidarity Agreement
is renewable until November 2016.
• the strategy continued for the application of more stringent control policies on the incoming
customer base, which led to a reduction in volumes, but at the same time an improvement in
the quality of the customer base and the consequent cash flows. In detail, once again in 2012,
action continued for the progressive reduction of the customers who pay via post office
paying-in slip or credit transfer (who present greater rates of insolvency) to the benefit of
automatic payment methods (direct debit and credit cards);
• as from 1 July 2012, the decrease in the mobile termination tariff (both at cost and revenue
level), sanctioned by means AGCOM resolution, led to a positive net effect of around EUR 4.7
million for 2012.
From the point of view of the business results for the year, in detail we can reveal that:
• in the last quarter of the year, partly thanks to the aggressive sales policies and the optimum
performance of the web sales channels, the decreasing trend in the customer base reversed