Tiscali 2008 Annual Report Download - page 99

By means of provision in August 2008, the Rotterdam Court ordered
Tiscali to pay an amount of US$ 1,318,720.80 plus interest and
related charges. This amount reflects the first of the three instalments
envisaged in the IRU agreement. Given the essentially positive
outcome of the trial, Tiscali complied with the ruling which became
final in November 2008 further to failure by the parties to appeal.
The main dispute has therefore definitively concluded.
Mobistar dispute
The indirect subsidiary, Tiscali International BV, is involved in a
dispute furthered by the company Mobistar NV (a Wanadoo Group
company) in June 2006. The dispute concerns the termination by
Wanadoo Belgium of a dial-in traffic termination agreement with
Mobistar NV, following the acquisition in Spring 2003 by Tiscali
Belgium of 100% of Wanadoo Belgium’s shares. The contract for
the sale of the Wanadoo Belgium shares between Wanadoo SA and
Tiscali Belgium envisaged the possibility of early termination of the
Contract, a circumstance also confirmed by Tiscali’s legal advisors.
Mobistar however opposed this early termination. Subsequently,
Tiscali Belgium sold Wanadoo Belgium to Scarlet. On the basis
of the contract for the sale of the Wanadoo Belgium shares by
Tiscali Belgium to Scarlet, Tiscali is responsible vis-à-vis Scarlet
for Mobistar claims with reference to the termination of the
Contract. Tiscali has brought before the courts (i) Wanadoo SA
– responsible in accordance with the contract for the sale of the
Wanadoo Belgium shares to Tiscali Belgium, (ii) the legal advisors
for the purchase transaction – who issued an erroneous opinion
on the possibility of terminating the Contract - and (iii) the
respective insurance company.
The
petitum amounts to € 4 million, nevertheless the Tiscali believes
that the same should be reduced (i) by around € 1 million on the
basis of the correct interpretation of the Contract, (ii) by a further
amount, since the summons before the court of Wanadoo and
the legal advisors by Tiscali should at least minimize the profile of
responsibility of the latter. During this initial stage of the proceedings,
Tiscali believes that it is in no way responsible; however, given the
complexity of the dispute and the number of parties involved, a
forecast with regards to the possible outcome emerges as complex.
Despite the fact that the possibility of reaching an agreement on
the dispute has been outlined, involving the payment of
approximately EUR 400.000, Tiscali intends to hold out in the
court case, unless the negotiations currently underway conclude
favourably. In the financial statements at 31 December 2008,
Tiscali International BV had not set aside provisions.
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 – in relation to the
purchase/sale contract stipulated with Tiscali Business GmbH on
3 February 2007 and signed by Tiscali in its capacity as guarantor
– it challenged the company that certain income values pertaining
to the activities acquired were not correctly represented during the
negotiations and in the related purchase agreement and requested
the Company to launch an independent appraisal into these values.
Therefore, as a consequence of the alleged deviation from the real
values, Ecotel assumes that it has suffered a loss during its activities,
whose effective total it estimates as coming to at least EUR 15
million. The Company has fully disputed the contents of the letters.
In agreement with the arbitration clause present in the contract for
the sale of the German activities, on 21 April 2008 Ecotel launched
arbitration proceedings, summoning Tiscali Business Gmbh and
Tiscali as jointly and severally bound. Ecotel requests compensation
for the damages suffered estimated as totalling EUR 15.2 million
plus any additional damages and other related charges. Tiscali and
Tiscali Business Gmbh have made their statement of action, disputing
the charges. The arbitration proceedings will take place in Frankfurt
(Germany) and are estimated to last around 24 months.
The Company deems Ecotel Communication AG’s requests to be
lacking grounds, therefore the Company has not made any
provision in the financial statements for this dispute.
Tax assessments
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 amount of these
disputes is EUR 2 million, against which Tiscali International BV
has made payments totalling around EUR 0.3 million. The residual
amount mainly refers to stock options which are alleged to have
been granted to Mr. Landefeld (a party what is more resident for
tax purposes in Germany) and, in the opinion of Tiscali’s tax
advisors, not subject to taxation on the Netherlands. Given this
circumstance and considering that this dispute is in the initial
stages, it was decided that the liability cannot be considered likely
and therefore no related provision was made.
Segment reporting (by country and business segment)
The activities of the Tiscali Group and the related strategies, as
well as the underlying activities linked to head office control,
are structured and defined by geographic area, which therefore
represents the primary segment for the purposes of information
by business sector, as required by IAS 14. The geographic areas
are represented in particular 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.
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CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES