(Translation from the Italian original which remains the definitive version) e.biscom S.p.A Third Quarter Report

Transcription

1 (Translation from the Italian original which remains the definitive version) e.biscom S.p.A.

2 Contents Company officers 4 Letter to the shareholders 5 e.biscom S.p.A. - 8 e.biscom S.p.A. - Parent company financial schedules 8 e.biscom S.p.A. Explanatory notes to the parent company financial schedules Accounting policies Key factors influencing the company's third quarter performance Revenues More significant income items contributing to the result for the period Net financial position at 30 September Outlook 13 e.biscom group - Consolidated financial schedules 14 e.biscom group Explanatory notes to the consolidated financial schedules Accounting policies Key factors influencing the group's third quarter performance Telecommunications Media & Business to consumer (B2C) Business to business (B2B) Principal investments in associated companies Revenues Telecommunications - FastWeb group Telecommunications - HanseNet Media & B2C B2B More significant income items contributing to the result for the period Net financial position at 30 September Outlook 24 Appendix 1: Information on the group's subsidiaries and associated companies at 30 September Appendix 2: Structure of e.biscom group at 30 September

3 Company officers Board of directors Francesco Micheli Chairman Legal representative Silvio Scaglia Ugo Rietmann Mario Greco Guido Martinotti Deputy chairman and managing director Director Director Director Legal representative in the absence or inability of the chairman to represent the company and powers for the ordinary management of the company The term of office of the board of directors expires upon approval of the financial statements as at and for the year ending 31 December General director Barbara Poggiali Board of statutory auditors Giuseppe Deiure Francesco Fenghi Giorgio Oggioni Vieri Chimenti Pierluigi Galbussera Chairman Statutory auditor Statutory auditor Substitute statutory auditor Substitute statutory auditor The term of office of the board of statutory auditors expires upon approval of the financial statements as at and for the year ending 31 December Auditors KPMG S.p.A. 4

4 Letter to the shareholders Dear Shareholders, for the third quarter 2001 the Group showed consolidated revenues of 36.7 million Euro, driven by a continued strong demand for FastWeb s integrated telecommunications offer in Italy. e.biscom revenues rose 23% in the third quarter, up from 29.8 million Euro from the second quarter. For the first nine-months, revenues rose to 93.7 million Euro. The bank financing secured by FastWeb Group, in these difficult times, is a further indication of the credibility of the business model promoted by e.biscom and is confirmed by the progressive closing in on the year-end targets. Revenues from FastWeb SpA, the group s Italian broadband telecommunications unit, rose to 18.7 million Euro in the third quarter, more than the sum of the previous two quarters combined, with corporate clients continuing to account for a bulk of the revenue growth. The gross margin for the third quarter stood at around 70%, maintaining its position as one of the highest in the sector. Client numbers rose more than 55% to 22,700 as of 30 September 2001 compared to the end of the second quarter. The number of homes passed increased by 56% in the third quarter compared to the second quarter, totaling some 226,300. FastWeb activated its first clients in Rome in September. Italy s largest city joins the list of others that already have clients enjoying FastWeb s innovative telecom service, namely Milan and surrounding areas, Turin and Genoa. Work on building the metropolitan area network has already begun in Naples, Bologna and Reggio Emilia where FastWeb s integrated telecom service will be introduced in a few months. The cities receiving FastWeb s service after Milan are showing a similar rapid pace of growth. At the end of September, FastWeb s network reached all of Milan s businesses and over one third of the city s homes and SOHOs. This puts the telecommunications carrier right on target to offer its service to the entire city of Milan by next year. In terms of market penetration, FastWeb has reached an overall market share of nearly 10%, with peaks of over 20% in the areas of Milan which first received access to its fast Internet, video and telephone services only a year ago. FastWeb has also recently closed a financing deal with Italian commercial banks for the amount of over 950 million Euro, making it one of the few telecom operators able to obtain funding in current market conditions. Through the financing, FastWeb s execution of the roll-out plan, focused on Italy s largest, most-densely concentrated urban centres, is fully-funded. Following an agreement signed in July, FastWeb has been given the right to use the Telecom Italia Group s Socrate Duct Network to offer its services to clients in Italy. The agreement became fullybinding only this month when Telecom Italia maintained its controlling stake in Cecchi Gori Communications. Use of the Socrate network will greatly accelerate the roll-out and immediately increase FastWeb s potential market. Having secured the duct network will significantly lower the company s execution risk and reduce investment costs relative to client connections and network expansion. As of the end of September, the part of the Socrate network already being used by FastWeb, granted under auspices of the above-mentioned accord, has reached a potential 150,000 customers. 5

