Financial year ended 31 January 2009 saw Astro All Asia Networks plc report record high subscriber additions in its Malaysian pay-TV business, and healthy growth in its radio business. Good progress was also made in the pay-TV business in India. In Malaysia, pay-TV subscriber growth, standing at 2.64 million subscribers up from 2.27 million last financial year, was underpinned by a strategy focused on targeting new customers through the Group’s continuing investment in local content. Gross subscriber additions in the year were at a new high of 612,000 resulting in 374,000 net new customers. Churn remained within targeted levels at 9.7 percent. This achievement was a major contributor to a 14 percent year-on-year increase in the Group’s consolidated revenue, taking this to RM2.97 billion. EBITDA (excluding costs and provisions incurred in respect of the Indonesia Venture) rose 20 percent to RM671 million from RM557 million. Astro’s increased investment in local content, however, is a source of worry for international channels. As Media Partners Asia’s Vivek Couto highlights, “Astro plans to achieve 60 percent penetration of Malaysian TV households by 2012. Going forward, it plans to increase spend on local content while at the same time reduce spend on certain regional and international TV channels – though it will maintain investment in key Chinese and Indian content, as well as rights franchises. Other highlights of Astro’s 2008 results include growth for Indian DTH operator Sun Direct, in which the Group owns a 20 percent equity stake. Services, initially launched in southern India, were subsequently expanded to all major metropolitan areas – Sun Direct now has over 2.5 million subscribers. The Group also accounted for RM687 million of cost incurred in a previously proposed joint venture in Indonesia. “While this has had a very significant impact on the Group’s results for the current year, the Board believes that adequate provision has been made for costs associated with the now terminated business proposal. Various legal actions have commenced in respect of developments in Indonesia and the Group is required to account for costs associated with these actions as they are incurred,” says a statement. As a result of the cost of terminating the provision of broadcast services in Indonesia and anticipated start-up losses arising in certain regional investments, the Group reported a loss after tax and minority interest of RM529 million. Meanwhile major telco Telekom Malaysia Berhad (TM) is planning a Q4 2009 launch of as yet unnamed commercial IPTV services. This new IPTV service is not to be confused with TM’s existing subscription-based broadband TV service Hypp TV, revamped end-2008 and priced at MYR 9.90 (US$2.80) per month. September 2008 saw TM sign a Public-Private Partnership (PPP) Agreement with the Government of Malaysia to roll-out HSBB (high-speed broadband) network and services. Infrastructure will be rolled out over a period of 10 years with the Government investing RM2.4 billion, and TM investing RM8.9 billion (totalling US$3 billion) to provide high-speed broadband access to over 1.3 million premises by 2012. Phase 1 of the HSBB project will cover the Inner Klang Valley, all key economic and industrial zones throughout the country, the Iskandar Malaysia Region, all public institutes of higher learning nationwide and all private such institutes within the rollout areas. Comments Media Partners Asia’s Couto, “In Malaysia, we believe that Astro’s strategy to focus on rural and urban Malay audiences will lead to more growth on its dominant DTH platform. Its continued investment in Indian and Chinese content will also bring growth along with the retention of key franchises (i.e. English premier league football). Incumbent telco Telekom Malaysia (TM) is upgrading its fixed networks to provide faster broadband speeds and capacity for IPTV, a costly initiative partially subsidized by the government.With respect to content, Telekom Malaysia plans to spend about US$55 million for the next two years, somewhat light relative to the US$270 million. Astro spent on programming during 2008. Media Partners Asia (MPA) forecasts indicate that pay-TV penetration will climb from 45.3 percent in 2008 to reach 60.7 percent by 2013, and 63.6 percent by 2018. Astro’s DTH service will have 57 percent of TV homes by 2018, while Telekom Malaysia will have 6.6 percent with IPTV. Continues Couto, “Regarding Telekom Malaysia, there are a couple of scenarios to consider: One is that TM could pursue a JV with terrestrial broadcast major Media Prima to aggregate the latter’s popular local content into viable IPTV channels and VOD services. However, a marked ad downturn has hurt Media Prima in 2009, and the company is unlikely to invest in a JV over the near term unless there is immediate monetization. Secondly, TM may still close a long-awaited alliance with Hong Kong telco/IPTV specialist PCCW for technical infrastructure and content. The timing of this deal remains uncertain, given PCCW’s privatization pitfalls in Hong Kong during Q1 2009, while the nature of the deal itself remains opaque. Even if TM were able to get carriage of a few brand-name channels currently available on Astro or on PCCW (we understand that TM is in negotiations with STAR, National Geographic Channel and HBO), it would still be lacking viable local content, which features high in the ratings. In 2008, (for example) Astro Ria, Sun TV, Astro Prima and Astro Ceria featured among the top 10 TV channels during 2008 for all demographics.” “According to MPA analysis, revenues for pay-TV channels and content providers reached US$320 million in 2008, an increase of 18 percent year on year. Advertising grew a healthy 7.8 percent on the Astro platform, driven primarily by viewership growth for its local TV channels. Economic weakness will likely mean a three to four percent decline in ad sales during 2009, though prospects remain generally positive over the medium term. Subscription revenues remain relatively high at US$270 million per year, a direct result of Astro’s investment in content. Increasingly, this money is being targeted at Astro’s own local channels, its various content JVs and sports rights, while spends on turnaround regional and international channels are moderating.” TVAplus