5 years ago

iesy Repository GmbH - Irish Stock Exchange

iesy Repository GmbH - Irish Stock Exchange

segment by an average of

segment by an average of 31.1% and decreased installation fees for all subscribers. iesy experienced increased churn following each of these price increases. See “—Factors Affecting Our Results of Operations—Subscribers.” Due to the 2004 price increase, we have experienced some additional churn in early 2005 as subscribers with annual contracts renew such contracts for the first time since our 2004 price increase. See “Risk Factors—Risks Relating to Our Business—Customer churn, or the threat of customer churn, may adversely affect our business.” Historically, as part of iesy’s pricing arrangements with customers, iesy offers several discounts to the standard rate card. For example: • For all customers, iesy offers a standard 5% discount to those who prepay the monthly subscription fees on an annual basis. • For iesy’s residential customers, it offers a discount if they subscribed prior to 1991. The pre-1991 discount of approximately 8% reflects the subsidy paid by these customers related to the original installation of the Level 4 cable network. • For certain housing associations, iesy has offered additional discounts if they agreed to enter into multi-year agreements with iesy. • For certain professional Level 4 operators, iesy has, historically, offered additional discounts. These discounts combined with the network element-based costing in iesy’s standard rate card create incentives for these operators to lower their rates by clustering subscribers behind individual connection points. We are seeking to adjust several discounts and other pricing related anomalies. For example, we expect the discount for residential subscribers who subscribed before 1991 will be eliminated over time as these subscribers sign new contracts with iesy or receive new products, eventually leading to a single tariff scheme for all single dwelling unit subscribers. In addition, iesy seeks to address the significantly lower ARPU generated by the professional Level 4 customers as compared to iesy’s other subscriber segments. In particular, iesy has allowed its contracts with BN and EWT to expire, resulting in some of their subscribers being disconnected from iesy’s network, while the remaining BN and EWT subscribers became subject to iesy’s standard rate card. Because the ARPU for a large professional Level 4 operator such as BN and EWT tends to be comparatively low, the revenue impact of such subscriber losses is not as significant as it would be for other customers and may be significantly offset by the reduced discount on the remaining subscribers. Accordingly, the average revenue per subscriber generated by the remaining BN and EWT subscribers is higher because they are now subject to iesy’s standard rate card. See “—Factors affecting our results of operations—Subscribers” and “—Factors Affecting Our Results of Operations— ARPU.” For more information on our pricing and customer segments, see “Business—Business of iesy—Products and Services.” iesy’s pricing is currently subject to regulatory review by RegTP. As a result of the new regulatory regime implementing the recently introduced EU’s “New Framework,” we could become subject to more regulation in the future. See “Risk Factors—Risks Relating to Regulatory and Legislative Matters—We do not have complete control over the prices that we charge to broadcasters and customers, including Level 4 operators, and this may adversely affect our future cash flows and profitability” and “Regulation.” We believe that iesy will maintain its market share in basic cable by continuing to focus its sales and marketing activities on specific market segments, to implement customer retention programs to reduce customer churn, and to put in place more stringent detection measures to ensure that only paying subscribers have access to iesy’s network. iesy also believes the introduction of new premium cable television and high speed Internet products and services will complement its basic cable offering and help retain subscribers. See “Risk Factors—Risks Relating to Our Business—We operate in competitive industries, and competitive pressures could have a material adverse effect on our business” and “—If we fail to introduce new or enhanced products or services successfully, our revenues and margins could be lower than expected.” Carriage Fees iesy receives carriage fees from national, regional and local broadcasters for the distribution of their programs over its network. Carriage fees amounted to €1.9 million (5.7%) of total revenues for the three months ended March 31, 2005, and €8.0 million (5.9%) of the total revenues for the year ended December 31, 2004. Carriage fees are paid by broadcasters in order to reach the maximum number of viewers. At the same time, iesy depends on the provision of programs by these broadcasters in order to attract subscribers to its network. In general, carriage fees are charged based on analog reach. For a significant part of iesy’s analog programming, iesy does not have direct contracts with broadcasters but relies on nationwide carriage agreements concluded between broadcasters and DTAG, its predecessors or subsidiaries, as the case may be. For these contracts, carriage fees are billed by MSG and are based upon a 80