5 In late October, after the end of the third quarter, FastWeb closed an important agreement with Vivendi s TELE+, Italy s first pay TV, to offer their sports and film content over the telecom operator s fibre optic network. The agreement, which complements a similar deal struck with Italy s other satellite TV operator Stream, allows FastWeb users to enjoy access to Italy s most important football matches, the country s most popular past time. Like the agreement with Stream, TELE+ pays FastWeb for access to its client base on a revenue-sharing basis. HanseNet Telekommunikation GmbH, the alternative facilities-based carrier in the Hamburg area, posted 13.5 million Euro in revenues for the third quarter this year. Coherent with its strategy to achieve a higher-quality revenue mix, HanseNet posted a gross profit of 7.7 million Euro in the third quarter, up from 7.3 million Euro in the second quarter, or as a percentage of revenues 57% compared to 46%, respectively. HanseNet s revenues grew to 45.6 million Euro for the nine months, up 68% on the same period a year ago. The total number of German clients rose over 30% in the third quarter to 31,500 compared to the second quarter of this year. The overall e.biscom network has grown as the roll-out continues. The total network in Italy and Germany has grown to 6,560 Km (including segments of the Socrate network) of which over 4,200 Km are local access in the main cities. On the content side during the third quarter, e.bismedia, the content producing and packaging unit of e.biscom, sealed two important deals with Dreamworks for premier films and the British Broadcasting Corporation (BBC) for children s entertainment. These will be added to the list of other important content partners, such as Universal Studios, the Discovery Channel and the Italian state broadcaster RAI, which have already signed deals with e.bismedia. More recently, e.bismedia agreed to purchase a controlling stake in the Rome-based publishing house Editing SpA. This joining of forces between two important content providers will enable e.bismedia to sell a full content package, both printed and video services, to third parties on a tailor-made basis. This demonstrates a widening of the customer target from only the final consumer, up until now, to other media enterprises and publishing houses which may require e.bismedia s original content and multimedia skills to meet their specific needs. Also, e.bismedia has launched, together with Mondadori Informatica, the multimedia unit of the Italian publishing house Mondadori SpA, the Academy 365 project for e-learning. Academy 365 offers companies, professionals and university students the opportunity to take a variety of courses using the Internet so that physical distance is no longer a barrier to professional training. In the B2B area, B2Biscom has enriched its own portal, e.bixtrade, with a current offering of over 31,000 products compared to 20,000 at the end of the second quarter and has begun generating revenues from its first completed transactions. In the third quarter, B2Biscom closed an important agreement with Compagnia delle Opere, Italy s small- and medium-sized business association, to provide e-commerce services to over 17,000 companies. Just last month, B2Biscom signed an accord with Ancitel, the service association of Italian city governments, to create an electronic auction platform that enables local governments to buy goods and services at competitive prices. The platform will host its first transactions in November this year. Also in October, B2Biscom closed an agreement with MPSnet, the electronic services unit of Monte dei Paschi di Siena SpA (Italy s sixth largest bank), to create digital marketplaces together on behalf of the Tuscany-based institution s clients. 6

6 e.biscom s consolidated EBITDA loss for the third quarter (Earnings before Interest, Tax, Depreciation and Amortisation) stood at 29.6 million Euro, an improvement on Group s internal budget. As a percentage of revenues, however, EBITDA improved from a negative 305% in the third quarter 2000 to a negative 81% in the third three-month period of this year. The net consolidated loss amounted to 59.4 million Euro in the third quarter of this year. Consolidated capital expenditure amounted to million Euro for the third quarter of the year. Total investments made, thus far, are in-line with e.biscom s internal budgets. e.biscom s balance sheet posted a consolidated positive cash position of more than 1.04 billion Euro, which distinguishes the company from its competitors in the sector. The net financial position stood at million Euro at the end of the nine-month period. Total headcount for the group was 1,450, increasing nearly 3 fold, from 490 people at the end of September The development of the Group activities is in line with the business plan approved and described during the course of the year. The markets reception, both business and residential, continues to confirm the credibility of the Group s project, strengthened furthermore by the conclusion of the financing operation described above. e.biscom S.p.A. Chairman Managing Director Francesco Micheli Silvio Scaglia 7

7 e.biscom S.p.A. - e.biscom S.p.A. - Parent company financial schedules e.biscom - Balance sheet as at 30 September 2001 (thousands of Euro) 31 December 30 September 30 June Variation (a) (b) (a) - (b) Assets 491,946 Fixed assets 650, ,031 75,919 1,149,992 Current assets 990,457 1,080,218 (89,761) 1,126,825 of which liquid funds and short term financial assets 952,271 1,042,227 (89,956) 2,717 Accrued income and prepaid expenses ,644,655 Total assets 1,641,546 1,655,315 (13,769) Liabilities 1,691,417 Share capital and reserves 1,636,251 1,636,251 0 (55,166) Net income (loss) for the period/year (697) 14,387 (15,084) 1,636,251 Total shareholders' equity 1,635,554 1,650,638 (15,084) 492 Reserves for risks and charges Employees' leaving entitlement ,775 Payables 5,417 4,113 1,304 7,775 due within one year 5,417 4,113 1,304 8,404 Total liabilities 5,992 4,677 1,315 1,644,655 Total liabilities and shareholders' equity 1,641,546 1,655,315 (13,769) 1,126,825 Liquid funds and short term financial assets 952,271 1,042,227 (89,956) (215) Short term debt ,126,610 Net financial position 952,271 1,042,227 (89,956) 8

