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The TOM Group
Expanding Our Sporting Rights Portfolio
15th August 2002
2
Addition of ATP Tennis Rights to TOM’s Sports Portfolio
Telecom VAS
Internet Access
Wireless VAS
Media & Entertainment
Music & Entertainment Outdoor OnlinePublishing
Virtual Network Operator
YC Companies
SPORTS
basketball, volleyballuniversity soccerwomen’s soccertable tennis, golfgymnastics, bowling
Philips Sports ReportNokia Sports Daily NewsSpecial programmingJV with China Sports Industry
Tennis Management GroupRights to ATP
TennisTV programmes (including Salem Open)
Commercial rights
Programming
3
Part I
About The Transaction
4
About Tennis Management Group
Tennis Management Group is a leading sports marketer in the industry
Tennis Management Group 2002E Revenue:
HK$46 million
• Programme syndication
• Sports event consulting
• Promotion & Advertising
25%
Event sponsorship75%
• 46% of i-cable’s HK$100M in World Cup revenues
• Recurrent annual revenue
5
Perpetual Ownership Of Asia’s Leading Sports Event The Association of Tennis Professionals (ATP) has granted Tennis
Management Group rights to the Hong Kong ATP Open since 1990
The rights are renewed automatically every year upon payment of an annual fee (US$25,000 p.a.) and compliance with regulations
Only one ATP right granted in Hong Kong
In discussions with ATP to alternate the tournament between Hong Kong and Beijing
6
About the Salem Open
One out of only 3 ATP authorised tennis tournaments in Asia that entitle players to international ranking credits (others in Shanghai and Tokyo)
One of the most profitable international tennis tournaments in Asia
Organised by Tennis Management Group once a year since 1990
Attracts 50-70 international players including 5-8 star players every year: Michael Chang, Andre Agassi, Pete Sampras, Mark Philippoussis …
2002 Star Players
Marat Safin World No. 2 & 2000 US Open Champion
Juan Carlos Ferrero 2002 French Open Finalist & 2000 Davis Cup Champion
Alex Corretja 1998 World Championship & 2001 Davis Cup Champion
Carlos Moya World No. 5 & 1998 French Open Champion
Mark Philippousis Winner of 9 ATP Singles Titles & Former US Open Finalist
Jan-Michael Gambill Winner of 2 ATP Singles Titles
Nicolas Lapentti Former World No. 6
Taylor Dent ATP Title Winner in 2002
7
Contract Term (2002)
Strong Sponsorship Revenue from Long-Term Sponsors
Major Sponsors
Nortel Networks
Citizen Watches
Perrier
Jebsen (Blue Girl)
Circle K
Fortress
Mercedez Benz
United Airlines
1 year78%
2-3 years22%
Loyal sponsor base:
Average years of participation of top 5 sponsors: 6 years
Years of Participation (2002)
1-4 years32%
13 years55%
5-8 years13%
8
Contract Term (2002)
Stable Tour Club Membership (TCM) Revenue
Major TCM Customers
BNP Paribas Peregrine
PCCW
Schindler Lift
Hutchison Whampoa
Fuji Xerox
Hong Kong Jockey Club
Bank of America
Ernst & Young
JPMorgan
1 year39%
2-3 years61%
Loyal TCM customer base:
Average years of participation of top 5 TCM customers: 6 years
Years of Participation (2002)
1-4 years36%
5+ years64%
9
Additional Revenue from Ticketing & TV Syndication
0
20,000
40,000
60,000
80,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Attendance at thematches
Attendance at thematches & theFestival Area
Ticketing
TV Programme Syndication
Salem Open and other sports TV programmes are distributed to over 25 TV stations in China (including TVB, CCTV, Guangdong TV) and worldwide (e.g. Eurosport)
Revenue from the sale of broadcasting rights / resale of commercial airtime
Stable Attendance with Growth in Recent Years
The Festival Area opened to the public
from 1997
Att
en
dan
ce
10
A Profitable Business
HK$'M 2001A 2002E
Revenue 41.4 46.4
Gross Profit 19.2 31.2
Gross Margin 46% 67%
Net Profit 15.0 28.0
Net Profit Margin 36% 60%
80% confirmed
with contracts
signedas at Aug 15
Significant margin increase in 2002 over 2001
