Tiscali’s Board of Directors approves 1Q04 results and Ruud Huisman is appointed CEO

Cagliari, 13th May 2004  - Tiscali’s Board of Directors approves 1Q04 results and Ruud Huisman is appointed CEO. Revenues up 26% vs 1Q03 to EUR 267.1 million and record growth in ADSL customer numbers

Tiscali’s Board of Directors has approved 1Q04 results. A key feature of the first quarter was organic revenue growth driven by a sharp rise in ADSL subscriber numbers, with an average of 33,000 new ADSL customers signing up every week.

The successful launch of unbundled services in the Netherlands and Denmark has allowed to reach 50% and 80% of ADSL customers, respectively, in the unbundling mode, which yields ca 70% gross margin, substantially higher margins than wholesale ADSL services.

The Group’s profitability will be boosted by the offer unbundled ADSL services in both Italy and France, where further network and infrastructure investments are being implemented. The Group’s first quarter performance allows to confirm 2004 targets.

Revenues and gross margin

Tiscali posted first quarter revenues of EUR 267,1 million, up 26% versus 1Q03 and 7% ahead of the previous quarter. At 31 March, ADSL customer numbers had quadrupled compared to a year ago, to 1,240,000 (+48% vs. 4Q03), with 33,000 new subscribers signing up each week on average. This rate of growth continued in April, with almost 80,000 new adds, taking the total to 1.320 million. The number of active dial-up users is 6.8 million.

70,000 ADSL users (50% of the total) in the Netherlands and more than 80% in Denmark now receive unbundled services. Even more customers are expected to be unbundled in Italy and France in the second half of the year.

Access revenues rose by 22% versus 1Q03 to EUR 180.9 million (68% of total revenues), and by 11% versus the previous quarter. ADSL revenues for the first quarter were EUR 68 million (38% of access revenues and 25% of total revenues), quadrupled from EUR 24 million in 1Q03.

Revenues from business services were EUR 52.1 million (20% of the total), up 52% versus 1Q03 and 4% versus 4Q03 thanks to the expansion of the basis of consolidation and synergies arising from the integration of the businesses acquired in 2003. This business area has now become Tiscali’s second biggest revenue source, and offers strong synergies with the B2C market.

Voice revenues rose by 34% versus 1Q03 to EUR 21 million (8% of total revenues), and were broadly flat compared with the previous quarter. The revenue increase in this business area was due to both organic and external growth, following the acquisition of npower in the UK, which was consolidated from the second half of 2003.

Portal revenues came in at EUR 11.4 million (4% of revenues), a slight drop versus 1Q03 (-5%) and 4Q03 (-8%), as the Group decided to discontinue so called dialler services, in view of protecting its customers. In 1Q04, Tiscali was confirmed as one of Europe’s leading web properties, with over 19 million unique visitors in March alone, a 30% increase on March 2003.

Gross profit totalled EUR 126.6 million (48% of revenues), up 21% vs 1Q03 (50% of revenues) and substantially stable vs 4Q03 (51% of revenues). The gross margin should improve in 2Q04 with the increase of ADSL clients receiving unbundled ADSL services, in line with the Group’s strategic plan.

The Group has confirmed the following targets for 2004:

- revenues of over EUR 1.2 billion, an increase of more than 30% versus 2003
- EBITDA margin at 11% of revenues
- over 1.6 million ADSL users
- investment at 10% of revenues
- net profit before extraordinaries in 2005
- cash flow generation from the second half of 2004
- sales of assets in Switzerland, South Africa, Norway and Sweden, to be completed by the end of the year

The Board of Directors has approved the appointment of Ruud Huisman as CEO of the Tiscali Group, after becoming a Director following the Shareholders’ meeting held on 6 May.

In addition, the Board of Directors resolved to empower the Chairman to call an extraordinary shareholders’ meeting, on a date to be determined, to approve an increase in the capital of Tiscali SpA pursuant to Article 2441, fourth paragraph, second period of the Italian Civil Code. The rationale for the capital increase is to enhance the Group’s financial flexibility to access the capital markets.