Tiscali 2008 Annual Report Download

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ANNUAL REPORT 2008

Table of contents

  • Page 1
    ANNUAL REPORT 2008

  • Page 2
    ANNUAL REPORT 2008

  • Page 3

  • Page 4
    Tiscali Group 1 Directors and Auditors 2 Highlights 3 Alternative performance indicators Tiscali Group - Financial Statements at 31 December 2008 4 Report on operations 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Tiscali's position within the market scenario Regulatory background Tiscali shares Significant events ...

  • Page 5
    Issue date: 31 December 2008 This report is available on the website www.tiscali.com TISCALI S.P.A. Registered offices: SS195 Km 2.3, Sa Illetta, Cagliari, Italy Share Capital EUR 308,272,742.50 Cagliari Companies' Register and VAT No. 02375280928 Econ. & Admin. Roster - 191784

  • Page 6
    T iscali Group 5 T I S C A L I G R O U P

  • Page 7
    G R O U P T I S C A L I Management Mario Rosso Chairman and CEO Mary Turner CEO Tiscali UK Luca Scano General Manager Tiscali Italy Romano Fischetti Executive in charge of drawing up the Company's accounting documents Salvatore Pulvirenti CIO Paolo Susnik CEO TINet 6

  • Page 8
    ... and Chief Executive Officer Mario Rosso Directors Francesco Bizzarri Massimo Cristofori Umberto De Iulio1 Renato Soru2 BOARD OF STATUTORY AUDITORS Chairman Aldo Pavan Statutory Auditors Piero Maccioni Andrea Zini Deputy Auditors Rita Casu Executive appointed to draw up the accounting and corporate...

  • Page 9
    ...expansion plan following the IPO on Nuovo Mercato of Milan. In March 1999, Tiscali launched the first free Internet access service in Italy giving a significant boost to the growth of the whole market and establishing itself as an undisputed first mover. 8 January 2000 ACQUISITION OF WORLD ONLINE...

  • Page 10
    ... services to its customers, both private individuals and companies, namely: internet access through dial-up and ADSL, Voice, VoIP, media, value-added services and other technologically advanced products. Tiscali, with its activities in the European markets with the highest growth - Italy and the UK...

  • Page 11
    T I S C A L I G R O U P UNITED KINGDOM 2008 Revenues (EUR ml) EBITDA (EUR ml) ADSL subscribers (000) Market share ADSL Number of colocations 684 108 1,768 10% 951 2007 609 99 1,830 13% 800 10

  • Page 12
    ITALY 2008 Revenues (EUR ml) EBITDA (EUR ml) ADSL subscribers (000) Market share ADSL Number of colocations 314 76 586 5% 486 2007 292 63 553 5% 486 11 T I S C A L I , Core Countries Snapshot G R O U P

  • Page 13
    ... ml 32.0 66.0 93.0 121.0 135 120 105 90 75 60 45 30 15 0 3 MONTHS 6 MONTHS 9 MONTHS 12 MONTHS ADSL REVENUES Euro ml 103.9 144.7 207.5 269.6 319.9 387.1 471.9 496.4 500 450 400 350 300 250 200 150 100 50 0 3M 07 3M 08 6M ...

  • Page 14
    ... Net Financial Debt Net financial debt as per "Consob" Shareholders' equity Investments 1,205.8 601.1 616.4 4.8 174.3 1,599.9 636.5 657.4 207.0 193.5 OPERATING FIGURES (000) 31 / 12 / 2008 31 / 12 / 2007 Internet Access and Voice users ADSL (broadband) users of which: Direct ADSL users (LLU...

  • Page 15
    Results by segment T I S C A L I G R O U P Revenues by country Revenues by business line United Kingdom 69% Italy 31% Bband and VoIP 63% Voice 22% Media 5% Dial up 5% Other 1% B2B 4% Group Total Revenues (EUR ml) Group Total Revenues (EUR ml) 984 984 14

  • Page 16
    EBITDA by country ADSL subscribers by country United Kingdom 59% Italy 41% United Kingdom 75% Italy 25% Group EBITDA (EUR ml) Group ADSL subscribers (EUR ml) 197 2,3 15 T I S C A L I G R O U P

  • Page 17
    ... subsidiary Tiscali Italy, was "Tiscali TuttoIncluso" which promoted the dual play offer, the best package - ADSL flat + voice - with very competitive prices. The offer provides, for EUR 4.95 per month, 8 Mega Adsl flat + free national calls, without the need to pay telecom Italia fixed charges. As...

  • Page 18
    ... Tiscali UK, was "Home Early" which promoted Tiscali's brand new up to 8Mb Superfast Broadband package with Free UK & International weekend calls, plus a free wireless router all for £6.49 a month for the first three months then just £12.99. The advertisement uses humour to carry the product...

  • Page 19
    ... the stock option plans (Adjusted EBITDA) are economic performance indicators not defined by the reference accounting standards and are formed as indicated below: Pre-tax result and result deriving from assets destined to be disposed of + Financial charges - Financial income +/- Income/Charges from...

  • Page 20
    Financial Statements at 31 December 2008

  • Page 21
    4. Report on operation

  • Page 22
    ... scenario The Tiscali Group provides telecommunications services on the fixed network in the UK and in Italy. Within this context, Tiscali is placed among the main alternative operators in Europe offering integrated Internet access, and telephone services, mainly to residential customers. Tiscali is...

