2014 Interim Results

6 August 2014

i-CABLEii--CABLECABLECommunications Communications LimitedLimited

• Revenue compression continued. Margin improved significantly from

the 1st half of 2013 but declined from the 2nd half

• More margin improvement is needed to return to profitability but

current trends are expected to continue in the near term

• Internet & Telephony revenue continued its upward trend since 2012,

producing the biggest EBITDA since 2011

• TV revenue erosion continued, albeit smaller in magnitude in 2014

than in the 2nd half of 2013. EBITDA contracted as a result but

nonetheless the best in the 1st half since 2010

• Free TV will pose both a new opportunity & a new risk

Results Highlights

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Television

• The Group continued to see customer base contraction in 2014

mainly due to the migration of BPL broadcast rights

• Some viewers are adopting a wait-and-see approach when more

free TV channels are expected to be coming on stream from the 2

new licensees (including Group affiliate Fantastic Television Limited)

& Radio Television Hong Kong. These are expected to put a drag on

our business performance at least in the immediate term

• Although Pay TV business will continue to suffer from a rather tight

operating margin, we would endeavour as always to press ahead

with our persistent efforts through prudent programming investment

strategies & stringent cost control to offset revenue erosions. Our

programming offers will nonetheless continue to be as interesting

and exciting as they are diverse & extensive

Subscription Services

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Television

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• TV revenue erosion continued with lower subscription revenue &

advertising income

• EBITDA contracted as a result, but nonetheless the best in the

1st half since 2010

2014

HK$M 1H 2H 1H vs 1H13

Turnover 820 726 648 - 21%

Opex before dep’n (827) (594) (577) - 30%

EBITDA (7) 132 71 n/a

Depreciation (70) (70) (68) - 3%

Operating Profit / (Loss) (76) 62 3 n/a

EBITDA Margin -1% 18% 11%

Operating Margin -9% 9% 1%

2013

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• At a time when local news organisations

are often accused by different parties of

taking sides in political issues &

controversial public policies, our news team

continue to enjoy wide recognition from

viewers & opinion leaders for their

professionalism & unbiased coverage of

news & current affairs

• Our breaking news & investigative reports

are frequently quoted & referenced in print,

electronic & social media, attesting to the

high quality & credibility of our services

• Fully dedicated to providing viewers with

unrivalled news services, we are upgrading

essential systems and facilities in our news

centre to take it to a new level

Programming

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NewsNews

• The football line-up will be rich &

comprehensive

�2014 Incheon Asian Games

�UEFA Champions League

�UEFA Europa League

�European Qualifiers

�German Bundesliga

�J.League

�A-League

HD SportsHD Sports

Programming

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Programming

• Entertainment offerings continue to be strong, featuring popular

drama series acquired from around the world, movie hits produced

both here & abroad as well as creative local productions spanning

multiple genres

Programming

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EntertainmentEntertainment

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New Channels

• DBC 數碼電台

�7 digital audio channels

• Comedy Central Channel

爆笑台

• beTV

• Sony Entertainment Television

50%

27%

15%

7%

0%

10%

20%

30%

40%

50%

60%

HKC Now TV TVBNV bbTV

Viewership

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• CABLE TV viewership continued to perform strongly relative

to peers

Source: Nielsen

Pay TV viewers aged 4+

Jan – Jun 2014, All Day All Time

54%

26%27%

15%

CABLE TV Now TV* TVBNV^ bbTV

Viewing Share Among Pay TV

Operators

* Excluded 8 TVBNV channels via Now TV platform

^ Included 8 TVBNV channels via Now TV platform

50%

3%

18%

7%

1H13 2H13 1H14

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

CABLE TV Now TV TVBNV bbTV

1,311

916

372

168

TV Services Watched Past 7 Days

Source: Nielsen Media Index (Jan – Dec 2013)

Weighted by population

Aged 12-64 (‘000)

