ОАО O2TV Strategy and Outlook for Setting up a Media Holding. September 14, 2011

Transcription

1 ОАО O2TV Strategy and Outlook for Setting up a Media Holding September 14, 2011

2 О2TV: yesterday, today, tomorrow Yesterday Initial stage of development Leveraged business development Inefficient management structure Today A rapidly expanding TV channel with a successful background ОАО О2TV is a public company whose shares trade on MICEX A company with no debts! The channel will be broadcast on Moscow and St. Petersburg cable networks by the end of the year Tomorrow ОАО О2TV is to be converted into Holding O2 Media The Holding s main area of activity will be managing subsidiaries and associates In addition to O2TV television channel, the new holding will include new media assets, IT assets and other core assets 2

3 О2TV without debts As of the beginning of September 2011, ОАО О2TV s debt/equity (D/E) ratio was equal to zero based on data from consolidated financial statements The debt was paid off using the proceeds raised during an additional share issue held this spring ОАО О2TV is exploring the possibility of raising long-term bank loans to finance current projects, given that the Company is now debt-free and is capable of servicing debt 3

4 Why a media holding? Trend towards formation of large holdings in the Russian television industry Global economic slowdown is conducive to the enlargement of media industry companies Integration of TV channels and producers of video content Effect of synergy and cost-cutting after the merger Broad financing opportunities Adding value to the merged company Transforming OAO O2TV into profitable and competitive media holding OAO O2 Media 4

5 Goals and priorities Growing the market value of the merged company Rapid pace of the media holding s revenue growth, including organic growth Strong profitability Higher free cash flow Broadening the scale of activity Raising the channel s penetration rate and viewership, rolling out Internet TV Producing high-quality TV content Developing new forms of business which are of interest to a young audience 5

6 Structure of the holding OAO O2 Media TV broadcasting Producing TV programs Internet IT business O2TV Channel Other TV channels Production Center Internet TV Internet projects Computer games manufacturer 6

7 TV broadcasting: О2TV 9 Subscriber trendline, E, m 8.47 Consolidated revenue and organic growth rate, Rub, m % 794% % % % % % 66% 32% 200% 0% E E 2012E 2013E Revenue, Rub m (lf t scale) Revenue growth, % E = Estimates E = Estimates In 2010 the number of O2TV channel s subscribers rose 64% in 2010, while this metric is forecast to double y- o-y in 2011 due to the channel s entry into NCN s cable system According to the company s forecasts, O2TV s 2011 consolidated revenue (not including acquisitions) will increase 2.2 times compared to 2010 to Rub 184 m, and at least Rub 402 m compared to 2013 by entering into new contracts with advertisers and collaboration with a sales house By the end of the year, O2TV also intends to sign contracts with satellite pay TV operators NTV Plus and Tricolor TV 7

8 Broadcasting: NFTA TV Advertising expenses on NFTA TV in Russia and rate of growth, E 7 37% % 6 35% % 30% 5 26% % 25% % % 20% 3 15% % % 1 5% 0 0% E 2012E 2013E 2014E 2015E Advertising costs at non-fta TV channels, Rub bn Advertising costs growth rate, % Source: AKAR. Estimates: OMD. E = estimates According to OMD s forecast, in 2011 advertising expenses for cable and satellite TV in Russia will rise 37% and market value will be Rub 2.6 bn O2TV is mostly interested in acquiring informative and entertainment TV channels O2 Media holding plans to acquire 7 or 8 TV channels and set up a commercial digital broadcasting multiplex on the basis of these channels These plans on the part of the holding in no way change the idea of O2TV television channel taking part in a tender to enter the second (state) digital broadcasting multiplex 8