  • Page 23
    ...% 65% 67% 67% 69% Mobile 16% SOURCE: TISCALI ANALYSIS, 2008 6% Fixed The UK broadband market is very competitive and is characterized by the presence of few large infrastructured operators which are joined by a consistent number of operators who merely resell internet access. With regard to the...

  • Page 24
    ... 4.5: BROADBAND CONNECTIONS ON THE MOBILE NETWORK IN THE UK FEBRUARY-JUNE 2008 (Mln) pre-paied contract 69 6 63 86 9 77 98 10 88 124 28 96 133 32 101 Italy In Italy, during 2008 the AGCOM concentrated on the following macro-areas of intervention: • Provisions relating to the Telecom Italia access...

  • Page 25
    ... No. 719/08/CONS "Change in prices for Telecom Italia S.p.A. access services as from 1 February 2009", dated 23 December 2008, the increase in monthly fees applied by Telecom Italia to residential customers for the access service to the public telephone network from a fixed position was approved. As...

  • Page 26
    ... available within 10 months of notification of the ruling. The analysis process involves: • markets of services and products supplied to end customers (retail markets); • markets of elements necessary for operators which in turn provide their services and products to end customers (wholesale...

  • Page 27
    ... and on the parties to whom the costs should be allocated. Following a number of changes within the Government, the matter is currently the responsibility of the Digital Britain review project. • OFCOM renewed efforts directed at avoiding undue sales of products and services to consumers during...

  • Page 28
    ...CAPITALI 4.3 Tiscali shares Tiscali shares have been listed on the Italian Stock Exchange (Milan: TIS) since October 1999. At 30 December 2008, market capitalization came to EUR 437.5 million, calculated on the value of EUR 0.7096 per share as of that date. On 31 December 2008, the number of shares...

  • Page 29
    ... general deterioration of the financial markets and the global economy. The overall performance of the Tiscali stock is set within the context of the global share market which in 2008 lost between 30% and 50% of the initial value. Italy in fact did not remain immune. As a result, the Italian Stock...

  • Page 30
    .... The Chief Executive Officer in charge as of that date, Tommaso Pompei, in mutual agreement with the Company, relinquished his powers, intending to remain a Board Director until the natural expiry of the entire Board, and therefore until approval of the 2007 financial During the year, Tiscali UK...

  • Page 31
    ... agreements. Renewal of the organizational set-up of the finance area On 9 June 2008, Massimo Cristofori, CFO of the Group (who had followed Tiscali since its start-up) left the Company, maintaining his role as Tiscali S.p.A. Board Director. The Chief Executive Officer, Mario Rosso, undertook the...

  • Page 32
    ... European countries, Italy and the UK, offering its products to consumer and business customers, mainly by means of four business lines: (i) the "Access" line, via Broadband (LLU; Wholesale/bitstream) and Narrowband; (ii) the "Voice" line, inclusive of telephone traffic services, both traditional...

  • Page 33
    ... of the interest rates may lead to increases or reductions in the cost of the loans. On a consistent basis with its risk management policies, the Tiscali Group tries to deal with the risks relating to exchange rate and interest rate fluctuations by means of recourse to financial hedging instruments...

  • Page 34
    ... customer Unbundled network coverage in Italy at 31 December 2008 came to 486 sites. The average ARPU for broadband services in Italy amounted to EUR 30 per month, an increase compared to the average of EUR 29 for the year 2007 and in line with plan targets. SOURCE: TISCALI United Kingdom Italy...

  • Page 35
    ... the same customer base which are included in their respective business segments, amounted in 2008 to EUR 44.1 million (a 9% increase over the EUR 40.5 million of 2007). Internet access This segment, which includes revenues from broadband (ADSL) and narrowband (dial-up) internet access services and...

  • Page 36
    ... development of the unbundling network and the range of the ADSL services (modem and customer activation costs). FY 2007 FY 2008 SOURCE: TISCALI During the year, indirect operating costs stood at EUR 276.4 million (28.1% of revenues), in line in terms of proportion of revenues when compared with...

  • Page 37
    ... fixed assets. Investments in Italy came to around EUR 58.2 million, while in the UK they totalled approximately EUR 116.0 million. At 31 December 2008, Tiscali's unbundling network included more than 486 sites in Italy and around 951 sites in the UK. Marketing & sales Payroll and related costs...

  • Page 38
    ... access services and line rentals, the provision for staff severance indemnities, the provision for risks and charges and the provision for taxation. The change is attributable to the repayment of the bridging loan by means of the income, for EUR 150 million, emerging from the share capital increase...

  • Page 39
    ... directly to Mario Rosso, Chief Executive Officer of Tiscali Italia and the parent company Tiscali S.p.A.. Luca Scano is also responsible for the role of Finance Director of the Italian subsidiary. R E P O R T O N As indicated in the comments on the business continuity, please note that the Group...

  • Page 40
    ... Company suspended said payments, including those falling due in the same month. The Company has also specified that the route taken has the aim of renegotiating the financial debt with leading lending institutions, who are willing to negotiate, and that the business activities in Italy and the UK...

  • Page 41
    ... the restructuring of the Tiscali Group's financial debt on a consistent basis with the cash flows and suitable for supporting the new Business Plan. As a point of fact, the attention and interest demonstrated by the financial institutions in relation to the Company, the signing of a waiver and...

  • Page 42
    5. Corporate Governance Report

  • Page 43

  • Page 44
    ... relations" section on the Company website: www.tiscali.com. Fulfilling the prescribed obligation and with the intention of providing extensive corporate disclosure to the shareholders and the investors, Tiscali S.p.A.'s ("Tiscali" or the "Company") Board of Directors has drawn up this report...

