iesy Repository GmbH - Irish Stock Exchange

Legal, Consulting and Management Fees
iesy incurred legal and consulting fees as part of operating its business and conducting strategic reviews, as well as
transactions such as the ish Acquisition, the Financing and the Refinancing. In addition Apollo may be entitled to strategic
advisory fees in connection with certain transactions. Following the completion of the ish Acquisition, Apollo received a
€12.7 million strategic advisory fee. Upon completion of the ish Acquisition, Apollo agreed to waive its right to receive
management fees pursuant to the management services agreement. See “Certain Relationship and Related Party
Transactions—Management services agreement.” For the three months ended March 31, 2005, iesy incurred €0.3 million in
legal and consulting fees, and €0.5 million in strategic advisory fees, and for the year ended December 31, 2004, iesy
incurred legal and consulting fees of €4.3 million (including €3.0 million on refinancing and acquisition related advisory
fees), and management and strategic advisory fees of €5.8 million.
Bad Debt Expenses
Bad debt expenses were €0.2 million for the three months ended March 31, 2005, and €1.8 million for the year ended
December 31, 2004. For more information see “—Trade receivables and bad debt.”
Taxes on Income
iesy’s effective tax rate is positively affected by the deferred tax assets relating to our prior tax losses. Recently, an
increase in iesy’s profits has increased its effective tax rate.
Following completion of the ish Acquisition, iesy intends to create tax groups (Organschaften) with ish and certain
other subsidiaries. As a result, the combined entity will not be able to use the tax loss carry forwards to offset taxes while
such Organschaften exist (other than existing loss carry-forwards of iesy Hessen). See the “The ish Acquisition—Potential
Post-Acquisition Reorganization.”
iesy has written up its customer base in the financial statements of iesy Hessen for the year ended December 31, 2004.
The total amount of this write-up was €152.8 million and, accordingly, its effect on its balance sheet was a taxable gain
which resulted in incremental taxes payable of €1.4 million.
Losses
iesy has a history of losses, although in the year ended December 31, 2004 iesy reported a net profit. During the three
months ended March 31, 2005, iesy recognized a taxable loss and therefore accrued no tax liabilities during this period. iesy
expects to incur net losses in the future due to the Financing and the ish Acquisition. A substantial portion of these losses are
expected to consist of depreciation and amortization expense, which does not directly impact iesy’s cash flow, interest
expense and extraordinary items, which are mainly one-time in nature and directly related to finance and advisory fees.
Capital Expenditures
iesy’s capital expenditures relate primarily to extending or upgrading its network. Capital expenditures also include
intangible assets (except iesy’s customer list) and do not include financial assets. In addition, iesy incurs a limited amount of
expenditures required to sustain its current network which iesy accounts for as repair and maintenance expenditures within
raw materials and consumables on its income statement. Repair and maintenance expenditures were €2.6 million in the year
ended December 31, 2004, and €0.6 million in the three months ended March 31, 2005. Capital expenditures were €6.7
million for the year ended December 31, 2004 and were €2.8 million in the three months ended March 31, 2005. These
amounts correspond to 4.9% and 8.4% of total revenues for each of these respective periods.
iesy focuses on maximizing cash flows from existing assets and engages in limited network upgrades on a selective
basis. iesy has a high quality, well-engineered network in which the vast majority of the cable plant is below the ground (and
as such is subject to fewer breakdowns caused by external elements). In addition, iesy believes its network ownership
structure contributes to lower capital maintenance and operating expenses for infrastructure. DTAG generally has a
responsibility to maintain and invest in network infrastructure leased to iesy, and professional Level 4 operators and housing
associations generally maintain their own networks. For that reason, a significant part of the network infrastructure is
maintained by other parties. Incremental capital expenditures such as the upgrade of the Level 4 or in-house network or the
introduction of a new product are designed to ensure that iesy’s return on investment thresholds are met.
Capital expenditures for the year ended December 31, 2004 include approximately €1.3 million for the upgrading of
iesy’s network for an additional 120,000 homes in Frankfurt. It also includes €0.6 million for the acquisition of small Level 4
operators. Capital expenditures during the three months ended March 31, 2005 relate primarily to the development of iesy’s
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