egulated pricing model. Fees are payable based upon the aggregate number of analog subscribers reached by ish, KBW, KDG and iesy. MSG then allocates such carriage fees to iesy and the other Level 3 operators in proportion to their analog subscribers. DTAG has recently terminated some of the nationwide feed-in contracts with broadcasters to which DTAG is still a contracting party to the end of 2005 and has announced it will terminate others by the end of 2006. In case of such termination, iesy will need to renegotiate its own feed-in contracts with these broadcasters and will no longer depend on MSG for the administration of these contracts. iesy also receives carriage fees directly from the public broadcasters ARD and ZDF, for transmission of their analog and digital programming pursuant to a transition agreement, which provides for an aggregate flat fee payable to all Level 3 operators. iesy’s share of this fee is allocated based on the number of subscribers and paid by the public broadcasters to iesy on a quarterly basis. See “Risk Factors—Risks Relating to Our Business—We do not have guaranteed access to programs and are dependent on agreements with third parties for our content and carriage fees, which may adversely affect our business” and “Business—Business of iesy—Products and Services—Basic cable television—iesy’s basic cable carriage fees.” Premium Cable Television Sales iesy’s premium cable business generates sales primarily through subscription fees. iesy’s premium cable business also generates revenues through carriage fees paid primarily by Premiere to us via MSG. See “—Other revenues.” iesy’s premium cable television products consist of a variety of foreign language and English language program packages compiled, marketed and sold by iesy, which were introduced in October 2003 and October 2004, respectively. iesy had approximately 9,600 foreign language program subscribers as of December 31, 2004, of which approximately half subscribed to Turkish language programs. iesy offers its premium cable television programs for an additional monthly fee on top of the existing subscription fee. Subscription fees for iesy’s premium cable television products generated €0.2 million, or 0.6%, of its revenues for the three months ended March 31, 2005, and €0.6 million, or 0.4% of its revenues for the year ended December 31, 2004. In general, iesy has avoided long-term content agreements with minimum subscriber number guarantees. However, it will not always be possible to avoid entering into program agreements without guaranteeing certain minimum revenues or subscriber levels. We plan to introduce additional premium cable television services. Following the ish Acquisition, we plan to introduce the ish premium cable television offerings in Hesse. We expect iesy’s operating expenditures to increase as part of introducing premium cable television services. Wherever possible, iesy’s operating expenditures will be made on an incremental basis linked to incremental revenues to cover these expenditures. See “Risk Factors— Risks Relating to Our Business—We do not have guaranteed access to programs and are dependent on agreements with third parties for our content and carriage fees, which may adversely affect our business.” In addition, we do not and do not in the future intend to specify set-top boxes, relying instead on cooperation between manufacturers and retailers to set specifications for such boxes to the market. iesy may, however, in the future acquire and then resell set-top boxes that are available in the market. High Speed Internet Sales iesy’s high speed Internet business generates sales primarily through subscription fees. iesy currently has three high speed Internet products: “iesy internet 256,” a lower speed product intended for Internet users trading up from dial-up access; “iesy internet 2000,” its higher-end product designed to compete with other high speed Internet providers; and “iesy Multimedia-Anschluss,” a product for housing associations. As of March 31, 2005, iesy served approximately 2,300 high speed Internet subscribers, and as of December 31, 2004, approximately 600 such subscribers. iesy’s high speed Internet business generated €0.1 million, or (0.3%) of its revenues for the three months ended March 31, 2005, and €0.1 million (0.1%) of its revenues for the year ended December 31, 2004. Going forward, iesy expects to derive additional subscription fees from increased subscriptions for iesy’s high speed Internet products. iesy intends to selectively upgrade its network, including in conjunction with new housing association contracts, to a 630-Mhz bi-directional capability. In November 2004, iesy entered into a contract with GeWoBau Marburg under which iesy has upgraded the existing Level 4 in-house wiring for approximately 2,600 connected homes to offer its iesy Multimedia-Anschluss product. In order to fulfill these obligations, iesy also has upgraded the Level 3 network in the city of Marburg. In addition to the monthly fees iesy will receive under this contract for each connected home, iesy has the right to sell its premium cable television and high speed Internet products to all residents of the GeWoBau Marburg housing association. In March 2005, iesy entered into a contract with Viterra, a large housing association in Hesse, under which iesy will upgrade Viterra’s Level 4 network. iesy upgraded its network for approximately an additional 67,000 homes in Frankfurt and Marburg during the three months ended March 31, 2005 and as of March 31, 2005, iesy’s upgraded network passed a 81

