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Results Highlights • Weaker local consumption depressed demand, while intense competition & product substitution increased supply • They combined to put significant pressure on both subscription & airtime sales revenue • TV customer base contraction continued on weaker sales in a shrinking market despite signs of stabilization towards the end of the year • Broadband reported minor growth in revenue & operating margin • It has become more necessary than ever to invest prudently in programming & other initiatives to prepare for challenging times ahead i-CABLE Communications Limited • Past operating losses have weakened our financial position. To sustain this investment, we will evaluate funding options from internal resources, external debt as well as fresh equity 2
Subscription Services TV Services • Customer base contraction continued on weaker sales in a shrinking market despite signs of stabilization towards the end of the year • The contraction of high yield segment slowed down • Challenges remained fierce as more free content, available both legally & illegally & enabled by technology, continued to fundamentally change viewing behavior & customer expectation i-CABLE Communications Limited 3
Subscription Services TV Services • Our multiple HD content offers enhanced viewing experience • We continued to devote significant investment to upgrade our HD News Centre & broadcasting facilities to bring a new look to our customers in the near future i-CABLE Communications Limited 4
TV Services 2013 2014 2014 HK$M FY 1H 2H FY % chg. Turnover 1,546 648 618 1,266 -18% Opex before dep’n (1,421) (577) (655) (1,232) -13% EBITDA 125 71 (37) 34 -73% Depreciation (139) (68) (68) (136) -3% Operating Profit / (Loss) (14) 3 (105) (101) 609% EBITDA Margin 8% 11% -6% 3% i-CABLE Communications Limited Operating Margin -1% 1% -17% -8% • Weaker local consumption depressed demand, leading to lower subscription & advertising income • Lower programming & subscriber acquisition cost partly offset by higher network related cost & cost of sales 5
Programming • Our unique local programming helped us to compete in an increasingly crowded marketplace • We are proud of being the most watched pay TV platform over the past 21 years • The creativity & uniqueness of our programming is a strong asset to uphold our leading position in the local pay TV scene • We will continue to wisely invest in local programming i-CABLE Communications Limited
Programming News • Our news team had been working full steam to cover the political reform & Occupy Central protests, providing up to the minute updates of every turn of the events while maintaining a fair & balanced editorial stance • Preparations are underway in earnest to upgrade our news production & broadcast to HD capabilities, taking i-CABLE Communications Limited our news services to a whole new level & boosting the sales potential of our news programming both as packaged & standalone products
Programming Sports • We renewed UEFA Champions League through to 2018 & strengthened our line-up with exclusive rights to the qualifiers, playoffs & friendlies of the UEFA European Championship 2016 & 2018 FIFA World Cup • Other sports brought to our viewers included tennis, table tennis, swimming, badminton, basketball & volleyball as well as world class cycling i-CABLE Communications Limited 8
Programming Sports • The region's most coveted sports event, the 2014 Incheon Asian Games was held in September & October, with close to 140 hours of live broadcast over 16 days through our 24-hour, dedicated Asian Games channel • We were the host Broadcaster & Official media partner of the Hong i-CABLE Communications Limited Kong International Track Cup & broadcasted live the 1st & 2nd event in January & November 2014 9
Programming Entertainment • Internationally sought-after channels such as Comedy Central, Sony TV & beTV were added to our Pay TV platform to enrich our offers of premium entertainment programming • Also introduced was the HD version of AXN previously in SD only • We would continue to dedicate ample resources to local & acquired productions to keep our customers well entertained i-CABLE Communications Limited 10
Viewership Viewing Share Among Pay TV TV Services Watched Past 7 Days Operators Aged 12-64 (‘000) 57% 1,100 1,012 60% 1,000 50% 51% 900 FY13 FY14 50% 800 735 40% 700 600 27% 30% 500 25% 25% 317 400 17% 20% 15% 16% 300 148 7% 200 10% 7% i-CABLE Communications Limited i-CABLE Communications Limited 100 2% 0% 0 CABLE TV Now TV* TVBNV^ bbTV CABLE TV Now TV TVBNV bbTV HKC Now TV TVBNV bbTV Source: Nielsen All Individuals aged 4+ Source: 2014 Nielsen Media Index (Jul 2013 – Jun 2014) All Day All Time Weighted by population * Excluded 8 TVBNV channels via Now TV platform in top 50 channel list only ^ Included 8 TVBNV channels via Now TV platform in top 50 channel list only • As the most watched Pay TV service in Hong Kong, our movie & entertainment platforms significantly outperformed our competitors during the year 11 11
i-CABLE.com • A new "i-CABLE.com" application for mobile devices replaced its older, free- for-all version & incorporated a previously subscriber-only app called "CABLE TV on Mobile” • The new app provides both pay & free online programming & related information on 1 single platform under our new multi- view strategy to bring subscribers a better mobile viewing experience & provide prospective customers with a rich portal i-CABLE Communications Limited to sample our services • This new app drew a good hit rate & also advertising income 12
Customers June 2014 December 2014 110,000 113,000 Telephony 194,000 186,000 Broadband Television 1,036,000 1,002,000 i-CABLE Communications Limited 13
Subscription Services Internet & Multimedia Internet & Multimedia • Broadband reported modest growth in revenue & operating margin, mostly from the continuous growth in our mid-range price plans � a 200 Mbps plan to target the mid-range segment of the market � these affordably priced, mid-range products with a strong price- performance ratio would stand to benefit from market changes • The Group continued to invest in service & network upgrades to enhance & optimize network performance to bring customers better, faster & more reliable broadband services i-CABLE Communications Limited • The expanded network capacity & service quality will facilitate customer retention & acquisition, as well as upselling opportunities 14
Internet & Multimedia 2013 2014 2014 HK$M FY 1H 2H FY % chg. Turnover 348 180 184 365 5% Opex before dep’n (223) (107) (102) (209) - 6% EBITDA 125 73 83 156 25% Depreciation (92) (45) (44) (89) - 3% 102% Operating Profit 33 29 39 67 EBITDA Margin 36% 41% 45% 43% i-CABLE Communications Limited Operating Margin 10% 16% 21% 19% • Minor growth in revenue & operating margin, mostly from upselling subscribers to mid-range price plans • EBITDA improved by 25% compared to 2013 15
Consolidated Results 2013 2014 2014 HK$M FY 1H 2H FY % chg. Turnover 1,932 843 823 1,666 - 14% Opex before dep’n (1,782) (747) (831) (1,578) - 11% EBITDA 149 95 (7) 88 - 41% Depreciation (237) (113) (113) (227) - 5% 58% Operating Loss (88) (18) (121) (139) Finance costs & others (2) (0) (0) (1) - 76% Loss before taxation (90) (18) (121) (139) 55% i-CABLE Communications Limited Taxation (3) (5) 5 (0) - 93% Net Loss (93) (23) (116) (139) 50% Capex 149 81 107 188 26% • Weaker local consumption, intense competition & product substitution put significant pressure on both subscription & airtime sales revenue • Escalating cost, especially programming rights fee continued to erode our margin 16
Operating Expenses 2013 2014 HK$M FY FY % chg. Programming 1,088 925 - 15% Network 220 221 0% Selling, CS, G&A 372 334 - 10% Cost of Sales 103 99 - 5% Sub-total 1,782 1,578 - 11% Depreciation 237 227 - 5% Total 2,020 1,804 - 11% i-CABLE Communications Limited • Decrease in premium sports programming costs were offset by other rights fee • Continued to streamline productivity efficiency on each level 17
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