iesy Repository GmbH - Irish Stock Exchange

total of approximately 217,000 homes in Frankfurt and Marburg. See “—Recent Developments” and “Risk Factors—Risks
Relating to Our Business—If we fail to introduce new or enhanced products and services successfully, our revenues and
margins could be lower than expected.”
Other Revenues
Other revenues primarily consists of own work capitalized, premium cable television program carriage fees and prior
period income, such as the release of accruals and allowances. iesy has historically recognized a fairly significant amount of
other revenues. We believe this item will decline over time. For the three months ended March 31, 2005, other revenues were
€1.2 million (3.7%) of iesy’s total revenues, and €6.7 million (4.9%) of its total revenues for the year ended December 31,
2004.
Own Work Capitalized
Own work capitalized reflects that portion of personnel costs which is directly attributable to the planning and
construction of projects related to the extension of iesy’s network. Under German GAAP, these costs are also reflected in
iesy’s revenues to the extent capitalized. If and to the extent iesy’s expansion activities (and hence capitalized costs) increase,
the contribution from own work capitalized to revenues will also increase. Own work capitalized were €0.5 million, or 1.5%
of iesy’s total revenues for the three months ended March 31, 2005, and €1.3 million, or 1.0% of its total revenues for the
year ended December 31, 2004.
Other Operating Income
Other operating income primarily consists of prior period income such as releases of accruals and allowances, as well
as premium cable television carriage fees. It includes premium cable television program carriage fees, which relate primarily
to fees paid by Premiere to iesy via MSG. The fees derived by iesy from this arrangement include a fixed carriage fee
component for each premium cable television channel made available to Premiere, plus a variable fee based upon Premiere’s
revenues generated from its subscribers served by iesy’s network. This calculation is performed by MSG on a national basis
and revenues are then allocated to each of the Level 3 operators based upon the number of their digitally reachable
subscribers. iesy does not receive carriage fees from broadcasters for its foreign and English language program packages but
instead pays programming fees for access to such content to either Mediapool Content Services GmbH (“Mediapool”), a
program provider who acquires content on iesy’s behalf, or to the broadcasters from whom iesy acquires content directly.
Premium cable television program carriage fees generated €0.5 million, or 1.5% of iesy’s total revenues for the three months
ended March 31, 2005, and €1.9 million, or 1.4% of iesy’s total revenues for the year ended December 31, 2004. See “—
Other operating expenses—Costs relating to premium cable television programming” and “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.”
Other operating income for the three months ended March 31, 2005 was €0.8 million, or 2.4% of iesy’s total revenues,
and for the year ended December 31, 2004 was €5.4 million, or 4.0%, of iesy’s total revenues.
Cost of Materials and Services
Cost of materials consists of cost of raw materials and consumables, and cost of purchased services. The former is
comprised mainly of repairs and maintenance costs, and the latter of network infrastructure services costs, which include
costs under SLAs and the BRN-iesy agreement with DTAG and other agreements, and customer care, billing and network
systems. Repair and maintenance costs will be affected by the development of new products and services and, dependent
upon the success of the rollout, may increase.
iesy’s most significant costs include payments under SLAs and the BRN-iesy agreement with DTAG for the use of
assets which are shared between iesy’s network and that of DTAG, and which are owned by DTAG, and for services
provided by DTAG. These assets include underground ducts used to house DTAG’s telephony network and iesy’s cable
television network; facilities which house DTAG’s telephony switches and iesy’s cable television headends; tower space
used to house iesy’s transmission devices; rental space housing iesy’s microwave equipment used to transmit cable television
signals; electricity supplied to shared facilities; and fiber optic systems used to transmit iesy’s cable television signals. For a
description of the SLAs, see “Business—Business of iesy—Supply—SLAs with DTAG.”
If DTAG terminates any of these SLAs or the BRN-iesy agreement, iesy would be required to obtain replacement
facilities, which could be difficult and could be more expensive. See “Risk Factors—Risks Relating to Our Business—We
rely on DTAG and certain of its affiliates for a significant part of our network. Any disruption or termination of our
arrangements with DTAG would materially and adversely affect our business and results of operations.” For accounting
purposes, iesy treats the SLAs as operating leases and hence expense payments made under the SLAs. See “Risk Factors—
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