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52%

22%

20%

6%

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Customers

1,036,0001,060,000

194,000196,000

113,000115,000

June 2014December 2013

Television

Broadband

Telephony

Internet & Multimedia

• Following years of heated price wars, a de facto truce ensued for the

best part of 2014 with few innovative or attracting marketing

initiatives from key competitors

• Things, however, took a dramatic turn just around mid-year when

steep price increases were announced by certain mobile service

operators

• We expect to see the more price sensitive mobile users opting for

fixed line & subscribers to competitors' fixed line plans going for our

affordable & attractively priced, low-to-mid range Broadband and

Telephony products

Subscription Services

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Internet & Multimedia

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• Internet & Telephony revenue continued its upward trend,

producing the biggest EBITDA since 2011

2014

HK$M 1H 2H 1H vs 1H13

Turnover 171 177 180 6%

Opex before dep’n (112) (110) (107) - 5%

EBITDA 58 67 73 26%

Depreciation (46) (46) (45) - 2%

Operating Profit 13 21 29 127%

EBITDA Margin 34% 38% 41%

Operating Margin 7% 12% 16%

2013

Consolidated Results

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2014

HK$M 1H 2H 1H vs 1H13

Turnover 1,009 923 843 - 16%

Opex before dep’n (1,007) (775) (747) - 26%

EBITDA 1 148 95 7451%

Depreciation (118) (119) (113) - 4%

Operating Profit / (Loss) (117) 29 (18) - 84%

Finance Costs & Others (1) (1) (0) n/a

Profit / (Loss) before taxation (118) 28 (18) - 85%

Taxation 6 (9) (5) n/a

Net Profit / (Loss) (112) 19 (23) - 79%

Capex 78 72 81 4%

2013

• Margin improved significantly from the 1st half of 2013 but

declined from the 2nd half

• More margin improvement is needed to return to profitability

• Sundream productions scored high during the period as an

independent studio with discerning tastes and acute business

sense

• The business model of Sundream becoming a recognised studio in

its own right while acting as movie distributor is gaining a foothold in

the market

• More productions are earmarked for release this year & beyond

Sundream Motion Pictures

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Operating Expenses

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• Lower operating costs primarily due to lower programming &

acquisition cost

2014

HK$M 1H 2H 1H vs 1H13

Programming 662 426 421 - 36%

Network 109 111 111 2%

Selling, CS, G&A 186 186 167 - 10%

Cost of Sales 51 52 48 - 6%

Sub-total 1,007 775 747 - 26%

Depreciation 118 119 113 - 4%

Total 1,126 894 861 - 24%

2013

• Negotiations with the Communications Authority over Fantastic

Television's free TV licence have made little progress

• Closer examination of the proposed licensing conditions &

requirements reveals a regulatory framework that not only lacks

any measures to help new entrants establish a meaningful

foothold in the early stages of market liberalisation, but also turns

out to be the most stringent among broadcasters despite the

incumbents’ unmatched advantage in various aspects including

years of first mover advantage, service coverage & ease of

reception due to their entrenched & free use of public radio

spectrum

• We are urgently taking this up with the authorities to address

such concerns satisfactorily otherwise the Government's policy

objectives for truly opening up the free TV market would have

little hope of being fulfilled

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Fantastic TV

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• Competition will remain intense. More margin improvement is

needed to return to profitability but current trends are expected to

continue in the near term

• Our Pay TV business is likely to see further contraction until

viewers, advertisers, operators & content providers have a better

understanding of the changes to market landscape following the

introduction of more free channels as well as how much more

serious a threat illegal online viewing could evolve into

• Our sales, marketing, content, new media, infrastructure &

customer service teams have been working diligently putting

together strategies & initiatives to help see us through challenges

ahead with a view to better unlocking the potential of our content,

bringing higher convenience & satisfaction to our subscribers &

facilitating more flexibility in our products & services for maximum

cross-media exploitation

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Outlook

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i-CABLE Communications Limited

HKSE Stock Code: 1097.HK

Disclaimer

All information and data are provided for information purposes only. All opinions

included herein constitute i-CABLE’s judgement as of the date hereof and are

subject to change without notice. i-CABLE and its subsidiaries and affiliates

hereby disclaim (i) all express, implied, and statutory warranties of any kind to

user and/or any third party including warranties as to accuracy, timeliness,

completeness, or fitness for any particular purpose; and (ii) any liability

whatsoever for any loss howsoever arising from or in reliance upon the whole or

any part of the information and data contained herein.