9 Internet TV Advertising expenses on TV and Internet in Russia and rate of growth E % % 30% 20% % 0% E -10% -20% -30% Costs of TV advertising (including non-fta channels), Rub bn (lft scale) Advertising in Internet, Rub bn TV advertising growth rate, % internet advertising growth rate, % According to a forecast by ZenithOptimedia, TV advertising expenses in Russia will grow by 23% due to a rise in NFTA advertising, and Internet advertising expenses will go up much more, by 42% Taking over Internet TV channels with a large online viewership would be a savvy capital investment, since it would allow the channel to boost its cash streams from video advertising The new Internet TV channel will not compete against O2TV s channel for young people as these two resources could effectively complement each other given how popular Internet TV has become among young people Source and estimates: ZenithOptimedia, E = estimates 9

10 Internet portals 60% 50% 40% 30% 20% BIA penetration rate, E 55% 50% 41% 35% 27% E 2012E 2013E Value and share of online video advertising in Russia, E 2% % 4% % % 6% 8% E 2012E 2013E 2014E 2015E Video advertising in Internet m arket volume, $ m Share of video advertising at Internet advertising m arket, % 12% 10% 8% 6% 4% 2% 0% Source and forecast : J son & Partners Consulting. E = estimates Source and forecast : J son & Partners Consulting. E = estimates According to estimates by J son and Partners, the number of video content users will go up 30-40% on Runet in , while growth in Internet video content could rise astronomically on an annual basis during the same period due to growth in BIA penetration rate and an upsurge in portal traffic Video advertising is one of the most rapidly growing segments of the Internet advertising market. As a result of this, taking over high-traffic Internet portals could be a profitable investment target 10

11 Production of TV content Reasons for investing in the acquisition of video content producers Raising TV viewers requirements for content of non-fta TV channels Fast rate of growth for advertising on cable and satellite TV Economies of scale: lower expenses for producing own content compared to outsourcing Clear-cut trend towards integration of TV channels and producers of TV content in Russia Purchase of intangible assets with a long service life Adding value to the merged company 11

12 IT sector companies Values of Russia s computer games market, E E The computer games market will grow due to the online games segment (25-30% per year, based on various estimates) Taking over computer games producers will make it possible to raise interest of the youth audience in O2TV television channel The channel is exploring the possibility of taking over large computer game manufacturers, especially companies with low costs and high sales margins Source and estimates: Discovery Research Group. E = estimates 12

13 Financing Sources of financing for future M&A transactions Placing a new additional share issue among a limited range of investors To this end, the charter capital of OAO O2TV is expected to be upsized The range of potential purchasers of shares has already been determined Shares could also be sold to existing shareholders or a share swap could be made with the owners of companies taken over 13

14 Disclaimer Some statements made in this presentation are not historical facts, and are to be considered merely forward-looking statements (forecasts). These statements include, but are not limited, to: plans, forecasts or guidance concerning our revenues, profits (losses), including profits/losses per share, dividends, equity structures, including shareholder capital, other financial indicators and ratios, and the investment program; statements made concerning our plans, purposes or tasks in operating activities; statements concerning future economic indicators; statements concerning the assumptions on which some statements are made. In addition, words such as assume, expect, presuppose, plan, intend, consider, anticipate, and other such phrases used in the future tense shall be regarded solely as forwardlooking statements, and not as an assurance that any such future events referred to therein will actually come true. In essence, the abovementioned forward-looking statements (forecasts) shall be construed as integral risks, given that any such plans, expectations and other statements projected into the future may not materialize. The reader should be cognizant that the actual results of O2TV could differ materially from its plans, purposes, expectations, estimates and intentions as stated in such forward-looking statements by virtue of a number of risk factors. Should you rely on forward-looking statements, you should carefully analyze the above-mentioned facts and also other issues and events which are devoid of clarity, especially in light of the political, economic, social and legal environment in which the Company operates. Such forward-looking statements shall be deemed valid only on the date of their publication, and the Company shall not assume any obligation to update or review them, whether at the time when such information becomes available, when new events occur or for any other reason. The Company shall make no claims or provide no assurances that the results assumed in such forward-looking statements will be achieved, nor shall it publish any estimates regarding the probability that the results set forth in forward-looking statements will be reached. Forward-looking statements shall be regarded as merely one way in which a certain situation may unfold, and not necessarily the most likely or standard course of events. 14

15 THANKS FOR YOUR ATTENTION!