Tiscali Press Release - H&M uses Tiscali technology to give customers a better in-store experience

12th August 2006

Tiscali and Video Networks International Ltd announce today that they have reached an agreement whereby their respective UK market operations would be fully integrated.

Pursuant to this agreement, Video Networks International Ltd (VNIL) would contribute 100% of their UK operations - Video Networks Ltd (VNL) - into Tiscali UK Ltd, fully owned subsidiary of Tiscali SpA, in exchange for an interest in Tiscali UK. As a result, Tiscali SpA would control 88.5% of Tiscali UK, while VNIL would own 11.5%. The agreement is expected to become effective in August 2006, upon fulfillment of certain technical conditions. Furthermore, the shareholding of VNIL in Tiscali UK could be increased to up to 20% if certain performance targets are reached. Tax losses carried forward would also be contributed to Tiscali UK by VNIL at a discount and payable on a deferred basis and according to their expected utilisation in the future. Tiscali SpA has the right to acquire and VNIL to sell VNIL's stake in Tiscali UK starting from three years after closing or earlier upon certain trigger events.

Following this integration, Tiscali UK will immediately have more than 1.3 million DSL customers, of which 350,000 customers are taking voice and broadband, over 45,000 will be IPTV subscribers, and an unbundled local loop ("ULL") network covering over 300 BT exchanges with in excess of 220,000 ULL customers.

Video Networks currently provides TV and video services under its Homechoice brand, to its broadband subscriber base using its state of the art IPTV platform. Homechoice has 45,000 customers, mostly taking triple play (broadband, telephone and TV) which pay on average £500 a year. VNL has an annualised turnover of approximately £18 million.

Homechoice's premium offering includes content from all the major Hollywood studios delivering a library of over 1,000 movies, over 5,000 interactive music videos via the award-winning V:MX service as well as a full bouquet of pay TV channels.

Tiscali UK will market these IPTV services as part of a compelling product proposition including voice, data, television (IPTV) and other on-demand video services. Tiscali UK's strategy will also be to enhance its current wholesale DSL product by adding IPTV to the proposition and syndicating this on a 'white label' basis.

"This agreement represents a very important step for the Tiscali Group not only in the UK market, where Tiscali's position would be further strengthened, but also in the other markets, allowing Tiscali to position itself as a true Triple Play operator. The Triple Play offer in the UK will be launched by the end of the year and will be immediately followed by the launch of the service in Italy and then in the other markets." says Tommaso Pompei, CEO of the Tiscali Group.

Mary Turner, CEO of Tiscali UK says: "This agreement further underlines Tiscali's position as a leading investor and innovator in the UK market. This will put us in a strong position to offer our customers an exciting and compelling package of existing and next generation communication and entertainment services."

Roger Lynch, Chairman and CEO of VNL who will head the syndication business and join the board of directors of Tiscali UK following completion of the transaction, says: "This agreement will allow many more consumers nationally to experience VNL's market-leading IPTV offer as part of a compelling triple play bundle of services. It also gives significant additional capabilities to develop and promote the growing IPTV syndication business in the UK and abroad, which will be an important growth driver."