iesy Repository GmbH - Irish Stock Exchange

Level 3 network in new construction areas, customer connections, and own work capitalized, and include €1.0 million for the
upgrading of iesy’s network for an additional 67,000 homes in Frankfurt and Marburg.
In the future we expect that the upgrade of iesy’s network for high speed Internet services will increase iesy’s capital
expenditures. We estimate that iesy’s capital expenditures for the year ended December 31, 2005 will be approximately €14.0
million, taking into account both non-discretionary and discretionary spending. We expect that iesy’s repair and maintenance
expenditures (not accounted for in capital expenditures) will be approximately €3.0 million in 2005. See “Business—
Business of iesy—Products and Services” for a description of these new products.
The investments required for iesy’s high speed Internet services are modular, so investments can be allocated in ways
which are based on customer demand. iesy has partially included in its capital expenditures budget upgrades of Level 4 or inhouse
networks for its high speed Internet services. iesy has also assumed that a number of homes are already upgraded and
that further upgrades will be undertaken by housing associations, professional Level 4 operators and iesy in connection with
new contracts. If these assumptions are incorrect, we may need to make additional expenditures in order to upgrade the Level
4 and in-house networks for iesy’s high speed Internet users. In addition, we may decide to accelerate the upgrade of our
network depending upon our competitive position, which could increase our level of capital expenditures significantly.
We believe that, because of significant additional digital capacity available on iesy’s network, we will be able to
undertake iesy’s planned expansion of its premium cable television services without major additional capital expenditures. In
addition, capital expenditures requirements for premium cable television services are limited because we currently rely on
third party providers who have established infrastructures. For example, iesy does not, as a result of its service agreement
with MSG, provide its own technical services in relation to the digital playout facility for premium cable television, and
therefore iesy does not provide for capital expenditures for such facilities. However, most of the agreements concluded with
MSG with respect to such services have been terminated or have expired and are currently being renegotiated, and iesy may
be required to make certain capital expenditures in order to provide for its own or third party facility. Following the ish
Acquisition, we intend to rely on ish’s NOC in Kerpen if renegotiations are not successful and we do not continue to receive
these services from MSG. Recently MSG notified us of its intention to terminate certain services relating to the distribution
of iesy’s own premium cable television programming. The incremental capital expenditures required to connect to ish’s NOC
in Kerpen are not expected to be material. See “Business—Business of iesy—Supply—Other Significant Supply
Agreements” and “Risk Factors—Risks Relating to Our Business—We rely on MSG, a subsidiary of KDG, for the provision
of certain playout services and because of changes in our relationship with MSG, our premium cable television services could
be disrupted or may lead to higher costs. Existing contracts of MSG with third parties, especially Premiere, as well as our
current agreements with MSG could adversely affect the development of our digital strategy” for a further description of the
arrangement with MSG.
The total level of capital expenditures will depend, among other things, upon iesy’s success in attracting new
customers, including housing association contracts, the competitive and regulatory environment, and whether unexpected
network problems develop. In the future, other products may require significant capital expenditures if they require new
technologies or if new technologies are needed to improve iesy’s competitive position. In addition, iesy’s business requires
capital expenditures on a continuing basis for various purposes, including the maintenance of iesy’s network, investing in
new customer acquisitions, and offering new services. However, iesy does not currently believe that major capital projects
are required to maintain iesy’s network, other than the capital expenditures described above. See “Risk Factors—Risks
Relating to Our Business—Our assumptions about the low cost of upgrading selected parts of our network to provide basic
Internet services may be inaccurate. Failure to maintain our cable television network or make other network improvements
could have a material adverse effect on our operations and impair our financial condition.”
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