Financial Summary of 1Q/FY2005 and our Business Strategy. July, 2005 SKY Perfect Communications Inc.

Transcription

1 Financial Summary of 1Q/FY2005 and our Business Strategy July, 2005 SKY Perfect Communications Inc.

2 Section Financial Summary of 1Q/FY2005 2

3 Subscription Trend of 1Q/FY2005 New New subscriber subscriber numbers numbers of of SKY SKY PerfecTV! PerfecTV! and and SKY SKY PerfecTV! PerfecTV! in in 1Q 1Q increased increased respectively respectively thanks thanks to to the the factors factors such such as as campaigns. campaigns. Also Also the the churn churn rate rate dramatically dramatically improved improved and, and, accordingly, accordingly, the the number number of of net net subscriber subscriber addition addition greatly greatly increased. increased. New individual subscribers Churn Individual Churn Rate Net Addition Cumulative Total SKY PerfecTV! 107,076 65, % 41,816 3,190,556 Difference from the same period last year +15.0% -13.2% % +105,634 SKY PerfecTV! ,665 3, % 15, ,718 3 Difference from the same period last year +62.0% +11.7% % +52,308

4 Trend of Individual Churn Rate Quarterly trend of curn rate Q Q Q Q Annual FY03 8.9% 8.7% 9.1% 9.6% 9.0% FY04 9.8% 9.2% 9.7% 8.8% 9.4% FY05 8.3% E9.0% 12.0% End of Japan Professional Baseball League Season End of Fiscal Year 10.0% 8.0% 6.0% 4.0% 8.6% 8.2% 8.0% Stepping up of churn prevention measures in our customer center FY04 FY05 2.0% Renewal of CLUB SKY PerfecTV! monthly magazine 0.0% 4

5 5 (April 1, June 30, 2005 Consolidated Non- Consolidated Difference Revenues 20,354 18,471 1,882 Operating Profit Profit before Income Taxes Net Profit Total Assets 127, ,363 7,709 Total Shareholder's Equity 90,167 92,783-2,616 Affiliates for which Equity Method is applied SKY Perfect Communications Inc. Data Network Center Corporation (51% shareholding) Customer Management Multi Channel Entertainment Inc. (90% shareholding) 110 degree CS broadcasting service Samurai TV Inc. (80.25% shareholding) Special TV channel for wrestling and martial arts OptiCast Inc. (100% shareholding) Content distribution service through FTTH SKY Perfect Well Think, Co. Ltd. (100% shareholding) Content development and investment SKYPerfect Marketing, Co., Ltd. (50% shareholding) Rental STB supply service (reorganized as a operating company on April 2005) Cable television Adachi Corporation (77.3% shareholding) CATV business Information Network Koriyama Inc. (66.7% shareholding) CATV business (planning company) Pay Per View Japan Inc (65% shareholding) PPV service System Create Inc. SKYPerfect Mobile, Inc. (32.3% shareholding) (51% shareholding) System development (CD-ROM distribution) Content distribution service to mobile phones *The companies in double-lined boxes are newly consolidated subsidiaries.

6 Summary of Profit and Loss Statement [Profit and Loss Statement: Consolidated] (Millions of Yen) 1Q 1Q Difference Result FY04 FY05 FY04 DTH Gross Addition (thousand) DTH Sub. At FY End (thousand) 3,208 3, ,310 Revenues (Total) 18,777 20,354 +1,576 74,016 Subscriber-related revenues 12,158 12, ,608 Transmission-related revenues 2,465 2, ,768 Other fees and revenues 4,153 5,535 +1,381 15,640 Operating Profit 1, ,120 2,826 Profit before Income Taxes 1, ,116 3,681 Net Profit 1, ,826 3,709 Retained Earnings 3,922 4, ,909 Total Dealing Amount of Subscription Fees etc. 34,379 34, ,078 EBITDA 2, ,719 6,698 6

7 ARPU (CS 124/ ) Subscription Fees per Subscriber Yen Subscriber-related Revenues per Subscriber Yen 3,629 3,597 1,452 3,505 3,446 3,496 1,422 1,395 1,384 1, ,663 2,655 2,596 2,563 2, Q/04 2Q/04 3Q/04 4Q/04 1Q/ Q/04 2Q/04 3Q/04 4Q/04 1Q/05 Basic Fee/unit PPV Fee/unit Monthly Fee/unit Revenues from Own Programs 7