8 e.biscom S.p.A. - Income statement for the three months ended 30 September 2001 (thousands of Euro) 3rd quarter 3rd quarter Variation ( ) Operating revenues 1, ,490 Other positive income statement components 498 1,341 (843) Total revenues 1,988 1, Operating expenses (4,285) (3,959) (326) Gross operating margin (EBITDA) (2,297) (2,618) 321 Amortisation, depreciation and provisions (449) (600) 151 Operating result (EBIT) (2,746) (3,218) 472 Net financial income and charges (10,190) 19,047 (29,237) Extraordinary charges (2) (21,203) 21,201 Adjustments to the carrying value of financial assets (2,146) 0 (2,146) Net income (loss) for the period before taxation (15,084) (5,374) (9,710) 9

9 e.biscom S.p.A. - Income statement for the nine months from 1 January to 30 September 2001 (thousands of Euro) 9 months 9 months Variation from 1 January from 1 January to 30 September to 30 September ( ) Operating revenues 4, ,584 Other positive income statement components 4,263 4,266 (3) Total revenues 8,847 4,266 4,581 Operating expenses (16,705) (8,726) (7,979) Gross operating margin (EBITDA) (7,858) (4,460) (3,398) Amortisation, depreciation and provisions (1,253) (881) (372) Operating result (EBIT) (9,111) (5,341) (3,770) Net financial income and charges 28,066 34,247 (6,181) Extraordinary charges (2) (63,991) 63,989 Adjustments to the carrying value of financial assets (19,650) 0 (19,650) Net income (loss) for the period before taxation (697) (35,085) 34,388 10

10 e.biscom S.p.A. Explanatory notes to the parent company financial schedules 1. Accounting policies The accounting policies used to prepare the 2001 third quarter financial schedules are consistent with those adopted by the company in drawing up its 2000 annual financial statements, as provided by Consob Regulation no of 14 May 1999, modified by Communication no of 6 April 2000, and article IA of the Instructions of the New Issue Market, organised and managed by Borsa Italiana S.p.A., modified thereby in its communication no of 23 March The balance sheet figures given in the financial schedules can be compared to those in the 2000 annual report and 2001 half year report. The income statement figures are shown excluding the effect of taxation and are comparable with the figures of the same quarter in 2000 and for the first nine months of In order to allow maximum comparability of the reclassified schedules with the figures given in the annual financial statements and consolidated financial statements, it should be noted that the caption "Gross operating margin (EBITDA)" for the first nine months and third quarter of 2001 is stated after the accrual for employees' leaving entitlement for the periods. This caption was classified under "Amortisation, depreciation and other provisions" in the 2001 first quarter report. The following information relates to the period from 1 July 2001 to 30 September Reference should be made to the 2001 first quarter report and half year report for information on the related periods (also available on The company's extraordinary shareholders' meeting of 26 April 2001 approved the conversion of its share capital into Euro. Accordingly, the figures in this report are given solely in this currency. 2. Key factors influencing the company's third quarter performance e.biscom S.p.A. s activity consists in the organisational development of the group companies and the coordination of their strategies and financial resources. With respect to the group's organization, the most significant events of the quarter were: Subscription of the subsidiary FastWeb's share capital increase for Euro 185,313 thousand. This operation was performed in two stages, the second of which was finalized after the quarter end. At 30 September 2001, the company's stake therein was equal to 56.79%, worth Euro 104,973 thousand. This percentage increased to 64.41% on 15 October 2001 having a total book value of Euro 231,082 thousand; Subscription of the 100% owned subsidiary e.bismedia's share capital increase for Euro 10,000 thousand and the concurrent payment of Euro 6,000 thousand for future increases. After these operations, the investment's book value was equal to Euro 106,100 thousand; sale of the 100% stake in e.bisnews S.p.A. to e.bismedia S.p.A. for Euro 5,000 thousand. This transaction is part of the company's decision to reorganise the group's investments by business sector. Accordingly, e.bismedia coordinates all the Media & B2C sector activities. 11