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    PROSPECTUS iesy Repository GmbH €

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    the market price of the Notes at a

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    which the issue or the offer of sec

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    “combined entity”, and “we”

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    “Tele Columbus” refers to the c

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    Revenue generating units, or “RGU

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    end of 2005. Our subscribers can al

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    populations, with approximately 2.7

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    In April/May 2005, iesy entered int

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    Our Corporate and Financing Structu

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    THE OFFERING The summary below desc

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    Optional Redemption We may redeem a

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  • Page 29 and 30: iesy Other Financial Data (unaudite
  • Page 31 and 32: iesy Operational Data (unaudited) R
  • Page 33 and 34: ish Income Statement Data Audited y
  • Page 35 and 36: 35 Three months ended Year ended De
  • Page 37 and 38: 37 As of December 31, As of March 3
  • Page 39 and 40: RISK FACTORS You should carefully c
  • Page 41 and 42: acquiring content, purchasing servi
  • Page 43 and 44: agreements—MSG”). We cannot ass
  • Page 45 and 46: In addition, most of our cable netw
  • Page 47 and 48: Strikes or other industrial actions
  • Page 49 and 50: acquisitions. In addition, any addi
  • Page 51 and 52: provision and may not be abusive. S
  • Page 53 and 54: €1,050.0 million would have been
  • Page 55 and 56: We depend on payments from our subs
  • Page 57 and 58: • Claims against the Issuer and s
  • Page 59 and 60: Senior Credit Facilities before the
  • Page 61 and 62: court rulings did not address the p
  • Page 63 and 64: THE ISH ACQUISITION The description
  • Page 65 and 66: In addition to the warranties, spec
  • Page 67 and 68: CAPITALIZATION The following table
  • Page 69 and 70: Unaudited Pro Forma Condensed Conso
  • Page 73 and 74: (€m, except percentages) Pro form
  • Page 75 and 76: Income Statement Data 75 Audited Ye
  • Page 77 and 78: (7) Number of subscribers at the en
  • Page 79: • iesy’s premium cable televisi
  • Page 83 and 84: Risks Relating to Our Indebtedness
  • Page 85 and 86: Legal, Consulting and Management Fe
  • Page 87 and 88: Subscribers iesy classifies its cus
  • Page 89 and 90: 2003 to €8.20 per subscriber in t
  • Page 91 and 92: • the senior credit facilities we
  • Page 93 and 94: average installation fees from July
  • Page 95 and 96: Cash flow from investing activities
  • Page 97 and 98: In the three months ended March 31,
  • Page 99 and 100: eview and optimization of services
  • Page 101 and 102: Cash Flow from Operating Activities
  • Page 103 and 104: oadcasters in television and radio.
  • Page 105 and 106: educed or increased by a material a
  • Page 107 and 108: Income Statement Data Audited year
  • Page 109 and 110: 109 As of December 31, As of March
  • Page 111 and 112: • ish’s premium cable televisio
  • Page 113 and 114: In addition, ish markets pay-per-vi
  • Page 115 and 116: Cost of Materials and Services Cost
  • Page 117 and 118: For accounting purposes, ish treats
  • Page 119 and 120: Subscribers ish classifies its cust
  • Page 121 and 122: Competition ish faces significant c
  • Page 123 and 124: This decrease was primarily due to
  • Page 125 and 126: Net Loss Net loss was €17.9 milli
  • Page 127 and 128: Pension Obligations As of March 31,
  • Page 129 and 130: Term Sheets with DTAG, BRN-ish agre
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    estructuring liabilities, while 200

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    accrual for pending losses. The exp

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    International Financial Reporting S

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    Content Providers Basic Television

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    Digital Home” and PrimaCom offers