8 SAC (Subscriber Acquisition Cost) (CS124/ ) Total SAC Millions of Yen SAC per Subscriber Yen 5,022 39,961 3,191 1,966 30, ,751 2,112 1Q/FY04 1Q/FY05 Sale incentives Promotional expenses Advertising expenses * *1 SAC of 1Q/FY05 is based on the total costs of non-consolidated SKY PerfecTV! and SKYPerfect Marketing. *2 Public relations costs are excluded from advertising expenses. 8

9 Summary of Consolidated Balance Sheet [Balance Sheet : Consolidated] Millions of Yen Mar 31, June 30, Difference Current assets 68,815 60,318-8,496 Fixed assets 52,317 66, ,436 Total assets 121, ,072 +5,939 Current liabilities 25,340 28,051 +2,711 Fixed liabilities 3,388 5,528 +2,140 Total liabilities 28,726 33,580 +4,854 Minority interests 2,995 3, Common stock 50,037 50, Capital surpluses 43,947 43, Earned surpluses 5,909 4,167-1,742 Defference regarding estimate of securities -1,213 2,276 +3,489 Treasury Stock -9,272-10,282-1,009 Total shareholders' equity 89,408 90, Total 121, ,072 +5,939 9

10 Consolidated Cash Flow [Consolidated] Millions of Yen 1Q/FY05 FY04 Net cash from operating activities +3,009 +4,302 Net cash from investing activities -4,240-7,087 Net cash from financing activities -2,347-10,916 Adjustment of exchange 0 0 Net increase(decrease) in cash and cash equivalents -3,578-13,701 Cash and cash equivalents at end of period (A) 28,661 32,239 Cash and negotiable securities at end of period (B) 43,169 52,251 Total amount of fund ((B)+the securities for financial investment) 69,151 79,625 * Difference between (A) and (B) as of the end of 1Q/FY2005 is due to fixed-term deposits (1,505 million yen) and negotiable securities (13,003 million yen), which terms are over 3 months. 10

11 Section Business Strategy 11

12 FY05 Forecast (unchanged) [Subscribers] unchanged (Thousand) FY 4 Result 5 Forecast FY 4 Result 5 Forecast New Individual Subscribers Individual Sub. Net Addition % 9.0% Individual Sub.at Period End 3,310 3,542 Total Sub.at Period End 3,823 4,055 [Individual Churn Rate] unchanged [Business Forecast] unchanged Millions of Yen Consolidated Non-Consolidated Semiannual FY04 Result FY05 Forecast Difference FY04 Result FY05 Forecast Difference Revenues 37,146 42,000 +4,854 36,068 37,500 +1,432 Profit before Income Taxes Net Profit/Loss 3,599 3, ,099-2,911 3,959 3,632 1,200 1,200-2,759-2,432 Annual FY04 Result FY05 Forecast Difference FY04 Result FY05 Forecast Difference Revenues 74,016 85, ,983 71,881 75,500 +3,619 Profit before Income Taxes 3, ,181 4,677 3,500-1,177 Net Profit/Loss 3,709 1,000-2,709 4,532 3,500-1, *1 Forecast of the number of new Individual subscribers is 540 thousand. SKY PerfecTV! : 400 thousand, SKY PerfecTV!110 : 100 thousand, HIKARI PerfecTV! : 40 thousand *2 Net profit/loss is estimated to increase in revenue and decrease in profit effected by the start of STB rental system and the expansion of HIKARI PerfecTV! service etc. *3 750 yen annual dividend is forecasted in FY2005 at the same level in FY2004.

