i-cable Communications Limited 2011 Final Results 12 March 2012
Results Highlights 2 Group revenue continued to rebuild, as it continued to strengthen programming, improve service offerings, expand product diversity, introduce value-added services, streamline operations & effect infrastructure improvements Record high advertising turnover with growth in TV subscription base Loss position improved in 2011. The operating environment remains challenging as the Group strives to return to profitability Operating margin is under considerable pressure in the face of competition and rising costs. This situation would likely remain a challenge in the foreseeable time ahead as we continue to invest in and for the future
3 Subscription Services Television Rebuilding nicely in many respects with higher viewership, subscription revenue, subscriber yield, especially advertising income and EBITDA growing noticeably faster than TV subscriber base Effective marketing and promotional campaigns were executed to leverage prized content and strong HD services
Television 2011 2011 2010 2009 vs 2010 HK$M 1H 2H FY FY FY % chg. Turnover 874 875 1,749 1,561 1,228 12% Opex before dep n (822) (858) (1,680) (1,625) (1,111) 3% EBITDA 51 17 69 (64) 117 n/a Depreciation (74) (90) (163) (158) (162) 3% Operating Loss (22) (72) (95) (222) (45) - 57% EBITDA Margin 6% 2% 4% -4% 10% Operating Margin -3% -8% -5% -14% -4% Higher recurrent revenue mainly attributable to increase in higher yield subscriptions & airtime sales Operating margin under considerable pressure in the face of competition & rising costs 4
Value-added Services HD Channels Committed to deliver more valueadded services to enhance customer experience Launched 9 HD Channels with best picture quality in town ¾ ¾ 5 HD Sports Channels (hd200 hd204) 3 HD Movie Channels (hd241, hd243 & hd245) 1 HD Entertainment (hd212) 5 i-cable Communications Limited ¾
Value-added Services 6 3D D for TV Hong Kong s first-ever 3D BPL matches broadcast live and exclusively on CABLE TV Life-like excitement on 3Dcapable TV sets at no additional charge to HD BPL Pack subscribers Ten 3D live BPL matches in the 2 nd half of 2011/12 season
Value-added Services 7 Pay-Per Per-Day BPL Introduced Pay-Per-Day service, allowing football fans & viewers to watch up to 3 BPL live matches & related programmes on Channel 690 (SD) at $30 per day
London 2012 Olympics 8 The official broadcaster & exclusive holder of all media rights in Hong Kong Unprecedented live coverage on multiple platforms enabling viewers to watch it at any time, from anywhere and through multiple devices Carriage of high interest events as well as the opening & closing ceremonies Leveraging on CABLE TV experience in broadcasting Beijing 2008 Olympics on new media, FIFA World Cups, Asian Games and Winter Olympics
Exclusive Sports Programmes 9 Sports The leading sports platform in town Successful renewal of the exclusive broadcasting rights to UEFA Champions League & UEFA Europa League until 2015 The German Bundesliga until 2015 Comprehensive coverage of the 2011/2012 BPL season, boosting this platform to a total 11 HD & SD channels
Original Programming 10 News Professional team maintained its leadership position, serving the community with fast, accurate & independent reports & updates 24X7 Plans were underway to introduce HD capabilities to news platform and enrich the presentation of our newscasts
Original Programming 樂壇第一手 名廚 鄉土濃情甄文達 日本泡湯趣 大Fun享 11 i-cable Communications Limited 還看當年
Original Programming 12
Viewership 13 940,000 440,000 127,000 78,000 Source: CSM Media Research Jan-Dec 2011, All Day All Time CABLE TV is the most watched Pay TV with average daily reach of 940,000
Viewership 60% 50% 52% 58% 40% 37% 30% 30% 2009 2010 2011 20% 10% 9% 8% 2% 4% 0% Source: CSM Media Research All Day All Time (Individuals aged 4+) HKC Now TV TVBPV bbtv CABLE TV viewership almost 2X the closest follower Leadership position going stronger than ever, as it continued to strengthen programming & improve service offerings 14
Subscribers 15 Jun 2011 Dec 2011 157,000 225,000 149,000 218,000 Television Broadband Telephony 1,103,000 1,106,000
New Acquired Channels Phoenix Hong Kong Channel Hong Kong Satellite TV Liaoning Satellite TV Jiangsu Satellite TV Thrill 16
Cross-platform Opportunities 17 Strengthened service offerings to meet customers fast-changing needs and entertainment landscape not only TV services, but various alternatives available on the Internet & mobile platforms Further upside will come from cross-platform opportunities including outdoor advertising, new media, content distribution & Free TV once approved
Cross-platform Opportunities 18 Advertising & Outdoor Substantial turnover increases in 2011, a record high surpassing even the years when there were high-interest mega programming such as FIFA World Cup Newsline Express in MTRC s trains also reported significant growth in advertising revenue Taking this successful business venture further, an agreement was reached to cover additional lines under a phased scheme starting in December 2011
