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Digital TV: opportunity for companies with good contents Underweight

Media Sector

- Digital TV channels start trial run today


The winners of the 24 digital TV channels licenses are as follows:

National Broadcasting and Telecommunication Commission (NBTC) will run digital TV

broadcast trail on 1-24 April. Digital TV network providers: the Royal Thai Army, MCOT,

Thai PBS and the Government Public Relations Department will be permitted to test

their network signal transmissions. The companies that won the auction for digital TV

channels will receive the licenses on 25 April 2014, which would be counted as the first

day of the 15-year license. However, RS will not receive the license on 25 April as its

program plan is still unclear as a result of the case on 2014 World Cup broadcast. After

25 February (the deadline for schedule submission), RS was given 90 days to finish the

schedule (due in late-May). After the winners for 24 digital TV channels receive their

licenses, they have 30 days for preparation; their digital TV channels’ official broadcast

will start on 25 May.

- Digital TV channels available via satellite and cable digital TV network now

Winners for 24 digital TV channels will be permitted to broadcast their digital TV

channels on 1-24 April, but advertisements are not allowed until they officially receive

the licenses on 25 April. Analog TV channels providers are most advantageous, as they

can broadcast all of their contents from analog TV channels on digital TV channels.

However, BEC might be unable to broadcast 100% of its contents on its HD Variety

channel. As BEC holds its TV Channel 3 concession on behalf of Bangkok Entertainment

Co. Ltd. but won the auction for the digital TV channel on behalf of BEC-Multimedia Co.,

Ltd., BEC has to purchase the contents from Channel 3 to broadcast on the new digital

TV channel. Still, BEC’s another two digital TV channels (SD Variety channel and a

children channel) are able to be on air in May. Satellite and cable TV channel providers

(GRAMMY, WORK, RS, NBC and True Vision) are also advantageous, as they can

broadcast their contents from satellite and cable channels. RS would not be able to

advertise on digital TV channels until it has received the license from NBTC. Still, RS can

broadcast and advertise on Channel 8 via PSI Satellite, so the pressure on RS would be

limited. Preliminarily, ground digital TV network would be available for only four

provinces: Bangkok, Chiang Mai, Songkla and Nakhon Ratchasima; Set Top Box is

required. However, satellite and cable digital TV network already has nationwide

coverage, covering 70% of total household in Thailand.

- "Underweight". Sector’s top pick is RS and BEC

As digital TV channels are available now, FY2014 advertisement spending is projected to

grow by over 3%yoy. However, digital TV channels are expected to face loss and the

sector’s net profit is expected to stay flat yoy, during the first few years. We

recommend "Underweight" for the sector. The sector’s top pick is RS(FV@B11) for its

strongest growth; thanks to its success on satellite TV business and channel upgrade

(from satellite TV to digital TV), it is likely to make a breakeven this year. Moreover, the

broadcast right of 2014 World Cup is projected to raise the profit base by over B100m

and boost its FY2013 net profit by 42.5%. We recommend buying BEC(FV@B64) as it

has the strongest contents and audience base. BEC’s expenses would increase as a

result of the broadcast of the new HD digital TV channel (along with analog Channel 3)

and the investment on the two new digital TV channels (SD Variety and children

channels). However, thanks to increasing service capacity, net profit is expected to stay

unchanged in 2014 and rebound significantly in 2015. BEC’s FY2014 dividend yield is

expected at 5%.


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