11 The most important transaction undertaken to invest temporary liquidity was the acquisition of Pirelli & C. shares on the market, equal to an investment that has to date exceeded 5% of this industrial holding company's share capital. The securities have been accounted for in the balance sheet as marketable securities. Returns on the company's investment portfolio, which showed a positive result of Euro 21,033 thousand at 30 June from its fixed and variable income investments, including adjustments to market value, decreased significantly during this third quarter. This is due to the continued weakness of financial markets, worsened in September following the terrorist attacks in the USA. The company's financial position for the first nine months of the year is thus Euro 8,416 thousand. 3. Revenues The company's revenues are earned on services provided to its subsidiaries as set out in the specific contracts. They derive from: those related to coordination and strategic management services provided to the group companies, legal and financial assistance, coordination of personnel development policies and corporate secretarial services; recharges to subsidiaries of documented costs incurred on their behalf. Revenues from the first form of services amounted to Euro 4,584 thousand for the quarter with those related to recharges of direct costs totaling Euro 4,263 thousand. 4. More significant income items contributing to the result for the period The company's income statement, prepared for the first nine months of the year and set out earlier, shows a net loss for the quarter of Euro 697 thousand, excluding the effect of taxation. The gross operating margin (EBITDA) is a negative Euro 7,858 thousand. Revenues of Euro 8,847 thousand include recharges to subsidiaries and associated companies of costs incurred on their behalf and revenues from the providing of services to subsidiaries. These transactions take place at normal market conditions. Expenses amount to Euro 16,705 thousand comprising costs incurred on behalf of subsidiaries and associated companies of Euro 4,263 thousand and recharged to them. The balance also includes personnel expenses of Euro 5,510 thousand and third party consultancy and services fees of Euro 4,561 thousand incurred relating to the coordination, planning and development of the ongoing initiatives and those under study. 12

12 5. Net financial position at 30 September 2001 The company's net financial position amounts Euro 952,271 thousand at the end of the quarter and mainly consists of short term investments with banks. As described earlier, it decreased in October following the subscription of the second installment of FastWeb's share capital increase (Euro 126,109 thousand). 6. Outlook Following completion of the subsidiary FastWeb's share capital increase, the company will continue to develop the group and to provide financial assistance to the subsidiaries. It will concurrently continue to manage its own financial position, keeping a close watch on market developments in order to best avail of opportunities that arise before year end. Based on current information and the better performance of the financial markets, the company expects to record a positive year-end result. 13

13 e.biscom group - Consolidated financial schedules e.biscom group - Consolidated balance sheet as at 30 September 2001 (thousands of Euro) 31 December 30 September 30 June Variation (a) (b) (a) - (b) Assets 550,432 Fixed assets 802, , ,784 1,310,853 Current assets 1,192,535 1,273,117 (80,582) 1,219,956 of which liquid funds and short term financial assets 1,048,171 1,139,321 (91,150) 3,499 Accrued income and prepaid expenses 5,724 2,408 3,316 1,864,784 Total assets 2,000,331 1,963,813 36,518 Liabilities 1,690,223 Share capital and reserves 1,587,686 1,587, (102,584) Net income (loss) for the period/year (120,599) (61,202) (59,397) 1,587,639 Total group shareholders' equity 1,467,087 1,526,467 (59,380) 49,394 Minority share of capital and reserves 98,946 54,381 44,565 (13,583) Minority share of income (loss) for the period/year (35,301) (21,115) (14,186) 35,811 Total minority share of shareholders' equity 63,645 33,266 30,379 1,623,450 Total consolidated shareholders' equity 1,530,732 1,559,733 (29,001) 1,014 Reserves for risks and charges 2,995 2, ,300 Employees' leaving entitlement 3,263 2, ,966 Payables 458, ,840 64, ,228 due within one year 360, ,599 64,540 20,738 due after one year 97,920 98,241 (321) 3,054 Accrued expenses and deferred income 5,282 4, ,334 Total liabilities 469, ,080 65,519 1,864,784 Total liabilities and shareholders' e quity 2,000,331 1,963,813 36,518 1,219,957 Liquid funds and very short term financial assets 1,048,171 1,139,321 (91,150) (65,012) Short term debt (96,066) (88,198) (7,868) 1,154,945 Net financial position 952,105 1,051,123 (99,018) 14

14 e.biscom group - Consolidated income statement for the three months ended 30 September 2001 (thousands of Euro) 3rd quarter 3rd quarter Variation ( ) Operating revenues 36,675 4,672 32,003 Other positive income statement components 4,752 2,514 2,238 Total revenues 41,427 7,186 34,241 Operating expenses (71,104) (21,418) (49,686) Gross operating margin (EBITDA) (29,677) (14,232) (15,445) Amortisation, depreciation and provisions (29,282) (4,148) (25,134) Operating result (EBIT) (58,959) (18,380) (40,579) Net financial income and charges (10,745) 20,942 (31,687) Extraordinary charges 9 (21,201) 21,210 Adjustments to the carrying value of financial assets (3,888) (2,392) (1,496) Net income (loss) for the period before taxation (73,583) (21,032) (52,551) Minority share of (income) loss for the period 14,186 3,397 10,789 Group share of net income (loss) for the period (59,397) (17,635) (41,762) 15

