Annual report (20-F) - Ono

If we experience a change of control, we may not have enough money to repay the multiborrower
credit facilities and the Note Proceeds Loans.
Under the terms of the Indentures, upon the occurrence of a change of control of Cableuropa, or
the sale of all or substantially all of our assets, ONO Finance is required to offer to purchase all
outstanding Notes at a purchase price equal to 101% of the aggregate principal amount thereof, in
addition to the accrued and unpaid interest, if any, up to the purchase date. The multi-borrower credit
facilities and the Note Proceeds Loans have a corresponding covenant requiring repayment. However, we
cannot assure you that in the event of a change of control, we would have sufficient funds to repay the
multi-borrower credit facilities and the Notes Proceeds Loans. In addition, the 2005 senior bank facility
and instruments governing our existing and future debt may prohibit us from repaying the multi-borrower
credit facilities and the Notes Proceeds Loans prior to their stated maturity, including upon a change of
control or a sale of all or substantially all of our assets. In the event of a change of control, our failure to
repay the multi-borrower credit facilities and the Notes Proceeds Loans would result in an event of
default under the Indentures which, in turn, would constitute an event of default under the 2005 senior
bank facility. In such circumstances, the subordination provisions in the Indentures would restrict any
repayment under the multi-borrower credit facilities (including payments under the guarantees) unless all
of our senior debt has been paid in full.
We have incurred substantial net losses to date and we may not be profitable in the future.
The construction and operation of our network and the development of our business has required
a significant investment. Excluding the extraordinary effect of our repurchase in 2003 of certain Notes,
we have incurred substantial net losses since our inception as our depreciation and amortization and our
financial expenses are significantly higher than our EBITDA. On a consolidated basis we incurred net
losses of €81 million in 2004, €106 million in 2003 excluding the effect of our repurchase of certain
Notes, and €195 million in 2002 and we expect to continue to incur net losses until at least 2006.
However, we cannot be certain that we will achieve or sustain profitability in the future. As a result, we
may not have sufficient funds to make payments on our substantial debt obligations, to meet the
covenants under our 2005 senior bank facility or to fund our operations.
We prepare our financial statements in accordance with Spanish GAAP, which differs
from U.S. GAAP, International Financial Reporting Standards or other accounting legislation that
may be applicable to us in the future and which could significantly affect our net equity.
According to Spanish law and regulations, we carry our accounting records and prepare our
financial statements in accordance with Spanish GAAP, which differs in certain significant respects from
U.S. GAAP (information relating to the nature and effect of such differences is presented in note 27 to
our consolidated financial statements). The European Union intends to converge its State Members’
accounting policies and adopt International Financial Reporting Standards (“IFRS”). Although we are not
currently affected by any rule that requires us to change our accounting standards, we may be affected by
these rules in the future. To the extent that we are required to adopt IFRS, or we choose to do so in the
future, we would be required to change certain of our accounting policies. Such changes could
significantly affect our net equity position and the presentation of our results of operations.
Risks Relating to our Business
We may not generate sufficient cash flow to fund our operations or capital expenditures.
The operation, expansion and upgrade of our network, as well as the costs of sales and marketing
of our products and services require substantial financing. We also have major capital resource
requirements relating to, among other things, the following:
• the continued build-out of our network within our franchise areas;
• development and deployment of new products and services;
• implementation of new technologies;
• maintain the quality of our network;
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