  • Page 45
    ..., in pursuance of the provisions of Italian Law No. 262/2005, on 7 August 2008 the Board of Directors took steps to appoint Romano Fischetti, currently Planning, Reporting & Control manager, as executive in charge of drawing up the Company's accounting documents. directly (*) via Andalas Ltd via...

  • Page 46
    ... and Chief Executive Officer report to other Directors and to the Board of Statutory Auditors during Board meetings held at least once a quarter, on operations of significant economic, financial or equity value performed by the Company or its subsidiaries. They also provide the Board of Directors...

  • Page 47
    ... Board Director of SEAT Pagine Gialle S.p.A. Chief Executive Officer of Italtel S.p.A. (*) Office covered as from 19 March 2009 In the specific "investor relations" section of the website www.tiscali.com, the Company publishes the professional résumés of its Directors, so that the shareholders...

  • Page 48
    ..., as amended by Italian Legislative Decree No. 303/2006. Pursuant to the aforementioned Article 11 (Board of Directors), the list of nominations must be filed at the Company's registered office at least ten days prior to the date of the next Shareholders' Meeting in first calling, together with the...

  • Page 49
    ... the current Board of Statutory Auditors, which will remain in office until the date of the shareholders' meeting called to approve the annual financial statements at 31 December 2008. During these meetings, a total of two lists were presented. The first list, presented by the shareholder Renato...

  • Page 50
    ...for listed companies and the suggestions of Borsa Italiana S.p.A., on 25 March 2004 the Board of Directors took steps to up-date the organizational set-up of the internal audit system, on the basis of a proposal made by the Internal Audit Committee on 24 March 2004. The current internal audit set-up...

  • Page 51
    .../2005 relating to the 2008 financial statements, which were carried out on the Group's most important subsidiaries. On the basis of the checks carried out, the Board of Directors deemed the internal audit system to be adequate for the Company's needs, as well as in line with current legislation and...

  • Page 52
    ... information and market communications. Investor Relations office 5.4 Organization, management and control model pursuant to Italian Legislative Decree No. 231/2001 The Company adopted the "Organization, management and control model pursuant to Italian Legislative Decree No. 231/2001", up-dated...

  • Page 53
    ... concerning Tiscali or the Group, may take place solely via the head of investor relations, unless they involve interviews or declarations made by the executive directors. The company managers and, in any event, all the employees and collaborators are obliged to keep price sensitive information and...

  • Page 54
    ... 2008 (c) Until 29 April 2008 (d) Appointed Chief Executive Officer and Chairman as from 29 April 2008 (e) Until 25 February 2009 Board of Statutory Auditors Name - Surname Position No. of shares held No. of shares/ No. of shares sold No. of shares held at 31.12.08 at 31.12.07 purchased/subscribed...

  • Page 55

  • Page 56
    6. Consolidated Financial Statements and Explanatory Notes

  • Page 57
    ...services Payroll and related costs Stock option plan costs Other operating (income) charges Writedowns of receivables from customers Restructuring costs and other writedowns Amortisation/depreciation Operating result Share of results of equity investments valued using the equity method Net financial...

  • Page 58
    ... lenders Payables for finance leases Payables to suppliers Other current liabilities 34 34 bis 35 36 37 510,012 21,399 268,899 148,765 949,076 176,204 19,502 239,127 171,515 606,348 1,599,941 Liabilities directly related to assets held for sale Total Liabilities and Shareholders' equity 22,274...

  • Page 59
    ...Personnel costs relating to stock options Current income taxes Deferred income taxes Financial income Financial charges Gains/Losses deriving from the disposal of subsidiaries net of taxation Cash flows generated by operating activities before changes in working capital (Increase)/Decrease in trade...

  • Page 60
    ... in financial liabilities (leasing) Change in medium-term financial liabilities Increases in capital and share premium reserve Purchase of own shares Minority interests Payments for share issue costs and convertible bond issues Payments for debt issue costs CASH FLOWS GEENRATED BY/USED IN FINANCAL...

  • Page 61
    ...206,970 Share capital increase Increases/(Decreases) Purchase of treasury stock Transfers covering losses Exchange differences arising on the translation of the financial statements of foreign companies Changes in the consolidation area Net profit (loss) for the period Balance at 31.12.2008 96,066...

  • Page 62
    ... No. 15519 dated 27 July 2006 31.12.2008 of which: related parties Revenues Other income Purchase of materials and outsourced services Payroll and related costs Stock option plan costs Other net operating (income) charges Writedowns of receivables from customers Restructuring costs and other...

  • Page 63
    ... liabilities Payables to banks and other lenders Payables for finance leases Payables to suppliers Other current liabilities 510,012 21,399 268,899 148,765 949,076 Liabilities directly related to assets held for sale Total Liabilities and Shareholders' equity 22,274 1,205,817 31,529 1,241 176,204...

  • Page 64
    Investments C O N S O L I D A T E D 174 F I N A N C I A L S T A T E M E N T S EUR (mln) A N D E X P L A N A T O R Y N O T E S

  • Page 65
    ... under the laws of the Republic of Italy at the Cagliari Companies' Register. The Tiscali Group provides telecommunications services on the fixed network in the UK and Italy. Tiscali offers integrated internet access, telephone and multimedia services and in particular is positioned in the...

  • Page 66
    ... the restructuring of the Tiscali Group's financial debt on a consistent basis with the cash flows and suitable for supporting the new Business Plan. As a point of fact, the attention and interest demonstrated by the financial institutions in relation to the Company, the signing of a waiver and...