15 e.biscom group - Consolidated income statement for the nine months from 1 January to 30 September 2001 (thousands of Euro) 9 months 9 months Variation from 1 January from 1 January to 30 September to 30 September ( ) Operating revenues 93,723 9,381 84,342 Other positive income statement components 15,095 8,472 6,623 Total revenues 108,818 17,853 90,965 Operating expenses (198,203) (39,739) (158,464) Gross operating margin (EBITDA) (89,385) (21,887) (67,498) Amortisation, depreciation and provisions (67,257) (7,531) (59,726) Operating result (EBIT) (156,642) (29,417) (127,225) Net financial income and charges 24,898 36,142 (11,244) Extraordinary charges 6 (63,992) 63,998 Adjustments to the carrying value of financial assets (24,162) (3,081) (21,081) Net income (loss) for the period before taxation (155,900) (60,348) (95,552) Minority share of (income) loss for the period 35,301 7,229 28,072 Group share of net income (loss) for the period (120,599) (53,120) (67,479) 16

16 e.biscom group Explanatory notes to the consolidated financial schedules 1. Accounting policies The accounting policies used to prepare the 2001 third quarter consolidated financial schedules are consistent with those adopted in drawing up the 2000 annual consolidated financial statements. The consolidation area used in the 2001 half year report has been extended following acquisition of the remaining 20% of GiB S.r.l. (now 100% controlled) and the increase of e.bismedia's investment in e.voci S.p.A. to 90.4%. The balance sheet figures given in the consolidated financial schedules can be compared to those in the 2000 annual report and 2001 half year report. The income statement figures are shown excluding the effect of taxation. They are comparable with the figures for the same quarter in 2000 and for the first nine months of In order to allow maximum comparability of the reclassified schedules with the figures given in the annual financial statements and consolidated financial statements, it should be noted that the caption "Gross operating margin (EBITDA)" for the first nine months and third quarter of 2001 is stated after the accrual for employees' leaving entitlement for the periods. This caption was classified under "Amortisation, depreciation and other provisions" in the 2001 first quarter report. The following information relates to the period from 1 July 2001 to 30 September Reference should be made to the 2001 first quarter report and half year report for information on the related periods (also available on As noted in the section on the parent company, the consolidated financial schedules are expressed in Euro. 2. Key factors influencing the group's third quarter performance The group continued to develop its business operations, particularly in the telecommunications sector, currently the most important business area. This process was both strategic, with the finalisation of certain economic and financial agreements of fundamental importance to ensure the group's growth and the creation of value in the medium term, and commercial and operative, aimed at building up the customer portfolio and developing turnover in its markets. As part of the strategic development, FastWeb obtained long-term financing of Euro 955,000 thousand after the period end. This was granted by a syndicate of banks led by Interbanca S.p.A. and Unicredit Banca Mobiliare S.p.A. and has the scope of allowing development of the group's business plan in the seven most important Italian cities. Given the current stagnation of the financial markets, this transaction demonstrates the general market confidence in e.biscom and its business plan in just its second year of activities. In terms of commercial and operating activities, those that took place during the third quarter for each of the business sectors in which the group operates are described below. 17

17 2.1 Telecommunications Both FastWeb group and HanseNet group significantly expanded their customer bases in this quarter and developed their network and access infrastructures FastWeb group FastWeb's positioning as a key player in the domestic market was confirmed with the official startup of its residential services in Rome. Following the agreement with Telecom Italian for the concession for the use of the Socrate network infrastructures in July, FastWeb has been assigned almost 375 Km of infrastructure for this network, equal to approximately 150,000 potential residential units. The time period reserved to Telecom group by the Telecommunications Supervisory Body for the sale of control of Cecchi Gori Communications to third parties expired on 11 November. This issue could have meant that the agreement with FastWeb could have been unilaterally terminated by the former monopoly operator. Therefore, during this quarter and following periods, FastWeb group will continue to develop its own nationwide network while continuing to request assignment of new sections on the Socrate network as per the terms of the above contract. This will allow it to significantly extend its portfolio of potential residential users, including in those cities where infrastructure is not currently being installed. In the same period and using the group's technology based on the IP protocol, the ADSL connections were launched in the same cities where optical fibre infrastructures are being installed in order to speed up commercial penetration. FastWeb's ADSL service guarantees transmission speed at almost twice that of its competitors. Its advantage is due to the fact that unbundling of the Telecom Italia lines only covers the section between the single Telecom stations and the end users while the connections with the Telecom stations take place on optical fibre lines. At the end of the quarter, FastWeb's commercial structure consisted of more than 260 agents, 25 sales outlets and 40 dealers, mainly based in the Milan area. The pipeline infrastructures in Naples, Bologna and Reggio Emilia are still under construction at 30 September. The company launched a promotion in September offering integrated telecommunications, Internet and Video Internet services. This campaign used the national press and television channels. After period end, FastWeb signed a commercial agreement with the leading Italian pay TV company, TELE+, for the distribution of programmes on its digital channels HanseNet During the third quarter, the German group continued to develop its innovative high-tech services with high operating margins. It also focused on expanding its customer base in the Hamburg area. Its broadband services, which had already been well received in the previous quarter, continued to meet with success during the summer months. Accordingly, the group's customer portfolio increased 31% on the previous three months to more than 31,500 units at period end. 18

