Published October 9, 2009

Astro shares up slightly after it wins EPL rights

Company and ESPN paying RM862.5m; analysts see pressure on margins

By S JAYASANKARAN
IN KUALA LUMPUR

	Email this article
	Print article
	Feedback

SHARES of Malaysia's pay-TV operator Astro All Asia Networks moved up slightly - to RM3.39 apiece, up 0.59 per cent - despite analyst comments that its margins would come under pressure after the satellite-TV operator won the exclusive rights to air English Premier League soccer matches for the 2010-2013 season.

Astro, which won the bid jointly with sports content provider ESPN, reportedly paid RM862.5 million (S$353.4 million) for those rights and OSK Research felt that the price could not be fully passed on to subscribers.

Still, the market seemed to disagree and some industry officials concur.

'They have 2.5 million subscribers and around 70 per cent subscribe to the sports channel,' one industry executive told BT. 'If they charge RM30 per month for sports, that's RM630 million per year and RM1.89 billion over three years.'

Indeed, Astro, which is majority-owned by tycoon T Ananda Krishnan, wasn't the only one bidding. Telekom Malaysia, which hopes to roll out a high speed broadband network in the country soon, also threw in its bid together with Total Sports, one of the largest sports marketing agencies in the country. The duo, however, pulled out at a later stage leaving Astro as the lone bidder.

The interest shown in airing sports matches indicates the phenomenal growth of sports marketing in the region of late, particularly in Malaysia, Singapore and Hong Kong. The explosive growth is manifest in the steadily rising cost of content.

Indeed, the price paid by the Astro-ESPN team could be higher than expected. OSK Research said that the price paid was effectively double its previous bid in 2006. Including the rights fee, content production and broadcasting over three years, the total cost would balloon to RM1.02 billion.

'We see upside risk to content cost assumptions for 2010/11 financial year, which we currently project at 35-36 per cent of pay-TV revenue,' OSK said in its research report yesterday.

All things being equal, an increase in content cost to 40 per cent of pay-TV revenue over the next two financial years would slash the core earnings forecast by 27-32 per cent, OSK said. The securities house concluded that the satellite-TV operator was likely to hike its subscription rates.