iesy Repository GmbH - Irish Stock Exchange

and North Rhine-Westphalia subscribe to Premiere, from whom we receive carriage fees for the transmission of
their premium cable television programs throughout our network.
• High speed Internet access. We provide high speed Internet services at speeds ranging from 128 kbit/s to 5
Mb/s. iesy’s products include iesy Multimedia-Anschluss, a service tailored for housing associations to enable
their properties for Internet access and to purchase Internet access at 128 kbit/s on a bulk basis. iesy internet 256 is
a 256 kbit/s flat-rate product designed to encourage Internet users to upgrade from dial-up access, while iesy
internet 2000 provides access at a higher speed of 2 Mb/s. ish’s products include ish flat at a speed of 256 kbit/s,
ish flat plus at 2 Mb/s and ish flat pro at 5 Mb/s. Due to the improved economics of upgrading our network
resulting from technological advances and lower equipment costs, we recently recommenced the upgrade of
certain parts of our network. Our upgraded network now passes over 1.5 million homes. This represents a 27.2%
increase of the number of upgraded homes in 2003. As of December 31, 2004, we served approximately 16,600
high speed Internet subscribers, and as of March 31, 2005, approximately 21,300 on a pro forma basis. We intend
to upgrade further parts of our network particularly in conjunction with new housing association contracts that
allow us to increase the number of customers to whom we can market our high speed Internet services.
• Telephony. We offer telephony services under the brand name “ish Zusammen” to subscribers in upgraded areas
in North Rhine-Westphalia in conjunction with high speed Internet access services. Our telephony offering
provides first-line quality of service, which is made possible by the investments in our network. The ability to offer
telephony services has led to increased take-up of high speed Internet services in this region. The ish Acquisition
will enable us to offer telephony services in the upgraded areas of Hesse as well. We intend to offer a similar
bundle of telephony and high speed Internet access in upgraded areas of Hesse as soon as possible following the
ish Acquisition.
Our Free Cash Flow
The combination of our strong EBITDA generation and our disciplined approach to capital investment has generated
substantial free cash flow.
We intend to maintain an efficient cost structure. Our primary costs consist of materials which are mainly network
infrastructure expenses (21.0% of our total revenues for the year ended December 31, 2004) and personnel expenses (15.7%
of our total revenues for the year ended December 31, 2004). We have streamlined and refocused our business on the relevant
basic cable television customer segments. Operating costs (comprised of costs of materials, personnel expenses, and other
operating expenses) were reduced from €323.2 million in 2003 to €319.6 million in the year ended December 31, 2004 on a
pro forma basis, a reduction of 1.1%.
Our capital expenditures in 2004 were €45.9 million and for the twelve months ended March 31, 2005, €47.4 million
on a pro forma basis, which includes expenditures for the recently completed upgrade of the network passing an additional
320,000 homes in Frankfurt, Bonn and Neuss. We intend to undertake future upgrades after careful consideration of the
customer demand for high speed Internet access services or in conjunction with long-term housing association contracts.
Our Adjusted EBITDA minus capital expenditures in 2004 was €216.3 million on a pro forma basis, or 38.6% of
revenues and €218.4 million on a pro forma basis, or 38.9% of revenues for the twelve months ended March 31, 2005. This
results in adjusted EBITDA minus capital expenditures per home passed of approximately €25.70 and €25.80 for the twelve
months ended March 31, 2004 and 2005, respectively. We are the leading Level 3 cable operator in Germany based on these
measures.
Our Markets
German Television Market
The German television market is the largest in Western Europe, with approximately 36.2 million television homes and
a combined cable, satellite and terrestrial penetration rate of approximately 92.6% (as a percentage of approximately 39.1
million households in Germany as of March 2004). According to industry sources, the German television market accounted
for approximately €12.0 billion of total public and private revenues in 2003.
The television signal distribution platforms in Germany include cable networks, satellite and terrestrial systems.
According to industry sources as of December 2004, approximately 19.4 million, or 53.5%, of German television homes use
cable as their primary means of reception. Satellite is used in approximately 15.5 million, or 42.7%, of television homes and
terrestrial transmission via antenna is used in approximately 1.4 million, or 3.8%, of television homes.
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