18 In organisational terms, the merger by incorporation of the three 100% controlled subsidiaries HanseNet Transportnetzgesellschaft m.b.h., HanseNet Telefongesellschaft. m.b.h. and HanseNet Geschaftsfuhrungs G.m.b.H. with the parent HanseNet Telekommunikation G.m.b.H. took place in August. The transaction has legal effect from 1 January Media & Business to consumer (B2C) Activities linked to the production and distribution of contents were stepped-up significantly during the quarter: the Video and TV on Demand services were launched in July offering more than 1,000 programmes including those produced directly by e.bismedia and its associated company RaiClick; agreements with the American production company Dreamworks and the English BBC were reached for the offer of contents. The contract with the latter relates to children's programmes; with respect to information (the News area), e.bisnews S.p.A., the group press agency which operates in Italy under the APBiscom logo, developed its customer portfolio finalising new agreements with Finanza & Futuro, Alenia, the President's Office, Banca di Roma and Poste Italiane. As part of the reorganisation of e.biscom group's investments by business sector, control of e.bisnews S.p.A. was transferred by the parent company e.biscom S.p.A. to e.bismedia S.p.A Business to business (B2B) B2Biscom S.p.A. finalised new commercial agreements during the quarter related to both the e.bixtrade horizontal marketplace and vertical marketplace projects: an agreement was signed on 21 August with Compagnia delle Opere, an association of small and medium sized Italian companies (over 17,000 members), to provide them with e- commerce services; an agreement was finalized with Montepaschi di Siena group in October for a strategic partnership. This will involve the distribution of B2Biscom services (e-commerce, distribution of software using the ASP technology) to the banking group's customers and the provision of value added services directly to the banks; an agreement was also stipulated with the Associazione Nazionale dei Comuni d'italia in the same month for the promotion of its e-commerce services with the more than 5,000 member municipal authorities. In organisational terms, the main activities involved the rationalisation of operating costs in order to reduce the effect of the slower than expected growth in business volumes on operating results. 2.4 Principal investments in associated companies Metroweb S.p.A. This company, managed by e.biscom which has a 33% stake therein, owns the main optical fibre telecommunications network in the Milan area. The majority investment is held by AEM S.p.A.. 19

19 It recorded a positive EBITDA of Euro 11,171 thousand, a positive EBIT of Euro 7,061 thousand and net income of Euro 909 thousand for the first nine months of the year. These results are a continuation of the positive trend commented on in the 2001 half year report and are better than the budget forecasts. Thanks to its operating efficiency, Metroweb is a market leader in the dark fibre providing sector. During the first nine months of the year, Metroweb recorded operating revenues of Euro 32,719 thousand, including Euro 2,725 thousand related to work in progress and Euro 31,661 thousand due from FastWeb S.p.A.. The optical fibre network, the development of which will continue in line with the company's business plan, is now some 1,857 km long. It includes approximately 1,035 km of urban backbone and connections to business offices and 450 km of residential cabling with a potential of approximately 20,769 connectible buildings and more than 370 km of long distance cabling RaiClick S.p.A. The joint venture with RAI, of which e.biscom holds 40% through e.bismedia, commenced operations on 17 July with eight specialist channels, using the files and current programmes of the RAI networks, available on FastWeb's broadband infrastructures. Its results at 30 September 2001 show negative EBITDA and EBIT of Euro 2,637 thousand and Euro 2,944 thousand respectively Scala Group S.p.A. The 22.5% investment in this company held by e.bismedia was acquired in July Scala Group has a large photograph archive and is an international market leader in the art images and culture distribution and off- and on-line multimedia works production sector. Its first nine month results include turnover of approximately Euro 3,500 thousand. 3. Revenues The group s revenue results and its main operating indicators are discussed below by business sector. All the figures given in the tables relate to the first nine months and third quarter of They are exclusive of taxation and inclusive of intercompany transactions with group companies operating in other business sectors. 3.1 Telecommunications - FastWeb group The key financial data of the FastWeb group for the first nine months and third quarter of 2001 are given below. 20