13 SKY PerfecTV! (CS124/128) The The number of of subscribers in in 1Q/FY05 increased thanks to to the the free free antenna installation campaign STB rental service (from June 1) Free antenna installation campaign (from April 1) Q/FY03 1Q/FY04 1Q/FY05 Total Subscribers Individual Subscribers 13

14 SKY PerfecTV! Free antenna installation campaign Free antenna installation campaign contributes to to excavation of of new new subscriber segment <Subscriber percentage chart by age> Free antenna installation Total SKY PerfecTV! <Subscriber percentage by sexual distinction> Male Female (Trend based on sampling research)

15 SKY PerfecTV! 110 Free-viewing service applications in 1Q/FY05 increased 165% compared to the same period last year due to the expansion of built-in receivers and the strengthening of measures Measures for acquiring 100 thousand new subscribers The number of built-in receivers shipments is greatly increasing 3,190 thousand is forecasted in 2005 by JEITA Continue approaching to the purchasers of built-in receivers Strengthen introducing our free viewing service (posting etc.) Strengthen improving the viewing environment support of antenna installation Penetrate our contents strategies for SKY PerfecTV! 110 starting from FY2004 STAR Channel HD started from September 2004 Basic Package (started from November 2004) Own channels SKY PerfecTV! Channel 110 started from March 2005) <Trend of free trial viewing service applications in 1Q/FY05 compared with 1Q/FY04> 161% 175% 160% 10,072 6,244 6,070 9,722 4,643 FY06 Free-viewing service 8,121 15

16 Major Contents in and after 2Q/FY05 Soccer -- Ready for for 2006! 2006! Launch Launch of of new new Soccer Soccer Set Set start start application application from from July July 15, 15, charge charge from from August August 1) 1) European European Soccer Soccer League League (Italy/SerieA (Italy/SerieA : : August August 28, 28, England/Premier England/Premier League, League, Holland/Eredivisie Holland/Eredivisie : : August August UEFA UEFA Champions Champions League League September September FIFA FIFA World World Cup Cup qualifying qualifying games games in in Europe, Europe, South South America America and and Africa. Africa. Other Sport Sport Motor Motor sports sports held held in in Japan Japan MotoGP MotoGP Japan Japan GP, GP, WRC WRC Round13 Round13 Japan, Japan, Japan Japan GP) GP) FIBA FIBA World World Championship Championship broadcast broadcast all all games games KIRIN KIRIN International International Basketball Basketball August August , 24, broadcast broadcast live live all all games games Music/Drama Broadcast Broadcast Fes Fes & Peace Peace Summer Summer Festival Festival for for days days (September (September 16 25) 16 25) 57th 57th Annual Annual Emmy Emmy Awards Awards (September (September 19, 19, a a live live relay relay broadcast broadcast Korean Korean All All Star Star Summit Summit (September (September 24, 24, a a live live relay relay broadcast) broadcast) Films invested by by SKY SKY Perfect Well Well Think Think Team Team ASTRO ASTRO July July 28, 28, to to be be broadcast broadcast earlier earlier than than terrestrial terrestrial TV. TV. Suspected Suspected Person Person Muroi Muroi Shinji Shinji etc. etc. World ally Championship Photo offered by STI sambomaster Getty Images/AFLO 16 Kwon Sang Woo (c)1972 Shiro Tosaki / Norihiro Nakajima (c)2005 Team Astro Production Committee All Rights Reserved.

17 SKY PerfecTV! Tokyo Plage 2005 (10 th anniversary event) Duration : August 13 August 21, 2005 Location : Along the National Yoyogi Stadium Olympic Plaza Promenade, Yoyogi Park (Image Picture Opening hours : 10 am 9 pm Expected visitors : Approximately 200,000 people Entry fee : Free of charge Organized by : SKY PerfecTV! Tokyo Plage 2005 Planning Committee Special cooperation : JSAT Corporation Cooperation : Japan Satellite Broadcasting Association With support from : the Shibuya Koen-Dori Shopping District Promotion Association etc. Co-sponsored by : Nippon Telegraph and Telephone East Corporation Official suppliers : Index Corporation, Kao Corporation, Paris Plage CRYMSON Co., Ltd., Peugeot Japon etc. 17