  • Page 67
    ... by: • Italy • UK • Corporate and other business: minor Italian companies and corporate activities. Lines of business (Access, Voice, Business services / Business, Media) represent the secondary reporting segment, at sector information level. following, in a single item and net of the related...

  • Page 68
    ... Tiscali International Network BV, a subsidiary of Tiscali International BV. The offer included the purchase of the net assets of TiNet Bv, as well as the equity investments of the companies in the entire TiNet Group (TiNet spa, TiNet Ltd, TiNet Gmbh, TiNet Inc, TiNet Hong Kong) In order to provide...

  • Page 69
    ... fair values, at the date of the exchange, of assets, liabilities incurred or undertaken concerning the acquired company, and the financial instruments possibly issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree...

  • Page 70
    Internally-generated intangible assets arising from costs incurred for the development of applications software under Group control and directly associated with the production of services, in particular with regard to 'technological platforms' for access and management of the Tiscali network, are ...

  • Page 71
    ... item payables for finance leases, under financial payables. Lease payments are divided into their capital and interest elements. Financial charges are directly booked to the income statement for the year. Assets held under finance leases are depreciated using the straight-line method based on their...

  • Page 72
    ...current interest rate on the market, for similar non-convertible bonds. The difference between the net amount obtained from the issue and the fair value assigned to the liability component (representing the implicit option of converting bonds into shares of the Group) is included in the shareholders...

  • Page 73
    ... date of allocation, and for accounting purposes, it follows the rules fixed by IFRS 2 - Payments based on shares; the cost is reported in the income statement with a matching balance booked directly to the shareholders' equity. C O N S O L I D A T E D Financial income and charges Interest income...

  • Page 74
    ... taxable income will be available to allow all or part of these assets to be recovered. Revenue recognition criteria Revenues related to the activation of broadband services (ADSL) are deferred as the underlying benefits affect the entire duration of the customer contracts. The Directors have...

  • Page 75
    ...and "financial assets available for sale". The changes to IFRS 7 introduced new disclosure requirements in relation to the reclassifications permitted by the amended IAS 39. These changes did not have any effect on the consolidated financial statements at 31 December 2008 since the Tiscali Group has...

  • Page 76
    ... 23, financial charges which are directly attributable to the acquisition, construction or production of an asset which requires a significant period of time before being ready for its envisaged use or sale (so-called qualifying assets), must be capitalized as part of the cost of said asset. The new...

  • Page 77
    ... held for lease to third parties; • IAS 19 (Employee benefits): the amendment introduced, to be applied perspectively, clarifies the conduct to be adopted in the event of changes in employee benefits, defines the methods for recording the cost/income relating to the past work services precisely...

  • Page 78
    ... made for charges relating to the stock option plan of the UK (EUR 4.8 million) and Italian subsidiaries (EUR 2.9 million) and includes the effects of the acceleration of the plan reserved for the former Chief Executive Officer and the former Administration and Finance Director who maintained...

  • Page 79
    ... relating to the restructuring of the Pipex division business, as well as the reversal of the Pipex Internet and Bulldog brands for EUR 7.9 million; • restructuring charges of the Italian and Parent Company activities for a total of EUR 11.5 million, which reflect the corporate reorganization plan...

  • Page 80
    ... SGR, relating to the assets of the Tiscali International BV Group, a Tiscali S.p.A. subsidiary which offers customers worldwide wholesale IP-MPLS connectivity services via a global network which covers 3 continents and has more than 100 points of presence. On 15 November 2008, the assets...

  • Page 81
    ...been The final WACC values, checked with the Company's advisors and used for the value checks, are indicated in the following table. % Italy UK Tiscali Group WACC 9,88 9,79 9,86 S T A T E M E N T S A N D The terminal growth rate has been set at 2%, in line with the forecasts of the analysts, also...

  • Page 82
    ... The item Broadband service activation costs, totalling EUR 33.7 million, relates to the capitalisation of the activation costs for the ADSL service. Such costs are amortised in relation to the minimum duration of the contracts with customers, currently equating to twelve months. Total increases in...

  • Page 83
    ... assets in process of formation and advance payments pertaining to the Italian subsidiary Tiscali Italia S.p.A. mainly representing costs for the development of the mobile telephone management platform for EUR 2 million and EUR 4.4 million relating to the purchase of transmission capacity (IRU...

  • Page 84
    ... List of subsidiaries included in the consolidation area). Deferred tax assets Total Deferred tax assets recorded in the financial statements relate to tax losses carried forward by Tiscali Group companies. The prepaid taxes have been provided for on the basis of forecasts on the taxable income...

  • Page 85
    ... of prepaid taxes, which took place in 2008, broken down in relation to the various Group companies falling within the perimeter of continuing operations. EUR (000) 31.12.2007 Uses Increase Assets held for sale Tiscali International BV Tiscali UK Ltd Tiscali International Network S.p.A. Total 34...

  • Page 86
    ...EUR 82.6 million. These receivables accrued from the sale of internet services, billing of network access services, inverse interconnection traffic, advertising revenues and business customer and telephone services provided by the Group. The book value of trade receivables, in view of the maturities...

  • Page 87
    ... million) mainly relates to accrued revenues pertaining to the period for services in the access segment. These are mainly accruals on marketing campaigns and leasing costs. Prepaid expenses of EUR 15.8 million relate to prepaid costs associated with long-term rental of lines, international circuit...