20 (thousands of Euro) FastWeb group - Key financial data 1 January - 30 September rd quarter 2001 Operating revenues 36,951 18,685 EBITDA (29,925) (11,013) EBIT (59,822) (25,421) Result for the period (62,216) (25,882) Capital expenditure 225, ,794 Net financ ial position (24,628) (24,628) Net cash flow 13,526 28,882 Variation in medium term indebtedness during the period (77,469) 0 At period end, new customers totaled more than 22,700, of which more than 50% are already connected to the group's network. The upturn in the quarter's turnover, better than that of the previous two quarters put together, demonstrates the positive attitude of the domestic market to the group's innovative services. Confirming FastWeb's role as technological partner with companies since its set up, Euro 34,866 thousand of the quarter's turnover was achieved with business customers. At quarter end, the network available to the FastWeb group reached 4,385 km, including more than 2,000 km of urban backbone and residential cabling. 3.2 Telecommunications - HanseNet The key financial data of the HanseNet group for the first nine months and third quarter of 2001 are given below. (thousands of Euro) HanseNet - Key financial data 1 January - 30 September 3rd quarter Operating revenues 45,647 13,499 EBITDA (17,924) (5,438) EBIT (33,004) (12,383) Result for the period (34,816) (12,981) Capital expenditure 75,067 21,886 Net financial position (10,030) (10,030) Net cash flow (33,046) (29,937) Variation in medium term indebtedness during the period

21 The developments in HanseNet's operating revenues confirmed the downturn in traditional telephony business and the increase in broadband services. The continued variation in their composition had a significant and positive effect on the contribution margin which has grown steadily since the beginning of the year. 3.3 Media & B2C The parent company in this business sector is e.bismedia S.p.A. which has majority control of e.bisnews S.p.A. (100%), e.voci S.p.A. (90.4%), e.mik S.r.l. (70%) and GiB S.r.l. (100%), together with a minority interest in Scala Group S.p.A. (22.5%), Mondadori Informatica - e.bismedia S.p.A. (50%) and RaiClick S.p.A. (40%). The key financial data of the group companies active in the Media & B2C sector for the first nine months and third quarter of 2001 are given below. (thousands of Euro) Media & B2C - Key financial data 1 January - 30 September 3rd quarter Operating revenues 6,913 2,807 EBITDA (26,229) (8,903) EBIT (32,651) (11,401) Result for the period (32,088) (11,087) Capital expenditure 15,822 2,790 Net financial position 22,513 22,513 Net cash flow 5,719 (1,206) Of all the sectors in which the group operates, this was the hardest hit by the reduction in business during the summer months due to its more direct relationship with residential customers. Accordingly, the companies saw a decrease in business volumes although they managed to record turnover greater than that of the previous quarter in this still growing sector. Total turnover, as shown in the table above, amounted to Euro 2,807 thousand, up Euro 586 thousand on the second quarter of the year. The slowdown in demand for on-line advertising services impacted the companies' results while their internet sites performed well. 3.4 B2B The group operates in this sector through B2Biscom S.p.A.. Its key financial data for the first nine months and third quarter of 2001 are given below. 22

22 (thousands of Euro) B2B - Key financial data 1 January - 30 September 3rd quarter Operating revenues 5,792 2,123 EBITDA (7,075) (2,093) EBIT (10,978) (3,517) Result for the period (10,295) (3,315) Capital expenditure 2, Net financial position 14,762 14,762 Net cash flow (12,267) (3,916) Although the market showed signs of recovery in the last part of the quarter, business is still slack. The forecasts, updated early in the year, were met at the end of the third quarter both for revenues and margins. 4. More significant income items contributing to the result for the period Consolidated gross operating margin (EBITDA) is a negative Euro 89,385 thousand for the first nine months and a negative Euro 29,677 thousand for the third quarter. The consolidated operating result (EBIT) is similarly a negative Euro 156,642 thousand and Euro 58,959 thousand for the first nine months and third quarter of the year respectively. These results are in line with forecasts. The main positive income components which do not represent turnover include the increases in own work capitalised under fixed assets of Euro 9,999 thousand at the end of the quarter. The activities, mainly performed by FastWeb, FastWeb Mediterranea and e.bismedia, include the design, creation and activation of network and IT infrastructures and Internet sites. The high technological content of the group's technical solutions requires significant and continued efforts in order to maintain its leadership position. Such efforts are achieved by the use of technological consultancy services and the work of the group's personnel. The main operating costs of the quarter are interconnection and fibre rental costs, technological consultancy fees and network and IT infrastructure maintenance costs. Personnel expenses continue to grow and totaled Euro 61,072 thousand, including the accrual for employees' leaving entitlement for the period. The group's workforce has grown considerably following the significant developments in the subsidiaries' operating initiatives. At quarter end, there were 1,450 employees. Costs for the rental of optical fibre network infrastructures in the Milan area from Metroweb S.p.A. amount to Euro 11,007 thousand for the first nine months of This caption continues to increase due to the ever greater infrastructure needed by FastWeb to provide services to customers in the area. 23