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    [GRAPHIC] [GRAPHIC] Level 4 is the

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    shared access basis. In this case,

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    The following table shows several k

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    In the domestic market, the German

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    BUSINESS Unless otherwise indicated

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    Germany, with approximately 30.2 mi

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    Prudently deploying capital. Our de

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    iesy’s Current Basic Cable Televi

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    amounted to €8.0 million or 5.9%

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    within iesy’s upgraded areas and

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    Supply The following chart shows th

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    Term Sheet Service Duration Offer o

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    y the new fiber system. See “Oper

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    part of settling arbitration procee

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    Business of ish Products and Servic

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    ish’s Current Basic Cable Televis

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    In addition to the monthly subscrip

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    Customers who subscribe to Premiere

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    Sales ish’s sales team is divided

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    The following chart illustrates ish

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    Term Sheet Service Duration Co-use

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    Lease of space for broadband cable

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    Other Significant Supply Agreements

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    ights themselves. As an exception,

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    Competition The cable television an

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    Introduction REGULATION German law

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    We assume that we will be deemed to

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    The Amendment provides that provisi

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    • Providers who had a dominant po

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    in the Munich office of Apax Partne

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    Marketing for Germany and Austria,

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    Gerard Tyler is ish’s Treasurer.

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    Beneficial Ownership The following

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    period (unless the interest period

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    Subordinated Bridge Facility In con

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    • the ability of the Obligors (ot

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    owed by the Insolvent Obligor will

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    in London, the Bank of New York, Ne

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    Issuer have agreed that iesy Hessen

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    Subsidiary Guarantor outstanding wh

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    the amount of their secured claim.

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    provisions described under “—De

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    In addition, the Intercreditor Agre

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    Euro Note to and including February

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    circumstances referred to above exi

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    that it has unconditionally exercis

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    time outstanding not exceeding (i)

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    description of this covenant and no

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    Date of any Indebtedness that has b

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    (13) Investments in an aggregate am

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    supplement or other modification) t

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    (1) the assumption by the transfere

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    Reports Whether or not required by

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    of the European Union on January 1,

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    contemporaneously with any such act

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    25% in principal amount of the outs

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    (2) provide for the assumption by a

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    (6) an Officer’s Certificate stat

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    calculated based on the relevant cu

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    “Bank Indebtedness” means any a

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    Consolidated Net Income (excluding

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    (9) the impact of capitalized inter

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    “Exchange Act” means the U.S. S

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    (iii) for the avoidance of doubt, a

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    “Nationally Recognized Statistica

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    (2) Investments in another Person i

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    (15) Permitted Collateral Liens; (1

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    (5) in the case of Apollo and Golde

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    service level agreement as replaced

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    “Unrestricted Subsidiary” means

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    The Issuer and the Trustee and thei

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    Secondary Market Trading The Book-E

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    to trade tax. The taxable gain from

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    date). A U.S. Holder’s adjusted t

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    (c) for so long as the Notes are el

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    LEGAL MATTERS Certain legal matters

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    Assets iesy Hessen GmbH & Co. KG, W

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    I. Application of Legal Provisions

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    III. Explanation of Balance Sheet a

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    Last year’s extraordinary expense

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    iesy Repository GmbH, Hamburg AMEND

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    and remaining useful life for the i

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    The movements in consolidated equit

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    iesy Repository GmbH, Hamburg AMEND

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    Assets iesy Repository GmbH, Hambur

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    I. Basis of Presentation The consol

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    V. Explanations to Material Items o

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    Network infrastructure, rental, lea

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    iesy Repository GmbH, Hamburg UNAUD

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    1. Basis of Presentation iesy Repos

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    5. Explanations to Material Items o

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    Shareholdings of iesy Repository Gm

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    iesy Hessen GmbH & Co. KG, Weiterst

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    (3) Accounting and Valuation Princi

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    The following auditors’ report (B

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    Depreciation and Amortization COURT

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    Cost of materials COURTESY TRANSLAT

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    Goodwill. Under German GAAP, the di

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    Under U.S. GAAP, loan origination f

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    IFRS requires a purchase price allo

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    financial liability incurred result

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    €235,000,000 10 1 /8% Senior Note

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