  • Page 88
    ... due to shareholders The item Liabilities for finance leases (EUR 73.1 million) includes payables to leasing companies for finance lease agreements. The above table has been drawn up in light of the Consob Communication n. DEM/6064293 dated 28 July 2006. For the evolution of current financial debt...

  • Page 89
    ...,067 52,966 44,540 122,573 Less future financial charges Current value of minimum payments (28,056) 94,517 (31,102) 98,969 94,517 98,969 A N D S T A T E M E N T S Included in the balance sheet Payables for current finance leases Payables for non-current finance leases 21,399 73,118 94,517 19...

  • Page 90
    ... relating to the LLU project. Other payables include: • the amount due to the former shareholders of Video Network Ltd for the portion of the deferred price, totalling EUR 71.2 million at 31 December 2008; • the valorisation at fair value of the swap (IRS) recorded by Tiscali UK Holding...

  • Page 91
    ..., charges relating to properties leased by the German subsidiaries for EUR 4.3 million, the provision of EUR 8.4 million for restructuring charges of the Italian subsidiaries and corporate activities, EUR 1.4 million for tax risks on a company in liquidation held by Tiscali International BV, along...

  • Page 92
    ... said loan is currently estimable in 500 base points, with the exclusion of the tranche relating to the envisaged share capital increase, already reimbursed. The credit facility and the line of liquidity with Intesa Sanpaolo, as per point c) above, contain financial commitments (financial covenants...

  • Page 93
    ... used for financing the working capital in Italy / UK December 2011 JP Morgan Chase Bank N.A. Tiscali UK Holdings Ltd, wholly-owned subsidiary of In the event of change of control These include limitations such as the payments, asset On the assets and on the shares of the Group companies which...

  • Page 94
    ADSL subscribers C O N S O L I D A T E D 2.3 F I N A N C I A L (mln) S T A T E M E N T S A N D E X P L A N A T O R Y N O T E S

  • Page 95
    ... expenses, such as costs for contents, costs for network access, costs for professional consulting and costs for line rentals. Deferred income mainly refers to the deferral of the capital gain on disposal relating to the sale & lease back transaction on the Sa Illetta property, amounting to around...

  • Page 96
    ...increase: (i) the financial charges payable by the Company relating to part of the debt not hedged and (ii) the costs of any refinancing of the debt, with possible negative effects on the assets and on the economic, equity and financial situation of the Group companies. If the interest rates changed...

  • Page 97
    ... dated 14 May 1999, available on the Company's website (www.tiscali.com). Stock Options Upon the proposal of the Board of Directors, on 3 May 2007 the shareholders' meeting approved a stock incentive plan in favour of the Chief Executive Officer and key employees of the Company and its Italian...

  • Page 98
    ...to his shareholding. Consequently, World Online International N.V was held responsible vis-Ã -vis the parties who had subscribed the shares of the company at the time of the IPO on 17 March 2000 (start date of trading) and who acquired shares on the secondary market up to 3 April 2000 (date on which...

  • Page 99
    ...The Dutch tax authorities forwarded World On Line International NV, and the direct subsidiary Tiscali International BV, a number of notices of assessment concerning the alleged non-payment of withholdings on remuneration and stock options acknowledged in previous years to Group executives. The total...

  • Page 100
    Double play Clients 1,073,000

  • Page 101
    ... statement 31.12 2008 EUR (000) Revenues From third parties Intra-group Total revenues Operating result Portion of results of equity investments carried at equity Net financial income (charges) Pre-tax result Income taxes Net result from operating activities (on-going) Result from assets disposed...

  • Page 102
    ... 31.12 2008 EUR (000) Activities Segment assets Equity investments carried at equity Equity investments in other companies Goodwill Total ...investments in other companies Goodwill Total consolidated assets Italy United Kingdom Other Corporate HFS/ Discontinued Cancellation adjustments Total ...

  • Page 103
    ... in fixed assets by business segment 31.12 2008 EUR (000) Intangible assets Properties, plant and machinery Access Broadband 73,169 49,156 122,325 Narrowband 1,408 1,859 3,267 25,256 542 25,798 Voice Business services 30 205 235 511 5 516 12,621 9,540 22,161 112,994 61,308 174,302 Media & Vas...

  • Page 104
    ... Company, relate to the sub-letting of the Tiscali offices in the suburbs of Cagliari. 2) Interoute: group entirely owned by the Sandoz Family Foundation, a Tiscali shareholder. The costs incurred during the year refer to purchases made by Tiscali Italia S.p.A. in relation to dark fibre and related...

  • Page 105
    ... Gmbh Tiscali Business Solution GmbH & Co KG World Online International Nv Tiscali International Bv Tiscali B.V. World Online Portal BV. Myt Vision Bv Xoip BV Tiscali Media Service BV Wolstar B.V. in liq. Tiscali Partner B.V. 12 Move Vof Tiscali Finance BV Tiscali International Network B.V. Tiscali...

  • Page 106
    Double play revenues C O N S O L I D A T E D 121.2 105 EUR (mln) F I N A N C I A L S T A T E M E N T S A N D E X P L A N A T O R Y N O T E S

  • Page 107
    ... International Network SA France (34) in liquidation Germany Italy 60% Tiscali International 40% Network S.p.A. Italy (58) USA Spain Tiscali International 100% Network GmbH Germany (60) The Netherlands United Kingdom Tiscali International 100% Network Ltd UK (59) Luxembourg Other Tiscali...