18 Development of HIKARI PerfecTV! Current subscription situation <as of the end of June 2005 including properties scheduled to be constructed after FY2005> 35,000 30,000 Properties that have approved service provision *1 Properties currently receiving service *2 The number of subscribers of multichannel broadcasting service 1,391 1,521 25,000 20,000 1,229 15, ,000 5,000 0 March,2005 April,2005 May,2005 June,2005 *1 Properties that have approved service provision: Those properties that, as of the end of each month and each quarter, have concluded a broadcasting service (retransmission or multi-channel broadcasting service) provision agreement. This figure also includes some properties for which service provision will commence in the following month or later, depending on when construction will be completed. *2 Properties currently receiving service: Those properties to which, as of the end of each month and each quarter, broadcasting services (retransmission or multi-channel broadcasting service) are being provided and which are being charged for such. 18

19 Expansion Schedule of HIKARI PerfecTV! Service Area & Topics Expand Expand the the service service area area where where million million households households have have possibility possibility to to enjoy enjoy the the service service in in (including (including single single houses) houses) Become Become a leading leading wired wired service service operator operator in in Japan Japan after after two two years yearsfrom the the launch launch of of the the service service Metropolitan Area -Acquire 50% shares of newly-built condominiums in 23 wards of Tokyo in FY2005 -Start trial of a mini package targeting for condominiums -Start lease of channels to Cable City Yokohama Start services in Yokohama and Kawasaki -Plan to start the service in Tokyo (except 23 wards of Tokyo) and Chiba in December 2005 Plan to start the service in December 2005 Hiroshima city Sapporo city Koriyama Sendai city (CATV business planning company) 19 Fukuoka city Fukuyama city Osaka -Started service in February Sales partnership with NTT MEDIAS and Osaka Gas 2005 OptiCast Inc. All rights reserved

20 Corporate Tie-up Image on Mobile Business SKY SKY PerfecTV! PerfecTV! provides provides users users our our original original and and various various kinds kinds of of services services by by enhancing both contents and technology cooperating with related companies. Mobile Business enhancing both contents and technology cooperating with related Know-how on mobile business development by being invested companies. Mobile Non-Mobile Business Contents for VOD Rental DVD etc. mobile phones Contents for IP Investment Worldwide Development Know-how of diversified new business based on capital alliance / Complement of content DTH Contents for broadcasting Broadcaster Broadcaster Investment Broadcaster Broadcaster FTTH 20

21 Image of Terrestrial Re-transmission by Satellite *Proposing transmission test in fall of 2005 JCSAT-3 JCSAT-4A Target Area limited by conditional access system using IC card Existing antenna for 124/128 services Transmission stations Terrestrial stations New STB can receive signals of both terrestrial digital retransmission and existing SKY PerfecTV! services. 21

22 General Notes to This Material Financial information in this material is prepared under Japanese GAAP unless mentioned otherwise. Regarding financial information based on US GAAP, please refer to our Annual Report and Semiannual Report. Sales Incentives mean sales incentives paid to the manufacturers and retailers of our set-top boxes according to the number of new subscribers and are Commissions to Sales Agents in the Major Items and Amount out of the Sales and General Expenses in the note of the financial statements. Number of Subscribers Number of Individual Subscribers (DTH) Subscribers who agreed with Pay-Subscription Agreement and have been actually paying subscription fee. Number of Total Registrations: The total numbers of provisional subscribers before executing Pay-Subscription Agreement, institutional subscribers including retailers exhibition and registrations for technical development in addition to DTH subscribers. Total Dealing Amount of Subscription Fees is used to represent the scale of the subscription fees of our company for convenience and previously called as Total Billing Amount of Subscription Fees, meaning Subscription Fees (Flat, PPV and Own content) + Registration Fee + Basic Fee + Corporate Subscription Fee, in this presentation material. was calculated as Operating profit(loss) Depreciation expenses to Net profit(loss) + loss of minority interests + Corporate tax, Resident tax and Business tax + Interest payment + Depreciation expenses. Forward looking statements including plan, strategy or belief contained in this material are not past facts but are forecasts based on the assumption or belief of our management judging from information available currently. Final decisions related to investment are on the judgment of users themselves. Such forward-looking statements are not guaranteed of future performance and involve risks and uncertainties, and actual results may differ from those in the looking-forward statements as a result of various factors, including, (1) the economic environment surrounding our areas of business, in particular consumer trends, (2) changes in legislation such as broadcasting laws and communications laws, particularly in the case of restriction of our business or proposals to this effect or incase of, for example, new business entry by rival companies, and (3) our ability to develop and continue to provide programs and services acceptable to customers in a fiercely competitive market characterized by features such as remarkably rapid technical innovation in the digital technology field in particular and remarkably subjective and changeable customer preferences in broadcasting business, However, factors that could influence our business results are not limited to the above. For any inquiries about this material or investor relations of our company SKY Perfect Communications Inc. Department ( ir@skyperfectv.co.jp TEL : ) 22