Increase in sponsor and TCM customer base
Joint promotions and barter deals with the media reduced A&P expenses by 40%
Reduced player appearance fees – without compromising the number of star players
Re-negotiations with contractors cut event expenses by 34%
*Profit Guarantee
*
11
Highlights of the Transaction
Investment
TOM to acquire a 60% equity interest in Tennis Management Group for HK$101M
All-equity transaction: 18.29M TOM shares issued at $5.51 per share
Warranty
Consideration shares are pledged until the end of 2006 against any possible shortfall of profits and in the unlikely event that the ATP rights are cancelled
Profit GuaranteeHK$’M
Profit After Tax Guarantee
Minimum 10% CAGR
guaranteed
Failing achievement of 2002 guarantee, valuation will be adjusted accordingly
Any shortfall of cumulative 2003 – 2005 guarantee will be compensated by dividends of the vendor
12
Valuation Analysis
US$'M
Revenue Revenue / staff(US$'000)
Net profit Profit margin
International Speedway 529 587 88 17%
Sportsworld Media Group 52 156 13 24%
CSS Stellar 33 163 2 7%
Sports Resource Group 14 194 (1) -7%
Tennis Management Group 5.3 592 1.9 36%
2001 A
Tennis Management Group is the most efficient company …
… with the most attractive valuation
P/E
International Speedway 23.6
Sportsworld Media Group 12.7
CSS Stellar 22.0
Sports Resource Group 14.2
Tennis Management Group 6.0*
*Based on 2002 profit guarantee
13
Part II
TOM’s Sports & Entertainment Division
14
Divisional Management
COOMichelle Leung
COOMichelle Leung
GM - BDMichael NgGM - BD
Michael Ng
GM – Corp DevAnthony Tse
GM – Corp DevAnthony Tse
Hong XiangZhang Bao Cheng
Hong XiangZhang Bao Cheng
YC CompaniesBen Li / Sarah Fung
YC CompaniesBen Li / Sarah Fung
Corporate – Sports & Entertainment Team
PRC Operation Center
Finance DirectorQuincy Tang
Finance DirectorQuincy Tang
Senior AdvisorTan Zhi
Senior AdvisorTan Zhi
Tennis Management Group
Tennis Mgt GroupLincoln
Venancio / Anna Pang
Tennis Mgt GroupLincoln
Venancio / Anna Pang
Lincoln VenancioFounder & Managing Director
• Former Olympic team tennis coach
• 16 years of experience in organising 500+ sports events, including tennis, golf, basketball, table tennis, volleyball, etc., in Greater China, Japan, Korea, Southeast Asia, the US, Brazil, Spain …Anna Pang
General Manager
• 10 years of experience in organising and marketing 200+ sports events; and in sports TV production and programme syndication
15
Growth Of YC Companies Under TOM’s Management
HK$’M
YC Companies Revenue Trend
Q1 is historically the weakest quarter due to advertising seasonality
Rights Portfolio
VolleyballUniversity SoccerTable TennisBowling
Gymnastics
Basketball
TennisGolfWomen’s Soccer
TOM acquires YC
KCRC Chinese Gymnastic Gold Medallists Show
World Cup
Philips Inter-University Football Game
Major Cross Media Events
•Grew advertiser base by 10% since acquisition
•Developed new co-sponsorship packages to monetise existing rights
16
Higher Margins for the Sports Division
Net Profit Margin Analysis
9%
36%
13%7%
60%
15%7%
0%
10%
20%
30%
40%
50%
60%
70%
YC Companies TennisManagement
Group
Combined YC Companies TennisManagement
Group
Combined Avg of Int'lSports Marketing
Co's
2001A2001A 2002E2002E
International sports marketing companies include World Wrestling Entertainment, International Speedway, Sportsworld Media Group, CSS Stellar, Sports Resource Group, Sport Entertainment Media and Proactive Sports Group
17
Synergies With TOM
Sports & Entertainment Division
YC Companies
China Sports Industry JV
Tennis Management
Group
Hong Xiang Audio Video
Production & distribution of sports programming
• Sports consultancy• Athlete
representation
• Launch an alternate ATP Open in Beijing
• Cross-leverage client base
• Expand sports TV programme syndication business – new programmes and new distribution channels
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