Cross-platform Opportunities 19 New Media Leveraging on CABLE TV experience on new media, we endeavor to make the best use of various platforms & technologies providing cross-media & cross-platform services The London 2012 Olympic Games will be available on www.i-cable.com, enable citizens to watch it at any time from anywhere & through multiple means Supply CABLE TV content to wireless operators Launched 'Joemud?', a multi-functional mobile app combining the latest news in trends, entertainment, dining, shopping, TV programming, movie & social networking
Cross-platform Opportunities 20 CABLE TV Goes Mobile Designated subscribers can watch programmes, anytime, anywhere at no additional fee 5 streaming channels providing round-the-clock services Live News Financial Information Entertainment News BPL simulcast live matches Soccer Betting
Cross-platform Opportunities 21 CABLE TV Goes Mobile Promotional offers Multimedia signals, direct links to premier offers Programme guide Programme search, user-set push alerts for favourite programmes, programme schedule for coming week Personal interactive customer service Instant booking of service offerings, account-related enquiries, technical support, frequently asked questions
Cross-platform Opportunities 22 Free TV Government is considering 3 applications for domestic free TV licences that may lead to an imminent introduction of free territory-wide channels, including 2 proposed by CABLE TV on behalf of Fantastic Television Fantastic TV is all set for new licence and we are earnestly waiting for regulatory approval to provide viewers with more & better choice including London 2012 Olympics in unprecedented coverage
Subscription Services 23 Internet Broadband business is still eroding & under competitive pressure from not only wire-line service providers but also wireless operators luring customers with aggressive service packages often bundled with multiple products Roll-out of 130Mbps covering HK Island was completed earlier in the year and works for the rest of the territory were nearing completion A plan is in place to arrest the erosion, with additional upgrade alternatives being implemented or under consideration The resulting expansion in network capacity and improvement in service quality would help reduce customer attrition, protect revenue through up-selling to existing customers and attract new ones
Internet & Multimedia 24 2011 2011 2010 HK$M 1H 2H FY FY % chg. Turnover 167 172 340 433-21% Opex before dep n (98) (116) (213) (248) - 14% EBITDA 70 57 127 184-31% Depreciation (39) (48) (88) (88) 0% Operating Profit 30 9 39 96-60% EBITDA Margin 42% 33% 37% 43% Operating Margin 18% 5% 11% 22% Competition from both wire-line & mobile services providers reduced EBITDA & Operating Margin
Sundream Motion Pictures 25 Well acknowledged for its discerning tastes & acute market sensibility, Sundream continued with its proven track record of identifying quality productions & bringing them to the HK audience The King s Speech, a major box office with critical success both in HK & overseas Award-winning productions in the pipeline for theatrical release
Consolidated Results 2011 2011 2010 HK$M 1H 2H FY FY % chg. Turnover 1,051 1,059 2,110 2,002 5% Opex before dep n (983) (1,048) (2,031) (1,997) 2% EBITDA 68 11 78 5 1498% Depreciation (117) (142) (258) (254) 2% Operating Loss (49) (131) (180) (249) - 28% Share of profit less losses of associates (3) (0) (3) (41) n/a Net interest income & others (2) (1) (3) (0) n/a Loss before taxation (51) (132) (186) (290) - 37% Taxation (4) 7 4 23-84% Net Loss (55) (125) (179) (267) - 33% Loss position improved but the operating environment remains challenging as the Group strives to return to profitability Continue to rebuild revenue & manage costs 26
Operating Expenses 2011 2010 HK$M FY FY % chg. Programming 1,305 1,274 2% Network 225 233-3% Selling, CS, G&A 409 435-6% Cost of Sales 92 55 67% Sub-total 2,031 1,997 2% Depreciation 258 254 2% Total 2,289 2,251 2% Higher programming costs due primarily to European soccer partly offset by expenses relating to FIFA World Cup, Asian Games & Winter Olympics which did not recur in 2011 Acquisition of telephony business leads to higher cost of sales 27
Outlook 28 Competitive pressure is not expected to ease & operating costs will remain high across all business arms in 2012 Despite the past few years significant increase in Pay TV customer base, similar growth rates would be difficult to sustain in a fairly saturated Pay TV market Broadband & telephony business would continue to come under pressure from aggressively priced offers by both wire-line and mobile services competitors. All these factors will continue to drag the Company s return to profitability Despite such challenges, we will endeavor to strengthen our programming offers, enhance the effectiveness of marketing initiatives, invest in service & infrastructure upgrades, introduce innovative value-added services & explore ways outside traditional broadcasting means to unlock the full potential of prized content so as to drive customer & revenue growths
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