  • Page 108
    100% Tiscali Financial Services SA (29) 100% Tiscali Finance SA Luxembourg (28) 99.5% World Online International N.V. The Netherlands (24) 100% Tiscali International B.V. The Netherlands (22) 100% 100% Green Dot Property Man. Ltd UK (10) Tiscali Business GmbH Germany (31) 100% Tiscali Ltd UK...

  • Page 109
    .... Business restructuring activities involved costs of around EUR 32 million Furthermore, on 22 December 2008 the Board of Directors approved the restructuring plan for the Italian companies. E X P L A N A T O R Y activities held by Tiscali International Network BV, a company controlled by Tiscali...

  • Page 110
    ... Certification services Ernst & Young S.p.A. Tiscali Spa Subsidiary companies Subsidiary companies Total * Accounting support for the disposal of the UK subsidiaries Milan, Italy, 27 March 2009 The Chief Executive Officer The Executive appointed to draw up the Corporate Accounting Documents...

  • Page 111
    ... as Executive appointed to draw up the corporate accounting documents of Tiscali S.p.A., hereby certify, also taking into account the matters envisaged by Article 154 bis, sections 3 and 4, of Italian Legislative Decree No. 58 dated 24 February 1998: • the adequacy in relation to the Company...

  • Page 112
    7. T iscali S.p.A. 2008 Financial Statements

  • Page 113
    ... held in the company World Online International N.V equating to EUR 954 million. Revenues from services mainly comprise (EUR 15.6 million) the fees contractually agreed deriving from 'Corporate' services to subsidiaries including the payments for licences to use the Tiscali trademark calculated as...

  • Page 114
    ... Current liabilities Current liabilities not relating to the financial position are represented mainly by payables to suppliers totalling EUR 22 "Other current payables" are represented by financial payables to the subsidiary Tiscali International BV, a sub-holding company of the Tiscali Group...

  • Page 115

  • Page 116
    8. T iscali S.p.A. Financial Statements and Explanatory Notes

  • Page 117
    ...23,454,660) A N D Other operating costs Writedowns of receivables from customers Other writedowns Amortisation/depreciation Operating result Portion of result of equity investments carried at equity Net financial income (charges) Pre-tax result Income taxes Net result from operating activities (on...

  • Page 118
    ... charges 19 20 21 3,622,967 271,188 40,220,386 44,114,541 Current liabilities Payables to banks and other lenders Payables to suppliers Other current liabilities 22 23 24 626,825 22,077,214 50,882,660 73,586,699 Liabilities directly related to assets held for sale Total Liabilities and Shareholders...

  • Page 119
    ... of changes in shareholders' equity Share Capital Share premium reserve Balance at 01.01.2007 212,206,582 948,016,541 Accumulated losses and losses for the period (207,065,867) Stock option reserve Reserve for treasury shares EUR Total E X P L A N A T O R Y - 953,157,256 Increases Transfers...

  • Page 120
    ...assets - Payments for the sale of financial fixed assets NET CASH USED IN INVESTING ACTIVITIES (8,235,744) (30,643,367) 2,099 (342,508) (8,763) (5,176) 486,017 (8,576,153) (30,171,289) FINANCIAL ACTIVITIES Changes in financial assets Increase (decrease) in other non-current liabilities Changes in...

  • Page 121
    ... under the laws of the Republic of Italy at the Cagliari Companies' Register. The Tiscali Group provides telecommunications services on the fixed network in the UK and Italy. Tiscali offers integrated internet access, telephone and multimedia services and in particular is positioned in the...

  • Page 122
    ... the restructuring of the Tiscali Group's financial debt on a consistent basis with the cash flows and suitable for supporting the new Business Plan. As a point of fact, the attention and interest demonstrated by the financial institutions in relation to the Company, the signing of a waiver and...

  • Page 123
    ... assets are valued, consistently with IAS 39 provisions for financial assets 'available for sale', at fair value or alternatively at cost whenever fair value cannot be reliably calculated. Gains and losses from changes in fair value are directly booked to equity until the asset is disposed of or...

  • Page 124
    ... is the fair value of the stock options at the date of allocation, and for accounting purposes, it follows the rules fixed by "IFRS 2 - Payments based on shares"; the cost is reported in the income statement with a matching balance booked directly to the shareholders' equity. Critical decisions in...

  • Page 125
    ... 23, financial charges which are directly attributable to the acquisition, construction or production of an asset which requires a significant period of time before being ready for its envisaged use or sale (so-called qualifying assets), must be capitalized as part of the cost of said asset. The new...

  • Page 126
    Active users 2,948,000

  • Page 127
    ...held for lease to third parties; • IAS 19 (Employee benefits): the amendment introduced, to be applied perspectively, clarifies the conduct to be adopted in the event of changes in employee benefits, defines the methods for recording the cost/income relating to the past work services and precisely...

  • Page 128
    ... on the sale of the equity investments in 2007. Revenues from services provided to Group companies mainly refer to the invoicing of services provided by the Company in favour of Group companies. This item also includes charges for rights of use on the Tiscali brand name calculated as a percentage...

  • Page 129
    ... commentary on shareholders' equity in Note 7.5.21. Also note that the remunerative component deriving from the Stock Option plans relating to managers who are employees of other Group companies is not booked to the income statement of the parent company Tiscali S.p.A. but is booked to increase the...