23 The considerable growth in investments (net value of Euro 756,827 thousand at 30 September 2001) generated amortisation and depreciation of Euro 64,720 thousand, Euro 25,996 thousand of which on intangible fixed assets, Euro 10,309 thousand on goodwill arising on consolidation and Euro 28,416 thousand on tangible fixed assets. 5. Net financial position at 30 September 2001 As shown in the consolidated financial schedules, the group's net financial position is Euro 952,105 thousand. The decrease of Euro 202,840 thousand on year end 2000 is due to progress in the operating companies' investment plans, although the resources earmarked for these have not yet been fully used as most of the investments will only effectively be paid for after 30 September Forecasts of the group's future financial position include the transformation of its current financial resources into technological capital, supporting its operating investments. Its position, as shown in this report, together with third party financing (obtained as described earlier) will allow the group to implement the investments planned for the future. 6. Outlook The fourth and final quarter of the year will see the Group still committed to increasing commercial penetration in the markets and the sectors in which it operates, focusing its investment activities in the telecommunications sector. In particular, in the telecommuncations sector, the FastWeb group will continue developping Bologna, Milan, Rome, Turin, Genoa, Naples and Reggio Emilia, taking advantage of the availability of the Socrate network which allows growth of the potential number of clients more rapidly and with fewer investments in infrastructure. In the Media and B2C sector, efforts continue in the diffusion of TV and Video on Demand services, and at the same time, new strategic partnerships with the main content distributors are being defined. As regards enriching the content offer in the News area, positive results are expected in terms of volume increases. The consolidated net result for the year is expected to be negative, in line with Group forecasts, still in the full development phase and with significant investments being made. The consolidated EBITDA and net result, even if still negative, will continue to show gradual improvements towards a breakeven situation. 24

24 25

25 Appendix 1: Information on the group's subsidiaries and associated companies at 30 September 2001 Name Holding company Registered offices of subsidiary Percentage Share capital held Euro/000 Result for the nine months from 1 January to 30 September Euro/000 Subsidiar y companies FastWeb S.p.A. e.biscom Milan 56.79% 28,376 (58,873) FastWeb Mediterranea S.p.A. FastWeb Genoa 51.00% 10,200 (3,343) e.bismedia S.p.A. e.biscom Milan % 100,100 (23,112) GiB S.r.l. e.bismedia La Spezia % 104 (395) e.mik S.r.l. e.bismedia Milan 70.00% 520 (253) e.voci S.p.A. e.bismedia Milan 90.40% 1,382 (3,441) B2Biscom S.p.A. e.biscom Milan 99.79% 50,100 (10,295) HanseNet Telekommunikation G.m.b.H.(*) e.biscom Hamburg (D) 80.00% 91,522 (34,816) e.bisnews S.p.A. e.bismedia Milan % 5,000 (4,888) e.fly S.r.l. e.biscom Milan % 99 (81) Associated companies Metroweb S.p.A. e.biscom Milan 33.00% 20, CC&F Partners e.biscom Lugano 28.87% 656 N/D Innovation Utilities B.V. e.biscom Amsterdam 50.00% 20 N/D (NL) Wemacom Telekommunikation HanseNet Hamburg (D) 25.00% 60 N/D G.m.b.H. Telekommunikation Smartcity.it S.p.A. Innovation Utilities Milan % 2,000 N/D Mercato Impresa S.p.A. B2Biscom Milan 35.00% 15,494 (2,475) B2Bipielle B2Biscom Milan 35.00% 15,000 (533) Mondadori Informatica - e.bismedia Milan 50.00% 176 N/D e.bismedia S.r.l. RaiClick S.p.A. e.bismedia Rome 40.00% 176 (1,402) Scala Group S.p.A. e.bismedia Florence 22.50% 950 (148) (*) merged with the three majority controlled subsidiaries HanseNet Transportnetzgesellschaft m.b.h., HanseNet Telefongesellschaft.m.b.H. and HanseNet Geschaftsfuhrungs G.m.b.H. in August 2001 with effect from 1 January

26 Appendix 2: Structure of e.biscom group at 30 September 2001 e.biscom S.p.A. e.voci S.p.A % FastWeb S.p.A % FastWeb Mediterranea S.p.A % e.mik S.r.l % e.bismedia S.p.A % e.bisnews S.p.A % e.fly S.r.l % GiB S.r.l % RaiClick S.p.A % B2Biscom S.p.A % HanseNet Telekommunikation G.m.b.H % (*) Mondadori Informatica e.bismedia S.r.l % Scala Group S.p.A. 22.5% Metroweb S.p.A % Mercato Impresa S.p.A % Innovation Utilities B.V % B2Bipielle S.p.A % CC&F Partners S.A % Wemacom Telekommunikation G.m.b.H % = subsidiary company = associated company (*) merged with the three majority controlled subsidiaries HanseNet Transportnetzgesellschaft m.b.h., HanseNet Telefongesellschaft.m.b.H. and HanseNet Geschaftsfuhrungs G.m.b.H. in August 2001 with effect from 1 January