23 (Referential Material) Extracts from Mid-Term Vision (FY05-10) 23

24 Goal and Key Points of Mid-term Vision Become the the largest largest conglomerate in in Japanese Pay Pay TV TV (content distribution) business and and provide diversified content services that that cater cater to to a broad broad spectrum of of consumer lifestyles. Vertical expansion Strengthen development of DTH business Establish the structure that can accelerate subscription growth further by positively taking part in producing, acquiring contents and moreover setting up STB for customers toward the value chain. Horizontal expansion Expand multi-platform business strategy further Develop our services with various infrastructures such as optical fibers so that consumers could have a chance to enjoy SKY PerfecTV! in various scenes of life. Progress of management in affiliates and strategic investment Implement each measure for our mid-term vision in cooperation with our affiliates. Strengthen our consolidated management structure. Position the first two years as investment terms to strengthen our group. For that reason, short-term profits might be assumed to be sacrificed to some extent. 24

25 Business Fields aimed at by SKY PerfecTV! Viewer Subscriber User Terminal/ Display Re-build STB supply structure Network Wired business Platform Current SKY PerfecTV! Business HIKARI PerfecTV! Wired business New Business Content Reinforce content aggregation -Strengthen the relationship with broadcasters -Invest in content production 25 Terrestrial Rental Satellite FTTH/CATV IP VOD Mobile

26 Difference of Business Model (DTH vs FTTH) Fulfillment of of larger larger scale scale revenues because all all subscription fee fee are are recognized. Achieve high high profitability after after reaching the the breakeven point point in inthe subscriber number because of of the the limited limited fixed fixed cost, cost, mainly mainly for for relay relay line line charge. DTH FTTH (at the break even point) Other expenses Subscription Fee Expenses related to purchasing contents (about 40%) Revenues of DTH (SKY PerfecTV!) 26 Basic Fee 390 Revenues of FTTH (HIKARI PerfecTV!) Registration Fee Basic Fee Rental Fee for STB Access Line Fee Re-transmission Fee Sales incentives Subscriber management cost STB cost Access line cost Relay line cost Variable costs 2004 OptiCast Inc. All rights reserved

27 Mid-Term Vision (FY05-10)-Numerical target Become the the largest largest conglomerate in in Japanese Pay Pay TV TV (content distribution) business and and provide diversified content services that that cater cater to to a broad broad spectrum of of consumer lifestyles. Number of Subscribers (Total Subscribers) Subscribers including those through cables at the end of FY2007 more than 5 million Subscribers enjoying SKY PerfecTV! related services at the end of FY2010 more than 8 million Revenues/Profits Consolidated, billion yen FY2004 E FY2007 FY2010 Revenues 74 billion yen 150 billion yen 250 billion yen Profit before Income Taxes 4.4 billion yen 15 billion yen more than 40 billion yen 27

28 Strategic investment in growing business fields Image of use of funds FY05-10) Supply Operating cash flow (after excluding SAC and content cost) Use Return to shareholders (considering profit amount) Provide stable dividend distribution Acquire treasury stocks Fund from IPO and others Balance at the end of December 2004 about 91.8 billion yen Constant capital investment 4-5 billion yen/year Up-linking facilities/information and administrative systems etc. Strategic investment and financing Strengthen relationship with /Invest in broadcasters 20 billion yen Establish supply and sales structure of STB 10 billion yen OptiCast CATV business 30 billion yen Invest in contents and related companies 10 billion yen Invest in new business (including M&A) 10 billion yen Total 80 billion yen Growth by developing business further 28