Tiscali Board of Directors approves 2008-2012 business plan

CAGLIARI — The Board of Directors of Tiscali S.p.A has approved the strategic plan 2008-2012.

Guidelines

The guidelines at the basis of the industrial plan 2008-2012 foresee to strengthen the competitive positioning in Italy and in the UK targeting, primarily in 2008, the acceleration of the integration process of Pipex in the UK and a commercial boost in Italy.

The product positioning will be maintained on the double play offers (voice and data) with high capacity and at competitive prices, with an offer also covering IPTV services, already available in the UK and which are being launched in Italy and mobile telephony services as well (through MVNO agreements).

The plan also envisages, particularly in the UK by leveraging on the client base acquired with Pipex, to further develop a positioning in the SMEs market, by offering a complete portfolio of integrated IP services with a competitive market positioning.

From an infrastructure standpoint, the plan contemplates a further expansion of the network to reach 1,800 unbundling (LLU) sites in 2008 and 2,100 by 2009, covering approximately 30 million lines. In particular, it is expected to reach 1,000 LLU sites in the UK in 2008 (740 of which IPTV enabled) and 1,100 sites in 2009 (covering 17 million lines). In Italy, thanks to a virtual unbundling agreement reached with Telecom Italia, the IPTV offer will be launched on 1,000 LLU sites already in 2008 (13 million lines), rolling out the network in 2H2008 to reach directly 800 LLU sites by 2008 and 1,000 in 2009, where economically viable.

The capital expenditure necessary to acquire the forecast customer base and to develop the network and the new services (IPTV and MVNO etc), amounts, over the business plan horizon, to ca EUR 1 billion, of which EUR 220 million in 2008.

In order to further simplify the Group structure and to achieve a better operating efficiency, the Board of Directors has also approved the merger of Tiscali Italia SpA with Tiscali Services – the company currently providing IT services to the Group – and a new consolidation perimeter including all Italian activities of the Group (Tiscali Italian SpA, Tiscali Services, Tiscali Network, MVNO).

Targets

On the basis of the business plan approved today the targets at consolidated level and in Italy and United Kingdom are:

• 2008 revenues at EUR 1.3 billion (+39% vs 2007) growing 17% per annum to reach over EUR 2 billion in 2012. In particular:
  • Italy: EUR 417 million revenues in 2008 and EUR 850 million in 2012 (+21% per annum), 70% from direct access
  • United Kingdom: approximately EUR 900 million of revenues in 2008 and approximately EUR 1.2 billion revenues in 2012, +14% per annum with about 70% from direct access
• Gross Operating Result at EUR 290 million in 2008 (22% of revenues) and over EUR 600 million in 2012 (30% of revenues), with a 30% growth per annum. In particular:
  • Italy: Gross Operating Result at EUR 90 million in 2008 (21% of revenues) and EUR 250 million in 2012 (29% of revenues)
  • United Kingdom: Gross Operating Result at approximately EUR 220 million in 2008 (24% of revenues) and EUR 370 million in 2012 (30% of revenues)
• 3.3 million customers in 2008, of which 1.6 million direct customers and 1.1 million ‘multiplay’, reaching over 4 million customers in 2012 of which approximately 3 million direct customers (2.1 million as ‘multiplay’ customers, of which 650,000 IPTV). In particular:
  • In Italy 1.2 million customers in 2008 of which 600,000 direct customers and 400,000 multiplay customers, reaching 1.7 million customers in 2012, of which 700,000 multiplay;
  • In the UK 2.1 million customers in 2008, of which 1 million direct and 700,000 ‘multiplay’, reaching 2.6 million broadband customers in 2012, of which 1.8 million direct and 1.4 million ‘multiplay’.
• Net profit and cash flow from 2008. Within the plan time horizon, cumulated cash flow exceeding EUR 650 million
• Net debt at approximately EUR 500 million in 2008 (assuming the execution of EUR 150 million capital increase and its use for debt repayment), 1,7 times 2008 gross operating result; neutral financial position in 2012