  • Page 130
    ...000) Financial income Interest on bank deposits Other 31.12.2008 31.12.2007 202 5 206 90 11 101 Financial charges Interest on bonds Interest and other charges due to banks Other financial charges (135) (1,986) (2,121) Net financial charges (1,915) (343) (68) (411) (310) EUR (000) Current taxes...

  • Page 131
    ... of territorial information via a system based on vectorial mapping and a geo-referencing database. A N D Properties, plant and machinery (note 11) The table below shows the changes which occurred during the year: EUR (000) 31.12.2007 Increase Depreciation (Decreases) and other changes 31.12.2008...

  • Page 132
    ... S.r.l . in liquidazione World Online International N.V. Tiscali Int.l Network S.p.A. Tiscali Financial Services Sa Balance 31.12.2007 357 55,439 1,076,270 1,306 31 1,133,403 Increases (Disposals) Reval/ (write-down) (766) (953,665) (119) (751) (954,550) Other changes Balance 31.12.2008 111,817 122...

  • Page 133
    ...the parent company Tiscali S.p.A but is booked to increase the book value of the equity investments in the companies on which the management benefiting from the plans depend, in accordance with the matters laid down by the international accounting standards relating to Stock Option plans (IFRS2) and...

  • Page 134
    ...same. Tiscali Italia S.p.A. Changes during the year include EUR 55.8 million in relation to the allocation of the financial receivables due from the parent company Tiscali S.p.A. to cover losses relating to the previous year, as well as the booking of the figurative charge of the Stock Option plans...

  • Page 135
    ...Deutschland Gmbh (ex Nikoma ) Tiscali Finance SA Tiscali Italia S.p.A.(Ex Andaledda S.p.A.) Tiscali Motoring S.r.l. in liquidation World Online International N.V.(***) Tiscali Int.l Network S.p.A. Tiscali Financial Services Sa Total (***) Forecast balance sheet data at 31 December 2008 Head Offices...

  • Page 136
    ... from Group companies are detailed below: EUR (000) Quinary SpA Tiscali Deutschland Gmbh Tiscali Business Gmbh Tiscali Gmbh Tiscali Espana SLU Tiscali UK Ltd Tiscali UK Holdings Ltd Tiscali International Network BV Tiscali International Network SpA Tiscali Italia S.p.A. Tiscali Services S.p.A. Total...

  • Page 137
    ... the former Chief Executive Officer and the former Finance Director who maintained their assigned rights after leaving the Group. Shareholders are also informed that the remunerative component deriving from the Stock Option plans relating to managers who are employees of other Group companies is not...

  • Page 138
    ...: The analysis of financial payables to Group companies is as follows: EUR 000 Tiscali Motoring S.r.l. Tiscali Italia S.p.A. Tiscali Services S.p.A. Quinary S.p.A. Tiscali International Network S.p.A. Tiscali International Network BV Tiscali International Network SA Total 31.12.2008 3,092 16 3,108...

  • Page 139
    ...40,220 1,835 110 (184) 1,762 31.12.2007 Increases Decrease 31.12.2008 S T A T E M E N T S EUR (000) Tiscali International BV Tiscali Business Gmbh Tiscali Gmbh Tiscali Espana SL Tiscali UK Ltd Tiscali Italia S.p.A. Tiscali Services S.p.A. Quinary S.p.A. 31.12.2008 5 7,956 3,187 11,148 31.12.2007...

  • Page 140
    ... financial position 31.12.2008 (43,605) (5,025) (48,630) 31.12.2007 (231,966) (4,082) (236,048) Financial risk management Financial risk management objectives The Group's Corporate Treasury division provides business services, co-ordinates access to the local and international financial markets...

  • Page 141
    ...481) 23% 17% 31.12.2008 of which: related parties 15,981 92% change % F I N A N C I A L S T A T E M E N T S A N D E X P L A N A T O R Y Portion of result of equity investments carried at equity Net financial income (charges) Pre-tax result Income taxes Net result from operating activities (on...

  • Page 142
    ... Tiscali Uk Ltd Tiscali Business GmbH Tiscali Italia S.p.A. Tiscali Services S.p.A. Total Group companies Bizzarri Francesco Borghesi e Colombo Associati S.r.l Stock options - CEO and employees Notes Costs 1 1 1 1 1 1 1 1 1 1 1 1 (1,835) (1,835) 2 3 4 (2,481) 31.12.2008 Revenues 90 675 259 Costs...

  • Page 143
    ... Tiscali International Network SpA Tiscali Italia S.p.A. Tiscali Media Srl Tiscali Motoring Srl Tiscali Services S.p.A. Tiscali Telecomunicaciones SA Tiscali UK Holdings Ltd Tiscali UK Ltd S T A T E M E N T S 7,957 - - - F I N A N C I A L Total Group companies Francesco Bizzarri Stock options...

  • Page 144
    ... member of Tiscali S.p.A.'s Board of Directors, in the previous year provided Tiscali S.p.A. with consultancy services as part of extraordinary finance transactions. (4) Stock option - CEO and employees. Cost recorded in the item Payroll and related costs in the parent company's financial statements...

  • Page 145
    ...the Board of Directors, on 3 May 2007 the shareholders' meeting approved a stock incentive plan in favour of the Chief Executive Officer and key employees of the Company and its Italian subsidiaries, with the aim of aligning management's interests with the creation of value for the Tiscali Group and...

  • Page 146
    ...the time of listing relating to his shareholding. Consequently, World Online International NV was held responsible vis-Ã -vis the parties who had subscribed the shares of the company at the time of the IPO on 17 March 2000 (start date of trading) and who acquired shares on the secondary market up to...

  • Page 147
    ...The Dutch tax authorities forwarded World On Line International NV (and the direct subsidiary Tiscali International BV) a number of notices of assessment concerning the alleged non-payment of withholdings on remuneration and stock options acknowledged in previous years to Group executives. The total...

  • Page 148
    ... Term of office Emoluments for office (EUR) Board of Directors Non-monetary benefits Other forms of remuneration (EUR) Vittorio Serafino Tommaso Pompei Mario Rosso Chairman Chief Executive Officer Director (a)(b) Until 29 April 2008 Until 29 February 2008 Approval of financial statements as...

  • Page 149
    ... process for the sale of the UK subsidiary (3) Assistance for preparation of the Floating Rate Note Offering Circular S T A T E M E N T S A N D Milan, Italy, 27 March 2009 The Chief Executive Officer The Executive appointed to draw up the Corporate Accounting Documents F I N A N C I A L Mario...

  • Page 150
    ... as Executive appointed to draw up the corporate accounting documents of Tiscali S.p.A., hereby certify, also taking into account the matters envisaged by Article 154 bis, sections 3 and 4, of Italian Legislative Decree No. 58 dated 24 February 1998: • the adequacy in relation to the Company...

  • Page 151

  • Page 152
    , 9. Independent Auditors Report to the Consolidated Financial Statements

  • Page 153

  • Page 154
    ...financial statements, comprising the balance sheet, income statement, statement of changes in shareholders' equity, cash flow statement and the related explanatory notes, of Tiscali S.p.A. and its subsidiaries (the Tiscali Group) as of and for the year ended 31 December 2008. The Company's directors...

  • Page 155
    ..., ascertaining certain responsibility pertaining to World Online International NV, without however passing sentence with regard to any damages, which will have to form the subject matter of new and separate proceedings by the damaged third parties, as yet not started up. To-date, the appeal and the...

  • Page 156
    .... 53 dated 24 February 1993. Due to the significance of the effects associated with the uncertainties described in the previous paragraphs, we are unable to express an opinion on the consistency of the Directors' Report on Operations with the consolidated financial statements of the Tiscali Group at...

  • Page 157

  • Page 158
    , 10. Independent Auditors Report to the Statutory Financial Statements

  • Page 159
    ...income statement, statement of changes in shareholders' equity, cash flow statement and the related explanatory notes, of Tiscali S.p.A. as of and for the year ended 31 December 2008. The Company's directors are responsible for drawing up the financial statements in compliance with the International...

  • Page 160
    ..., ascertaining certain responsibility pertaining to World Online International NV, without however passing sentence with regard to any damages, which will have to form the subject matter of new and separate proceedings by the damaged third parties, as yet not started up. To-date, the appeal and the...

  • Page 161
    ...Directors' Report on Operations with the financial statements, as required by Article 156.4 bis, letter d) of Italian Legislative Decree No. 53 dated...consistency of the Directors' Report on Operations with the financial statements of the Tiscali S.p.A. at 31 December 2008. Milan, Italy, 14 April 2009...

  • Page 162
    11. Report of the Board of Statutory Auditors

  • Page 163
    ... request information on the performance of corporate transactions or on specific business affairs directly from the management and auditing bodies of the subsidiaries - the Board has requested the six-monthly forwarding - by the Board of Statutory Auditors of the subsidiary Tiscali Italia SpA - of...

  • Page 164
    ... make it possible define a new debt structure consistent with the cash flow projections of the 2009-2013 business plan. - 163 R E P O R T O F T H E B O A R D O F the general performance of the subsidiary company. In this connection, no significant data or information emerged which must be...

  • Page 165
    ... Legislative Decree No. 58/98, we formally acknowledge that the Directors in their report on Corporate Governance declare that the Tiscali Group complies and follows the Code of Best Practice for listed Italian companies issued in March 2006. Compliance with the legislation envisaged by the afore...

  • Page 166
    ..., the Board issued its opinion pursuant to Article 2389 of the Italian Civil Code (directors' remuneration). The independent auditing firm, Reconta Ernst & Young SpA, has not issued any opinion required by law, with the exception of its report on the interim accounts at 30 June 2008. The supervisory...

  • Page 167

  • Page 168
    12. Attachment - Glossary

  • Page 169
    ... access areas", they identify the geographic areas which are not served directly by Tiscali's network (also see Bitstream and Wholesale) average revenue from land-line and mobile telephone services per user calculated over a specific period for the average number of Tiscali Group customers or...

  • Page 170
    ...Digital systems offer minor interference with regard to noise and may comprise cryptography as protection from outside interference. Double Play DSL Network combined internet access and land-line telephone product. acronym for Digital Subscriber Line Network: this is a network created starting off...

  • Page 171
    ...access technologies such as for example the traditional telephone lines (POTS), the ADSL2+ line, the SHDSL symmetrical lines, the VDSL and the VDSL2, both via copper and fibre networks. acronym for Mobile Virtual Network Operators: a party who offers mobile telecommunications services to the general...

  • Page 172
    ... switching (virtual call); analogue and direct broadband transmission of TV signals and additional services, such as closed group of users; calls on hold; reverse charge calls; call forwarding and caller identification. The value added services provided by the network, terminals or specialized...

  • Page 173
    ...the interoperability of systems based on the IEEE 802.16-2004 standard for land-line access and the IEEE.802.16e2005 standard for land-line and mobile access services which involve the re-sale to third parties of access services. acronym for Wholesale Line Rental, the re-sale by a telecommunications...